oversight

New Horizons, Kansas City, MO, Received Improper Section 8 Housing Assistance Payments

Published by the Department of Housing and Urban Development, Office of Inspector General on 2017-03-03.

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

                         New Horizons,
                        Kansas City, MO
       Section 8 Housing Assistance Payments Program




Office of Audit, Region 7       Audit Report Number: 2017-KC-1002
Kansas City, KS                                      March 3, 2017
To:            Edward Manning, Director, Kansas City Asset Management Division,
               7AHMLAS

               //signed//
From:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
Subject:       New Horizons, Kansas City, MO, Received Improper Section 8 Housing
               Assistance Payments




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of New Horizons’ 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: 2017-KC-1002
                     Date: March 3, 2017

                     New Horizons, Kansas City, MO, Received Improper Section 8 Housing
                     Assistance Payments



Highlights

What We Audited and Why
We audited New Horizons’ Section 8 housing assistance payments program because we noted
significant deficiencies during our audit of the project’s identity-of-interest management agent,
Majestic Management, LLC, report 2017-KC-1001. Our objective was to determine whether
New Horizons properly verified tenants’ eligibility, requested assistance only for tenants living
in the units, retained tenant files for the required period, and properly collected and deposited
tenant rents.

What We Found
New Horizons’ management agent, Majestic Management, did not properly verify tenant
eligibility, requested subsidies for ineligible tenants and tenants not living in units, did not retain
tenant files, did not properly collect and deposit rents, and had unreported tenants living in the
units. As a result, it received $144,556 in ineligible and $726,399 in unsupported housing
assistance payments and could not account for at least $16,687 in project rents owed by tenants.

What We Recommend
We recommend that HUD require New Horizons to (1) repay $144,556 in housing assistance for
tenants who were not eligible for assistance or not living in units, (2) support or repay $726,399
in housing assistance payments based on missing or incomplete tenant files, (3) support that
$16,687 in tenant rents was collected and deposited or repay the project, (4) obtain independent
management, and (5) conduct a review to determine who currently lives in the units and verify
their eligibility. In addition, HUD should monitor New Horizons to ensure that it properly
maintains its tenant files, completes the required annual recertifications, and properly supports
disability exemptions.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: New Horizons’ Management Agent Mismanaged Its Section 8 Housing
         Assistance Payments Program ......................................................................................... 5

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................12
         A. Schedule of Questioned Costs .................................................................................. 12
         B. Auditee Comments and OIG’s Evaluation ............................................................. 13
         C. Criteria ....................................................................................................................... 32
         D. Tenant Deficiencies ................................................................................................... 39
         E. Missing Tenant Files ................................................................................................. 41




                                                                     2
Background and Objective
Agape Properties, LLC, a nonprofit corporation located in St. Louis, MO, is the owner of five
multifamily scattered properties in Kansas City, MO. These five multifamily properties are
known as New Horizons (see photos below). Agape Properties purchased these properties in
2009 and assumed the existing Section 8 housing assistance payments contract with the U.S.
Department of Housing and Urban Development (HUD) from the previous owner.




              1844 Benton                                  2643 Garfield




              3920 East Linwood                            2804 Benton




                                      1715 East Linwood


                                                3
The housing assistance payments contract described the New Horizons project as five group
homes with a total of 30 units for developmentally disabled people. In 1996, HUD approved
mixing chronically mentally ill and developmentally disabled tenants at the project. HUD made
housing assistance payments to Agape Properties under a Section 8 housing assistance payments
contract that covered all 30 units. Following a contract rent adjustment in May 2016, each
bedroom at the New Horizons project rented for $1,200 per month. From June 2013 through
July 2016, HUD paid Agape Properties more than $881,000 in Section 8 housing assistance.

                 Property address         Units       Assistance payments
                 2643 Garfield            6                       $194,692
                 3920 East Linwood        6                        175,994
                 1844 Benton              6                        155,829
                 1715 East Linwood        6                        173,156
                 2804 Benton              6                        181,723
                 Total                    30                       881,394

To purchase the New Horizons project, Agape Properties obtained a HUD-insured loan for
almost $1.2 million under Section 207 of the National Housing Act, based on Section 223(f), and
an additional $274,400 loan under Section 241(a) of the National Housing Act. To participate in
the program, Agape Properties was required to execute a regulatory agreement with HUD. The
agreement, signed in 2009, required Agape Properties to deposit all rents and other receipts of
the project into a financial institution and restricted the use of those funds. Majestic
Management, LLC, a related company, served as the management agent. We audited Majestic
Management’s expenditures of multifamily project funds in audit report number 2017-KC-1001.
The project-based Section 8 housing assistance payments program provides rental assistance to
low-income individuals, 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
individual or family. At move-in and at least once annually, the owner or management agent
collects appropriate documentation and calculates the amount of the assistance payment, which
is the difference between the contract rent and the family’s share of the rent.
Under the Section 8 housing assistance payments contract, the owner submits monthly
applications for housing assistance payments, in which it certifies that
    1.   Each tenant’s eligibility and assistance payment is properly computed;
    2.   All required inspections are completed;
    3.   The units are decent, safe, sanitary, and occupied or available for occupancy;
    4.   No amount included has been previously billed or paid;
    5.   All facts and data on which this request for payment is based are true and correct; and
    6.   The owner has not received and will not receive any payments or other consideration
         from the tenant or any public or private source for the unit beyond that authorized in the
         assistance contract or the lease, except as permitted by HUD.
Our audit objective was to determine whether New Horizons properly verified tenant eligibility,
requested assistance only for tenants living in the units, retained tenant files for the required
period, and properly collected and deposited tenant rents.


