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# 

# 

# VERIFICATION GUIDANCE

# FOR THE PUBLIC HOUSING & HOUSING CHOICE VOUCHER PROGRAMS

# TO BE USED BY 

# HUD PUBLIC HOUSING FIELD OFFICES & PUBLIC HOUSING AGENCIES

# 

# 

# 

#   {#section-5 .unnumbered}

#  Verification Guidance

# Table of Contents

# 

# 

#  [Page]{.underline}

# 

# I. Introduction 3

# 

# II. Income and Rent Determination Policies 3

# 

# III. File Documentation 4

# 

# IV. Verification of Social Security Numbers 5

# 

# V. Required Consent by Applicants and Participants 5

# 

# VI. Requirement for Third Party Verification 6

# 

# VII. Verification of Income 7

# 

# VIII. Levels of Verification Methods 11

# IX. Exceptions to Third Party Verification Requirements 15

# 

# X. Verification of Mandatory Deductions 21

A. Dependent Deduction 21

B. Disabled Family Deduction 23

C. Elderly Family Deduction 24

D. Child Care Expense Deduction 25

E. Medical Expense Deduction 27

F. Disability Assistance Expense Deduction 29

G.  When a Family is Eligible for Medical and Disability

> Assistance Expenses 31

H.  Comments of Verification of Medical/Disability Assistance

> Expenses 34

XI\. Verification References 35

# I. INTRODUCTION

# 

# The verification process during the time of application, interim reexamination and annual reexamination is a critical task in the administration of the Department of Housing and Urban Development (HUD) assisted housing programs. This task requires Public Housing Agencies (PHAs) to verify factors that affect the determination of an applicant's/participant's adjusted income. The verification process also requires the applicant/participant to provide and disclose information that is true and complete, which is necessary in the administration of HUD's assisted housing programs.

Based on results from HUD computer matching and Rental Housing Integrity
Improvement Project (RHIIP) initiatives, HUD has determined that a
substantial number of participants are not accurately reporting their
income. HUD's Office of Policy Development and Research (PD&R) published
a final report in June 2001, on its "Quality Control for Rental
Assistance Subsidies Determination." The study found that 60% of rent
calculations had some type of administrative or calculation component
error contributing to a subsidy overpayment or underpayment situation.
The study projected, with 95% confidence, that the amount of subsidy
overpayments attributed to tenant underreporting of income was \$978
million plus or minus \$247 million. This underreporting of income
resulted in overpayment of limited government funding, thus not serving
as many families in need of housing assistance, as should have been
served.

This publication serves as a tool for PHA administrators of Public
Housing and tenant-based Section 8 programs to use in the verification
process of family income and a supplement to previously published HUD
occupancy guidebooks. The basis of this guidance comes from the
regulations found at 24 CFR Parts 5, 903, 960 and 982, applicable to the
Public Housing and Housing Choice Voucher Programs.

# II. INCOME & RENT DETERMINATION POLICIES

All PHAs should have written policies that provide for third party
verification of income for families who pay an income-based rent. HUD
regulations, 24 CFR Parts 960.259(c) and 982.516(a), require PHAs to
obtain and document in the tenant files, independent third party
verification (or document the reason why third party verification was
not available) of reported family income, the value of assets, expenses
related to deductions from income and other factors affecting adjusted
income.

In accordance with 24 CFR Part 903.7(d), a PHA's annual plan must
include a statement of the PHA's basic discretionary policies that
govern rents charged for public housing units, applicable flat rents,
and the rental contributions of families receiving tenant-based
assistance.

The PHA should provide detailed verification procedures in its written
policies so that participants are thoroughly informed of the
verification process. This will clarify the steps to be taken in the
independent validation of income and deter falsification of information.
While the high level of details of the verification process is not a
mandatory component of the Administrative Plan, PHAs are strongly
encouraged to demonstrate their ability to effectively manage and
account for government funds appropriated for low-income housing
programs. A detailed statement of the PHA's rent determination policies,
including verification procedures, is an important step towards
demonstrating the PHA's ability to establish management controls geared
to reducing subsidy overpayment errors.

In addition to inclusion of verification procedures in the PHA's
policies, PHAs should ensure that staff interviewers are trained to
explain the types of information that the PHA will verify during
interviews, and the methods of verification the PHA will use, including
upfront income verification (UIV) and computer matching.

**Q:** What is recommended for inclusion in a PHA's administrative plan
or Admissions and Continued Occupancy Policy (ACOP) regarding
verification procedures?

**A:** In light of the regulations at 24 CFR §903.7, §960.259(c)(1) and
§982.516(a)(2), the PHA should include its general policy on
verification in its administrative plan or ACOP. The policy should also
provide information on the following components of rent determination:

-   What must be verified.

-   The type of verification methods that will be used by the PHA
    (including computer matching).

-   Require all family members 18 years of age or older to sign a
    consent form to authorize the release of information.

-   Applicant's/Tenant's responsibility to provide documents at the
    request of the PHA.

-   Minimum rent.

-   Flat rent/income-based rent option. (Note: flat rents apply to
    public housing units only.)

-   Interim reexamination procedures.

# III. FILE DOCUMENTATION

PHAs must maintain a file for each program applicant/participant. Files
may be maintained in paper or electronic format. These files are subject
to audit and review by HUD, or Independent Public Accountants (IPAs), or
HUD's designee upon proper notification to the PHA. The file should
include (but is not limited to): housing application and supporting
documents, income executed lease(s), unit inspection reports,
verifications, leases, supplements to lease, notices and letters, income
and rent determinations and a summary of PHA interactions with the
tenant. The PHA must maintain these files in an area that is secure and
private. The PHA must also have record retention and destruction
policies. See 24 CFR 982.158 for Section 8 requirements.

For those PHAs that elect to maintain electronic files, HUD recommends
that PHAs keep all documents that are normally required for paper files
be included in electronic files, if feasible. This can be accomplished
by scanning documents and placed in the electronic file. Lastly,
electronic files should be organized in a logical and consistent manner
and e-documents should be properly labeled for easy retrieval and
review.

# IV. VERIFICATION OF SOCIAL SECURITY NUMBERS

24 CFR §5.216 requires applicants and participants to disclose the
complete and accurate social security number (SSN) assigned to the
applicant/participant and to each member of the
applicant's/participant's household, who is at least six years of age
**[and]{.underline}** to provide documentation to verify each SSN.

In the event an applicant or participant or household member, who is at
least six years of age, has not been assigned an SSN, the household
member (or guardian if the member is under the age of 18) must execute a
certification that states the household member was not issued a social
security number.

**Q:** How do you verify the social security numbers (SSN) of a
participant's/applicant's household?

**A:** The documentation necessary to verify the SSN of an individual,
who is required to disclose his/her SSN, is a valid social security card
issued by the Social Security Administration, or such other evidence of
the SSN as HUD, and where applicable, the Public Housing Agency (PHA)
may prescribe in administrative instructions. See 24 CFR §5.216(f).

**[Note:]{.underline}** The PHA may include in its written policies,
other documents the PHA may accept in lieu of a social security card.
Some examples of other documents (containing the SSN) that PHAs may
accept are:

-   A driver's license.

-   Identification card issued by a federal, state, or local agency.

-   Identification card issued by a medical insurance company or
    provider (including Medicare and Medicaid).

-   Identification card issued by an employer or trade union.

-   Benefit award letters from government agencies.

-   Retirement benefit letter

-   Life insurance policies

-   Court records (real estate, tax notices, marriage and divorce,
    judgment, or bankruptcy records).

# V. REQUIRED CONSENT BY APPLICANTS & PARTICIPANTS

Each member of the family of an assistance applicant or participant, who
is at least 18 years of age, and each family head and spouse, regardless
of age, shall sign one or more consent forms. See 24 CFR §5.230.

PHAs must ensure that they use appropriate consent forms to obtain
specific information. The HUD Form 9886 authorizes HUD and the PHA to
obtain third party verification of the following:

-   Any income information or materials from State Wage Information
    Collection Agencies (SWICA).

-   Income information obtained from previous and current employers.

The HUD Form 9886 authorizes HUD **only**, to obtain third party
verification of the following:

-   Income information from the SSA.

-   Income return information from the IRS.

The HUD Form 9886 may not be used to obtain any other information. PHAs
may generate other types of consent forms to verify items not covered
under the HUD Form 9886. Examples are available in the appendix of the
Public Housing Occupancy Guidebook.

# VI. REQUIREMENT FOR THIRD PARTY VERIFICATION

The requirement for third party verification can be found at 24 CFR
§960.259(c)(1) and §982.516(a)(2) and states that "The PHA must obtain
and document in the family file third party verification of the
following factors, or must document in the file why third party
verification was not available:

(i) Reported family annual income;

(ii) The value of assets;

(iii) Expenses related to deductions from annual income; and

(iv) Other factors that affect the determination of adjusted income or
     income-based rent."

The Department has defined third party verification based on
verification requirements established by the Inspector General's Office,
prior HUD notices and guidebooks.

References: PIH Notice 2001-15: Improving Income Integrity in Public and
Assisted Housing

> Housing Choice Voucher Program Guidebook (Section 12-4) issued April
> 2001

The Tenant Integrity Program Training Guide issued by the Office of the
Inspector General (Page 51) issued October 1989

**Third party verification** is defined as independent verification of
income and/or expenses by contacting the individual income/expense
source(s) supplied by the family. The verification documents must be
supplied directly to the independent source by the PHA and returned
directly to the PHA from the independent source.

The tenant shall not hand carry documents to or from the independent
source. The PHA may elect to mail, fax, or e-mail the verification
request form to the independent source.

In the event that the independent source does not respond to the PHA's
faxed, mailed, or e-mailed request for information, the PHA may pursue
oral third party verification.

