oversight

The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer Its Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-03-30.

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

            Crisfield Housing Authority,
                    Crisfield, MD
                  Housing Choice Voucher Program




Office of Audit, Region 3          Audit Report Number: 2018-PH-1003
Philadelphia, PA                                       March 30, 2018
To:            Russell DeSouza, Acting Director, Office of Public Housing, Baltimore Field
               Office, 3BPH
               Craig T. Clemmensen, Director, Departmental Enforcement Center, CACB
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       The Crisfield Housing Authority, Crisfield, MD, Did Not Properly Administer 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 Crisfield Housing Authority.
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
215-430-6734.
                    Audit Report Number: 2018-PH-1003
                    Date: March 30, 2018

                    The Crisfield Housing Authority, Crisfield, MD, Did Not Properly
                    Administer Its Housing Choice Voucher Program




Highlights

What We Audited and Why
We audited the Crisfield Housing Authority’s Housing Choice Voucher program because we
received a hotline complaint alleging that it misused public housing assets and we had never
audited the Authority. Our audit objective was to determine whether the Authority (1) ensured
that families met eligibility requirements, (2) properly admitted families from the waiting list, (3)
correctly calculated housing assistance payments and maintained documentation to support the
calculations, (4) ensured that confidential information was properly transmitted electronically,
and (5) detected and prevented conflict-of-interest situations. This the first of two reports we
will issue on the Authority. The second report will address its public housing programs.

What We Found
The Authority did not (1) ensure that families met eligibility requirements, (2) always maintain
adequate documentation to show that it properly selected families from its waiting list, (3)
always make accurate housing assistance payments and utility reimbursements, (4) always
maintain documentation to support housing assistance payments and utility reimbursements, and
(5) use the U.S. Department of Housing and Urban Development’s (HUD) Enterprise Income
Verification system to verify household income. The Authority also failed to properly safeguard
confidential information and detect and prevent conflict-of-interest situations. These conditions
occurred because the Authority did not ensure that the responsible staff member was adequately
trained to efficiently administer the program and the executive director did not properly
supervise the staff member. The Authority also lacked controls to detect and prevent conflict-of-
interest situations. As a result, it made ineligible and unsupported housing and utility
reimbursements totaling $373,933 and received $42,752 in unsupported administrative fees.

What We Recommend
We recommend that HUD direct the Authority to (1) provide documentation to support $280,561
(housing assistance payments totaling $237,809 and $42,752 in administrative fees) or reimburse
its program from non-Federal funds for any funds it cannot support, (2) reimburse $17,101 to its
program from non-Federal funds or to the appropriate household for miscalculating housing
assistance, and (3) reimburse its program $119,023 from non-Federal funds for ineligible
payments it made due to the conflict-of-interest situations. We also recommend that HUD’s
Departmental Enforcement Center evaluate the apparent conflict-of-interest situations in this
report and pursue administrative sanctions if warranted.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Authority Did Not Properly Administer Its Housing Choice
         Voucher Program in Accordance With Program Requirements ................................. 4

         Finding 2: The Authority Did Not Comply With Conflict-of-Interest
         Requirements................................................................................................................... 11

Scope and Methodology .........................................................................................13

Internal Controls ....................................................................................................14

Appendixes ..............................................................................................................15
              A. Schedule of Questioned Costs and Funds To Be Put to Better Use ................ 15

              B. Auditee Comments and OIG’s Evaluation ....................................................... 16

              C. Summary of Results of File Reviews ................................................................. 21




                                                                   2
Background and Objective
The Crisfield Housing Authority administers Somerset County’s Housing Choice Voucher
program. The Authority provides safe, decent, and sanitary housing for very low-income
families and manages Federal funds provided by the U.S. Department of Housing and Urban
Development (HUD). The Authority is governed by a four-member board of commissioners.
The board conducts the Authority’s business and establishes policies. The mayor of Crisfield
appoints the members to the board. The board hires an executive director to manage the day-to-
day operations of the Authority. The executive director is directly responsible for carrying out
the policies established by the board and is delegated responsibility for hiring, training, and
supervising the Authority’s staff to ensure compliance with applicable requirements. The
Authority is located at 115 South Seventh Street, Crisfield, MD.

Under the Housing Choice Voucher program, the Authority administered 23 vouchers. HUD
authorized the Authority the following assistance for housing choice vouchers for fiscal years
2014 to 2016.

                               Year            Annual budget authority
                               2014                    $118,275
                               2015                     126,338
                               2016                     138,098


We received a complaint alleging that the Authority was not administering its public housing
programs in accordance with Federal requirements. The complaint made several allegations
including misuse of public housing funds and improper use of assets to secure a loan. Since we
had never audited the Authority, we decided to perform a comprehensive audit of its HUD-
funded programs. This the first of two reports we will issue on the Authority. The second report
will address its public housing programs.

