Rural Housing Service:

Efforts to Identify and Reduce Improper Rental Assistance Payments Could Be Enhanced

GAO-12-624: Published: May 31, 2012. Publicly Released: Jul 2, 2012.

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What GAO Found

The Rural Housing Service (RHS) has identified improper rental assistance payments caused by certain sources of errors, but its reported error rate (total amount improperly paid divided by program outlays) may understate the magnitude of the problem. RHS has identified improper payments resulting from inaccurate calculations of tenant subsidies and incomplete supporting documents. From fiscal years 2007 through 2010, RHS reduced its reported error rate from 3.95 percent (representing $35 million in errors) to 1.48 percent (representing $15 million in errors). However, these figures may be understated because RHS has not estimated improper payments due to unreported tenant income, and it lacks the authority to match tenant data to federal income data for this purpose. These data include the Department of Health and Human Services’ (HHS) New Hires database and the Social Security Administration’s (SSA) data on benefits payments. RHS has proposed legislation to gain access to the HHS data but not the SSA data. Additionally, RHS has not recently estimated payment processing errors and has not strictly adhered to procedures for classifying payments as improper. Further, in 2008, RHS began excluding improper payments of less than $100 from its estimated error rates. However, it did not submit this change to the Office of Management and Budget (OMB), which is responsible for approving agency methodologies for estimation. As a result, RHS lacks assurance that its approach is appropriate.

RHS uses required statistical methods for estimating improper payments but has not fully met requirements for reporting on, reducing, and recovering such payments. Consistent with the Improper Payments Information Act of 2002, as amended, and OMB guidance, RHS examines a statistically valid sample of payments and generates estimates with an acceptable level of precision. RHS also has reported required information, such as actions to address payment errors. However, RHS did not fully comply with the requirement to implement and report steps for holding agency managers accountable for reducing improper payments. In addition, although OMB cites data matching as a way to reduce payment errors, RHS has not used data already available from SSA to detect payments made on behalf of deceased tenants. Further, RHS has yet to institute a recovery audit program in accordance with the Improper Payments Elimination and Recovery Act of 2010, although it plans to do so sometime in 2012. These shortcomings negatively affect the integrity of RHS’s subsidy payments.

The Department of Housing and Urban Development’s (HUD) use of data matching to reduce improper payments in its rental assistance programs illustrates the potential benefits and challenges of this technique for RHS. HUD developed a web-based system that allows authorized HUD staff and program administrators (e.g., public housing agencies) to match tenant information to HHS’s New Hires database and SSA benefits data. According to HUD, the system has helped to reduce income reporting errors and has contributed to a more than threefold decline in total improper payments from fiscal years 2000 through 2010. Negotiating a data-sharing agreement with one agency and fully implementing the data matching system took several years. Additionally, HUD provides extensive guidance, training, and technical assistance to program administrators to help ensure effective use of the system.

Why GAO Did This Study

RHS, an agency within USDA, paid property owners about $1 billion in fiscal year 2011 to help more than 270,000 low-income rural tenants afford rental housing. Each year, some of RHS’s rental subsidy payments are improper—that is, too high or too low. Federal requirements regarding improper payments are set forth in statute and in OMB guidance. GAO was asked to review (1) the extent to which RHS has examined the sources and magnitude of improper rental assistance payments, (2) RHS’s compliance with requirements and guidance concerning improper payments, and (3) potential lessons RHS could learn from HUD efforts to identify and reduce improper rental assistance payments. To do this work, GAO analyzed agency data and documents; reviewed statutes and guidance; and interviewed RHS, HUD, and OMB officials.

What GAO Recommends

To help reduce improper payments caused by unreported tenant income, GAO suggests that Congress should consider authorizing RHS access to HHS’s New Hires database and recommends that RHS develop proposed legislation to gain access to SSA benefits data. GAO also recommends that USDA submit RHS’s method for estimating improper payments to OMB for review and that RHS take steps to consistently apply procedures for classifying payments as improper, examine improper payments made on behalf of deceased tenants or caused by payment processing errors, and hold agency managers accountable for reducing improper payments. USDA said it generally agreed with GAO’s recommendations.

For more information, contact Mathew Scirè at (202) 512-8678 or scirem@gao.gov.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: Congress should consider amending Section 453(j) of the Social Security Act to grant RHS access to HHS's New Hires database for purposes of verifying tenant incomes. If such access were granted, RHS would need to develop specific procedures with HHS to facilitate it.

