Chapter 4. Verifications PIH RHIIP Summit January 2004 Chapter 4. Verifications

Chapter 4. Section 1. Overview Learning Objective Apply HUD requirements and standards for effective verification techniques

Overview The issue of verification cuts across all occupancy areas. All information in tenant family’s file must be verified and properly documented PHAs need to establish detailed verification procedures within the ACOP (or separately) for management control purposes

Overview Each PHA should ensure that staff interviewers are trained to explain the following points during face-to-face interviews or over the phone if necessary: The types of information that the PHA will verify The methods of verification, including computer matching, that the PHA will use

Overview PHAs share the responsibility for documentation and verification of income information with families To fulfill their responsibilities, families must: Complete all necessary paperwork Sign all required release forms Be responsive to PHA requests Provide requested items and documents in a timely manner PHAs must follow-up with third party sources

Overview Verifications are essential to high quality administration Verifications ensure that the income information provided by families and used by PHAs to determine eligibility and rent subsidy amounts is correct PHAs must take measures to ensure that each regulatory and policy item that needs to be verified is, in fact, verified consistently by all staff members

Overview Learning Activity 4-1: Minimum Rent Verification Page 4-3 Instructions: review the shaded area from the policy on page 4-4 and answer questions 1a-c about that item on page 4-5. Take the others home for yourself or staff to complete.

Chapter 4. Section 2. Verification Policies

Regulatory Verification Requirement The regulatory requirement is stated below. 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: Reported family annual income The value of assets Expenses related to deductions from annual income Other factors that affect the determination of adjusted income

Hierarchy of Verification Methods HUD has established a hierarchy of five verification levels. Using this hierarchy, PHAs should develop and adopt verification policies to guide staff in determining what qualifies as adequate verification for specific items that affect the determination of income and rent. Policies must be consistent with the regulatory requirements.

Hierarchy of Verification Methods On following pages, you will find two samples: General verification policy that follows HUD’s hierarchy (page 4-9) Policy that applies specifically to the verification of assets (page 4-11)

Release Forms Before requesting any verifications, PHAs must obtain signed consent forms from family members authorizing release of information. One such consent form must be consistent with 24 CFR 5.230 regulations PHAs must also use other consent forms to request verification of information not covered by this form Because of privacy act issues, PHAs are advised to use specific, rather than generic, consent forms

PIH RHIIP Summit January 2004 Authorization for Release of Information/ Privacy Act Statement (form HUD-9886) Form 9886 must be signed by: All adult family members (18 years of age +) Head & spouse, regardless of age Form can be used between regular reexams to verify unreported income Valid for 15 months from date of signature

PIH RHIIP Summit January 2004 Authorization for Release of Information/ Privacy Act Statement (form HUD-9886) HUD-9886 may be used only for: Wage & unemployment compensation from SWICAs Salary and wages from current/former employers Unearned income from financial institutions Form 9886 (page 4-15)

Chapter 4. Section 3. Recommended Levels of Verification

Recommended Levels of Verification Highest Up-front income verification (UIV) – to become mandatory when HUD’s UIV system is available High Written 3rd party – mandatory when UIV is not available or sufficient Medium Third party oral – mandatory if written 3rd party is not available Medium-low Document review - to be used on provisional basis or in situations where UIV and third-party verification are unavailable Low Tenant declaration – to be used only as a last resort

Upfront Income Verification What is it? The verification of income, before or during a reexamination, through an independent source that systematically and uniformly maintains income information in computerized form for a large number of individuals.

Recommended Levels of Verification Because UIV is particularly useful in identifying undisclosed income, HUD believes that it offers the best opportunity for making the biggest impact on reducing the excess rental assistance subsidies in the QC Study.

Recommended Levels of Verification UIV opportunities to reduce errors: $900 million per year (over $2 million dollars per day) – and UIV is particularly useful in identifying this income HUD estimates that 50% of the errors associated with earned income could be reduced by using UIV techniques. Reducing that number is a major challenge and opportunity for the housing industry, including HUD.