Our audit objective was to determine whether the Authority (1) ensured that families met
eligibility requirements, (2) properly admitted families into its program from the waiting list, (3)
correctly calculated housing assistance payments and maintained documentation to support the
calculations, (4) ensured that confidential information was properly transmitted electronically,
and (5) detected and prevented conflict-of-interest situations.




                                                  3
Results of Audit

Finding 1: The Authority Did Not Properly Administer Its Housing
Choice Voucher Program in Accordance With Program
Requirements
The Authority did not (1) ensure that families met eligibility requirements, (2) always maintain
adequate documentation to show that it properly selected families from its waiting list, (3)
always make accurate housing assistance payments and utility reimbursements, (4) always
maintain documentation to support housing assistance payments and utility reimbursements, and
(5) use HUD’s Enterprise Income Verification system to verify household income. It also failed
to properly safeguard confidential information. These conditions occurred because the Authority
did not ensure that the responsible staff member was adequately trained to efficiently administer
the program and the executive director did not properly supervise the staff member. As a result,
the Authority made ineligible and unsupported housing and utility reimbursements totaling
$345,904 and received $42,752 in unsupported administrative fees. It also made underpayments
of housing assistance and utility reimbursements totaling $984.

The Authority Lacked Documentation To Support Household Eligibility
The Authority’s files for all 23 of its assisted families lacked documentation to show that the
families were eligible for assistance under the program. HUD regulations at 24 CFR (Code of
Federal Regulations) 982.201 require the Authority to admit only eligible families into its
program. The files lacked the following eligibility documentation:

    •   23 files lacked documentation to show citizenship declarations. Regulations at 24 CFR
        5.508(c)(1) required the Authority to obtain a written declaration of citizenship from each
        family member.
    •   19 files lacked a current Authorization for the Release of Information/Privacy Act
        Notice. 1 Chapter 5, paragraph 5.2, of HUD’s Housing Choice Voucher Guidebook
        7420.10G required the Authority to ensure that adult applicants and participants signed
        the release form as a condition for admission and continued assistance. The form is valid
        for 15 months and must be signed annually at reexamination.
    •   13 files lacked copies of birth certificates for 1 or more household members. Chapter 7,
        paragraph 7-II.C, of the Authority’s administrative plan stated that a birth certificate or
        other official record of birth was the preferred form of age verification for all family
        members.
    •   10 files lacked documentation to show that background checks were completed. Chapter
        3, paragraph 3-III.D, of the Authority’s administrative plan required the Authority to
        perform a criminal background check through local law enforcement for every adult
        household member.

1
    Form HUD-9886


                                                 4
   •   9 files lacked Social Security number verifications. Regulations at 24 CFR 5.216(g)
       required the Authority to obtain documents to verify Social Security numbers.
   •   1 file lacked a copy of the family’s application for assistance. Regulations at 24 CFR
       982.158(e)(3) required the Authority to keep the family application during the term of
       each assisted lease and for 3 years after.
   •   1 file lacked a detailed criminal history report, although the background check on the
       head of household indicated a criminal history. Chapter 3, paragraph 3-III.E, of the
       Authority’s administrative plan required the Authority to consider all relevant
       circumstances when deciding whether to deny assistance based on a family’s past history.

Because the files for the 23 households were missing required eligibility documentation, the
related housing assistance payments totaling $315,287, paid during the period April 2014
through June 2017, were unsupported. This condition occurred because the Authority failed to
follow its own administrative plan regarding maintaining documentation of families admitted
into its program and its responsible staff member was not adequately supervised to ensure that
program requirements were followed. (Appendix C contains a summary of the results of our file
reviews.)

The Authority Did Not Maintain Documentation To Support Waiting List Selection and
Placements
For 18 of the 23 files reviewed, the Authority did not maintain appropriate documentation to
show that the families were selected from the waiting list. Specifically, the Authority did not
always maintain documentation showing the date and time of application, the date each family
was added to the waiting list, the determination and calculation of preference points, and the
family’s position on the waiting list. For example, documentation in the file for 1 family showed
that it was selected from the waiting list and awarded 26 preference points. However, the file did
not contain information to support the 26 preference points the Authority awarded. In another
example, a family applied for housing assistance on January 25, 2015, and the Authority
admitted it into the program on January 29, 2015. The Authority had no documentation or
justification to explain why the family was admitted into the program so quickly and before other
applicants on the waiting list. This condition occurred because the Authority failed to follow its
own waiting list administration procedures, which required that it maintain a clear record of all
information required to verify that families were selected from the waiting list in accordance
with its selection procedures.

