oversight

The Youngstown Metropolitan Housing Authority, Youngstown, OH, Did Not Always Comply With HUD's and Its Own Requirements Regarding the Administration of Its Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2017-07-07.

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

     Youngstown Metropolitan Housing
       Authority, Youngstown, OH
                  Housing Choice Voucher Program




Office of Audit, Region 5          Audit Report Number: 2017-CH-1002
Chicago, IL                                               July 7, 2017
To:            Kevin Laviano, Director of Public and Indian Housing Hub, 5DPH

               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA
Subject:       The Youngstown Metropolitan Housing Authority, Youngstown, OH, Did Not
               Always Comply With HUD’s and Its Own Requirements 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 Youngstown Metropolitan Housing
Authority’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 website. 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: 2017-CH-1002
                    Date: July 7, 2017

                    The Youngstown Metropolitan Housing Authority, Youngstown, OH, Did
                    Not Always Comply With HUD’s and Its Own Requirements Regarding the
                    Administration of Its Housing Choice Voucher Program



Highlights

What We Audited and Why
We audited the Youngstown Metropolitan Housing Authority’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 appropriately managed its Family Self-Sufficiency program
and Housing Choice Voucher program files in accordance with the U.S. Department of Housing
and Urban Development’s (HUD) and its own requirements.

What We Found
The Authority failed to 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 made progress toward self-sufficiency, (2) escrow balances and monthly escrow
deposits totaling nearly $60,000 in HUD’s and its own systems were accurate and reliable, and
(3) more than $400,000 in coordinator grant funds and escrow disbursements were used
appropriately. In addition, it inappropriately disbursed more than $23,000 in program funds for
ineligible program graduates. If the Authority does not develop and implement adequate
procedures and controls for its program, it could inappropriately use nearly $128,000 in
coordinator grant funds over the next year.
The Authority did not always comply with HUD’s and its own requirements for its Housing
Choice Voucher program files. Specifically, it did not always correctly calculate and support
housing assistance payments and perform household reexaminations in a timely manner. As a
result, the Authority inappropriately paid nearly $32,000 and had nearly $2,000 in unsupported
housing assistance payments. If the Authority does not correct its certification process, it could
overpay nearly $323,000 in housing assistance over the next year.

What We Recommend
We recommend that the Director of HUD’s Cleveland Office of Public and Indian Housing
require the Authority to (1) support or reimburse its programs from non-Federal funds for escrow
calculations and disbursements, coordinator grant funds, and housing assistance payments; (2)
reimburse its programs from non-Federal funds for the ineligible escrow disbursements and
housing assistance payments; (3) ensure that program funds are used effectively; and (4)
implement adequate procedures and controls to correct the findings cited in this audit report.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding 1: The Authority Failed To Appropriately Manage Its Family Self-
         Sufficiency Program ......................................................................................................... 5

         Finding 2: The Authority Did Not Always Comply With HUD’s and Its Own
         Requirements for Its Housing Choice Voucher Program Files .................................. 13

Scope and Methodology .........................................................................................16

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 ..................................................................... 42
Background and Objective
The Youngstown Metropolitan Housing Authority was established in 1933 under Title 37,
Chapter 3735, of the Ohio Revised Code. The Authority is governed by a five-member board of
commissioners, with two members appointed by the mayor of Youngstown, OH, and one
member each appointed by the Mahoning County Probate Court, Mahoning County Common
Pleas Court, and Mahoning County commissioners. The board appoints the executive director.
The executive director has general supervision over the administration of the business affairs of
the Authority, subject to the discretion of the Authority, and the management of the Authority’s
housing projects.

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 individuals to
lease or purchase safe, decent, and affordable privately owned rental housing. As of March 2017,
the Authority had 2,280 vouchers and received more than $8.7 million in program funds.
Additionally, the Authority received a Section Eight Management Assessment Program1 score of
115 out of 145 (79 percent) as of June 30, 2016, which classified it as a standard performer.

The Authority also operates a Family Self-Sufficiency program. The Family Self-Sufficiency
program enables HUD-assisted families to increase their earned income and reduce their
dependency on welfare assistance and rental subsidies. Each year, HUD makes funding for
program coordinator salaries available through a competitive process. The program coordinators
work in collaboration with a program coordinating committee to secure commitments for public
and private resources for the operation of the program. Eligible families execute contracts of
participation that specify their rights and responsibilities. The contracts incorporate individual
training and services plans that contain intermediate and long-term goals, and steps that the
families need to take to achieve those goals, including needed services and resources. Generally,
a family becomes eligible to receive funds deposited into an escrow account on its behalf when it
meets its goals and completes its family self-sufficiency contract. The amount credited to the
family’s escrow account is based on the increased rent the family pays due to increases in earned
income during the term of the contract.




1
 A HUD system that is used to measure the performance of public housing agencies in key Housing Choice
Voucher program areas and to assign performance ratings.




                                                      3
The objective of our audit was to determine whether the Authority appropriately managed its
Family Self-Sufficiency program and Housing Choice Voucher program files in accordance with
HUD’s and its own requirements.




                                             4
Results of Audit

Finding 1: The Authority Failed To Appropriately Manage Its
Family Self-Sufficiency Program
The Authority failed to appropriately manage its Family Self-Sufficiency program. Specifically,
it did not maintain consistent and reliable program information and required documentation that
was complete and accurate and met HUD’s requirements. It also did not ensure that participants’
escrow accounts were correctly calculated and supported and that it maintained a separate bank
account for its program participants’ escrow funds. The weaknesses occurred because the
Authority failed to implement adequate procedures and controls and did not ensure that its
program coordinators had a sufficient understanding of HUD’s program requirements. As a
result, HUD and the Authority lacked assurance that (1) program participants benefited from the
program or made progress toward self-sufficiency, (2) escrow balances and monthly deposits
totaling nearly $60,000 in HUD’s and its own systems were accurate and reliable, and (3) more
than $400,000 in coordinator grant funds and escrow disbursements were used appropriately. In
addition, it inappropriately disbursed more than $23,000 in program funds for ineligible program
graduates. If the Authority does not develop and implement adequate procedures and controls
for its program, it could inappropriately use nearly $128,000 in coordinator grant funds over the
next year.
The Authority Did Not Maintain Consistent and Reliable Program Information
The Authority did not maintain consistent and reliable information for its program. The
Authority maintained participant information in its internal program system, on a separate
subsidiary ledger maintained by the finance department, and in HUD’s Inventory Management
System-Public and Indian Housing Center system (HUD’s system). When we compared the
information from the three systems, the information was neither consistent nor reliable for the
Authority’s current participants. Therefore, we were unable to determine the correct (1) number
of current program participants, (2) monthly escrow deposits, and (3) total escrow balances.
Specifically, according to an ad hoc report from HUD’s system for the period February 29, 2016,
through February 28, 2017, the Authority had 1202 current participants on its program. Of the
120 current program participants, 39 had monthly escrow deposits totaling $7,041, and 44 had
current escrow balances totaling $85,072.




