Urban Poor:

Tenant Income Misreporting Deprives Other Families of HUD-Subsidized Housing

HRD-92-60: Published: Jul 17, 1992. Publicly Released: Jul 17, 1992.

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Pursuant to a congressional request, GAO provided information on the Department of Housing and Urban Development's (HUD) internal controls to ensure proper reporting of subsidized households' income, focusing on: (1) a one-time computer match of subsidized household records with federal tax records to determine household income reporting accuracy; and (2) the extent of federal tax data used to verify household income.

GAO found that: (1) HUD lacks sufficient information to ensure that federally subsidized housing units are occupied by needy low-income families and the rent HUD charges is correct; (2) public housing and management agencies lack effective verification of subsidized households' income; (3) 21 percent of the 175,000 households that GAO matched by computer using 1989 federal tax data understated their income by $138 million, resulting in $41 million in excess rent subsidies; and (4) a centralized household income and eligibility verification system with access to federal tax information would ensure proper income verification, rents and access to subsidized housing.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Omnibus Budget Reconciliation Act of 1993, P.L. 103-66, amends the Internal Revenue Code to grant HUD access to certain tax data to verify program eligibility.

    Matter: After HUD fully implements its Multifamily Tenant Characteristics System for the Public Housing Program, Congress should amend the Internal Revenue Code to allow HUD temporary access to federal tax data so that it can validate the costs and benefits of using such data to identify household income reporting errors. If HUD subsequently demonstrates that its use of tax data is indeed cost-beneficial, Congress should further amend the Internal Revenue Code to broaden and make permanent HUD access to federal tax data, including its use in the Section 8 program when that program's centralized management information system becomes fully operational.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD has established security procedures to prohibit the unauthorized disclosure of Privacy Act information and to comply with IRS requirements. Before any exchange of tax return data, HUD, IRS, and SSA will execute matching agreements concerning compliance with the security and other requirements of the Computer Matching and Privacy Protection Act of 1988. These agreements have been drafted and submitted for HUD, SSA, and IRS Data Integrity Board reviews.

    Recommendation: To attain better reporting of household income information and facilitate future computer matching with federal tax databases, the Secretary of Housing and Urban Development should ensure that HUD-assisted housing information systems containing centralized household data, now under development, adequately meet Internal Revenue Service safeguards against unauthorized disclosure of federal tax data.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD now uses income source classifications in collecting tenant data that will be substantially comparable to those used by the IRS and SSA. Tenant income data contained in HUD's Multifamily Tenant Characteristics System and the Tenant Rental Assistance Certification System will be matched to IRS and SSA data. The matching will help to identify potential unreported/underreported income by source.

    Recommendation: To attain better reporting of household income information and facilitate future computer matching with federal tax databases, the Secretary of Housing and Urban Development should standardize the classification of income sources for all assisted housing programs to parallel sources of income derived from federal tax databases.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Not Implemented

    Comments: The Department believed that a cost-benefit analysis would only serve to validate findings in the GAO report and by the HUD Inspector General, which show potential excess federal subsidies, and would delay implementation of the computer matching program. GAO believed that such an analysis, as it related specifically to HUD, was needed to satisfy Congress of the value of granting HUD access to tax data. The Omnibus Budget Reconciliation Act of 1993, signed August 10, 1993, granted HUD access to tax data. No further action is needed.

    Recommendation: The Secretary of Housing and Urban Development should conduct a cost-benefit analysis of using tax data to identify misreporting of income by subsidized households, and report the results to Congress.

    Agency Affected: Department of Housing and Urban Development

 

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