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From: catherine bishop
email: mailto:cbishop@nhlp.org
link: http://
date: 7/5/0 21:06
Date: 12/21/00
Time: 11:34:20 AM
Remote Name: 207.251.188.199
Here are the almost final comments. They must be e-mailed to HUD on Thursday, June 6, 2000. If you have any additional comments to provide please let me know, ASAP.
FYI, HUD has posted on the REAC website information that parts of the Guide have been withdrawn, esp Chapter 3 and that a new revised Guide, Release 1.8 is anticipated to be posted by July 11, 2000. [Presumably after reviewing our comments and after we have a chance to see Release 1.8 before it is posted.]
COMMENTS ON
INCOME DISCREPANCY RESOLUTION GUIDE
Version 1.0, Release 1.7
(June 9, 2000)
Submitted on July 6, 2000
By
Greater Boston Legal Services Greater Up State Law Project National Housing Law Project
Preface-Calendar year 1998 Income Data Match
The last sentence of the preface should be rewritten to make it clear that HUD is not encouraging POAs to collect back rents or take other action against tenants as a result of the information that a POA obtained due to the 1998 income match and verification. The last sentence should be rewritten as follows
HUD is not instructing or encouraging any POA to recover excess rental assistance identified as a result of the 1998 income match and verification process. If a POA decides to proceed to recover excess rental assistance, it must follow all the due process procedures outlined in this Guide. HUD further urges POAs to exercise flexibility and humane judgement in making any decisions with respect to income discrepancies identified.
24 C.F.R. § 5.240(c), 65 Fed. Reg. 16691, 16715 (March 29, 2000) requires POAs to verify the accuracy of income information received from the family (including information provided to the family by HUD) and change the amount of the total tenant payment or terminate assistance, as appropriate based upon such information. The introductory comments to the regulation interpret the regulation as making "appropriate adjustments to rent or housing assistance payments," and in the event that the tenant has moved, urges POAs to "pursue abuses." 65 Fed. Reg. 16694 (March 29, 2000). To the extent that this section requires POAs to collect back rent, HUD should issue an interpretation that states the following with respect to income that is identified pursuant to the 1998 income match and verification program. "HUD is not instructing or encouraging any POA to recover excess rental assistance identified as a result of the 1998 income match and verification process. If a POA decides to proceed to recover excess rental assistance, it must follow all the due process procedures required by state and federal law including this Guide. HUD further urges POAs to exercise flexibility and humane judgement in making any decisions with respect to income discrepancies identified."
Chapter 1 Introduction
The Guide states that it is applicable to administrators of several listed assisted housing programs including the Rent Supplement and the Rental Assistance Program. The purpose of the Guide is to provide instruction to these administrators so that they may verify income identified by HUD through an income match program. HUD will send letters to tenants setting forth the identified income discrepancy and request that the tenant disclose the letter to the POA. There is however no statutory or regulatory authority for HUD to require rent supplement or rental assistance tenants to disclose to an owner income information that they received from HUD pursuant to the income match. Neither the statute nor the regulations that authorize the disclosure make reference to these programs. See 42 U.S.C. § 1437a(f) and 24 C.F.R. § 5.240, 65 Fed. Reg. 16692, 16715 (March 29, 2000). Thus it would appear that neither HUD nor the POA may require these tenants to disclose the HUD supplied income match information.
Section 1.3.1 Large-Scale Federal Tax Data CMIV
Figure 3. Under item 3 Track Case Processing the reference number 3 "Funds Recovery" should be omitted to be consistent with the objective of the Guide which is to establish a base line for 1998. The emphasis of the Guide is not on the recovery of funds.
The final paragraph of this section also should be revised. It should restate the HUD policy that "it is not requiring or encouraging POAs to seek retroactive rent adjustments based upon the income matching. Moreover, HUD will take no action against a POA for not seeking repayment for any rental assistance overpayment identified as a result of the 1998 income match and verification program. For those POAs that seek retroactive rent adjustments, HUD is further encouraging each POA to exercise humane judgement and flexibility."