2
  The 120 participants included households that currently participated or had participated in the program within the
last year.




                                                          5
However, as of February 2017, the Authority’s

        Internal program system report identified 135 current program participants, of which 41
         received monthly escrow deposits totaling $8,985 and 64 had escrow account balances
         totaling $132,975.

        Subsidiary ledger3 showed current escrow account balances for 88 participants totaling
         $149,152.

Further, the Authority reported in HUD’s Voucher Management System4 that its monthly escrow
deposits were $7,562 for the month of February 2017.

HUD requires that the monthly escrow deposits for participants match between its systems and
the Authority’s records. However, the participants’ monthly escrow deposits reported by the
Authority did not match the information that it reported in HUD’s system and Voucher
Management System. Therefore, the differences of $1,944 ($8,985 monthly escrow deposits
from the Authority’s internal program system – $7,041 monthly escrow deposits reported by
HUD’s system) and $521 ($7,562 monthly escrow deposits reported to HUD’s Voucher
Management System – $7,041 monthly escrow deposits reported in HUD’s system),
respectively, were not supported.

In addition, although HUD does not require the total escrow balances for participants currently
earning monthly escrow deposits to match between the Authority’s internal reports and HUD’s
system, it does require that the balances for the participants that do not earn monthly escrow
deposits match. However, the balances for those participants did not always match.

Further, because the Authority maintained multiple escrow balance calculations and reports, the
information should have been reconciled as required.5 Therefore, we estimated the average
difference between the total escrow balances reported in the Authority’s internal program system
and subsidiary ledger and HUD’s system to be $55,992.6




3
  The Authority’s subsidiary ledger did not contain information regarding the number of participants that received
monthly escrow deposits and the associated amounts.
4
  The Voucher Management System maintains information regarding coordinator grant fund expenditures, total
monthly escrow deposits, and total monthly escrow forfeitures.
5
  HUD’s Public and Indian Housing Notice 2016-08, appendix 2, number 3b
6
  Our calculation of the average difference among the reports and information from the three systems is as follows:
$149,152 reported in the Authority’s subsidiary ledger + $132,975 reported in the Authority’s internal system / 2 –
$85,072.




                                                         6
HUD’s guidance reminds public housing agencies that the submission of incorrect information to
HUD may result in lower Section Eight Management Assessment Program scores, improper
results in HUD program evaluations, and reductions in funding. As of June 30, 2016, the
Authority received 10 out of 10 points for its administration of its Family Self-Sufficiency
program.
The Authority Did Not Ensure That Required Documentation Was Complete and Accurate
and Met HUD’s Requirements
We reviewed the files for 58 households that participated in the Authority’s program from
September 1, 2014, through August 31, 2016, to determine whether the Authority maintained
documentation that was complete, accurate, and met HUD’s requirements. All 58 of the
participant files (100 percent) contained incorrect or incomplete documentation. The 58
program participant files contained 1 or more of the following deficiencies:

       58 had missing or incomplete resources and supportive services listed on the individual
        training and services plan,
       51 had missing annual escrow reports,
       42 did not contain HUD-required interim goals on the individual training and services
        plan,
       18 did not contain the required final goal of seeking and maintaining suitable
        employment on the contract of participation,
       15 had inappropriate or incorrect baseline certification dates for information used on
        the contract of participation,
       11 had incorrect family rent amounts listed on the contract of participation,
       10 had incorrect effective and expiration dates on the contract of participation,
       6 had incorrect income amounts listed on the contract of participation, and
       1 was missing the participant’s signature on the contract of participation.

The Authority also lacked sufficient documentation to support that contract extensions for six
participants were appropriate and that eight participants were eligible to graduate from the
program, which impacted its minimum program size.7 In addition, based on documentation
maintained in its program participant files, the Authority should have terminated four
participants from its program and graduated another participant that had been terminated from
the Housing Choice Voucher program for not receiving housing assistance payments for more
than 180 days. However, as of February 2017, the five participants remained on the Authority’s
list of current program participants.




7
 The minimum program size for an agency’s program is reduced by one slot for each family that graduates from the
program by fulfilling its contract of participation.




                                                       7
In addition, the Authority’s participant files contained limited documentation to support that
its program participants received services or information regarding opportunities for
education, job training, counseling, and social service assistance to help them reach their goals
and become self-sufficient. Although the Authority provided advertisements for community
events, workshops, food pantry locations, children’s events, and listings for job opportunities,
the information was general and not tailored to the specific needs of the participants.

For example, one participant, with a goal of obtaining a general equivalency diploma, notated
on the Authority’s program update form that she was having difficulties with her classes.
Nearly a year later, on another update form, the participant notated that she needed assistance
with obtaining tutoring for her classes. However, the participant’s file did not contain
evidence that the Authority had contacted the participant to assist with finding a tutor or
another service that would have helped the participant achieve her goal.
The Authority Did Not Ensure That Participants’ Escrow Accounts Were Correctly
Calculated and Supported
During our audit, of the 58 participants reviewed, 39 (67 percent) had incorrect escrow
balances or escrow disbursements or a combination of both. As a result of our audit, in
December 2016, the Authority’s program coordinators manually recalculated each
participant’s escrow balance. However, when we reviewed the recalculations, we
determined that the balances for 38 of the 58 participants (66 percent) were inaccurate.
Specifically, the 38 participants had 1 or more of the following deficiencies:

      12 had underfunded escrows totaling $4,684,
      11 had unsupported escrows totaling $17,266,
      5 had overfunded escrows totaling $7,574,
      6 had unsupported interim or graduation disbursements totaling $6,839,
      5 had ineligible interim or graduation disbursements totaling $23,475, and
      2 had underfunded graduation disbursements totaling $7,076.

Additionally, 3 of the 58 participants stated on their Family Self-Sufficiency program
applications that they had earned income. However, the program coordinators disregarded the
information and, instead, used the most recent certification for each participant’s household,
which did not identify earned income.
Based on the errors with the Authority’s participants’ escrows deposits, we estimate that at least
31 (19.8 percent) of the participants on its program had miscalculated escrow balances.




                                                 8
The Authority Did Not Maintain a Separate Bank Account for Its Program Participants’
Escrow Funds
The Authority did not maintain a separate bank account for its program participants’ escrow
funds as required by HUD. Instead, the participants’ escrow funds were inappropriately
maintained in its Housing Choice Voucher program bank account.
The Authority Failed To Implement Adequate Procedures and Controls and Lacked a
Sufficient Understanding of HUD’s Requirements
The Authority failed to implement adequate procedures and controls to ensure that it
appropriately managed its program. It failed to implement necessary controls for assuring the
accuracy of its financial and accounting information for its program reporting and achieving the
program’s objectives.
In addition, according to the Authority’s program supervisor, the Authority was aware that
its program software had not accrued participants’ escrow deposits properly since 2014.
However, there was no evidence that the Authority took necessary actions to correct
participants’ escrow deposits and balances caused by the system errors. As a result of our
audit, on October 25, 2016, the Authority sent an email to the software company regarding
the need to correct the escrow balances for 61 program participants.