                                                  4
Results of Audit

Finding: New Horizons’ Management Agent Mismanaged Its
Section 8 Housing Assistance Payments Program
Majestic Management did not properly verify tenant eligibility, requested subsidies for ineligible
tenants and tenants not living in units, did not retain tenant files, did not properly collect and
deposit rents, and had unreported tenants living in the units. This condition occurred because the
owner and identity-of-interest management agent did not implement adequate controls over its
housing assistance payments program. As a result, it received $144,556 in ineligible and
$726,399 in unsupported housing assistance payments and could not account for at least $16,687
in project rents owed by tenants.
Section 8 Housing Assistance Payments Program Mismanaged
Of the 87 tenants for whom New Horizons received housing assistance payments, Majestic
Management did not properly verify eligibility for 18 tenants, requested subsidies for 16
ineligible tenants, did not retain 62 tenant files as required, and did not properly collect and
deposit tenant rents. These numbers cannot be added together, as some files had more than one
deficiency. Appendixes D and E contain details on these deficiencies. In addition, New
Horizons had at least 11 unreported tenants living in its units for whom it did not receive housing
assistance payments.
Improperly Verified Tenants
Of the 25 tenant files reviewed, Majestic Management did not properly verify the eligibility of
18 tenants by verifying the tenants’ identity or disability.
Majestic Management did not properly verify the identity of 13 tenants. The tenant files did not
include documents verifying the tenants’ identity, such as the original Social Security card or a
driver’s license or government-issued document containing the Social Security number. HUD
requires tenants to provide this documentation to verify the tenant’s Social Security number
before tenants are admitted to a unit.
Majestic Management did not adequately verify that 12 tenants met the disability requirements to
live at the property. New Horizons is designated as a property for disabled tenants; however, the
owner used it as housing for people struggling with drug and alcohol addiction. Regulations at
24 CFR (Code of Federal Regulations) 5.403 state that for purposes of qualifying for low-income
housing, a person with disabilities does not include a person whose disability is based solely on
drug or alcohol dependence. Three files contained contradictory information on whether the
person’s disability was related to alcohol or drug addiction. Majestic Management used a
certification of disability form to document a tenant’s disability. In five files, we were not able
to verify that the doctor or licensed social worker who certified the disability existed as we could
not locate the social workers who signed the forms in State licensing databases. There were also
instances in which tenants told us that the doctor who signed the form was not their doctor, that



                                                 5
the tenant filled out and signed the verification of disability form himself, and that the disability
form was left blank. One tenant claimed that he was disabled, but he was employed as a
construction worker performing hard physical labor.

                               Improperly verified tenants Count

                              Unverified identity                  13
                              Unverified disability                12
                              Total*                               25
                      *These 25 deficiencies relate to 18 individual tenants.
Ineligible Tenants
Of the 25 tenant files reviewed, Majestic Management requested subsidies for 16 ineligible
tenants.
Majestic Management improperly requested subsidies for three house managers. The housing
assistance payments contract did not cover the house managers’ units. The New Horizons owner
and board members stated that the house manager assigned to each unit did not pay rent and they
were not supposed to receive housing assistance payments for their units. In addition, the house
manager was an unpaid position given to a tenant who had lived in the home the longest.
However, three of the five house managers were included on the housing assistance payment
vouchers and were charged rent according to leases in the files and the rent roll.
Majestic Management admitted seven nondisabled tenants. New Horizons is designated as a
property for disabled tenants. However, of the 10 tenants on the rent roll interviewed, 5 stated
that they were not disabled. We also found two disability forms stating that the tenants were not
disabled, but the tenants were admitted to the units.
New Horizons received housing assistance payments for eight tenants who did not live at the
property. According to tenants interviewed, at least eight tenants listed on the most current rent
roll and housing assistance vouchers at the time of our review moved in later than the date
claimed or no longer lived in their units. One tenant had moved out as much as 6 months earlier,
but New Horizons continued receiving housing assistance for him, while another moved in as
much as 12 months after the project started collecting the housing assistance payments for her.

                                    Ineligible tenants               Count
                                    House managers                      3
                                  Not disabled tenants                  7
                                Tenants not living in units             8
                                         Total*                      18
*These 18 deficiencies relate to 16 individual tenants as two of the house managers were also not
                                            disabled.



                                                    6
Missing Tenant Files
Majestic Management did not retain 62 of 87 tenant files as required. HUD requirements state
that tenant files must be maintained for 3 years after a tenant vacates a unit. Majestic
Management did not maintain tenant files for any of its prior tenants. It maintained tenant files
for only 25 of its 26 tenants for whom it received housing assistance payments in July 2016. It
did not maintain files for an additional 61 prior tenants and 1 current tenant during our audit
period, June 2013 through July 2016.
Improper Rent Collection and Deposits
Majestic Management did not properly collect and deposit tenant rents. Tenants submitted their
rent each month to their respective house manager, who would then submit the rent to Majestic
Management to deposit into the New Horizons bank account. There were no receipts issued to
tenants for rent paid. For 8 of 31 months of bank statements reviewed, there were no deposits of
tenant rent. For the 23 months of bank statements that showed deposits, management provided
insufficient records showing what was included in each deposit to allow verification of whether
all rents were collected and deposited.
Unreported Tenants
New Horizons had at least 11 unreported tenants living in its units. During interviews with
current tenants in July and August 2016, we determined that at least 11 people lived in the
project units in July who were not reported on the housing assistance payment voucher or rent
roll for that month. Majestic Management did not report any of these tenants on its July 2016
application for housing assistance payments, instead reporting that 26 units were occupied by
different tenants and 4 were vacant. Majestic Management certified to HUD that all facts and
data on which the request was based were true and accurate.
Inadequate Controls
The owner and identity-of-interest management agent did not implement adequate controls over
the housing assistance payments program. It did not have adequate oversight of its program or
the property, and it did not have adequate policies or procedures to ensure compliance with
requirements.
The owner and identity-of-interest management agent did not establish adequate oversight of its
program or the property. The property had one house manager for each of its five group homes.
However, the house manager was an unpaid position given to a tenant who had lived in the home
the longest. The house manager was responsible for collecting tenant rent and serving as a
communication point between the other residents and the management agent. It did not maintain
a local manager to oversee its properties. The property manager lived in St. Louis, MO, and
traveled to New Horizons several times per month to address the tenants’ complaints, fulfill any
maintenance requests, and collect tenants’ rent from the house managers and bring the payments
to the St. Louis management office for deposit. This hands-off approach to property
management resulted in the management agent being unaware of when tenants moved in or out
of the property and having a general lack of knowledge regarding the tenants. For example,
when we asked the property manager to identify the tenants living in each home, she was unable
to do so because she did not know their official names in the tenant files and on the rent roll. She
stated that she knew only their nicknames. In addition, another employee located in St. Louis,



                                                 7
who was both a board member of New Horizons and a director at Majestic Management, would
submit the tenants’ housing assistance payments, requesting funds from HUD. This employee
reported that she was also in charge of the tenant files beginning in January 2016, but in August
2016, she was still trying to determine who lived there. She was unable to verify tenant names
because she did not work with the tenants regularly.
The owner and identity-of-interest management agent did not have adequate policies or
procedures to ensure compliance with requirements. The project’s only written policies and
procedures guidance was a manual called the Residential Management Manual. This manual
was issued in 2006 by Majestic Management, but its employees stated that it was no longer in
use. Adequate policies and procedures, including those for verification of tenants’ eligibility and
occupancy, tenant file retention, and collecting and depositing tenants’ rent, are necessary to
ensure compliance with the program requirements.
Ineligible and Unsupported Housing Assistance Payments
New Horizons received $144,556 in ineligible and $726,399 in unsupported housing assistance
payments and could not account for at least $16,687 in project rents owed by tenants.

