**U.S. Department of Housing and Urban Development**

**Office of Public and Indian Housing**

**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**Special Attention of: Notice PIH 2001-15 (HA)**

Field Office Directors of Public Housing; **Issued: May 2, 2001**

Secretary's Representatives; **Expires: May 31, 2002**

Public Housing Agencies;

Resident Management Corporations;

Resident Councils;

**Subject: Improving Income Integrity in Public and Assisted Housing**

**Applicability: Public Housing, Housing Choice Voucher, and Moderate
Rehabilitation Programs**

**Purpose:** The purpose of this Notice is to emphasize timely,
accurate, and fair income and rent determinations by Public Housing
Agencies (PHAs). This includes the following:

-   Assuring that PHAs and residents are in compliance with required
    statutes and regulations;

-   Identifying frequent errors made by PHAs and residents in reporting
    and calculating income and determining rent;

-   Providing ideas and tips to PHAs to improve income integrity; and

-   Identifying PHAs with state-of-the-art, up-front techniques to
    verify income.

**Background**

Reexaminations of family income and composition must be conducted at
least annually for families who pay an income based rent in public
housing and for families in the Housing Choice Voucher Program \[24 CFR
§960.257(a)(1), §982.516(a)\]. For public housing families who choose
flat rents, PHAs must conduct reexaminations of family composition at
least annually and must conduct a reexamination of family income at
least once every three years \[24 CFR §960.257(a)(2)\]. PHAs must adopt
admissions and occupancy policies concerning annual and interim
reexaminations and these policies must be in accordance with the PHA
plan. \[24 CFR§ 960.257(c)\]. Families are obligated to supply any
information that the PHAs or HUD determines is necessary in
administration of the public housing program and for use in a regularly
scheduled reexamination or an interim reexamination \[24 CFR
§§960.259(a)(1) and (2)\]. Families must submit consent forms for
obtaining wage and claim information from State Wage Information
Collection Agencies (SWICAs) and to authorize any depository or private
source of income, or any Federal, State, or local agency, to furnish or
release to the PHA or HUD such information determined to be necessary
\[24 CFR §960.259(a)(3)(ii), §960.259(b), §982.516(g)\]. PHAs must
obtain and document in the family files the third party verification
received or document why it is not available \[24 CFR §960.259 and
§982.516(a)(2)\].

The two main causes of incorrect income and rent determinations are:

1)  Inconsistencies in the provision, collection and use of complete and
    accurate income information for resident families; and

2)  Error by PHAs in calculating income correctly, either by not
    granting exclusions and deductions to which resident families are
    entitled, or by other mistakes such as miscalculation and computer
    error.

Improving income integrity is vital for the Department of Housing and
Urban Development (HUD). HUD has recently been criticized for weakness
in its income determination techniques, including rent calculations in
public and assisted housing, by HUD's Office of the Inspector General
and the U.S. General Accounting Office. Additionally, in March 2001,
HUD's Office of Policy Development and Research released the interim
report on "Quality Control for Rental Assistance Subsidies
Determinations." This analysis of 2,403 households representing 600
assisted housing projects (public housing, PHA administered Section 8,
Owner-administered Section 8) found that:

-   36 percent of all households paid at least \$5 less per month than
    they should (with an average error of \$150 per month),

-   40 percent of all households paid the correct amount of rent within
    \$5 per month (29 percent paid exactly the right amount), and

-   24 percent of all households paid at least \$5 more per month than
    they should (with an average error of \$56 per month).