Therefore, although the Authority had been aware of the issues with its program software since
2014, it failed to implement alternative procedures until its system was fixed to ensure that
participants’ escrow account balances were accurate.
The Authority also failed to ensure that its program coordinators had a sufficient
understanding of HUD’s program requirements. As a result of our audit, the Authority’s
program coordinators manually recalculated the escrow balances for 58 program participants.
However, their recalculations were not always accurate and supported. In addition, all 58 of
the participant program files reviewed were deficient. The Authority’s program supervisor
said she believed that the training its program coordinators received was adequate. However,
the deficiencies noted in this finding show that the Authority’s program staff lacked a
sufficient understanding of HUD’s and its own requirements.

In addition, the Authority’s program manager stated that as a result of the audit, the
Authority had been working on a corrective action plan for its program to submit to HUD.
The plan would include implementing new policies and procedures, as well as actions to
correct the deficiencies identified in the audit, especially the internal control weaknesses.
Program Coordinator Grant Funds Were Used To Pay Salaries
From September 2014 through December 2017, HUD awarded the Authority Housing
Choice Voucher Family Self-Sufficiency coordinator grant funds totaling $515,051 to
effectively administer a Family Self-Sufficiency program. As of March 2017, the Authority




                                                 9
had used $387,507 of the $515,051 to pay the salaries of its program coordinators.
According to HUD’s grant agreement, performance is based upon whether the Authority
achieves the agreed-upon activities and whether the Authority has produced tangible results
through the implementation of the grant activities.
Conclusion
The weaknesses described above occurred because the Authority failed to implement adequate
procedures and controls and did not ensure that its program coordinators had a sufficient
understanding of HUD’s program requirements. As a result, HUD and the Authority lacked
assurance that the program participants benefited from the Authority’s program or made progress
toward self-sufficiency and could not support the variance in participants’ ecrow balances and
monthly escrow deposits totaling $58,457 among HUD’s systems and the Authority’s records.
In addition, (1) escrow accounts were underfunded by $4,684, (2) escrow calculations totaling
$17,266 were unsupported, (3) escrow accounts were overfunded by $7,574, (4) escrow
disbursements totaling $6,839 were unsupported, (5) escrow disbursements totaling $23,475
were ineligible, and (6) graduation disbursements totaling $7,076 were underfunded.
Because the Authority failed to appropriately manage its Family Self-Sufficiency program, HUD
lacked assurance that the Authority appropriately used $387,507 ($515,051 total grant funds
received – $127,544 remaining to be spent) in coordinator grant funds. If the Authority does not
develop and implement adequate procedures and controls regarding its Family Self-Sufficiency
program, it could inappropriately use $127,544 ($515,051 – $387,507 grant funds spent) in grant
funds over the next year.
Further, due to the deficiencies cited in this finding, the Authority’s program size and score in
HUD’s Section Eight Management Assessment Program may not be accurate or appropriate.
Recommendations
We recommend that the Director of HUD’s Cleveland Office of Public and Indian Housing
require the Authority to
     1A. Reconcile the $58,457 difference among its system report and subsidiary ledger and
         the information reported in HUD’s system ($1,944 in monthly escrow deposits +
         $521 difference in monthly escrow deposits between HUD’s system and the amount
         reported in the Voucher Management system + the average difference of $55,992 in
         total escrow account balances) to ensure that the monthly escrow deposits and total
         escrow balances are appropriately reported in HUD’s system and provide the
         supporting documentation to HUD.

     1B. Reconcile the current program participants and related information in its internal
         systems with the current participants listed in HUD’s systems.




                                                 10
     1C. Transfer $4,684 from its Housing Choice Voucher program account to its program
         account for the 12 participants with underfunded escrows.

     1D. Support or transfer $17,266 from its program account to its Housing Choice Voucher
         program for the 11 unsupported escrow calculations cited in this finding.

     1E. Transfer $7,574 from its program account to its Housing Choice Voucher program
         account for the five participants with overfunded escrows.

     1F. Support or reimburse its Housing Choice Voucher program $6,839 from non-Federal
         funds for the one unsupported interim disbursement and five unsupported graduation
         disbursements cited in this finding.

     1G. Reimburse its Housing Choice Voucher program $23,475 from non-Federal funds for
         the two ineligible interim and three ineligible graduation disbursements cited in this
         finding.

     1H. Reimburse two participants $7,076 from its Housing Choice Voucher program
         account for the underfunded graduation payments cited in this finding.

     1I.   Ensure that it obtains a separate interest-bearing depository account for its program
           participants’ escrow funds in accordance with HUD’s requirements.

     1J.   Ensure that its staff is appropriately trained and familiar with HUD’s requirements
           and its program action plan regarding the administration of its program to ensure that
           (1) participants’ contracts of participation and individual training and services plans
           are properly updated and contain the necessary signatures; (2) changes in
           participants’ files are properly identified and notated; and (3) participants are notified
           of changes in their monthly escrow deposits, total escrow balances, or both.

     1K. Develop and implement procedures and controls to ensure that (1) documentation
         required by HUD and its own action plan is correctly completed, documented, and
         updated; (2) escrow account balances are correctly calculated and disbursed; and (3)
         escrow accounts and disbursements are fully supported to ensure that $127,544 in
         coordinator grant funds is appropriately used over the next year.

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




                                                 11
1L. Determine the amount of the $387,507 in coordinator grant funds that was
    appropriately earned by the Authority for meeting requirements. The funds that are
    determined to be unearned should be reimbursed to HUD from non-Federal funds.

1M. Review the Authority’s graduate documentation and adjust the Authority’s
    minimum program size as necessary.

1N. Review the Authority’s Section Eight Management Assessment Program scores for
    the Family Self-Sufficiency program and adjust as necessary.

1O. Provide technical assistance and guidance to the Authority to ensure that it properly
    administers its Family Self-Sufficiency program.




