oversight

The Housing Authority of the County of Lake, Grayslake, IL, 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 2018-09-25.

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

     Housing Authority of the County of
            Lake, Grayslake, IL
                  Housing Choice Voucher Program




Office of Audit, Region 5          Audit Report Number: 2018-CH-1007
Chicago, IL                                        September 25, 2018
To:            Daniel Sherrod, Director of Public and Indian Housing Hub, 5APH


               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA
Subject:       The Housing Authority of the County of Lake, Grayslake, IL, 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 Housing Authority of the County of Lake’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) 913-8499.
                    Audit Report Number: 2018-CH-1007
                    Date: September 25, 2018

                    The Housing Authority of the County of Lake, Grayslake, IL 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 Housing Authority of the County of Lake, IL’s Housing Choice Voucher
Program based on the activities included in our 2018 annual audit plan and our analysis of risk
factors related to public housing agencies in Region 5’s jurisdiction. Our audit objective was to
determine whether the Authority appropriately managed its program in accordance with the U.S.
Department of Housing and Urban Development’s (HUD) and its own requirements.

What We Found
The Authority did not appropriately manage its Family Self-Sufficiency program. As a result,
HUD and the Authority lacked assurance that program participants benefited from the program
and made progress toward self-sufficiency and more than $445,000 in coordinator grant funds
was used appropriately. In addition, (1) participants’ escrow accounts were overfunded, (2)
graduation disbursements were unsupported, (3) ineligible escrow disbursements were paid, and
(4) participants’ escrow accounts were underfunded.
The Authority also did not always correctly calculate and support housing assistance payments.
As a result, it overpaid nearly $17,000, underpaid nearly $4,000, and was unable to support
nearly $19,000 in housing assistance. If the Authority does not correct its certification process, it
could overpay nearly $352,000 in housing assistance over the next year.
The Authority did not always ensure that program funds were used for eligible expenses and
inappropriately charged fees to its Project-Based Voucher Program developments. It also did not
properly allocate expenses and lacked support that rent charged to its program was reasonable.
As a result, the Authority inappropriately used nearly $14,000 in program funds and earned
nearly $9,200 in fees. In addition, nearly $4,100 in expenses was unsupported, and nearly
$43,000 was not available for its program.

What We Recommend
We recommend that the Director of HUD’s Chicago Office of Public and Indian Housing require
the Authority to (1) support or reimburse its program for the unsupported escrows, unearned
coordinator grant funds, housing assistance payment calculations, and expenditures; (2)
reimburse its programs from non-Federal funds for the ineligible escrow disbursements, housing
assistance payment calculations, and expenses; and (3) implement adequate procedures and
controls to address the findings cited in this audit report.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Authority Did Not Appropriately Manage Its Family Self-
         Sufficiency Program ......................................................................................................... 4

         Finding 2: The Authority Did Not Always Comply With HUD’s and Its Own
         Requirements for Its Housing Choice Voucher Program Files .................................... 9

         Finding 3: The Authority Did Not Always Appropriately Manage Its Program
         Funds ................................................................................................................................ 12

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

Internal Controls ....................................................................................................20

Appendixes ..............................................................................................................22
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 22

         B. Auditee Comments and OIG’s Evaluation ............................................................. 24

         C. Federal and Authority Requirements ..................................................................... 38




                                                                      2
Background and Objective
The Housing Authority of the County of Lake, IL, was created under the laws of the State of
Illinois to relieve the shortage of decent, safe, affordable, and sanitary dwellings. The Authority
is governed by a seven-member board of commissioners appointed by the Lake County board.
The board appoints the executive director. The executive director has general supervision over
the administration of the Authority’s business and affairs, subject to the direction of the
Authority and management of the housing projects of the Authority.

The Authority administers the Housing Choice Voucher Program, funded by the U.S. Department
of Housing and Urban Development (HUD). The program allows very low-income individuals to
lease or purchase safe, decent, and affordable privately owned rental housing. As of December
2017, the Authority had 3,076 vouchers and had received nearly $24 million in program funds.

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, which 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.
The objective of our audit was to determine whether the Authority appropriately managed its
program in accordance with HUD’s and its own requirements. Specifically, we wanted to
determine whether the Authority (1) appropriately managed its Family Self-Sufficiency program,
(2) maintained its Housing Choice Voucher Program files in accordance with HUD’s and its own
requirements, and (3) appropriately managed its Housing Choice Voucher Program funds.




                                                 3
Results of Audit

Finding 1: The Authority Did Not Appropriately Manage Its
Family Self-Sufficiency Program
The Authority did not appropriately manage its Family Self-Sufficiency program. Specifically it
did not maintain required documentation that was complete and accurate and met HUD’s
requirements and ensure that participants’ escrow accounts were correctly calculated and
supported. The weaknesses occurred because the Authority did not have adequate procedures
and controls to oversee its program coordinators to ensure that the program was effectively
managed. In addition, the Authority’s program coordinators lacked a sufficient understanding of
HUD’s and the Authority’s requirements. As a result, HUD and the Authority lacked assurance
that program participants benefited from the program and made progress toward self-sufficiency
and more than $445,000 in coordinator grant funds was used appropriately. In addition, (1)
participants’ escrow accounts were overfunded by nearly $23,000, (2) graduation disbursements
totaling nearly $121,000 were not supported, (3) ineligible escrow disbursements of nearly
$12,500 were paid, (4) participants’ escrow accounts were underfunded by more than $3,800,
and (5) one graduation disbursement was underpaid by more than $500.
The Authority Did Not Ensure That Required Documentation Was Complete and Accurate
and Met HUD’s Requirements
We reviewed the files for 45 households that participated in the Authority’s program from
January 1, 2016, through December 31, 2017, to determine whether the Authority obtained
and maintained documentation that was complete and accurate and complied with HUD’s
requirements and its own program action plan. All 45 of the participant files (100 percent)
reviewed contained incorrect or incomplete documentation.1 The 45 program participant files
contained 1 or more of the following deficiencies:

        45 had incomplete individual training and services plans,
        37 had missing annual escrow reports,2
        23 had inaccurate contracts of participation,
        21 had goals that did not promote self-sufficiency, and



1
    See appendix C for criteria.
2
    For the remaining eight (45-37) participant files, the participants had not been on the program for a full year or
    left the program before the first year was completed; therefore, an annual escrow report would not have been
    required.




