oversight

Officials of the Rochester Housing Authority, Rochester, NY, Generally Administered the Housing Choice Voucher Program in Accordance with HUD Regulations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-08-05.

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

           Rochester Housing Authority
                 Rochester, NY
                  Housing Choice Voucher Program




Office of Audit, Region 2          Audit Report Number: 2016-NY-1008
New York-New Jersey                                   August 05, 2016
To:            Lisa Pugliese, Director
               Office of Public Housing, Buffalo, NY, 2PH

               \\SIGNED\\
From:          Kimberly Greene
               Regional Inspector General for Audit, 2AGA
Subject:       Officials of the Rochester Housing Authority, Rochester, NY, Generally
               Administered the Housing Choice Voucher Program in Accordance With HUD
               Regulations


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 Rochester Housing Authority,
Rochester, NY 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
(212) 264-4174.
                    Audit Report Number: 2016-NY-1008
                    Date: August 05, 2016

                    Officials of the Rochester Housing Authority, Rochester, NY, Generally
                    Administered the Housing Choice Voucher Program in Accordance With
                    HUD Regulations



Highlights
         Administer Its Community Development Block Grant Program in
         Accordance With HUD Requirements


What We Audited and Why
We audited the Rochester Housing Authority’s Housing Choice Voucher program to address our
goal to contribute to improving the U.S. Department of Housing and Urban Development’s
(HUD) execution of its fiscal responsibilities. We selected this auditee based on a risk analysis
of public housing agencies administered by the HUD Buffalo field office, which considered,
among other factors, funds received and the number of program housing units. The audit
objective was to determine whether Authority officials administered the Housing Choice
Voucher program in accordance with HUD regulations and the Authority’s own administrative
plan.

What We Found
Authority officials generally administered the Housing Choice Voucher program in accordance
with HUD regulations; however, program controls could be strengthened and procedures updated
to provide greater assurance that housing assistance payments are correctly calculated and
adequately supported and subsidized units comply with HUD’s housing quality standards.
Authority officials made errors in calculating tenants’ program subsidies, did not always identify
housing quality standards deficiencies in program units, and lacked written procedures for
conducting housing quality standards quality control inspections. As a result, Authority officials
spent $2,684 in ineligible and $4,238 in unsupported housing assistance payments, and
subsidized units did not always comply with HUD standards.

What We Recommend
We recommend that the Director of HUD’s Buffalo Office of Public and Indian Housing instruct
Authority officials to (1) reimburse the program from non-Federal funds $2,684 in ineligible
housing assistance payments, (2) provide documentation to adequately support the eligibility of
$4,238 in unsupported housing assistance payments, (3) revise procedures to ensure that
documents required for determining tenant housing assistance payments are maintained for all
active tenants, (4) provide training to Authority inspection staff to provide greater assurance that
they are aware of HUD’s housing quality standards requirements, and (5) develop written
procedures to document the Authority’s housing quality standards quality control process.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: Authority Officials Generally Administered the Housing Choice
         Voucher Program in Accordance With Regulations…………….……………….4

Scope and Methodology ...........................................................................................7

Internal Controls ......................................................................................................9

Appendixes ..............................................................................................................10
         A. Schedule of Questionable Costs ............................................................................... 10

         B. Auditee Comments and OIG’s Evaluation ............................................................. 11




                                                             2
Background and Objective
The United States Housing Act of 1937 established the Federal framework for government-
owned affordable housing and was amended by the Quality Housing and Work Responsibility
Act of 1998. The U.S. Department of Housing and Urban Development (HUD) provides
funding for rent subsidies for tenants eligible for the Housing Choice Voucher program.
The Rochester Housing Authority was created in 1955 to service lower income families, seniors,
and disabled citizens. The Authority is the regional public housing agency for the five-county
Greater Rochester, NY, region. Established by New York State Public Housing Law, there are
currently seven board members: five appointed by the mayor for a 5-year term and two
appointed by Authority residents for a 2-year term. The board appoints an executive director
who manages the day-to-day activities of the Authority.
The Authority’s Housing Choice Voucher program received more than $46.7 million and $44.3
million in Housing Choice Voucher program funds from HUD in fiscal years 2015 and 2014,
respectively, to administer more than 9,000 Section 8 units, the most of any of the 100 public
housing agencies administered by the HUD Buffalo field office.
The objective of the audit was to determine whether Authority officials administered the
Housing Choice Voucher program in compliance with HUD regulations. Specifically, we
reviewed the Authority’s (1) admission policies, (2) initial application and recertification
procedures, (3) rental assistance payment and unit size determinations, (4) procurement actions,
and (5) compliance with housing quality standards.