                                         12
Finding 2: The Authority Did Not Always Comply With HUD’s and
Its Own Requirements for Housing Choice Voucher Program Files
The Authority did not always comply with HUD’s and its own requirements for its program files.
Specifically, it did not always correctly calculate and support housing assistance payments and
perform household reexaminations in a timely manner. The weaknesses occurred because the
Authority lacked adequate oversight of its program to ensure that it complied with HUD’s and its
own requirements. As a result, it inappropriately paid nearly $32,000 in ineligible and had
nearly $2,000 in unsupported housing assistance. If the Authority does not correct its
certification process, it could overpay nearly $323,000 in housing assistance over the next year.
The Authority Had Miscalculated and Unsupported Housing Assistance Payments
We reviewed 85 statistically selected certifications for 84 of the Authority’s program household
files to determine whether the Authority correctly calculated housing assistance payments for the
period September 1, 2014, through August 31, 2016. Our review was limited to the information
maintained by the Authority in its household files.
For the 85 certifications, 39 (46 percent) had incorrectly calculated housing assistance and utility
allowances. The 39 certifications contained 1 or more of the following deficiencies:

      29 had incorrect income calculations,
      11 had incorrect utility allowances,
      5 had incorrect deductions from income,
      1 had an incorrect payment standard, and
      1 had incorrect asset income.

For the households associated with the 39 certifications, the Authority overpaid $21,990 and
underpaid $1,265 in housing assistance. The Authority earned $12,676 in administration fees for
the 39 files.

In addition, of the 85 certifications reviewed, 15 contained 17 errors that had no impact on the
housing assistance. The errors included incorrect income calculations, utility allowances, child
support deductions, payment standard amounts, voucher sizes, and medical expense calculations.

Further, 3 of the 84 household files contained documentation showing that the households had
valid unreported or underreported income. However, the Authority failed to make adjustments
to their housing assistance payments and execute repayment agreements with the households to
recapture $9,644 in overpaid subsidies. In addition, the Authority had $1,666 in unsupported
housing assistance.




                                                 13
The Authority’s Reexamination of Households’ Income Was Not Performed in a Timely
Manner
The Authority did not always conduct household reexaminations annually in accordance with
HUD’s requirements. Specifically, of the 84 households reviewed, 29 (35 percent) had 31
reexaminations that were not conducted in a timely manner. The Authority performed
reexaminations for the households up to 10 months after the households’ annual reexaminations
were due.
The Authority Lacked Adequate Oversight of Its Program
The Authority lacked adequate oversight of its program to ensure that it complied with HUD’s
and its own requirements. According to the Authority, it underwent changes with its program
staff in 2013 and had to manage its program with a significant reduction in staff due to high staff
turnover. For instance, the Authority’s Housing Choice Voucher program director said that from
July 2013 through December 2015 (less than 2 years), the Authority’s Housing Choice Voucher
program department had gone through nine employees. In addition, at one point during that
timeframe, the department was staffed with only two employees to complete annual and interim
reexaminations and all other functions of the department for more than 2,000 program
households. According to the program director, the department had been stabilized since March
2016 with six employees. Therefore, the Authority’s Housing Choice Voucher Program director
believed that the housing assistance payment calculation errors and late reexaminations were a
direct result of its personnel issues. Due to the amount of work, lack of staff, and high turnover
rate, errors were made.
Of the 29 certifications with income calculation errors, 24 (83 percent) were completed by 2
former housing specialists. According to the Housing Choice Voucher Program director, one of
the two former specialists had been employed by the Authority for a while and should have
known how to do the calculations correctly. Therefore, it was likely that the volume of the work
led to the calculation errors. In addition, because of the Authority’s staffing issues, it became
challenging to oversee and monitor staff members to ensure the accuracy of their work since the
program director had been tasked with resolving other issues rather than being able to effectively
oversee the program.
Conclusion
The weaknesses described above occurred because the Authority lacked adequate oversight of its
program to ensure that it complied with HUD’s requirements. As a result of the calculation
errors, the Authority overpaid $21,990 and underpaid $1,265 in housing assistance. Further, it
overpaid $9,644 in housing assistance for three households due to unreported or underreported
income and lacked support for housing payments totaling $1,666 due to unsupported housing
assistance calculations.
In accordance with 24 CFR (Code of Federal Regulations) 982.152(d), HUD is permitted to
reduce or offset any program administrative fees paid to a public housing agency if it fails to




                                                14
perform its administrative responsibilities correctly or adequately under the program. The
Authority received $12,676 in program administrative fees related to the unsupported and
inappropriate housing assistance payments for the 39 program households with incorrectly
calculated housing assistance and 3 program households with unreported or underreported
income.
If the Authority does not correct its certification process, we estimate that it could overpay
$322,550 in housing assistance over the next year. 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 Cleveland Office of Public and Indian Housing
require the Authority to
         2A. Reimburse its program $34,666 from non-Federal funds ($21,990 + $12,676 in
             administrative fees) for the overpayment of housing assistance due to inappropriate
             calculations of housing assistance.

         2B. Reimburse the appropriate households $1,265 from program funds for the
             underpayment of housing assistance due to inappropriate calculations.

         2C. Pursue collection from the applicable households or reimburse its program $9,644
             from non-Federal funds for the overpayment of housing assistance due to
             unreported or underreported income.

         2D. Support or reimburse its program $1,666 from non-Federal funds for the
             unsupported payments of housing assistance cited in this finding.

         2E. Implement adequate procedures and controls to ensure that (1) housing assistance
             payments are appropriately calculated and supported, (2) repayment agreements
             are created to recover overpaid housing assistance when unreported income is
             discovered during the examination process, and (3) annual reexaminations are
             completed in a timely manner to ensure that $322,550 in program funds is
             appropriately used for future payments.




                                               15
Scope and Methodology
We performed our onsite audit work between September 2016 and March 2017 at the
Authority’s main office located at 131 West Boardman Street, Youngstown, OH. The audit
covered the period September 1, 2014, through August 31, 2016, 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, 982, and 984; HUD’s Public and
        Indian Housing Notice 2016-08; Office of Public and Indian Housing, Real Estate
        Assessment Center, Accounting Brief 23; and HUD’s Guidebook 7420.10G.

       The Authority’s program administrative plan, Family Self-Sufficiency action plan,
        annual audited financial statements for fiscal years 2013 through 2015, accounting
        records, system reports, bank statements, policies and procedures, board meeting minutes
        for September 2014 through August 2016, payment standards, household and landlord
        reports, housing assistance payment register, and household and participant files and
        HUD’s fair market rents.
Finding 1
We selected a representative nonstatistical sample of 6 participant files from the 138 participants
that were currently on the Authority’s program as of September 21, 2016; 2 participant files from
the 23 participants that graduated the Authority’s program as of September 1, 2016; and 2
participant files from the 65 participants that were terminated from the Authority’s program as of
August 31, 2016. We used these methods to select the participant files for review during the
survey because the number of participants was too large to review 100 percent. Because we did
not select a statistical sample, we are unable to project our survey results to the universe of 138
participants on the Authority’s program as of September 21, 2016.