# VII. VERIFICATION OF INCOME

PHAs must put forth a conscientious effort to ensure that they use all
available resources, including upfront income verification techniques,
to obtain verification of tenant reported (unreported or underreported)
income. There is an increased burden on the PHA to verify earned income
and social security benefits. While other income components, such as
assets are important, earned income and social security benefits are
material components of income that have high rates of underreporting and
represents a large portion of subsidy payment errors.

**Q:** How do you verify family reported income?

**A:** HUD regulations require PHAs to obtain and document third party
verification of reported family annual income. However, if third party
verification is not available, the PHA must document in the tenant file
the reason why third party verification was not available.

> Most recently, HUD is strongly encouraging PHAs to use upfront income
> verification techniques, which is considered a type of third party
> verification, during required reexaminations (and initial application,
> if available) of family income. Below is a summary of how to verify
> family reported income of different types, using different
> verification methods.

There are several methods available for PHAs to verify and document
income and assets. HUD strongly encourages the use of upfront income
verification techniques to improve the accuracy and efficiency of the
income verification process. No one verification method is the answer to
every possible situation, but studies show that the use of upfront
income verification techniques has decreased the number of unreported
and under reported income cases.

Below are verification methods that a PHA may use in determining a
family\'s Total Tenant Payment (TTP).

**A.** **[Upfront Income Verification:]{.underline}**

The verification of income, before or during a family reexamination,
through an independent source that systematically and uniformly
maintains income information in computerized form for a large number of
individuals.

## Authorization for Use of Upfront Income Verification

To prevent fraud and abuse in HUD programs, the United States Code (USC)
and Code of Federal Regulations (CFR) allow HUD and PHAs to obtain
information about applicants and participants to determine their
eligibility or level of benefits. Most importantly, the USC authorizes
computer-matching agreements of income information. Below is a summary
of laws and regulations that govern the use of upfront income
verification.

24 CFR §5.234 (Requests for Information from SWICAs and Federal
Agencies; Restrictions on Use) indicates that income information will
generally be obtained through computer matching agreements between HUD
and a SWICA or Federal Agency, or between a PHA and a SWICA.

42 USC 3544(c)(2)(A) (Preventing Fraud and Abuse in Housing and Urban
Development Programs) provides the legal basis for preventing fraud and
abuse in HUD programs. The law allows HUD to require that applicants and
participants sign a consent form to request the following: current or
previous wages and salaries from employers, wage information and
unemployment compensation from the State agency charged with the
administration of the State unemployment law, and income information
from the Commissioner of Social Security and the Secretary of the
Treasury.

**Types of Income That May be Verified Using Upfront Income Verification
(UIV).**

(1) Gross Wages and Salaries (including overtime pay, commission, fees,
    tips, bonuses, and other compensation for personal services.)

(2) Unemployment Compensation

(3) Welfare Benefits

(4) Social Security Benefits (including Federal and State benefits,
    Black Lung benefits, dual benefits.)

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(a) Social Security (SS)

(b) Supplemental Security Income (SSI)

**Note:** Other income types (i.e., child support, pensions, etc.)
should be verified using upfront income verification techniques if the
resources are available.

**Available Upfront Income Verification Techniques**

> PHAs may obtain upfront income verification through the following
> methods:

(1) Computer matching agreements with a federal, state, or local
    government agency, or a private agency;

(2) Use of HUD's Tenant Assessment Subsystem (TASS); or

(3) Submit direct requests for income verifications to a federal, state,
    or local government agencies or a private agency.

**HUD Systems Available for Upfront Income Verification.**

Use of HUD's Tenant Assessment Sub-System (TASS) and centralized UIV
System are acceptable methods for verifying family income. HUD will
announce the availability of the UIV System through issuance of a Public
Housing Notice (PIH) or other appropriate means in the future.

**[Note:]{.underline}** The PHA **[must]{.underline}** have a valid HUD
Form 9886 signed by all household members who are 18 years of age or
older in the tenant file.

**Use of Third Party Verification to Supplement Upfront Income
Verification.**

Upfront income verification replaces, to a large extent, the more time
consuming and less accurate third party verification process of
contacting individual employers identified by the family or reviewing
outdated income verification documents. However, third party
verification may continue to be necessary to complement upfront income
verification, for example, when the tenant disputes the data. It should
not be considered as an automatic substitute for other third party
verification, and may supplement other verification documentation, such
as original, current tenant provided documents.

**B.** **[Written Third Party Verification:]{.underline}**

Independent verification of income and/or expenses by contacting the
individual income/expense source(s) supplied by the family. The
verification documents must be supplied directly to the independent
source by the PHA and be returned directly to the PHA from the
independent source.

**C. [Oral Third Party Verification:]{.underline}**

Independent verification of income and/or expenses by contacting the
individual income/expense source(s) supplied by the family, via
telephone or in-person visit. PHA staff should document in the tenant
file, the date and time of the telephone call, the name of the person
contacted and telephone number, along with the confirmed verified
information.

This verification method is commonly used in the event that the
independent source does not respond to the PHA's faxed, mailed, or
e-mailed request for information in a reasonable time frame, i.e., ten
(10) business days.

**D. [Document Review:]{.underline}**

> The PHA reviews original documents provided by the tenant in support
> of their declaration of income during the income reexamination. This
> verification method can only be used as the sole source of income
> verification when third party verification cannot be obtained. When
> the PHA resorts to reviewing tenant-provided documents, the PHA must
> document in the tenant file why third party verification was not
> available.

**Acceptable Participant-Provided Documents**

Housing program participants have an obligation to the PHA to provide
any letter or other notice, including any letter or notice from HUD that
provides information concerning the amount or verification of family
income, per section 3(f) of the U.S. Housing Act of 1937, as amended. In
support of the tenant's declaration of income, the PHA may review
original (authentic) documents provided by the participant. All
documents should be dated **within the last 60 days** of the interview.
The PHA should make a photocopy of the [original]{.underline}
document(s) and maintain the copy in the participant case file. The PHA
should also document in the tenant file, the receipt, copy, and review
of the original (authentic) document. Below is a summary of some
acceptable participant-provided documents:

-   Consecutive and original pay stubs

-   Social Security Administration award letter

-   Bank statements

-   Pension benefit statements

-   Temporary Assistance to Needy Families (TANF) award letter

-   Other official and authentic documents from a Federal, State, or
    local agency.

**E. [Tenant Certification:]{.underline}**

> The tenant submits an affidavit or notarized statement of reported
> income and/or expenses. This verification method should be used as a
> last resort when all other verification methods are not possible. When
> the PHA relies on tenant certification, the PHA must document in the
> tenant file why third party verification was not available.

## VIII. LEVELS OF VERIFICATION METHODS

PHAs should begin with the highest level of verification methods. The
use of lower level verification methods will place a higher burden on
the PHA to justify its use of that particular verification method rather
than a higher level of verification methods. PHAs may be required to
provide documentation for each case.

+-----------------------------------------------------------------------+
| **Upfront (UIV) Highest (Highly Recommended, highest level of third   |
| party verification)**                                                 |
|                                                                       |
| **Written 3^rd^ Party High (Mandatory if upfront income verification  |
| is not available or if UIV data differs substantially from            |
| tenant-reported information)**                                        |
|                                                                       |
| **Oral 3^rd^ Party Medium (Mandatory if written third party           |
| verification is not available)**                                      |
|                                                                       |
| **Document Review Medium-Low (Use on provisional basis)**             |
|                                                                       |
| **Tenant Declaration Low (Use as a last resort)**                     |
+-----------------------------------------------------------------------+