Program regulations at 24 CFR 982.204 required the Authority to select participants from the
waiting list and select them in accordance with its admission policy in its administrative plan.
Section 4-I.D of the Authority’s administrative plan required that it place families on the waiting
list according to any preferences for which they qualified and record the date and time it received
their completed application. Section 4-III.C required the Authority to assign preference points
based on documentation. The Authority assigned preference points for situations such as
working families, veterans or surviving spouses, and residents who live or work in the county.
Because the Authority did not follow its policies and procedures, HUD had no assurance that
applicants were placed properly on the waiting list and selected fairly from it.



                                                 5
The Authority Did Not Always Make Accurate Housing Assistance Payments and Utility
Reimbursements
The Authority incorrectly calculated housing assistance and utility allowance amounts for 14 of
23 files reviewed because it used incorrect payment standard amounts. Regulations at 24 CFR
982.505(a) required the Authority to use the payment standards to calculate housing assistance
payments. The housing assistance payment calculation must use the correct payment standard
for the family and the appropriate-size unit and area. The Authority did not always follow this
requirement when calculating housing assistance payments. For example, for one family, the
Authority used the $779 payment standard for a two-bedroom unit but should have used the $646
payment standard for a one-bedroom unit. As a result, it made overpayments of housing
assistance totaling $6,293 for eight families and underpayments of housing assistance totaling
$813 for four families during our audit period. It also made overpayments of utility
reimbursements to two families totaling $134 and underpayments of utility reimbursements to
one family totaling $119.

For 9 of 23 files, the Authority did not ensure that housing assistance amounts determined at
recertification were the amounts paid to the owners and families. 2 For example, for one family,
the Authority determined that the monthly housing assistance payment to the owner was $559;
however, the Authority’s housing assistance payment register showed that it paid the owner
$700, resulting in an overpayment of assistance. The Authority could not provide a reason why
the amount paid was higher than the amount determined at recertification. As a result, it made
overpayments of housing assistance totaling $3,374 for seven families and underpayments of
housing assistance totaling $52 for one family during our audit period. It also made
overpayments of utility reimbursements to three families totaling $354.

The Authority did not always make accurate housing assistance payments and utility
reimbursements, resulting in ineligible disbursements totaling $10,155. 3 It also underpaid $984
in housing assistance and utility reimbursements. 4 (Appendix C contains a summary of the
results of our file reviews.)

The Authority Did Not Always Maintain Documentation To Support Housing Assistance
and Utility Reimbursements
All 23 files reviewed lacked documentation. Specifically,

    •   23 files lacked an executed housing assistance payments contract. The contract is the
        form required by HUD that must be executed by the Authority and the owner of the
        assisted unit. The contract contains the initial rent amounts, lease term dates, and
        housing assistance payment amounts. Without an executed contract, the related housing
        assistance payments totaling $315,287 were unsupported. Program regulations at 24
        CFR 982.162(a)(2) required the Authority to use HUD-required contracts when
        administering its program. Specifically for the Housing Choice Voucher program, the


2
    Amounts shown on the family’s form HUD-50058
3
    $10,155 = $6,293 + $134 + $3,374 + $354
4
    $984 = $813 + $119 + $52


                                                   6
         Authority was required to use a housing assistance payments contract between the
         Authority and the owner of the program unit.
     •   22 files lacked a signed Request for Tenancy Approval. 5 Chapter 8, section 8.7, of
         HUD’s Housing Choice Voucher Guidebook 7420.10G required the Authority to use the
         form. The form tells the Authority whether the owner or the assisted family is
         responsible for paying utility expenses. It also identifies the utilities that service the
         housing unit. The Authority uses this information to determine whether the family is
         entitled to a utility reimbursement. Because the files lacked these forms, the Authority
         made unsupported utility reimbursements totaling $8,633 to families during the audit
         period.
     •   20 files lacked documentation to support the verification of family income. Specifically,
         the Authority did not always maintain adequate documentation to support wages, salaries
         and other income earned by the family. Program regulations at 24 CFR 982.516(a)(2)(i)
         required the Authority to obtain and document in the tenant file third-party verification of
         reported family income.
     •   18 files lacked annual recertifications. For example, for 6 of the 18 files, the Authority
         had not performed an annual recertification since 2015. Without recertification
         documentation to support the family composition, income, rent amounts, and payment
         standards, housing assistance payments were unsupported. As a result, the Authority
         made housing assistance payments totaling $67,256 and utility allowance payments
         totaling $300 that were not supported by a recertification performed during our audit
         period. Program regulations at 24 CFR 982.516(a) require the Authority to conduct a
         recertification of the family income and composition at least annually.

These conditions occurred because the Authority did not supervise the responsible staff to ensure
that documentation to support housing assistance payments was maintained in the file.