                                                           4
        3 contracts of participation had incorrect effective dates.

In addition, the program participants’ files lacked sufficient documentation to support that the
Authority appropriately extended three contracts of participation as required.3

There was also limited documentation in the files to support that the Authority’s Family Self-
Sufficiency 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.4 For example there was no support of any contact between one
participant and the Authority for more than 3 years. In addition, the Authority’s program
coordinators allowed 21 participants to include goals and activities and services on their
individual training and services plans that did not aid in self-sufficiency. Some examples of the
inappropriate goals and activities included getting a deep tissue massage, taking a cat to the pet
dentist, taking a family vacation, and enrolling children in extracurricular activities. According
to HUD’s requirements,5 the Family Self-Sufficiency coordinators should be prepared to help
participants define realistic, individualized, short- and long-term goals with target dates for
completion in three key areas: education and job training, employment, and financial capability.

The Authority Did Not Ensure That Participants’ Escrow Accounts Were Correctly
Calculated and Supported
We reviewed the Authority’s escrow calculations for the 45 participants. Of the 45
participants, 25 (56 percent) had incorrect escrow balances, escrow disbursements, or a
combination of both.6 Specifically, the 25 participants had 1 or more of the following
deficiencies:

        14 had overfunded escrows totaling $22,601,
        10 had unsupported graduation disbursements totaling $120,067,
        8 had ineligible escrow disbursements totaling $12,460,
        4 had underfunded escrows totaling $3,801, and
        1 had an underpaid graduation disbursement totaling $547.

We also reviewed the Authority’s Family Self-Sufficiency ledger and determined that 29
participants had exited the program before December 31, 2017, yet had remaining escrow




3
    See appendix C for criteria.
4
    24 CFR 984.102
5
    HUD’s Family Self-Sufficiency program guidebook, section 2.5
6
    See appendix C for criteria.




                                                      5
balances. The escrow funds, totaling more than $56,000 should have been returned to the
Housing Choice Voucher Program.
The Authority Lacked Adequate Procedures and Controls and Lacked a Sufficient
Understanding of HUD’s Requirements
The Authority did not have adequate procedures and controls to properly supervise its
program coordinators to ensure that the program was effectively managed. According to the
Authority, it had experienced a high turnover in program staff over the past few years. For
instance, in 2016 and 2017, the Authority had gone through seven permanent employees. It
also had four temporary employees from a staffing agency in 2017. One of the seven
employees had worked for only 1 week, and another had worked for 5 months, while the
length of employment for the temporary staff varied between 2 weeks and 2 months.
Although the Authority experienced staff turnover, it did not have a system in place to ensure
the quality of its program coordinators’ work. The interim executive director acknowledged
that the staff had not been appropriately trained. Therefore, the Authority’s program staff
lacked a sufficient understanding of HUD’s and its own program requirements.

In 2017 and 2018, the Authority hired new program staff and had started implementing new
procedures and controls. For instance, the Authority’s director of community affairs planned
to complete quality control reviews of approximately 15 files per month until 100 percent of
the files had been reviewed.
Program Coordinator Grant Funds Were Awarded
HUD awarded the Authority Family Self-Sufficiency coordinator grant funds totaling
$445,122 for fiscal years 2016 and 2017 to effectively administer the Family Self-
Sufficiency programs.7 According to HUD’s grant agreement, performance was based upon
whether the Authority achieved the agreed-upon activities and whether the Authority had
produced tangible results through the implementation of the grant activities.
Conclusion
The above weaknesses occurred because the Authority did not have adequate procedures and
controls to properly supervise its program coordinators to ensure that the program was
effectively managed and did not ensure that its program coordinators had a sufficient
understanding of HUD’s and its own requirements. As a result, HUD and the Authority lacked
assurance that program participants benefited from the program and made progress toward self-
sufficiency and more than $445,000 in coordinator grant funds was used appropriately. In
addition, (1) participants’ escrow accounts were overfunded by nearly $23,000, (2) graduation



7
    The grant funds were provided to the Authority to administer its Housing Choice Voucher and Public Housing
    Family-Self Sufficiency programs. The Authority could not provide the allocations used for each program.




                                                       6
disbursements totaling nearly $121,000 were not supported, (3) ineligible escrow disbursements
of nearly $12,500 were paid, (4) participants’ escrow accounts were underfunded by more than
$3,800, and (5) one graduation disbursement was underpaid by more than $500.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Public and Indian Housing require
the Authority to
     1A. Transfer $78,786 ($22,601 + $56,185) from its Family Self-Sufficiency account to its
         Housing Choice Voucher Program account for the overfunded and forfeited escrows.

     1B. Support or reimburse its Housing Choice Voucher Program $120,067 from non-
         Federal funds for unsupported graduation disbursements.

     1C. Reimburse its Housing Choice Voucher Program $12,460 from non-Federal funds
         for the ineligible disbursements.

     1D. Transfer $3,801 from its Housing Choice Voucher Program account to its Family
         Self-Sufficiency account for the underfunded escrows.

     1E. Reimburse one participant, $547 from its Family Self-Sufficiency program for the
         underpaid graduation payment.

     1F. Implement procedures and controls to ensure that documentation required by HUD
         and the Authority’s own action plan is correctly completed, documented, and
         updated.

     1G. 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’ individual training and services plans are complete and contain
         appropriate goals to assist the family in achieving self-sufficiency, (2) participants
         are notified of their escrow account balances at least annually, and (3) contracts of
         participation are complete and accurate.

     1H. Ensure that its newly created policies and procedures include a process for ensuring
         that (1) escrow balances are correctly calculated and disbursed, (2) escrow accounts
         and disbursements are fully supported, and (3) forfeited escrow account funds are
         returned to the Housing Choice Voucher Program as required.

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




                                               7
1I.   Determine the amount of the $445,122 in coordinator grant funds that were
      appropriately earned by the Authority for meeting requirements and paid to the
      coordinators while performing duties of the Family Self-Sufficiency program. The
      funds that are determined to be unearned should be reimbursed to HUD from non-
      Federal funds.