**Common Mistakes Made by PHAs in Determining Included and Excluded
Income and Deductions**

It is important to remember that a family's anticipated total income or
gross income determines not only eligibility for housing assistance, but
also all the rent a family will pay and the subsidy required. A family's
anticipated income and deductions for the year following certification
or reexamination determine the family's rent (see Appendix A, *Improving
Income Integrity Guidebook*). This rent calculation requires the PHA to
determine Annual Income and Adjusted Income for a family:

1.  The ***annual income*** is determined by calculating a family's
    anticipated total or gross income minus allowable exclusions.

    \[TOTAL/GROSS INCOME -- EXCLUSIONS = ANNUAL INCOME\]

2.  The ***adjusted income*** is calculated by subtracting allowable
    deductions from the annual income. \[ANNUAL INCOME-DEDUCTIONS =
    ADJUSTED INCOME\]

Understanding these two terms is often problematic. A few additional
examples of common areas in which PHAs often make errors in reporting,
tracking, and verifying information include:

-   Unreported employment and regular occurring overtime wages;

-   Sporadic income;

-   Changes in household size; and

-   Changes in TANF or other Federal, State, or local benefits or
    assistance.

These are items that require vigilance and training on the part of the
PHA to make sure staff understand the admission and occupancy rules and
that residents understand their rights and responsibilities in relation
to their individual rent determinations. Additionally, PHAs should work
toward using all available resources that provide additional
verification information and make sure the information is retained in
tenant files.

PHAs must also take into account all anticipated eligible exclusions or
deductions from income. PHAs must obtain an applicant/resident's
***medical expenses*** and provide either an exclusion \[24 CFR §5.609
(c)(4)\] or deduction \[24 CFR §5.611 (a)(3)\], where applicable. The
exclusion covers amounts received by the family that are specifically
for, or reimbursements of, the cost of medical expenses of
[any]{.underline} family member. The deduction covers the sum of
unreimbursed medical expenses for any elderly or disabled family in
excess of 3 percent of annual income \[24 CFR §5.611 (a)(3)(i)\] and the
unreimbursed reasonable attendant care and auxiliary apparatus expenses
to the extent necessary to enable any member of the family to be
employed, but not exceed earned income received because of the attendant
care or apparatus \[24 CFR §5.611 (a)(3)(ii)\]. This impacts a
significant number of elderly and persons with disabilities. PHAs need
to review all regulations regarding medical exclusions/deductions and
determine if their intake and reexamination process is accurately
requesting, tracking and verifying costs to fully provide these
residents the required deduction or exclusion. *\[**Tip:** Educate
residents regarding maintaining accurate and complete medical bills and
receipts or use of pharmacy computerized systems to assist in
documentation.\]*

PHAs must also consider an exclusion \[24 CFR §5.609 (c)(8)(iii)\] or a
deduction \[24 CFR §5.611 (a)(4)\] for ***childcare expenses*** \[as
defined under 24 CFR §5.603(d)\]. A PHA would provide an exclusion for
out of pocket expenses if a family was receiving childcare payments from
another publicly assisted program, such as a Department of Labor
childcare grant. A family is eligible for a deduction for reasonable
childcare expenses (for children under13 years of age ) necessary to
enable a member of the family to actively seek employment, be employed
or further his or her education (including before and after school
childcare and summer camp) to the extent these expenses are not
reimbursed. *\[**Tip:** For unconventional childcare payments (e.g.,
cash) inform residents of acceptable documentation -- notarized
statements of payment by childcare provider or PHA generated third-party
forms.\]*

Often mistakes are made with self-employed individuals. **Net business
income** is counted as income \[24 CFR §5.609(b)(2)\]. The error occurs
in determining net business income, which in simple terms is the total
business income minus the expenses needed to operate the business. A
good example is a landscaper's income minus the cost of gas and machine
maintenance. *\[**Tip**: Urge self-employed residents to keep accurate
records and receipts for business expenses.\]*

Other frequent errors included failure to consider individuals who are
in certain types of ***employment training programs***. Under \[24 CFR
§5.609(c)(8)(i)\] earnings and benefits from employment training
programs funded by HUD are excluded from income and \[24 CFR
§5.609(c)(8)(v)\] excludes from income incremental earnings and benefits
from qualifying State or local employment training programs.
Additionally, \[24 CFR §5.609(c)(8)(iii)\] excludes from income any
reimbursements of out-of-pocket expenses incurred (special equipment,
clothing, transportation, and childcare) which are made solely to allow
participation in a specific program. ***\[Tip**: Educate residents on
the eligible types of training programs and encourage them to notify the
PHA when participating in such programs.\]*