+--------+-----------+----------+------------+----------+------------+
| **     | **        | *        | **Oral     | **       | **Tenant   |
| Income | Upfront** | *Written | Third      | Document | Dec        |
| Type** |           | Third    | Party**    | Review** | laration** |
|        |           | Party**  |            |          |            |
+========+===========+==========+============+==========+============+
|        | **(LEVEL  | **(LEVEL | **(LEVEL   | **(LEVEL | **(LEVEL   |
|        | 5)**      | 4)**     | 3)**       | 2)**     | 1)**       |
+--------+-----------+----------+------------+----------+------------+
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+--------+-----------+----------+------------+----------+------------+
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| next   |           |          |            |          |            |
| twelve |           |          |            |          |            |
| m      |           |          |            |          |            |
| onths, |           |          |            |          |            |
| year-t |           |          |            |          |            |
| o-date |           |          |            |          |            |
| ear    |           |          |            |          |            |
| nings, |           |          |            |          |            |
| bo     |           |          |            |          |            |
| nuses, |           |          |            |          |            |
| ove    |           |          |            |          |            |
| rtime, |           |          |            |          |            |
| c      |           |          |            |          |            |
| ompany |           |          |            |          |            |
| name,  |           |          |            |          |            |
| a      |           |          |            |          |            |
| ddress |           |          |            |          |            |
| and    |           |          |            |          |            |
| tel    |           |          |            |          |            |
| ephone |           |          |            |          |            |
| n      |           |          |            |          |            |
| umber, |           |          |            |          |            |
| name   |           |          |            |          |            |
| and    |           |          |            |          |            |
| po     |           |          |            |          |            |
| sition |           |          |            |          |            |
| of the |           |          |            |          |            |
| person |           |          |            |          |            |
| comp   |           |          |            |          |            |
| leting |           |          |            |          |            |
| the    |           |          |            |          |            |
| empl   |           |          |            |          |            |
| oyment |           |          |            |          |            |
| verifi |           |          |            |          |            |
| cation |           |          |            |          |            |
| form.  |           |          |            |          |            |
|        |           |          |            |          |            |
| **Eff  |           |          |            |          |            |
| ective |           |          |            |          |            |
| Date   |           |          |            |          |            |
| of     |           |          |            |          |            |
| E      |           |          |            |          |            |
| mploym |           |          |            |          |            |
| ent:** |           |          |            |          |            |
| The    |           |          |            |          |            |
| PHA    |           |          |            |          |            |
| should |           |          |            |          |            |
| always |           |          |            |          |            |
| c      |           |          |            |          |            |
| onfirm |           |          |            |          |            |
| start  |           |          |            |          |            |
| and    |           |          |            |          |            |
| termi  |           |          |            |          |            |
| nation |           |          |            |          |            |
| dates  |           |          |            |          |            |
| of     |           |          |            |          |            |
| emplo  |           |          |            |          |            |
| yment. |           |          |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| Sel    | Not       | The PHA  | The PHA    | The PHA  | The PHA    |
| f-Empl | Available | mails or | may call   | may      | may accept |
| oyment |           | faxes a  | the source | accept   | a          |
|        |           | veri     | to obtain  | any      | notarized  |
|        |           | fication | income     | d        | statement  |
|        |           | form     | in         | ocuments | or         |
|        |           | directly | formation. | (i.e.    | affidavit  |
|        |           | to       |            | tax      | from the   |
|        |           | sources  |            | returns, | tenant     |
|        |           | id       |            | invoices | that       |
|        |           | entified |            | and      | declares   |
|        |           | by the   |            | letters  | the        |
|        |           | family   |            | from     | family's   |
|        |           | to       |            | cu       | total      |
|        |           | obtain   |            | stomers) | annual     |
|        |           | income   |            | provided | income     |
|        |           | info     |            | by the   | from       |
|        |           | rmation. |            | tenant   | self-e     |
|        |           |          |            | to       | mployment. |
|        |           |          |            | verify   | **Note:**  |
|        |           |          |            | self-em  | The PHA    |
|        |           |          |            | ployment | must       |
|        |           |          |            | income.  | document   |
|        |           |          |            | *        | in the     |
|        |           |          |            | *Note:** | tenant     |
|        |           |          |            | The PHA  | file, the  |
|        |           |          |            | must     | reason     |
|        |           |          |            | document | third      |
|        |           |          |            | in the   | party      |
|        |           |          |            | tenant   | ve         |
|        |           |          |            | file,    | rification |
|        |           |          |            | the      | was not    |
|        |           |          |            | reason   | available. |
|        |           |          |            | third    |            |
|        |           |          |            | party    |            |
|        |           |          |            | veri     |            |
|        |           |          |            | fication |            |
|        |           |          |            | was not  |            |
|        |           |          |            | o        |            |
|        |           |          |            | btained. |            |
+--------+-----------+----------+------------+----------+------------+
| **     |           |          |            |          |            |
| Verifi |           |          |            |          |            |
| cation |           |          |            |          |            |
| of     |           |          |            |          |            |
| Sel    |           |          |            |          |            |
| f-Empl |           |          |            |          |            |
| oyment |           |          |            |          |            |
| Inc    |           |          |            |          |            |
| ome:** |           |          |            |          |            |
| Typi   |           |          |            |          |            |
| cally, |           |          |            |          |            |
| it is  |           |          |            |          |            |
| a      |           |          |            |          |            |
| cha    |           |          |            |          |            |
| llenge |           |          |            |          |            |
| for    |           |          |            |          |            |
| PHAs   |           |          |            |          |            |
| to     |           |          |            |          |            |
| obtain |           |          |            |          |            |
| third  |           |          |            |          |            |
| party  |           |          |            |          |            |
| verifi |           |          |            |          |            |
| cation |           |          |            |          |            |
| of     |           |          |            |          |            |
| sel    |           |          |            |          |            |
| f-empl |           |          |            |          |            |
| oyment |           |          |            |          |            |
| i      |           |          |            |          |            |
| ncome. |           |          |            |          |            |
| When   |           |          |            |          |            |
| third  |           |          |            |          |            |
| party  |           |          |            |          |            |
| verifi |           |          |            |          |            |
| cation |           |          |            |          |            |
| is not |           |          |            |          |            |
| avai   |           |          |            |          |            |
| lable, |           |          |            |          |            |
| the    |           |          |            |          |            |
| PHA    |           |          |            |          |            |
| should |           |          |            |          |            |
| always |           |          |            |          |            |
| r      |           |          |            |          |            |
| equest |           |          |            |          |            |
| a      |           |          |            |          |            |
| not    |           |          |            |          |            |
| arized |           |          |            |          |            |
| tenant |           |          |            |          |            |
| decla  |           |          |            |          |            |
| ration |           |          |            |          |            |
| that   |           |          |            |          |            |
| in     |           |          |            |          |            |
| cludes |           |          |            |          |            |
| a      |           |          |            |          |            |
| p      |           |          |            |          |            |
| erjury |           |          |            |          |            |
| stat   |           |          |            |          |            |
| ement. |           |          |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| Social | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
| Se     | HUD       | mails or | may call   | may      | may accept |
| curity | Tenant    | faxes a  | SSA, with  | accept   | a          |
| Be     | A         | veri     | the tenant | an       | notarized  |
| nefits | ssessment | fication | on the     | original | statement  |
|        | System    | form     | line, to   | SSA      | or         |
|        | (TASS) to | directly | obtain     | Notice   | affidavit  |
|        | obtain    | to the   | current    | from the | from the   |
|        | current   | local    | benefit    | tenant.  | tenant     |
|        | benefit   | SSA      | amount.    | *        | that       |
|        | history   | office   | **(Not     | *Note:** | declares   |
|        | and       | to       | Available  | The PHA  | monthly    |
|        | di        | obtain   | in some    | must     | social     |
|        | screpancy | social   | areas      | document | security   |
|        | reports.  | security | because    | in the   | benefits.  |
|        |           | benefit  | SSA makes  | tenant   | **Note:**  |
|        |           | info     | this data  | file,    | The PHA    |
|        |           | rmation. | available  | the      | must       |
|        |           |          | through    | reason   | document   |
|        |           | **(Not   | TASS. SSA  | third    | in the     |
|        |           | A        | encourages | party    | tenant     |
|        |           | vailable | PHAs to    | veri     | file, the  |
|        |           | in some  | use        | fication | reason     |
|        |           | areas    | TASS.)**   | was not  | third      |
|        |           | because  |            | av       | party      |
|        |           | SSA      |            | ailable. | ve         |
|        |           | makes    |            |          | rification |
|        |           | this     |            |          | was not    |
|        |           | data     |            |          | available. |
|        |           | a        |            |          |            |
|        |           | vailable |            |          |            |
|        |           | through  |            |          |            |
|        |           | TASS.    |            |          |            |
|        |           | SSA      |            |          |            |
|        |           | en       |            |          |            |
|        |           | courages |            |          |            |
|        |           | PHAs to  |            |          |            |
|        |           | use      |            |          |            |
|        |           | TASS.)** |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| W      | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
| elfare | computer  | mails,   | may call   | may      | may accept |
| Be     | matching  | faxes,   | the local  | review   | a          |
| nefits | a         | or       | Social     | an       | notarized  |
|        | greements | e-mails  | Services   | original | statement  |
|        | with the  | a        | Agency to  | award    | or         |
|        | local     | veri     | obtain     | notice   | affidavit  |
|        | Social    | fication | current    | or       | from the   |
|        | Services  | form     | benefit    | printout | tenant     |
|        | Agency to | directly | amount.    | from the | that       |
|        | obtain    | to the   |            | local    | declares   |
|        | current   | local    |            | Social   | monthly    |
|        | benefit   | Social   |            | Services | welfare    |
|        | amount    | Services |            | Agency   | benefits.  |
|        | electr    | Agency   |            | provided | **Note:**  |
|        | onically, | to       |            | by the   | The PHA    |
|        | by mail   | obtain   |            | tenant.  | must       |
|        | or fax or | welfare  |            | *        | document   |
|        | in        | benefit  |            | *Note:** | in the     |
|        | person.   | info     |            | The PHA  | tenant     |
|        |           | rmation. |            | must     | file, the  |
|        |           |          |            | document | reason     |
|        |           |          |            | in the   | third      |
|        |           |          |            | tenant   | party      |
|        |           |          |            | file,    | ve         |
|        |           |          |            | the      | rification |
|        |           |          |            | reason   | was not    |
|        |           |          |            | third    | available. |
|        |           |          |            | party    |            |
|        |           |          |            | veri     |            |
|        |           |          |            | fication |            |
|        |           |          |            | was not  |            |
|        |           |          |            | av       |            |
|        |           |          |            | ailable. |            |
+--------+-----------+----------+------------+----------+------------+
| Child  | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
| S      | agreement | mails,   | may call   | may      | may accept |
| upport | with the  | faxes,   | the local  | review   | a          |
|        | local     | or       | Child      | an       | notarized  |
|        | Child     | e-mails  | Support    | original | statement  |
|        | Support   | a        | E          | court    | or         |
|        | En        | veri     | nforcement | order,   | affidavit  |
|        | forcement | fication | Agency or  | notice   | from the   |
|        | Agency to | form     | child      | or       | tenant     |
|        | obtain    | directly | support    | printout | that       |
|        | current   | to the   | payer to   | from the | declares   |
|        | child     | local    | obtain     | local    | current    |
|        | support   | Child    | current    | Child    | child      |
|        | amount    | Support  | child      | Support  | support    |
|        | and       | Enf      | support    | Enf      | amount and |
|        | payment   | orcement | amount and | orcement | payment    |
|        | status    | Agency   | payment    | Agency   | status.    |
|        | electr    | or child | status.    | provided | **Note:**  |
|        | onically, | support  |            | by the   | The PHA    |
|        | by mail   | payer to |            | tenant   | must       |
|        | or fax or | obtain   |            | to       | document   |
|        | in        | current  |            | verify   | in the     |
|        | person.   | child    |            | current  | tenant     |
|        |           | support  |            | child    | file, the  |
|        |           | amount   |            | support  | reason     |
|        |           | and      |            | amount   | third      |
|        |           | payment  |            | and      | party      |
|        |           | status.  |            | payment  | ve         |
|        |           |          |            | status.  | rification |
|        |           |          |            | *        | was not    |
|        |           |          |            | *Note:** | available. |
|        |           |          |            | The PHA  |            |
|        |           |          |            | must     |            |
|        |           |          |            | document |            |
|        |           |          |            | in the   |            |
|        |           |          |            | tenant   |            |
|        |           |          |            | file,    |            |
|        |           |          |            | the      |            |
|        |           |          |            | reason   |            |
|        |           |          |            | third    |            |
|        |           |          |            | party    |            |
|        |           |          |            | veri     |            |
|        |           |          |            | fication |            |
|        |           |          |            | was not  |            |
|        |           |          |            | av       |            |
|        |           |          |            | ailable. |            |
+--------+-----------+----------+------------+----------+------------+
| Unempl | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
| oyment | computer  | mails,   | may call   | may      | may accept |
| Be     | matching  | faxes,   | the State  | review   | a          |
| nefits | a         | or       | Wage       | an       | notarized  |
|        | greements | e-mails  | I          | original | statement  |
|        | with a    | a        | nformation | benefit  | or         |
|        | State     | veri     | Collection | notice   | affidavit  |
|        | Wage      | fication | Agency to  | or       | from the   |
|        | In        | form     | obtain     | unem     | tenant     |
|        | formation | directly | current    | ployment | that       |
|        | C         | to the   | benefit    | check    | declares   |
|        | ollection | State    | amount.    | stub, or | un         |
|        | Agency to | Wage     |            | printout | employment |
|        | obtain    | Inf      |            | from the | benefits.  |
|        | une       | ormation |            | local    | **Note:**  |
|        | mployment | Co       |            | State    | The PHA    |
|        | com       | llection |            | Wage     | must       |
|        | pensation | Agency   |            | Inf      | document   |
|        | electr    | to       |            | ormation | in the     |
|        | onically, | obtain   |            | Co       | tenant     |
|        | by mail   | unem     |            | llection | file, the  |
|        | or fax or | ployment |            | Agency   | reason     |
|        | in        | comp     |            | provided | third      |
|        | person.   | ensation |            | by the   | party      |
|        |           | info     |            | tenant.  | ve         |
|        |           | rmation. |            | *        | rification |
|        |           |          |            | *Note:** | was not    |
|        |           |          |            | The PHA  | available. |
|        |           |          |            | must     |            |
|        |           |          |            | document |            |
|        |           |          |            | in the   |            |
|        |           |          |            | tenant   |            |
|        |           |          |            | file,    |            |
|        |           |          |            | the      |            |
|        |           |          |            | reason   |            |
|        |           |          |            | third    |            |
|        |           |          |            | party    |            |
|        |           |          |            | veri     |            |
|        |           |          |            | fication |            |
|        |           |          |            | was not  |            |
|        |           |          |            | av       |            |
|        |           |          |            | ailable. |            |
+--------+-----------+----------+------------+----------+------------+
|        | Use of    |          |            |          |            |
|        | HUD       |          |            |          |            |
|        | systems,  |          |            |          |            |
|        | when      |          |            |          |            |
|        | a         |          |            |          |            |
|        | vailable. |          |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| Pe     | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
| nsions | computer  | mails,   | may call   | may      | may accept |
|        | matching  | faxes,   | the        | review   | a          |
|        | a         | or       | pension    | an       | notarized  |
|        | greements | e-mails  | provider   | original | statement  |
|        | with a    | a        | to obtain  | benefit  | or         |
|        | Federal,  | veri     | current    | notice   | affidavit  |
|        | State, or | fication | benefit    | from the | from the   |
|        | Local     | form     | amount.    | pension  | tenant     |
|        | G         | directly |            | provider | that       |
|        | overnment | to the   |            | provided | declares   |
|        | Agency to | pension  |            | by the   | monthly    |
|        | obtain    | provider |            | tenant.  | pension    |
|        | pension   | to       |            | *        | amounts.   |
|        | in        | obtain   |            | *Note:** | **Note:**  |
|        | formation | pension  |            | The PHA  | The PHA    |
|        | electr    | info     |            | must     | must       |
|        | onically, | rmation. |            | document | document   |
|        | by mail   |          |            | in the   | in the     |
|        | or fax or |          |            | tenant   | tenant     |
|        | in        |          |            | file,    | file, the  |
|        | person.   |          |            | the      | reason     |
|        |           |          |            | reason   | third      |
|        |           |          |            | third    | party      |
|        |           |          |            | party    | ve         |
|        |           |          |            | veri     | rification |
|        |           |          |            | fication | was not    |
|        |           |          |            | was not  | available. |
|        |           |          |            | av       |            |
|        |           |          |            | ailable. |            |
+--------+-----------+----------+------------+----------+------------+
| Assets | Use of    | The PHA  | The PHA    | The PHA  | The PHA    |
|        | co        | mails,   | may call   | may      | may accept |
|        | operative | faxes,   | the source | review   | a          |
|        | a         | or       | to obtain  | original | notarized  |
|        | greements | emails a | asset and  | d        | statement  |
|        | with      | veri     | asset      | ocuments | or         |
|        | sources   | fication | income     | provided | affidavit  |
|        | to obtain | form     | in         | by the   | from the   |
|        | asset and | directly | formation. | tenant.  | tenant     |
|        | asset     | to the   |            | **Note:  | that       |
|        | income    | source   |            | The PHA  | declares   |
|        | in        | to       |            | must     | assets and |
|        | formation | obtain   |            | document | asset      |
|        | electr    | asset    |            | in the   | income.    |
|        | onically, | and      |            | tenant   | **Note:    |
|        | by mail   | asset    |            | file,    | The PHA    |
|        | or fax or | income   |            | the      | must       |
|        | in        | info     |            | reason   | document   |
|        | person.   | rmation. |            | third    | in the     |
|        |           |          |            | party    | tenant     |
|        |           |          |            | veri     | file, the  |
|        |           |          |            | fication | reason     |
|        |           |          |            | was not  | third      |
|        |           |          |            | avai     | party      |
|        |           |          |            | lable.** | ve         |
|        |           |          |            |          | rification |
|        |           |          |            |          | was not    |
|        |           |          |            |          | av         |
|        |           |          |            |          | ailable.** |
+--------+-----------+----------+------------+----------+------------+
| # Co   | Whenever  | *        | The PHA    |          | The PHA    |
| mments | HUD makes | *Note:** | should     |          | should use |
|        | available | The      | document   |          | this       |
|        | wage,     | ind      | in the     |          | ve         |
|        | unem      | ependent | tenant     |          | rification |
|        | ployment, | source   | file, the  |          | method as  |
|        | and SSA   | c        | date and   |          | a last     |
|        | inf       | ompletes | time of    |          | resort,    |
|        | ormation, | the form | the        |          | when all   |
|        | the PHA   | and      | telephone  |          | other      |
|        | should    | returns  | call or in |          | ve         |
|        | use the   | the form | person     |          | rification |
|        | in        | directly | visit,     |          | methods    |
|        | formation | to the   | along with |          | are not    |
|        | as part   | PHA.     | the name   |          | possible   |
|        | of the    | Agency.  | and title  |          | or have    |
|        | reex      | The      | of the     |          | been       |
|        | amination | tenant   | person     |          | uns        |
|        | process.  | should   | that       |          | uccessful. |
|        | Failure   | not hand | verified   |          | *          |
|        | to do so  | carry    | the        |          | *Notarized |
|        | may       | d        | current    |          | statement  |
|        | result in | ocuments | income     |          | should     |
|        | d         | to or    | amount.    |          | include a  |
|        | isallowed | from the |            |          | perjury    |
|        | costs     | ind      |            |          | penalty    |
|        | during a  | ependent |            |          | st         |
|        | RIM       | source.  |            |          | atement.** |
|        | review.   |          |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| > **N  |           |          |            |          |            |
| ote:** |           |          |            |          |            |
| > The  |           |          |            |          |            |
| > PHA  |           |          |            |          |            |
| > must |           |          |            |          |            |
| > not  |           |          |            |          |            |
| > pass |           |          |            |          |            |
| >      |           |          |            |          |            |
| verifi |           |          |            |          |            |
| cation |           |          |            |          |            |
| >      |           |          |            |          |            |
|  costs |           |          |            |          |            |
| >      |           |          |            |          |            |
|  along |           |          |            |          |            |
| > to   |           |          |            |          |            |
| > the  |           |          |            |          |            |
| >      |           |          |            |          |            |
| partic |           |          |            |          |            |
| ipant. |           |          |            |          |            |
+--------+-----------+----------+------------+----------+------------+
| > **N  |           |          |            |          |            |
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+--------+-----------+----------+------------+----------+------------+