                                         8
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. The
weaknesses occurred because the Authority lacked adequate oversight of its program and did not
consistently follow its written policies. As a result, it overpaid nearly $17,000, underpaid nearly
$4,000, and was unable to support nearly $19,000 in housing assistance payments. If the
Authority does not correct its certification process, it could overpay nearly $352,000 and
underpay nearly $103,000 in housing assistance over the next year.
The Authority Had Miscalculated and Unsupported Housing Assistance Payments
We reviewed 60 statistically selected certifications8 for 60 of the Authority’s program household
files to determine whether the Authority correctly calculated housing assistance payments for the
period January 1, 2016, through December 31, 2017. Our review was limited to the information
maintained by the Authority in its household files.
For the 60 certifications, 30 (50 percent) had incorrectly calculated housing assistance and utility
allowances.9 The 30 certifications contained 1 or more of the following deficiencies:

         20 had incorrect income calculations,
         8 had incorrect utility allowances, and
         4 had incorrect deductions from income.

For the households associated with the 30 certifications, the Authority overpaid $10,331 and
underpaid $3,590 in housing assistance. In addition, the Authority had $26,654 in unsupported
housing assistance payments for 10 households. During the audit, the Authority provided partial
support for one household. Therefore, the Authority had $18,638 ($26,654 - $8,016) in
unsupported housing assistance payments for 10 households. The Authority earned $10,119 in
administration fees for the 30 certifications.

In addition, of the 60 certifications reviewed, 13 contained 18 errors10 that had no impact on the
housing assistance. The errors included incorrect income calculations, utility allowances, child
support deductions, payment standards, and medical expense calculations.11




8
     Our methodology for the statistical sample is explained in the Scope and Methodology section of this audit
     report.
9
     See appendix C for criteria.
10
     One household can have more than one error.




                                                          9
Further, 4 of the 60 household files contained documentation showing that the households had
unreported or underreported income. However, the Authority did not identify the unreported or
underreported income, make adjustments to the housing assistance payments, or issue repayment
agreements for the overpaid housing assistance as required by its program administrative plan.12
As a result, the Authority overpaid $6,367 in housing assistance for the four households.
The Authority Lacked Adequate Oversight of Its Program
The Authority lacked adequate oversight of its program and did not consistently follow its
written policies. The Authority’s director of voucher management said that she completed
quality control file reviews for all new admission households. However, the Authority did not
have a system or process to review certifications for households that were already on the
program, unless there was a tenant complaint or the housing certification specialists requested a
review of a particular file. The Authority’s interim executive director said that with the recent
addition of an assistant director of voucher management, the Authority planned to implement a
more consistent measure for monitoring quality assurance in the files to include annual
reexaminations and new admissions. In addition, the Authority did not consistently follow its
administrative plan for the calculation of income. For instance, according to the Housing Choice
Voucher Program director, the Authority’s staff used historical amounts received to calculate
child support; however, the Authority did not consistently apply this policy.
Conclusion
The weaknesses described above occurred because the Authority lacked adequate oversight of its
program and did not consistently follow its written policies. As a result, it overpaid $10,331 and
underpaid $3,590 in housing assistance. In addition, the Authority lacked support for housing
assistance payments totaling $18,638 due to unsupported housing assistance calculations and
overpaid $6,367 in housing assistance for four households due to unreported or underreported
income.
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
perform its administrative responsibilities correctly or adequately under the program. The
Authority received $10,119 in program administrative fees related to the inappropriate and
unsupported housing assistance payments cited in this finding.



11
     Further clarification: A specific example of an error that would not affect housing assistance would be that if the
     household’s payment standard was too low but the utility allowance amount was too high, depending on the
     amount of the error, they could cancel each other out and, thus, not impact the household’s housing assistance
     payment.
12
     Section 16-IV.B of the Authority’s administrative plan. 




                                                           10
If the Authority does not correct its certification process, we estimate that it could overpay
$351,060 and underpay $102,939 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 Chicago Office of Public and Indian Housing require
the Authority to
        2A. Reimburse its program $20,450 from non-Federal funds ($10,331+ $10,119 in
            associated administrative fees) for the overpayment of housing assistance due to
            inappropriate calculations of housing assistance.

         2B. Reimburse the appropriate households $3,590 from program funds for the
             underpayment of housing assistance due to inappropriate calculations.

         2C. Support or reimburse its program $18,638 from non-Federal funds for the
             unsupported payments of housing assistance cited in this finding.

        2D. Enter into repayment agreements to pursue collection from the applicable
            households or reimburse its program $6,367 from non-Federal funds for the
            overpayment of housing assistance due to unreported or underreported income.

         2E. Implement adequate procedures and controls to ensure that housing assistance
             payments are appropriately calculated and supported and that repayment
             agreements are created to recover overpaid housing assistance when unreported
             income is discovered during the examination process to ensure that $453,999
             ($351,060 + $102,939) in program funds is appropriately used for future
             payments.




                                              11
Finding 3: The Authority Did Not Always Appropriately Manage
Its Program Funds
The Authority did not always ensure that program funds were used for eligible expenses and
inappropriately charged fees to its Project-Based Voucher Program developments. It also did not
properly allocate expenses and lacked support that rent charged to its program was reasonable.
The weaknesses occurred because the Authority lacked a sufficient understanding of HUD’s
regulations regarding the appropriate use of program funds and the allocation of expenditures.
As a result, the Authority inappropriately used nearly $14,000 in program funds and earned
nearly $9,200 in fees. In addition, nearly $4,100 in expenses was unsupported, and nearly
$43,000 was not available for its program.
The Authority Did Not Always Use Program Funds for Eligible and Supported
Expenditures
We reviewed 172 expenses from the Authority’s program general ledger and credit card
statements for the period January 1, 2016, through December 31, 2017, to determine whether
they were appropriate and adequately supported. Of the 172 expenses reviewed, the Authority
was unable to support 38 (22 percent) totaling $4,070, and 31 (18 percent) totaling $3,117 were
ineligible. The unsupported and ineligible expenses13 included but were not limited to

         coffee makers and kitchen supplies,
         food and beverages,
         fees for awards,
         travel expense related to the Authority’s nonprofit,
         caps and gowns for the Family Self-Sufficiency program, and
         gift cards.
The Authority Inappropriately Charged Administrative Fees to Project-Based Voucher
Developments
The Authority’s director of finance stated that the program generated non-Federal income that
would cover the ineligible expenses. We reviewed the income sources and determined that the
Authority modified its Project-Based Voucher contracts to include fees charged to owners. For
instance, the Authority altered one contract to require the owner to pay an annual $500 contract-
processing fee and a $10 per contract unit annual waiting list management fee. HUD does not
permit changes to Project-Based Voucher contracts. In addition, according to HUD, the




13
     See appendix C for criteria.




                                                12
Authority earned administrative fees for the Project-Based Voucher Program; therefore, it was
not appropriate to charge owners additional fees for the normal costs of doing business.

