oversight

Solace LLC, Rexburg, ID, Did Not Always Correctly Compute Tenant Annual Income, Conduct Timely Tenant Income Verifications, or Request the Appropriate Assistance When Tenants Moved Out

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-09-12.

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

               Solace LLC, Rexburg, ID
       Section 8 Housing Assistance Payments Program




Office of Audit, Region 10     Audit Report Number: 2016-SE-1003
Seattle, WA                                    September 12, 2016
To:            Thomas W. Azumbrado, Director, San Francisco Multifamily Housing Hub,
               9AHMLAP
               //signed//
From:          Ronald Hosking, Regional Inspector General for Audit, 0AGA
Subject:       Solace LLC, Rexburg, ID, Did Not Always Correctly Compute Tenant Annual
               Income, Conduct Timely Tenant Income Verifications, or Request the
               Appropriate Assistance When Tenants Moved Out


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of Solace LLC’s Section 8 housing assistance
payments 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
913-551-5870.
                    Audit Report Number: 2016-SE-1003
                    Date: September 12, 2016

                    Solace LLC, Rexburg, ID, Did Not Always Correctly Compute Tenant
                    Annual Income, Conduct Timely Tenant Income Verifications, or Request
                    the Appropriate Assistance When Tenants Moved Out


Highlights

What We Audited and Why
We audited Solace LLC’s Section 8 housing assistance payments program because of the results
of our previous audit of another multifamily property. The person responsible for housing
assistance program issues at the other property was also Solace’s manager. Our objectives were
to determine whether Solace correctly computed tenant annual income, conducted timely tenant
income verifications, and requested assistance for tenants after they moved out.

What We Found
Solace did not always correctly compute tenant annual income or conduct timely tenant income
verifications. As a result, it overcharged the U.S. Department of Housing and Urban
Development (HUD) more than $7,100 for housing assistance and overcharged three tenants
more than $700. In addition, Solace requested housing assistance for tenants after they had
moved out and overcharged HUD almost $600 for these tenants.

What We Recommend
We recommend that the Director of the San Francisco Office of Multifamily Housing Programs
require Solace to (1) provide support for $6,804 in overcharged housing assistance that was
based on unverified income and reimburse HUD any amount that remains unsupported; (2)
reimburse HUD $320 in overcharged assistance and $584 that it charged for tenants who had
moved out; (3) reimburse three tenants who overpaid rent by $714; (4) conduct periodic reviews
of tenant files to ensure that its manager correctly calculates housing assistance payments,
adequately documents the completion of required annual recertifications, and does not request
assistance from HUD for tenants after they move out.
We also recommend that the Director provide technical assistance to ensure that Solace’s
manager understands the requirements in the Monthly Activity Transmission Guide, paragraph
7-12(E), and review Solace’s tenant files 1 year later to determine whether this requirement is
understood and being followed.
Table of Contents
Background and Objectives ....................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: Solace Did Not Always Correctly Compute Tenant Annual Income or
         Conduct Timely Tenant Income Verifications ............................................................... 4
         Finding 2: Solace Requested Assistance for Tenants After They Had Moved Out ... 6

Scope and Methodology ...........................................................................................8

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

Appendixes ..............................................................................................................10
         A. Schedule of Questioned Costs .................................................................................. 10
         B. Auditee Comments and OIG’s Evaluation ............................................................. 11
         C. Incorrect Assistance Amounts Noted in Tenant Files ........................................... 15
         D. Criteria ....................................................................................................................... 16




                                                                     2
Background and Objectives
Solace LLC
Solace LLC is the owner of Rexburg Plaza Apartments, a 40-unit multifamily property in
Rexburg, ID. Solace has owned and managed Rexburg Plaza since June 2006. The U.S.
Department of Housing and Urban Development (HUD) made housing assistance payments to
Solace under a Section 8 contract that covered all 40 units. During our audit period, HUD
provided Solace more than $763,000 in Section 8 housing assistance payments.




