oversight

The Housing Authority of the City of Muncie, Muncie, IN, Did Not Always Comply With HUD's Requirements and Its Own Policies Regarding the Administration of Its Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-08-23.

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

        Housing Authority of the City of
             Muncie, Muncie, IN
                  Housing Choice Voucher Program




Office of Audit, Region 5          Audit Report Number: 2016-CH-1006
Chicago, IL                                            August 23, 2016
To:            Patricia S. Tyus, Director of Public Housing Hub, 5HPR
               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA
Subject:       The Housing Authority of the City of Muncie, Muncie, IN, Did Not Always
               Comply With HUD’s Requirements and Its Own Policies Regarding the
               Administration of Its Housing Choice Voucher Program

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 Housing Authority of the City of Muncie, IN’s
Housing Choice Voucher program.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
(312) 353-7832.
                    Audit Report Number: 2016-CH-1006
                    Date: August 23, 2016

                    The Housing Authority of the City of Muncie, Muncie, IN, Did Not Always
                    Comply With HUD’s Requirements and Its Own Policies Regarding the
                    Administration of Its Housing Choice Voucher Program



Highlights

What We Audited and Why
We audited the Housing Authority of the City of Muncie’s Housing Choice Voucher program
based on the activities included in our 2016 annual audit plan and our analysis of risk factors
related to the public housing agencies in Region 5’s jurisdiction. Our audit objective was to
determine whether the Authority administered its program in accordance with HUD’s and its
own requirements.

What We Found
The Authority did not always administer its program in accordance with HUD’s and its own
requirements. It did not (1) obtain and maintain required eligibility documentation and (2)
correctly calculate and pay housing assistance and utility allowances. As a result of these
weaknesses, HUD and the Authority lacked assurance that more than $587,000 in program funds
was used appropriately. If the Authority does not correct its certification process, we estimate
that it could overpay nearly $251,000 in housing assistance over the next year.
In addition, it did not appropriately use HUD’s Enterprise Income Verification system to identify
program households with unreported or underreported income to recapture overpaid housing
assistance and utility allowances. As a result, nearly $76,000 in program funds was not available
for other program use.
 The Authority also did not appropriately manage its Family Self-Sufficiency program. As a
result, HUD and the Authority lacked assurance that (1) program participants benefited from the
program or had made progress toward self-sufficiency and (2) more than $100,000 in program
funds was used appropriately.

What We Recommend
We recommend that the Director of HUD’s Indianapolis Office of Public and Indian Housing
require the Authority to (1) support or reimburse its program more than $617,000 from non-
Federal funds for the unsupported housing assistance payments and Family Self-Sufficiency
program escrow fund activities, (2) reimburse its program more than $88,000 from non-Federal
funds for the ineligible housing assistance payments, (3) reimburse its program households more
than $2,300 for the overpayment of housing assistance, (4) transfer more than $55,000 to its
Housing Choice Voucher program, and (5) implement adequate controls to address the findings
cited in this audit report.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding 1: The Authority Did Not Always Comply With HUD’s and Its Own
         Requirements for Housing Choice Voucher Program Files ......................................... 5

         Finding 2: The Authority Did Not Appropriately Use HUD’s Enterprise Income
         Verification System Income Discrepancy Reports....................................................... 11

         Finding 3: The Authority Did Not Appropriately Manage Its Family Self-
         Sufficency Program ........................................................................................................ 13

Scope and Methodology .........................................................................................17

Internal Controls ....................................................................................................19

Appendixes ..............................................................................................................21
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 21

         B. Auditee Comments and OIG’s Evaluation ............................................................. 23

         C. Federal and Authority Requirements ..................................................................... 30




                                                                 2
Background and Objective
The Housing Authority of the City of Muncie is a public housing agency created in 1938 under
the laws of the State of Indiana. The Authority is governed by a seven-member board of
commissioners appointed by the mayor. The board’s responsibilities include performing the duties
and functions required by the Authority’s bylaws and any other duties or functions established by
resolution of the board. The board appoints the Authority’s executive director. The executive
director is responsible for providing general supervision over the administration of the Authority’s
affairs in accordance with the operational, fiscal, personnel, and other policies adopted by the
board and all other laws. In addition, the executive director is responsible for maintaining all
records of the Authority.

The Authority administers the Housing Choice Voucher program funded by the U.S. Department of
Housing and Urban Development (HUD). The program allows very low-income families to choose
and lease or purchase safe, decent, and affordable privately owned rental housing. In fiscal year
2015, the Authority had 864 vouchers and was authorized to receive more than $4.3 million in
program funds. In addition to program funding, HUD provides administrative fees to public
housing agencies to cover costs incurred for the performance of administrative responsibilities
under the program in accordance with HUD’s requirements. During the period November 1,
2013, through October 31, 2015 the Authority earned nearly $715,000 in administrative fees.
Further, the Authority received a Section 8 Management Assessment program1 score of 130 out
of 145 (90 percent) which classified it as a high performer.

The Family Self-Sufficiency program enables HUD-assisted families to increase their earned
income and reduce their dependency on welfare assistance and rental subsidies. Public housing
agencies work in collaboration with a program coordinating committee to secure commitments
of public and private resources for the operation of the program, to develop the Authority’s
program action plan, and to implement the program. Once an eligible family is selected to
participate in the program, the Authority and the head of each participating family execute a
contract of participation that specifies the rights and responsibilities of both parties. The contract
also incorporates the family’s individual training and services plan, which records the plan for
the family, including intermediate and long-term goals, the steps the family needs to take, and
the services and resources the family may need to access to achieve those goals. An interest-
bearing escrow account is established by the Authority for each participating family. Any
increases in the family’s rent as a result of increased earned income during the family’s
participation in the program result in a credit to the family’s escrow account. Once a family
graduates from the program, it may access the escrow and use it for any purpose.




1
 SEMAP establishes a system for HUD to measure public housing authorities’ performance in key Section 8
program areas and to assign performance ratings.
                                                      3
Our audit objective was to determine whether the Authority administered its program in
accordance with HUD’s and its own requirements. Specifically, we wanted to determine
whether the Authority (1) obtained and maintained required documentation to support household
eligibility, (2) correctly calculated and paid housing assistance and utility allowances, (3)
appropriately used HUD’s Enterprise Income Verification system for the recovery of overpaid
housing assistance, and (4) appropriately administered its Family Self-Sufficiency program.