In 2016 and 2017, the Authority received nearly $9,200 from Project-Based Voucher Program
developments. In addition, the Authority earned income from activities not related to the
program. However, it did not deduct the expenses incurred by program staff, such a salaries, and
office supplies used to earn income from activities not related to the program. Because the
Authority did not appropriately allocate expenses for the income earned by program staff that
was not related to the program, we could not determine the difference between program income
and non-Federal income.
The Authority Did Not Always Allocate Expenses
The Authority’s general ledger included transactions for bank analysis fees totaling more than
$43,000. The director of finance said that bank account analysis fees had always been allocated
solely to the program. However, the Authority’s detailed statement contained individual charges
for each bank account associated with the Authority’s programs. Therefore, the Authority did
not appropriately allocate these charges among its programs. During the audit, the Authority
provided documentation to show that the total amount that should have been allocated among its
other programs totaled $10,861. However, the Authority did not provide documentation to
support that its program had been reimbursed. Additionally, the Authority did not provide
documentation for the remaining bank service charge totaling $1,848.

The Authority also did not allocate expenses for its Family Self-Sufficiency program between
the Housing Choice Voucher Program and the public housing program. Instead, it charged the
Housing Choice Voucher Program for all incurred expenses. HUD requires public housing
agencies to develop a cost allocation method that allocates Family Self-Sufficiency expenses
fairly between the program and the public housing program.14
The Authority Charged Its Program for Rents That May Not Have Been Reasonable
The Authority charged its program nearly $41,000 in rent for use of approximately 116 square
feet of office space in its main office and additional space in a satellite office located in one of its
public housing properties for its Family Self-Sufficiency program. Specifically, the Authority
charged its program (1) $25,056 from January 1, 2016, through December 31, 2017, for the
space in its main office and (2) $15,600 from October 1, 2016, through December 31, 2017, for
space in its public housing property. Although the Authority is permitted to incur costs, such as
office space, for the administration of the Family Self-Sufficiency program, the Authority did not
have fully executed leases or support that the rent it charged its program was reasonable. The




14
     HUD’s Accounting Brief Number 23.




                                                  13
Authority also did not allocate the costs between its two programs.15 According to the
Authority’s interim executive director, the Family Self-Sufficiency staff had been relocated to
the Authority’s main office. However, she was unable to remember exactly when the staff had
been relocated. She also said that the Family Self-Sufficiency staff would occasionally use the
space located at the public housing property for activities. As of December 2017, the
Authority’s program was paying monthly rent for space in the public housing property.

The Authority Lacked a Sufficient Understanding of HUD’s Requirements
The Authority lacked a sufficient understanding of HUD’s requirements regarding the
appropriate use of program funds and the allocation of expenses. The Authority disagreed that
expenses for food, beverages, and kitchen supplies were not necessary expenses for
administering the program. In addition, the Authority believed that the expenses for its public
housing Family Self-Sufficiency program that had been paid using Housing Choice Voucher
Program funds were minimal and could be covered with other sources of funding. Therefore, it
seemed unreasonable to allocate expenses to the Family Self-Sufficiency program because it
received non-Federal income in the form of donations that could absorb the public housing
portion of the expenses. However, the Authority’s general ledger and supporting documentation
showed that program funds were used to pay for the Family Self-Sufficiency program’s
expenses.
Conclusion
The weaknesses described above occurred because the Authority lacked a sufficient
understanding of HUD’s requirements regarding the appropriate use of program funds and the
allocation of expenditures. As a result, the Authority used Housing Choice Voucher Program
funds to pay for (1) ineligible expenditures totaling $13,978 ($3,117 + 10,861), (2) unsupported
expenditures totaling $4,070, (3) $1,848 in bank service charges not allocated to its programs,
and (4) $40,656 in rent for its Family Self-Sufficiency program that may not be reasonable. In
addition, the Authority inappropriately charged the owners of Project-Based Voucher
developments fees totaling $9,170 for the normal cost of doing business.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Public and Indian Housing require
the Authority to
           3A. Reimburse its program $3,117 from non-Federal funds for the ineligible program
               expenditures.




15
     The Authority has both a public housing and a Housing Choice Voucher Family Self-Sufficiency program.




                                                       14
        3B. Support or reimburse its program $4,070 from non-Federal funds for the
            unsupported program expenditures.

        3C. Reimburse $9,170 from non-Federal funds to the owners of the Project-Based
            Voucher developments it inappropriately charged for the normal cost of doing
            business to administer the Project-Based Voucher contracts.

        3D. Reimburse the Housing Choice Voucher Program $10,861 from its various
            programs for the bank service charges inappropriately charged to its Program.

        3E. Determine the appropriate allocations of the bank service charges and reimburse
            its Housing Choice Voucher Program from the various programs to ensure that
            $1,848 is available for appropriate program use.

        3F. Ensure that its staff is appropriately trained and familiar with HUD’s expenditure
            and allocation requirements.

        3G. Develop and implement adequate procedures and controls to ensure that program
            expenditures are for eligible and supported program costs and that costs are
            appropriately allocated to its various programs as required.

We also recommend that the Director of HUD’s Chicago Office of Public and Indian Housing

        3H. Review the Authority’s Project-Based Voucher contracts, determine the total
            amount to be reimbursed to the project owners, and require the Authority to (1)
            remove all inappropriate language from its contracts, (2) issue amended contracts
            as necessary, and (3) reimburse the inappropriate charges to the applicable project
            owners from non-Federal funds.

        3I.   Determine any remaining amounts for bank service charges inappropriately
              charged to the Housing Choice Voucher Program and ensure that the various
              programs reimburse the Program as appropriate for all bank service charges not
              appropriately allocated.

        3J.   Determine whether the rent charged to the Housing Choice Voucher Program for
              the Family Self-Sufficiency program office space in the Authority’s main office
              and in its public housing property is appropriate and reasonable.

