«Pontiac Housing Commission Pontiac, MI Section 8 Housing Choice Voucher Program 2014-CH-1009 SEPTEMBER 12, 2014 Issue Date: September 12, 2014 Audit ...»
OFFICE OF AUDIT
Pontiac Housing Commission
Section 8 Housing Choice Voucher Program
2014-CH-1009 SEPTEMBER 12, 2014
Issue Date: September 12, 2014
Audit Report Number: 2014-CH-1009
TO: Willie C. Garrett, Director of Public Housing, 5FPH
FROM: Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA
SUBJECT: The Pontiac Housing Commission, Pontiac, MI, Did Not Always Administer Its Section 8 Housing Choice Voucher Program in Accordance With HUD’s and Its Own Requirements 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 Pontiac Housing Commission’s Section 8 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 Web site. Accordingly, this report will be posted at http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at (312) 353-7832.
September 12, 2014 The Pontiac Housing Commission, Pontiac, MI, Did Not Always Administer Its Section 8 Housing Choice Voucher Program in Accordance With HUD’s or Its Own Requirements Highlights Audit Report 2014-CH-1009 What We Audited and Why What We Found The Commission did not always administer its Family We audited the Pontiac Housing Self-Sufficiency program in accordance with HUD’s Commission’s Section 8 Housing and its own requirements. Specifically, it did not (1) Choice Voucher program based on our correctly calculate participants’ escrow balances, (2) analysis of risk factors relating to the housing agencies in Region 5’s1 ensure that participants’ files contained required documentation, and (3) ensure that i
The Pontiac Housing Commission was established in June 1948 by the City of Pontiac, MI, to provide decent, safe, sanitary, and affordable housing and create opportunities for selfsufficiency and economic independence for eligible low- and moderate-income residents of Oakland County. The Commission’s primary funding source is the U.S. Department of Housing and Urban Development (HUD) under the regulation of the State of Michigan’s Act 18 of 1933.
A five-member board of commissioners is appointed by the mayor of Pontiac to serve a 5-year term. The board is responsible for the overall policy and direction of the Commission. The Commission’s executive director is appointed by the board of commissioners and is responsible for providing general supervision and carrying out the Commission’s day-to-day operations.
The Commission administers the Section 8 Housing Choice Voucher program funded by HUD. The Section 8 program provides assistance to low- and moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing rents with owners of existing private housing. As of June 11, 2014, the Commission had 530 units of its authorized 770 vouchers under contract, and the annual housing assistance payments totaled more than $2.6 million in program funds.
The Family Self-Sufficiency program promotes the development of local strategies to coordinate public and private resources that help Housing Choice Voucher program participants and public housing tenants obtain employment that will enable participating families to achieve economic independence. The Family Self-Sufficiency program is administered by public housing agencies with the help of program coordinating committees. The program coordinating committees usually consist of representatives of local government, employment and job training agencies, welfare agencies, nonprofit providers, local businesses, and assisted families. Supportive services most commonly provided to program participants are child care, transportation, education, and job training. The major components of the program include a contract of participation between the public housing agency and the family, an individual training and services plan for each participating family member, and an interest-bearing escrow account.
The program establishes an escrow account for each family that is funded by the Housing Choice Voucher program’s housing assistance payments. The family’s annual income, earned income, and family rent when the family begins the program are used to determine the amount credited to the escrow account based on increases in earned income. The full amount of the escrow account in excess of any amount owed to the public housing agency becomes available to the family when it has fulfilled its obligations under the contract and has certified that no family member is receiving welfare assistance. From December 2008 to June 2014, the Commission reported escrow deposits totaling $425,678 in HUD’s Voucher Management system. HUD provided grant funding to public housing agencies to pay the salaries and benefits of its Family Self-Sufficiency program staff through its notices of funding availability for fiscal years 2012 and 2013 for the Housing Choice Voucher Family Self-Sufficiency program. All recipients of funding under these notices must administer the program in accordance with HUD at 24 CFR (Code of Federal Regulations) Part 984 and must comply with Housing Choice Voucher program requirements, notices, and guidebooks.
3 The Commission was designated as troubled in its 2011, 2012, and 2013 Section Eight Management Assessment Program ratings. It also was designated as troubled in its Public Housing Assessment System ratings. As a result of its troubled status, HUD entered into a recovery agreement with the Commission to improve its ratings. In addition, HUD contracted with the Nelrod Company to provide technical assistance to the Commission. However, this technical assistance did not specifically address the Commission’s Family Self-Sufficiency program.
Our objective was to determine whether the Commission complied with Federal, State, or its own requirements regarding its Family Self-Sufficiency program and conflicts of interest.
Specifically, we wanted to determine whether the Commission (1) accurately computed Family Self-Sufficiency escrow credits for its program participants, maintained the appropriate eligibility documentation, and appropriately used its Family Self-Sufficiency program coordinator grant funds and (2) followed HUD’s and the State of Michigan’s conflict-of-interest requirements.