The Authority Did Not Use the Enterprise Income Verification System as Required
For 22 of the 23 files reviewed, the Authority did not use HUD’s Enterprise Income Verification
system to verify household income. HUD required 6 the Authority to use the web-based system
to verify family employment and income information during mandatory reexaminations of
family composition and income. The income verification system provides the Authority with
employment, wage, unemployment compensation, and Social Security benefit information for
families participating in its public housing programs. Because the Authority did not use the
system as required, there was an increased risk that families could underreport income. During
our review, documentation in the files for 10 families showed indicators of potential problems
with the amount of income that the families reported, such as claiming zero income and outdated
pay stubs.

We requested that HUD access the system to determine the income for the 10 families. HUD
accessed the system and found that for 4 of the 10 families, the system showed more income than
the amount the families reported on their recertification forms. For example, for one family,

5
    Form HUD-52517
6
    Public and Indian Housing Notice 2010-19, dated May 17, 2010


                                                       7
income from wages totaling $15,683 was not reported on the 2015 recertification form. Had
these wages been included in the Authority’s assistance calculations, the family would not have
received a monthly utility allowance payment. Because the Authority did not identify these
wages and consider them in its calculations, it overpaid the family $5,654 in utility
reimbursements. The other three families also had unreported income, which resulted in the
Authority’s making overpayments of housing assistance totaling $4,911 and utility
reimbursements totaling $1,264 during our audit period. This condition occurred because the
responsible Authority staff member disregarded the employment verification requirements.
Section 7-1-C of the Authority’s administrative plan required that the responsible staff member
access the verification system during annual reexaminations, obtain each family income report,
and compare the income to the annual income reported during the recertification process. As a
result of this error, the Authority made ineligible payments totaling $11,829. 7

Confidential Information Was Not Properly Transmitted Electronically
The Authority did not ensure that confidential information was properly transmitted
electronically. Specifically, during the audit, an Authority employee used a personal email
account to send confidential public housing information, including Social Security numbers, to
our staff and HUD without encrypting the information. 8 The employee stated that the personal
email account was used to transmit information because the Authority had not established an
official email account for her to conduct Authority business. The executive director explained
that a business email account had not been established for the employee because she normally
did not need email to perform her daily duties. The Authority also lacked policies governing
computer use or transmission of confidential information. As a result, it did not properly
safeguard confidential information. HUD issued Public and Indian Housing Notice 2015-06 on
April 23, 2015, and it prohibited the Authority from transmitting sensitive information via an
unsecured information system without first encrypting the information.

During the audit, we brought this issue to the attention of the Authority, and it took action to stop
the employee from using a personal email account to transmit confidential information. The
Authority established a business email account for the employee. The Authority also developed
and implemented a computer, internet, and email use policy. The policy outlines the Authority’s
guidelines for acceptable use of computer, internet, and email and states that employees are
prohibited from using personal email accounts to transmit confidential information.

Conclusion
The Authority did not properly administer its program. It did not ensure that families met
eligibility requirements, properly admit families into its program from the waiting list, correctly
calculate housing assistance payments and maintain documentation to support the calculations,
and ensure that it properly transmitted confidential information electronically. We identified
problems with the files for all 23 families participating in the Authority’s program. In
accordance with regulations at 24 CFR 982.152(d), HUD is permitted to reduce or offset
program administrative fees paid to a public housing authority if it fails to perform its

7
    $11,829 = $5,654 + $4,911 + $1,264
8
    There was no evidence that the transmitted information was compromised.


                                                        8
administrative responsibilities correctly or adequately, such as not properly administering is
Housing Choice Voucher program. As a result, the Authority made ineligible and unsupported
housing and utility reimbursements totaling $345,904 and received $42,752 in unsupported
administrative fees. It also made underpayments of housing assistance and utility
reimbursements totaling $984.

Recommendations
We recommend that the Director of HUD’s Baltimore Office of Public Housing direct the
Authority to

         1A.     Provide documentation to support $280,561 (housing assistance and utility
                 allowance payments totaling $237,809 9 for families that did not meet eligibility
                 requirements and $42,752 in administrative fees) or reimburse its program from
                 non-Federal funds for any amounts it cannot support.

         1B.     Reimburse its program $17,101 10 from non-Federal funds for the overpayment of
                 housing assistance and utility allowances to 14 families.

         1C.     Reimburse five households $984 from program funds for the underpayment of
                 housing assistance and utility reimbursements due to incorrect calculations.

         1D.     Develop and implement procedures and controls to ensure that housing assistance
                 and utility allowance payments are correctly calculated, including the use of the
                 Enterprise Income Verification system to verify household income, and that they
                 are adequately supported.

         1E.     Correct the errors in the files identified in this report.