        3K. Require the Authority to reimburse its Housing Choice Voucher Program from
            non-Federal funds for any amounts determined not to be reasonable to ensure that
            $40,656 in program funds is available for appropriate program use.




                                             15
3L. Require the Authority to allocate any rents determined to be reasonable between
    its Housing Choice Voucher Program and Public Housing Family Self-
    Sufficiency program and require the Authority to reimburse its Housing Choice
    Voucher Program from its public housing program any amounts that should have
    been allocated among the programs.




                                    16
Scope and Methodology
We performed our onsite audit work between January and July 2018 at the Authority’s main
office located at 33928 North Route 45, Grayslake, IL. The audit covered the period January 1,
2016, through December 31, 2017.

To accomplish our audit objective, we interviewed HUD program staff and the Authority’s
employees. In addition, we obtained and reviewed the following:

       HUD’s regulations at 24 CFR Parts 5, 982, 983, and 984; HUD’s Office of Public and
        Indian Housing (PIH) Notice PIH-2012-15; PIH, Real Estate Assessment Center,
        Accounting Brief Number 23; HUD’s Guidebook 7420.10G; HUD’s Administering an
        Effective Family Self-Sufficiency Program: A Guidebook Based on Evidence and
        Promising Practices; and HUD’s fair market rents.

       The Authority’s policies and procedures; accounting records; bank statements; general
        ledger; board meeting minutes for January 2016 through December 2017; organizational
        chart; payment standards; utility allowances; independent audit reports for fiscal years
        2014, 2015, and 2016; housing assistance payments register; and household and Family
        Self-Sufficiency participant files.

Finding 1
We selected a nonstatistical sample of 62 participant files from the 376 participants that
participated in the program between January 1, 2016, and December 31, 2017. We used this
method to select the participant files for review during the survey and audit because the number
of participants was too large for us to review 100 percent and we wanted to ensure that we
reviewed participant files with differing attributes, including active participants with an escrow
balance, inactive participants without an escrow balance, and participants with a disbursement.
We stopped our review at 45 participant files because we determined that we had sufficient
information for the finding to show that the Authority did not appropriately manage its program.
Because we did not select a statistical sample, we are unable to project our results to the universe
of 204 current participants in the Authority’s program as of December 31, 2017.
Finding 2
We selected a systematic random sample of 60 monthly housing assistance payments from the
Authority’s 49,214 monthly disbursements for program participants from January 2016 through
December 2017. We used a statistical sample so the audit results could be projected to the
universe to make a reliable statistical conclusion on the universe error rate and error amount. To




                                                17
be conservative, we reported values at a one-sided 95 percent confidence level as the final
projected dollar amount. We concluded that housing assistance payments were overpaid by
$29,255 and underpaid by $8,57816 monthly. This is equivalent to a $351,060 ($29,255 x 12
months) overpayment and $102,939 ($8,578 x 12 months) underpayment yearly. This equates to
a total of $453,999 ($351,060 + $102,939).

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

Finding 3
We reviewed the Authority’s program general ledger and credit card statements for the period
January 1, 2016, through December 31, 2017. We used a nonstatistical sample because we
believed we knew enough about the population to target high-risk expenditures. We reviewed 74
questionable expenditures from the Authority’s the general ledger and 98 credit card transactions
charged to the Authority’s program, for a total of 172 (74 +98) transactions. We reviewed the
supporting documentation and interviewed the Authority’s staff to determine whether the
expenditures were eligible and supported under HUD’s program regulations. Because we did not
select a statistical sample, we are unable to project our results to the universe of general ledger
and credit card transactions.

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 Chicago
Office of Public and Indian Housing and the Authority’s interim executive director during the
audit. In addition, we informed the Director of HUD’s Chicago Office of Public and Indian
Housing of minor deficiencies through a memorandum, dated September 25, 2018.
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



16
     Rounded for reporting purposes.




                                                18
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               19
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

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

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




                                                  20
   The Authority did not have adequate procedures and controls to properly supervise its
    program coordinators to ensure that the program was effectively managed and did not ensure
    that its program coordinators had a sufficient understanding of HUD’s and its own
    requirements (finding 1).
   The Authority lacked adequate oversight of its program and did not consistently follow its
    written policies to ensure that it correctly calculated housing assistance payments (finding 2).
   The Authority lacked a sufficient understanding of HUD’s requirements regarding the
    appropriate use of program funds and the allocation of expenditures to ensure that it
    appropriately managed its program funds (finding 3).




                                                 21
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                                              $78,786
              1B                           $120,067
              1C          $12,460
              1D                                              3,801
              1E                                                547
              1I                            445,122
              2A           20,450
              2B                                              3,590
              2C                             18,638
              2D            6,367
              2E                                            453,999
              3A            3,117
              3B                              4,070
              3C            9,170
              3D           10,861
              3E                                             1,848
              3K                                              40,656

             Total         62,425           587,897          583,227




                                      22
1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.
2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.
3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this 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 that 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.  