                                 Deficiency                   Amount

                       Ineligible tenants                         $144,556

                       Improperly verified tenants                 129,790

                       Missing tenant files                        596,609

                       Total                                       870,955



HUD made more than $100,000 in housing assistance payments for tenants who were not
disabled or who were the house managers of the units. HUD also overpaid more than $40,000
for tenants who had moved out or who had not yet moved into their units (appendix D). These
housing assistance payments were ineligible.
HUD made nearly $130,000 in housing assistance payments on behalf of tenants whose identities
or their disabilities were not verified. In addition, since the project housed unreported tenants,
the units may not have been available to house eligible tenants, and the project may not have
received rents for these units. New Horizons also received from HUD nearly $600,000 in
housing assistance for tenants whose files were no longer available. Without the required tenant
files for these tenants, all of the assistance based on these tenants was unsupported. Appendix E
includes a table showing how much assistance New Horizons received for each of these 62
tenants during our audit period.
Finally, Majestic Management could not account for at least $16,687 in projects rents owed by
tenants. During 8 months, Majestic Management did not make deposits of tenants rent, and
management was not able to provide documentation to explain the lack of deposits or where the



                                                 8
tenant rents totaling $16,687 would have gone. The amount deposited in the other months varied
significantly, and additional rents from tenants may have been unaccounted for in these months.
Conclusion
New Horizons, through its identity-of-interest management agent Majestic Management, did not
properly verify tenant eligibility, requested subsidies for ineligible tenants and tenants not living
in units, did not retain tenant files, did not properly collect and deposit rents, and allowed
unreported tenants to live in the units. New Horizons received $144,556 in ineligible and
$726,399 in unsupported housing assistance payments and could not account for at least $16,687
in project rents owed by tenants because it did not implement adequate controls over its housing
assistance payments program.
Recommendations
We recommend that the Director of the Kansas City Office of Multifamily Housing Programs

       1A.     Require New Horizons to repay HUD from project funds if available (otherwise,
               from nonproject funds) $144,556 in housing assistance payments for tenants who
               were not eligible for assistance or not living in units.
       1B.     Require New Horizons to provide support for the $726,399 in housing assistance
               payments based on missing or incomplete tenant files or repay the assistance from
               project funds if available (otherwise, from nonproject funds) to HUD.
       1C.     Require New Horizons to support that $16,687 in tenant rents was collected and
               deposited as required or repay the project from nonproject funds.
       1D.     Require New Horizons to obtain independent management.
       1E.     Require New Horizons to conduct a review to determine who currently lives in
               the units and verify their eligibility.
       1F.     Monitor New Horizons to ensure that it properly maintains tenant files, completes
               required annual recertifications, and supports disability exemptions in accordance
               with HUD requirements.




                                                  9
Scope and Methodology
We performed our audit work between February and December 2016. We performed our onsite
work at Majestic Management’s central office located at 2815 Olive Road, Saint Louis, MO, as
well as at the New Horizons project at 1844 Benton, 2804 Benton, 1715 East Linwood, 3920
East Linwood, and 2643 Garfield in Kansas City, MO. Our audit period was June 1, 2013,
through July 31, 2016.
To accomplish our objective, we reviewed

      Applicable regulations and HUD guidance.
      New Horizons’ housing owner’s certification and application for housing assistance
       payments reports and voucher reports.
      The project’s bank statements.
      The project’s regulatory and use agreements.
      The project’s tenant files.
In addition, we interviewed employees of Majestic Management, tenants of the project, property
managers and owners, and HUD staff.
Based on our review of housing assistance payment voucher reports and applications, we
identified 87 tenants who lived at New Horizons and received housing assistance between June
2013 and July 2016. This is our audit universe. We selected all 87 tenants for review due to the
small size of the universe. The total housing assistance payment amount received for the 87
tenants between June 2013 and July 2016 was $881,394. We requested the tenant files to
determine whether New Horizons’ identity-of-interest management agent, Majestic
Management, properly verified tenant eligibility and requested assistance only for eligible
tenants.
We did not rely on computer-processed data to support our audit conclusions. All audit
conclusions were based on the review of source documentation.
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.




                                                10
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:

   Policies and procedures to ensure compliance with HUD’s housing assistance payments
    program requirements.
   Internal control structures to provide adequate oversight of the program or property.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

   New Horizons did not have adequate controls to ensure compliance with HUD’s
    requirements (finding).




                                                  11
Appendixes

Appendix A


                          Schedule of Questioned Costs
                  Recommendation
                                   Ineligible 1/ Unsupported 2/
                      number
                          1A             $144,556
                          1B                                 $726,399
                          1C                                   16,687

                        Totals             144,556            743,086



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.