                                                16
During our audit, we also selected a simple random statistical sample of 48 participant files from
the 159 participants8 on the Authority’s program as of September 21, 2016, to review during the
audit. We used a statistical sample so that the total escrow calculation errors determined in the
audit results could be projected to the universe. Deducting the statistical margin of error to
accommodate the uncertainties inherent in statistical sampling, the escrow calculation errors
equal 29.1 percent. Therefore, we can say with a one-sided confidence interval of 95 percent
that at least 19.8 percent of all participants meet these criteria. Projecting this error rate to the
audit universe of 159 participants and after deducting for the margin of error, we can say with a
one-sided confidence interval of 95 percent that at least 31 participant files contained escrow
calculation errors.

For our review of the Authority’s program, the audit scope was expanded to September 21, 2016,
to include support for our calculations of the program participants’ monthly escrow deposits,
escrow balances, and escrow disbursements. This expansion of the scope was necessary to
ensure that our audit results included the most current information available in HUD’s and the
Authority’s systems at the time of our onsite fieldwork.

Finding 2
We statistically selected a stratified random sample of 85 monthly housing assistance payments9
from the Authority’s 39,028 monthly disbursements to landlords from September 2014 through
August 2016 (24 months). We used a statistical sample so the audit results could be projected to
the universe. Based on the 85 randomly selected housing assistance payments from the audit
universe of 39,028 housing assistance payments, we found that the overpayment per household
was an average of $26.80 per tenant month. Deducting for a statistical margin of error, we can
say with a one-sided confidence interval of 95 percent that this amounts to at least $16.53 per
tenant per month. Therefore, projecting this amount to the audit universe of 39,028 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 $645,100 in housing assistance in the universe was overpaid. Over the next year, this is
equivalent to an additional overpayment of $322,550 ($645,100 / 2) in housing assistance. Due
to the low percentage of underpayment errors, underpayment projections were not reported in
our statistical sampling results.
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




8
 The universe of 159 included current and graduated participants.
9
 The 85 monthly housing assistance payments were from the 85 household certifications, which represented 84
households.




                                                      17
which the housing assistance was incorrectly paid or unsupported. We limited the inappropriate
administrative fees to the amounts of housing assistance payment calculation errors for the
household files that contained 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 Cleveland
Office of Public and Indian Housing and the Authority’s 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.




                                               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.




                                                  19
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

   The Authority failed to implement adequate procedures and controls and ensure that its
    program coordinators had a sufficient understanding of HUD’s program requirements
    (finding 1).
   The Authority lacked adequate oversight of its program to ensure that it complied with
    HUD’s and its own requirements (finding 2).




                                               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                                              $58,457
                1C                                                     4,684
                1D                                $17,266
                1E                                                     7,574
                1F                                  6,839
                1G             $23,475
                1H                                                     7,076
                1K                                                   127,544
                1L                                387,507
                2A             34,666
                2B                                                     1,265
                2C              9,644
                2D                                 1,666
                2E                                                   322,550

              Total            67,785             413,278            529,150


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.




                                            21
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 instance, if the Authority implements our
     recommendations, it will ensure that participants’ escrow accounts are properly
     calculated, recorded, and available for uses consistent with HUD’s requirements to assist
     participants in achieving self-sufficiency and coordinator grant funds are used to
     appropriately administer the program. In addition, it will 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.  




                                             22
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




Comment 2



Comment 3




                              23
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 4



Comment 5



Comment 6


Comment 7
Comment 8


Comment 8



Comment 9




                              24
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 10




Comment 11
Comment 12
Comment 13




Comment 14




                              25
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 15




Comment 15




Comment 16




Comment 17
Comment 18




                              26
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 19


Comment 19




Comment 19




Comment 18




                              27
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 20



Comment 18




Comment 20



Comment 18



Comment 18


Comment 21




                              28
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 22


Comment 10




Comment 10


Comment 23




Comment 24




                              29
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 24




Comment 25




Comment 25




Comment 25




Comment 25




                              30
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 25




Comment 26




Comment 27




Comment 28




                              31
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 29




Comment 30




Comment 31




                              32
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 32


Comment 33




Comment 34



Comment 34




                              33
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 34



Comment 34




                              34
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority stated that the methodology used to conclude that it did not
            maintain consistent and reliable information was ill-conceived and insufficient to
            reasonably use as a basis for findings and recommendations. We disagree. We
            obtained the ad hoc report from HUD’s Inventory Management System/Public
            and Indian Housing Information Center system (HUD’s system), and completed
            our comparison using HUD’s guideline detailed in appendix 3 of Public and
            Indian Housing Notice 2016-08.
Comment 2   The Authority stated that the ad hoc report should include a "date in the future"
            and the ad hoc report would not have included households whose certifications
            were dated on or after March 1, 2017. We partially agree. In accordance with
            appendix 3, section D1 of HUD Notice 2016-08, the date entered for the report
            would include records updated for a 1 year period. Therefore, since we used the
            report dated February 28, 2017, all updated records for the period February 29,
            2016, through February 28, 2017, would have been included. Further, our review
            period for program participants ended on February 28, 2017. Therefore, changes
            made in HUD’s PIC system after that date were not part of our review.
Comment 3   The Authority contends that we did not provide the date of the ad hoc report that
            that was discussed in the report. Although the date of the report was not stated in
            the discussion draft audit report, as the information was not necessary to
            understand the context of the report, we provided the report’s start and end dates
            as well as other relevant information to the Authority.
Comment 4   The Authority stated that the ad hoc report was compared to its internal system
            report and did not rely on certification dates, but whether a participant had an
            enrollment date and had not exited the program. We compared the current
            participants listed on the ad hoc report to the Authority’s list of current
            participants. As mentioned in the audit report, the Authority’s list included
            participants that were currently on its program or had participated in its program
            within the last year. Therefore, these participants should have been listed on the
            ad hoc report.
Comment 5   The Authority stated that the ad hoc report did not list all current participants and
            did not include participants that had exited the program. The Authority further
            stated that the reports could not be compared because they did not and were not
            designed to include the same list of participants. We disagree. The ad hoc report
            had a start date of September 1, 2014, and an end date of February 28, 2017.
            Therefore, participants that were currently on the Authority’s program, had been