                                                                                                    
  Figure 1      Rexburg Plaza Apartments            Figure 2     Rexburg Plaza Apartments

Section 8 Housing Assistance Payments Program
The project-based Section 8 housing assistance payments program provides rental assistance to
low-income individuals and families, enabling them to live in affordable, decent, safe, and
sanitary housing. HUD makes the assistance payment to the owner of an assisted unit on behalf
of an eligible family, defined as having income at or below 80 percent of the area median income
adjusted for family size. The family pays the higher of (1) 30 percent of its monthly adjusted
income, (2) 10 percent of its monthly income, (3) welfare rent (if applicable), and (4) $25
minimum rent. The owner or management agent calculates the amount of the assistance
payment, which is the difference between the contract rent and the family’s share of the rent.
The owner is responsible for reexamining the family’s income and composition at least once
each year and adjusting the amount of assistance payments accordingly.
Our objectives were to determine whether Solace (1) correctly computed tenant annual income,
(2) conducted timely tenant income verifications, and (3) requested assistance for tenants after
they moved out.




                                                3
Results of Audit

Finding 1: Solace Did Not Always Correctly Compute Tenant
Annual Income or Conduct Timely Tenant Income Verifications
Solace did not always correctly compute tenant annual income or conduct timely tenant income
verifications. This condition occurred because Solace lacked a process for reviewing its
manager’s income verifications and calculations. As a result, it overcharged HUD more than
$7,100 for housing assistance and overcharged three tenants more than $700.

Unperformed Income Verifications
Of the 13 tenants reviewed, the manager did not reverify one tenant’s income when reinstating
his assistance. To ensure that assisted tenants pay rents according to their ability to pay, HUD
Handbook 4350.3 requires owners to verify income, assets, expenses, deductions, and all
eligibility requirements before move-in. In addition, it requires that owners recertify family
income and composition at least annually. If a tenant does not receive assistance payments and
then later begins receiving them, the annual recertification date will change to the first day of the
month in which the tenant began receiving that assistance. The manager agreed that she should
have processed this tenant’s reinstatement like a move-in or an annual reexamination and
verified all of the necessary information at that time. However, the tenant file contained no
recent documentation to support the tenant’s education grants or his bank balances. Verification
documents are valid for only 120 days, yet the previous documentation verifying these items was
dated roughly 1 year before the reexamination date.
Incorrect Annual Income
Solace’s manager did not always correctly calculate annual income for its tenants. HUD
Handbook 4350.3 requires owners to verify tenants’ income and accurately calculate their rents.
However, the manager made mathematical errors when determining the annual income for 6 of
the 13 tenants, such as not averaging the income over the correct number of pay periods or hours.
Similarly, the manager did not apply one tenant’s veterans’ benefits over the correct number of
months, and when determining another tenant’s overtime income, the manager failed to include
all of the overtime documented for the period. The manager also included financial aid income
when it should have been excluded for one tenant and excluded it for another tenant when it
should have been included.
Inadequate Review Process
Solace did not have a review process to assess whether its manager verified tenant income and
accurately calculated the tenants’ housing assistance payments before requesting funds from
HUD. Not only did the manager compute the assistance amounts, but she also submitted the
payment requests to the HUD performance-based contract administrator that is responsible for
managing Section 8 assistance in Idaho. This manager was the only administrative staff member
onsite, and when Solace’s owner visited Rexburg Plaza, he reviewed the property’s financial
position but did not examine the manager’s housing assistance calculations or the tenant files.


                                                  4
Unsupported and Overcharged Assistance and Rent
Solace charged HUD more than $6,800 in housing assistance for the reinstated tenant. Without
the required verifications, this recertification was incomplete. Therefore, the monthly assistance
amount was unsupported. The $6,800 unsupported amount was the total of housing assistance
charged for the 12 months after reinstatement and until Solace processed the next recertification.
Solace overcharged HUD for more than $300 in housing assistance because the manager
calculated lower tenant income than the verification documents supported. This error resulted in
undercharging rent to the tenants and overcharging HUD for the difference.
Solace overcharged three of its tenants more than $700 for rent because the manager calculated
higher tenant income than the verification documents supported. This error resulted in
overcharging rent to the tenants and undercharging HUD for the difference. Solace could put
these funds to a better use by implementing our recommendation to refund the overpaid rent to
the tenants.
These amounts are the difference between the correct monthly rent and assistance amounts and
the amounts charged to the tenant and HUD, multiplied by the number of months the charges
were incorrect. Appendix C shows the individual amounts of incorrect rent and assistance
charges.
Recommendations
We recommend that the Director of the San Francisco Office of Multifamily Housing Programs
require Solace to

       1A.     Provide support for the $6,804 in housing assistance that was based on the
               unverified income and reimburse HUD any amount that remains unsupported.
       1B.     Reimburse HUD the $320 in overcharged housing assistance.
       1C.     Reimburse the three tenants who overpaid rent by $714. If HUD agrees to
               reimburse Solace for the $714 in underpaid assistance, Solace could use these
               funds to reimburse the tenants.
       1D.     Recalculate the housing assistance charged for the 35 units not sampled during
               our audit, reimburse HUD for any overcharged assistance amounts, provide
               support for any unsupported amounts, and reimburse tenants for any overcharged
               rents.
       1E.     Conduct periodic reviews of tenant files to ensure that its manager correctly
               calculates the housing assistance payments and adequately documents completion
               of the required annual recertifications.




