The purpose of the Quality Control Studies (QC studies) is to provide national estimates of rent subsidy errors for HUD’s Public and Indian Housing (PIH)-administered Public Housing (Public Housing), PIH-administered Section 8 Housing Choice Voucher and Moderate Rehabilitation programs (PHA-administered Section 8); and Housing-administered Section 8, Section 202 PRAC, Section 811 PRAC, and Section 202/162 PAC programs (owner-administered). Rent subsidy errors occur during the tenant certification and annual recertification processes, and an “error” is defined as any rent calculation or eligibility determination that differs from what would have occurred if the PHA/owner had followed all of HUD’s income certification and rent calculation requirements. In practice, QC studies are designed to identify current HUD eligibility, income, and rent determination regulations, translate these regulations into survey instruments, develop an error detection system, and provide nationally representative estimates of rent subsidy errors.

HUD’s rental housing assistance programs are administered on HUD’s behalf by third-party program administrators, including Public Housing Agency (PHAs), public and private project owners, and contracted management agents. In these programs, eligible tenants are generally required to pay 30 percent of their income toward shelter costs (rent plus utilities), with HUD providing the balance of the rental payment. New program applicants are required to provide certain information on household characteristics, income, assets, and expenses that is used to determine what rent they should pay. Existing tenants are required to recertify this information annually and also, in some circumstances, when there are significant changes in household income or composition. Applicant or tenant failure to correctly report income may result in HUD’s over- or underpayment of housing assistance. The failure of the responsible program administrator to correctly interview the tenant or process, calculate, and bill the tenant’s rental assistance may also result in HUD’s over- or underpayment of housing assistance. These rent discrepancies have been a concern to HUD and Congress. In response to congressional concerns, HUD established the Rental Housing Integrity Improvement Project (RHIIP) in 2001 with a goal of reducing the estimated dollar amount of improper rent subsidies by 50 percent from fiscal year 2000 (baseline year) to 2005. To accomplish this goal, HUD began to establish a baseline error measurement of rental housing assistance payment errors.

The studies are also used to assess HUD’s performance in reducing Improper Payments as required under the Improper Payments Information Act of 2002 (IPIA). They also point out the sources of errors, enabling the Department to target these areas for further improvement. The results of the annual QC studies are used to develop the Performance and Accountability Report for HUD. The QC studies and related initiatives have enabled HUD to become the first agency in compliance with the Improper Payments Information Act of 2002 and to leave the Government Accountability Office (GAO’s) “high risk” list.

Reduction in the rent error associated with the programs included in this study does not mean there will be an overall savings in the costs associated with administering these programs. Given there are large numbers of eligible households on waiting lists, if a household leaves the program because it is no longer eligible for a subsidy, another household will take its place. The replacement household may be entitled to a smaller or a larger subsidy than the household that left the program. Therefore, the most direct benefit of identifying households with rent error is making sure those households who are eligible for the program are receiving the correct subsidy, rather than reducing the amount of funds needed to administer the programs. The most appropriate use of this study is as a tool for strengthening HUD’s procedures for ensuring administrative compliance with regulations. The recommendations presented in this report may require greater rather than fewer resources to provide HUD, PHAs, and owners with the written policy guidelines, training, standardized forms, and ongoing monitoring needed to assure the programs are administered correctly. HUD’s objective of providing the right subsidies to the right families is a worthy one that this study can assist in achieving. This point is particularly important now that OMB is requiring government agencies to develop and implement a recapture audit plan.

In response to the findings and recommendations of the 2000 Assisted Housing Quality Control Study, HUD initiated a series of aggressive actions to address the causes of erroneous assistance payments, including extensive onsite monitoring. Actions taken by HUD included:

1. A Rental Housing Integrity Improvement Program (RHIIP) committee was formed to coordinate and monitor corrective actions. The committee meets to review progress, and identify and resolve impediments to progress in reducing errors.

2. The Offices of Housing and Public and Indian Housing developed and issued new handbooks and instructional material that detailed all current HUD program requirements and standardized them to the extent possible without regulatory or statutory change. These handbooks cover nearly all aspects of occupancy policy, from the point of tenant application for admission and rent calculations through ongoing occupancy to lease termination. For Public Housing, the issuance of a Public Housing Occupancy Guidebook represented the first such effort in more than 20 years, and provided a defined methodology for calculating a number of complex requirements (e.g., the Earned Income Disallowance).

   The Offices of Housing and Public and Indian Housing substantially increased training efforts, and have held a number of national and regional training sessions. This contrasts with a less activist role in the 1980's and 1990's.

3. The Offices of Housing and Public and Indian Housing initiated comprehensive, large scale, and onsite occupancy and management reviews, which also represented a major procedural change from the previous two decades for most HUD offices

   • The Office of Housing primarily used new agreements with Contract Administrators, which are usually State agencies, to perform this function. Contract Administrators provide technical support in adhering to HUD program requirements and routinely perform detailed monitoring on agency compliance.
   • The Office of Public and Indian Housing initiated a system of Rental Integrity Monitoring (RIM) reviews to detect and reduce errors in income and rent calculations at targeted PHAs, reduce rent under- and/or overpayments by residents, and ensure that HUD’s limited housing resources were being used to serve eligible families in a fair and equitable manner as intended by Congress.
4. HUD initiated a legislative change that gives it access to the Department of Health and Human Service’s New Hires income and wage database for income matching purposes. It will use these data to compare tenant-reported income with state wage data to better ensure that the right subsidy payments are made to the right households in accordance with program statutory and regulatory requirements. This legislation was passed in late 2003 and required implementation of agreements and data systems. HUD also negotiated agreements with some states to obtain access to the same information. Some local agencies have already initiated income-matching systems, and it seems that this has made some contribution to error reductions.