[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.
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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
[[Page 40499]]
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