                                                5
Finding 2: Solace Requested Assistance for Tenants After They
Had Moved Out
Solace requested housing assistance for tenants after they had moved out. This condition
occurred because Solace did not have a process in place to adequately supervise its manager. As
a result, it overcharged HUD almost $600 for tenants who had moved out.

Post-Move-Out Assistance
For four of the five tenants reviewed, Solace continued to request housing assistance between 3
and 16 days after the tenant moved out. The Monthly Activity Transmission Guide, however,
limits assistance payments to the period when the tenant occupied the unit.
Inadequate Review Process
Solace did not have a review process to assess whether its manager accurately applied HUD
rules. The manager’s immediate supervisor was the owner. During his visits to Rexburg Plaza,
the owner reviewed the property’s financial positions but did not examine the tenant files.
Overcharged Assistance
Solace overcharged HUD almost $600 for tenants who had moved out. This amount was the
prorated assistance charged for the four tenants after evidence of their departure. The table
below shows the number of days and amounts Solace charged HUD for assistance after the four
tenants moved out.

                                  Move-out       Assistance     Days     Post-move-out
          Unit       Tenant
                                   date           end date      late     assistance paid
          107        Tenant 1      8/28/2013      8/31/2013         3                 $83
          306        Tenant 2      9/30/2015      10/6/2015         6                 100
          407        Tenant 3      4/30/2013      5/15/2013        15                  72
          506        Tenant 4     12/20/2015       1/5/2015        16                 329
          Total                                                                       584

Recommendations
We recommend that the Director of the San Francisco Office of Multifamily Housing Programs
       2A.       Require Solace to reimburse HUD the $584 it paid in post-move-out assistance
                 for four tenants.
       2B.       Provide technical assistance to ensure that Solace’s manager understands the
                 requirements in the Monthly Activity Transmission Guide, paragraph 7-12(E),
                 and review Solace’s tenant files 1 year later to determine whether this requirement
                 is understood and being followed.
       2C.       Require Solace to review the 49 tenant files not sampled during our audit,
                 determine whether HUD paid additional housing assistance for tenants after they




                                                  6
      had moved out, and have Solace reimburse HUD for any additional post-move-
      out assistance it paid.
2D.   Require Solace to conduct periodic reviews of tenant files to ensure that its
      manager does not request assistance from HUD for tenants after they have moved
      out.




                                     7
Scope and Methodology
We performed our fieldwork in February 2016 at Rexburg Plaza Apartments located at 430 West
5th South, Rexburg, ID. Our audit period covered January 1, 2013, through December 31, 2015.

To accomplish our objective, we performed the following steps:

      Reviewed applicable HUD requirements.
      Interviewed staff from HUD, Solace, and HUD’s contract administrator.
      Obtained and reviewed housing assistance payment data.
      Reviewed the sampled files.
      Recalculated the amount of housing assistance supported by the sampled files.
      Determined the amount of housing assistance requested for tenants after they moved out.

Sample Selection
We randomly selected a sample of five units to evaluate Solace’s assistance calculations and the
accompanying support. Due to turnover in the units, these five units involved 13 different
tenants.

We also randomly selected five tenants who moved out of Rexburg Plaza during the audit period.
We used this sample to determine whether Solace requested assistance for tenants after they
moved out.

For both of these samples, we randomly selected the items because we wanted our observations
to be representative. However, given the amount of time required to review each unit and each
move-out, selecting larger statistically valid samples would not have been cost effective.
Therefore, we did not project the results of either sample to the universe and are reporting only
what we found in our samples.

We did not rely on computer-processed data for our conclusions but, rather, relied on supporting
documentation in the sampled unit files and from HUD’s contract administrator.

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
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                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 objectives:

      Policies and procedures for correctly and timely calculating housing assistance payments
      Policies and procedures to prevent housing assistance from being requested for tenants
       after they move out.
We assessed the relevant controls identified above by evaluating the available policies and
procedures. We also reviewed assistance payment data and the files of the sampled units, which
demonstrated the effectiveness of the controls.