Recommended Levels of Verification HUD maintains a website devoted to UIV, and links to many current UIV resources are posted on this website. See Appendix A, page A-1 for address.

Recommended Levels of Verification Current UIV resources include the following: Social Security (SS) and Supplemental Security Income (SSI) information accessed via a secure Internet facility (TASS) State Wage Information Collection Agencies (SWICAs) State TANF systems Credit Bureau Association (CBA) credit reports Internal Revenue Service (IRS) letter 1722 Private sector databases (e.g. The Work Number) See Useful Website Addresses in References

Recommended Levels of Verification PHAs may execute UIV agreements, such as SWICA agreements and agreements with TANF agencies, independent of HUD. PHAs may execute UIV agreements with SWICAs only in states where HUD has not already executed such agreements.

Use of UIV for Verification When UIV does not differ substantially from tenant-provided documents, PHAs may use UIV to satisfy their regulatory obligation to obtain third-party verification. PHAs are not required to obtain additional third-party verification from employers. PHA will need to define “differ substantially.” HUD suggests $200 or more per month as reasonable guideline

Use of UIV for Verification When UIV differs substantially from tenant-provided documents, third-party verification is still required. For example: Tenant discloses an employer that is not represented in the UIV system. UIV reveals employer or other income source that tenant did not disclose. The income amounts on UIV and tenant-provided documents differ substantially.

Use of UIV to Project Income PHAs can also use UIV to project income. However, since UIV information is not up-to-date, PHAs may need to use it along with tenant-provided documents, such as pay stubs or SS/SSI award letters when making their income projections.

Use of UIV to Project Income UIV and pay stubs are complementary sources of information. UIV satisfies the third-party obligation; pay stubs do not. UIV reveals undisclosed income; pay stubs do not. Pay stubs provide hours worked and rate of pay; UIV does not. Pay stubs are current; UIV is dated (usually 3-5 months old.)

Upfront Income Verification: Projecting Annual Income HUD has established criteria for what constitutes a substantial difference in cases where UIV data differs from tenant-provided and/or other verified income. HUD defines a substantial difference as $200 or more per month. UIV may alleviate the need for 3rd party verification if not a substantial difference.

UIV Income Data is Not Substantially Different If UIV income data is less than current tenant-provided documentation, use tenant-provided documents to calculate anticipated annual income.

UIV Income Data is Not Substantially Different If UIV income data is more than current tenant-provided documentation, use UIV to calculate anticipated annual income unless the tenant provides documentation of a change in circumstances. Upon receipt of acceptable tenant-provided documentation of a change in circumstances, use tenant-provided documents to calculate anticipated annual income.

UIV Income Data is Substantially Different Request written 3rd party verification from the discrepant income source. Review historical income data for patterns of employment, paid benefits, and/or receipts of other income, if you can not readily anticipate income, i.e. seasonal employment, etc.

UIV Income Data is Substantially Different Analyze all data (UIV data, 3rd party verification and other documents/information provided by the family) and attempt to resolve the income discrepancy. Use the most current verified income data (and historical income data if appropriate) to calculate anticipated annual income.

Upfront Income Verification Projecting Annual Income HUD recommends that tenant-provided documents should be dated within the last 60 days of the PHA interview date. PHA may average amounts received/earned, if unable to anticipate annual income using current information due to historical fluctuations in income.

Upfront Income Verification Projecting Annual Income If the tenant disputes UIV SS/SSI benefit data, request the tenant to provide current, original SSA notice or benefit letter within 10 business days of PHA interview date. Tenant may contact SSA at 1-(800) 772-1213 or visit their local SSA office.