Section 1.3.3 Needs of disabled, elderly and non-English speaking tenants
As noted in the comments to Appendix A supra, more information should be provided to the tenants on issues regarding reasonable accommodation. Also the current message that is available on the 1-800-298-0289 phone line should be updated to advise tenants that the income verification process has been suspended. The Spanish line, as of July 3, 2000, states only that the tenant must call back after June 26, 2000. Similar information on the suspension of the program should be provided in the recorded message and by the staff that is responding to requests from the 888-825-3916 line. As of July 5, 2000, HUD staff is still advising tenants to turn in any letter that they receive to management. They are not advising that the program has been suspended.
Add new section: There should be a section which discusses compliance with the statutory requirement that there be an agreement in place with the resident under which the resident agrees to provide the information contained in the HUD letter. See 42 U.S.C. § 3544(b)(4) In public housing, PHAs may have amended their leases to create the agreement. Amendments to public housing leases require a 30-day notice and comment period, as provided in 24 C.F.R. §§ 966.3 and 966.5. In HUD multifamily housing, the POA may also have to obtain this separate agreement as the form lease does not provide that a HUD letter must be turned over to the owner or manager. In tenant-based Section 8, there will also need to be a separate agreement between tenant and PHA, as there is currently no agreement between these parties. Existing recerification forms, to the extent that they take the form of agreements, are not sufficient, as they do not specifically incorporate the statutory obligation or place the applicant/participant on notice of the same. Since such agreements are a pre-condition for enforcement of the family obligation to provide the HUD letter to the POA, they should be mentioned and required by the Guide.
Section 2.1 HUD Discrepancy Notifications
Figure 4 Add to this figure another box that states "Identify Reported Excess Income and Tenant Overpayment of Rent."
Section 2.2 Contacting Tenants
The paragraph entitled "note" should be revised to state that POAs are encouraged not to take any administrative action against tenants. However if such action is taken, then it may be taken only after all discrepancies are resolved.
The third paragraph should be removed. This paragraph encourages a POA to pursue a tenant for the recovery of excess rental assistance. Absent fraud, it is HUD's policy that the collection of excess rental assistance is not required or encouraged. This language is inconsistent with that policy.
Within this section and subsections, the Guide is dealing with at least two different situations that require separate resolutions. One is the situation in which head of household is identified with the income discrepancy and the second situation is one in which a household member who is not the head of house hold is identified with an income discrepancy or both are identified but only the head of household responds and cooperates. In the latter situations, if it is the household member who is not head of household who fails to cooperate with the POA and provide the information, sign the IRS forms or fails to disclose the HUD letter, there should be no action taken against the head of household and the other cooperating family members. If local policy requires that action be taken for failure to cooperate with an income verification procedure, the POA should be encouraged to offer the head of household the alternative that the household member (non head of household) may move out of the unit. This option of removing the non cooperating household member from the assisted families household should be set forth in the letters to the head of household set forth in Appendixes F and G.
Section 2.2.1 Processing if a Tenant Fails to Respond to the POA Contact
The last sentence of the third paragraph summarizes the content of the letters sent to the tenant. This summary is no longer consistent with HUD's policy. The sentence should be changed to remove the reference to the "potential issue affecting rental assistance." The sentence should be changed to provide that "The POA should indicate that these letters informed tenants of an income discrepancy, the need to resolve the discrepancy and verify income and that the tenant(s) were directed to contact the POA regarding the letter(s)." This change is necessary because the affect on rental assistance for income discrepancies identified for 1998 is prospective only and not the main theme of the letters.