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1




Comment 2




                               13
Ref to OIG   Auditee Comments
Evaluation




Comment 3




                            14
Ref to OIG   Auditee Comments
Evaluation




Comment 4




Comment 5




Comment 6




                            15
Ref to OIG   Auditee Comments
Evaluation




Comment 7




                            16
Ref to OIG   Auditee Comments
Evaluation




Comment 8
Comment 9




Comment 10




Comment 11
Comment 1
Comment 12




                            17
Ref to OIG   Auditee Comments
Evaluation




                            18
Ref to OIG   Auditee Comments
Evaluation




Comment 13




Comment 14




Comment 15


Comment 16




                            19
Ref to OIG   Auditee Comments
Evaluation




Comment 17




Comment 18




Comment 19




                            20
Ref to OIG   Auditee Comments
Evaluation




Comment 20




Comment 21




Comment 22




                            21
Ref to OIG   Auditee Comments
Evaluation




Comment 23




Comment 24




Comment 25




                            22
Ref to OIG   Auditee Comments
Evaluation




Comment 26




Comment 27


Comment 28


Comment 23




Comment 29




                            23
Ref to OIG   Auditee Comments
Evaluation




Comment 30




                            24
                         OIG Evaluation of Auditee Comments


Comment 1   Majestic Management’s response included numerous exhibits which due to
            volume are not printed in our report. The exhibits are available upon request.
Comment 2   These comments relate to management agent activities at other projects, which
            were discussed in our audit report 2017-KC-1001, issued December 16, 2016.
Comment 3   This situation involves a non-HUD project so we did not review this information
            during our audit.
Comment 4   Majestic Management expressed dissatisfaction with the way we notified them of
            our audit. We contacted the president on February 19, 2016, and explained to her
            that we would be conducting an audit of Majestic Management and set up the
            entrance conference for three days later. At this meeting, we told the president
            the reason for scheduling the audit, the audit objective and the scope and also
            allowed time for any questions to be asked. Because of the short turnaround
            between scheduling and the meeting, we delivered the audit notification letter to
            the auditee at the meeting. It is not a standard auditing practice of ours to ask for
            an attorney to be present when a subpoena is signed.
Comment 5   As Majestic Management stated in their comments, we met with them and their
            attorney and agreed to reduce the scope of our subpoenaed records from five
            years to three, based on Majestic Management’s request for less documents to
            produce and because we were focusing on more current issues in the audit report.
            We informed Majestic Management of our decision to issue two reports from this
            audit: one on Majestic’s expenditures of project funds for all HUD-insured
            projects that it managed and one on Majestic’s receipt of income for New
            Horizons. While we estimated that we might have the draft report ready by
            September or October of 2016 depending on the availability of audit
            documentation, we actually provided the draft of the first report on November 1,
            2016.
Comment 6   Majestic Management discussed the use of the president’s signature stamp. These
            comments relate to activities discussed in the first report, audit report number
            2017-KC-1001, issued December 16, 2016.
Comment 7   Majestic Management provided information relating to the history of how they
            came to acquire and manage the New Horizons project. Our audit scope did not
            cover this as we audited activities occurring after June 2013.
Comment 8   Majestic Management’s response indicated that every management review prior
            to 2016 was satisfactory or above average. However, HUD conducted a
            Management and Occupancy Review on July 30, 2015 that resulted in Below
            Average owner rating. HUD issued a Notice of Violation (NOV) based on a
            variety of findings. In particular, it reported that the ownership and the identity of



                                               25
              interest management agent had continued to violate HUD business agreements,
              specifically the Regulatory Agreement and Section 8 Housing Assistance
              Payment Contract ("HAP") dated July 1, 2009.
Comment 9     Majestic Management identified the employees involved in the daily project
              oversite at the New Horizons project. However, the president of Majestic
              Management is ultimately responsible for the actions of the company and its
              employees. Proper oversight of the business and its employees is needed to
              ensure the company is performing in accordance with all HUD rules and
              regulations.
Comment 10 Majestic Management’s response indicated that the employee, who was both a
           board member of New Horizons and a director at Majestic Management, stopped
           performing the day-to-day operations of the project in early 2012 and didn’t
           resume this task until December 2016. However, the tenant files have her
           signature on all documents from 2013 to current. The tenant files do not bear the
           signature of the other Majestic Management employee.
Comment 11 Majestic Management’s response discussed hiring a third party to review its files.
           This 100 percent third party review of the tenant files was mandated by HUD as a
           result of a HUD tenant file review conducted on May 24, 2016. The review
           determined that the project’s tenant files were non-compliant with occupancy
           requirements of subsidized multifamily programs, as described in HUD
           Handbook 4350.3 and non-compliant with the Enterprise Income Verification
           notice H2013-06.
Comment 12 Majestic Management expressed concerns with us visiting New Horizons to
           conduct interviews with tenants. There appears to be some confusion on the part
           of the auditee as they were not present during the interviews. Majestic claimed
           there were 3 investigators at New Horizons on Friday, July 19th; however, there
           were 2 auditors onsite on Friday, July 15th. We went onsite to perform
           confirmations as one of our auditing procedures. This is a procedure in which we
           confirm the information in the tenant files directly with the tenants without the
           involvement of management. We introduced ourselves to the residents, informed
           them that we had been performing an audit of Majestic Management, and asked
           them questions to confirm the information in the tenant files. Majestic
           Management’s response includes a number of misstatements. We did not threaten
           the tenants, misinform the tenants about what Majestic knew about our audit
           procedures, open a door and let ourselves in, or state that Majestic was under
           investigation for misappropriation of funds. Also, numerous times throughout the
           response our audit is referred to as an investigation which is also incorrect as we
           were performing an audit, not an investigation.
Comment 13 Majestic Management’s response discussed how we came back to Kansas City to
           perform more inspections without their knowledge and without giving the tenants
           24-hour notice. We did come back to Kansas City to try to talk to additional
           tenants since we were unable to complete all interviews during our first visit. In


                                              26
              this case, we were not required to give 24-hour notice as we were not conducting
              inspections of units and were not asking tenants to allow us into their units. We
              preferred to conduct our interviews outside and this is where most of the
              interviews took place. We did not go into any tenants’ units and only went into
              the common area when invited by tenants or house managers. The HUD OIG law
              enforcement officers who accompanied us were dressed in plain clothes and
              identified themselves accordingly. The officers only told one tenant she could be
              arrested. When that tenant lied about her identity, the officer told her she could
              be arrested if she lied to a federal law enforcement officer.

Comment 14 Majestic Management’s response indicated that as a result of our interviews,
           tenants gave notice to vacate the property, which resulted in financial difficulties
           for the project. We cannot comment on whether any tenants decided to vacate the
           project as a direct result of our visit. On August 29, 2016, Majestic told us they
           had received four notices to vacate, and provided us an updated rent roll. We
           analyzed the information and identified five tenants who had appeared on the July
           rent roll who were no longer on the August roll or were noted as pending move
           out. We had not been able to interview any of these five tenants during our onsite
           visits. We do not have further documentation on when they vacated or for what
           reason.

Comment 15 Majestic Management’s response stated that we returned to the property to
           conduct additional interviews which we did because we had not been able to
           interview many of the tenants during the previous two visits. We provided a sign-
           up sheet to management with half hour time slots for each tenant at each of the
           homes, but we did not receive a response showing who was scheduled for which
           time slots. We again did not get full tenant participation even after having
           management give tenants notice and were only able to talk to some tenants on
           August 31, 2016. We did not ask tenants about their particular disability or
           hospital stays. We presented the tenants with documents from their tenant files
           and asked them to confirm that it was their information and that the information
           provided to HUD was accurate.

Comment 16 Majestic Management’s response again dealt with us coming back to the property
           to conduct interviews. The auditee is again confused on the dates, times and
           details of the interviews as they were not present during the interviews. We
           emailed management on August 30, 2016, rather than August 31, 2016, letting
           them know we were running late but were still coming to the property. When we
           arrived we were not able to conduct interviews because no tenants were available.
           We conducted additional interviews on August 31, 2016.

Comment 17 Majestic Management’s response stated that they have provided as Attachment F
           letters from tenants who wanted to voice their concerns about how they were
           treated. However, the letters do not accurately reflect the nature of the interviews
           we performed. One of the letters was from a house manager we never spoke to



                                               27
              during any of our trips to New Horizons. Another was from a house manager
              who we did speak to. The two emails from the house managers have many
              identical statements and were dated within a day of the date Majestic’s comments
              for this report were due, which was about 6 months after we last spoke to the one
              house manager. The last two letters, presumably written by the same tenant, said
              the tenant was harassed by HUD people. However, our interview with that tenant
              was cordial and we provided assistance to that tenant by answering questions he
              had about federal housing. Also, the tenant’s name on the one letter is misspelled,
              and he did not sign the other letter but we presume it was from him since he was
              the only tenant ever interviewed at the listed address.

