[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Rules and Regulations]
[Pages 40496-40499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18877]



[[Page 40495]]

_______________________________________________________________________

Part VII





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 985



Technical Amendment to the Section 8 Management Assessment Program 
(SEMAP); Interim Final Rule

  Federal Register / Vol. 64, No. 142 / Monday, July 26, 1999 / Rules 
and Regulations  

[[Page 40496]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 985

[Docket No. FR-4498-I-01]
RIN 2577-AC10


Technical Amendment to the Section 8 Management Assessment 
Program (SEMAP)

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: This interim rule amends the regulations for the Section 8 
Management Assessment Program (SEMAP) for the purpose of incorporating 
technical revisions recommended by the Office of Management and Budget 
to conform to requirements under the Single Audit Act Amendments of 
1996. This interim rule revises the basis upon which HUD assigns 
ratings under eight SEMAP indicators. For the eight SEMAP indicators 
where the HUD verification method is the latest independent auditor 
(IA) annual audit report, this interim rule provides that the rating 
will be based on the housing agency (HA) SEMAP certification to HUD, 
rather than on statements in the annual audit report. Under this 
interim rule, SEMAP ratings will be subject to change after HUD 
receives the HA's annual audit report if the audit report contains 
information that the HA's SEMAP certification is not accurate.

DATES: Effective Date: August 25, 1999. Comments Due Date: September 
24, 1999.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to Rules Docket Clerk, Office of General Counsel, Room 10276, 
Department of Housing and Urban Development, 451 Seventh Street, S.W., 
Washington, D.C. 20410-0500. Communications should refer to the above 
docket number and title. Facsimile (FAX) comments are not acceptable. A 
copy of each communications submitted will be available for public 
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: Gerald Benoit, Acting Director, Real 
Estate and Housing Performance Division, Office of Public and Assisted 
Housing Delivery, Office of Public and Indian Housing, Room 4210, 451 
Seventh Street, S.W., Washington, DC 20410-0500. Telephone: (202) 708-
0477 (voice); (202) 708-0850 (TTY). Persons with hearing or speech-
impairments may call 1-800-877-8339 (Federal Information Relay Service 
TTY). (Other than the ``800'' number, these are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

    On September 10, 1998 (63 FR 48548), HUD published a final rule 
which established the Section 8 Management Assessment Program (SEMAP). 
The September 10, 1998 final rule provided that HUD would rate the 
performance of a housing authority (HA) under eight SEMAP indicators 
based on statements in the latest independent auditor (IA) annual audit 
report. The eight indicators are: (1) Selection from the Waiting List; 
(2) Reasonable Rent; (3) Determination of Adjusted Income; (4) Utility 
Allowance Schedule; (5) Housing Quality Standards (HQS) Quality Control 
Inspections; (6) HQS Enforcement; (7) Expanding Housing Opportunities; 
and (8) Deconcentration Bonus. HUD intended that IAs would 
independently test a minimum sample of files for HA compliance with 
requirements under five of these eight indicators and would include 
specific statements concerning HA compliance in the audit report on 
compliance with all eight. Procedures of the Office of Management and 
Budget (OMB) implementing the Single Audit Act Amendments of 1996, 
however, do not permit HUD to include audit procedures in the OMB 
Circular A-133 compliance supplement which require either minimum 
samples of files or any specific reporting on compliance.

II. This Rule

    In accordance with OMB requirements under the Single Audit Act 
Amendments of 1996, HUD is amending the September 10, 1998 final rule 
to base ratings for the eight indicators on the HA's SEMAP 
certification to HUD, rather than on the IA annual audit report. The 
OMB Circular A-133 compliance supplement for the Section 8 tenant-based 
programs will still provide procedures for the IA to audit compliance 
for the eight SEMAP indicators, and to verify the accuracy of the HA's 
SEMAP certification to HUD. Therefore, the HUD method of verification 
of HA performance under the eight indicators remains the IA annual 
audit report. The Department continues to rely on IA's to verify the 
accuracy of the HA's SEMAP certification with respect to the eight 
indicators. This interim rule also clarifies that HUD confirmatory 
reviews will be used as an additional method of verification to the 
extent they are performed.
    This technical amendment to the September 10, 1998 final rule 
requires the HA to submit a SEMAP certification concerning the results 
of its supervisory quality control reviews of file samples drawn in an 
unbiased manner to ensure compliance under four SEMAP indicators ((1) 
Selection from the Waiting List; (2) Reasonable Rent; (3) Determination 
of Adjusted Income; and (4) HQS Enforcement). The interim rule, 
therefore, requires the HA to perform annual quality control reviews of 
its performance under these indicators in order to complete the SEMAP 
certification form. While there has previously been no regulatory 
requirement that an HA perform quality control reviews in these four 
areas, many HAs would have instituted such procedures under the 
September 10, 1998 final rule. Further, sound management practices 
require adequate internal control systems, such as supervisory quality 
control reviews, which the Department has required and encouraged in 
the past.
    This technical amendment also revises the SEMAP standard under 
Sec. 985.3(e) for HQS quality control inspections. This indicator is 
changed to require HQS quality control samples of the same minimum 
sample size as required for other supervisory quality control reviews. 
The requirement for a 5 percent HQS quality control sample no longer 
applies.