Section 2.2.2 Processing if a Tenant Claims that a HUD Discrepancy Letter Was Not Received
The last sentence of the last paragraph states that termination proceedings will begin within one week. A threat of a termination proceeding commencing within one week will be sudden for the head of household who is unaware that another member of the household is not responding to requests for a meeting or cooperating in verifying income. The head of household should be notified as soon as possible. Thus the head of household should be notified of all requests to other members of the household for a copy of the HUD letter and/or for a meeting with the POA. As noted in the draft Guide, if the member of the household fails to respond to the POA's request for a meeting or fails to show up for the meeting, the head of household should be sent a letter. That letter should provide the head of household with a 30 day notice to respond and inform the head of household that he or she has the option to exclude the non cooperating household member from the household, if the household member continues to fail to cooperate in the income verification process.
Section 2.4 Using the Income Comparison Worksheet
Entering Tenant Identifiers. Remove the last sentence as it refers to "action to recover excess rental assistance." This sentence is not in accord with the HUD policy.
Note. This paragraph, entitled note, acknowledges that PHAs may have different reporting requirements. The Guide currently recognizes that a PHA policy may require interim reporting but not change rents as a result of the reporting and provide for increases in rent if the tenant fails to report. In such a situation, the Guide states that the PHA should review all documentation to determine when the income began. Once the PHA determines when the income began, it then must check to see if that income was reported at the time of recertification. If it was not, the PHA should continue to process the case to identify unreported income.
This note could be expanded upon to clarify the position by also stating the same point another way. It would be helpful to add to this note the following language. "In the case where tenants are required to report changes in income but rents would not be increased because the POA does not adjust rents based on the interim report, no discrepancy will be found unless it is determined that the tenant did not report income at the time of the relevant recertification. It is important to emphasize that the only reporting issue of importance at this time is whether the tenant reported income at the relevant recertification. Thus, whether a tenant failed to report an interim change in income in the past, even if the failure would have resulted in an increase in rent, is not significant at this time."
Section 2.4.4 Entering Federal Tax Data
The box in this section seems to assume that unearned income would never be excluded, but that is not the case. For example, the income that appears on a tax return may, in fact, be a trust which would be excludable, or it may be some other source of sporadic income that isn't counted (small lottery winnings, gifts, or lump sum additions to family income from a personal injury settlement, or the delayed start of a Social Security or SSI benefits.) As is indicated in HUD Handbook 4350.3, there may also be situations where a household member has an asset, but it should not be counted (such as where a battered woman co-owns the marital home, but cannot realize any income or assets from it because she has fled the abuser). All of these examples are either exclusions from unearned income or excludable sporadic income. POAs should be prompted by the computer screen to be aware of and look for these possibilities. The box should at a minimum acknowledge this fact.
Section 2.4.5 Identifying Unreported Income
As mentioned above in 2.4.4, this section should also acknowledge that there may be exclusions from unearned income. Thus on page 13 after the clause For each unearned income source, the POA should: 1) enter the Federal tax date unearned income source and amount, there should be added the following. "2) Determine if the income was excluded based on program requirements and issuances. "
Also note that the description for the process that a POA must follow for earned and unearned income is different. It is difficult to determine why the language is different and what is the reason for the two different explanations. We believe that the two explanations should be conformed.
Section 2.4.5.1 Determining if Income is Excluded
As mentioned in section Appendix H infra, it is important to list all relevant deductions and exclusions from income. The mere referencing the documents is not enough. The documents should be attached. Moreover, the reference to PIH Notice 93-65 is not adequate because that notice was issued in 1993 and the mandatory 18 month earned income deduction for public housing tenants was not available at that time. In addition, the current regulations in effect now do not explain the earned income disregard that was in effect in 1998.
Because the exclusions and deductions are important, there should be a place that the POA must check on the computer screen that states that the POA has reviewed all the exclusions and deductions set forth in Appendix H of the Guide to determine if any are applicable to the tenant's 1998 income.
