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Slide #1©2007 Nan McKay & Associates
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Nan McKay
RIM Review Issues and Legislative Update on SEVRA
©2007 Nan McKay & Associates
Slide #2©2007 Nan McKay & Associates
Today’s Topics
RIM Reviews SEVRA What else from HUD?
Slide #3©2007 Nan McKay & Associates
Learning Objectives
Learn how to proactively avoid RIM Review findings and loss of Admin Fees
Discover the specific in’s and out’s of SEVRA and what it will mean to you if it’s passed in the next session of Congress.
Slide #4©2007 Nan McKay & Associates
RIM Review Issues
Slide #5©2007 Nan McKay & Associates
Notice 2007-27
Notice is applicable for all on-site monitoring reviews, required PHA responses, and corrective actions that take place after the effective date of the Notice – August 24.
Slide #6©2007 Nan McKay & Associates
Notice 2007-27
Although there was substantial progress in reducing errors, the intent of the notice is to ensure that the downward trend in error reduction continues.
The concern is now the financial impact on the housing authority if the RIM review results in errors.
Slide #7©2007 Nan McKay & Associates
Notice 2007-27
Discusses 2 areas• Incentives for pursuing tenant fraud• HUD’s policy regarding the disallowed costs
over $2500 per program review uncovered during site monitoring that result in HUD overpayment of subsidy
Slide #8©2007 Nan McKay & Associates
Notice 2007-27 – Tenant Fraud
PHA options• Terminate assistance• Enter into a Repayment Agreement• Pursue litigation
These options will allow a PHA to retain an amount which will flow to the PHA’s Administrative Fees Net Restricted Assets.
Slide #9©2007 Nan McKay & Associates
Notice 2007-27 – Tenant Fraud
HUD regs regarding this area:• Where the PHA is the principal party initiating
or sustaining an action to recover amounts from tenants that are due as a result of fraud or abuse, the PHA may retain the greater of . .
Slide #10©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
A) 50% of the amount actually collected from a judgment, litigation (including settlement of a lawsuit) or an administrative repayment agreement pursuant to the PHA’s informal hearing procedures.
Slide #11©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
B) Reasonable and necessary costs that the PHA incurs related to the collection from a judgment, litigation (including settlement of a lawsuit) or an administrative repayment agreement. Reasonable and necessary costs include the costs of the investigation, legal fees, and collection agency fees.
Slide #12©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
Note that if HUD incurs costs on behalf of the PHA in obtaining the judgment, these costs will be deducted from the amount to be retained by the PHA.
Slide #13©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
Note that the remaining balance of the recovery proceeds that the PHA is not authorized to retain will flow to the HAP Net Restricted Assets.
Slide #14©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
The PHA may only use the amount of the recovery it is authorized to retain in support of the section 8 program in which the fraud occurred.
The remaining balance of the recovery efforts (whatever the PHA is NOT allowed to retain) must be applied as directed by HUD.
Slide #15©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
The PHA must retain records to allow HUD to audit these amounts including:• Amounts recovered on any judgment or repayment
agreement;• The nature of the judgment or repayment
agreement; and • The amount of legal fees and expenses incurred in
obtaining the judgment or repayment agreement and recovery.
Slide #16©2007 Nan McKay & Associates
Notice 2007-27 Tenant Fraud
If the PHA takes none of the actions noted, than all amounts that constitute an overpayment of HAP subsidy in excess of $2500 per review must be reimbursed to HAP Net Unrestricted Assets from Administrative Fees Net Unrestricted Assets or other non-federal funds.
Slide #17©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Overpayment of Subsidy• If the PHA overpaid HAP due to calculation or
other errors in excess of $2500 per review, 100% of that amount must be reimbursed to HAP Unrestricted Net Assets from the Administrative Fees Unrestricted Net Assets or other non-federal funds.
Slide #18©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Overpayment of Subsidy • In addition, if such errors impacted any
funding baseline determinations, funding for the affected renewal periods will be adjusted.
Slide #19©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Underpayment of subsidy• PHAs will not be reimbursed for
underpayment of subsidies. • PHAs are required to reimburse families for
overpayment of the total family share.
Slide #20©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Underpayment of subsidy• Reimbursements of the tenant portion of the rent
can be made in current and future months through an increase in HAP to the landlord and a decrease in the family share until the family’s overpayment is fully compensated.
• A PHA may not use funds from its HAP account or HAP Net Restricted Assets to directly reimburse families for overpayment of the total family share.
Slide #21©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Underpayment of subsidy• If the family did not receive the full amount of
utility reimbursement from the PHA, the PHA must reimburse the family.
• These reimbursements may be paid out of the PHA’s HAP account or HAP Net Restricted Assets.