                                             35
              terminated, or had graduated during that time period were included on the report.
              This information should have been reconcilable with the Authority’s information,
              as detailed in HUD's Notice 2016-08, which provided specific instructions for
              public housing agencies on how to reconcile their program system data with
              HUD's system.
Comment 6     The Authority said that the monthly escrow deposit amounts did not match among
              the reports because the reports were not designed to include the same list of
              participants. We acknowledge that the monthly escrow deposit amounts did not
              match. However, we disagree that they should not match. HUD's Notice 2016-
              08, appendix 3, states that HUD expects participants monthly credit amounts to
              match between its system and the Authority's internal records. Additionally,
              HUD's accounting brief 23 states that participant’s total escrow funds should be
              supported by the Authority's accounting records. The brief also states that
              deposits made into participants’ escrow accounts should be reported in HUD's
              Voucher Management System on a monthly basis. Therefore, the Authority's
              records for its participants’ monthly escrow deposits should match the
              information reported in both HUD's system and Voucher Management System.
Comment 7     The Authority stated that we compared the escrow balances reported in HUD's
              system, the Authority's internal system report dated February 9, 2017, and its
              subsidiary ledger dated April 6, 2017. We acknowledge that we compared the
              information among the three system-generated reports; however, the end date of
              the subsidiary ledger was February 28, 2017.
Comment 8     The Authority stated that the current total escrow balances should not match. We
              partially agree. According to HUD's Notice 2016-08, the total escrow balances
              for its participants should not match, unless the participants were not earning
              monthly escrow deposits. As cited in this audit report, there were participants that
              had not earned monthly escrow deposits; however, their total escrow balances did
              not match among the three systems.
Comment 9     The Authority stated that we did not reconcile the Authority's data with HUD's
              system. We used the guidance in HUD’s Notice 2016-08 to compare the
              Authority's internal data with the data that the Authority entered into HUD's
              system. As cited in the report, we identified the differences reported among the
              various systems and recommended that the Authority reconcile the information
              that it reported in its internal systems to the information it reported in HUD's
              system, in accordance with the HUD Notice.
Comment 10 The Authority stated that it had prepared and submitted a corrective action plan to
           HUD. It also stated that it would update its corrective action plan to fully address




                                               36
              the issues cited in the audit report. We commend the Authority for being
              proactive by taking steps to address the preliminary issues that we discussed with
              the Authority during an update meeting and the deficiencies cited in this audit
              report. The Authority should work with HUD to ensure the steps taken
              adequately address the issues cited in this report.
Comment 11 The Authority contended that the discussion draft report stated that 15 participant
           files had incorrect baseline certification dates. However, it found that only 6 had
           errors. The Authority also contended that 6 participants' certifications had been
           completed within 120 days of their contracts’ execution date. We disagree. The
           contract of participation, form HUD-52650, shows that the effective date was the
           date that the contract had begun, not the date that the contract had been signed or
           executed. Additionally, the contract states that "the income and rent numbers
           inserted on page 1 may be taken from the amounts on the last reexamination or
           interim determination before the family’s initial participation in the program,
           unless more than 120 days will pass between the effective date of the
           reexamination and the effective date of the contract of participation. If it has been
           more than 120 days, the public housing agency must conduct a new
           reexamination or interim redetermination.”
Comment 12 The Authority stated that the supporting schedule listed 13 participants with
           incorrect baseline certification dates. We agree. In addition to the 13 participants
           listed on the supporting the schedule, there were 2 participants listed on the
           schedule as "unknown" because the execution date had been altered, which made
           it illegible.
Comment 13 The Authority provided copies of the supporting schedule as well as the correct
           certification for participant number 57. Based on the documentation provided, it
           appears the Authority was referring to participant number S7. The Authority
           provided a copy of a form HUD-50058 that was effective November 1, 2013.
           However, the form was last modified on June 8, 2017, which was nearly 4 years
           after the effective date. Additionally, the amounts listed on the participant’s
           contract of participation did not match the information on her November 1, 2013,
           certification. Instead, the amounts matched the participant’s January 1, 2014,
           certification. Therefore, the certification that was used as the baseline was
           effective after the participant’s contract of participation.
Comment 14 The Authority asserted that the contract of participation for household numbers 8
           and 47 contained the correct income. We disagree. For participant number 8, the
           Authority did not use the correct annual income amount that was reflected on the
           participant’s baseline certification. It included food stamp income, which should
           have been excluded from the household’s annual income. Additionally, the




                                              37
              family rent amount listed on the participant’s contract of participation was not
              accurate. For participant 47, the Authority provided a document from its system
              showing that the participant had no earned income. However, according to the
              participant's application in the Authority's files, the participant stated that she was
              working. Additionally, the Authority’s program coordinator notated in the file
              that the participant had two part-time jobs. However, the Authority failed to
              conduct an interim certification to include the household's income. Therefore, the
              participant’s earned income was not accurately reflected on the contract of
              participation.
Comment 15 The Authority stated that the errors in the family rent amounts on the contracts of
           participation were due to issues with its system. During the audit, the Authority
           indicated that many of the deficiencies that had been identified during the audit
           were caused by its system. The Authority had been aware of its system issues
           since February 2014; however, it failed to take necessary actions to correct the
           family rent amounts, or recalculate participants' monthly escrow credits and total
           escrow balances until December 2016 as evidenced by an updated list provided by
           the Authority.
Comment 16 The Authority stated that we provided a spreadsheet detailing our determinations
           of the calculation errors; however, we did not provide documentation to support
           our calculations. We disagree. Our review was limited to the information
           maintained by the Authority in its participant files and entered by the Authority
           into HUD’s system. Therefore, the Authority maintains the documentation that
           supports our calculations in its files.
Comment 17 The Authority contends that when we met to discuss the audit results, we declined
           to provide documentation. We disagree. We provided our supporting schedules
           to the Authority on April 27, 2017. On May 18, 2017, we met with the Authority
           to discuss the schedules and finding outlines. During the meeting, we informed
           the Authority’s program manager that our review was limited to the information
           maintained by the Authority in its participant files and entered by the Authority
           into HUD’s system.
Comment 18 The Authority stated that until it received the documents that supported our
           calculations, it could not agree to transfer funds. The Authority should work with
           HUD on the resolution of the recommendations cited in the audit report.
Comment 19 The Authority disagreed with the dollar amounts cited in recommendation 1A.
           Please see comments 1 through 9. However, it agreed that the information from
           its internal systems should be reconciled with the information it enters into HUD's
           system. The Authority also stated that it would complete a reconciliation twice




                                                38
               per year. We commend the Authority for taking steps to reconcile the
               information. The Authority should work with HUD regarding the resolution of
               recommendations 1A and 1B.
Comment 20 The Authority agreed with recommendation 1D and 1F and stated that it would
           provide support or transfer the funds. The Authority should work with HUD
           regarding the resolution of this recommendation.
Comment 21 The Authority stated that it had obtained an interest-bearing account. However, it
           did not provide documentation to support its assertion. The Authority should
           work with HUD on the resolution of this recommendation.
Comment 22 The Authority stated that two of its program coordinators had attended training.
           However, it did not provide documentation to support its assertion. The Authority
           should work with HUD on the resolution of this recommendation.
Comment 23 The Authority stated that it was working on addressing the errors created by its
           system and developing a manual and handbook. We commend the Authority for
           taking the necessary actions to resolve the audit recommendations. The Authority
           should work with HUD to ensure that its system corrections and updated policies
           are appropriate and fully implemented.
Comment 24 The Authority disagrees with recommendation 1L. Section I.A.1.b.3. of the
           notice of funding availability for the coordinator grant states that "…the
           coordinator's responsibilities are to ensure that the services included in the
           participants' contracts of participation are provided on a regular, ongoing and
           satisfactory basis; that participants are fulfilling their responsibilities under the
           contracts; and that escrow accounts are established and properly maintained for
           eligible families." Because the Authority program coordinators mismanaged its
           program, as detailed in finding 1, the recommendation was appropriate. The
           Authority should work with HUD on the resolution of this recommendation.
Comment 25 The Authority provided a narrative and print screens of its "Logic Module"
           reporting. However, it did not provide documentation to support its statements or
           the numbers reported in the "Logic Module." Therefore, the Authority should
           work with HUD to ensure that its reports are updated to reflect HUD's
           determinations of the Authority's program to address the audit recommendations.
Comment 26 The Authority provided copies of appreciation letters submitted by its program
           participants. We commend the Authority’s participants for being able to reach
           their goals. However, the Authority required its participants to submit
           appreciation letters before they could receive their graduation payments.