III. Justification for Interim Rulemaking

    It is HUD's policy to publish rules for public comment before their 
issuance for effect, in accordance with its own regulations on 
rulemaking found at 24 CFR part 10. Part 10 provides, however, that 
prior public procedure will be omitted if HUD determines that it is 
``impracticable, unnecessary, or contrary to the public interest'' (24 
CFR 10.0). HUD finds that in this case prior comment is unnecessary. 
This interim rule amends Secs. 985.1, 985.2, 985.3, and 985.103, only 
to make technical changes to the basis for HUD ratings on eight SEMAP 
indicators and to the minimum sample size for HQS quality control 
inspections. Rather than relying on statements in the IA annual audit 
report to assign ratings under the eight indicators, HUD will rely on 
the HA's SEMAP certification to assign ratings. The HA's SEMAP 
certification for these eight indicators may be subject to a compliance 
audit under the Single Audit Act Amendments of 1996, or to a HUD 
confirmatory review, and if the audit report on compliance or the

[[Page 40497]]

confirmatory review report contains information that the HA's SEMAP 
certification is not accurate, SEMAP ratings will be subject to change.

IV. Findings and Certifications

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
for this rule has been made in accordance with HUD regulations at 24 
CFR part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969. The Finding of No Significant Impact 
is available for public inspection between 7:30 a.m. and 5:30 p.m. 
weekdays in the Office of the Rules Docket Clerk, Office of the General 
Counsel, Department of Housing and Urban Development, Room 10276, 451 
Seventh Street, S.W., Washington, D.C. 20410.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule would not have a significant 
economic impact on a substantial number of small entities. There are no 
anti-competitive discriminatory aspects of the rule with regard to 
small entities, and there are not any unusual procedures that would 
need to be complied with by small entities. Nevertheless, the 
Department is sensitive to the fact that the uniform application of 
requirements on entities of differing sizes often places a 
disproportionate burden on small businesses. The Department, therefore, 
is soliciting alternatives for compliance from small entities as to how 
these small entities might comply in a way less burdensome to them.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
does not have ``federalism implications'' because it does not have 
substantial direct effects on the States (including their political 
subdivisions), or on the distribution of power and responsibilities 
among the various levels of government.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Program numbers assigned 
to the Section 8 Management Assessment Program are 14.855 and 14.857.

List of Subjects for 24 CFR Part 985

    Grant programs--housing and community development, Housing, Rent 
subsidies, Reporting and recordkeeping requirements.

    Accordingly, part 985 of title 24 of the Code of Federal 
Regulations is amended as follows:

PART 985--SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP)

    1. The authority citation for 24 CFR part 985 continues to read as 
follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

    2. Section 985.1 is amended by revising the second sentence of 
paragraph (a) to read as follows:


Sec. 985.1  Purpose and applicability.

    (a) Purpose. * * * SEMAP also establishes a system for HUD to 
measure HA performance in key Section 8 program areas and to assign 
performance ratings. * * *
* * * * *
    3. In Sec. 985.2 amend paragraph (b) by adding definitions of 
``confirmatory review'' and ``HA's quality control sample'' in 
alphabetical order to read as follows:


Sec. 985.2  Definitions.