                                                3
Results of Audit

Finding: Authority Officials Generally Administered the Housing
Choice Voucher Program in Accordance With Regulations
Authority officials generally administered the Housing Choice Voucher program in accordance
with HUD regulations; however, program controls could be strengthened and procedures updated
to provide greater assurance that housing assistance payments are correctly calculated and
adequately supported and subsidized units comply with HUD’s housing quality standards.
Authority officials made errors in calculating tenants’ subsidies, did not always identify housing
quality standards deficiencies in program units, and lacked written procedures for conducting
housing quality standards quality control inspections. We attributed this deficiency to Authority
officials’ errors in calculating housing assistance payments and performing housing quality
standards inspections. As a result, Authority officials spent $2,684 in ineligible and $4,238 in
unsupported housing assistance payments, and subsidized units had housing quality standards
deficiencies.

Authority Administrative Plan Complied With HUD Regulations
Authority officials had established and implemented an administrative plan in accordance with
HUD regulations and the guidance in HUD’s Housing Choice Voucher Program Guidebook
(7420.10G). Authority officials’ administration of the admission process, including operation of
the waiting list, application and recertification procedures, and assignment of tenants to the
correct unit size, complied with HUD regulations. Specifically, Authority officials maintained a
single waiting list for program applicants, including specific applicant information; updated the
waiting list annually; and generally certified the number and age of applicant family household
members before issuing vouchers to ensure that the family received a voucher for the correct unit
size. In addition, Authority officials had established and implemented a procurement policy that
complied with HUD regulations.

Housing Assistance Payments Were Ineligible and Unsupported
Authority officials incorrectly calculated subsidies in 2 of 14 tenant files reviewed, which
resulted in subsidy overpayments of $2,684. For one of the tenants, Authority officials
miscalculated the income and used the incorrect payment standard, causing a monthly
overpayment of $217 to the landlord, which resulted in a total overpayment of $2,604 for the 12
months in which the certification was effective. For the second tenant, Authority officials used
an incorrect utility allowance, which caused a monthly subsidy overpayment of $10, resulting in
an $80 total overpayment for the 8 months in which the certification was effective. Regulations
at 24 CFR (Code of Federal Regulations) 5.240(c) require Authority officials to verify the
accuracy of income information from the program tenant, and section III(C) of the Authority’s
administrative plan requires the accurate determination of program subsidies. We attributed the
errors noted above to mistakes made by Authority officials responsible for calculating housing
assistance payments. In addition, Authority officials lacked support for the subsidy payment for
another file reviewed, resulting in $4,238 in unsupported costs. The documents supporting the



                                                4
subsidy payment for this file, such as the housing assistance payments contract and tenant
income information, had been purged. We attributed this deficiency to the Authority’s policy of
purging tenant file information after 3 years, regardless of whether the information supports
subsidy payments less than 3 years old.
Units Did Not Always Comply With Housing Quality Standards
Regulations at 24 CFR 982.401 and section 10.1 of HUD’s Housing Choice Voucher Program
Guidebook (7420.10G) require that units meet basic housing quality standards to meet the goal
of the program to provide decent, safe, and sanitary housing to low-income families. While the
14 subsidized units tested for compliance with housing quality standards did not materially fail,
17 deficiencies were identified in 9 of the units as noted in the chart below.