Slide #22©2007 Nan McKay & Associates
Notice 2007-27 PHA Error
Underpayment of subsidy• Note that a PHA cannot reimburse prior year
costs with current year funding.
Slide #23©2007 Nan McKay & Associates
REALITY!!!
RIM Review Results
Tracking Staff Errors
What to do about them?
Slide #24©2007 Nan McKay & Associates
Notice 2007-27 Sanctions
PHAs must identify and implement corrective actions or rectify errors in meeting program requirements uncovered during on-site monitoring reviews.
In the event that a PHA fails to comply with the requirements of the on-site monitoring reviews, HUD will impose sanctions for the voucher program by reducing the administrative fee.
Slide #25©2007 Nan McKay & Associates
Notice 2007-27 Sanctions
The following shall result in sanctions: (1) failure to submit a Corrective Action Plan as directed by the field office within the timeframes outlined by the Field Office; and (2) failure to implement corrective actions pursuant to a field office approved Corrective Action Plan.
Slide #26©2007 Nan McKay & Associates
Notice 2007-27 Sanctions
If, as a result of an on-site monitoring review, it is discovered that a PHA does not respond in writing to an on-site monitoring review report within 45 days, or does not implement its corrective actions within the timeframes approved by the field office, 10 percent of one-twelfth of its annual administrative fee amount will be withheld beginning the month the field office makes the sanction effective and lasting until the PHA has complied with the program requirements.
Slide #27©2007 Nan McKay & Associates
Notice 2007-27 Sanctions
Thus, the withholding of the HCV program administrative fee is a temporary sanction.
Slide #28©2007 Nan McKay & Associates
Notice 2007-27 SEMAP
An on-site monitoring review may serve as a SEMAP confirmatory review of indicator three and other indicators if they are reviewed in depth during the on-site review.
Slide #29©2007 Nan McKay & Associates
Notice 2007-27 SEMAP
In the event that a PHA’s self-certification of SEMAP Indicator three (Determination of Adjusted Income) is not supported by an on-site review, the field office must adjust the SEMAP score for that indicator, regardless of its impact on the PHA’s SEMAP performance designation (high, standard, troubled).
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Notice 2007-27 SEMAP
If, during the on-site review, it is discovered that other indicators are also not supported by file or other documentation, the SEMAP score for those indicators shall be adjusted as well.
Slide #31©2007 Nan McKay & Associates
Notice 2007-27 Self-Assessment
During FY 2007, HUD will be conducting additional on-site monitoring reviews of a PHA’s PH and HCV programs.
HUD strongly encourages PHAs to conduct self-assessment reviews to quality control and assure that the PHA’s income and rent determination process is in compliance with program requirements.
Slide #32©2007 Nan McKay & Associates
Notice 2007-27 Appeals
A PHA may appeal the imposition of sanctions, and/or disallowed costs to the HUD field office within 30 calendar days of imposition of adverse action(s) by submitting a written request to the HUD field office via certified mail.
Slide #33©2007 Nan McKay & Associates
Notice 2007-27 Appeals
SEMAP scores will use their own appeal process if the adjustment will be as a result of an on-site monitoring review.
Slide #34©2007 Nan McKay & Associates
Notice 2007-27 Appeals
The written request must provide material evidence or justification of any arguments or additional facts and data concerning the proposed adverse action.
The PHA may not request more than one appeal per adverse action (i.e., only one request for an appeal is allowed for the imposition of disallowed costs).
Slide #35©2007 Nan McKay & Associates
Notice 2007-27 Appeals
The field office will have 30 calendar days from receipt of a request for an appeal to approve or deny the appeal.
If the field office fails to approve or deny the appeal during this time, the appeal will be automatically granted to the PHA.
Slide #36©2007 Nan McKay & Associates
Notice 2007-27 Appeals
An appeal made to a field office (HUD Hub or program center) and denied, may be further appealed to the Assistant Secretary within 15 calendar days from the date of the denial.
Slide #37©2007 Nan McKay & Associates
Notice 2007-27 Appeals
The PHA shall submit the appeal via certified mail to the Office of the Assistant Secretary for Public and Indian Housing. Appeals submitted to HUD Headquarters that include material evidence not submitted with the initial appeal to the field office, or appeals made to HUD Headquarters directly, without first being submitted to the field office, will not be considered.
