Finding 2022-001 Eligibility and Reporting (Form HUD-50058 MTW) Identification of the Federal Program: U.S. Department of Housing and Urban Development (HUD) Assistance Listing No. 14.881 ? Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2022 through December 31, 2022 Program No.: IL002-01-00022D Section 8 ? Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2022 through December 31, 2022 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): 2 CFR section 200.303 of the Office of Management and Budget?s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) states the following regarding internal control: ?The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Eligibility ? Most Public Housing Authorities (PHAs) devise their own application forms that are filled out by the PHA staff during an interview with the tenant. The head of the household signs: (a) one or more release forms to allow the PHA to obtain information from third parties; (b) a federally prescribed general release form for employment information; and (c) a privacy notice. Under some circumstances, other members of the family are required to sign these forms (24 CFR sections 5.212, 5.230, and 5.601 through 5.615).The PHA must: ? As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, 960.259, and 982.516). ? For both family income examinations and reexaminations, obtain and document in the family file third-party verification of: (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 960.259 and 982.516). ? Determine income eligibility and calculate the tenant?s rent payment using the documentation from third-party verification in accordance with 24 CFR part 5 subpart F (24 CFR section 5.601 et seq.) (24 CFR sections 960.253, 960.255, 960.259, 982.201, 982.515, and 982.516). ? Select tenants from the waiting list (24 CFR sections 960.206 through 960.208 and 982.202 through 982.207). ? Reexamine family income and composition at least once every 12 months (Public Housing program) or 24 months (HCV program) and adjust the tenant rent and housing assistance payment as necessary using the documentation from third-party verification (24 CFR section 960.253, 960.257, 960.259, and 982.516). In addition, the Chicago Housing Authority (the Authority) is participating in the Department of Housing and Urban Development?s (HUD) Moving-to-Work (MTW) Demonstration program. The Authority?s initial MTW Agreement was signed by the Authority and HUD on February 6, 2000, at which time HUD allowed the Authority to implement its Plan for Transformation. On June 26, 2008, the Authority and HUD signed the Amended and Restated MTW Agreement that extended the Authority?s participation in the MTW program through December 31, 2018. On April 4, 2016, the MTW Agreement was further modified and extended through December 31, 2028. Through this agreement, HUD waived selected statutory and regulatory requirements to allow the Authority flexibility in achieving the stated objectives of the MTW demonstration program. As such, per the Authority?s HCV Administrative Plan, reexamination of family income and composition under the HCV program is performed biennially or triennially. Reporting (Form HUD-50058 MTW) ? Per 24 CFR Part 908 and 24 CFR Section 982.158, the PHA is required to submit the Form HUD-50058 MTW, Family Report, each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Form HUD-50058 when a family ends participation in the program or moves out of the PHA?s jurisdiction under portability. The following line items on the Form HUD-50058 MTW contain critical information: (1) Line 1c ? Program (2) Line 2a ? Type of Action (3) Line 2b ? Effective Date of Action (4) Line 2k ? FSS Participation Now or in the Last Year (5) Line 3b, 3c ? Last Name, First Name (6) Line 3e ? Date of Birth (7) Line 3n ? Social Security Numbers (8) Line 5a ? Unit Address (9) Line 5h ? Date Unit Last Past HQS Inspection (10) Line 5i ? Date of Last Annual HQS Inspection (11) Line 7i ? Total Annual Income (12) Line 13h ? Contract Rent to Owner (13) Line 13k ? Tenant Rent (14) Line 13x ? Mixed Family Tenant Rent (15) Line 17a ? Participation in Special Programs ? Participation in the Family Self Sufficiency (FSS) Program (16) Line 17k(2) ? FSS Account Information ? Balance Condition: Eighty tenants and participants were selected for testing of internal controls over compliance with the eligibility and Form HUD-50058 MTW reporting requirements for the program. For the 80 tenants and participants selected, 40 were Public Housing and RAD tenants (28 Public Housing and 12 RAD) and 40 were Housing Choice Voucher (HCV) participants. In our testing of the Authority?s internal controls over compliance with the eligibility and Form HUD-50058 MTW reporting requirements, there were four Public Housing tenants and three RAD tenants for which control deviations/compliance exceptions were noted (8.8% overall MTW deviation rate). The nature of the control deviations identified is as follows: ? In the case that a recertification was to be performed in 2022, the examination/re-examination checklist was not initialed by the certification specialist (CS), therefore the Authority did not retain evidence that the CS inspected all relevant forms (three instances). ? In the case that a recertification was to be performed in 2022, the examination/re-examination checklist was initialed by the certification specialist (CS), but forms were missing and/or not signed (one instance). ? In the case that a recertification was to be performed in 2022, relevant forms were signed after the effective date and submittal to HUD (three instances). ? In the case that a recertification was to be performed in 2022, relevant forms were missing and/or missing signature by tenant and recertification clerk (five instances). In addition, 100 tenants and participants were selected for testing over the compliance requirements over eligibility and Form HUD-50058 MTW reporting for the program. For the 100 tenants and participants selected, 60 were Public Housing and RAD tenants (42 Public Housing and 18 RAD) and 40 were HCV participants. In our testing, there were 7 Public Housing tenants and 5 RAD tenants with compliance exceptions (12% overall MTW exception rate). The nature of the compliance exceptions identified is as follows: ? In the case that a recertification was to be performed in 2022, relevant forms were missing and/or missing signature by tenant and recertification clerk (eight instances). ? In the case that a recertification was to be performed in 2022, third-party income support was not available and/or on file (four instances). ? In the case that a recertification was to be performed in 2022, third-party income support did not match the calculation amount (one instance). ? In the case that a recertification was to be performed, it was not performed within a reasonable timeframe (two instances). ? In the case that a recertification was to be performed, proper documentation was not available and/or on file to tie key line items within Form HUD-50058: total annual income, date of birth, and social security number (two instances). ? In the case that a recertification was to be performed in 2022, the reexamination file could not be located (one instance). The compliance exceptions noted above are a result of a deficiency in internal controls. Furthermore, for Public Housing, RAD and HCV, the quality review specialists perform a quality review of a sample of tenant/participant recertification files to ensure compliance with eligibility and reporting (Form HUD-50058 MTW) requirements. For Public Housing and RAD, management did not maintain evidence of documentation of completeness and accuracy regarding populations utilized in selecting samples for the quality control reviews performed. In addition, management did not design an internal control to ensure findings identified in the quality control review are resolved. Cause: Management has not designed a control to ensure that eligibility and HUD-50058 MTW reporting requirements are being met. Effect or Potential Effect: Ineligible tenants or participants may be inappropriately allowed to participate in federal programs and information reported to HUD could be inaccurate or incomplete. Questioned Costs: None. Context: The Public Housing and RAD programs had 12,931 and 4,949 tenants on its rent rolls, respectively, as of December 31, 2022. The HCV program had 45,389 participants as of December 31, 2022. All active tenants and participants have a Form HUD-50058 MTW, which is filed annually (Public Housing and RAD), biennially (HCV), or triennially (HCV). Identification as a Repeat Finding, if Applicable: This finding is a repeat of finding 2021-001 from the prior year. Recommendation: The Authority should design sufficiently precise policies, procedures, and internal controls to ensure ineligible tenants or participants are not inappropriately allowed to participate in federal programs and reporting to HUD is complete and accurate. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.