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:

      Solace lacked a process for reviewing its manager’s assistance calculations (finding 1).
      Solace did not have a process in place to adequately supervise its manager (finding 2).
Separate Communication of Minor Deficiencies
We reported minor deficiencies to the auditee in a separate management memorandum, dated
September 12, 2016.




                                                9
Appendixes

Appendix A
                              Schedule of Questioned Costs


         Recommendation                                            Funds to be put
                               Ineligible 1/    Unsupported 2/
             number                                                to better use 3/
                1A                                    $6,804
                1B                  $320
                1C                                                         $714
                2A                   584
               Totals                904               6,804                714


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.
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 case, the tenants overpaid rent and if Solace
     implements our recommendation to refund their money, this would put those funds to a
     better use.




                                               10
Appendix B
                  Auditee Comments and OIG’s Evaluation



Ref to OIG                                  Auditee Comments
Evaluation




                                                                                                        
              
             Ronald J. Hosking 
             Regional Inspector General for Audit 
             U.S. Department of Housing and Urban Development Office of Inspector General Office 
             of Audit (Region 10) 
             909 1st Avenue, Suite 126 
             Seattle, WA 98104 
              
             Dear Mr. Hosking, 
Comment 1    Thanks for giving me the opportunity to give you a brief back story on the situations at 
             Rexburg Plaza (40 units‐Solace) and Pocatello Portfolio (55 units‐Reflection5).   
              
             When I purchased the Rexburg Plaza in 2006 I inherited the on site manager of the 
             property at the time.  Idaho Housing was familiar with her and gave her high marks.  I 
             hired her as my manager and for over the past ten years I have been pleased with her 
             capability and her performance.  I believe all of her Management review scores with 
             Idaho Housing have been above average, if not excellent.   
              
             In 2013 I purchased my second section 8 property in Southeastern Idaho, the 55 unit 
             Pocatello Portfolio. My Rexburg Plaza manager had been asking for more responsibility 
             and more opportunity to grow so I hired a local on site manager and a local 
             maintenance man at the new Pocatello property, which is one hour or so away from 
             Rexburg, and my Rexburg on site manager with a decade of experience, could oversee 
             and manage the staff and property.  For the first year or so the property ran smoothly as 
             the woman I hired as the Pocatello manager did a great job, under my Rexburg 
             manager’s supervision and direction.  After a year, My Pocatello manager left the 
             Pocatello area for personal reasons.  During this transition my maintenance man at 
             Pocatello filled in for the manager and did a great job.  I believe in the low income 
             housing program and the benefits it provides.  In the same vein, I also believe in giving 
             my employees every opportunity to grow and progress.  So, I decided to promote the 
             maintenance man to be the full time manager, with my Rexburg manager continuing to 
             oversee him as a regional manager, and hire a new maintenance man.  The mianenance 
             man had been so much more than just a maintenance man.  He had helped extensively 
             in the office with paperwork and was the point man with the tenants since he had been 
             on the ground working with them.  According to both the former Pocatello manager and 
             the Rexburg manager, the maintenance man was capable and already helping with the 
             office side of the management.  I reviewed his resume closely and his background in the 
             US Army and his administrative experience there, and other experience, and he was well 




                                              11
Ref to OIG                                  Auditee Comments
Evaluation


             qualified for the position.  In retrospect I was loyal to a fault as my new Pocatello 
             manager was overwhelmed in his new position.  At the same time, unbeknownst to me, 
             my Rexburg manager had taken a second job at a section 8 senior housing complex 
             about thirty minutes for Rexburg.   Despite my training and numerous phone calls and 
             directives and reminders the Pocatello and Rexburg managers were not working 
             together to get the job done as it needed to be.  I wanted the properties run smoothly 
             and correctly so I proactively fired the Pocatello manager, reached out to Idaho Housing 
             for their insight and hired immediately on their recommendation the top management 
             company in the city, Pocatello Housing Authority.  But it was too late and many of the 
             tenant files were left incomplete. One month after hiring the new property manager I 
             received word of the audit with OIG.  An audit that was apparently initiated due to work 
             my Rexburg manager was doing at the elderly section 8 property I was unaware of.   
              
             Since day one, Pocatello Housing Authority has done an excellent job of stepping in, 
             completing the appropriate paperwork and keeping detailed files.  I look forward to a 
             long and successful partnership with them.  My Rexburg manager has benefitted from 
             not having to oversee employees in Pocatello and is doing a good job just managing 
             Rexburg Plaza for me.  I feel both properties are in great condition now and things are 
             running very, very well.  
              