Comment 18 Majestic Management stated that they have corrected all tenant files and the files
           now include the verification forms. However, we were not provided with this
           corrected tenant file information or verification forms. The corrected files can be
           provided to HUD during the audit resolution process for HUD to determine
           whether the corrections adequately resolve the issue.

Comment 19 Majestic Management’s response indicated that we violated the Fair Housing Act
           and that we are asking them to do so as well. We did not violate the Fair Housing
           Act and we are not asking Majestic Management to do so either. Majestic
           Management must follow applicable HUD Handbooks. Shown in appendix C to
           this audit report, HUD Handbook 4350.3 - Occupancy Requirements of
           Subsidized Multifamily Housing Programs, Section 3-28, states that an owner
           may verify disability to determine whether a family or person meets the definition
           of disability used to determine eligibility for a project, preferences, or an
           allowance, or to identify applicant needs for features of accessible units or
           reasonable accommodations. The owner may not specifically ask for or verify the
           nature and extent of the disability. There are ways to verify disability status
           without obtaining detailed information or information that must not be collected.
           The form Majestic used to verify disability should have been a third-party
           verification of disability in which the form is sent by the owner to an appropriate
           source of information, including but not limited to a physician, psychologist,
           clinical social worker, other licensed health care provider, or the Veterans
           Administration. It further states that if a third-party form is used, it must be
           signed by the applicant authorizing the release of such information to the owner.
           The forms provided in the tenant file did not indicate that they were third party
           verifications as they did not show mailing addresses, fax numbers or other
           information indicating that they were sent by the owner to a third party. In some
           cases, the tenants themselves filled out the third party verification form.

Comment 20 Majestic Management claimed it did not request subsidies for three house
           managers, and it indicated there were specific criterion to become a house
           manager. However, according to the housing assistance payment vouchers,
           Majestic Management did request subsidies for three individuals that they
           identified as house managers. We were able to talk to two of these three house



                                               28
              managers, both of whom confirmed that they were house managers and therefore
              did not pay rent. We were never provided with the specific criterion that house
              managers need to meet. When we asked this of Majestic Management they
              confirmed that it was just the tenant that lived in the home the longest. Again, we
              have not been provided with all files that have been updated.

Comment 21 Majestic Management’s response stated they are not responsible for checking in
           on their tenants on a monthly basis. However, management must certify to HUD
           monthly that all facts and data on which the request for housing assistance
           payments was based were true and accurate. If management requests housing
           assistance payments for different tenants than those actually occupying the units,
           they are providing a false certification to HUD for tenants no longer living in
           units.

Comment 22 Majestic Management’s response stated that they are unaware of missing tenant
           files. We initially requested the tenant files for all of Majestic Management’s
           HUD properties for the time period January 1, 2011 through January 31, 2016
           with our subpoena back in February 2016. However, we were not provided the
           tenant files until July 2016. At that time, we notified management that we had
           received 25 files and asked if there were 5 vacancies since New Horizons was a
           30 unit project. Management replied back that there should have been 26 files as
           there are 4 vacancies. We informed management of the file we were missing and
           were told it had fallen out in an employee’s trunk and we would be provided with
           it, but we never were. Therefore, we were only provided with 25 of the 26 current
           tenant files for review. Since the subpoena asked for tenant files covering several
           years, that meant we needed all files, not just files for current tenants. We again
           requested these tenant files via email on August 11, 2016, and asked Majestic’s
           attorney for them during our meeting on August 15, 2016, at which time he told
           us that they did not have these files. He requested that we send him a request in
           writing for those files and he would respond, so we would have it in writing that
           they do not have these tenant files. We sent an email on August 16, 2016, to the
           attorney and management, but never received a response.

Comment 23 Majestic Management’s response questioned how we could conclude there were
           missing tenant rents since we had stated we did not receive enough detail on the
           deposits, and they indicated that they process rent and make monthly rent deposits
           as required by HUD. However, according to the project bank statements, there
           were no deposits that could have potentially been for tenant rent during 8 of the
           months we reviewed.

Comment 24 Majestic Management’s response stated that our draft report includes the
           following false statement: Majestic Management had 11 unreported tenants living
           in its units. However, based on the interviews we conducted with current tenants
           and house managers in July and August 2016, we identified 11 individuals who
           lived in the project units in July but were not reported on the housing assistance



                                               29
              payment voucher or rent roll for that month. On its July 2016 application for
              housing assistance payments, Majestic Management reported that 26 units were
              occupied by tenants other than the 11 we identified through our interviews and 4
              were vacant. Majestic Management certified to HUD that all facts and data on
              which the housing assistance payments request was based were true and accurate.

Comment 25 Majestic Management asserted that New Horizons received the attention that it
           should despite staff living out of town. However, we found that management’s
           lack of knowledge of who was living at the property was due in part to the owner
           and identity-of-interest management agent not establishing adequate oversight.
           Further, in the Notice of Violation issued by HUD in July 2015, HUD stated that
           Majestic is in violation of HUD requirements by providing inadequate onsite
           supervision for elderly or disabled residents at the project. Majestic
           Management’s comments also stated that it was not true that the board member of
           New Horizons and director at Majestic Management (who they referred to as the
           property manager in their comments) indicated she was still trying to decipher
           who lived in the property. During an interview in August 2016 with this
           employee, she told us she was still trying to determine who lived in the units.
           Majestic Management’s comments further stated that we were confused about
           who was property manager versus who was property maintenance. We asked all
           the Majestic Management employees their duties during interviews in 2016. The
           property manager explained her role as the property manager and stated she had
           been the property manager for four years. We asked this property manager to
           identify the tenants living in each home and she was unable to do so because she
           did not know their official names in the tenant files and on the rent roll. She
           stated that she knew only their nicknames. We also asked the president what the
           property manager’s role was and the president confirmed that the employee was
           the property manager at New Horizons. Now, Majestic Management is calling
           the property manager property maintenance.

Comment 26 Majestic Management’s response stated that they never told us the Majestic
           manual was no longer used. However, we were told by the office manager who
           provided the Majestic manual that they were outdated and not used.

Comment 27 Majestic Management replied to our recommendation 1A by stating that the
           reported number was based on our review of 26 tenant files. We received and
           reviewed 25 tenant files, not 26 as noted in Majestic Management’s comments.
           We were not provided with the updated tenant files. As part of the audit
           resolution process, HUD will determine whether any information that has been
           added to the files is appropriate and whether it has any impact on the amounts we
           calculated as being ineligible.

Comment 28 Majestic Management’s response stated that our figure in recommendation 1B
           was inflated. However, we have not been provided with any documentation to
           support the $726,399 in housing assistance payments we reported as unsupported



                                              30
              because Majestic Management had missing or incomplete tenant files. This
              number is mostly for past tenants for which Majestic Management did not have
              tenant files.