## 

**[Example:]{.underline}** Mary Tenant reports that she is employed by
K-mart as of June 1, 2003, and earns \$300 a month. Ms. Tenant also
reports she no longer receives Transitional Emergency Medical and
Housing Assistance (TEMHA) benefits. Household size is 1.

**Q:** Which income verification method should the PHA use first,
second, etc.? How should the PHA use each of the above noted
verification methods and under what circumstances should the PHA use
each method?

**A:** The PHA should use the following verification methods in the
order listed below:

> \(1\) Upfront Verification

\(2\) Written Third Party Verification

\(3\) Oral Third Party Verification

(4) Document Review

(5) Tenant Declaration

The PHA should attempt to use upfront income verification first and
whenever possible, since it is the most preferred method by HUD and does
not rely on an individual filling out a form, which may result in lower
data integrity.

If upfront verification is not available (PHA does not have access to
this type of information or it is too costly to obtain) then the PHA
should obtain required written third party verification. Verification
forms should be mailed, faxed or e-mailed directly to the independent
source.

In the event that the independent source fails to respond to written
verification requests, the PHA should then contact the independent
source by telephone or an in person visit to obtain the verification.
Upon receipt of the information, the PHA should document in the family
file, the date and time the information was received along with the name
of the person and title that provided the information.