         1F.     Develop and implement procedures and controls to ensure that required eligibility
                 documentation is obtained and maintained to support households’ selection from
                 its waiting list and admission to and continued assistance on the program.

         1G.     Develop and implement controls to ensure that employees comply with its
                 computer, internet, and email use policy and use only official business email
                 accounts to transmit confidential information.




9
     To avoid double-counting, we reduced the amount shown as unsupported for recommendation 1A by the
     amounts in recommendations 1B and 2A. The $237,809 is the full amount of unsupported housing assistance
     and utility allowance payments, $323,920 ($315,287 + $8,633), less the $86,111 in payments reported in
     recommendation 2A.
10
     To avoid double-counting, we reduced the amount shown as unsupported for recommendation 1B by the
     amount in recommendation 2A. The $17,101 is the full amount of ineligible payments due to overpayment,
     $21,984 ($10,155 + $11,829), less $4,883 in payments reported in recommendation 2A.




                                                       9
      1H.    Develop and implement controls to ensure that its Section 8 coordinator is
             adequately trained and supervised to ensure that the program operates in
             accordance with requirements.

      1I.    Follow its administrative plan to ensure that program requirements are met.

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

      1K.    Provide technical assistance to the Authority to ensure that it properly administers
             its program and that program regulations are met.

      1L.    Evaluate the Authority’s email system and its computer, internet, and email use
             policy to determine whether they provide sufficient safeguards for transmitting
             and handling confidential information.




                                               10
Finding 2: The Authority Did Not Comply With Conflict-of-Interest
Requirements
Contrary to requirements, the Authority allowed a conflict-of-interest situation to exist when it
paid a real estate company that participated in its program as a property owner, although the
Authority’s board chairman was a partner of the owning entity. This condition occurred because
the Authority lacked controls to prevent and detect conflict-of-interest situations. The Authority
believed it had obtained a waiver from HUD to allow the board chairman’s company to
participate in the program as an owner. However, the Authority could not provide
documentation to show that it had obtained the waiver. As a result, the Authority improperly
paid $119,023 in program funds to an owner that was prohibited by the annual contributions
contract from participating in the program.

The Authority Allowed a Conflict-of-Interest Situation To Exist
The Authority allowed an ineligible owner to participate in its program. The owner was
prohibited from participating in the program because the Authority’s board chairman was a
partner in the real estate company that was the owning entity. Section 2.13(A) of the Authority’s
consolidated annual contributions contract states that the Authority must not enter into a contract
or arrangement in connection with the program in which any present or former member or
officer of the Authority has an interest, direct or indirect, during his or her tenure or for 1 year
thereafter. During the period April 2014 through June 2017 the Authority paid the board
chairman’s company $119,023 in housing assistance. This violation occurred because the
Authority lacked controls to prevent and detect conflict-of-interest situations. The Authority
believed it had obtained a waiver from HUD to allow the board chairman’s real estate company
to participate in the program as an owner. The Authority provided a copy of a letter to HUD,
dated December 20, 1990, in which it requested that HUD approve the board chairman’s
participation in the program. However, the Authority could not provide documentation showing
that HUD approved this request and granted a waiver. HUD officials stated that they had no
record of granting a waiver. Without a waiver, the Authority violated its consolidated annual
contributions contract and made ineligible housing assistance payments totaling $119,023.

Conclusion
The Authority allowed an ineligible property owner to participate in its program because its
board chairman was a partner in the real estate company that was the property owner. The
Authority did not obtain a waiver from HUD to allow this situation. As a result, the Authority
improperly paid $119,023 in program funds to an owner that was prohibited by the annual
contributions contract from participating in the program.

Recommendations
We recommend that the Director of HUD’s Baltimore Office of Public Housing require the
Authority to




                                                 11
          2A.     Reimburse its program $119,023 11 from non-Federal funds for the ineligible
                  housing assistance payments it made due to the conflict-of-interest situation
                  identified by the audit and any additional ineligible housing assistance payments
                  it made outside our review period.

          2B.     Develop and implement controls to prevent and detect conflict-of-interest
                  situations.

We also recommend that the Director of HUD’s Departmental Enforcement Center

          2C.     Evaluate the apparent conflict-of-interest situation in this report and pursue
                  administrative sanctions if warranted.




11
     This amount includes $86,111 reported in recommendation 1A and $4,883 reported in recommendation 1B. We
     reduced the amounts reported in finding 1 to avoid double-counting.