Section 2.4.5.2 Determining Tenant Reported and Unreported Earned Income
The sentence on the top of page 14 should be removed as the HUD policy is to verify income and resolve discrepancies for 1998. The income of the tenant for other years is not at issue at this time. The following language could be added to the Guide. "If as a result of this income verification process, the POA becomes aware that the tenant is receiving income that has not been previously reported, the POA may verify that fact and adjust the tenant's income for the period of the first 2000 recertification conducted with the information provided from the 1998 income match forward."
This section again assumes that there are no exclusions or deductions from unearned income. There are multiple examples of exclusions from unearned income. See 2.4.4 supra for a fuller discussion of this issue.
This section at the bottom of page 15, also makes reference to the fact that unearned income will be treated differently in the case of sporadic income and excluded income. This sentence should be removed. As noted infra, there are multiple examples of exclusions from unearned income. Also, there is no authority for the position that the sporadic income rule does not apply to unearned income. The published rule states that "annual income does not include...sporadic income (including gifts)." 24 C.F.R. § 5.609(c)(9). No distinction is made in the regulation between earned and unearned sporadic income. Nevertheless, the Guide goes beyond the published regulations and states that the "sporadic income rule does not apply to unearned income." See also Appendix D, ¶ 5.
Section 2.5 Calculating Excess Rental Assistance
In the first paragraph, the parenthetical states that if the income discrepancy is less than $1000 the POA should follow existing HUD program guidelines. What are these guideline? There should be a direct and clear reference to or citation of HUD program guidelines on this issue.
The first note, which refers to exclusions and rent restrictions should cross reference to Appendix H which should set forth all the relevant exclusions applicable for 1998 and which should provide clear reference to any an all rent restrictions. The Guide at this point mentions ceiling rent and market rent. It should also reference "rent recertification policies that do not require interim reporting of income or do not require a change in rent once the income is reported."
Approach 2. This paragraph instructs POAs that they may use existing procedures and/or software to calculate the new level of rental assistance. Allowing POAs to use existing procedures and/or software makes sense only if the existing procedure and software take into account all of the relevant exclusions and deductions from rent. For example, the current procedure or software would be inadequate if it did not allow for the earned income disregard that was in effect in 1998.
The final note on page 17 should be corrected to delete the reference to the processing of the underpayment of assistance. Also any reference to program guidelines should be clear and specific with a citation to the relevant regulation or guideline.
Chapter 3 Administrative and Legal Actions
Revise the introductory paragraph of chapter 3, as follows.
"This section provides a brief description of the procedures that POAs can use upon receiving independent verification of unreported income and confirming payment of excess rental assistance based on existing regulations and rules. As noted in the Preface, for the first year of large scale CMIV, POAs should focus on the resolution of discrepancies and NOT on the recovery of excess rental assistance. In addition, HUD encourages POAs to use human judgment and flexibility in any and all decisions taken with respect to the pursuit of the recovery of excess rental assistance,."
"POAs are reminded that the existence of discrepancies between incomes calculated for housing program purposes and household incomes reported by the IRS and the SSA do not, in and of themselves, establish that a tenant has failed to comply with HUD program requirements. Discrepancies between data sources will often be accounted for by variations in applicable reporting periods, valid exclusions from income, and changes in income not required to be reported on an interim basis. Additionally, discrepancies may occur as a result in situational variables, such as changes in household composition that are not reflected in the data comparison.
"POAs are additionally, reminded that even verified discrepancies do not, in and of themselves, establish the elements of intentional fraud that would require consideration of further action such as termination of assistance, referral for prosecution, and action to collect under payments. See, e.g.,Handbook 4350.3, 5-19(b)-(e).
"If after receiving notice of an income discrepancy through the Tenant Income Verification Program a POA concludes that the discrepancy might be attributable to variables such as those noted above, or that practical limitations on the POA's ability to reconstruct the exact cause or amount of the deficiency preclude a definitive resolution of the discrepancy, or the unlikelihood of reaching such a resolution does not justify the expenditure of POA resources to attempt to resolve the discrepancy, HUD does not require the POA to pursue repayment, or to take other administrative or legal actions. Only in egregious cases involving verified instances of intentional misrepresentation (fraud), is the POA obligated to refer the matter to the Inspector General. See 3.1.1 below."