Upfront Income Verification Resources for Historical Income Data Social Security Earnings Statement, request via mail or online at www.ssa.gov Two years of earnings may be obtained from UIV System or Local State Wage Information Collection Agency (SWICA) Last eight (8) amounts of SS benefits paid to a participant may be obtained from the TASS or UIV system

Use of TASS PHAs should use UIV routinely to verify SS and SSI income information. In its initial round of RIM reviews, HUD did not make failure to use TASS to obtain UIV of SS and SSI income a finding. Field offices were instructed to note on their RIM reports that such failure will be a finding next time if there is no other third-party verification of SS and SSI income (from a local SSA office) in a tenant’s file. UIV from TASS is far superior to third party verification because PHAs often fail to ask for information on all family members, including children.

HUD’s UIV System Background and Rationale: PIH is developing UIV to provide PHAs with a single source for obtaining verification of wages, unemployment and social security benefits HUD has invested millions of dollars in this system to assist in the reduction of subsidy payments for unreported income Goal is to achieve reduction of subsidy errors: 30 percent by FY 2004 50 percent by FY 2005

HUD’s UIV System Background and Rationale: HUD has been negotiating cooperative agreements with SWICAs nationwide Computer matching enables HUD to receive wages and unemployment compensation on ongoing basis through a computer matching operation for disclosure to PHAs PIH anticipates having more than 40 cooperative agreements executed by midyear 2004

HUD’s UIV System The UIV system will contain: Wage and unemployment information from SWICAs across the nation Social security benefits from the Social Security Administration (SSA)

HUD’s UIV System All housing program participants whose SSNs are transmitted to PIC will be matched on a quarterly basis with UIV data Will allow HUD to provide most recent income information from SWICAs and SSA Wages and social security benefits are largest unreported income components Therefore, UIV is best tool for PHAs to identify potential wage and benefit underreporting

PHA Responsibilities While UIV will be an excellent tool, PHAs will be responsible to: Compare UIV information with tenant-provided information Resolve income discrepancies promptly to determine accurate tenant rents

PHA Responsibilities In addition, PHAs will be responsible for: Maintaining a current form HUD-9886 in each applicant’s and tenant’s file Restricting access to UIV data to employees who have a recognized need to know for valid administration reasons Ensuring UIV data is stored in secure places

PHA Responsibilities HUD plans to provide guidance to PHAs to ensure they implement appropriate physical, technical and administrative safeguards in their business operations.

PHA Responsibilities Safeguards will include: ED certification re security plan Appointment of a security coordinator User agreements signed by all PHA users Physical security of tenant information (files, offices, etc.) UIV system security Updating of user IDs quarterly Monitoring of system usage Training for staff

HUD’s UIV System How the system will work: To log onto UIV system, an authorized user will enter PIC ID and password (p. 4-23) PHAs may request additional PIC IDs and passwords

System Preview (Screens subject to modification) Page 4-23 Log in screen: UIV uses PIC User ID and Password

HUD’s UIV System How the system will work: The starting point for the user will be the welcome page (p. 4-24)

Page 4-24 Welcome Page

HUD’s UIV System How the system will work: The user will then search income records by household information (any of the following) Head of household’s SSN Head of household’s last name Head of household’s date of birth

Household Search Screen Page 4-25 Household Search Screen

HUD’s UIV System How the system will work: The search may bring up more than one name; the user will pick the correct person

Head of Household Screen Page 4-26 Head of Household Screen

HUD’s UIV System How the system will work: The next screen will display the household summary and income record status for the family (p. 4-27)

Household Income Summary Screen Page 4-27

HUD’s UIV System How the system will work: The user will then arrive at the household income details screen (p. 4-29) Household summary table Head of household identifier Member selection list Wage and benefits table Access to income data for 4 most recent quarters

Household Income Detail Screen Page 4-29 Household Income Detail Screen Wage Data Social Security Unemployment Compensation

HUD’s UIV System UIV system will also contain an “exceeds threshold report” Based on 2 mathematical comparisons Third party (SWICA and SSA) tenant household quarterly income data will be compared with PIC 50058 projected income data The difference will be compared to an established threshold

HUD’s UIV System The results of the report may be used to: Identify individual households with suspect income reporting Generate metrics that may be used in measuring the effectiveness of income error reduction efforts achieved with the UIV system The report will be a critical tool in pursuing undisclosed income.