                                             23
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




Comment 2




Comment 3




                              24
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation


Comment 4


Comment 5


Comment 6


Comment 7



Comment 8




Comment 9



Comment 10


Comment 11


Comment 9




                              25
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation



Comment 9


Comment 7




Comment 12




Comment 8




Comment 13




                              26
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation


Comment 14




Comment 15



Comment 16



Comment 15




Comment 17




Comment 14




                              27
              Auditee Comments and OIG’s Evaluation




Ref to OIG     Auditee Comments
Evaluation




Comment 18


Comment 19

Comment 20


Comment 21


Comment 18,
19




Comment 22


Comment 23




                               28
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation



Comment 24



Comment 25



Comment 20




Comment 26



Comment 27



Comment 21




                              29
              Auditee Comments and OIG’s Evaluation




Ref to OIG     Auditee Comments
Evaluation




Comment 21,
28




                               30
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority acknowledged that certain areas of the Family Self-Sufficiency
            program can be improved upon and committed to work with its HUD field office
            to improve overall program administration. We appreciate the Authority’s
            acknowledgement and commitment to improve the administration of its Family
            Self-Sufficiency program.
Comment 2   The Authority stated that OIG reviewed every aspect of the Family Self-
            Sufficiency program. We acknowledge that we obtained documentation from the
            Authority to gain a general understanding about the Authority’s administration of
            the program. However, our review was focused on the areas as discussed in this
            audit report (see findings 1 and 3). The Authority stated that several months
            before the OIG audit, it had identified material weakness in its administration of
            the Family Self-Sufficiency program and undertook action to correct and improve
            its performance. The Authority further stated that all previous Family Self-
            Sufficiency staff were terminated and new staff were hired with a goal to meet
            with each participant, review the individual training service plans, redefine
            individual goals to focus solely on achieving self- sufficiency, and to review,
            correct, and reconcile escrow accounts to ensure that accurate annual escrow
            accounts. In addition, it would update its Family Self-Sufficiency program action
            plan and administrative plan. We acknowledge that the Authority hired new staff;
            however there was no documentation in the participant files of corrections or
            adjustments. In addition, the Authority did not inform the audit staff or provide
            information to support that it had identified material weaknesses in the
            administration of its program before the audit. The Authority should work with
            HUD to ensure that its updated policies and procedures are appropriate and fully
            implemented.
Comment 3   The Authority agreed that individual training and service plans must be complete
            with clear interim and final goals that are measurable. As part of the Authority’s
            program improvement action plan, it would meet with all current participants to
            review, revise, and update the individual training and service plans, as necessary.
            The Authority did not provide a copy of its program improvement action plan for
            our review; however, we appreciate the Authority’s willingness to take corrective
            actions. The Authority should work with HUD to ensure that its updated policies
            are appropriate and fully implemented.
Comment 4   The Authority stated that its Family Self-Sufficiency module in its system
            generates escrow reports. However, the Authority did not maintain copies of the
            escrow reports in its participant files or other documentation to show that it




                                             31
            mailed the annual escrow reports to the participants. The Authority also stated
            that it would ensure that copies of the escrow reports are maintained in the files
            each year. We appreciate the Authority’s willingness to take corrective actions.
            The Authority should work with HUD to ensure that it appropriately documents
            the dissemination of the annual escrow reports.
Comment 5   The Authority stated that as part of its program improvement action plan, it would
            review all current contracts of participation and revise the contracts as necessary.
            The Authority did not provide a copy of its program improvement action plan for
            our review; however, we appreciate the Authority’s willingness to take corrective
            actions. The Authority should work with HUD to ensure that its contracts are
            updated appropriately.
Comment 6   The Authority stated that its program improvement action plan includes analysis
            and reconciliation of all current escrow accounts. It also stated that it would
            include an analysis of the participant escrow disbursements identified by OIG as
            unsupported or ineligible. We appreciate the Authority’s willingness to take
            corrective actions for the participant escrow disbursements that were unsupported
            or ineligible. The Authority should work with HUD to ensure that its
            reconciliations are appropriately completed and include (1) transferring funds
            back to the Housing Choice Voucher Program for over-funded escrows, (2)
            transferring funds to its Family Self-Sufficiency program for under-funded
            escrows, and (3) reimbursing its Housing Choice Voucher Program from non-
            Federal funds for any ineligible disbursements as cited in our recommendations
            (see finding 1).
Comment 7   The Authority agreed that high staff turnover and lack of adequate staff training
            contributed to a lack of sufficient understanding of HUD’s and its own policies
            and procedures. It also acknowledged that it did not have a system in place to
            ensure the quality of the work performed by the Family Self-Sufficiency program
            coordinators. The Authority stated that its program improvement plan has
            reassigned oversight of the program to a director level position and that the
            program has been added to its overall quality control procedures in the Housing
            Choice Voucher Program. The Authority did not provide a copy of its program
            improvement action plan for our review; however, we appreciate the Authority’s
            willingness to take corrective action. The Authority should work with HUD to
            ensure that its quality control procedures are sufficient and fully implemented.
Comment 8   The Authority stated that although there were operational deficiencies in the
            Family Self-Sufficiency program, the grant funds awarded for the program
            coordinators were properly expended. The Authority also stated that all
            coordinator grant funds were used only for staff that were actively engaged in the




                                             32
               program. We disagree. As indicated in the audit report, HUD’s grant agreement
               stated that performance was based upon whether the Authority achieved the
               agreed-upon activities and whether the Authority had produced tangible results
               through the implementation of the grant activities. Additionally, 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
               participant’s 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.” However, there was limited documentation in the files to
               support that the Authority’s Family Self-Sufficiency 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. Therefore, we determined the Authority program
               coordinators did not appropriately manage its program and that the program
               coordinator grant funds were not appropriately earned by the Authority for
               meeting requirements and paid to the coordinators while performing duties of the
               Family Self-Sufficiency program.
Comment 9      The Authority stated that upon completion of its reconciliation of all escrow
               accounts it would transfer overfunded, forfeited, and underfunded escrow
               amounts and reimburse any underfund graduation disbursements, as necessary.
               We appreciate the Authority’s willingness to resolve the recommendation. The
               Authority should work with HUD on the resolution of these recommendations.
Comment 10 The Authority stated that it would provide supporting documentation to HUD’s
           Chicago Field Office to support the $120,067 in graduation disbursements. We
           appreciate the Authority’s willingness to work with HUD on the resolution of the
           recommendation.
Comment 11 The Authority stated that it would provide documentation to HUD’s Chicago
           Field Office to support the $12,460 were eligible disbursements. The Authority
           should work with HUD to resolve this recommendation.
Comment 12 The Authority stated that it has started training its staff and that additional training
           was scheduled in the next 3 months. The Authority did not provide support that
           its Family Self-Sufficiency program staff had received training or that it had
           scheduled trainings. The Authority should work with HUD to ensure that its
           proposed training is sufficient and appropriate to address the finding.
Comment 13 The Authority stated that it recognizes that ongoing staff training and additional
           supervisory reviews of certifications would improve the housing assistance




