Finding Number: 2023-009
Program: COVID-19 Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through Entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year.
Federal Award Year: 2023
Compliance Requirement: Special Tests- Housing Assistance Payment, Reporting, and Allowability
Criteria
The Public Housing Authority (PHA) must pay a monthly housing assistance payment (HAP) on behalf of the family that corresponds with the amount on line 12u of the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register (24 CFR section 982.158 and 24 CFR Part 982, Subpart K).
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Conditions Found
For 1 of 40 samples selected, the City did not complete the required eligibility re-examination as required on 4/1/2023, but instead completed it on 1/4/2024. At the time of the re-examination, the City found that the individual no longer qualified for further HAP payments a their monthly adjusted income exceeded 30% of the rental payment. As a result of the delay in completing the re-examination, the individual continued to receive HAP payments that they were no longer eligible to receive. While the HUD-5508 and the amended HAP contract showed a $0 housing assistance payment amount, the HAP register showed that the individual continued to receive HAP assistance payments in the amount of $462 through the City’s fiscal year end of 9/30/2023.
Additionally, the City’s control over the HAP register, used in testing the housing assistance payment and allowability compliance requirements, requires six of the Housing Authority Coordinators to review each check run/HAP register. Each Coordinator is responsible for reviewing and approving a different area of the register to ensure its completeness and accuracy. For six of the seven samples selected, the check run/HAP register did not include all signatures of the required Housing Authority Coordinator.
With regard to the HUD-50058 reporting testwork, the City does not have a control in place to ensure that the HUD-50058 is complete and accurate. As such, there was not a control related to this process to test.
Cause
Due to the Housing Authority being understaffed and the required number of re-examinations be performed, many of the re-examinations were completed late. This caused the City to not be in compliance with HUD regulations and as such the HUD-50058, HAP register, and HAP contracts to not be in agreement.
Effect
The City is not in compliance with HUD’s requirements that the HUD-50058, HAP register, and HAP contract/amended contract agree. Additionally, the City has been providing ineligible participants with HAP payments resulting in unallowable costs.
Questioned Costs
$462- Difference between the contract/amendment and the HAP register.
Repeat finding
A similar finding was not reported in the prior year.
Statistical sample
The sample was not intended to be, and was not, a statistically valid sample.
Recommendation
We recommend the City implement additional controls and procedures to ensure proper record keeping and that the HUD-50058, HAP register, and HAP contract all agree.
View of Responsible Officials
Due to staffing shortages during the fiscal year and the high volume of participants in the City’s HCV program, a few reexaminations were completed late. Moreover, a significant amount of staff time was used for training regarding the Housing Opportunity Through Modernization Act (HOTMA) regulations that were continually revised and ultimately delayed, which reduced the amount of time that staff could have utilized for certification processes. The changing regulations created ambiguity for existing and new staff.
There was one selection out of forty, of which KPMG determined did not qualify for further HAP payments, since the family share equaled or exceeded the gross rent. For this particular sample selection, the April 1, 2023 annual reexamination was completed on January 4, 2024, when the HAP payment decreased from $462 to $0 per month. A Zero-HAP letter was sent to the participant on February 26, 2024, informing the participant that effective March 1, 2024 this individual would be responsible for the full rent and would no longer receive a Housing Assistance Payment (HAP). The letter also advised the individual that she would remain a participant for an additional six months and no change in income/circumstances, her participation in the voucher program would be terminated, per HUD policies. Because the annual reexamination was processed late, HACLB absorbed the HAP payment until the 30-day notice of change was provided to the participant. At the conclusion of the Zero-HAP term (six months), the Housing Specialist completed the End of Participation for the participant and has requested the transfer of the remaining overpaid HAP from the HAP fund to the Housing Authority Administrative Fund. This minimal amount correction was being processed in FY24.
To address delays in reexamination processes, HACLB has contracted with an agency to assist in processing overdue reexaminations, and HACLB has submitted recruiting requisitions to its Human Resources department to hire additional housing specialists to improve upon its management of the high volume of HCV program participants, documentation and processes, and to meet various requirement deadlines.
Regarding the testing of HUD-50058 forms, the HUD-50058 form is generated after information is inputted into HUD’s system. Error warnings are produced from the system if information is missing. Accuracy is based on the information inputted. HACLB will provide additional training to staff inputting the information, and reviews will continue to be done by the supervisor. However, it would be very difficult for the HUD-50058 form, HAP register and HAP contract to not be in agreement. When a reexamination is processed, any changes are made in HUD’s system, changes are locked in, a HUD-50058 is generated, an amended HAP contract is printed, which reflects the changes made on the 50058 form, and when the HAP payment is made the payment is made for the new amount per the HAP register. Thereby, each step dependent upon the prior step’s information, making it very difficult for the HUD-50058 form, HAP register and HAP contract to not be in agreement. To further improve upon the process, HACLB implemented new housing software in August 2024, which enhances reporting and tracking of payments, of HUD-50058 forms and of contract amendments. Housing Assistance Coordinators will use these reports to identify and address discrepancies.
Lastly, regarding the City’s control with the HAP register’s required signatures, HACLB’s internal procedures does not require all six Housing Coordinators to approve the check run/HAP register, as KPMG assumed. There are only three assigned Housing Assistance Coordinators that have designated staff who are allowed to make adjustments and review the check-run adjustment register to confirm the work of their respective teams. If one of the approvers is absent, another approver may review and approve the adjustments that can be completed via email.
Response to Views of Responsible Officials
As noted in the conditions found, the City did not complete this reexamination until nine months after the effective date. Therefore, the process that occurred in January 2024, should have occurred by April 1, 2023. The individual would have been determined to have a $0 HAP payment at this time. Therefore, the City provided the participant with the $462 payment for the nine months that the reexamination was not completed.
Through walkthrough procedures and process narrative understanding documents, the City communicated to KPMG in writing that all parties listed on the HAP register are required to sign off and approve the register. Only one of seven registers selected for testing included all six signatures. Written process narratives were provided to KPMG on June 5, 2024.