HUD’s UIV System Generating an exceeds threshold report Click on “Get Report” (p. 4-31)

Threshold Report – Critical Tool for Pursuing Undisclosed Income Page 4-31 Set Threshold of discrepancy % between Household 50058 income vs. UIV Income from wage & SSA match

HUD’s UIV System PHA Exceeds Threshold Report (p. 4-32) If discrepancy between family’s reported data and UIV data equals or exceeds the established threshold, the family’s name will be listed on the report. To obtain more information, the user will click on the SSN of the family’s head of household.

PHA Exceeds Threshold Report Page 4-32 PHA Exceeds Threshold Report

HUD’s UIV System Head of Household’s Information Screen will display detailed information (p. 4-33) Using Exceeds Threshold reports, PHAs will be able to follow up with families to ensure that income has been correctly reported and calculated. Where underreporting has occurred, PHAs will need to take appropriate action (entering into repayment agreements)

Household level detail of threshold report Page 4-33 Household level detail of threshold report

HUD’s UIV System Field offices will also be able to view exceeds threshold reports. HUD will be using these reports to monitor and follow up with PHAs to ensure that discrepancies are being addressed. (p. 4-34)

Field Office Level Report of PHA Threshold Statistics HUD will be following up regularly, using this report

HUD’s UIV System When HUD’s UIV system is fully operational: PHAs will be required to use it. HUD will intensely monitor whether PHAs are using it. Monthly usage rates will be reviewed at all levels of HUD Discrepancy rates will be reviewed closely to determine whether PHAs with rates higher than the norm are using UIV to reduce undisclosed income The system will be linked to a hotline set up by HUD’s IG to receive and process complaints of fraud, waste and abuse

HUD’s UIV System One caveat: A federal statute governing computer matching requires that before an adverse action can be taken by a PHA using UIV, a tenant must be given notice and opportunity to address the discrepancy See “Up-Front Verification Orientation” on page 4-67

HUD’s UIV System Learning Activity 4-2: UIV Case Study 1 Group Activity – Family data conflicts with UIV Page 4-37

HUD’s UIV System Learning Activity 4-3: UIV Case Study 2 Page 4-40

Third Party Verification Third-party verification is obtained independently from information sources identified by families The sources may have income information or expense information

Third Party Verification Written Documents must be supplied directly to independent sources by PHAs and returned directly to PHAs from the independent sources (not hand carried by family) PHAs may mail, fax, or email verification requests to independent sources HUD strongly encourages PHAs to make at least two attempts to obtain third-party written verification

Third Party Verification Oral PHAs contact the independent sources by telephone or in-person Third-party oral verification may be used when requests for written verification have not been returned within a reasonable time – e.g. 10 business days

Document Review PHA reviews original documents provided by family as verification of a given income or expense item Document viewed may be used when third party verification cannot be obtained

Document Review Acceptable documents: Consecutive and original pay stubs SSA award letters Bank statements TANF award letters Other official and authentic documents from federal, state or local agencies

Document Review To be acceptable for this method of verification, documents must be original and authentic PHA must: Make and retain copy of document in file Note in the file that the original has been received, reviewed and copied Documents should be as current as possible (e.g. dated within 60 days of the family’s interview)

Tenant Declaration An applicant or tenant submits an affidavit or notarized statement to certify income or expenses that s/he has reported This method should be used as a last resort when no other verification method is possible

Levels of Verification of Income See Level of Verifications Chart (page 4-45)