* * * * *
    (b) * * *
    Confirmatory review means an on site review performed by HUD to 
verify the management performance of an HA.
* * * * *
    HA's quality control sample means an annual sample of files or 
records drawn in an unbiased manner and reviewed by an HA supervisor 
(or by another qualified person other than the person who performed the 
original work) to determine if the work documented in the files or 
records conforms to program requirements. The minimum size of the HA's 
quality control sample is as follows:

------------------------------------------------------------------------
                                           Minimum number of files or
               Universe                       records to be sampled
------------------------------------------------------------------------
50 or less............................  5.
51-600................................  5 plus 1 for each 50 (or part of
                                         50) over 50.
601-2000..............................  16 plus 1 for each 100 (or part
                                         of 100) over 600.
Over 2000.............................  30 plus 1 for each 200 (or part
                                         of 200) over 2000.
------------------------------------------------------------------------

Where the universe is: the number of admissions in the last year for 
each of the two quality control samples under the SEMAP indicator at 
Sec. 985.3(a) Selection from the Waiting List; the number of families 
assisted for the SEMAP indicators at Sec. 985.3(b) Reasonable Rent, and 
985.3(c) Determination of Adjusted Income; the number of units under 
HAP contract during the last completed HA fiscal year for the SEMAP 
indicator at Sec. 985.3(e) HQS Quality Control Inspections; and the 
number of failed HQS inspections in the last year for the SEMAP 
indicator at Sec. 985.3(f) HQS Enforcement.
* * * * *
    4. Section 985.3 is amended by revising the last sentence of the 
first introductory paragraph, the first sentence of the second 
introductory paragraph, and paragraphs (a)(2), (a)(3) introductory 
text, (a)(3)(i) introductory text, (a)(3)(i)(B), (a)(3)(ii), (b)(2), 
(b)(3) introductory text, (b)(3)(i) introductory text, (b)(3)(i)(B), 
(b)(3)(ii), (b)(3)(iii), (c)(2), (c)(3) introductory text, (c)(3)(i) 
introductory text, (c)(3)(ii), (c)(3)(iii), (d)(2), (d)(3), (e), 
(f)(2), (f)(3), (g)(2), (g)(3) introductory text, (g)(3)(i) 
introductory text, (g)(3)(ii), (h)(2) and (h)(3) to read as follows:


Sec. 985.3  Indicators, HUD verification methods and ratings.

    * * * The method for selecting the HA's quality control sample 
under paragraphs (a), (b), (c) and (f) of this section must leave a 
clear audit trail that can be used to verify that the HA's quality 
control sample was drawn in an unbiased manner.
    An HA that expends less than $300,000 in Federal awards and whose 
Section 8 programs are not audited by an independent auditor (IA), will 
not be rated under the SEMAP indicators in paragraphs (a) through (g) 
of this section for which the annual IA audit report is a HUD 
verification method. * * *
    (a) * * *
    (2) HUD verification method: The independent auditor (IA) annual 
audit report covering the HA fiscal year entered on the SEMAP 
certification and on-site confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that:
* * * * *
    (B) Based on the HA's quality control samples, drawn separately for 
applicants reaching the top of the waiting list and for admissions, 
documentation shows that at least 98 percent of the families in both 
samples of applicants and admissions were selected from the waiting 
list for admission in accordance with these policies and met the 
selection criteria that determined their places on the waiting list and 
their order of selection. 15 points.
    (ii) The HA's SEMAP certification does not support the statement in 
paragraph (a)(3)(i) of this section. 0 points.
    (b) * * *