                                                33
              calculations. It further stated that it would implement a requirement that all staff
              responsible for transactions in the voucher program will receive rent calculation
              training and pass a rent calculation certification exam each year. We appreciate
              the Authority’s willingness to take corrective action. The Authority should work
              with HUD to ensure that its proposed training and certification process is
              sufficient and appropriate.
Comment 14 The Authority agreed that it currently does not conduct quality control review of
           annual or interim certifications. The Authority also stated that it plans to develop
           and implement a quality control program that includes random sampling of annual
           and interim recertification transactions of each certification specialist. We
           appreciate the Authority’s willingness to improve its quality control processes.
           The Authority should work with HUD on the resolution of these
           recommendations to ensure that it also addresses the unsupported calculation
           errors and the recovery of overpaid housing assistance when unreported income is
           discovered. The Authority should also work with HUD to ensure that its
           proposed quality control procedures are sufficient and fully implemented.
Comment 15 The Authority contends that the overpayment of housing assistance due to
           inappropriate calculations reflects less than .0008 percent and that the
           unsupported calculations reflected less than .0011 percent of all funds received
           and that under generally accepted accounting principles and other audit standards
           that this would be immaterial and disregarded. We disagree. As indicated in the
           scope and methodology section of the report, we selected a systematic random
           sample of 60 monthly housing assistance payments from the Authority’s 49,214
           monthly disbursements for program participants from January 2016 through
           December 2017, which represented less than .13 percent of the entire universe of
           housing assistance payments. However, our review of 60 housing assistance
           payments disclosed 30 had incorrectly calculated housing assistance and utility
           allowance payments which represents a 50 percent error rate. When using the
           error rate and error amount when projecting to the audit universe, if the Authority
           does not correct its certification process, it could overpay nearly $352,000 and
           underpay nearly $103,000 in housing assistance over the next year. Nevertheless,
           we appreciate the Authority’s willingness to work with HUD on the resolution of
           recommendations 2A and 2C.
Comment 16 The Authority stated that it would review the files in more detail to determine if
           the $3,590 is the correct amount owed to participants and that it would reimburse
           the households as necessary. The Authority should work with HUD on the
           resolution of this recommendation.




                                               34
Comment 17 The Authority stated that it would review the files to determine the unreported
           income amounts and execute repayments agreements with participants. The
           Authority should work with HUD on the resolution of this recommendation.
Comment 18 The Authority contends that it has a thorough understanding of HUD’s
           regulations regarding the appropriate use of funds and allocation of expenditures.
           We disagree. Federal funds were used for items such as food, beverages, travel
           for Authority employees to conduct business for its non-profit, and gift cards.
           These expenditures are inappropriate and not necessary to run the Housing Choice
           Voucher or the Family Self-Sufficiency programs. Additionally, as stated in
           finding 3, the Authority believed that it would be unreasonable to allocate
           expenses for its Family Self-Sufficiency program, however, HUD regulations
           require the Authority to allocate expenses. Therefore, the Authority did not have
           a thorough understanding of HUD’s regulations and should work with HUD to
           ensure that it fully understands what expenses are appropriate for the Housing
           Choice Voucher and Family Self-Sufficiency programs as well as the appropriate
           method for allocating expenses among the Authority’s various programs.
Comment 19 The Authority stated that the practice of charging fees to its Project-Based
           Developments was initiated under the Authority’s former administration and that
           it has discontinued this practice as of the completion of the audit. The Authority
           did not provide documentation to support its assertions. The Authority should
           work with HUD to ensure that it appropriately discontinues the practice by
           executing revised contracts and identifying non-Federal funds to reimburse the
           project-based developments any fees it inappropriately charged.
Comment 20 The Authority stated that it was working with its third-party certified public
           accounting firm to review its allocation methodology to ensure that it is
           appropriate and sufficiently supported with documentation for all programs. The
           Authority did not provide documentation to show that it allocated expenses
           among its various programs and did not provide an allocation methodology for
           our review. In addition to working with its accounting firm, the Authority should
           work with HUD to ensure that its allocation methodology is appropriate and fully
           implemented and that staff are appropriately trained and familiar with HUD’s
           requirements.
Comment 21 The Authority stated that it would review the lease agreements between the Public
           Housing and the Housing Choice Voucher programs and ensure that the charges
           are documented and appropriate in the lease agreements. It also stated that the
           documentation would include comparable rates for commercial square footage
           that will support the amount charged to the Housing Choice Voucher program for
           the use of public housing facilities. We appreciate the Authority’s willingness to




                                              35
              resolve the issues regarding its lease agreements. The Authority should work
              with HUD to ensure that the rent charged for space in its main office and space
              used for activities in its public housing property are appropriate and reasonable.
Comment 22 The Authority stated that it would provide documentation for the ineligible
           expenditures to its HUD field office to support the eligibility of the expenditures
           or reimburse the program if necessary. The Authority should work with HUD on
           the resolution of this recommendation.
Comment 23 The Authority stated that it would provide documentation to support the $4,070 in
           unsupported expenditures to its HUD field office to support the eligibility of the
           expenditures or reimburse the program if necessary. We appreciate the
           Authority’s willingness to work with HUD on the resolution of this
           recommendation.
Comment 24 The Authority stated that it would reimburse owners of the Project-Based
           Voucher program developments $9,170 with the funds previously collected for
           these fees. The Authority should ensure that it uses non-Federal funds to
           reimburse the developments; therefore, the Authority should work with HUD on
           the resolution of this recommendation.
Comment 25 The Authority stated that the appropriate allocation of the bank services charges
           was completed and that it provided HUD-OIG with the supporting
           documentation. According to the Authority, only $11,658.16 of the bank service
           charges should be reimbursed, and that it will work with its HUD field office to
           confirm this amount. The Authority provided documentation to support that
           $30,505 of the $43,214 in bank service charges should have been allocated to the
           Housing Choice Voucher Program for 23 of the 24 months reviewed. However,
           the Authority provided fees charged by the bank for the period January 2016
           through December 2017. The service charges for December 2017 were not
           entered in its general ledger until January 2018 (after our audit scope). We
           reviewed the general ledger for bank service charges posted to the general ledger
           during the months January 2016 through December 2017, which includes the
           charges for the months of December 2015 through November 2017.
              Additionally, the Authority did not provide documentation to support that the
              excess service charges totaling, $10,861, were reimbursed to the Housing Choice
              Voucher Program. Therefore, the Authority should reimburse its Program
              $10,861 from its various programs. Additionally, the Authority should work with
              HUD to determine the appropriate allocation of bank service charges totaling
              $1,848, for the month that remains to be allocated. Further, along with the
              Authority’s comments, it did not provide support to show that it discontinued the




                                               36
              inappropriate allocation of all bank service charges to its Program. We appreciate
              the Authority’s willingness to work with HUD on the resolution of this
              recommendation.
Comment 26 The Authority stated that it would request assistance from its independent auditor
           to provide additional training to staff as needed to ensure program expenditures
           are for eligible and supported costs and costs are appropriately allocated. We
           appreciate the Authority’s willingness to correct the issue. The Authority should
           with HUD on the resolution of this recommendation.
Comment 27 The Authority stated that it would review all Project-Based Voucher housing
           assistance payment contracts and amend as necessary. We appreciate the
           Authority’s willingness to resolve the issue. The Authority should work with
           HUD on the resolution of this recommendation.
Comment 28 The Authority stated that it would provide documentation to support all
           questionable expenses and that it would work with its HUD field office to
           reimburse any program expenses as needed. We appreciate the Authority’s
           willingness to work with HUD on the resolution of the recommendations.