                                              4
Results of Audit

Finding 1: The Authority Did Not Always Comply With HUD’s and
Its Own Requirements for Housing Choice Voucher Program Files
The Authority did not always ensure that it (1) maintained required eligibility documentation, (2)
correctly calculated and paid housing assistance and utility allowances, and (3) conducted
interim reexaminations for zero-income households. It also did not ensure that (1) duplicate
housing assistance payments were not made to program landlords and (2) program households
were not charged inappropriate fees. The weaknesses occurred because the Authority failed to
implement a quality control process and disregarded HUD’s and its own requirements. As a
result, the Authority was unable to support more than $467,000 in housing assistance. In
addition it overpaid more than $76,000 and underpaid more than $600 in housing assistance.
The Authority Lacked Documentation To Support Households’ Eligibility
We reviewed 93 of the Authority’s household files to determine whether it maintained the
required documentation2 to support households’ eligibility for the program. Of the 93 household
files reviewed, all 93 (100 percent) were missing 1 or more documents needed to determine
household eligibility. The 93 household files were missing the following eligibility
documentation:

          93 were missing support showing that background checks were performed,
          28 were missing birth certificates for 1 or more household members,
          22 were missing landlord ownership documents,
          20 were missing citizenship declarations,
          10 were missing a current form HUD-9886, Request for Authorizations for the Release of
           Information,
          7 were missing signed lead-based paint disclosure forms for the units built before 1978,
          6 were missing Social Security number verifications,
          1 was missing an executed lease, and
          1 was missing a housing assistance payments contract.

During the audit, the Authority was able to provide copies of eligibility documentation that was
initially missing from the files. However, the 93 household files were still missing 1 or more
required eligibility documentation as of August 1, 2016. For each household file reviewed, the
table below shows the number of documents originally unsupported, documents provided during
the audit, and documents that remained unsupported.




2
    See appendix C for criteria.
                                                  5
                                                     Originally       Provided          Remaining
                         Document                   unsupported      during audit      unsupported
              Criminal background check                93               0                 93
              Full support for household
              members                                  28                24                4
              Landlord ownership document              22                17                5
              Citizenship Declaration                  20                8                12
              HUD form 9886 Request for
              Authorization for the Release of
              Information                              10                6                 4
              Signed lead-based paint
              certification                             7                6                 1
              Social Security numbers                   6                2                 4

              Executed lease                            1                1                 0
              Housing assistance payments
              contract                                  1                1                 0

                            Totals                     188               65               123



Because the 93 household files were missing required eligibility documentation, HUD and the
Authority lacked assurance that the households were eligible for the program. As a result,
$467,426 in housing assistance provided for the households and $28,715 in administrative fees
received by the Authority were unsupported.3

Further, contrary to HUD’s regulations at 24 CFR 982.508, the Authority allowed one household
to move into a unit that was not affordable.4 The household’s contribution towards rent exceeded
40 percent of the adjusted monthly income, when the household initially moved into the unit. As
a result, the household made rental payments totaling $936 in excess of 40 percent of the
adjusted monthly income.
The Authority Miscalculated Housing Assistance Payments
We reviewed 95 statistically selected5 certifications for 93 of the Authority’s program household
files to determine whether the Authority correctly calculated housing assistance payments for the




3
  Public housing agencies receive administrative fees for correctly administering its program. Since we were unable
to determine whether the 93 households were eligible for the program, the Authority receipts of these fees are also
unsupported.
4
  24 CFR 982.508
5
  Our methodology for the statistical sample is explained in the Scope and Methodology section of this audit report.
                                                         6
period November 1, 2013, through October 31, 2015. Our review was limited to the information
maintained by the Authority in its household files.
For the 95 certifications, 36 (38 percent) had incorrectly calculated housing assistance. The 36
certifications contained 1 or more of the following deficiencies:

          34 had incorrect income calculations,
          6 had incorrect utility allowances,
          2 had incorrect dependent or disability allowances, and
          2 had incorrect payment standards.

In addition, of the 95 certifications reviewed, 6 contained errors that had no impact on the
housing assistance. The errors included incorrect income calculations, utility allowances, and
minimum rent determinations.

As a result of the Authority’s calculation errors, it overpaid $51,536 and underpaid $623 in
housing assistance. In addition, it was unable to support its calculations of housing assistance,
resulting in $444 in unsupported payments. Because the housing assistance was incorrectly
calculated, the Authority inappropriately received $9,236 in administrative fees. If the Authority
does not correct its certification process, we estimate that it could overpay nearly $251,000 in
housing assistance over the next year.6
The Authority Did Not Perform Interim Reexaminations for Zero-Income Households
Contrary to its administrative plan,7 the Authority did not conduct interim reexaminations every
3 months for households that had zero income. We reviewed files for 3 of the Authority’s 38
households that reported zero income as of October 31, 2015. All three (100 percent)
households had income that had not been reported to the Authority. Had the Authority
performed interim reexaminations, it likely would have identified that these households had
income. As a result of this noncompliance, $18,718 in housing assistance was overpaid to the
households, and the Authority inappropriately received $2,770 in administrative fees.
The Authority Made Duplicate Housing Assistance Payments to Landlords
We reviewed the Authority’s housing assistance payment register for the period November 1,
2013, through October 31, 2015. The Authority made 16 duplicate housing assistance payments
totaling $7,354 to 12 program landlords. As a result of our audit, the Authority collected $2,158
from two of the landlords; however, $5,891 had not been collected.




6
    Our methodology for this estimate is explained in the Scope and Methodology section of this audit report.
7
    Paragraph 11-II.C of the Authority’s 2005 program administrative plan
                                                           7
The Authority Inappropriately Charged Its Program Households for Missed Inspections
Contrary to HUD’s requirements,8 the Authority charged households a fee for each missed
scheduled housing quality standards inspection. According to the Authority’s accounting
specialist, intake specialist, and housing quality standards assistant, the contractor that performed
housing quality standard inspections charged the Authority a $22 fee when a household was not
available for a scheduled inspection. Therefore, the Authority would charge the fee to the
household. For the period November 1, 2013, through October 31, 2015, the Authority
inappropriately charged 34 program households a total of $748 (34 households x $22) for missed
inspections.
The Authority Failed To Implement a Quality Control Process and Disregarded HUD’s
Requirements
The Authority failed to implement a quality control process. The Authority’s acting executive
director and the Housing Choice Voucher program manager said that they believed the incorrect
housing assistance payment calculations were generally caused by a former Housing Choice
Voucher program staff person. While reviewing the Authority staff’s caseloads, we determined
that of the 36 program household files with calculation errors, 21 (58 percent) were the
responsibility of the former staff person. However, the Authority also did not have a quality
control process that would have mitigated the deficiencies identified in its household files.
In addition, the Authority’s finance accounting specialist was not aware of the duplicate housing
assistance payments. As a result of our audit, the Authority started recapturing the duplicate
payments from its program landlords.
The Authority also disregarded HUD’s and its own requirements. The Authority was aware of
the requirements for program eligibility and interim examinations; however, according to its
Housing Choice Voucher program manager, the Authority did not perform household
background checks, which included both a criminal and sex offender registry check, because
they were too expensive. The Authority stated that it met with the board of commissioners and
plans to complete background checks in the near future. However, the Authority did not provide
documentation such as a board resolution or effective date of this procedure to support its
assertion. In addition, the Authority’s staff was not consistent in performing interim
reexaminations every 3 months for zero-income households as required.
Conclusion
The weaknesses described above occurred because the Authority failed to implement a quality
control process and disregarded HUD’s and its own requirements. As a result, it (1) was unable
to support more than $467,870 ($467,426 + $444) in housing assistance payments and (2)
overpaid more than $76,145 ($51,536 + $18,718 + $5,891) and underpaid more than $623 in
housing assistance. Further, its households paid $1,684 ($936 + $748) for units that were not
affordable or missed inspections.




