Rural Housing Service: Updated Guidance and Additional Monitoring Needed for Rental Assistance Distribution Process

Chapter 8 of USDA's updated regulations clarifies RHS's guidance on transferring rental asssistance. (7CFR3560.259) The regulations went into effect on 2/24/2005.

We reported that RHS's supervisory reviews, the primary internal control activity used to verify the information tenants and property owners submit, are conducted infrequently and use samples that may be too small to effectively mitigate the risks associated with providing unauthorized rental assistance. We recommended that the Secretary of Agriculture require program officials to improve sampling methods to ensure that a sufficient number of tenant household files are selected for supervisory reviews. In its statement of action letter dated October 26, 2004, USDA wrote that it intended to revamp its supervisory visit procedure, including improving its sampling methods to ensure that a sufficient number of households are selected for review. In its FY 2006 Performance and Accountability Report, USDA reported that one of its statisticians developed a sampling plan based on the model used by the Department of Housing and Urban Development. USDA also reported that its new sampling plan covered the full fiscal year studied and that the methodology produced a sampling plan with a 99-percent confidence level.

We reported that RHS used alternate methods, such as internal database checks and wage matching, to verify tenant and payment information. We found that these methods had limited effectiveness in governing the rental assistance distribution process but could help to improve internal control if they were properly designed and implemented. We recommended that the Secretary of Agriculture require program officials to improve its verification of tenant information, including more effective use of alternative methods of income verification. In its statement of action letter, dated October 26, 2004, USDA wrote that it intended to improve its verification of tenant information through various methods, including the implementation of civil money penalties, a revision to the tenant certification, the education of tenants on requirements and expectations, and National office guidance on the use of the Treasury Offset Program. In its FY 2004 Performance and Accountability report, USDA wrote that it was undertaking a study to collect and analyze data for reducing the estimated rate of improper payments in its rental assistance program. In February 2005, USDA implemented 7 CFR 3560, its new multifamily housing regulation which, among other things, provides guidance regarding the procedures that borrowers should follow to assure that proper verification and income calculations are done, provides guidance to the State offices regarding the use of wage and benefit matching with State Departments of Labor and similar agencies, and requires State offices to report quarterly on their efforts to participate in wage matching. On 4/4/2007. RHS' Administrator sent a memo updating corrective actions concerning this specific recommendation. He wrote that RHS was revising its guidance handbook to address occupancy issues as they relate to income. (note: this section of 3560 was updated in 9/76 with case examples throughout to help owners and RHS field staff to understand rules applicability) He also wrote that MFH has undertaken improper payment audits to address income verification and subsidy payment issues, directed State offices to train field staff, borrowers, and property managers, and have begun a wage matching pilot program with the Florida Department of Law Enforcement and the Centralized Servicing Center to determine the effectiveness of targeting certain high risk income groups.