Slide #38©2007 Nan McKay & Associates
SEVRA
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Introduction
Since this is all legislation or change in progress, the details will have to be fleshed out with final legislation and HUD regulations
Slide #40©2007 Nan McKay & Associates
SEVRA II Highlights
Section Eight Voucher Reform Act (SEVRA) Passed by House 7/14/07
• Minor amendments added Has not yet been addressed in the Senate
• If passed, would go to committee
Slide #41©2007 Nan McKay & Associates
SEVRA II Highlights
Slightly revised version of last year’s SEVRA bill
Makes many changes in the voucher program
Slide #42©2007 Nan McKay & Associates
Overview of SEVRA
Reform the Section 8 formula Revise the rent calculation process for BOTH
Section 8 and PH to “expand work incentives and reduce administrative costs”
Increase flexibility to use vouchers for homeownership
Slide #43©2007 Nan McKay & Associates
SEVRA Funding
Adopts the 2007 funding formula • Bases funding allocation on leasing and cost data
for 12 months• Provides that 12 month period would be the most
recent calendar year• Adjusted for inflation• Other adjustments (first-time renewal of enhanced
vouchers, set-aside for PBVs)
Slide #44©2007 Nan McKay & Associates
SEVRA Funding
Requires that HUD recapture any unused voucher funds at the end of the year in excess of one month reserve for 2007 (8.33% of annual funding)
Future years: would recapture anything over 5% of annual allocation
Recaptures to be used to help PHAs with FSS escrow and portability costs; balance reallocated to PHAs who are fully utilized
Slide #45©2007 Nan McKay & Associates
SEVRA Funding
PHAs required to absorb ported vouchers (fully funds cost differences – amendment)
PHAs with shortfalls could request an advance of next year’s funds (up to 2% of PHA allocation) which would reduce the following year’s allocation
Slide #46©2007 Nan McKay & Associates
SEVRA Funding
Admin fees based on the number of vouchers in use with an inflation adjuster
Includes new requirement to include calculation of an amount “for the cost of issuing vouchers to new participants”
HUD required to update fee annually All fees subject to appropriations
Slide #47©2007 Nan McKay & Associates
Income and Rent
Applies to HCV, PBV and PH
Slide #48©2007 Nan McKay & Associates
Income and Rent
Allowances and deductions• Child care eliminated• Increases dependent deduction to $500• Increases eld/dis HH deduction to $725
Both indexed for inflation in $25 increments• Medical/attendant care/auxiliary apparatus
expense threshold raised to 10%
Slide #49©2007 Nan McKay & Associates
Income and Rent
Work-related deductions• 10% of the first $10,000 of earnings of
employed individuals deducted from income ($1000)
• Eliminates EID
Slide #50©2007 Nan McKay & Associates
Income and Rent
Assets • Bill prohibits family from:
Having more than $100,000 in net assets • excluding retirement/education assets• FSS escrow, homeownership equity exempt
Slide #51©2007 Nan McKay & Associates
Income and Rent
Assets • Bill prohibits family from:
Having ownership in residence (with some exceptions)
• making a “good faith effort” to sell• Section 8 homeownership • victim of domestic violence
Slide #52©2007 Nan McKay & Associates
Income and Rent
Assets • PHA can accept family self-certification of
assets• For public housing, PHA may elect not to
enforce limits at recertification• Or may delay eviction/termination for up to 6
months
Slide #53©2007 Nan McKay & Associates
Income and Rent
Asset income• Imputed income from assets not included• Actual income from assets is included
Income exclusions• Not required to maintain a record of
miscellaneous income exclusions
Slide #54©2007 Nan McKay & Associates
Income and Rent
Annual Reexaminations• Families still reexamined annually
PHA must use prior year’s earned income and may use prior year’s unearned income
• Exclude 10% of the first $10,000 of earned income
Slide #55©2007 Nan McKay & Associates
Income and Rent
Annual Recertifications• Families on a fixed income (generally elderly
and disabled)90% of income from SS, SSI or similar sourceRecertifications required every 3 years Inflation factor used annuallyProbably will be an annual certification
Slide #56©2007 Nan McKay & Associates
Income and Rent
Interims• Families may request an interim if their annual
income falls by more than $1500 PHAs can set lower thresholdA $1500 reduction in income would result in a
rent decrease of approximately $38
Slide #57©2007 Nan McKay & Associates
Income and Rent
Interims• If unearned annual income is increased by more
than $1500, the PHA must conduct an interim No interim increases as a result of earnings unless
family has had a interim reduction during year• If a family gets a job, there is no interim
adjustment based on the increase until the annual reexam unless the family had an interim reduction in their income that went into effect during the same year
Slide #58©2007 Nan McKay & Associates
Income and Rent
Verification• Allows agencies to rely on determinations of
income conducted for other federal means-tested programs including TANF, Medicaid and Food StampsWill really help PHAs who are “on line” with
these agencies
Slide #59©2007 Nan McKay & Associates
Income Targeting
75% remains Based on the higher of 30% of area median
income or the federal poverty line, adjusted for family size (federal poverty line for family of 4 is about $20,500)
Slide #60©2007 Nan McKay & Associates
Continued Eligibility
The legislation imposes an initial and continuing income limit of 80% of median income• PHA may elect not to enforce for PH and PBV• Or may delay termination of assistance in a
unit for up to 6 months
Slide #61©2007 Nan McKay & Associates
General Changes - Voucher
Inspections• HQS still applies• Would allow initial subsidy payments if unit
doesn’t passFailure would have to be non-life-threatening
itemDefects corrected within 30 days for continued
payments
Slide #62©2007 Nan McKay & Associates
General Changes - Voucher
Inspections• Inspections required every 2 years• Inspection standard met by “a satisfactory
inspection of the unit under the rules of another housing assistance program that equals or exceeds the protections under HQS”REAC, Tax Credit, etc.