For persons who have recently become employed -- these residents could
be eligible for various exclusions including the new ***earned income
disallowance*** found in \[24 CFR §960.255 (b)\] for public housing
families and in \[24 CFR §5.617\] for persons with disabilities in
public housing, Section 8 and other HUD assisted housing. This replaces
the previous 18-month earned income exclusion. The PHA is required to
provide this disallowance for any qualified family. PHAs need to notify
families that they may be eligible for this disallowance and request
appropriate documentation in order to provide this disallowance.
*\[**Tip**: Provide residents with information on the earned income
disallowance and encourage them to notify the PHA when newly
employed.\]*

**New Provisions in the Public Housing Reform Act**[^1]

PHRA adds new provisions that impact the rent calculation and treatment
of income. Appendix A, the *Improving Income Integrity Guidebook*
discusses some of these major changes, but more information can be found
in the ***"Changes to Admission and Occupancy Requirements in the Public
Housing and Section 8 Housing Assistance Programs: Final Rule,"***
published March 29, 2000 in the Federal Register.

**Verification of Income**

The most basic form of verification is a resident's ***proof of
identification***. The most important tool for identification is a
resident's ***Social Security number***. PHAs are required to obtain
Social Security Numbers for each member of a family six years and up
\[24 CFR §5.216\]. Social Security numbers are needed for most methods
of income verification. If the family member does not have or cannot get
a Social Security number, the PHA may require another document in its
place or some certification with the family member's name and the reason
the individual does not have a Social Security number. (Note: Obtaining
correct Social Security numbers and the accuracy of submission into the
Multifamily Tenant Characteristics System (MTCS) is also important in
this process.)

A PHA must obtain and document in the family file ***third party
verification*** of reported family income, value of assets, expenses
related to deductions from annual income and other factors that affect
the determination of adjusted income or income based rent. If this
information is not available, the PHA must document in the file the
reason(s). \[24 CFR §960.259(c) and §982.516(a)(2)\].

A PHA may use several methods to verify the income of a resident family.
A PHA may require and check documents and information supplied by the
family; however, to be considered third party verification the
documentation must come directly to the PHA from the provider. The types
of documents required could vary depending on the type(s) of income
being reported. The following provides examples of acceptable
verification documents:

A.  Income Documentation Materials

```{=html}
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```
1.  IRS tax forms including Form 1099, Form 1040, Form 4506 and Form
    8821;

2.  Written verification of TANF income from the appropriate welfare
    agency;

3.  Social security or disability award statements;

4.  Child Support Payment canceled checks and/or award letters; and

5.  Pay stubs or earnings statements supplied by the employer directly
    to the PHA.

    B. Deduction Documentation Materials

6.  Signed receipts or paid invoices for childcare expenses supplied by
    the provider directly to the PHA; and

7.  Receipts for medical expenses or insurance premiums supplied by the
    provider directly to the PHA.

8.  

9.  Other effective and possibly more efficient third party verification
    methods are the use of "***Up-Front" Income Verification
    Techniques,*** especially those that are [automated]{.underline}.
    These systems can enhance the accuracy of the up-front verification
    process and reduce the need for additional re-verification work by
    the PHA at the end of the process.

#### Ideas and Tips for Improving Income Integrity

The following list provides some suggested ideas and tips for PHAs to
consider to work towards improving income integrity within their
organizations.

10. Review PHA occupancy procedures (initial examination, reexamination,
    interim reexamination, income determination, and rent calculation)
    to reflect changes in the Public Housing Reform Act of 1998 (PHRA)
    and to assure that these policies reflect the actual practices
    implemented by the PHA.

11. Update any PHA generated worksheets for determining income to
    reflect current PHRA provisions and requirements. The HUD field
    office and other PHAs may have model forms that can be modified to
    fit the needs of your PHA.

12. Review the consent or waiver forms signed by the applicants. The
    forms should include all of the various methods which are presently
    used or anticipate using to verify income. (Note: PHAs should
    explain and provide to residents/applicants completed copies of all
    documents they are required to sign.)

13. Train occupancy and intake specialists on the changes in the law,
    the revised HUD 50058, MTCS 2000. Refer to the HUD Web site, which
    includes information and training materials from HUD training
    offered earlier this year.

14. Ensure that all information used to determine income and rent is
    verified and accurately reported in the MTCS system.

15. Review and enhance the competency of occupancy specialists in income
    and rent determination to assure that current program terms,
    regulations and requirements are being used and applied by PHA
    staff.

16. Explore as many third-party verification resources in your community
    and state, including technological solutions as possible. HUD Field
    Offices may be able to provide information regarding resources,
    which are currently being used by other PHAs. Additionally, state
    professional organizations may be able to provide contact
    information for these agencies to avoid duplication of efforts by
    the PHA.

17. Develop PHA internal quality control systems (i.e. supervisory
    review systems). Quality control systems need not be very elaborate
    to be effective. The most frequently implemented quality control is
    to have a supervisor or the most knowledgeable occupancy person
    rework a sample of cases performed by other staff. In situations
    where there are only one or two occupancy persons or where there are
    no experienced staff, the PHA is encouraged to review a few cases
    with another PHA with experienced staff or Field Office staff.

18. Review the **Improving Income Integrity Guidance Booklet (See
    Appendix A)**. The guidebook serves as a reference for accurately
    calculating income and lists supplementary materials.

#### Up-Front Income Verification Techniques

HUD has implemented the use of "up-front" techniques for tenant income
verification. HUD believes "up-front" techniques will greatly reduce the
error rate in applicant/tenant income reporting; verification of
information by PHAs; and rent calculations. Additionally, PHAs that use
"up-front" verification techniques make it a practice to notify
applicants and tenants that this method will be used to clarify or
recheck reported applicant/tenant income. This step is critical to
reduction in applicant/tenant fraud. There are various resources
available for PHAs to consider when attempting to do "up-front"
verification. These include:

-   Tenant Assessment Sub-System (TASS);

-   State Wage Information Collection Agencies;

-   Credit Bureau Association (CBA) Credit Reports;

-   The Work Number; and

-   Internal Revenue Service (IRS) Letter 1722.

    **TASS:** TASS matches Social Security (SS) and Supplemental
    Security Income (SSI) to comparable tenant data from MTCS and TRACS
    databases. HUD provides Internet-based access to SS and SSI benefit
    information. Each month, HUD extracts tenant data from MTCS and
    TRACS for families with initial examinations or reexaminations
    completed 8 to 9 months prior to the current month (i.e., for
    families who will be reexamined in 3 to 4 months). The SS and SSI
    reports are placed on the Internet on or about the 15^th^ to the
    20^th^ of each month. This matching effort provides quick and easy