             That leaves us with a window of time where paperwork was not done correctly, or not 
             at all and things I was responsible for overseeing were missed by my employees.  At the 
             end of day, the files were left incomplete and important paperwork undone.  As a result, 
             I cannot disagree with OIG’s findings about missing paperwork pertaining to occupancy, 
             re‐certifications, and other eligibility requirements to support proof of the tenants’ 
             eligibility for low income assistance and the subsequent payment of that Assistance 
             received by Solace and Reflection5.  As owner, I take full responsibility for the 
             incompetence of these employees as I was the one that gave them the opportunity and 
             responsibility.  However, despite the missing and incorrect paperwork, I can attest that I 
Comment 2    am 100% confident that there were tenants living in the units where housing assistance 
             was being paid to Solace and Reflection5.  We were always 100% occupied.  I am also 
             very confident that these tenants were eligible for housing assistance payments.  Both 
             properties have always maintained a waiting list of tenants equal to a 1‐2 year wait 
             period.  As vacant units opened up, I am certain the Pocatello manager and the Rexburg 
             manager were putting new tenants in from the wait list.  Because of that, and because 
             of my personal physical inspections to these properties during the time in question, it is 
             my belief that not only were they filled but they were filled with tenants that qualified 
             and deserved housing assistance.  I believe many of the tenants in question had been 
             long time tenants where the recertification and other paperwork was simply just not 
             completed on their behalf.   Per the OIG inspection, the auditor found that ALL tenants 
             occupying the property during the review, where the paperwork was completed, were 
             shown to be HAP assistance eligible.   




                                              12
Ref to OIG                                  Auditee Comments
Evaluation


             In the case of Rexburg Plaza (Solace) some honest occasional calculation errors were 
             made dealing with the exact move in or move out date, or similar oversights.  In the case 
             of Pocatello (Reflection5) there was a period where the tenant files were left incomplete 
             and many important and required aspects of the housing assistance requirements were 
             simply not executed correctly. I believe this was an unfortunate lesson of promoting the 
             wrong employee from within and not overseeing his development and training and 
             performance as closely as I should have and as closely as I was lead to believe my 
             Rexburg manager was.  I want to assure you that the moment I realized these errors I 
             made immediate changes.  I can also promise you no fraud or other or theft of 
             services/housing payments for ineligible tenants was ever conceived or committed on 
             my part.  I can tell you due to these events and audits we are more dedicated than ever 
             to running these properties as perfectly as possible going forward and eliminating any 
             errors whatsoever.  I apologize for the oversights on my part and on the part of my staff.  
             We have made internal changes to process and procedures to improve our process and 
             proactively hired outside management companies for the properties to assure this never 
             happens again.  I humbly request that HUD give us the chance to prove that without 
             inflicting such a large monetary penalty.  These properties are 45 years old and need and 
             deserve capital improvements for the tenants’ benefit.  I am not sure how we could 
             cope with such a large financial set back.   
              
             I am sincerely sorry and embarrassed for this situation.  I have been an owner of section 
             8 housing for over a decade.  I believe in the program and I believe in providing low 
             income housing and I want to be involved long term in HUD’s efforts to provide housing 
             for those who stand in need.   
              
             Sincerely, 


                            
             Greg Barratt 
             Managing member of Solace, LLC and Reflecion5, LLC 




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                         OIG Evaluation of Auditee Comments


Comment 1   Mr. Barratt provided these comments in response to this report as well as to our
            report 2016-SE-1004 on Reflection5, the owner entity of his Pocatello, ID
            properties. He generally agreed with our findings.
Comment 2   We did not find any eligibility issues with the 13 tenants whose files we reviewed
            for the calculation of tenant assistance and accompanying support. However, we
            did not review the eligibility of all of the Solace and Reflection5 tenants as Mr.
            Barratt states here.




