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From: Catherine Bishop
email: mailto:cbishop@nhlp.org
link: http://
date: 7/3/0 22:18
Date: 12/21/00
Time: 11:35:37 AM
Remote Name: 207.251.188.199
Commnents on chapters 1 and 2 of the Income Verification Guide, Release 1.7
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, POAs 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 the 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 a waiver of the regulation or an interpretation that states that with respect to income that is identified pursuant to the 1998 income match and verification program, it is not appropriate for a POA to make an adjustment to rent or housing assistance payments.
[Mike and Mac do you agree that we need to advise HUD that it must take this action. The regulations are not completely dispositive, but it is hard to argue that they did not intend to require a repayment of excess rental assistance.]
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 or 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 PHA may require these tenants to disclose the HUD supplied income match information.
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 the POA to exercise humane judgement and flexibility."
[Note that I have not included a new section here stating that there must be an agreement in place before the tenant can be required to turn over the information to the POA. We have given up on that argument as I think that we should?]
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 currently 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.
2.1 HUD Discrepancy Notifications
Figure 4 Add to this figure another box that states "Identify Reported Excess Income and Tenant Overpayment of Rent."
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 tenant 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 tenant 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 tenant (non head of household) may move out of the unit. This option of removing the non cooperating tenant from the assisted families household should be set forth in the letter to the head of household set forth in Appendix G.
[Mike and Mac. Is there agreement that a tenant can be terminated or evicted for failure to turn over the letter or cooperate with the POA in the income verification process? Mac you raised this question too and felt that there were no good arguments against it. I concur. But as a practical matter, there will be problems as to what is defined as "cooperate." There will be issues of missed appointments, appointments set for times when tenant is working, POAs refusal to cooperate with the tenant such as sending tenant forms in the mail such as IRS forms to sign, etc. But I think that we cannot resolve all those problems with this guide.]
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.
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 tenant in 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 the tenant for a copy of the HUD letter and/or for a meeting with the POA. As noted in the draft Guide, if the tenant 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 30 day notice to respond and inform the head of household that he or she has the option to exclude the non cooperating tenant from the household, if the tenant continues to fail to cooperate in the income verification process.
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 were tenants are required to report changes in income but rents do not increase as a result, 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 when the failure would have resulted in an increase in rent is not important at this time."
2.4.4 Entering Federal Tax Data
The box in this section seems to assume that unearned income would never be excluded, but that's 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 shouldn't be counted (such as where a battered woman co-owns the marital home, but can't realize any income or assets from it because she's fled 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.
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.
[Mike and Mac. I cannot not tell if there is a problem here or not. I do not think there is but I cannot explain why the language should be different.]
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.
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.
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 5 Field Reviews.
It would be helpful if the Guide stated at this point that "HUD will not review POAs to determine if they have collected or pursued tenants for excess rental assistance identified as a result of the 1998 income match and verification program. HUD will not sanction or take any adverse action against a POA which does not pursue repayment of any excess rental assistance identified through the 1998 income match and verification program. A PHA's PHAS and SMAP scores will not be adversely affected if the PHA does not pursue a repayment (recovery) of the excess rental assistance."
Add to Mac's provisions on 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.