Comment 29 Majestic Management’s response addressed our recommendation 1D stating that
           they have hired a property management consultant to address the issues identified
           in the audit report. We have not reviewed or received any of the updated forms,
           policies and procedures, or methods as referenced in Majestic Management’s
           response. However, based on this audit report and the last audit report, we
           believe that New Horizons should hire independent management of its property,
           not just a one-time consultant.

Comment 30 Majestic Management’s response addressed our recommendation 1E stating that
           all tenant files are accurate with current data. The updated tenant files and other
           information indicated in the response can be provided to HUD during the audit
           resolution process for HUD to determine if the updates are enough to close this
           recommendation.




                                               31
Appendix C
                                             Criteria


Provisions From the Regulatory Agreement Entered Into by Agape Properties in August
2009
Owners shall not, without the prior written approval of the [HUD] Secretary, permit the use of
the dwelling accommodations or nursing facilities of the project for any purpose except the use
which was originally intended.
The mortgaged property, equipment, buildings, plans, offices, apparatus, devices, books,
contracts, records, documents, and other papers relating thereto shall at all times be maintained
in reasonable condition for proper audit and subject to examination and inspection at any
reasonable time by the Secretary or his duly authorized agents.
All rents and other receipts of the project shall be deposited in the name of the project in a
financial institution, whose deposits are insured by an agency of the Federal Government. Such
funds shall be withdrawn only in accordance with the provisions of this Agreement for expenses
of the project or for distributions of surplus cash as permitted by paragraph 6(e) above. Any
Owner receiving funds of the project other than by such distribution of surplus cash shall
immediately deposit such funds in the project bank account and failing so to do in violation of
this Agreement shall hold such funds in trust.
Until September 1, 2022, the maturity date of the original 202 direct loan associated with this
project, in the case of a conflict between a provision in this Regulatory Agreement and a
provision in the Use Agreement between the Owners and the Secretary dated as August 25,
2006, the provision in the Use Agreement will control.
Provisions From the Use Agreement – Dated August 2006
The Owner, for itself, its successors and assigns, covenants with HUD that the Owner will
continue to operate the Project on terms at least as advantageous to existing and future tenants as
the terms required by the original Section 202 loan agreement or any Section 8 rental assistance
payments contract or any other rental housing assistance contract and all applicable Federal
regulations for not less than the remaining term of the original Section 202 direct loan.
The Owner agrees to maintain the Project solely as rental housing for very-low income elderly or
disabled persons (or low income elderly or disabled person as approved by HUD or moderate
income elderly or disabled persons in the case of non-subsidized Section 202 projects) for the
life of the Use Agreement.
The Project will continue to operate until the maturity date of the original Section 202 Loan in a
manner that will provide rental housing for the elderly and persons with disabilities on terms at
least as advantageous to existing and future tenants as the terms required by the original loan.
Provision From the Housing Assistance Payments Basic Renewal Contract, Dated May
2012



                                                 32
Housing assistance payments shall only be paid to the Owner for contract units occupied by
eligible families leasing decent, safe and sanitary units from the Owner in accordance with
statutory requirements, and with all HUD regulations and other requirements.
Housing Owner’s Certification and Application for Housing Assistance Payments, Form
HUD-52670
Part V – Owner’s Certification
I certify that:
    (1) Each tenant’s eligibility and assistance payment was computed in accordance with
        HUD’s regulations, administrative procedures, and the Contract, and are payable under
        the Contract;
    (2) all required inspections have been completed;
    (3) the units for which assistance is billed are decent, safe, sanitary, and occupied or
        available for occupancy;
    (4) no amount included on this bill has been previously billed or paid;
    (5) all the facts and data on which this request for payment is based are true and correct; and
    (6) I have not received and will not receive any payments or other consideration from the
        tenant or any public or private source for the unit beyond that authorized in the assistance
        contract or the lease, except as permitted by HUD.
Upon request by the Department of Housing and Urban Development, its duly authorized
representative, or the Comptroller General of the United States, I will make available for audit all
books, records and documents related to tenants’ eligibility for, and the amount of, assistance
payments. Warning: HUD will prosecute false claims & statements. Conviction may result in
criminal and/or civil penalties (18 U.S.C. Sections 1001, 1010, 1012; 31 U.S.C. [United States
Code] Sections 3729, 3802).
24 CFR 5.403
Person with disabilities:
(1) Means a person who:
   (i) Has a disability, as defined in 42 U.S.C. 423;
   (ii) Is determined, pursuant to HUD regulations, to have a physical, mental, or emotional
        impairment that:
            (A)    Is expected to be of long-continued and indefinite duration;
            (B)    Substantially impedes his or her ability to live independently, and
            (C)    Is of such a nature that the ability to live independently could be improved by
                   more suitable housing conditions; or
   (iii) Has a developmental disability as defined in 42 U.S.C. 6001.
(2) Does not exclude persons who have the disease of acquired immunodeficiency syndrome or
any conditions arising from the etiologic agent for acquired immunodeficiency syndrome;
(3) For purposes of qualifying for low-income housing, does not include a person whose
disability is based solely on any drug or alcohol dependence; and



                                                 33
(4) Means “individual with handicaps”, as defined in §8.3 of this title, for purposes of
reasonable accommodation and program accessibility for persons with disabilities.
24 CFR 891.505
Handicapped person or individual means:
(1) Any adult having a physical, mental, or emotional impairment that is expected to be of long-
    continued and indefinite duration, substantially impedes his or her ability to live
    independently, and is of a nature that such ability could be improved by more suitable
    housing conditions.
(2) A person with a developmental disability, as defined in section 102(7) of the Developmental
    Disabilities Assistance and Bill of Rights Act (42 U.S.C. 6001(5), i.e., a person with a severe
    chronic disability that:
    (i) Is attributable to a mental or physical impairment or combination of mental and physical
         impairments;
    (ii) Is manifested before the person attains age twenty-two;
    (iii) Is likely to continue indefinitely;
    (iv) Results in substantial functional limitation in three or more of the following areas of
         major life activity:
         (A) Self-care;
         (B) Receptive and expressive language;
         (C) Learning;
         (D) Mobility;
         (E) Self-direction;
         (F) Capacity for independent living;
         (G) Economic self-sufficiency; and
    (v) Reflects the person’s need for a combination and sequence of special, interdisciplinary, or
         generic care, treatment, or other services that are of lifelong or extended duration and are
         individually planned and coordinated.
(3) A person with a chronic mental illness, i.e., if he or she has a severe and persistent mental or
    emotional impairment that seriously limits his or her ability to live independently, and whose
    impairment could be improved by more suitable housing conditions.
(4) Persons infected with the human acquired immunodeficiency virus (HIV) who are disabled
    as a result of infection with the HIV are eligible for occupancy in section 202 projects
    designed for the physically disabled, developmentally disabled, or chronically mentally ill
    depending upon the nature of the person’s disability. A person whose sole impairment is
    alcoholism or drug addiction (i.e., who does not have a developmental disability, chronic
    mental illness, or physical disability that is the disabling condition required for eligibility in a
    particular project) will not be considered to be disabled for the purposes of the section 202
    program.
HUD Handbook 4350.3 - Occupancy Requirements of Subsidized Multifamily Housing
Programs
3-4 Eligibility Determinations – General