                                                       12
Scope and Methodology
We conducted the audit from January 2017 through January 2018 at the Authority’s office
located at 115 South Seventh Street, Crisfield, MD, and our offices located in Richmond, VA,
and Baltimore, MD. The audit covered the period April 2014 through June 2017.
To accomplish our objective, we reviewed

   •   Applicable laws, regulations, the Authority’s administrative plan, HUD’s program
       requirements at 24 CFR Part 982, HUD’s Housing Choice Voucher Guidebook
       7420.10G, and other guidance.
   •   The Authority’s program files, including waiting lists, household files, family data,
       housing assistance payment register, annual audited financial statements, policies and
       procedures, board meeting minutes, and organizational chart.
   •   HUD’s monitoring reports for the Authority.
   •   Enterprise Income Verification system information retrieved for us by HUD.

We also interviewed the Authority’s employees and HUD staff.

To achieve our audit objective, we relied in part on computer-processed data, such as the family
ledgers, waiting list, and recertification forms from the Authority’s computer system. We also
accessed HUD’s Public and Indian Housing Information Center system and obtained other
family information reported by the Authority. Although we did not perform a detailed
assessment of the reliability of the data, we did perform a minimal level of testing and found the
data to be adequate for our purposes. We reviewed information for all 23 families the Authority
assisted during the audit period.

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.




                                                 13
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

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

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

•   Program operations – Policies and procedures that management has implemented to
    reasonably ensure that a program meets its objectives.
•   Validity and reliability of data – 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:

•   The Authority’s staff was not adequately trained to efficiently administer the program, and
    the executive director did not properly supervise the staff (finding 1).

•   The Authority lacked controls to prevent and detect conflict-of-interest situations (finding 2).




                                                  14
Appendixes

Appendix A


          Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                    Funds to be put
                           Ineligible 1/ Unsupported 2/    to better use 3/
            number
                1A                                 $280,561
                1B               $17,101
                1C                                                       $984
                2A               119,023

              Totals             136,124            280,561               984



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




                                              15
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1


Comment 2


Comment 3

Comment 4

Comment 5

Comment 6




                               16
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 7
Comment 8
Comment 9


Comment 7

Comment 10




Comment 11
Comment 12




                               17
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority agreed that its files were missing eligibility documentation. It
            stated that it was working to provide all of the missing documentation and it
            believed that it will not need to reimburse its program for any unsupported
            payments. As part of the audit resolution process, the Authority will have the
            opportunity to provide documentation to HUD and HUD will evaluate it to
            determine whether it sufficiently supports the families’ eligibility.
Comment 2   The Authority stated that it just received the details on the housing assistance and
            utility payments. It asserted that it has documentation to support some of the
            deficiencies. It stated that it will discuss with HUD and provide documentation
            after it reviews the finding details. We did provide the Authority a summary
            spreadsheet with the details on the questioned costs after the exit conference,
            however, during the audit, we had several meetings with the Authority to discuss
            the audit results, our methodology, and recommendations. As part of the audit
            resolution process, the Authority will have the opportunity to provide
            documentation to HUD and HUD will evaluate it to determine whether it
            sufficiently addresses the recommendation.
Comment 3   The Authority stated that it just received the documentation on the underpayment
            of housing assistance and utility reimbursements. It also stated that it will review
            the documentation and respond to HUD. We did provide the Authority a
            summary spreadsheet with the details on the underpayments after the exit
            conference, however, during the audit, we discussed the underpayments with the
            Authority. We had several meetings to discuss the audit results, our
            methodology, and recommendations. As part of the audit resolution process, the
            Authority will have the opportunity to provide documentation to HUD and HUD
            will evaluate it to determine whether it sufficiently addresses the
            recommendation.
Comment 4   The Authority stated that it uses the Enterprise Income Verification (EIV) system
            to verify income reported by families, but it failed to maintain documentation in
            the tenant files. It stated that it will implement new procedures to ensure that it
            maintains documentation of EIV verifications in the tenant files. We are
            encouraged that the Authority plans to implement new procedures. As part of the
            audit resolution process, HUD will determine whether the Authority’s corrective
            actions are sufficient to satisfy the intent of the recommendation.
Comment 5   The Authority stated that it has started correcting the errors in the tenant files
            identified in the audit report. It will update all of the files and verify that it is
            using the correct payment standards and utility allowances. We are encouraged
            by the Authority’s statements. As part of the audit resolution process, HUD will
            determine whether the Authority’s corrective actions are sufficient to satisfy the
            intent of the recommendation.