Section 3.1 General Provisions
This section should be revised to read as follows:
"If a tenant's income has been under reported and, based on the 1998 data, the current rent is too low, POAs may increase the tenant's rent. If based on the 1998 data, the current rent is too high, POAs may decrease the tenant's rent. HUD will not require and does not encourage POAs to make rental adjustments for prior years for income that is identified through this process. POAs must afford tenants appropriate due process, as described in HUD program requirements or in state and local regulations, as applicable, and as further described and supplemented below, regarding any unresolved disputes over income discrepancies, or if the POA chooses to take adverse action against the tenant based on the Federal tax data contained in HUD's tenant letter. (Such adverse action is not mandated by HUD with regard to the FY 2000 baseline collection.)".
Sections 3.2 through 3.4
Except as noted below, all of these sections should be removed as they are inconsistent with the HUD policy that the purpose of the 1998 income match and verification program is to provide a base line for income discrepancy resolution and inaccurate rental assistance levels.
Section 3.3.1. Limitations on Referral to Inspector General
The first sentence of this section should be revised as follows :
Only where a POA discovers egregious abuses, such as cases in which independent verification reveals intentional under reported income which resulted in rental or subsidy over payments of $10,000 for 1998, should the POA elect to refer the case to the Inspector General. In these cases, a POA must provide the following material to support the finding of fraudulent acts:
The reference in the last bullet to Section 3.3 should be deleted, as we are recommending that the section should be removed.
Section 3.5 Due Process
This should be renumbered and revised to read as follows:
This section should remain unchanged.
Section 3.5.1 Grievance Procedure
Revise the title to read: "Grievance/Informal Hearing/Review Procedures"
The text should be revised as follows:
"If there are unresolved disputes between the POA and the tenant regarding income discrepancy based on the Federal tax data, or if the POA chooses to take adverse action against the tenant based on the Federal tax data contained in HUD's tenant letter, the tenant can seek review of the POA's determination regarding the discrepancy, or the POA's adverse action, through a grievance, informal hearing, or review procedure. These procedures are different for the PIH and Housing Programs."
Section 3.5.2 Public and Indian Housing
Revise the title to read: "Public Housing and Section 8 Tenant-Based Programs"
The text should be revised as follows:
"The following grievance or informal hearing procedures apply for Public Housing and Section 8 Tenant-Based programs."
Section 3.5.2.1 Settling a Tenant Grievance Informally–Public Housing
No changes recommended.
Section 3.5.2.2 Conducting a Hearing–Public Housing
Add the following sentence to the end of the paragraph.
"There shall be no requirement for the tenant to escrow the disputed rent as a precondition to review of a dispute regarding an income discrepancy or PHA adverse action based on the Federal tax data."
Section 3.5.2.3 Conducting an Informal Hearing–PIH Section 8 Programs
The first two sentences of this paragraph should be revised to read as follows:
"PHAs administering the Section 8 Tenant-Based Program are required to offer participants (tenants) the opportunity for an informal hearing to dispute income and rent data, and various adverse actions taken by the PHA. The informal hearing considers whether certain decisions relating to the household's circumstances are in accordance with the law, HUD regulations, and PHA policies." The last two sentences of the section can be left as is.
Section 3.5.3 Office of Housing
Revise the title to read: "Project-Based Assistance."