**IX. EXCEPTIONS TO THIRD PARTY VERIFICATION REQUIREMENTS**

HUD is aware that in some situations, third party verification is not
available for a variety of reasons. Oftentimes, the PHA may have made
numerous attempts to obtain the required verifications with no luck, or
the income source may not honor written or oral requests for income
information, or the asset or expenses to be verified is an insignificant
amount, or it may not be cost effective to obtain third party
verification of assets and expenses, when the impact on total tenant
payment is minimal (See summary of example exceptions to third party
verification below). In these cases, it is acceptable for PHAs to review
original documents provided by the tenant. However, the PHA is
**required to document in the family file the reason(s) why third party
verification was not available.** The PHA should also maintain a
photocopy of the original document in the family file.

Exceptions to Third Party Verification Summary:

A.  **Income**

    a.  PHA made at least two documented attempts to obtain third party
        verification, with no luck.

    b.  The income source does not have the capability to provide
        written or oral third party verification.

B.  **Assets and Expenses**

    a.  PHA made at least two documented attempts to obtain third party
        verification, with no luck.

    b.  The asset or expense to be verified is an insignificant amount,
        thus it is not cost effective or reasonable to obtain third
        party verification.

HUD expects all PHAs to use upfront income verification systems made
available to PHAs during mandatory reexaminations of income. HUD Rental
Integrity Monitoring (RIM) reviews will issue a finding in cases where
PHAs have not documented why third party verification was not obtained
for earned income and social security benefits. Effective December 19,
2003, PHAs will also be subject to disallowed costs as a result of PHAs
errors uncovered during RIM reviews that result in HUD overpayment of
subsidy (see PIH Notice 2003-34(HA). Below is a summary of examples in
which third party verification may not be available:

  -----------------------------------------------------------------------
  **INCOME TYPE**              **REASON 3^RD^ PARTY VERIFICATION IS NOT
                               AVAILABLE**
  ---------------------------- ------------------------------------------
  Checking/Savings Accounts    Balance is under a specified reasonable
                               threshold (determined by the PHA and
                               included in PHA plans and policies) and it
                               would not be cost effective to incur bank
                               verification fee and/or use PHA
                               administrative staff time to facilitate
                               3^rd^ party verification.

  Employment                   PHA has attempted third party verification
                               (and documented the tenant file) and has
                               not received a response. It would not be
                               reasonable or cost effective to continue
                               seeking 3^rd^ party verification.

  Self-Employment Verification The tenant may do odd jobs such as
                               babysitting, cutting lawns, running
                               errands for various people, or other
                               Schedule C type work. Often times, the
                               participant cannot provide a name and
                               address or telephone number for the PHA to
                               confirm this type of income, thus making
                               it impossible for the PHA to obtain 3^rd^
                               party verification.

  Social Security Benefits     Benefit information is not available in
                               HUD's Tenant Assessment Sub-system (TASS)
                               and the Social Security Administration
                               (SSA) Office does not accept verification
                               requests from PHAs. (Examples of why data
                               is not available: invalid SSN in PIC
                               system, newly admitted family into
                               program.)

  Unemployment Benefits        PHA does not have a computer matching
                               agreement with the State Wage Information
                               Collection Agency (SWICA) to obtain income
                               verification. SWICA refuses to provide
                               information over the telephone or in
                               writing.

  Welfare Benefits             PHA does not have a computer matching
                               agreement with the local welfare office to
                               obtain income verification. Local welfare
                               office refuses to provide information over
                               the telephone or in writing.
  -----------------------------------------------------------------------

The exception to third party verification can be found at 24 CFR
§960.259(c)(1) and §982.516(a)(2), which states, "The PHA must obtain
and document in the family file third party verification of the
following factors, **or must document in the file why third party
verification was not available**."

**Note:** HUD requires PHAs to provide **adequate** documentation for
lack of third party verification of earned income.

**Example:** Harry Long reports continued employment with ABC Box
Company. He provides the PHA staff with three months of consecutive pay
stubs. The PHA staff calculates TTP based on the submitted pay stubs and
documents the file as follows:

> 07/10/03 **"Annual Review 10/03** completed. No assets. No change in
> family composition. Sole income is from wages earned at ABC Box
> Company. Average weekly pay is \$250 based on submitted consecutive
> pay stubs (12 in quantity) for the months of May and June. Third party
> verification not available. Offered choice of flat rent of \$465 or
> income based rent of \$325. Tenant selected income based rent. TTP is
> \$325 effective 10/03."

**O. Specialist**

The above documentation does **[not]{.underline}** demonstrate the PHA's
efforts to obtain third party verification and would be viewed as
non-compliant with the requirement to obtain third party verification or
document the reason third party verification was not available. The PHAs
burden to justify non-use of third party verification for earned income
will increase significantly. PHAs should not simply rely on information
obtained from the tenant.

An example of proper documentation is below:

> 06/03/03 Mailed wage form to ABC Box Company; 123 Main Street, Wash.
> DC 20036. Tenant consent on form.
>
> **O. Specialist**
>
> 06/18/03 No response received from ABC Box Company regarding wage form
> mailed on 06/03/03. Faxed copy of original wage form to 202-555-1212
> to the attention of Bubba Miller.
>
> **O. Specialist**
>
> 07/07/03 Called ABC Box Company (202-555-1234) to verify wage
> information. Spoke with Cindy Blue, who informed writer that the
> company does not honor verbal income verification requests and that
> Marvin Tammer, who handles written income verification, is out on
> extended leave for two months.

###### O. Specialist

> 07/10/03 **"Annual Review 10/03** completed. No assets. No change in
> family composition. Sole income from wages earned at ABC Box Company.
> No response to two attempts to obtain third party verification from
> ABC Box Company. Average weekly pay is \$250 based on submitted
> consecutive pay stubs (12 in quantity) for the months of April, May
> and June. Offered choice of flat rent of \$465 or income based rent of
> \$325. Tenant selected income based rent. TTP is \$325 effective
> 10/03."

**O. Specialist**

The above documentation demonstrates the PHA's effort to comply with
third party verification requirements. The PHA documents on 07/10/03,
why tenant provided documents were used, which justifies why third party
verification was not available.

**Q:** When may a PHA make an exception to third party verification?

**A:** The PHA may make an exception to obtaining third party
verification when:

**[For Income:]{.underline}**

(1) Staff has made at least two documented efforts (mail, fax, telephone
    call, or e-mail) to obtain third party verification of income and no
    response is received; or

(2) An independent source does not have the capability of sending
    written third party verification directly to the PHA or does not
    facilitate oral third party verification.

> **[For Assets and Expenses:]{.underline}**

(1) The asset or expense to be verified is not a significant amount and
    would have minimum impact on the total tenant payment (TTP)
    **[and]{.underline}** the PHA is able to verify the asset or expense
    through review of original documents provided by the tenant; or

(2) An independent source does not have the capability of sending
    written third party verification directly to the PHA or does not
    facilitate oral third party verification; or

(3) It is not cost effective or reasonable to obtain third party
    verification of assets and expenses.

**[Note:]{.underline}** The cost of postage and envelopes to obtain
third party verification of income, assets, and expenses is not an
unreasonable cost.

**Example:** Mandy Lee reports that she has a savings account with a
monthly average balance of \$1,000.00, which earns 1.25% interest
(annual percentage rate). Ms. Lee provides the PHA with the most recent
bank statement and bank statements for the last year. The PHA pursues
third party verification of the reported asset, only to learn that the
bank charges a \$10 verification fee. It is not cost effective or
reasonable for the PHA to incur the \$10 verification fee (and
administrative time) to receive the verification. See below:

**Costs:**

> **Third Party Verification Costs Document Review Costs**

\$10.00 Verification Fee \$0.00

\$ 9.00 Administrative Time

**Total Costs \$19.00 \$0.00**

> The PHA incurs cost of \$19.00 to process a third party verification
> request of a \$12.50 annual interest payment that can be accurately
> verified by reviewing documents provided by the tenant, and will
> result in little change in the family's TTP if the interest amount was
> slightly more than according to third party verification versus the
> amount obtained by document review.

**Q:** How does HUD define unavailability of third party verification?

**A:** The unavailability of third party verification is defined as the
existence of one or more of the following situations: (1) it is not cost
effective or reasonable to obtain; (2) the PHA has made at least two (2)
documented attempts to obtain and the independent source fails to
respond to the PHA's verification request; or (3) an independent source
does not have the capability of providing written third party
verification directly to the PHA or does not facilitate oral third party
verification.

**Q:** How does the PHA properly document the unavailability of third
party verification?

**A:** When documenting the unavailability of third party verification
in the family file, the PHA should include the dates, times, company
name and person request sent to, how verification request was sent and
non-receipt of response. See example below.

**Example:** Mary Tenant reports that she is employed by K-mart as of
June 1, 2003, and earns \$300 a month. Ms. Tenant also reports she no
longer receives Transitional Emergency Medical and Housing Assistance
(TEMHA) benefits. The PHA mails a verification form to Ms. Jones, Human
Resource Specialist at K-mart located at 123 Main Street in Woodlawn,
Maryland on June 23, 2003. After ten business days, the PHA has not
received a response from K-mart, and on July 7, 2003, the PHA faxes a
verification form to K-mart, to the attention of Ms. Jones at (410)
555-1212. After ten business days, the PHA still has not received a
response from K-mart and resorts to reviewing tenant provided documents
(original pay stubs and notice of employment from K-mart that was sent
directly to Ms. Tenant. The family file should be documented as follows:

**06/23/03** Ms. Tenant in office to complete annual re-examination for
October 2003. Ms. Tenant reports no change in family composition
(household size continues to be 1), her sole source of income is wages
from K-mart. Ms. Tenant reports she no longer receives TEMHA benefits as
of 05/31/03. Writer contacted Ms. Miller at the Department of Social
Services by phone (410) 555-6789 to confirm termination of benefits at
9:47AM. Ms. Miller, DSS caseworker indicates that benefit amount of
\$132 terminated 05/31/03. Participant submitted the following original
documents: DSS Notice of Benefit Termination, Notice of Employment and
two current pay stubs dated 06/13/03 and 06/20/03. Documents indicate
TEMHA benefits terminated 05/31/03; employment with K-mart began
06/01/03 and Ms. Tenant earns \$10.00 an hour, average weekly pay is
\$400. Ms. Tenant signed consent form for income verification. Work
Number via fax at 10:00AM. Mailed a verification form to Ms. Jones,
Human Resource Specialist at K-mart located at 123 Main Street in
Woodlawn, Maryland 21244. Contact person and mailing address taken from
Notice of Employment letter (copy in file). Informed Ms. Tenant that
based on tenant provided documents, her estimated TTP is \$520 a month.
However, upon receipt of third party verification the TTP may be higher
or lower than the estimated TTP at the time of interview and the PHA
will mail a notice of change in TTP effective October 2003 by August 15,
2003. Offered option of flat rent of \$550 or income based rent of
\$520. Ms. Tenant opted for the income based rent of \$520, however
indicated that upon calculation of TTP after receipt of third party
verification and if income based rent exceeded \$550, she would prefer
to select a flat rent. Rent choice form signed by tenant and writer.
O***. Specialist***

**07/07/03** No response received from mailed request to K-mart for
employment verification. Faxed copy of mailed verification form to
K-mart, to the attention of Ms. Jones at (410) 555-2345. Fax number
obtained from Notice of Employment letter previously included in tenant
file.