Slide #63©2007 Nan McKay & Associates
Homeownership
Adds a downpayment assistance grant in lieu of monthly payment • Up to $10,000• One-time grant• Already in the regulations but funds were not
appropriated
Slide #64©2007 Nan McKay & Associates
PHA Performance
HUD required to set standard to measure “periodically” (not necessarily annually)• Housing quality• Funding utilization• Financial condition of the agency• Timeliness and accuracy of reporting to HUD• Effectiveness of deconcentration of poverty policies
Slide #65©2007 Nan McKay & Associates
PHA Performance
New performance standards would replace SEMAP HUD would have to issue new regulations Bill does not establish consequences for different
levels of performance (regulatory)
Slide #66©2007 Nan McKay & Associates
Other Amendments
Can use vouchers for purchase of manufactured homes on leased land
Requires HUD to issue guidance to ensure that the 50,000+ vouchers created for non-elderly disabled families continue to be reserved for such persons
Slide #67©2007 Nan McKay & Associates
Other Amendments
Eliminates baseline cap More reliable funding source for FSS
Coordinators Requires HUD to establish smaller areas for
the purpose of calculating FMR levels and providing funding inflation adjustments to improve accuracy
Slide #68©2007 Nan McKay & Associates
Other Amendments
Housing Innovation Program (formerly MTW)• Expands # of PHAs who can participate
Expands by 20 2nd Category of 20 additional agencies under
expanded tenant protection including resident participation in demolishing public housing
• Lets agencies experiment with development, financing and work incentive proposals while adding substantial tenant protections to the program
Slide #69©2007 Nan McKay & Associates
Other Amendments
Authorize 20,000 new incremental vouchers in each of next 5 years
Strengthen protections for voucher families in units that fail to meet HQS
Strengthen voucher provisions to address areas when families face high rent burden
Slide #70©2007 Nan McKay & Associates
Other Amendments
Ensure that families seeking public and assisted housing are only screened on their ability to meet lease obligations
Exclude income from Coverdell and Section 529 education accounts from rent calculations
Increase voucher work incentives for severely disabled persons, in conjunction with State demonstration programs
Slide #71©2007 Nan McKay & Associates
Other Amendments
Authorize 15 year contract terms for vouchers used in tax credit projects to help facilitate financing for the projects
Protect “empty nesters” from eviction from certain buildings when their units are oversized (enhanced vouchers)
Slide #72©2007 Nan McKay & Associates
New Amendments to House Bill
Requirement that HIP (MtW) agencies must comply with VAWA
Requirement for all adult household members to provide “secure ID”
Slide #73©2007 Nan McKay & Associates
Other HUD Changes
Slide #74©2007 Nan McKay & Associates
What’s Expected from HUD?*
Reworking 982 – proposed reg out this year; final reg probably a year away
SEMAP changed
Slide #75©2007 Nan McKay & Associates
SEMAP Proposed Changes
Utilization of funds – using funds appropriated by Congress
Financial condition (clean audits) Decent, safe and sanitary housing not in
concentrated areas (BIG) Timely and accurate reporting – PIC/VMS
Slide #76©2007 Nan McKay & Associates
Learning Objectives
Learn how to proactively avoid RIM Review findings and loss of Admin Fees
Discover the specific in’s and out’s of SEVRA and what it will mean to you if it’s passed in the next session of Congress.
Slide #77©2007 Nan McKay & Associates
Summary
“The more things change, the more things stay the same.”
Slide #78©2007 Nan McKay & Associates
Upcoming Lunch ‘n’ Learns
Sep 28 Supervision for PH Managers Oct 5 Reducing FSS Program Costs Oct 19 Common Rent Calculation Errors
and How to Reduce Them Nov 9 Succession Planning Nov 29 FSS Case Management