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    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that:
* * * * *
    (B) Based on the HA's quality control sample of tenant files, the 
HA follows its written method to determine reasonable rent and has 
documented its determination that the rent to owner is reasonable in 
accordance with Sec. 982.503 for at least 98 percent of units sampled 
at the time of initial leasing, if there is any increase in the rent to 
owner and, at the HAP contract anniversary if there is a 5 percent 
decrease in the published FMR in effect 60 days before the HAP contract 
anniversary. 20 points.
    (ii) The HA's SEMAP certification includes the statements in 
paragraph (b)(3)(i) of this section, except that the HA documents its 
determination of reasonable rent for only 80 to 97 percent of units 
sampled at initial leasing, if there is any increase in the rent to 
owner, and at the HAP contract anniversary if there is a 5 percent 
decrease in the published FMR in effect 60 days before the HAP contract 
anniversary. 15 points.
    (iii) The HA's SEMAP certification does not support the statements 
in either paragraph (b)(3)(i) or (b)(3)(ii) of this section. 0 points.
    (c) * * *
    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that, based on 
the HA's quality control sample of tenant files, for at least 90 
percent of families:
* * * * *
    (ii) The HA's SEMAP certification includes the statements in 
paragraph (c)(3)(i) of this section, except that the HA obtains and 
uses independent verification of income, properly attributes 
allowances, and uses the appropriate utility allowances for only 80 to 
89 percent of families. 15 points.
    (iii) The HA's SEMAP certification does not support the statements 
in either paragraph (c)(3)(i) or (c)(3)(ii) of this section. 0 points.
    (d) * * *
    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that the HA 
reviewed utility rate data within the last 12 months, and adjusted its 
utility allowance schedule if there has been a change of 10 percent or 
more in a utility rate since the last time the utility allowance 
schedule was revised. 5 points.
    (ii) The HA's SEMAP certification does not support the statement in 
paragraph (d)(3)(i) of this section. 0 points.
    (e) HQS quality control inspections. (1) This indicator shows 
whether an HA supervisor or other qualified person reinspects a sample 
of units under contract during the HA fiscal year, which meets the 
minimum sample size requirements specified at Sec. 983.2 under HA's 
quality control sample, for quality control of HQS inspections. The HA 
supervisor's reinspected sample is to be drawn from recently completed 
HQS inspections (i.e., performed during the 3 months preceding 
reinspection) and is to be drawn to represent a cross section of 
neighborhoods and the work of a cross section of inspectors. (24 CFR 
982.405(b))
    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that an HA 
supervisor or other qualified person performed quality control HQS 
reinspections during the HA fiscal year for a sample of units under 
contract which meets the minimum sample size requirements specified in 
Sec. 983.2 under HA's quality control sample. The HA's SEMAP 
certification also states that the reinspected sample was drawn from 
recently completed HQS inspections (i.e., performed during the 3 months 
preceding the quality control reinspection) and was drawn to represent 
a cross section of neighborhoods and the work of a cross section of 
inspectors. 5 points.
    (ii) The HA's SEMAP certification does not support the statements 
in paragraph (e)(3)(i) of this section. 0 points.
    (f) * * *
    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that the HA's 
quality control sample of case files with failed HQS inspections shows 
that, for all cases sampled, any cited life-threatening HQS 
deficiencies were corrected within 24 hours from the inspection and, 
for at least 98 percent of cases sampled, all other cited HQS 
deficiencies were corrected within no more than 30 calendar days from 
the inspection or any HA-approved extension, or, if any life-
threatening HQS deficiencies were not corrected within 24 hours and all 
other HQS deficiencies were not corrected within 30 calendar days or 
any HA-approved extension, the HA stopped (abated) housing assistance 
payments beginning no later than the first of the month following the 
correction period, or took prompt and vigorous action to enforce family 
obligations. 10 points.
    (ii) The HA's SEMAP certification does not support the statement in 
paragraph (f)(3)(i) of this section. 0 points.
    (g) * * *
    (2) HUD verification method: The IA annual audit report covering 
the HA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The HA's SEMAP certification states that:
* * * * *
    (ii) The HA's SEMAP certification does not support the statement in 
paragraph (g)(3)(i) of this section. 0 points.
    (h) * * *
    (2) HUD verification methods: HA data submitted for the 
deconcentration bonus, the IA annual audit report covering the HA 
fiscal year entered on the SEMAP certification, and on-site 
confirmatory review if performed.
    (3) Rating: (i) The data submitted by the HA for the 
deconcentration bonus shows that the HA met the requirements for bonus 
points in paragraph (h)(1)(i), (ii) or (iii) of this section. 5 points.
    (ii) The data submitted by the HA for the deconcentration bonus 
does not show that the HA met the requirements for bonus points in 
paragraph (h)(1)(i), (ii) or (iii) of this section. 0 points.
* * * * *
    5. Section 985.103 is amended by redesignating paragraph (d) as 
paragraph (e), adding a new paragraph (d), and revising newly 
redesignated paragraph (e)(3), to read as follows:


Sec. 985.103  SEMAP score and overall performance rating.

* * * * *
    (d) Modified rating on an indicator. A rating on any of the 
indicators at Secs. 985.3(a) through 985.3(h) will be subject to change 
after HUD receives the HA's annual audit report or after HUD conducts a 
confirmatory review if the

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audit report or the confirmatory review report contains information 
that the HA's SEMAP certification concerning an indicator is not 
accurate.
    (e) Modified or withheld overall rating. * * *
    (3) When HUD modifies or withholds a rating for any reason, it 
shall explain in writing to the HA the reasons for the modification or 
for withholding the rating.

    Dated: June 23, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-18877 Filed 7-23-99; 8:45 am]
BILLING CODE 4210-33-P