                                               18
Comment 6     The Authority stated that it has always chosen applicants from the top of the
              waiting list except in those instances when it would be over budget, then it chose
              the next available applicant to keep under budget. Although the Authority
              believed that this procedure was allowed, it stated that it will no longer do this.
              The Authority is required to select families from its waiting list in accordance
              with its admission policies in its administrative plan. We are encouraged that the
              Authority will no longer bypass applicants for budgetary reasons. As part of the
              audit resolution process, HUD will determine whether the Authority’s corrective
              actions are sufficient to satisfy the intent of the recommendation.
Comment 7     The Authority stated that it has an email and internet policy in place and that it
              provided it to us. It also stated that the company that provides it information
              technology services was taking steps to increase email security. As stated in the
              audit report, during the audit, the Authority developed and implemented a
              computer, internet, and email use policy. The policy outlines the Authority’s
              guidelines for acceptable use of computer, internet, and email and states that
              employees are prohibited from using personal email accounts to transmit
              confidential information. We recommended that the Authority develop and
              implement controls to ensure that employees comply with its computer, internet,
              and email use policy and use only official business email accounts to transmit
              confidential information. We also recommended that HUD evaluate the
              Authority’s policy to determine whether it provides sufficient safeguards for
              transmitting and handling confidential information. As part of the audit resolution
              process, HUD will evaluate the Authority’s corrective actions and determine
              whether they satisfy the intent of our recommendations.
Comment 8     The Authority stated that it is currently searching for online training courses for
              its Section 8 coordinator. As part of the audit resolution process, HUD will
              evaluate the Authority’s corrective actions and determine whether they satisfy the
              intent of our recommendation to develop and implement controls to ensure that its
              Section 8 coordinator is adequately trained and supervised to ensure that the
              program operates in accordance with requirements.
Comment 9     The Authority stated that it will ensure that its administrative plan will be
              followed going forward. As part of the audit resolution process, HUD will
              evaluate the Authority’s corrective actions and determine whether they satisfy the
              intent of the recommendation.
Comment 10 The Authority stated that it submitted a request to HUD in 1990 seeking approval
           for its board chairman to participate in its program as a rental property owner. It
           stated it was unaware whether the request had been approved although it
           acknowledged that neither it nor HUD had documentation to show that HUD had
           approved the request. The Authority does not believe that it should have to
           reimburse its program. The Authority stated that it will make another request for
           approval. It also stated that if its request is denied, it will comply with HUD’s
           decision.



                                                19
              Neither the Authority nor HUD had documentation to show that HUD had
              approved the request. At the time, the 1990 request involved a resident in one of
              the board chairman’s housing units. Since then, the number of the chairman’s
              units participating in the program has increased to seven. The Authority did not
              make any subsequent requests as the number of the chairman’s units participating
              in the program increased. Since the board chairman’s participation was
              prohibited by the Authority’s consolidated annual contributions contract and there
              was no evidence that HUD approved a waiver, the related payments identified by
              the audit and any additional payments made outside of our review period were
              ineligible. As part of the audit resolution process, the Authority can make another
              request for a waiver. HUD will determine whether it will require the Authority to
              reimburse its program for any ineligible payments.
Comment 11 The Authority stated that it is aware of the procedure it must follow for any future
           conflicts and it will take proper action to prevent future issues. As part of the
           audit resolution process, HUD will evaluate the Authority’s corrective actions and
           determine whether they satisfy the intent of the recommendation to develop and
           implement controls to prevent and detect conflict-of-interest situations.
Comment 12 The Authority stated that it would like to receive the denial of the acceptance
           before any further action. This recommendation was addressed to the Director of
           HUD’s Departmental Enforcement Center to evaluate the apparent conflict-of-
           interest situation in this report and pursue administrative sanctions if warranted.
           As part of the audit resolution process, the Departmental Enforcement Center will
           consider the Baltimore Office of Public Housing’s resolution of the
           recommendations in the finding.




                                               20
                                                     ∗
                                                                                                                  9
                                                                                                                  8
                                                                                                                  7
                                                                                                                  6
                                                                                                                  5
                                                                                                                  4
                                                                                                                  3
                                                                                                                  2
                                                                                                                  1




                                                                                                                 23
                                                                                                                 22
                                                                                                                 21
                                                                                                                 20
                                                                                                                 19
                                                                                                                 18
                                                                                                                 17
                                                                                                                 16
                                                                                                                 15
                                                                                                                 14
                                                                                                                 13
                                                                                                                 12
                                                                                                                 11
                                                                                                                 10
                                                                                                                                                                                                          Tenant file




                                                                                                                Totals
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X




                                                                                                                23
                                                                                                                                                                                                          Lacked citizenship declaration




                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X




                                                                                                                23
                                                                                                                                                                                                          Lacked an executed contract




                                                                                                                X
                                                                                                                                                                                    X
                                                                                                                                                                                    X
                                                                                                                                                                                    X
                                                                                                                                                                                    X
                                                                                                                                                                                    X
                                                                                                                                                                                                          Lacked Enterprise Income Verification
                                                                                                                                                                                                                                                                                            Appendix C




                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                X X
                                                                                                                   X
                                                                                                                   X
                                                                                                                   X
                                                                                                                   X
                                                                                                                   X
                                                                                                                   X