8
    24 CFR 982.405(e)
                                                  8
In accordance with 24 CFR 982.152(d), HUD is permitted to reduce or offset any program
administrative fees paid to a public housing agency if it fails to perform its administrative
responsibilities correctly or adequately under the program. The Authority received $40,721
($28,715 + $9,236 + $2,770) in program administrative fees related to the unsupported and
inappropriate housing assistance payments for the 93 program households with missing
eligibility documentation, 36 program households with incorrectly calculated housing assistance,
and 3 program households with unreported income.
If the Authority does not correct its certification process, we estimate that it could overpay
$250,500 in housing assistance over the next year.9 These funds could be put to better use if
proper procedures and controls are put into place to ensure the accuracy of housing assistance
payments.
Recommendations
We recommend that the Director of HUD’s Indianapolis Office of Public and Indian Housing
require the Authority to
             1A. Support or reimburse its program $496,585 from non-Federal funds ($467,426 +
                 $444 in housing assistance payments + $28,715 in administrative fees) for the
                 missing eligibility documentation and unsupported housing assistance payments.
             1B. Complete background checks for program household members that are 18 years
                 of age or older and ensure that all households receive a criminal background and
                 sex offender registry check before admission to the program.
             1C. Reimburse the appropriate household $936 from non-Federal funds for the rent
                 amount paid in excess of 40 percent of the adjusted monthly income for the unit
                 that was not affordable.
             1D. For the household residing in a unit that was not affordable, renegotiate the rent to
                 the owner or require the household to move into a unit that is affordable.
             1E. Implement adequate procedures and controls to ensure that (1) required eligibility
                 documentation is obtained and maintained and (2) program households reside in
                 units that are affordable.

             1F. Reimburse its program $63,542 from non-Federal funds ($51,536 in housing
                 assistance overpayments + $9,236 + $2,770 in associated administrative fees) for
                 the inappropriate payments.


             1G. Reimburse the appropriate households $623 from program funds for the
                 underpayment of housing assistance.




9
    Our methodology for this estimate is explained in the Scope and Methodology section of this audit report.
                                                           9
1H. Implement procedures and controls to ensure that housing assistance is correctly
    calculated and paid and that repayment agreements are created to recover
    overpaid housing assistance when unreported income is discovered during the
    examination process to ensure that $250,500 in overpayment of program funds is
    appropriately used for future payments.

1I.   Pursue collection from the applicable households or reimburse its program
      $18,718 from non-Federal funds for the overpayment of housing assistance due to
      unreported or underreported income.

1J.   Review the remaining 35 (38-3) zero-income households to determine whether
      additional households had income and if so, take appropriate actions to recover
      any overpaid housing assistance and utility allowance payments.

1K. Pursue collection from the applicable landlords or reimburse its program $7,354
    (of which $5,891 had not been collected or reimbursed) from non-Federal funds
    for the duplicate housing assistance payments.

1L. Implement adequate procedures and controls to ensure that duplicate payments of
    housing assistance are not made to program landlords.

1M. Reimburse the appropriate households $748 from program funds for inspection
    fees cited in this finding.


1N. Implement adequate procedures and controls to ensure that fees for missed
    housing quality standards inspections are not charged to the program households.




                                      10
Finding 2: The Authority Did Not Appropriately Use HUD’s
Enterprise Income Verification System Income Discrepancy Reports
The Authority did not appropriately use HUD’s Enterprise Income Verification system to
identify program households with unreported or underreported income to recapture overpaid
housing assistance. The noncompliance occurred because the Authority lacked adequate
procedures and controls to ensure that its program staff complied with HUD’s requirements for
repayment of overpaid housing assistance due to unreported or underreported household income.
As a result, more than $66,000 in program funds was not available for other program use.
Further, the Authority inappropriately earned nearly $9,400 in administrative fees for the
overpayments.
The Authority Failed To Recapture Overpaid Housing Assistance
According to the Authority’s income discrepancy report from HUD’s system, as of March 15,
2016, 68 households had income discrepancies. Of the 68 households, 58 had income
discrepancies above HUD’s $2,400 annual income discrepancy threshold10 totaling $395,885,
and 12 households had income discrepancies of $10,000 or more per year.

We reviewed the 12 households with a combined annual income of $175,435 to determine
whether the identified income discrepancies were valid because of unreported or underreported
income. Of the 12 households, 10 (83 percent) had valid income discrepancies. As a result, the
Authority overpaid $66,236 in housing assistance and utility allowances. As of June 21, 2016, it
had not established repayment agreements to recapture the overpaid assistance in keeping with
HUD’s and its own requirements.11 Therefore, the Authority inappropriately received $9,383 in
program administrative fees for the 10 households that had overpaid housing assistance and
utility allowances during the period November 1, 2013, through October 31, 2015.

The Authority Lacked Adequate Procedures and Controls
The Authority lacked adequate procedures and controls to ensure that its staff complied with
HUD’s and its own requirements to recapture overpaid housing assistance due to households’
unreported or underreported income. According to the Authority’s Housing Choice Voucher
program manager, the staff was aware of HUD’s system income discrepancy reports; however,
it used them only during the reexamination process to ensure that households with unreported
or underreported income correctly reported their income on their next certification. The
reports were not used to assist in the recovery of overpaid housing assistance as required.
Therefore, the Authority failed to determine and collect housing assistance that was previously
overpaid.
Conclusion
The Authority lacked adequate procedures and controls to ensure that its staff complied with
HUD’s and its own requirements to recapture overpaid housing assistance due to unreported or



10
     Public and Indian Housing (PIH) Notice PIH 2010-19, number 15
11
     Notice PIH 2010-19, number 16, and paragraph 14-II.b of the Authority’s administrative plan
                                                          11
underreported household income. As a result, more than $66,236 in program funds was not
available for other program use. Further, the Authority inappropriately earned nearly $9,400 in
administrative fees for the overpayments.
In accordance with 24 CFR 982.152(d), HUD is permitted to reduce or offset any program
administrative fees paid to a public housing agency if it fails to perform its administrative
responsibilities correctly or adequately under the program. The Authority received $9,383 in
program administrative fees related to 10 program households with unreported or underreported
income.
Recommendations
We recommend that the Director of HUD’s Indianapolis Office of Public and Indian Housing
require the Authority to
         2A. Take the appropriate actions to resolve the income discrepancies and pursue
             collection from the applicable households or reimburse its program $75,619
             ($66,236 in housing assistance payments + $9,383 in administrative fees) from
             non-Federal funds for the overpayment of housing assistance cited in this
             finding.

