As shown in figure 1, RHS’s national, state, and local offices share  administrative duties for the rental assistance program. The national office also distributes administrative notices and unnumbered  letters on an as-needed basis. State and local office staff also  collect and maintain property and tenant data for their areas. RHS calculates the  payments property owners receive using information supplied by tenants  and verified by property owners, who then use the information to create a  tenant certification form. Funds Are Distributed to Properties through Contracts and Transfers of Unused Rental Assistance

The rental assistance program provides four types of contracts: renewal,  construction, servicing, and preservation. 3). RHS’s Plans to Streamline the Payment Process Have Raised Concerns about Eliminating a Layer of Review

RHS’s national office is upgrading two systems to streamline the payment  process. RHS’s National and State Offices Monitor the Use Of Rental Assistance, with Local Offices Performing the Primary Review Every 3 Years

RD Instructions provide guidance for monitoring the use of rental  assistance funds. National office  staff are planning a number of initiatives to increase rental assistance  monitoring, but a number of key management positions in the national  office have been unfilled, potentially limiting the effectiveness of  monitoring efforts. Another  survey respondent stated that RHS guidance is sometimes unclear. RHS’s Internal Controls Do Not Provide Adequate Oversight of Rental Assistance Funds

RHS’s internal controls do not provide reasonable assurance that rental  assistance funds are used efficiently or that tenants’ incomes and assets are  adequately verified. Alternate methods of verification, such as internal  MFIS database checks and wage matching, could help improve RHS’s  existing internal controls if properly designed and implemented. Additionally, the  infrequency of the triennial supervisory reviews using a sampling  methodology that may be insufficient cannot reasonably ensure that  tenants’ income and assets, and ultimately rental assistance payments, are  adequately verified. Recommendations for Executive Action

To ensure that rental assistance funds are effectively distributed to  properties that have tenants with the greatest need, GAO recommends that  the Secretary of Agriculture require program officials to (1) establish  centralized guidance on transferring unused rental assistance, (2) improve  sampling methods to ensure that a sufficient number of tenant household  files are selected for supervisory reviews and (3) improve verification of  tenant information including more effective use of alternate methods of  income verification. However,  GAO did not take a position on this issue. Key  contributors to this report are listed in appendix V.

Scope and Methodology

To determine how RHS distributes rental assistance funds and monitors the  rental assistance program, and to identify the internal controls RHS has  established to ensure that rental assistance funds are administered and  used effectively, we collected written and testimonial information from  agency officials in the national office and in the Office of the Deputy Chief  Financial Officer in St. Louis, Missouri on the rental assistance distribution  process and the guidance governing the distribution process.
Why GAO Did This Study

The Rural Housing Service's (RHS) Section 521 rental assistance program provides rental subsidies for about 250,000 rural tenants. Because the program has a waiting list of 80,000 eligible tenants and there are over 1.3 million rural low-income renters eligible for housing subsidies, it is important to effectively distribute resources to extend assistance to as many needy tenants as possible. Therefore, GAO was asked to assess (1) how RHS distributes rental assistance funds to properties and tenants, (2) how RHS monitors the use of rental assistance funds, and (3) whether there are sufficient internal controls in place to ensure that these funds are being effectively administered and used.

What GAO Found

RHS's national office pays rental assistance funds to property owners through a variety of contracts and transfers of unused rental assistance from one property to another. RHS staff calculate the payment amounts using information provided by tenants and verified by property owners. The current system requires RHS staff to enter payment data into the agency's database manually. However, RHS's national office is upgrading two systems to streamline the payment process. But some local RHS staff are concerned that the new process may eliminate a layer of review. RHS's national, state, and local offices share responsibility for monitoring the rental assistance program, with the local offices performing the primary review every 3 years. The national office outlines the monitoring activities for the rental assistance program in its Rural Development Instructions and provides other guidance, such as administrative notices and unnumbered letters. We found that state and local offices follow this guidance inconsistently and sometimes consider it unclear. National office staff are planning a number of initiatives to increase monitoring of the rental assistance program, but a number of key management positions in the national office are unfilled, which could limit the effectiveness of program monitoring. RHS's internal controls do not provide adequate oversight of rental assistance funds because RHS guidance is inadequate and tenants' incomes are not adequately verified. First, insufficient guidance on the transfer process limits RHS's ability to move unused rental assistance to properties that have tenants with the greatest unmet need. Second, the triennial supervisory review does not provide reasonable assurance that tenants income and assets, and ultimately rental assistance payments, are adequately verified. Alternate methods of verifying tenant information also have limited effectiveness but could help improve internal control if properly designed and implemented.