    verification of SS and SSI benefits, and provides information on
    individuals who have unreported or underreported SS or SSI benefits.
    Further information can be found at
    [http://www.hud.gov/reac/products/tass/tass_guide_ssi.html]{.underline}.

    **State Wage Information Collection Agencies (SWICAs):** Another
    avenue for income verification is through obtaining data from SWICAs
    (often a part of the State's Department of Labor). SWICAs are a
    source of employers and reported wages. SWICAs must share data with
    PHAs upon request and on a reimbursable basis only to officers and
    employees of HUD and to representatives of a PHA based on Section
    505(i) of the Social Security Act. SWICAs can disclose wage
    information, and whether an individual is receiving, has received,
    or has made application for, unemployment compensation, and, in some
    states, disability, and the amount of any such compensation being
    received (or to be received) by such individual. A Memorandum of
    Understanding (MOU) is usually required between the PHA and the
    SWICA before information can be shared. The SWICA can charge the PHA
    a fee for providing the information. Some states share data
    electronically and others share data through paper requests. For
    more information see www.loc.gov/global/state/stategov.html to
    obtain links to State government web sites.

    **Credit Bureau Association (CBA) Credit Reports:** The CBA Credit
    Profile is derived from the Experian consumer credit database. The
    credit profile contains public record information, credit
    relationships, inquiries, and demographic information. CBA also
    provides subscribers with a list of names and addresses associated
    with a social security number. The service automatically verifies if
    the input social security number is valid and has been issued. PHAs
    can use reports from the CBA as a way of screening applicants to
    determine their credit history and ability to pay their rent. See
    www.CBAinfo.com for more information on credit reports.

    **The Work Number**: The Work Number is an automated service that
    provides controlled access to a national database of almost 40
    million employment and income records. When an applicant applies for
    aid and lists a current or previous employer, the State or Federal
    agency can have automated access to that information, provided the
    employer's records are part of The Work Number. The Work Number can
    help eliminate the need for PHA employees to process multi-page
    verification forms, while providing quick and accurate employment
    and wage information. Once signed on with the service, PHAs can
    perform wage and employment verifications with The Work Number by
    calling a toll-free phone line (**call 1-800-996-7566** for specific
    instructions) or by using the Internet at www.theworknumber.com. The
    Work Number will provide the information to public agencies free of
    charge, but the turn around time is not as quick as using the
    fee-for-service method.

    **Internal Revenue Service (IRS) Letter 1722:** An IRS Letter 1722,
    also known as a tax account listing, shows the applicant/tenants
    filing status, exemptions claimed, adjusted gross income, taxable
    income, taxes paid, etc. Individuals can obtain their own listing by
    calling the **IRS at 1-800-829-1040.** PHAs can inform residents
    that this would be an acceptable form of third party
    verification**.**

    The use of "up-front" techniques can assist PHAs in identifying
    potential discrepancies between resident reported and PHA verified
    income and residents income reported through one of the sources
    above. The resources listed are examples of services PHAs are
    currently using; however, some may not be available in all states.
    Additionally, PHAs should discuss with each agency providing these
    resources the following issues:

-   Availability of information through the most efficient means --
    possibly electronically, such as a mainframe hook up, Internet, etc;

-   Privacy Act and confidentiality issues regarding use of data and
    access;

-   Cost of service -- if used for public governmental use, possible
    wavier of cost; and

-   Partnerships with other PHAs for joint use of service.

    In most cases a Memorandum of Understanding (MOU) or a contract for
    services is developed to assist in clarifying these issues and to
    formalize the process. See ***Appendix B -- Best Practices - Tips
    and Tools*** for examples of coordination between PHAs, State and
    local governments, and private agency partners to obtain information
    for verification purposes that will improve income integrity.

    **Nondiscrimination**

    PHAs may not devise or implement income or rent determination,
    verification, or other related policies or procedures in a way that
    discriminates against persons on the basis of race, color, national
    origin, sex, religion, familial status, and perceived or actual
    disability. PHAs that administer public housing, Housing Choice
    Vouchers, and Moderate Rehabilitation must comply with fair housing,
    equal opportunity, and other civil rights requirements (24 CFR §§
    960.103, 982.53, and 983.11), respectively. Under the Fair Housing
    Act (42 USC §3617), it is unlawful to use income or rent
    determination, verification, or other related policies or procedures
    as retaliation.