**O. Specialist**

**07/18/03** No response to writer's mailed and faxed request for
employment verification from K-mart. Completed **Annual Re-examination
for 10/2003 -** No change in family composition and no assets reported
during 06/23/03 interview with Ms. Tenant. Previously reported TEMHA
benefits of \$132 a month, terminated 05/31/03 based on oral third party
verification with Ms. Miller, Caseworker at the Department of Social
Services by phone (410) 555-4567 on 06/23/03 at 9:47AM. and review of
tenant provided original DSS Notice of Terminated Benefits. Ms. Tenant
reports sole source of income from wages earned at K-mart effective June
1, 2003. Writer made three documented attempts to obtain third party
verification of Ms. Tenant's employment with K-mart. No response
received from K-mart. Based on original pay stubs and Notice of
Employment letter submitted by tenant, employment began 06/01/03 and
average weekly pay is \$400. New TTP effective 10/01/03 is \$520.

**O. Specialist**

**07/30/03** Mailed Supplement to Dwelling Lease to tenant by regular
mail. TTP increased to \$520 from \$32, effective 10/01/03.

**O. Specialist**

When documenting the family file, be sure to include all relevant facts
about an office visit or action that you took. Always include
documentation in the file. Indicate receipt date on the document. Do not
include opinions. Anyone that reviews the file after you should be able
to follow along and understand what has transpired. The writer should
end each entry with his/her name (full name or first initial of first
name and full last name.)

**[Note:]{.underline}** The PHA should also include a copy of rent
calculations with documentation used to determine TTP. A copy of the
calculator tape and/or worksheets used to determine TTP are quite useful
during Rental Integrity Monitoring (RIM) reviews or audits.

## X. VERIFICATION OF MANDATORY DEDUCTIONS

In determining adjusted income, in accordance with 24 CFR §5.611(a),
PHAs are required to deduct the following amounts from annual income:

-   \$480 for each dependent;

-   \$400 for any elderly or disabled family;

-   The sum of the following, to the extent that the sum exceeds 3% of
    annual income:

    -   Unreimbursed medical expenses of any elderly family or disabled
        family; and