         2B. Ensure that its staff is appropriately trained and familiar with HUD’s
             requirements and its administrative plan regarding unreported or underreported
             income.

         2C. Implement adequate procedures and controls to ensure that the Authority
             reviews HUD’s system report during the reexamination process and that
             appropriate actions are taken when income discrepancies exceeding HUD’s
             threshold are discovered during the examination process or during its review of
             the individual income reports.

         2D. Review the remaining 46 (58-12) households on HUD’s system income
             discrepancy report to determine whether additional households have valid
             income discrepancies and if so, take appropriate actions to recover any
             overpaid housing assistance and utility allowance payments.




                                               12
Finding 3: The Authority Did Not Appropriately Manage Its
Family Self-Sufficiency Program
The Authority did not appropriately manage its Family Self-Sufficiency program. Specifically, it
did not (1) establish a program coordinating committee; (2) maintain complete and accurate
records for its active, graduated, and terminated program participants; and (3) appropriately
maintain its program bank account. The weaknesses occurred because the Authority failed to
exercise proper supervision and oversight of its program. As a result, HUD and the Authority
lacked assurance that program participants benefited from the program or had made progress
toward self-sufficiency. Further, (1) more than $8,000 in program participants’ escrow balances
was unsupported and (2) more than $55,000 was not available for its Housing Choice Voucher
program. In addition, HUD and the Authority lacked assurance that the Authority appropriately
(1) used more than $36,000 in program funds and (2) deposited $1,000 into its program account.
The Authority Did Not Establish a Coordinating Committee and Maintain Complete and
Accurate Records
Contrary to HUD’s requirements at 24 CFR 984.202(a), the Authority did not establish a
program coordinating committee to assist in (1) securing commitments of public and private
resources for the operations of the program and (2) developing the program action plan and
implementation of the program.

In addition, when we attempted to review the Authority’s program participant information for
our audit period of November 1, 2013, through October 31, 2015, it was unable to provide a list
or identify the participants that had graduated or been terminated from its program. For its active
participants, the Authority provided three lists12 with conflicting information. According to the
Authority’s participant subsidiary ledgers, 19 program participants had escrow balances totaling
$63,520 as of September 30, 2015. When we reconciled the information, we determined that its
program had approximately 12 active participants.

In reviewing the 12 active program participants’ files, we determined that the files were missing
1 or more required documents:

                 12 were missing individual training and service plans that contained specific
                  interim goals and completion dates,
                 5 individual training and services plans were missing the final goal to seek and
                  maintain suitable employment, and
                 3 were missing program applications that included a family needs assessment.

Further, a Housing Choice Voucher program household member signed a letter stating that she
was interested in participating in the program. The Authority enrolled the household based only



12
  The Authority provided three separate lists. The first list had 33 participants, the second list had 21 participants,
and the third list had 32 participants.
                                                           13
on the letter of interest and did not create or execute (1) a contract of participation, (2) an
individual training and service plan, or (3) any other documents needed for participation in the
program. The Authority also failed to establish escrow accounts for 9 of the 12 active program
participants.
The Authority Failed To Appropriately Maintain Its Program Bank Account
As stated above, according to the Authority’s participant subsidiary ledgers, 19 program
participants had escrow balances totaling $63,520 as of September 30, 2015. We reviewed the
information in the participants’ files and determined that the subsidiary ledgers included
escrow balances for 16 participants that had expired contracts of participation. Contrary to
HUD’s regulations,13 the Authority failed to (1) remove these participants from its list of
active participants and (2) transfer $55,297 in forfeited escrow funds from its program bank
account into its Housing Choice Voucher program bank account.

In addition, the Authority’s program escrow bank account statements for the period November
1, 2013, through October 31, 2015, contained two transactions, aside from earned interest, for
which the Authority’s staff could not provide support. The first transaction was a withdrawal of
$36,038, and the second was a deposit of $1,000. According to the Authority’s fee accountant,
the journal entry for the withdrawal included a note stating that the (1) withdrawal was to force
balance the account and (2) funds were deposited into the Authority’s Housing Choice Voucher
program account. However, she did not have information regarding the deposit.
The Authority Failed To Exercise Proper Supervision and Oversight of Its Program
The Authority failed to exercise proper supervision and oversight of its Family Self-
Sufficiency program. The Authority’s acting executive director and housing manager said
that they believed the program had not been fully implemented or appropriately administered
since 2011. In addition, the previous staff person responsible for a majority of the housing
assistance payments’ calculation errors (finding 1) was also responsible for managing the
Authority’s program. Therefore, the Authority was aware that there were deficiencies with
its program; however, it had not implemented corrective actions. The Authority received 5
out 10 points for its Section 8 Management Assessment program regarding the
administration of its Family Self-Sufficiency program. However, based on the deficiencies
cited in the finding, HUD may need to reevaluate the Authority’s score.
Conclusion
The weaknesses described above occurred because the Authority failed to exercise proper
supervision and oversight of its program. As a result, HUD and the Authority lacked assurance
that the program participants benefited from the program or had made progress toward self-
sufficiency. Further, (1) more than $8,000 in program participants’ escrow balances was
unsupported, and (2) more than $55,000 was not available for its Housing Choice Voucher
program. In addition, HUD and the Authority lacked assurance that the Authority appropriately
(1) used more than $36,000 in program funds and (2) deposited $1,000 into its program account.



13
     24 CFR 984.305(f)
                                               14
Recommendations
We recommend that the Director of HUD’s Indianapolis Office of Public and Indian Housing
require the Authority to
     3A. Establish a program coordinating committee.

     3B. Determine the actual number of active, graduated, and terminated participants on its
         program and provide the documentation to HUD for review.

     3C. Support or reimburse its Housing Choice Voucher program $8,223 for the
         unsupported escrow balances cited in this finding.

     3D. Transfer $55,297 in forfeitures from its program account to its Housing Choice
         Voucher program account.

     3E. Complete program applications and family needs assessments and execute
         appropriate (1) contracts of participation and (2) individual training and services
         plans for all active program participants.

     3F. Implement adequate procedures and controls to ensure that all required
         documentation is complete, accurate, and maintained in the participants’ files to
         support program eligibility.

     3G. Support or reimburse its program bank account $36,038 from its Housing Choice
         Voucher program bank account for the withdrawal to force balance the program bank
         account.

     3H. Support or reimburse its Housing Choice Voucher program bank account for the
         $1,000 deposit to the program escrow bank account cited in this finding.