    Status: Open

    Comments: As of September 2013, Congress had not taken action to ammend the Social Security Act to grant RHS access to the HHS New Hires Database. As of the same date, USDA reported that it had prepared legislation that would provide this access, if enacted, and that the legislation was being reviewed by the Secretary of USDA.

    Matter: Congress should consider amending Section 453(j) of the Social Security Act to grant RHS access to HHS’s New Hires database for purposes of verifying tenant incomes. If such access were granted, RHS would need to develop specific procedures with HHS to facilitate it.

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendations for Executive Action

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should submit RHS’s methodology for estimating improper payments, including use of the $100 exclusion threshold, to OMB for review.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should consider examining payment processing errors as part of the next improper payments audit to provide more current information on whether these errors are significant.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: RHS included the examination of payment processing errors in its 2012 and 2013 improper payments audits. RHS said this examination will be a permanent part of its improper payment audit methodology.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should, in conducting the annual improper payments audit, either count all payments made on behalf of tenants with signed but undated Tenant Certification forms as improper or revise the audit procedure to classify such payments as proper when an acceptable certification date can be imputed from other documents.

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: Beginning with its 2012 improper payments audit, RHS revised its methodology to classify payments as proper when an acceptable certification date can be imputed from other documents.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should complete steps to use SSA’s Death Master File—potentially utilizing the batch-processing option offered through Treasury’s “Do Not Pay” web portal—to identify improper payments made on behalf of deceased tenants and use this capability in conducting the annual improper payments audit and for ongoing oversight of program payments.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should complete steps to ensure that RHS managers are held accountable for reducing and recovering improper payments in the rental assistance program and include a discussion of the accountability steps in USDA’s Performance and Accountability Reports (PAR).

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should include a discussion in USDA’s PAR of whether RHS has the internal controls, human capital, information systems, and other infrastructure to reduce improper rental assistance payments to targeted levels.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should submit RHS's methodology for estimating improper payments, including use of the $100 exclusion threshold, to OMB for review.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: As of September 25, 2013, RHS said it was preparing to submit its methodology for estimating improper payments to USDA's Office of the Chief Financial Officer by October 31, 2013, for subsequent submission to OMB by December 31, 2013

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should complete steps to use SSA's Death Master File-potentially utilizing the batch-processing option offered through Treasury's 'Do Not Pay" web portal-to identify improper payments made on behalf of deceased tenants and use this capability in conducting the annual improper payments audit and for ongoing oversight of program payments.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: In October 2012, USDA officials said they submitted a final 'Do Not Pay' plan to OMB on August 31, 2012, in response to OMB Memorandum M-12-11, "Reducing Improper Payments Through the 'Do Not Pay' List." The plan includes a commitment by all USDA agencies to be enrolled in the 'Do Not Pay' Portal. However, as of September 25, 2013, USDA officials reported that RHS did not yet have access to the Death Master File for use in improper payments audits.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should complete steps to ensure that RHS managers are held accountable for reducing and recovering improper payments in the rental assistance program and include a discussion of the accountability steps in USDA's Performance and Accountability Reports (PAR).

    Agency Affected: Department of Agriculture

    Status: Closed - Implemented

    Comments: In October 2012, USDA officials reported that RHS and Rural Development (RD) would adopt accountability steps similar to those of other departmental agencies. In its FY 2012 Annual Financial Report issued in November 2012, USDA included specific accountability steps and timeframes for RHS and RD managers to be held responsible for improper rental assistance payments.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should draft proposed legislation for congressional consideration that would grant RHS access to SSA benefits data for purposes of verifying tenant incomes.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: In October 2012, USDA indicated that before it pursued legislation to gain access to SSA benefits data, it wanted to obtain access to the Health and Human Services New Hires database. As of September 25, 2013, USDA officials reported that they had prepared legislation to access the New Hires database and that it was being reviewed by the Secretary's office.

    Recommendation: To help estimate, reduce, and recover improper payments in the Section 521 rental assistance program, the Secretary of Agriculture should include a discussion in USDA's PAR of whether RHS has the internal controls, human capital, information systems, and other infrastructure to reduce improper rental assistance payments to targeted levels.

    Agency Affected: Department of Agriculture

    Status: Open

    Comments: In September 2013, USDA officials said that RHS would include a discussion of the internal controls, human capital, information systems, and challenges associated with reducing improper rental assistance payments to targeted levels in the FY 2014 Annual Financial Report.

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