«Office of Audit, Region 6 Audit Report Number: 2015-FW-1004 Fort Worth, TX August 17, 2015 To: Floyd R. Duran, Program Center Coordinator, Office of ...»
Mesilla Valley Public Housing
Authority, Las Cruces, NM
Low-Rent and Housing Choice Voucher Programs
Office of Audit, Region 6 Audit Report Number: 2015-FW-1004
Fort Worth, TX August 17, 2015
To: Floyd R. Duran, Program Center Coordinator, Office of Public Housing, 6BPHO
From: Gerald R. Kirkland, Regional Inspector General for Audit, Fort Worth Region,
Subject: The Mesilla Valley Public Housing Authority, Las Cruces, NM, Miscalculated Housing Choice Vouchers and Incorrectly Paid Rental Assistance 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 Mesilla Valley Public Housing Authority’s low-rent and Housing Choice Voucher programs.
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 (817)-978-9309.
Audit Report Number: 2015-FW-1004 Date: August 17, 2015 The Mesilla Valley Public Housing Authority, Las Cruces, NM, Miscalculated Housing Choice Vouchers and Incorrectly Paid Rental Assistance Highlights What We Audited and Why At the request of the U.S. Department of Housing and Urban Development’s (HUD) Office of Public Housing in Albuquerque, NM, we conducted a review of the Mesilla Valley Public Housing Authority. The Office of Public Housing estimated that the Authority could lose nearly $1 million by the end of 2014 because it had leased only 983 of its 1,607 vouchers. Our objectives were to determine the extent, cause, and impact of not leasing all of its vouchers, and whether the Authority implemented its low-rent and Housing Choice Voucher programs in accordance with HUD regulations.
What We Found We did not determine the extent, cause, and impact of the Authority not leasing all of its vouchers because HUD’s Office of Public Housing changed the housing assistance payment reserve offset formula, which meant that the Authority would no longer lose nearly $1 million at the end of 2014. The Albuquerque, NM, Office of Public Housing began working with the Authority to lease more vouchers, and the Authority took other actions to resolve the other deficiencies.
However, we found deficiencies in 9 of 10 randomly selected program participant files. Each of the files contained one or more deficiencies, including payment calculation errors, incorrect payments, and missing documents to support participant and unit eligibility. These errors occurred because the Authority did not maintain knowledgeable in-house program staff, did not maintain continuity when it switched between contractors and in-house staff to process program files, and did not ensure staff followed the Housing Choice Voucher program policies and procedures. As a result, the Authority overpaid $2,139 in assistance and required participants to overpay $22. Further, it paid $21,426 for participants and units with unsupported eligibility and made an additional $53 in unexplained payments. We found no deficiencies in the Authority’s low-rent program.
What We Recommend We recommend that the Authority (1) repay $2,139 for incorrect housing assistance payments, (2) reimburse $22 to a family that was overcharged, (3) support or repay $21,479, and (4) take steps to ensure staff follows procedures when calculating rent and maintain adequate supporting documentation.
Table of Contents Background and Objectives
Results of Audit
The Authority Incorrectly Calculated and Paid Assistance and Could Not Support Program Participant and Unit Eligibility for Its Housing Choice Voucher Program
Scope and Methodology
A. Schedule of Questioned Costs and Funds To Be Put to Better Use
B. Auditee Comments and OIG's Evaluation
2 Background and Objectives On January 1, 2012, the City of Las Cruces and Dona Ana County had an intergovernmental agreement that established the Mesilla Valley Public Housing Authority. The Authority was previously known as the Housing Authority of the City of Las Cruces. The Authority has a fivemember board of commissioners, two of whom are appointed by the mayor of Las Cruces and two of whom are appointed by the Board of County Commissioners. The fifth member of the Authority’s board is a public housing resident. The primary purpose of the Authority is to provide safe, decent, and sanitary housing for low- and moderate-income families in Las Cruces, NM, and Dona Ana County, NM.
The Authority owns and manages 253 low-rent public housing units and has authority to issue up to 1,607 housing choice vouchers. The U.S. Department of Housing and Urban Development (HUD) provided operating subsidies, Public Housing Capital Fund program funds, and American Recovery and Reinvestment Act funds to the Authority to manage, maintain, and operate its public housing developments. The Authority disbursed more than $3 million in Housing Choice Voucher program funds in fiscal year 2012, $4.9 million in 2013, and $5.6 million in 2014.
The Authority hired a contractor to manage its program from March 2010 through October 2013.
In 2013, the Authority decided to bring its program back in-house. Between August 2013 and February 2014, the Authority hired two managers for the program and fired them because they did not meet the executive director’s expectations. When the in-house managers did not work out, the Authority signed a contract with the Eastern Regional Housing Authority to manage the program from February through December 2014 and placed it under the oversight of the public housing program manager. The Eastern Region Housing Authority revised the contract in August 2014 from “managing” to “overseeing” the program for the Authority. The Authority hired Bernalillo County Housing Authority to manage its program in February 2015, but this was after our audit period ended.
Our objectives were to determine (1) whether the Authority operated its low-rent and Housing Choice Voucher programs in accordance with HUD regulations; (2) the extent, cause, and impact of not leasing all of its vouchers; and (3) whether the factors that led to the reduction in Housing Choice Voucher program participants impacted its low-rent program.