                                                39
Comment 27 The Authority agreed with recommendation 1O and stated that it appreciated the
           opportunity to work with HUD to properly administer and improve its program.
           We commend the Authority on its willingness to resolve this recommendation.
Comment 28 The Authority agreed that calculation errors should be reimbursed; however, it
           provided documentation to reflect items for which it did not believe were errors,
           or had different amounts for the errors. We reviewed the information and
           adjusted the audit report and recommendation accordingly.
Comment 29 The Authority stated it disagreed that administrative fees should be reimbursed.
           The Authority should work with HUD on the resolution of the remaining amount
           cited in the recommendation, which includes administrative fees.
Comment 30 The Authority stated that it had reimbursed the households that it determined had
           been underpaid, and provided documentation for the items that it did not believe
           were errors, or had different amounts for the errors. The documentation provided
           by the Authority was not sufficient to support that it reimbursed the households.
           Additionally, for one household, the Authority reimbursed the household $96
           more than the amount that was owed. The Authority should work with HUD to
           ensure the steps taken adequately address the recommendation.
Comment 31 The Authority agreed to pursue collections from families with unreported income.
           It also stated that it had pursued repayments from the households that had
           unreported income. However, the documentation provided by the Authority was
           not sufficient to support its assertion. Additionally, the Authority provided
           documentation to reflect items that it did not believe were errors, or had different
           amounts for the errors. We reviewed the information and adjusted the audit report
           and recommendation accordingly. For one household, the Authority stated that it
           was at fault for the error; therefore, we included this amount in recommendation
           1A. The Authority should work with HUD to ensure the steps taken adequately
           address the recommendation.
Comment 32 The Authority agreed that unsupported payments should be repaid and provided
           documentation to support the payments for two households. The Authority
           should work with HUD to ensure the steps taken adequately address the
           recommendation.
Comment 33 The Authority disagreed with our calculation of unsupported payments. As stated
           above in comment 32, we reviewed the documentation it provided and adjusted
           the report and recommendation accordingly. The total unsupported amount
           remaining was $1,666, not $1,116 as indicated by the Authority. The Authority




                                              40
              should work with HUD to ensure the steps taken adequately address the
              recommendation.
Comment 34 The Authority stated it disagreed with the recommendation to implement adequate
           procedures and controls and stated that it had adequate procedures and controls in
           place. We disagree. The errors cited in finding 2 show that the Authority needs
           to implement adequate procedures and controls, as 46 percent of the files
           reviewed had at least one error. The Authority should work with HUD on the
           resolution of this recommendation.




                                             41
Appendix C
                              Federal and Authority Requirements

Finding 1
The National Affordable Housing Act of 1990, Section 554, amended Title I of the U.S. Housing
Act of 1937 by adding Section 23. Specifically, Title I, section 23d(2) of the United States
Housing Act of 1937 as amended states that for each participating family whose monthly
adjusted income is less than 50 percent of the area median income, the difference between 30
percent of the participating family’s adjusted income and the amount of rent paid by the
participating family must be placed into an interest-bearing escrow account established by the
public housing agency on behalf of the participating family.
HUD’s regulations at 24 CFR 984.303(b)(1) state that the contract of participation should be in
the form prescribed by HUD.
HUD’s regulations at 24 CFR 984.303(b)(2) state that the individual training and services plan,
incorporated into the contract of participation, must establish specific interim and final goals by
which the public housing agency and the family may measure the family’s progress toward
fulfilling its obligations under the contract of participation and becoming self-sufficient.
HUD’s regulations at 24 CFR 984.303(d) state that the public housing agency should extend the
term of the contract of participation for a period not to exceed 2 years for any participating
family that requests, in writing, an extension of the contract, provided that the agency finds that
good cause exists for granting the extension. It also states that the family’s written request for an
extension must include a description of the need for the extension and that “good cause” means
circumstances beyond control of the family.
HUD’s regulations at 24 CFR 984.303(g)(1) state that the contract of participation is considered
to be completed and the family’s participation in the program is considered to be concluded
when the family has fulfilled all of its obligations under the contract of participation on or before
the expiration of the contract term, including any extension thereof.
HUD’s regulations at 24 CFR 984.305(a)(2)(i) state that the total combined Family Self-
Sufficiency account funds will be supported in the public housing agency accounting records by
a subsidiary ledger showing the balance applicable to each family. During the term of the
contract of participation, the public housing agency should credit the escrow accounts
periodically but not less than annually to each family’s escrow account.
HUD’s regulations at 24 CFR 984.305(a)(3) state that each public housing agency will be
required to make a report, at least once annually, to each family on the status of the family’s
escrow account. In addition, it states that at a minimum, the report will include (i) the balance at




                                                 42
the beginning of the reporting period, (ii) the amount of the family’s rent payment that was
credited to the escrow account during the reporting period, (iii) any deductions made from the
account for the amounts due to the agency before interest is distributed, (iv) the amount of
interest earned on the account during the year, and (v) the total in the account at the end of the
reporting period.
HUD’s regulations at 24 CFR 984.305(b)(1) state that for purposes of determining the escrow
credit, “family rent” for the rental voucher program is 30 percent of adjusted monthly income.
HUD’s regulations at 24 CFR 984.305(c)(2)(ii) state that if the public housing agency determines
that the family has fulfilled certain interim goals established in the contract of participation and
needs a portion of the escrow account funds for purposes consistent with the contract of
participation, such as completion of higher education or job training or to meet startup expenses
involved in creating a small business, the public housing agency may, at its sole discretion,
disburse a portion of the funds from the family’s escrow account to assist the family in meeting
those expenses.
HUD’s Public and Indian Housing Notice 2016-08, section 3, states that public housing agencies
are reminded of an obligation to correct any previously submitted program information that is
not correct. Incorrect information may result in lower Section Eight Management Assessment
Program scores, improper results in HUD program evaluations, and reductions in funding.
Additionally, public housing agencies are reminded that documentation demonstrating
compliance with the requirements of this notice and regulation must be kept on file. HUD may
request this documentation at any time.
Section 4 of the Notice states that ensuring that the information being submitted is correct is
crucial.
Appendix 2, section 3b, of the Notice states that public housing agencies that maintain multiple
escrow balance calculations and listings must reconcile these different lists periodically but at
least annually and at the time of any withdrawal for that given participant. Any needed
reconciling adjustments must be made to each listing or system as necessary to bring all of the
multiple lists into balance with each other. Program coordinators, agency accountants, and rent
specialists may all be involved in this reconciliation process.
Appendix 3, section D.1, of the Notice states that HUD determines the coordinator funding by
the number of participants that were enrolled or active in the program during a given period.
Appendix 3, section D.4.1e, of the Notice states that under the current reporting requirement, it is
expected that the monthly escrow credits for participants match; therefore, the monthly escrow
credits reported in HUD’s system should be current with the public housing agency’s internal
records.




