HUD Has Identified the Sources of Payment Errors but Lacks Complete and Reliable Estimates for Each One

HUD has identified three basic sources of errors that have resulted in  improper rent subsidy payments  and has conducted separate studies for  each of these sources to assess the magnitude of the problem and the  progress that has been made in meeting RHIIP’s goal of reducing improper  subsidies. 1). HUD Has Reliable Estimates of Improper Payments Due Only to Program Administrator Errors

To determine the amounts of improper rent subsidies resulting from  program administrator errors, HUD collected data on more than 2,400  randomly selected households participating in the voucher, public  housing, and project-based Section 8 programs for fiscal years 2000 and  2003. Data from the  fiscal year 2003 study show that the department paid an estimated $1.4  billion in gross improper rent subsidies (representing $896 million in  overpayments and $519 million in underpayments) as a result of program  administrator errors in fiscal year 2003—a 39 percent decrease from fiscal  year 2000. For fiscal  year 2003, HUD has begun to implement a methodology for estimating  billing error for vouchers and public housing. HUD Has Taken Steps to Reduce Improper Subsidies in All Three Programs, but Challenges Remain

HUD has undertaken three separate efforts under RHIIP to address  improper rent subsidies for its public housing, voucher, and project-based  Section 8 programs. Specifically, HUD is (1) stepped up its monitoring of  program administrators, (2) improving verification of tenants’ incomes,  and (3) providing HUD staff and program administrators with guidance  and training to help them understand program requirements. Despite some  implementation problems and remaining challenges, these actions have  strengthened HUD’s oversight of the programs. To increase monitoring of program administrators, HUD has taken the  following actions:    For the voucher and public housing programs, HUD field office staff  completed about 1,100 RIM reviews—that is, on-site assessments of PHAs’  compliance with policies for determining rent subsidies—between 2002  and 2004. Additionally, problems with a database containing information on RIM  reviews prevented HUD from analyzing the results of the reviews to assess  improvements in PHAs’ calculations of tenant subsidies and provide  technical assistance to PHAs. According to  HUD, the complexity of the existing policies contributes to errors in  determining subsidies. For example, program administrators currently  must determine tenants’ eligibility for 44 different income exclusions and  deductions in order to calculate rent payments and subsidies. Under any  simplification approach, many tenants’ rental payments could be affected,  with some tenants paying higher rents and others paying lower rents. However, the department has not conducted a formal study on the impact  of policy changes to inform policymakers on this issue.
Why GAO Did This Study

In fiscal year 2003, the Department of Housing and Urban Development (HUD) paid about $28 billion to help some 5 million low-income tenants afford decent rental housing. HUD has three major programs: the Housing Choice Voucher (voucher) and public housing programs, administered by public housing agencies, and project-based Section 8, administered by private property owners. As they are every year, some payments were too high or too low, for several reasons. To assess the magnitude and reasons for these errors, HUD established the Rental Housing Integrity Improvement Project (RHIIP). This testimony, based on a report issued in February 2005, discusses the sources and magnitude of improper rent subsidy payments HUD has identified and the steps HUD is taking to address them.

What GAO Found

HUD has identified three sources of errors contributing to improper rent subsidy payments: (1) incorrect subsidy determinations by program administrators, (2) unreported tenant income, and (3) incorrect billing. HUD has attempted to estimate the amounts of improper subsidies attributable to each source but has developed reliable estimates for only the first--and likely the largest--source. HUD paid an estimated $1.4 billion in gross improper subsidies (consisting of $896 million in overpayments and $519 million in underpayments) in fiscal year 2003 as a result of program administrator errors--a 39 percent decline from HUD's fiscal year 2000 baseline estimate. GAO estimates that the amount of net overpayments could have subsidized another 56,000 households with vouchers in 2003. HUD has initiated several efforts under RHIIP to address improper subsidies in its public housing, voucher, and project-based Section 8 programs. Specifically, HUD has (1) stepped up monitoring of program administrators, (2) improved verification of tenants' incomes, and (3) provided guidance and training on program requirements to HUD staff and program administrators. These actions have strengthened HUD's oversight of the programs, despite some implementation problems and remaining challenges. For example, for the voucher and public housing programs, HUD field office staff completed about 1,100 Rental Integrity Monitoring reviews--that is, on-site assessments of public housing agencies' compliance with policies for determining rent subsidies--between 2002 and 2004. However, problems with a database containing information on these reviews prevented HUD from analyzing the results. According to HUD, the complexity of existing policies contributes to the difficulties program administrators have in determining rent subsidies correctly. For example, program administrators must assess tenants' eligibility for 44 different income exclusions and deductions. However, simplification of these policies, which will likely require statutory changes by Congress, could affect many tenants' rental payments, with some tenants paying more and others paying less. HUD has considered various approaches to simplifying policies for determining rent subsidies, but it has not conducted a formal study to inform policymakers on this issue.