     3I.   Ensure that its staff responsible for administering and monitoring its program is
           knowledgeable and complies with HUD’s and its own program requirements.

     3J.   Implement adequate procedures and controls and a corrective action plan for its
           program to ensure that the program is appropriately administered, including but not
           limited to ensuring that (1) escrow accounts are appropriately established, (2)
           monthly escrows are appropriately calculated and entered into the Authority’s
           subsidiary ledgers, (3) forfeited escrow balances are returned to the Housing Choice
           Voucher program bank account timely, and (4) its program bank account is
           appropriately maintained.

We also recommend that the Director of HUD’s Indianapolis Office of Public Housing




                                               15
3K. Review the Authority’s Section 8 Management Assessment Program results and
    consider revising its designation and if warranted, conduct a confirmatory review of
    its scoring process.




                                         16
Scope and Methodology
We performed our onsite audit work between December 2015 and May 2016 at the Authority’s
main office located at 409 East 1st Street, Muncie, IN. The audit covered the period November
1, 2013, through October 31, 2015, but was expanded as determined necessary.

To accomplish our audit objective, we interviewed HUD program staff and the Authority’s
employees. In addition, we obtained and reviewed the following:
        Applicable laws; HUD’s regulations at 24 CFR Parts 5, 908, 982, and 984; Office of
         Public and Indian Housing notices; and HUD’s Guidebook 7420.10G.

        The Authority’s program administrative plan as of January 2005; annual audited
         financial statements for 2013, 2014, and 2015; accounting records; bank statements;
         policies and procedures; board meeting minutes for November 2013 through October
         2015; organizational chart; payment standards; household and landlord reports; housing
         assistance payment register; program household files; Family Self-Sufficiency
         participant files; and Family Self-Sufficiency program action plan.
Finding 1
We statistically selected a stratified random sample of 95 monthly housing assistance payments14
from the Authority’s 18,240 monthly disbursements to landlords from November 2013 through
October 2015 (24 months). We used a statistical sample so the audit results could be projected to
the universe. Based on the 95 randomly selected housing assistance payments from the audit
universe of 18,240 housing assistance payments, we found that the overpayment per household
was an average of $4615 per tenant per month. Deducting for statistical variance to accommodate
the uncertainties inherent in statistical sampling, we can still say, with a one-sided confidence
interval of 95 percent, that this amounts to at least $2716 in overpayments per tenant per month.
Therefore, projecting this amount to the audit universe of 18,240 housing assistance payments
and deducting for statistical variance to accommodate the uncertainties inherent in statistical
sampling, we can state, with a confidence interval of 95 percent, that at least $501,000 in housing
assistance in the universe was overpaid. Over the next year, this is equivalent to an additional
overpayment of $250,500 ($501,000 x 12 months / 24 months) in housing assistance.

The calculation of administrative fees was based on HUD’s administrative fee per household
month for the Authority. The fees were considered inappropriately received for each month in
which the housing assistance was incorrectly paid and household eligibility was unsupported.



14
   The 95 monthly housing assistance payments were from the 95 household certifications, which represent 93
households.
15
   This amount was rounded for reporting purposes.
16
   This amount was rounded for reporting purposes.
                                                       17
We limited the inappropriate administrative fees to the amounts of housing assistance payment
calculation errors for the household files that had administrative fees exceeding the housing
assistance payment errors.
We ran an ad hoc report from HUD’s Public and Indian Housing Information Center system and
determined that 38 of the Authority’s program households had zero income as of October 31,
2015. We selected a random sample of 3 of the Authority’s 38 households to review and
determine whether (1) the households had unreported income and (2) the Authority adequately
managed its zero-income households. Because we did not select a statistical sample, we are
unable to project our results to the universe of the 38 households that had zero income.

Finding 2
We reviewed the income discrepancy report from HUD’s Enterprise Income Verification system
for the Authority as of March 15, 2016. The report identified 68 households that had income
discrepancies and may have unreported or underreported their income. Of the 68 households, 58
had income discrepancies above HUD’s $2,400 annual income discrepancy threshold17 totaling
$395,885. We reviewed the 12 of the 58 households that had individual income discrepancies.
The 12 households had individual income discrepancies totaling $10,000 or more per year.
Because we did not select a statistical sample, we are unable to project our results to the universe
of the 58 households that had income discrepancies above HUD’s threshold.

The calculation of administrative fees was based on HUD’s administrative fee per household
month for the Authority. The fees were considered inappropriately received for each month in
which the housing assistance was incorrectly paid and household eligibility was unsupported.
We limited the inappropriate administrative fees to the amounts of housing assistance payment
calculation errors for the household files that had administrative fees exceeding the housing
assistance payment errors.
Data, Review Results, and Generally Accepted Government Auditing Standards
We relied in part on data maintained by the Authority in its systems. Although we did not
perform a detailed assessment of the reliability of the data, we performed a minimal level of
testing and found the data to be adequately reliable for our purposes.
We provided our review results and supporting schedules to the Director of HUD’s Indianapolis
Office of Public Housing and the Authority’s acting executive director during the audit.
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.




17
     Notice PIH 2010-19, number 15 (See appendix C for criteria.)
                                                         18
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

   Effectiveness and efficiency of operations,
   Reliability of financial reporting, and
   Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

   Effectiveness and efficiency of operations – Policies and procedures that management has
    implemented to reasonably ensure that a program meets its objectives.
   Reliability of financial reporting – Policies and procedures that management has
    implemented to reasonably ensure that valid and reliable data are obtained, maintained, and
    fairly disclosed in reports.
   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that resource use is consistent with laws and
    regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

   The Authority failed to implement a quality control process and disregarded HUD’s and its
    own requirements regarding the administration of its program household files (finding 1).
   The Authority lacked adequate procedures and controls to ensure that its staff complied with
    HUD’s and its own requirements for the recapture of overpaid housing assistance due to
    unreported or underreported household income (finding 2).
                                                  19
   The Authority failed to exercise proper supervision and oversight of its Family Self-
    Sufficiency program to ensure that program participants benefited from the program or had
    made progress toward self-sufficiency (finding 3).




                                              20
Appendixes

Appendix A
           Schedule of Questioned Costs and Funds To Be Put to Better Use
     Recommendation                                                  Funds to be put
         number              Ineligible 1/        Unsupported 2/     to better use 3/
           1A                                      $496,585
             1C                                                           $936
             1F               $63,542
             1G                                                           623
             1H                                                         250,500
             1I               18,718
             1K                5,891
             1M                                                           748
             2A                                     75,619
             3C                                      8,223
             3D                                                          55,297
             3G                                     36,038
             3H                                      1,000

            Total             88,151                617,465             308,104


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.
2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.