                                              37
Appendix C
                              Federal and Authority Requirements

Finding 1
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 Authority 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 Authority 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 Regulations at 24 CFR 984.102 state that under the Family Self-Sufficiency program, low-
income families are provided opportunities for education, job training, counseling, and other
forms of social service assistance while living in assisted housing so that they may obtain the
education, employment, and business and social skills necessary to achieve self-sufficiency.
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
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




                                                 38
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 creation of a small business, the public housing agency may, at the public housing
agency’s sole discretion, disburse a portion of the funds from the family’s escrow account to
assist the family in meeting those expenses.
HUD’s Housing Choice Voucher Guidebook 7420.10G, section 23.1, states that families
entering the Family Self-Sufficiency program work with a case manager to develop goals that
will, over a 5-year period, lead to self-sufficiency. These goals may include education,
specialized training, job readiness and job placement activities, and career advancement
objectives.
Section 23.4 of the Guidebook 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.

Section 23.4 of the Guidebook states that the contract is effective the first of the month after
execution of the contract of participation.

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.

HUD’s Administering an Effective Family Self-Sufficiency Program: A Guidebook Based on
Evidence and Promising Practices, section 2.5, states that Family Self-Sufficiency coordinators
should be prepared to help participants define realistic, individualized, short- and long-term goals
with target dates for completion in three key areas: education and job training, employment, and
financial capability.

Form HUD-52650 (page 1), Family Self-Sufficiency Program (FSS) 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.




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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.

Page 10 of the Authority’s action plan states that the participant will maintain regular contact
with the assigned Family Self-Sufficiency manager (defined as contacting the Family Self-
Sufficiency manager monthly and meeting in person a minimum of once every 12 months to
update the individual training and services plan).

Finding 2
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)(2) state that annual income means all amounts anticipated
to be received from a source outside the family during the 12-month period following the
admission or annual certification date.
HUD’s regulations at 24 CFR 982.54(a) 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. (b) The administrative plan must be in accordance with
HUD regulations and requirements. (c) The public housing agency must administer the program
in accordance with the agency’s administrative plan.
HUD’s regulations at 24 CFR 982.402(a)(1) state that 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 982.517(b)(2)(ii) state that the public housing agency must
provide a utility allowance for tenant-paid air conditioning costs if the majority of housing units
in the market provide centrally air-conditioned units or there is appropriate wiring for tenant-
installed air conditioners.
HUD’s Housing Choice Voucher Guidebook, section 5.3, states that the public housing agency
must count alimony or child support amounts awarded as part of a divorce or separation
agreement unless the public housing agency verifies that the payments are not being made.




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Section 5.3 of the Guidebook states that when net family assets are $5,000 or less, use the actual
income from assets. When the family assets are more than $5,000 use the greater of actual
income from assets or a percentage of the value of such assets based upon the current passbook
rate savings rate established by HUD.
Section 5.5 of the Guidebook states that medical expenses are expenses anticipated to be
incurred during the 12 months following certification or reexamination, which are not covered by
an outside source, such as insurance.
Section 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 6-I.K of the Authority’s administrative plan states that the Authority will count amounts
for alimony and child support unless the public housing agency verifies that (1) the payments
have not been made in 3 months and (2) the family has made reasonable efforts to collect
amounts due, including filing with courts or agencies responsible for enforcing payments.
Section 7-I.B of the plan states that the documents used for verification must be the original (not
photocopied) and generally must be dated within 60 days of the date on which they are provided
to the Authority.
Section 11-II.C of the plan states that families are required to report all changes in income in
writing, including new employment, within 10 business days of the date on which the change
takes effect.
Section 12-II.C of the plan states that if a family owes amounts to the public housing agency, as
a condition of continued assistance, the public housing agency will require the family to repay
the full amount or enter into a repayment agreement within 60 days of receiving notice from the
public housing agency of the amount owed.
Section 16-IV.B of the plan states that the Authority will seek repayment and may choose to
terminate the household’s participation in the program based on the family’s failure to report in
an increase in income.
Finding 3
HUD’s regulations at 24 CFR 982.152(a)(3) state that public housing agency administrative fees
may be used only to cover costs incurred to perform public housing agency administrative
responsibilities for the program in accordance with HUD regulations and requirements.

HUD’s regulations at 24 CFR 983.5(b) state that the public housing agency’s Project-Based
Voucher Program is funded with a portion of the appropriated funding (budget authority)
available under the public housing agency’s voucher annual contributions contract. This pool of




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funding is used to pay housing assistance for both tenant-based and project-based voucher units
and to pay the public housing agency administrative fees for the administration of the tenant-
based and project-based voucher assistance.

HUD’s Notice PIH-2016-08, part 2, states that administrative fees must be used only for program
expenses. These include but are not limited to (1) waiting list management and updates; (2)
preference verifications; (3) eligibility determinations; (4) intake and briefings; (5) voucher
issuances; (6) owner outreach efforts; (7) unit inspections; (8) rent negotiations and reasonable
determinations; (9) annual and interim income reexaminations; (10) tenant fraud investigations
and hearings; (11) processing subsequent moves, including portability moves outside the public
housing agency’s jurisdiction; (12) the costs associated with making housing assistance
payments to owners; and (13) monthly reporting in HUD systems.

HUD’s Accounting Brief Number 23 states that public housing agencies with a Family Self-
Sufficiency program serving both public housing and Housing Choice Voucher Program families
with costs not chargeable to the Family Self-Sufficiency program coordinator grant are required
to develop a cost allocation method that allocates these expense fairly between the two programs.




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