                                                                                                                22 22
                                                                                                                                                                                                          Lacked a Request for Tenancy Approval




                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                                                    X
                                                                                                                                                                                              X
                                                                                                                                                                                              X
                                                                                                                                                                                              X
                                                                                                                                                                                                          Income not verified
                                                                                                                                                                                                          Lacked a current Authorization for the




                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X
                                                                                                                              X




                                                                                                                20 19
                                                                                                                                                                                                          Release of Information form
                                                                                                                                                                                                          Did not maintain sufficient documentation




                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                                        X
                                                                                                                                        X
                                                                                                                                        X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X
                                                                                                                                                             X




                                                                                                                18
                                                                                                                                                                                                          to show selection from the waiting list




                                                                                                                X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                      X
                                                                                                                                                                                                          Lacked annual recertifications




                                                                                                                                    X
                                                                                                                                        X X
                                                                                                                                        X X
                                                                                                                                        X X
                                                                                                                                                      X X
                                                                                                                                                      X X
                                                                                                                                                      X X
                                                                                                                                                      X X
                                                                                                                                                      X X
                                                                                                                                                      X X
                                                                                                                                                        X
                                                                                                                                                      X X
                                                                                                                                                                                                          Used incorrect payment standard




                                                                                                                X X X
                                                                                                                X X X
                                                                                                                                    X
                                                                                                                                    X
                                                                                                                                    X
                                                                                                                                    X
                                                                                                                                    X
                                                                                                                                                                                                      X
                                                                                                                                                                                                          Lacked copies of birth certificates




                                                                                                                      X X
                                                                                                                                      X
                                                                                                                                      X
                                                                                                                                    X X
                                                                                                                                    X X
                                                                                                                                    X X
                                                                                                                                                                                              X
                                                                                                                                                                                                          Lacked completed background checks




                                                                                                                                        X
                                                                                                                                        X
                                                                                                                                      X X
                                                                                                                                    X X X
                                                                                                                                        X
                                                                                                                                      X X
                                                                                                                                        X
                                                                                                                                                                                                  X
                                                                                                                                                                                                          Amount paid not based on form HUD-50058




21
                                                                                                                18 14 13 10 9 9
                                                                                                                              X
                                                                                                                              X
                                                                                                                                          X
                                                                                                                                          X
                                                                                                                                          X
                                                                                                                                          X
                                                                                                                                          X
                                                                                                                                        X X
                                                                                                                                                                                                      X
                                                                                                                                                                                                          Lacked Social Security number verification




                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                X
                                                                                                                                                                                                          Families with unreported income




                                                                                                                  X
                                                                                                                                                                                                          Lacked application
                                                                                                                                                                                                          Lacked a detailed criminal history report

                                                                                                                                                                                                          Unsupported housing assistance ∗
                                                                                                                                                                                                                                                       Summary of Results of File Reviews




                                                                                                                        5,008
                                                                                                                        4,680
                                                                                                                       21,406
                                                                                                                       10,570
                                                                                                                       11,154
                                                                                                                       13,072
                                                                                                                        6,874
                                                                                                                       18,525
                                                                                                                       17,500
                                                                                                                       16,500
                                                                                                                       13,332
                                                                                                                       18,652
                                                                                                                       25,874
                                                                                                                       23,964
                                                                                                                       15,669
                                                                                                                        5,448
                                                                                                                        6,271
                                                                                                                        4,832




                                                                                                                                                                                                          Overpaid housing assistance*




                                                                                                                4 1 1 315,287 14,578
                                                                                                                       15,202 1,845
                                                                                                                                 538
                                                                                                                                 306
                                                                                                                       14,188 3,198
                                                                                                                                 432
                                                                                                                                  93
                                                                                                                                  19
                                                                                                                       18,612 3,264
                                                                                                                    X 22,996 2,339
                                                                                                                                 816
                                                                                                                                 708
                                                                                                                       $4,958 $1,020




                                                                                                                                                                                                          Underpaid housing assistance




                                                                                                                865
                                                                                                                128
                                                                                                                              230
                                                                                                                                         420
                                                                                                                                                                                        $87




                                                                                                                                                                                                          Unsupported utility reimbursements*
                                                                                                                                                             1,966
                                                                                                                                                                     4,294
                                                                                                                                                                             $189




     To avoid double counting, we did not report questioned costs both as overpayments and unsupported costs.
                                                                                                                                                                                                          Overpaid utility reimbursements*




                                                                                                                8,633 7,406
                                                                                                                                               2,184 1,276
                                                                                                                                                     5,654
                                                                                                                                                                     24
                                                                                                                                                                             446
                                                                                                                                                                              $6




                                                                                                                                                                                                          Underpaid utility reimbursement




                                                                                                                119
                                                                                                                                                             $119