                                                   34
Owners are required to determine whether applicants are eligible to occupy the subsidized
property and receive housing assistance. Eligibility is determined by federal statute and HUD
regulation. For HUD programs, eligibility is only determined at move-in or at initial
certification, (e.g. when a Section 236 tenant starts receiving Section 8 assistance) except as
discussed in paragraphs 3-13, Determining Eligibility of Students for Assistance and 3-16,
Determining the Eligibility of a Remaining Member of a Tenant Family. HUD's general
eligibility requirements are found in HUD’s regulations at 24 CFR, part 5.
3-9 Disclosure of Social Security Numbers
C. Provisions for Applicants Disclosure and/or Documentation of Social Security Numbers
An applicant may not be admitted until SSNs [Social Security numbers] for all household
members have been disclosed and verification provided.
    1. If all household members have not disclosed and/or provided verification of their SSNs at
       the time a unit becomes available, the next eligible applicant must be offered the
       available unit.
    2. The applicant who has not disclosed and provided verification of SSNs for all household
       members must disclose and provide verification of SSNs for all household members to
       the owner within 90 days from the date they are first offered an available unit.
    3. If the owner has determined that the applicant is otherwise eligible for admission into the
       property, and the only outstanding verification is that of disclosing and providing
       verification of the SSN, the applicant may retain his or her place on the waiting list for
       the 90-day period during which the applicant is trying to obtain documentation.
    4. After 90 days, if the applicant has been unable to supply the required SSN and
       verification documentation, the applicant should be determined ineligible and removed
       from the waiting list (see paragraph 4-20 A).

3-14 Key Regulations
This paragraph identifies key regulatory citations pertaining to Section 2: Project Eligibility.
The citations and their titles (or topics) are listed below.
A. Eligibility for Admission to Section 8 Projects
    24 CFR part 5, subpart D (Definitions for Section 8)
B. Eligibility for Admission to Individual Section 202, Section 202/8, Section 202/162 PAC
[project assistance contract], Section 202 PRAC [project rental assistance contract], and Section
811 PRAC Projects
      24 CFR part 891, subparts A, B, C, and D (Section 202 PRAC and Section 811 PRAC
       projects)
      24 CFR part 891, subpart E (Section 202/8 and Section 202 PAC projects)
3-28 Verification of Family Type and Individual Status
A. Overview
Eligibility for certain projects (as identified in Section 2 of this chapter), certain income
deductions, and preferences are based upon whether the family is identified as elderly or



                                                   35
disabled, or whether a family has any individual members who are elderly or disabled.
Therefore, verifications of age and disability status are very important issues in determining
eligibility and rent.
B. Disability
An owner may verify disability to determine whether a family or person meets the definition of
disability used to determine eligibility for a project, preferences, or an allowance, or to identify
applicant needs for features of accessible units or reasonable accommodations. The owner may
not specifically ask for or verify the nature and extent of the disability. There are ways to verify
disability status without obtaining detailed information or information that must not be collected.
Verification of disability may be obtained through the following methods:
1. A third-party verification form may be sent by the owner to an appropriate source of
information, including but not limited to a physician, psychologist, clinical social worker, other
licensed health care, or the Veterans Administration.
    a. If a third-party form is used, it must be signed by the applicant authorizing the release of
        such information to the owner.
    b. The form should provide the definitions of disability used to determine eligibility and
        rent and should request that the source completing the form identify whether the
        applicant meets the definition. In this way the owner is not required to make any
        judgments about whether a condition is considered a disability, and will not have
        prohibited information.
2. Receipt of social security disability payments is adequate verification of an individual’s
disability status for programs listed in Figure 3-5 that use definition E for person with
disabilities. Such information is obtained through verification of the social security disability
payments. See the discussion in Chapter 5, Section 3.
NOTE: Applicants who meet the Social Security’s definition of disabled are eligible even if they
do not receive social security benefits. The Section 202 and Section 811 programs do not use
this definition of disability, therefore, this note does not apply to applicants for units in Section
202 or 811 projects. Because the Disability Status in EIV [the Enterprise Income Verification
system] is not always accurate, owners must not use this status for determining an applicant’s or
tenant’s eligibility as disabled for a HUD program or for receiving the elderly/disabled
household allowance. Owners must obtain current tenant-provided documentation, or
verification directly from the Social Security office to determine whether an applicant or tenant
meets their definition as disabled for programs listed in Figure 3-5 that use definition E for
person with disabilities.
3. Receipt of a veteran’s disability benefits does not automatically qualify a person as disabled,
because the Veteran’s Administration and Social Security Administration define disabled
differently.
4-22 Record-Keeping
   (A) The owner must retain current applications as long as their status on the waiting list is
       active.



                                                  36
   (B) Once the applicant is taken off the waiting list, the owner must retain the application,
       form HUD-92006 completed by the applicant, initial rejection notice, applicant reply,
       copy of the owner’s final response, and all documentation supporting the reason for
       removal from the list for three years.
   (C) When an applicant moves in and begins to receive assistance, the application and form
       HUD-92006 completed by the applicant must be maintained in the tenant file for the
       duration of the tenancy and for three years after the tenant leaves the property.
   (D) All files must be kept secure so that personal information remains confidential.
   (E) The applicant’s or tenant’s file should be available for review by the applicant or tenant
       upon request or by a third party who provides signed authorization for access from the
       applicant or tenant. EIV income data found in the tenant’s file has additional disclosure
       requirements (see paragraph 9-18).
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.
5-23 – Record-Keeping Procedures
A. Owners must keep the following documents in the tenant’s file at the project site:
       1. All original, signed forms HUD 9887 and HUD 9887-A;
       2. A copy of signed individual consent forms; and
       3. Third-party verifications.
B. Owners must maintain documentation of all verification efforts throughout the term of each
tenancy and for at least three years after the tenant moves out.
C. The tenant’s file should be available for review by the tenant upon request or by a third party
who provides signed authorization for access from the tenant.
7-4 – Key Requirements
A. To ensure that assisted tenants pay rents commensurate with their ability to pay, HUD
requires the following:
       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.

