The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited the Michigan State Housing Development Authority’s (Authority) Section 8 Project-Based Voucher program (program). The audit was part of the activities in our fiscal year 2010 annual audit plan. We selected the Authority’s program based upon our analysis of the housing authorities’ programs in Region V’s jurisdiction and as part of our internal audit of HUD’s oversight of the program. Our objective was to determine whether the Authority operated its program in accordance with HUD’s and its requirements. This is the second of two audit reports on the Authority’s program.
The Authority’s program administration regarding documentation of households’ eligibility and housing assistance and utility allowance payment calculations was inadequate. The Authority did not ensure that its household files contained the required documentation to support households’ admission to and continued assistance on the program. Of the 89 files statistically selected for review, all 89 were missing documentation required by HUD and the Authority’s program administrative plan to support nearly $629,000 in housing assistance and utility allowance payments and associated administrative fees.
In addition, the Authority did not effectively manage its housing assistance calculation and payment process in accordance with HUD requirements and its program administrative plan, resulting in nearly $23,000 in overpayments for 25 households and more than $3,000 in underpayments for 29 households for the period September 1, 2007, through August 31, 2009. Further, it received nearly $33,000 ($16,417 in administrative fees related to the overpayments and $16,572 in administrative fees related to the underpayments) in program administrative fees for the households with incorrect housing assistance payments. Based on our statistical sample, we estimate that over the next year, the Authority will overpay nearly $25,000 and underpay more than $5,000 in housing assistance and utility allowance payments due to calculation errors.
The Authority also inappropriately made more than $47,000 in overpayments of housing assistance and utility allowances for units when it failed to ensure that units receiving program housing assistance payments were under an executed housing assistance payments contract. Based on our statistical sample, we estimate that over the next year, the Authority will overpay nearly $56,000 in housing assistance and utility allowances for units not under housing assistance payments contracts.
The Authority did not effectively use HUD’s Enterprise Income Verification system (system) Income Discrepancy Report (report) to recover or reimburse program housing assistance and utility allowance payments for households with unreported, underreported, or overestimated income, resulting in more than $32,000 in overpayments and more than $1,700 in underpayments of housing assistance and utility allowances. Further, the Authority did not remove six deceased individuals from its program and did not recover more than $6,000 in housing assistance and utility allowance payments from the properties’ owners.
We recommend that the Acting Director of HUD’s Detroit Office of Public Housing require the Authority to (1) reimburse its program from non-Federal funds for the improper use of nearly $118,000 in program funds, (2) provide documentation or reimburse its program more than $757,000 from non-Federal funds for the unsupported payments cited in this audit report, and (3) implement adequate procedures and controls to address the findings cited in this audit report to prevent nearly $89,000 in program funds from being spent on excessive housing assistance and utility allowance payments over the next year.