4 RESULTS OF AUDIT
Finding 1: The Commission Did Not Always Administer Its Family Self-Sufficiency Program in Accordance With HUD’s and Its Own Requirements The Commission did not always administer its Family Self-Sufficiency program in accordance with HUD’s requirements and its own program action plan. Specifically, it did not (1) correctly calculate participants’ escrow balances, (2) ensure that participants’ files contained required documentation, and (3) ensure that its coordinator effectively managed the program. The noncompliance occurred because the Commission lacked sufficient policies and procedures and an adequate quality control process to ensure that HUD’s regulations, its own action plan, and Family Self-Sufficiency program procedures were followed. Further, it failed to exercise proper supervision and oversight of its program coordinator. As a result, the Commission overpaid nearly $107,000 to its program graduates, overfunded participants’ accounts by more than $53,000, and underfunded participants’ accounts by more than $6,500. It also funded or disbursed more than $212,000 in program funds to participants without proper supporting documentation and could not support that more than $137,000 in coordinator grant funds was properly used.
The Commission Made Inaccurate Escrow Calculations The Commission did not correctly calculate the escrow balances for all five of its Family Self-Sufficiency program graduates. The five graduates’ participant files
contained one or more of the following errors:
2 Despite the discovery of the escrow account errors for its current participants, the Commission failed to determine the accuracy of the escrow disbursements that were made to its five graduates.
The Commission Lacked Adequate Procedures and Controls The Commission lacked sufficient policies and procedures and an adequate quality control process to ensure that HUD’s regulations, its own action plan, and Family Self-Sufficiency program procedures were followed. It also failed to exercise proper supervision and oversight of its program coordinator.
Participants that met graduation requirements continued in the program because the Commission allowed a 6-month grace period, similar to the 180-day period the Section 8 program provides to households after they no longer receive housing assistance.4 This grace period was provided to program participants in case they lost their job or their circumstances changed and they still needed assistance to become self-sufficient. However, HUD’s regulations at 24 CFR 984.303(g) state that the contract is considered to be complete when 30 percent of the monthly adjusted income exceeds the applicable fair market rent. Further, the Commission’s Family Self-Sufficiency program action plan implied that an individual could participate in the program for 10 years, which is contrary to HUD’s maximum contract term of 7 years (according to 24 CFR 984.303(c)).
Conclusion The noncompliance described above occurred because the Commission lacked sufficient policies and procedures and an adequate quality control process to ensure that HUD’s regulations, its own action plan, and Family Self-Sufficiency program procedures were followed. It also failed to exercise proper supervision and oversight of its program coordinator. As a result, it (1) funded or disbursed $212,3225 ($137,858 + $74,464) in escrow payments for 20 program participants and 5 program graduates without proper documentation, (2) overpaid escrow disbursements to graduates by $106,924, and (3) overfunded $53,559 and underfunded $6,541 in program participants’ escrow accounts. Further, because 5 This amount was rounded.
1G. Implement adequate policies, procedures, and controls to ensure that program participants’ files are properly maintained, their escrow accounts are properly calculated, and their escrow funds are properly disbursed to prevent $50,877 in Family Self-Sufficiency program coordinator grant funds from being spent contrary to Federal requirements.
6 The actual unsupported amount was $137,858. However, $106,924 of that amount was included in recommendation 1A as an ineligible cost, thus reducing the amount in recommendation 1D to $30,934.
7 The actual unsupported escrow balance was $39,178. However, $30,138 of that amount was included in recommendation 1B as an ineligible cost, thus reducing the amount in recommendation 1E to $9,040.
We recommend that the Director of HUD’s Detroit Office of Public Housing 1I. Renegotiate its remediation agreement with the Commission to address the cited deficiencies.
11 Finding 2: The Commission Did Not Always Follow HUD’s and the State of Michigan’s Requirements Regarding Conflicts of Interest The Commission did not ensure that its staff and board members disclosed conflicts of interest in accordance with Federal and State requirements. This condition occurred because the Commission lacked procedures and controls to ensure compliance with applicable requirements.
As a result, more than $47,000 was paid to relatives and board members without proper disclosure and approval.
The Commission Lacked Documentation To Ensure That Conflicts of Interest Were Properly Disclosed Contrary to HUD’s regulations at 24 CFR 982.161(a) and (b), and section
125.658 of the State of Michigan Act, the Commission did not ensure that its staff and board members disclosed conflicts of interest. Of the Commission’s fivemember board of commissioners, two board members either participated or had relatives who participated in the Commission’s Section 8 program during the audit period. Specifically, the board president had a relative who participated in the program, and the board vice president was a landlord in the program. The Commission’s board of commissioners is responsible for the overall policy and direction of the Commission. The board president presides at all meetings of the Commission and submits recommendations or other information at each meeting concerning the business, affairs, and policies of the Commission, and the board vice president performs the duties of the board president in the absence or incapacity of the board president. The housing assistance payments improperly received for the tenant and the landlord totaled $24,465.
As of December 2013, the Commission’s two Housing Choice Voucher program specialists had three relatives who participated in the program. The three relatives were tenants and received $16,475 in housing assistance payments during the audit period. The responsibilities of the Commission’s specialists included conducting eligibility interviews, verifying income, performing rent reasonableness determinations, preparing housing assistance payments contracts, updating information, and other duties.
Further, the Commission’s quality control inspector had two relatives who participated in the program during the audit period. These two relatives were tenants and received $6,413 in housing assistance payments during the audit period. The Commission’s quality control inspector inspects and evaluates the quality of the housing quality standards inspections. Therefore, this individual has decision-making responsibilities similar to those of the Commission’s housing quality standards inspector, who is responsible for conducting inspections and