                                             21
3/   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 instance, if the Authority implements our
     recommendations, it will (1) ensure that funds are available to provide assistance to
     eligible households and (2) stop incurring program costs for the overpayment and
     underpayment of housing assistance and, instead, will spend those funds in accordance
     with HUD’s requirements and its program administrative plan. Once the Authority
     improves its controls, this will be a recurring benefit. Our estimate reflects only the
     initial year of this benefit.




                                            22
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                              23
             Auditee Comments and OIG’s Evaluation



Ref to OIG
              Auditee Comments
Evaluation




Comment 1
Comment 2

Comment 3
Comment 4


Comment 5
Comment 6
Comment 7
Comment 8
Comment 9
Comment 10

Comment 11




                              24
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation


Comment 10


Comment 12
Comment 12

Comment 12

Comment 12
Comment 12
Comment 12
Comment 13


Comment 10

Comment 12
Comment 12
Comment 12
Comment 12




                              25
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation


Comment 12
Comment 12
Comment 12
Comment 12




Comment 12
Comment 12
Comment 12
Comment 12
Comment 12
Comment 12
Comment 12
Comment 12
Comment 12
Comment 12




                              26
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority stated that household numbers S2 and A70 are the same household.
            We agree. As cited in the scope and methodology section of this report, we
            statistically selected a stratified random sample of 95 monthly housing assistance
            payments. The 95 monthly housing assistance payments represent 93 households.
            Therefore, the housing assistance payments for two households were reviewed for
            more than 1 month, during different recertification periods. Please see the Scope
            and Methodology section of this report for details regarding the sampling
            techniques used.
Comment 2   The Authority contends that member support and Social Security number
            verifications were provided for all but two households. We disagree. We
            reviewed the documentation provided by the Authority along with its comments
            and determined that (1) four files still lacked member support for all household
            members and (2) four files lacked support that each household members’ Social
            Security number had been verified. We adjusted the report to reflect the
            documents provided; however, the Authority should work with HUD to resolve
            the remaining issues cited in the finding. In addition to the Authority’s response
            in appendix B of this report, it provided documentation contained in its exhibit B.
            We did not include these documents in the report because they were too
            voluminous; however, it is available upon request.
Comment 3   The Authority contends that it found all Citizenship Declarations in the files,
            except for one. We disagree. Of the 20 files that did not contain Citizenship
            Declarations for all households, the Authority provided support of Citizenship
            Declarations for 8. Of the eight documents provided, four were dated July 21,
            2016, three were dated July 20, 2016, and one was dated May 3, 2016. Therefore,
            these documents were not in the household files when we were onsite at the
            Authority. However, we adjusted the report to reflect the receipt of the provided
            documents. In addition to the Authority’s response in appendix B of this report, it
            provided documentation contained in its exhibit B. We did not include these
            documents in the report because they were too voluminous; however, it is
            available upon request.
Comment 4   The Authority contends that it was not aware of HUD’s requirement to complete
            criminal background checks for households before admission to its program. We
            disagree. The Authority’s Housing Choice Voucher program manager said that
            Authority did not perform household background checks, which included both a
            criminal and sex offender registry check, because they were too expensive.
            Nonetheless, the Authority should work with HUD to ensure its updated policies
            are fully implemented to ensure that criminal background checks are conducted
            for all households currently on its program as well as new admissions. In addition
            to the Authority’s response in appendix B of this report, it provided


                                             27
            documentation contained in its exhibit A. We did not include this in the report;
            however, it is available upon request.
Comment 5   The Authority stated that it has provided a current HUD form 9886 for the
            participants that did not have one signed during the audit period. We
            acknowledge that the Authority provided current forms for all households.
            However, only six HUD forms 9886 were applicable based on the effective dates
            of the certifications that were reviewed. The remaining four household files cited
            in the finding had missing or expired forms. The Authority should work with
            HUD to resolve the remaining issues cited in the finding. In addition to the
            Authority’s response in appendix B of this report, it provided documentation
            contained in its exhibit B. We did not include this in the report because it was too
            voluminous; however, it is available upon request.
Comment 6   The Authority contends that the landlord ownership documentation was located in
            the household files. Of the 22 files that were missing support for landlord
            ownership, the Authority provided documentation to support 17. Of the
            remaining five files the Authority (1) provided incorrect landlord ownership
            forms for three and (2) failed to provide documentation for two. We adjusted the
            report to reflect the documents provided. The Authority should work with HUD
            to resolve the remaining issues cited in the finding. In addition to the Authority’s
            response in appendix B of this report, it provided documentation contained in its
            exhibit B. We did not include this in the report because it was too voluminous;
            however, it is available upon request.
Comment 7   The Authority contends that the one missing lease was found in the file and
            provided the document with its comments. We acknowledge receipt of the
            missing lease and adjusted the report accordingly. In addition to the Authority’s
            response in appendix B of this report, it provided documentation contained in its
            exhibit B. We did not include this in the report because it was too voluminous;
            however, it is available upon request.
Comment 8   The Authority contends that the one missing housing assistance payment contract
            was found in the file and provided. We acknowledge receipt of the missing
            contract and adjusted the report accordingly. In addition to the Authority’s
            response in appendix B of this report, it provided documentation contained in its
            exhibit B. We did not include this in the report because it was too voluminous;
            however, it is available upon request.
Comment 9   The Authority contends that the lead based paint certifications were found in the
            file and provided. We disagree. The Authority provided documentation to
            support six of the seven missing lead based paint certifications. We adjusted the
            report to reflect the receipt of the documents. The Authority should work with
            HUD to resolve the remaining issues cited in the finding. In addition to the
            Authority’s response in appendix B of this report, it provided documentation
            contained in its exhibit B. We did not include this in the report because it was too
            voluminous; however, it is available upon request.
                                             28
Comment 10 The Authority contends that the two households we cited in the report for residing
           in units that were not affordable were actually living in units that were affordable.
           We disagree. HUD’s Regulations at 24 CFR 982.508 state that at the time the
           public housing agency approves initial occupancy of a dwelling unit, the family
           share must not exceed 40 percent of the family’s adjusted monthly income. The
           Authority provided documentation to support that one of two households was in
           an affordable unit; therefore, we adjusted the report accordingly. However for the
           remaining household cited in the finding, at initial occupancy the unit was not
           affordable and the household’s share exceeded 40 percent of the adjusted monthly
           income. In addition to the Authority’s response in appendix B of this report, it
           provided documentation contained in its exhibit B. We did not include this in the
           report because it was too voluminous; however, it is available upon request.
Comment 11 The Authority requested that we recalculate the amount of reimbursement for the
           unsupported documents. We updated the report to reflect the receipt of the
           documents provided. However, all 93 files were still missing 1 or more
           documents to support the households’ eligibility and continued assistance on the
           program. Therefore, the Authority should work with HUD to resolve the
           remaining missing support documentation.
Comment 12 We acknowledge the Authority’s agreement with our recommendation. It should
           work with HUD to resolve the recommendation (s) during the audit resolution
           process.
Comment 13 For recommendation 1L, the Authority stated that it has updated its policy and
           obtained board approval on May 10, 2016. We acknowledge that the Authority
           provided (1) a copy of its updated policy and (2) evidence that its board approved
           the updated policy. The Authority also contends that the policy should be
           implemented going forward and current households on its program should be
           “grandfathered in”. We disagree. HUD’s Regulations at 24 CFR 5.856 states that
           standards must be established to prohibit admission to federally assisted housing
           if any member of the household is subject to a lifetime registration requirement
           under a State sex offender registration program. In the screening of applicants,
           necessary criminal history background checks must be performed in the State
           where the housing is located and in other States where the household members are
           known to have resided. The Authority should work with HUD to ensure that it (1)
           fully implements its updated policy and (2) completes criminal background
           checks for all households currently on its program as well as new admissions.