Chapter 4. Section 4. Verification Standards

Verification Standards PHAs should establish time frames for receipt of third-party verification before accepting documents provided by families Following up after a specified number of days or weeks and then waiting for another specified number of days or weeks before accepting documents See Sample Verification Monitoring Form (page 4-50)

Documenting the Absence of Third-Party Verification There are 4 acceptable reasons for not having third-party verification of an income or expense item in a family’s file: Staff has made efforts to obtain 3rd party in accordance with their policy and independent source has not responded;* or Independent source that has been asked to provide written third-party verification doesn’t have the capability of sending such verification directly to PHA or of facilitating oral third party verification*; or * When third-party verification is requested and not received (1 and 2 above), a family’s file should contain documentation of PHA efforts

Documenting the Absence of Third-Party Verification PIH RHIIP Summit January 2004 Documenting the Absence of Third-Party Verification Documentation should include the following information: Date/time of the initial request and all follow-ups Name of the company and the person to whom the request was sent Notation that no response was received

Documenting the Absence of Third-Party Verification It is not cost-effective or reasonable to obtain third party verification* The income or expense item to be verified is an insignificant amount that would have minimal impact on TTP AND the PHA is able to verify through original documents provided by the family* * When third-party verification is not attempted (3 and 4 above), a family’s file should contain documentation of the reasoning used to justify the decision

Documenting the Absence of Third-Party Verification All file notations made by staff should be: Complete Limited to facts Dated Signed or initialed

Third-Party Verification Not Cost-Effective Example: Ms. Lee reports a savings account with a balance of $1,000 earning 1.25% interest. Bank statements provided to PHA. Bank charges $10 fee for third-party verification. Staff time for processing a third-party verification is estimated at $9. Is this cost effective?

Third-Party Verification Not Cost-Effective Reasoning: 3rd party costs Document review $ $10 bank fee $0 $9 admin time Interest: $1000 x .0125 = $12.50 Answer: No – but document your reasoning! And - PHA must verify with review of family-supplied documents

Documenting the Absence of Third-Party Verification See Exception to Third Party Verification Chart (page 4-53)

What Must Be Verified Income, assets and asset income Divested assets Income exclusions Allowances and deductions Family composition Social security numbers Citizenship or eligible immigration status

Verifying Annual Income PHAs need a thorough understanding of what constitutes income PHAs should not make assumptions about whether someone may or may not have a particular type of income For example, family without children may be receiving back child support payments

Verifying Annual Income To properly verify annual income, PHA staff must first: Have a thorough data-gathering form Forms that gather data about annual income should ask the right questions Know how to conduct a thorough interview The initial interview is critical; it lays the groundwork for future interviews for interim and annual reexaminations

Verifying Income Exclusions All exclusions and excluded amounts associated with family members should be: Declared by the family, and Reported by the PHA in field 7e of the 50058

Verifying Income Exclusions PHAs need to obtain verification for an income exclusion, if, without that verification, they would not be able to determine whether or not the income is to be excluded

Verifying Income Exclusions The type of verification needed for exclusions may differ: Example 1: Payments received under a Federal Work Study Program The PHA would have to, at minimum, verify the source of that income Example 2: Wages of a child under 18 Verify age - verification of amount is not necessary for wages

Verifying Income Exclusions PIH RHIIP Summit January 2004 Verifying Income Exclusions There are also situations where it would be necessary to obtain third-party verification of both the source and the amount of the income in order to calculate properly. For example: Mandatory earned income disallowance The exclusion of incremental earnings and benefits resulting from participation in a qualifying state or local training program Do we want to leave the reference to 3rd party here? Because actual amounts are important to have

Summary The PHA is the final judge of what constitutes adequate and credible verification and documentation If there is doubt about the reliability of the information received, staff should pursue additional information PHA staff are not required to accept information simply because it is offered.

Verification Go over the remainder of the chapter with the staff in your office to be sure they understand verifying deductions.

Learning Objective Apply HUD requirements and standards for effective verification techniques