                                                 43
HUD’s Public and Indian Housing Notice 2016-08, appendix 3, section D.4.1e (table), lists the
steps the public housing agency should use to reconcile the total account balances in HUD’s
system to its internal records. The agency should start with the escrow balances as reported in
HUD’s system, add the monthly escrow credits earned, add any interest accrued, account for any
other adjustments, and compare this total to the agency’s current escrow balance.
Office of Public and Indian Housing, Real Estate Assessment Center, Accounting Brief 23, states
that under the program, the public housing agency is required to deposit the escrow account
funds of all participant families into a single depository account. This means that the program
escrow funds must be in an account that is separate from all other funds held by the agency.
HUD’s Housing Choice Voucher Guidebook 7420.10G, section 23.4, states that the contract of
participation must be executed no more than 120 days after the household’s most recent annual
or interim reexamination. If more than 120 days have passed since the last reexamination, a new
reexamination must be completed.

HUD’s Housing Choice Voucher Guidebook 7420.10G, section 23.4 of the Guidebook states
that every Family Self-Sufficiency contract must include a training and service plan for the head
of the family that commits the family head to seek and maintain suitable employment. The
training plan should include clearly stated goals with specific deadlines.

Form HUD-52650 (page 1), contract of participation, states that the amounts listed are the
family’s annual income, earned income, and family rent when the family begins participating in
the Family Self-Sufficiency program.
Form HUD-52650 (instructions) states that the (contract) effective date is the first day of the
month following the date the contract was signed by the family and the housing agency’s
representative. The (contract) expiration date is 5 years from the effective date of the contract.
If the housing agency decides to extend the term of the contract, the original expiration date
listed on page 1 of the contract must be crossed out and the new expiration date added.

Form HUD-52650 (instructions) states “the income and rent numbers to be inserted on page one
of the contract may be taken from the amounts on the last reexamination or interim
determination before the family’s initial participation in the program, unless more than 120 days
will pass between the effective date of the reexamination and the effective date of the contract of
participation. If it has been more than 120 days, the Agency must conduct a new reexamination
or interim redetermination.”

Form HUD-52650 (instructions) 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




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employment specific to that individual’s skill, education, and job training and the available job
opportunities in the area.

Finding 2
Federal Register, volume 79, number 122, section D,10 limits the utility allowance payment for
tenant-based vouchers to the family unit size for which the voucher is issued, regardless of the
size of the unit rented by the family. It further states that the utility allowance for a family
should be the lower of (1) the utility allowance amount for the family unit size or (2) the utility
allowance amount for the unit size of the unit rented by the family. This provision applies only
to vouchers issued after the effective date of this notice (July 1, 2014) and to current program
participants. For current program participants, the public housing agency must implement the
new allowance at the family’s next annual reexamination, provided that the agency is able to
provide a family with at least 60 days’ notice before the reexamination.
HUD’s 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, tenant rent, or program housing assistance payment or terminate assistance, as
appropriate, based on such information.
HUD’s regulations at 24 CFR 5.609(a)(1) state that annual income means all amounts anticipated
to be received from a source outside the family during the 12-month period following admission
or annual certification date.
HUD’s regulations at 24 CFR 982.54(1) state that the public housing agency must adopt a
written administrative plan that establishes local policies for the administration of the program in
accordance with HUD requirements. (1)(b) The administrative plan must be in accordance with
HUD regulations and requirements. (1)(c) The public housing agency must administer the
program in accordance with the agency’s administrative plan.
HUD’s 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.




10
   Federal Register (FR)-5778-Notice (N)-01, Notice of Statutory Changes to Section 243 of the Department of
Housing and Urban Development Appropriations Act, 2014 (2014 Appropriations Act) authorizes HUD to
implement certain statutory changes to the United States Housing Act of 1937 made by the 2014 Appropriations Act
through notice followed by notice and comment rulemaking. This notice establishes the terms and conditions by
which HUD will implement changes to the utility allowances for tenant-paid utilities. HUD’s 2014 Appropriations
Act is Title II of Division L of Public Law 113-76, 128 Stat. 5, approved January 17, 2014. See Public Law 113-76
at 128 Stat. 604.




                                                       45
HUD’s regulations at 24 CFR 982.402 state that (a)(1) the public housing agency must establish
subsidy standards that determine the number of bedrooms needed for families of different sizes
and compositions, (b)(1) the subsidy standards must provide for the smallest number of
bedrooms needed to house a family without overcrowding, and (b)(3) the subsidy standards must
be applied consistently for all families of like size and composition.
HUD’s regulations at 24 CFR 982.516(a)(1) state that the Authority must conduct a
reexamination of family income and composition at least annually.
Chapter 5.5 of the Guidebook states that reasonable childcare expenses for the care of children
age 12 and younger may be deducted from annual income if the care is necessary to enable the
family member to work, look for work, or further his or her education.
Section VI(A)(7) of the Authority’s administrative plan states that regular alimony and child
support payments are counted as income for calculation of total tenant payment. The Authority
will use the amount awarded by the court unless the family verifies that it is not receiving the full
amount awarded. Verification from the agency responsible for enforcement or collection is
acceptable. “Regular” payment is defined as receiving payments for at least 3 consecutive
months at the time of verification.
Section VI(E)(1) of the plan states that the Authority will make all attempts to obtain verification
in the following priority: Enterprise Income Verification system, third-party written, third-party
oral, review of documents, and certification or self-declaration. Section (E)(3) states that for
verification of a participant’s employment income, the Authority will use data from the system
plus four current, consecutive pay stubs or a letter from employer on company letterhead
detailing participant or applicant income.
Section VII(B)(1) of the Authority’s plan requires families to report income interim changes, in
writing, within 30 days of the change. Section (B)(2) states that changes in family unit size or
payment standard will be made at the time of the next regularly scheduled annual certification.




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