                                              29
Appendix C
                              Federal and Authority Requirements

Finding 1
Regulations at 24 CFR 5.210(a) state that applicants for and participants in covered HUD
programs are required to disclose and submit documentation to verify their Social Security
numbers.

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

Regulations at 24 CFR 5.855(a) state that a public housing agency may prohibit the admission of
a household to federally assisted housing under its standards if it determines that any household
member is engaging in or has engaged in during a reasonable time before the admission decision
(1) drug-related criminal activity; (2) violent criminal activity; (3) other criminal activity that
would threaten the health, safety, or right to peaceful enjoyment of the premises by other
residents; or (4) other criminal activity that would threaten the health or safety of the agency,
owner, or any employee.

Regulations at 24 CFR 5.856 state that standards must be established to prohibit admission to
federally assisted housing if any member of the household is subject to a lifetime registration
requirement under a State sex offender registration program. In the screening of applicants,
necessary criminal history background checks must be performed in the State where the housing
is located and in other States where the household members are known to have resided.

Regulations at 24 CFR 908.101 state that applicable program entities must retain at a minimum,
the last 3 years of the form HUD-50058 and supporting documentation, during the term of each
assisted lease and for a period of at least 3 years from the end of the participation date, to support
billings to HUD and permit an effective audit.
Regulations at 24 CFR 982.158(e) state that during the term of each assisted lease and for at least
3 years thereafter, the agency must keep (1) a copy of the executed lease, (2) the housing
assistance payments contract, and (3) the application from the family. Paragraph (f) states that
the agency must keep the following records for at least 3 years: lead-based paint records and
records to document the basis for the determination that the rent to the owner is a reasonable rent
(initially and during the term of a housing assistance payments contract).
Regulations at 24 CFR 982.302(c) state that the family must submit to the agency a request for
approval of the tenancy and a copy of the lease, including the HUD-prescribed tenancy
addendum.

Regulations at 24 CFR 982.305(c) state that the housing assistance payments contract must be
executed no later than 60 calendar days from the beginning of the lease term. Any contract
                                                 30
executed after the 60-day period is void, and the agency may not make any housing assistance
payments to the owner.

Regulations at 24 CFR 982.308(b) state that the tenant and the owner must enter into a written
lease for the unit. The lease must be executed by the owner and the tenant.

Regulations at 24 CFR 982.516(a) state that the public housing agency must reexamine family
income and composition at least annually. The agency must obtain and document in the tenant
file third-party verification of the following factors or must document in the tenant file why
third-party verification was not available: reported family annual income, the value of assets,
expenses related to deductions from annual income, and other factors that affect the
determination of adjusted income. Paragraph (f) states that the agency must establish procedures
that are appropriate and necessary to ensure that income data provided by an applicant or
participating families are complete and accurate.
Regulations at 24 CFR 982.508 state that at the time the public housing agency approves initial
occupancy of a dwelling unit, the family share must not exceed 40 percent of the family’s
adjusted monthly income.

Regulations at 24 CFR 982.517(d)(2) state that at reexamination, the public housing agency must
use the agency’s current utility allowance schedule.

HUD’s Housing Choice Voucher Guidebook, 7420.10G, section 11.4, states that the most
important objectives of the public housing agency regarding the processing of housing assistance
payments are to issue checks to owners on time and for the correct amount.

HUD’s Housing Choice Voucher Guidebook, 7420.10G, section 22.3, states that quality control
should include a review of the housing assistance payments processing function to detect and
prevent recurring errors, omissions, fraud, or abuse. The objective of this review is to first
determine whether the housing assistance payment to the owner is correct, based on the payment
standard and family contribution. Second, this review ensures that the payment being made to
the owner matches the amount shown on the agency’s housing assistance payment register.
Third, it also confirms that any change in rent resulting from a recertification or interim change
is properly reflected in the housing assistance payment to the owner. Fourth, it protects against
payments being made on a housing assistance payments contract that has been terminated.
Finally, this review protects against payments for a unit that has failed to meet HUD’s housing
quality standards and when the owner has not corrected the deficiency.

Paragraph 11-II.C of the Authority’s program administrative plan states that if a household
reports zero income, the Authority will conduct an interim reexamination every 3 months as long
as the household continues to report that it has no income.

Finding 2
Regulations at 24 CFR 5.233(a)(2) state that processing entities must use HUD’s Enterprise
Income Verification system in its entirety “(i) as a third party source to verify tenant employment

                                                31
and income information during mandatory reexaminations or recertification of family
composition and income and administrative guidance issued by HUD; and (ii) to reduce
administrative and subsidy payment errors in accordance with HUD administrative guidance.”
Regulations at 24 CFR 5.233(b) state that failure to use the Enterprise Income Verification
system in its entirety may result in the imposition of sanctions, the assessment of disallowed
costs associated with any resulting incorrect subsidy or tenant rent calculations, or both.
Regulations at 24 CFR 5.236(b)(2) state that upon receiving income information from a State
wage information collection agency or a Federal agency, HUD or when applicable, the public
housing agency should compare the information with the information about a family’s income
that was “(i) provided by the assistance applicant or participant to the public housing agency.”
Regulations at 24 CFR 5.236(b)(3) state that when the income information reveals an employer
or other income source that was not disclosed by the assistance applicant or participant or when
the income information differs substantially from the information received from the assistance
applicant or participant or from his or her employer, “(i) HUD or, as applicable or directed by
HUD, the public housing authority should request the undisclosed employer or other income
source to furnish any information necessary to establish an assistance applicant’s or participant’s
eligibility for or level of assistance in a covered program. This information should be furnished
in writing, as directed to: (B) the responsible entity (as defined in 24 CFR part 5.100) in the case
of the public housing program or any Section 8 program; or (ii) HUD or the public housing
authority may verify the income information directly with an assistance applicant or participant.
Such verification procedures should not include any disclosure of income information prohibited
under paragraph (b)(6) of this section.”
Public and Indian Housing Notice 2010-19,18 number 3, states that on December 29, 2009, HUD
issued the final rule, entitled Refinement of Income and Rent Determination Requirements in
Public and Assisted Housing Programs: Implementation of the Enterprise Income Verification
System - Amendments, which requires public housing agencies to use the system in its entirety
to verify tenant employment and income information during mandatory reexaminations of family
composition and income and reduce administrative and subsidy payment errors.
Public and Indian Housing Notice 2010-19, number 6, states that all public housing agencies are
required to review the system income report of each family before or during mandatory annual
and interim reexaminations of family income and composition to reduce tenant underreporting of
income and improper subsidy payments. The system also provides various reports to assist
public housing agencies with “(d) identifying tenants who may not have reported complete and
accurate income information and (e) identifying tenants who have started a new job.”