Revise the text as follows:
"The project-based programs affected by this guide are the Section 8 Project-Based Program, Section 202/811 Project Rental Assistance Contract, and Section 202/162 Project Assistance Contract. Where the program is administered by a PHA, or subject to PHA regulatory oversight (such as for the Section 8 moderate rehabilitation program or the Section 8 project-based certificate program, or Office of Housing units administered by a public housing authority, or for Office of Housing units administered by a state housing finance agency), the PHA is a "state actor", and is subject to federal due process requirements, as well as any applicable state and local due process requirements. Where, on the other hand, the program is not administered by a PHA or subject to PHA regulatory oversight, HUD must insure that governmental due process is provided for matters which cannot otherwise be resolved informally."
We have removed reference to the Rent Supplement Program and Rental Assistance Program (RAP) to be consistent with our comments to Section 1.1, supra.
Add a new Section 3.5.3.1 as follows: "Project-Based Assistance Administered by a PHA or Subject to PHA Regulatory Oversight:"
"If a Public Housing Agency (including but not limited to a State Housing Finance Agency) administers or provides regulatory oversight for the Section 8 project-based assistance, Section 202/811 project rental assistance, or Section 202/162 project assistance, and it is a "state actor" subject to federal due process requirements, the PHA shall provide tenants with the opportunity to request an informal hearing regarding unresolved disputes on income discrepancies based on federal tax data or any adverse action taken by the PHA based on that data. Such informal hearing process shall be consistent with such federal due process requirements, and any applicable state or local laws related to due process. Such due process protections shall, at a minimum, conform to the procedural requirements of 24 C.F.R. part 982 (for the Section 8 moderate rehabilitation program), 24 C.F.R. part 983 (for the Section 8 project-based certificate program), or 24 C.F.R. 5.514(f)(2)(iii) and (3)."
We have again removed reference to the Rent Supplement Program and Rental Assistance Program (RAP) to be consistent with our comments to Section 1.1, supra.
Add a new Section 3.5.3.2 as follows: "Project-Based Assistance Not Administered by a PHA or Subject to PHA Regulatory Oversight–Availability of HUD Review":
"If Project-Based Assistance is not administered by a PHA or subject to PHA Regulatory Oversight, as described above, the POA shall endeavor to informally resolve any disputes with a tenant concerning income discrepancy identified using Federal tax data or concerning adverse action that the POA chooses to take against a tenant based on such data. If the matter cannot be informally resolved, however, the POA shall inform the tenant of the right to seek review by HUD. The notice shall be in writing and shall advise the tenant of the person or persons at HUD who may be contacted for such review, the manner in which such review can be sought, and any time period for requesting such review. At a minimum, the tenant shall have 30 days to make a written request for such HUD review from receipt of notice from the POA. No final action shall be taken until the time period to request HUD review is exhausted. If a request for HUD review is made, no final action shall be taken until HUD has reviewed the POA process and decision and independently verified the information upon which the POA has based its action. HUD shall provide guidance to POAs as to the specific staff to be contacted where such reviews are sought, and the POA shall provide affected tenants with this information as part of the notice of the right to seek review."
Section 3.6 HUD Intervention
Revise the title to read:"Tenant Consultation with HUD Regarding Rights and Responsibilities",
Revise text as follows:
"In addition to the specific right to HUD review of decisions involving Project-Based Assistance not administered or subject to regulatory oversight by a PHA, any tenants affected by this Guide may contact the local HUD Field Office Director, Program Center Coordinator, or HUD Office of Housing for further clarification of the tenant's rights and responsibilities. HUD shall provide guidance to POAs as to the specific staff to be contacted, and the POAs shall provide affected tenants with this information."
Chapter 4
4.2.4.1 False Positive
On page 43 the first paragraph at the top that deals with discrepancies of less than $1000, should be modified. The sentence in the parenthesis should be removed as HUD is not encouraging any administrative action by POAs.
Section 4.2.4.2 Valid Discrepancy
The third bullet here, entitled "Discrepancy valid based on tenant non-response", is somewhat unclear, as it folds together two different situations. One is where the tenant doesn't respond at all, and the POA fails to get the HUD letter to the te