    **For More Information on Improving Income Integrity Contact**: Your
    HUD Field Office or the Public and Indian Housing Resource Center at
    1-800-955-2232.

#### /s/ {#s .unnumbered}

#### Gloria J. Cousar, Acting General Deputy Assistant Secretary  {#gloria-j.-cousar-acting-general-deputy-assistant-secretary .unnumbered}

#### for Public and Indian Housing {#for-public-and-indian-housing .unnumbered}

####  {#section .unnumbered}

#### APPENDIX B - BEST PRACTICES -- TIPS AND TOOLS  {#appendix-b---best-practices-tips-and-tools .unnumbered}

Currently there are examples of coordination efforts between PHAs, State
and local governments and private agencies. Following is a few examples
of some of the innovate efforts that demonstrate coordination and
cooperation to improve income integrity.

#  {#section-1 .unnumbered}

# *The New Jersey model* - Since 1991, the New Jersey Department of Community Affairs (NJDCA) and Department of Labor (DOL) have operated under MOU for DOL to provide wage record, unemployment, and disability benefits data online to NJDCA.  {#the-new-jersey-model---since-1991-the-new-jersey-department-of-community-affairs-njdca-and-department-of-labor-dol-have-operated-under-mou-for-dol-to-provide-wage-record-unemployment-and-disability-benefits-data-online-to-njdca. .unnumbered}

#  {#section-2 .unnumbered}

# Activities include: {#activities-include .unnumbered}

# Occupancy specialists for NJDCA use the data for income and rent determinations during the admissions briefing and annual reexamination process.

# NJDCA and DOL have a direct computer link via the state mainframe that required a dedicated printer the NJDCA purchased. 

# NJDCA, through MOUs, assists 7 other PHAs in New Jersey that were unable to gain access to the State DOL reports, with this service. 

# NJDCA accesses the DOL wage data for new admissions and reexaminations that are submitted to NJDCA by the other PHAs for their Section 8 programs and send the reports back to the PHA. 

# 

# Other verification activities conducted by NJDCA include using TEVS to access SSA data and using a series of forms for pharmacists and physicians to verify claimed medical expense deductions. Additionally, NJDCA also uses a private employment database (www.theworknumber.com) to match tenant reported income. 

# 

# Contact: For more information on the *New Jersey Department of Community Affairs* program contact - Jackie Grabine, Assistant Director, Division of Housing, at 609-633-8105 or www.state.nj.us/dca.gov

## 

## 

## OTHER MODELS

## 

## The *Delaware State Housing Authority* (DSHA) has an agreement since 1991 with the Delaware Department of Labor through which it has direct access via computer to wage record and unemployment record data for verification purposes. DSHA also has computer access to the state's Health and Human Services records and child support information from the Division of Family Services. These records are checked for all new applicants and current tenants at the time of reexamination. Other PHAs in Delaware also have the ability to use the Department of Labor information.

## 

## Contact: For more information on the *Delaware State Housing Authority* program contact - Ed Strauss, Assistant Housing Management and Program Administrator at 302-739-7419 or www.state.de.us/dsha.gov 

##### Virginia Employment Commission (VEC) has online access agreements to share wage record and unemployment benefits data with 5 PHAs in the state: Richmond Redevelopment and Housing Authority, Fairfax Housing Authority, Arlington Section 8 Program, Charlottesville Redevelopment and Housing Authority, and Albemarle Housing Authority. Eleven other PHAs request this information manually.

> **Contact:** For more information on the ***Virginia Employment
> Commission*** program contact --Norma Quirk, Supervisor of Customer
> Service, Virginia Employment Commission, at 804-7861485

# 

***Texas Workforce Commission (TWC)*** accepts manual and electronic
submissions. The larger PHAs in the state (such as Dallas HA, San
Antonio HA) can submit information to TWC on a diskette and receive the
wage record and unemployment benefits data on paper or a diskette. A MOU
is required in order to set up this type of procedure. PHAs may also
submit requests on paper with individual resident consent forms.

> **Contact:** For more information on the ***Texas Workforce
> Commission*** program contact -- Jim Nolan, Disclosure Officer,
> Information Release Office, at 512-463-2748

***Oklahoma Department of Human Services (ODHS)*** has coordinated
efforts with 11 PHAs in the state. Through the contracts, the PHAs are
assigned a user ID and password and access ODHS's database via a secure
Internet link. Using social security numbers, the PHAs can receive
information on the type of assistance applied for, amount received,
number of people residing in residence, amount of earned and unearned
income, imputed income, and recoupment (i.e., overpayment to cases
recaptured). Those included in the database are any person who has
applied for TANF, Medicaid, food stamps, state supplemental payments,
etc.

> **Contact:** For more information on the ***Oklahoma Department of
> Human Services*** program contact -- Tom Wright, Program Manager for
> Data Exchange, at 405-521-4094

[^1]: Quality Housing and Work Responsibility Act of 1998, Public Law
    105-276, §2518 which amended the United States Housing Act of 1937,
    42 United States Code (U.S.C.) §1437 et seq.