9-7 - Data Collection and Processing Procedures
E. Record-Keeping Requirements for HUD-50059, HUD-50059-A and Vouchers
       1. Owners must keep the signed HUD-50059(s) and copies of the HUD-50059-A(s) for
       tenants from the time of move-in to move-out and for a minimum of three years


                                                 37
      thereafter. Owners may move older records offsite when files get large, however, upon
      request, the files must be made available for review by HUD or the Contract
      Administrator.

Appendix 3: Acceptable Forms of Verification




                                             38
Appendix D
                                                                                                                   Tenant Deficiencies

                                 Disability not supported
         Identity not verified




                                                                           Does not live in unit

                                                                                                   House manager
                                                            Not disabled
                                                                                                                     Total
                                                                                                                    housing
Tenant                                                                                                                               Supported   Unsupported   Ineligible
                                                                                                                   assistance
                                                                                                                   payment



1                                   X                                                                                $34,078                         $34,078
2                                                                             X                                        2,873                                      $2,873
3          X                                                X                                                          6,925                                       6,925
4          X                        X                                                                                  3,335                           3,335
5          X                                                                  X                                        2,970                             990       1,980
6                                   X                                                                                  2,904                           2,904
7                                   X                                                                                 10,449                          10,449
8          X                        X                                                                                 15,245                          15,245
9                                   X                                                                                  9,168                           9,168
10                                                                            X                                        7,815            $4,908                     2,907
11         X                                                                  X                                        7,383                                       7,383
12         X                        X                                                                X                10,449                           6,924       3,525
13                                                                            X                                       13,353             2,721                    10,632
14         X                        X                                         X                                        3,069                             907      $2,162
15         X                                                X                                                         14,953                                      14,953
16                                                          X                                        X                37,224                                      37,224
17                                                          X                                                          2,361                                       2,361
18         X                        X                                                                                 29,645                          29,645
19         X                        X                                         X                                        8,141                           2,308       5,833
20         X                                                X                                        X                16,577                                      16,577
21         X                                                X                                                         11,785                                      11,785
22                                                                                                                     2,810             2,810
23                                                          X                                                         10,449                                      10,449
24         X                     X                                            X                                        8,067                           1,080       6,987
25                               X                                                                                    12,757                          12,757
Total    13                      12                          7                  8                     3              284,785            10,439       129,790    144,556




                                                                                                                                39
The following table shows details regarding assistance paid for the eight tenants not living in
units.
                          Assistance for Tenants Not Living in Units

                                    Assistance                  Assistance    Overpaid
             Tenant    Move-in                    Move-out
                                      start                        end        assistance
         2            May 2016      May 2016      May 2016     Continues*          $2,873
         5            May 2016      May 2016      June 2016    Continues*           1,980
                                                  Current
         10           Mar. 2016     Dec. 2015     tenant       Continues*           2,907
         11           Jan. 2016     Jan. 2016     Jan. 2016    Continues*           7,383
                                                  Current
         13          May 2016 May 2015            tenant     Continues*          10,632
         14          May 2016 May 2016            June 2016  Continues*           2,162
         19          Jan. 2016 Jan. 2016          Mar. 2016  Continues*           5,833
         24          Jan. 2016 Jan. 2016          Feb. 2016  Continues*           6,913
          Total                                                                  40,683
*New Horizons continued to receive assistance for these tenants as of July 2016, which was the
last month for which we obtained housing assistance payment vouchers.




                                                 40
Appendix E
                        Missing Tenant Files


              Tenant*     HAP begin     HAP end     Total HAP
         1               Oct. 2013     May 2014         $6,906
         2               June 2013     Sept. 2013         3,780
         3               June 2013     Sept. 2013         4,476
         4               June 2013     July 2013          1,661
         5               Mar. 2015     Jan. 2016          8,755
         6               Dec. 2013     Nov. 2014        13,428
         7               June 2013     Sept. 2013         4,476
         8               May 2015      Aug. 2015          4,579
         9               June 2013     Dec. 2013          6,944
         10              July 2015     Apr. 2016        11,354
         11              June 2013     Sept. 2013         4,476
         12              May 2015      Oct. 2015          6,924
         13              May 2015      Jan. 2016          9,344
         14              June 2013     July 2013          1,191
         15              June 2013     June 2015        28,045
         16              June 2013     Dec. 2013          6,750
         17              Oct. 2013     Feb. 2014          4,210
         18              June 2013     Feb. 2015        19,155
         19              July 2015     July 2016        14,953
         20              Oct. 2013     May 2015         21,838
         21              July 2013     July 2013            108
         22              Jan. 2014     Dec. 2014        13,392
         23              Feb. 2014     Jan. 2015        13,312
         24              Jan. 2015     Oct. 2015          8,968
         25              June 2013     Dec. 2015        28,583
         26              June 2013     Sept. 2013         4,476
         27              Oct. 2013     Oct. 2015        19,135
         28              June 2013     Jan. 2014          6,491
         29              Nov. 2015     Apr. 2016          6,924
         30              Oct. 2013     July 2015        23,681
         31              June 2013     July 2013          1,155
         32              June 2013     July 2015        22,786
         33              July 2015     Oct. 2015          4,430
         34              May 2015      Dec. 2015          9,083
         35              June 2013     July 2013          1,336


                                 41
                      Tenant           HAP Begin      HAP End       Total HAP
               36                     Sept. 2013     Aug. 2014           13,428
               37                     June 2013      Nov. 2013            4,408
               38                     June 2013      Nov. 2013            5,113
               39                     June 2013      Sept. 2013           3,880
               40                     Nov. 2015      Apr. 2016            6,924
               41                     June 2013      June 2013              992
               42                     June 2013      Aug. 2014           16,785
               43                     Feb. 2014      May 2015            17,788
               44                     Oct. 2013      Sept. 2014          13,428
               45                     Jan. 2016      Apr. 2016            3,814
               46                     Feb. 2015      May 2016            13,769
               47                     June 2013      Aug. 2013            2,419
               48                     June 2015      Apr. 2016           11,848
               49                     Aug. 2014      July 2015            8,089
               50                     June 2013      Sept. 2013           4,024
               51                     Nov. 2015      Apr. 2016            6,924
               52                     June 2013      Aug. 2013            2,451
               53                     June 2013      Sept. 2013           3,236
               54                     June 2013      Jan. 2016           33,858
               55                     Sept. 2013     Apr. 2016           36,300
               56                     June 2013      Jan. 2014            6,971
               57                     June 2013      July 2013            1,336
               58                     Oct. 2013      Sept. 2014           9,672
               59                     July 2015      Apr. 2016           11,540
               60                     June 2015      Oct. 2015            4,890
               61                     June 2013      July 2013            1,336
               62                     Jan. 2016      Apr. 2016            4,281
               Total                                                    596,609
*The tenant numbers listed here do not agree with the tenant numbers in appendix D.




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