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Appendix C
                    Incorrect Assistance Amounts Noted in Tenant Files


                          Unsupported                Overcharged
                                                                         Overcharged rent
                            assistance                assistance
 Unit    Tenant                                                          due to calculation
                       due to unperformed          due to calculation
                                                                               errors
                       income verifications              errors
 #201    Tenant 1                                                                     $228
 #202    Tenant 2                    $6,804
 #307    Tenant 3                                                 $201                   36
 #307    Tenant 4                                                                       450
 #506    Tenant 5                                                   45
 #506    Tenant 6                                                   35
 #506    Tenant 7                                                   39
 Total                                6,804                        320                  714




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Appendix D
                                             Criteria


HUD Handbook 4350.3 – Occupancy Requirements of Subsidized Multifamily Housing
Programs

5-12 – Verification Requirements
   B. Timeframe for Conducting Verifications
       Owners conduct verifications at the following three times.
       1. Owners must verify income, assets, expenses, and deductions and all eligibility
           requirements prior to move-in.
       2. Owners must verify each family’s income, assets, expenses, and deductions as part of
           the annual recertification process. Refer to Chapter 7, Section 1 for information on
           annual recertifications.
       3. Owners must verify changes in income, allowances, or family characteristics reported
           between annual recertifications. Refer to Chapter 7, Section 2 for information on
           interim recertifications.

5-17 – Effective Term of Verifications
Signed verification and consent forms must be used within a reasonable time after the applicant
or tenant has signed if the tenant’s signature is to represent a valid and current authorization by
the family. Therefore, HUD has set specific limits on the duration of verification consents. In
addition, verified information must be used in a timely manner since family circumstances are
subject to change. HUD places several other limits on the information that may be requested and
when and how it may be used.
    B. Effective Term of Verifications
        1. Verifications are valid for 120 days from the date of receipt by the owner.
        2. If verifications are more than 120 days old, the owner must obtain new verifications.
        3. Time limits do not apply to information that does not need to be reverified, such as:
            a. Age;
            b. Disability status;
            c. Family membership; or
            d. Citizenship status.
        4. Time limits also do not apply to the verification of social security numbers; however,
            at each recertification any family member who has previously reported having never
            received a social security number, must be asked:
            a. To supply verification of a social security number if one has been received; or
            b. To certify, again, that he/she has never received a social security number.

7-4 – Key Requirements
    A. To ensure that assisted tenants pay rents commensurate with their ability to pay, HUD
       requires the following:




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       1. Owners must conduct a recertification of family income and composition at least
          annually. Owners must then recompute the tenants’ rents and assistance payments, if
          applicable, based on the information gathered.

7-5 – Timing of Annual Recertifications
    A. Key Requirement
       Annual recertifications must be completed by the tenant’s recertification anniversary
       date.
    B. Determining Recertification Anniversary Dates
       1. The recertification anniversary date is the first day of the month in which the tenant
           moved into the property. A tenant moving in with no assistance payment, such as a
           Section 236 or a Section 221(d)(3) BMIR [Below Market Interest Rate] tenant, who
           later begins receiving assistance payments, will have his or her annual recertification
           date changed to the first day of the month that the tenant began receiving assistance
           from HUD.

8-6 – Procedures for Terminating or Reinstating Assistance
    To avoid the potential for discrimination, it is important for owners to ensure that the
    requirements and procedures described below are applied consistently to all tenants.
    B. Reinstating Assistance
       An owner may reinstate a tenant’s terminated assistance if:
       1. The original termination of assistance was due to:
               a. A tenant’s failure to recertify, or
               b. A tenant’s increased ability to pay;
       2. The original termination of assistance was not due to fraud;
       3. The tenant is eligible for assistance (based on the income and rent calculation, the
           tenant would pay less than market rent);
       4. The tenant submits the required information; and
       5. Assistance is available for the unit.

Appendix 14 – Fact Sheet – How Rent is Determined
Owner/Management Agent Responsibilities:
    Obtain accurate income information
    Verify resident income
    Ensure residents receive the exclusions and deductions to which they are entitled
    Accurately calculate Tenant Rent
    Provide tenants a copy of lease agreement and income and rent determinations
      Recalculate rent when changes in family composition are reported
    Recalculate rent when resident income decreases
    Recalculate rent when resident income increases by $200 or more per month
    Recalculate rent every 90 days when resident claims minimum rent hardship exemption
    Provide information on OA [Owner-Agent] policies upon request
    Notify residents of any changes in requirements or practices for reporting income or
      determining rent




                                                17
Monthly Activity Transmission User Guide

7-12 Assistance Payments
   E. Payments for Partial-Month Occupancies
      Owners are entitled to an assistance payment only for the actual number of days during
      the month that the tenant occupied the unit. If the move-out date is unknown because the
      tenant failed to notify the owner prior to moving out, the move-out date is the day the
      vacancy is discovered.




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