    -   Unreimbursed reasonable attendant care and auxiliary apparatus
        expenses for each member of the family who is a person with
        disabilities, to the extent necessary to enable any member of
        the family (including the member who is a person with
        disabilities) to be employed. **Note:** This deduction may not
        exceed the earned income received by family members who are 18
        years of age or older and who are able to work because of such
        attendant care or auxiliary apparatus;

```{=html}
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```
-   Any reasonable childcare expenses necessary to enable a member of
    the family to be employed or to further his or her education.

**A.** **DEPENDENT DEDUCTION**

**Dependent Deduction** 24 CFR §5.611(a)(1)

A dependent is defined as a member of the family (except foster children
and foster adults) other than the family head or spouse, who is under 18
years of age, or is a person with a disability, or is a full-time
student. See 24 CFR §5.603.

**Q:** How do you verify a family members' eligibility for the \$480
dependent deduction?

**A:** Initially, PHAs obtain a copy of each family member's birth
certificate, social security card, and/or other appropriate
documentation to verify the name, sex, SSN, date of birth disability,
and relationship to the head. If the family member is under 18, or has a
disability, or is over the age of 18 **[and]{.underline}** a full-time
student, each family member meeting these requirements is entitled to
the \$480 dependent deduction.

**Verifying full-time student status.** Upon consent by the family
member, the PHA should pursue third party verification of full-time
student status. Documentation may include current enrollment status
letter, which includes school name and address, dates of enrollment and
total number of classes or credits attempted in a given
quarter/semester, current school transcript, most recent grade report,
etc. The PHA should mail verification requests directly to the school
and receive the completed verification directly from the school.

**Note:** The school or vocational training center defines full-time
status. Typically, full-time status consists of 12 or more attempted
credit hours per semester/quarter.

**Q:** What is the definition of a full-time student?

**A:** HUD defines a full-time student as a person who is attending
school or vocational training on a full-time basis. See 24 CFR
§5.603(b).

**Example:**

## Family Composition

> Effective Date of Action: October 1, 2003

  ----------- ------------ ---------- --------- -------------- ---------- ---------
  **Family    **Relation   **School   **Sex**   **Disabled**   **Date of  **Age
  Member      to Head**    Grade**                             Birth**    \***
  Name**                                                                  

  Jones, Tina Head         N/A        F         Y              01/01/71   32

  Jones, Sam  Son          12^th^     M         Y              05/14/84   19

  Holly, Amy  Daughter     10^th^     F         N              10/15/87   15

  Miller, Tim Foster Son   9^th^      M         Y              12/12/88   14
  ----------- ------------ ---------- --------- -------------- ---------- ---------

\* As of effective date of action.

**Q:** Upon effective verification, which family members in the above
chart are entitled to the \$480 dependent deduction and why?

**A:** Although Sam Jones is over the age of 18, Sam is a full-time
student. He is also disabled. Thus, he is eligible for the \$480
dependent deduction.

> Amy Holly is under the age of 18 and is not a foster child. Thus, she
> is eligible for the \$480 dependent deduction.
>
> Although Tim Miller is under the age of 14, he is
> **[not]{.underline}** entitled to the \$480 dependent deduction
> because he is a foster child, and by definition, is excluded from
> receiving the \$480 dependent deduction.

# 

# B. DISABLED FAMILY DEDUCTION

# 

# Disabled Family Deduction 24 CFR §5.611(a)(2)

A disabled family is defined as a family whose, head, spouse, or sole
member is a person with disabilities. It may include two or more persons
with disabilities living together, or one or more persons with
disabilities living with one or more live-in aides. See 24 CFR §5.403.

A person with disabilities is defined as a person who has a disability,
as defined in 42 USC 423; is determined, pursuant to HUD regulations, to
have a physical, mental, or emotional impairment that (A) is expected to
be of long-continued and indefinite duration; (B) substantially impedes
his or her ability to live independently; and (C) is of such a nature
that the ability to live independently could be improved by more
suitable housing conditions; or has a developmental disability as
defined in 42 USC 6001.

**[Note:]{.underline}** If the household is classified as a disabled
family and an elderly family, the household is entitled to **only
[one]{.underline}** \$400 deduction.

**Q:** How do you verify a family's eligibility for the \$400 disabled
family deduction?

**A:** There are a couple of ways to verify a family's eligibility for
the disabled family deduction. If the head, spouse or sole member is
receiving disability benefits from the Social Security Administration
(SSA), the family member is disabled. The PHA may verify payment of SSA
disability benefits to the family member through TASS, or if TASS is not
available, the PHA may contact SSA by phone with the family member on
the line to confirm disability payments, or if third party verification
is not available, the PHA may view an original SSA notice provided by
the tenant to confirm current disability payments.

Secondly, for those individuals with disabilities that do not receive
disability payments from SSA, the PHA may use a disability verification
form to document that the tenant meets the HUD eligibility definition of
a person with a disabilities. The PHA should send the form directly to a
qualified professional having knowledge of the person's disability, who
can verify the tenant's status. PHAs may also accept doctor statements,
but such statement should meet the disability definition requirements as
outlined in USC Title 42, Chapter 7, Subchapter II, Section 423. See the
Appendix of the Occupancy Guidebook for sample verification forms.

> **[Note:]{.underline}** It is unlawful for PHA staff to make an
> inquiry to determine whether an applicant for a dwelling, a person
> intending to reside in that dwelling after it is sold, rented, or made
> available, or any person associated with that person, has a handicap
> or to make inquiry as to the nature or severity of a handicap of such
> a person.
>
> See 24 CFR §100.202(c).
>
> The above cited regulation does not prohibit the following inquiries,
> provided these inquires are made of all applicants, whether or not
> they have handicaps:

-   Inquiry into an applicant's ability to meet the requirements of
    ownership or tenancy;

-   Inquiry to determine whether an applicant is qualified for a
    dwelling available only to persons with handicaps or to persons with
    a particular type of handicap;

-   Inquiry to determine whether an applicant for a dwelling Is
    qualified for a priority available to persons with handicaps or to
    persons with a particular type of handicap;

-   Inquiring whether an applicant for a dwelling is a current illegal
    abuser or addict of a controlled substance;

-   Inquiring whether an applicant has been convicted of the illegal
    manufacture or distribution of a controlled substance.

**Example:** Cindy Kraus reports for an intake interview at the PHA. Ms.
Kraus has applied for low-income housing. The interviewer reviews the
application and sees that Ms. Kraus has checked the "yes" to the
question "Is the head of household or spouse age 62 or older or a person
with a disability?" listed under the Qualifying For Deductions in
Calculating Rent section of the application.

**Q:** May the PHA ask Ms. Kraus what is the nature of her disability?

**A:** The PHA may not ask Ms. Kraus the nature of her disability.
However, the PHA may ask Ms. Kraus if she needs a unit with accessible
features, provided that the PHA asks all participants this question,
regardless of whether the participant appears to have a disability or
says he/she has a disability. The PHA will verify the disability status
if the deduction depends on the status.

# C. ELDERLY FAMILY DEDUCTION

**Elderly Family Deduction** 24 CFR §5.611(a)(2)

An elderly family is defined as a family whose head, spouse, or sole
member is a person who is at least 62 years of age. See 24 CFR §5.403.

**[Note:]{.underline}** If the household is classified as an elderly
family and a disabled family, the household is entitled to **only**
**[one]{.underline}** \$400 deduction.

**Q:** How do you verify a family's eligibility for the \$400 elderly
deduction?

**A:** Initially, PHAs maintain a copy of each family member's birth
certificate and social security card to verify the name, sex, SSN, date
of birth and relationship to the head. If the head, spouse, or sole
family member is at least 62 years of age, then the family is eligible
for the elderly family deduction.

**Example:**

## Family Composition

> Effective Date of Action: October 1, 2003

  ----------- ------------ ---------- --------- -------------- ---------- ---------
  **Family    **Relation   **School   **Sex**   **Disabled**   **Date of  **Age
  Member      to Head**    Grade**                             Birth**    \***
  Name**                                                                  

  Handy, Tim  Head         N/A        M         Y              01/01/71   32

  Singer,     Mother       N/A        F         N              05/14/34   68
  Tina                                                                    

  Hall, Shari Daughter     10^th^     F         N              05/15/87   15

  Hill, Kim   Daughter     9^th^      F         Y              11/12/88   14
  ----------- ------------ ---------- --------- -------------- ---------- ---------

\* As of effective date of action.

**Q:** Upon effective verification, is this family entitled to the \$400
elderly family deduction?

**A:** Although the family household contains a family member that is at
least 62 years of age, this family is not entitled to the \$400 elderly
family deduction because the elderly family member is not the head of
household or spouse and the family member is not the sole member of the
household. However, the family is eligible for the \$400 disabled family
deduction since the head of household is disabled.

**D. CHILD CARE EXPENSE DEDUCTION**

**Child Care Expense Deduction** 24 CFR §5.611(a)(4)

Child care expenses are defined as amounts anticipated to be paid by the
family for the care of children under 13 years of age during the period
for which annual income is computed, but only where such care is
necessary to enable a family member to actively seek employment, be
gainfully employed, or to further his or her education and only to the
extent such amounts are not reimbursed. The amount deducted shall
reflect reasonable charges for childcare. In the case of childcare
necessary to permit employment, the amount deducted shall not exceed the
amount of employment income that is included in annual income. See 24
CFR §5.603.

**Q:** When may a family be eligible for the childcare expense
deduction?

**A:** A family may be eligible for the childcare expense deduction when
such expenses are incurred for children under the age of 13, to enable a
family member to work, seek work, or further his or her education.

**Q:** How do you verify a family's eligibility for the childcare
expense deduction?

**A:** Determining a family's eligibility for the childcare expense
deduction is a two-step process. First, you must verify that the
incurred childcare expense enables a family member to actively seek
employment, to be gainfully employed, or to further his/her education.
Secondly, you must verify that the incurred childcare expense is for a
child (or children) under the age of thirteen. The PHA should be sure to
inquire about childcare expenses that may be incurred for before and
after school care and during the summer months.

It may be a challenge to verify that a family member is actively seeking
work, if he/she is not doing so as a requirement for Welfare to Work,
continued collection of unemployment compensation, or other state
program. Typically, adequate verification of a family member actively
seeking work may consist of written or oral third party verification
from a local or state government agency that governs work-related
activities. In the event that third party verification is not available,
the PHA may rely on tenant provided documents along with a notarized
statement that indicates their efforts to seek employment.

For family members that are gainfully employed, simply use the
employment verification to confirm the family's eligibility for the
childcare expense deduction.

**Note:** Child support payments made to another on behalf of a minor
who is not living in the household are not a deductible childcare
expense.

Childcare expenses for a disabled family member, who is 13 years of age
or older, are not a deductible childcare expense. However, the childcare
expenses may be an allowable disability expense deduction.

> The PHA may not choose the type of childcare to be provided for the
> head of household's child(ren). The PHA may not refuse to give a
> family the childcare expense deduction because there is an adult
> family member in the household that may be available to provide
> childcare. See 24 CFR §5.611(a)(4).

**[Example:]{.underline}** Cassandra Williams works a full-time job
during the day and has two minor children ages 2 and 5. Ms. Williams
also has an adult child that is unemployed and is not attending school
or vocational training or actively seeking employment. Ms. Williams
reports that she pays \$150 a week for childcare. The PHA verifies the
childcare expense using third party verification. However, the PHA has a
policy that states "The PHA will not normally allow a deduction for
child care expenses when the household contains an unemployed adult
family member, who is capable of caring for the child(ren). However, the
PHA may make an exception to this policy if the unemployed adult family
member is not capable of caring for the child(ren) due to a disability.
The head of household must document the disability that prevents the
adult from providing childcare." The PHA does not give Ms. Williams the
childcare expense deduction.

**Q:** May a PHA disallow a deduction for childcare expense because
there is an unemployed adult family member available to provide
childcare?

**A:** The PHA has erred by disallowing the childcare expense deduction.
A PHA may **not** disallow a deduction for childcare expense because
there is an unemployed adult family member that may be available to
provide childcare. A PHA may not decide who will provide childcare for a
participant's child(ren), nor may the PHA decide the type of childcare
available for a participant's child(ren). PHAs may not adopt and enforce
policies that deny participants mandatory deduction specified in the
regulations.

**[Example:]{.underline}** Tim Williams (Head of Household) is employed
by ABC Box Company. Mr. Williams has two minor children ages 2 and 4.
The tenant reports that he pays Kinder Care Center \$250 a month for
childcare for both children.

To determine if the Williams' family is eligible for the childcare
deduction:

-   Does the childcare expense enable Mr. Williams to actively seek
    employment, be gainfully employed or further his education? If No,
    the family is not eligible for the deduction. If yes, continue to
    next question.

-   Are Mr. Williams' children under the age of 13? If No, the family is
    not eligible for the deduction. If yes, the family is eligible for
    the deduction and the PHA should obtain third party verification of
    the childcare expense.

**E. MEDICAL EXPENSE DEDUCTION**

**Medical Expense Deduction** 24 CFR §5.611(a)(3)(i)

Disabled or elderly families are entitled to a deduction for
unreimbursed medical expenses. The allowable medical expense is that
portion that exceeds three percent of annual income.

A disabled family is defined as a family whose head, spouse or sole
member is a person with disabilities. It may include two or more persons
with disabilities living together, or one or more persons with
disabilities living with one or more live-in-aides. See 24 CFR §5.403.

An elderly family is defined as a family whose head, spouse, or sole
member is a person who is at least 62 years of age. See 24 CFR §5.403.

The medical expense deduction is permitted only for households in which
the head or spouse is at least 62 years of age or disabled.

If the household is eligible for the medical expense deduction, the
medical expenses of all family members may be counted.

**Note:** The PHA should review all medical expense documents provided
by the family very closely to ensure that the PHA is accurately
anticipating regular, ongoing and anticipated expenses during the coming
year. The PHA should be careful not to include medical bills from
previous years that were recently paid in full during the current year

The PHA must define eligible medical expenses in its written policies.
PHAs may refer to the Internal Revenue Service Publication 502 for
definitions and examples of allowable medical expenses (some listed
below):

-   Acupuncture

-   Artificial Limbs

-   Braille Books and Magazines

-   Chiropractor

-   Crutches

-   Dental Treatment

-   Hearing Aids

-   Health Insurance Premiums

-   Home Care

-   Hospital Services

-   Laboratory Fees

-   Long Term Care

-   Monthly Payment on Medical Bills

-   Prescription Medicines

-   Nursing Home

-   Optometrist

-   Oxygen

-   Surgery

-   Therapy

-   Transportation

**Verifying Unreimbursed Medical Expenses**

With increasing privacy laws requirements, PHAs may have difficulty in
verifying unreimbursed medical expenses. The Occupancy Guidebook
provides sample verification forms in Appendix VIII, that PHAs may use
to obtain third party verification of unreimbursed medical expenses.

In the event the health care provider does not respond to the PHAs
verification request, the PHA may review tenant-provided documents.
However, the PHA should review tenant-provided documents with scrutiny
to ensure that expenses are not counted twice and ineligible expenses
are not counted.

**Example:** During Wilmetta Harris' 10/01/02 annual reexamination
conducted on June 10, 2002, Ms. Harris reported that she was paying \$50
a month on a past due medical bill to Dr. Adajay totaling \$800.00. The
bill will be paid in full by October 2003. During Ms. Harris' current
reexamination on June 23, 2003 (for 10/01/03), Ms. Harris submits
cancelled checks to verify medical expenses for the same bill to Dr.
Adajay (from the prior year) and requested a medical expense deduction.

The above referenced medical expense is not allowable since the expense
will not continue as of the effective date of the current reexamination
date (October 2003).

**Calculating Medical Expenses**

If a family has medical expenses and no disability assistance expenses,
the allowable medical expense is that portion of total medical expenses
that exceeds three (3%) percent of annual income.

The PHA should be sure not to include expenses that are reimbursed by
insurance or another third party.

**Example:** Wilbert Manning is at least 62 years of age. Mr. Manning is
the sole member of the household. He receives a monthly social security
benefit check of \$600. A Medicare insurance deduction of \$54.80 is
withheld from his benefit check, resulting in a net monthly benefit
payment of \$545.20. Mr. Manning also reports that his average monthly
out of pocket costs for prescriptions is \$75.00 (verified by the PHA).

**Q:** How is the allowable medical expense deduction calculated?

**A:** The calculation of the allowable medical expense deduction is a
multi-step process. The PHA must first calculate the household's total
annual income.

1\. Annual gross income: \$600 months X 12 months \$7,200

The PHA must then calculate total allowable medical expenses.

2\. Medicare insurance premium \$54.80 month X 12 \$ 658

Prescriptions \$75 month X 12 [\$ 900]{.underline}

Total allowable medical expenses **\$1,558**

Next, The PHA must determine the threshold.

3\. Multiply annual income by 3%: \$7,200 X 3% \$ 216

Then the PHA will determine the allowable medical expenses to be
deducted from annual income.

4\. Subtract \$216 from \$1,558. This is the total allowable medical
expenses deduction. **\$1,342**

**[Note:]{.underline}** When a participant's social security benefit is
reduced for Medicare Insurance premiums, the PHA should always use the
full gross benefit amount in determining annual income.

**F. DISABILITY ASSISTANCE EXPENSE DEDUCTION**

**Disability Assistance Expense Deduction** 24 CFR §5.611(a)(3)(ii)

Families are entitled to a deduction for unreimbursed medical expenses
to cover care attendants and auxiliary apparatus expenses for each
member of the family who is a person with disabilities, to the extent
necessary to enable any member of the family (including the member who
is a person with disabilities) to be employed. This deduction [may not
exceed]{.underline} the earned income received by family members who are
18 years of age or older, and who are able to work because of such
attendant care or auxiliary apparatus. The allowable disability
assistance expense is that portion that exceeds three percent of annual
income.

Examples of Auxiliary Apparatus Items:

-   Wheelchairs

-   Ramps

-   Adaptations to vehicles

-   Special equipment to enable a blind person to read or type

**Note:** These items must be directly related to permitting the
disabled person or other family member to work.

PHAs should define and provide examples of auxiliary apparatus items
that will qualify the family for the disability assistance expense
deduction.

**Example:** Gary Dillard pays an attendant \$100 a week to stay with
his disabled 18-year-old daughter so that he may go to work every day.
These payments are an eligible disability expense. Mr. Dillard works at
Mr. Tire and earns \$300 a week.

**Q:** How is the disability assistance expense deduction calculated?

**A:** The calculation of the allowable disability assistance expense
deduction is a multi-step process. The PHA must first calculate the
household's total annual income.

1\. Annual income: \$300/week X 52 weeks \$15,600

The PHA must then calculate total allowable disability assistance
expense deduction.

2\. Attendant care \$100/week X 52 \$5,200

Next, The PHA must determine the threshold (3% of annual income).

3\. Multiply annual income by 3%: \$15,600 X 3% \$ 468

Then the PHA will determine the allowable disability assistance expense
to be deducted from annual income.

4\. Subtract \$468 from \$5,200. This is the total allowable disability
assistance expenses deduction. **\$4,732**

**G. WHEN A FAMILY IS ELIGIBLE FOR MEDICAL & DISABILITY ASSISTANCE
EXPENSES**

**When a Family is Eligible for Medical and Disability Assistance
Expenses**

If an elderly family or disabled family has both medical expenses and
disability assistance expenses, the PHA must use a special calculation
to insure that the family's portion that exceeds three percent of annual
income is only applied one time. Since the allowable disability
assistance expense is limited by the amount earned by the person that is
enabled to work, the allowable disability assistance expense must be
calculated [before]{.underline} the allowable medical expenses are
calculated.

**Example:** Jill Smith (Head of Household) is employed at Margo's
Florist and earns \$10,000 a year and receives disability benefits
totaling \$5,000 a year. Ms. Smith is disabled and has a disabled adult
son (John Moore). Jill Smith also receives disability benefits totaling
\$5,000 annually for her son John. The family has \$3,000 in medical
expenses and \$4,000 in expenses for disability assistance that allows
Ms. Smith to work.

Three percent (3%) of annual income is \$600, as calculated below:

> **[Annual Income:]{.underline}**

Wage Income \$10,000

Disability Payments [\$10,000]{.underline}

> Total Annual Income \$20,000

[X 3%]{.underline}

3% of Annual Income \$ 600

> **[Allowable Disability Assistance Expense]{.underline}**
>
> Total Disability Assistance Expense \$4,000
>
> Less: 3% of Annual Income [- 600]{.underline}
>
> Allowable Disability Assistance Expense **\$3,400**

Allowable Medical Expense **\$3,000**

> (Entire 3% of annual income was deducted to compute the allowable
> disability assistance expenses.)

**Example:** When disability assistance expenses [exceed]{.underline}
the amount earned by the family member (enabled to work).

> Harry Gordon (Head of Household) is employed at Bob's Carpets and
> earns \$3,000 a year and receives disability benefits totaling
> \$10,000 a year. Mr. Gordon is disabled and has a disabled adult child
> (Gary Gordon). Gary Gordon also receives disability benefits totaling
> \$5,000 a year. The family has \$1,000 in medical expenses and \$4,000
> in expenses for disability assistance that allows Harry Gordon to
> work.

Three percent (3%) of annual income is \$540, as calculated below:

> **[Annual Income:]{.underline}**

Wage Income \$ 3,000

Disability Payments [\$15,000]{.underline}

> Total Annual Income \$18,000

[X 3%]{.underline}

3% of Annual Income \$ 540

> **[Allowable Disability Assistance Expense]{.underline}**
>
> Total Disability Assistance Expense \$4,000
>
> Less: 3% of Annual Income [- 540]{.underline}
>
> See note below \$3,460
>
> Allowable Disability Assistance Expense **\$3,000**
>
> **Note: Disability Assistance Expense cannot exceed \$3,000 (wages
> earned)**

Allowable Medical Expense **\$1,000**

> (Entire 3% of annual income was deducted to compute the allowable
> disability assistance expenses.)

When disability assistance expenses [exceeds]{.underline} the amount
earned by the person who was enabled to work, the allowance for the
disability assistance expense is capped at the amount earned by that
family member. When the family is also eligible for the medical expense
deduction, the 3% is typically exhausted in the first calculation and
the 3% will not be applied when calculating the allowable medical
expense deduction.

**Example:** When disability assistance expenses are [less]{.underline}
than the three percent of annual income.

> Sophia Bailey (Head of Household) is an elderly participant with an
> adult, disabled and employed family member (Karen Bailey). Karen
> Bailey earns \$4,000 a year and receives \$6,000 in disability
> payments a year. Sophia Bailey receives \$10,000 in old age survivor's
> benefits a year. The family has \$1,000 in medical expenses and \$500
> in expenses for disability assistance that allows Karen Bailey to
> work.

Three percent (3%) of annual income is \$600, as calculated below:

> **[Annual Income:]{.underline}**

Wage Income \$ 4,000

Old Age Survivor's Benefit \$10,000

> Disability Payments [\$ 6,000]{.underline}
>
> Total Annual Income \$20,000

[X 3%]{.underline}

3% of Annual Income \$ 600

> **[Allowable Disability Assistance Expense]{.underline}**
>
> Total Disability Assistance Expense \$ 500
>
> Less: 3% of Annual Income [- 600]{.underline}
>
> \$ (100)
>
> Allowable Disability Assistance Expense **\$ 0**

Total Medical Expense \$1,000

> Less: Balance of 3% of Annual Income [\$ (100]{.underline})
>
> Allowable Medical Expense **\$ 900**

When a family's disability assistance expenses are less than the three
percent of annual income, the family will receive no deduction for the
disability assistance expense. However, the medical expense deduction
will be equal to the amount by which the sum of both disability and
medical expenses exceed three percent of annual income.

**H. COMMENTS ON VERIFICATION OF MEDICAL/DISABILITY ASSISTANCE
EXPENSES**

The Department of Health and Human Services has developed Federal
privacy standards to protect patients' medical records and other health
information provided to health plans, doctors, hospitals and other
health care providers as of April 14, 2003. The new standards provide
patients with access to their medical records and more control over how
their personal health information is used and disclosed. These patient
privacy protections are a part of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA). HIPAA included provisions designed
to encourage electronic transactions and also required new safeguards to
protect the security and confidentiality of health information. The
final regulation covers health plans, health care clearinghouses, and
those health care providers who conduct certain financial and
administrative transactions (i.e. enrollment, billing and eligibility
verification) electronically. Most health insurers, pharmacies, doctors
and other health care providers were required to comply with these
federal standards beginning April 14, 2003.

The privacy requirements under HIPAA have a significant impact on how
PHAs verify disability status, medical expenses, and disability
assistance expenses. HIPAA requires that patients sign a specific
authorization before a covered entity could release their medical
information to a third party for purposes not related to the patients
health care. PHAs may find that many verification requests will not be
completed and returned directly to the PHA. PHAs will then have to rely
on tenant provided documentation and document in the tenant file why
third party verification was not available.

PHAs must remember that they are not permitted to inquire about the
nature or extent of a person's disability. The PHA may not inquire about
a person's diagnosis or details of treatment for a disability or medical
condition. If the PHA receives a verification document that provides
such information, the PHA should not place this information in the
tenant file. The PHA should destroy the document. Under no circumstances
should a PHA request a participant's medical record(s). For more
information on health care privacy laws, see the Department of Health
and Human Services' website at
[www.os.dhhs.gov](http://www.os.dhhs.gov/).

## XI. VERIFICATION REFERENCES

24 CFR Part 5

24 CFR Part 903

24 CFR Part 960

24 CFR Part 982

Public Housing Occupancy Guidebook (June 2003)

Public and Indian Housing Notice 2001-15 (May 2001)

Housing Choice Voucher Program Guidebook (April 2001)

The Tenant Integrity Program Training Guide (October 1989)

Paperwork Reduction.

The information collection requirements contained in this guidance have
been approved by the Office of Management and Budget (OMB under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3520) and assigned OMB
control number(s) 2577-0220.

In accordance with the Paperwork Reduction Act, HUD may not conduct or
sponsor, and a person is not

required to respond to, a collection of information unless the
collection displays a currently valid OMB control number.