3Results of Audit
The Authority Incorrectly Calculated and Paid Assistance and Could Not Support Program Participant and Unit Eligibility for Its Housing Choice Voucher Program The Authority had deficiencies in 9 of 10 randomly selected program files. Five of the nine files had calculation and payment errors. One file was missing documentation. The three remaining files had both calculation and payment errors and were missing documentation. These errors occurred because the Authority did not maintain knowledgeable in-house program staff, did not maintain continuity when it switched between contractors and in-house staff to process the program files, and did not ensure staff followed the Housing Choice Voucher program policies and procedures. As a result, for the 10 files reviewed, the Authority overpaid $2,139 in program assistance and required participants to overpay $22. Further, it paid $21,426 for participants and units with unsupported eligibility and made an additional $53 in unexplained payments.
Deficiencies in Program Files The Authority’s files contained several types of errors. These errors included incorrect payment standards, incorrect allowance deductions, not implementing payment changes at the appropriate time, unexplained payments, and missing eligibility documents. Table 1 shows the types of errors. Table 2 shows the effect of the errors on assistance payments.
Incorrect Payment Standards As shown in table 1, the Authority did not use correct payment standards for 5 of 10 randomly selected program participants. A payment standard is the amount generally needed to rent a moderately priced dwelling unit in the local housing market, which is used to calculate the amount of housing assistance a family will receive. The payment standard for the family is the lower of the payment standard amount for the family unit size or the size of the dwelling unit rented by the family.
In sample 2, for example, the Authority failed to use appropriate payment standards during recertification of a two-bedroom unit. In July 2012, the Authority correctly calculated the family’s move-in payment standard of $622 and paid it correctly. However, it incorrectly calculated the payment standard when it recertified the family in 2013, resulting in overpayments.
The Authority increased a payment standard before it should have. An approved payment standard increase from $622 to $696 was effective January 2013. It later decreased back to $622, effective May 2013. According to 24 CFR (Code of Federal Regulations) 982.505(c)(4), when there is an increase in the payment standard amount during the housing assistance payment contract term, the increased payment standard amount must be used to calculate the monthly housing assistance payment for the family beginning at the effective date of the family’s first regular reexamination on or after the effective date of the increase. Rather than using the $622 1 $45 unexplained payment + $2,072 payments based on missing documentation = $2,117 unsupported payments 2 $8 unexplained payment + $2,473 payments based on missing documentation = $2,481 unsupported payments 5 payment standard, the Authority used the $696 payment standard. As a result, in July 2013 it paid $531 in housing assistance rather than the appropriate amount of $493, an overpayment of $38.
One month later, the family composition changed from three to four family members, which resulted in a new notice of rent amount. The Authority continued to use the incorrect $696 (twobedroom unit) payment standard for recertification, which caused it to overpay a total of $418 for the period August 2013 through June 2014. Following the family’s July 2014 recertification, the Authority overpaid $2 monthly, a total of $8 from July through October 2014. In total, the Authority overpaid $464 in housing assistance for the family. The overpayments were an ineligible cost that the Authority should reimburse to its program.
Incorrect Allowance Deductions As shown in table 1, the Authority did not use the correct utility allowance deductions for 4 of 10 families reviewed. A utility allowance is the amount that a housing agency determines is necessary to subsidize the resident’s reasonable utility costs. The utility allowance schedule must be determined based on the typical cost of utilities and services paid by energyconservative households that occupy housing of similar sizes and type in the same locality. The Authority must maintain a utility allowance schedule for all tenant-paid utilities, the cost of tenant-supplied refrigerators and ranges, and other tenant-paid housing services.
For example, in sample 5, the Authority failed to use the appropriate utility allowance deductions to calculate payments. In April 2013, the family’s utility allowance calculation for a two-bedroom unit with appliances for heating, cooking, air conditioning, water heater, and other electrical services was $118; however, the Authority entered $122 as the utility allowance. The error caused the Authority to overpay $4 per month for rental assistance, or a total of $48 for the period April 2013 through March 2014. The overpayments were an ineligible cost that the Authority should reimburse to its program.
Failure To Implement New Payments on Time As shown in table 1, the Authority did not implement new payments at the appropriate time for 4 of the 10 families. The Authority should have paid the landlords the lesser of the monthly housing assistance or the actual rent for the unit.
In sample 3, for example, the Authority mailed a notice of rent adjustment letter on July 15, 2013, notifying the family that effective September 1, 2013, the housing assistance payments to the landlord would change from $396 to $349. However, on September 3, 2013, the Authority paid the landlord $396. Because the Authority did not implement the new payment, effective September 1, 2013, it overpaid $47 for September 2013. The overpayments were an ineligible cost that the Authority should reimburse to its program.
Unexplained Payments The Authority made unexplained payments for 2 of 10 sampled families. For example, in sample 7, the Authority correctly paid the landlord $138 on January 3, 2013. On the same day, the Authority made an adjustment payment to the landlord for $45 for the same family and unit.
The February 1, 2013, payment to the landlord was again $138. The Authority was unable to 6 provide supporting documentation or a reasonable justification for the $45 payment. The Authority made another unexplained payment of $8 for sample 9 on September 4, 2012. These payments were unsupported costs. The Authority should provide evidence that they were appropriate or reimburse the $53 3 to its Housing Choice Voucher program.
Missing Documentation Initially, 9 of the 10 sampled paper files were missing a total of 36 necessary documents. During the audit, the Authority located many of the missing documents in its management contractor’s online system and in the Eastern Regional Housing Authority’s computer system. The Authority located all but five documents from five different files.
The missing documents included an inspection report (one instance), results of a criminal background check (one instance), a form HUD-50058 (one instance), and income verification (two instances). The inspection report, income verification documents, and criminal background check are critical documents supporting the participants’ and units’ eligibility for assistance.