Deficiency        Unit 1   Unit 2   Unit 3   Unit 4       Unit 5   Unit 6   Unit 7   Unit 8   Unit 9   Total
Broken glass        X                                                X                                  2
Water in
basement-mold
in unit             X                                                                  X                2
Gap in window
frames                       X                 X                                                        2
Loose or
missing
handrails                    X                                       X                          X       3
Electrical                            X                     X                                           2
Infestation                                    X                                                        1
Roof-gutters                                   X            X                                           2
Siding                                                      X                                           1
Exterior hazard                                                               X                         1
Inoperable
smoke detector                        X                                                                 1
Total
deficiencies        2        2        2        3            3        2        1        1        1       17


We attributed these conditions to Authority inspectors’ errors when conducting inspections.

Written Housing Quality Standards Quality Control Procedures Were Lacking
While Authority officials conducted quality control procedures in accordance with regulations at
24 CFR 982.405, they did not have written procedures for the quality control process, such as a
methodology for selecting units for quality control reviews and the number of units to be
reviewed. We attributed this deficiency to errors on the part of Authority officials. Without such
written procedures, the Authority lacked assurance that its housing quality standards quality
control process would be implemented as required.
Conclusion
Authority officials generally administered the Housing Choice Voucher program in accordance
with HUD regulations; however, they made errors in calculating tenants’ subsidies, did not
always identify housing quality standards deficiencies in program units, and lacked written


                                                      5
procedures for conducting housing quality standards quality control inspections. We attributed
this deficiency to errors on the part of Authority officials. As a result, Authority officials spent
$2,684 in ineligible and $4,238 in unsupported housing assistance payments, and subsidized
units had housing quality standards deficiencies.
Recommendations
We recommend that the Director of the HUD’s Buffalo Office of Public and Indian Housing
instruct Authority officials to
       1A.     Reimburse the program from non-Federal funds $2,684 in ineligible housing
               assistance paid as a result of Authority officials’ calculation errors.
       1B.     Provide documentation to adequately support the eligibility of the $4,238 in
               unsupported housing assistance payments. Any amount determined to be
               unsupported should be reimbursed to the program from non-Federal funds.
       1C.     Revise procedures to ensure that tenant files are documented.
       1D.     Provide training to Authority inspection staff on HUD’s housing quality standards
               requirements.
       1E.     Develop written procedures to document the housing quality standards quality
               control process.




                                                   6
Scope and Methodology
We performed the audit fieldwork at the Authority’s office in Rochester, NY, between January
and May 2016. The audit scope covered the period January 1, 2014, through December 31,
2015, and was extended as necessary. The files and records related to the Authority’s Housing
Choice Voucher program are maintained at this office located at 675 West Main Street,
Rochester, NY.
To accomplish the audit objective, we
      Reviewed HUD’s Housing Choice Voucher program regulations and the Authority’s
       program policies and procedures.
      Documented and obtained an understanding of the Authority’s financial and
       administrative controls.
      Interviewed Authority officials to obtain an understanding of Housing Choice Voucher
       program processes.
      Reviewed the Authority’s independent public accountant reports for 2012 through 2014
       and HUD correspondence files for 2014 and 2015.
      Evaluated internal controls and reviewed computer controls to identify potential
       weaknesses related to our objective. We relied in part on computer-processed data
       primarily for obtaining background information on the Authority’s Section 8 Housing
       Choice Voucher program. We performed a minimal level of testing and found the data to
       be adequate for our purposes.
      Reviewed the Authority’s HUD-approved annual contributions contract.
      Reviewed records of the Authority’s board meeting minutes.
      Selected a statistical sample of 14 tenant files from the housing assistance payment
       register to test compliance with HUD regulations regarding (1) tenant eligibility, (2) unit
       size, (3) rent reasonableness determination, (4) subsidy compliance, (5) tenant share of
       the rent, and (6) timely recertification. The period sampled was from the 2014 and 2015
       program years.
      Selected a statistical sample of 14 Housing Choice Voucher program units from the
       inspection register for units that passed within the most recent 3 months to test
       compliance with HUD housing quality standards requirements.
      Reviewed the Authority’s procurement process for the contract awarded to an attorney
       for landlord-tenant legal services.
      Reviewed Authority officials’ administration of the Housing Choice Voucher program
       waiting list and the selection of tenants to receive program assistance.