18
     Notice PIH 2015-02 (HA), issued, January 9, 2015, extends Notice PIH 2010-19.



                                                        32
Public and Indian Housing Notice 2010-19, number 14, states that to ensure that public housing
agencies are aware of potential subsidy payment errors, they are required to monitor HUD’s
Enterprise Income Verification system “(1) income discrepancy report quarterly.”
Public and Indian Housing Notice 2010-19, number 15, explains how to use HUD’s Enterprise
Income Verification system income report as a third-party source to verify tenant employment
and income information. All system income reports contain the date the report was generated
and by whom and the date the system received each type of information. To minimize tenant
underreporting of income, public housing agencies are required to obtain a system income report
for each family any time the public housing agency conducts an annual or interim reexamination
of family income and composition. In accordance with 24 CFR 5.236(b)(2)(3), public housing
agencies are required to compare the information on the system report with the family-reported
information. If the system report reveals an income source that was not reported by the tenant or
a substantial difference in the reported income information, the public housing agency is required
to take the following actions:
  1. Discuss the income discrepancy with the tenant;
  2. Request that the tenant provide any documentation to confirm or dispute the unreported or
     underreported income and income sources;
  3. If the tenant is unable to provide acceptable documentation to resolve the income
     discrepancy, request from the third-party source any information necessary to resolve the
     income discrepancy;
  4. If applicable, determine the tenant’s underpayment of rent as a result of unreported or
     underreported income, retroactively;* and
  5. Take any other appropriate action as directed by HUD or the public housing agency’s
     administrative policies.

*The public housing agency is required to determine the retroactive rent as far back as the
existence of complete file documentation (form HUD-50058 and supporting documentation) to
support such retroactive rent determinations. A substantial difference is defined as an amount
equal to or greater than $2,400 annually.
Public and Indian Housing Notice 2010-19, number 16, states that tenants are required to
reimburse the public housing agency if they were charged less rent than required by HUD’s rent
formula due to the tenant’s underreporting or failure to report income. The tenant is required to
reimburse the public housing agency for the difference between the tenant rent that should have
been paid and the tenant rent that was charged. This rent underpayment is commonly referred to
as retroactive rent. If the tenant refuses to enter into a repayment agreement or fails to make
payments on an existing or new repayment agreement, the public housing agency must terminate
the family’s tenancy or assistance or both. HUD does not authorize public housing agency-
sponsored amnesty or debt forgiveness programs. All repayment agreements must be in writing,
dated, and signed by both the tenant and the public housing agency and include the total
retroactive rent amount owed, the amount of lump-sum payment made at time of execution if
applicable, and the monthly repayment amount.



                                               33
Public housing agencies are required to determine the retroactive rent amount as far back as the
public housing agency has documentation of family-reported income. For example, if the public
housing agency determines that the family has not reported income for a period of 5 years and
has documentation for only the last 3 years, the public housing agency is able determine
retroactive rent only for the 3 years for which documentation is available. The monthly
retroactive rent payment plus the amount of rent the tenant pays at the time the repayment
agreement is executed should be affordable and not exceed 40 percent of the family’s monthly
adjusted income. However, public housing agencies have the discretion to establish thresholds
and policies for repayment agreements in addition to HUD-required procedures.
Finding 3
Regulations at 24 CFR 984.103 define an individual training and services plan as a written plan
that is prepared for the head of the family and each adult member of the family who elects to
participate in the program by the public housing agency in consultation with the family member
and which sets forth
 (1) The supportive services to be provided to the family member,
 (2) The activities to be completed by that family member, and
 (3) The agreed-upon completion dates for the services and activities. Each individual training
     and services plan must be signed by the public housing agency and the participating family
     member and is attached to and incorporated as part of the contract of participation. An
     individual training and services plan must be prepared for the head of the family.
Regulations at 24 CFR 984.305(a)(1) state that the public housing agency must deposit the
Family Self-Sufficiency account funds of all families participating in the public housing
agency’s Family Self-Sufficiency program into a single depository account. The public housing
agency must deposit the Family Self-Sufficiency account funds into one or more of the HUD-
approved investments.
Regulations at 24 CFR 984.305(a)(2)(i) state that the total of the combined Family Self-
Sufficiency account funds will be supported in the public housing agency’s accounting records
by a subsidiary ledger showing the balance applicable to each Family Self-Sufficiency family.
During the term of the contract of participation, the public housing agency should credit
periodically but not less than annually to each family’s Family Self-Sufficiency account the
amount of the Family Self-Sufficiency credit determined in accordance with paragraph (b) of this
section.
Regulations at 24 CFR 984.305(f)(1) state that the amount in the Family Self-Sufficiency
account should be forfeited upon the occurrence of the following:
 “(i) The contract of participation is terminated, or
 (ii) The contract of participation is completed by the family but the family is receiving welfare
     assistance at the time of expiration of the term of the contract of participation, including any
     extension thereof.”

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Regulations at 24 CFR 984.305(f)(2)(ii) state that the family self-sufficiency account funds
forfeited by the family will be treated as program receipts for payment of program expenses
under the public housing agency’s budget for the applicable Housing Choice Voucher program
and should be used in accordance with HUD requirements governing the use of program
receipts.
Form HUD-52650, Program Contract of Participation, states that the contract must include an
individual training and services plan for the head of the family.
Form HUD-52650, Program Contract of Participation, states that interim goals must be specified
along with the activities and services needed to achieve them.
Form HUD-52650, Program Contract of Participation, states that the final goal listed on the
individual training and services plan of the head of the family must include getting and
maintaining suitable employment specific to that individual’s skills, education, job training, and
the available job opportunities in the area.
Regulations at 24 CFR 984.305(f) state that the amounts in the program account should be
forfeited upon termination of the contract of participation.

Regulations at 24 CFR 984.202(a) state that each participating public housing agency must
establish a program coordinating committee to assist the public housing agency in securing
commitments of public and private resources for the operations of the program within the public
housing agency’s jurisdiction, including assistance in developing the action plan and
implementing the program.




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