                                                 7
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.




                                                8
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

   Effectiveness and efficiency of operations,
   Reliability of financial reporting, and
   Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

   Program operations – Policies and procedures that management has implemented to reasonably
    ensure that a program meets its objectives.
   Reliability of financial data – Policies and procedures that management has implemented to
    reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in
    reports.
   Laws and regulations – Policies and procedures that management has implemented to
    reasonably ensure that resource use is consistent with laws and regulations.
   Safeguarding of resources – Policies and procedures that management has implemented to
    reasonably ensure that resources are safeguarded against waste, loss, and misuse.
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.




                                                   9
Appendixes

Appendix A


                           Schedule of Questioned Costs
                 Recommendation
                                    Ineligible 1/  Unsupported 2/
                     number
                         1A               $2,684
                         1B                                  $4,238
                       Totals             $2,684             $4,238


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.




                                              10
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1


Comment 2




Comment 3




                               11
Comment 4


Comment 5




Comment 6


Comment 7




            12
                          OIG Evaluation of Auditee Comments


Comment 1    Authority officials concur that an error resulting in an $80 total overpayment for
             the participant was made. Therefore, Authority officials need to reimburse the
             program $80 from non-Federal funds.
Comment 2    Authority officials stated that an overpayment was not made for the participant
             because the gross rent ($977) does not exceed the payment standard of $1,073 that
             should have been used. However, Authority officials are incorrect in stating that
             $1,073 is the payment standard for this tenant during the certification period
             reviewed. Specifically, our review of the November, 1, 2014 recertification
             determined that $878 is the correct payment standard for a 2 bedroom unit as per
             Authority policy to use the previous period payment standard for calculating
             participant subsidy when the payment standard increases. The payment standard
             of $1,073 was the previous period payment standard for a 3 bedroom unit;
             however, the participant was denied a request for a 3 bedroom unit and only
             qualified for a 2 bedroom unit. Authority officials also understated the
             participant’s income, due to the participant returning to work. As a result of these
             two errors, the monthly subsidy to the landlord was overpaid by $217 resulting in
             an overpayment for twelve months totaling $2,604. Therefore, Authority officials
             need to reimburse the program $2,604 from non-Federal funds.
Comment 3    Authority officials concur that the housing assistance payment contract for the
             unit was not in the file for the participant because the Authority’s records
             retention policy allowed staff to purge or destroy information in 2012 after being
             kept for 3 years. Authority officials stated that electronic information entered into
             the Authority’s computer system showed the income determined, payment
             standard used, and the utility chart used. Authority officials provided us with
             attachments which are not included here, but are available upon request.
             However, Authority officials were unable to provide source documents to verify
             the accuracy of tenant income information and other data entered into the
             Authority’s computer system. Therefore, the $4,328 in subsidy paid on behalf of
             this participant remains unsupported.
Comment 4 Authority officials stated that they have strengthened and revised records
          retention procedures as a result of the audit. Authority officials revised their
          procedures in this area; however, they need to provide HUD with these revised
          procedures during the audit resolution process and HUD can verify that they are
          being adequately implemented.
Comment 5    Authority officials concur that some HQS deficiencies were not identified by
             Authority officials during their original inspections, but that some were repaired,
             and didn’t hold up. We disagree with Authority officials that deficiencies, such as
             mold, could have reoccurred subsequent to their repair less than 3 months earlier.




                                               13
Comment 6   Authority officials state that they have strengthened their HQS quality control
            procedure pertaining to performing quality control inspections. Authority
            officials have formalized their HQS quality control process, however, they need
            to provide HUD with these revised procedures during the audit resolution process
            and HUD can verify that they are being adequately implemented.
Comment 7   Authority officials state that HQS inspectors received HQS certification in May
            2016 and attend training on a regular basis. Authority officials need to provide
            HUD with documentation supporting the HQS certifications and trainings during
            the audit resolution process.




                                             14