Under the Improper Payments Information Act of 2002, agencies are required to annually review all programs and activities they administer and identify those that may be susceptible to significant erroneous payments. Accordingly, HUD must measure annually the number and dollar amounts of errors and track its progress towards reducing subsidy payment errors.

If the amount of improper payments exceeds $10 million, HUD must report to the President and Congress:

• Causes of improper payments, corrective action taken, and results of those actions
• Whether the agency has the systems and infrastructure needed to reduce improper payments
• Steps to ensure agency managers are being held accountable for improper payments

The President's Management Agenda for Fiscal-Year 2002 mandated that HUD reduce by 50 percent both the frequency of calculation and processing errors and the amount of subsidy overpayment by 2005. Interim goals call for:

• A 15% reduction in the dollar amount of errors by FY 2003
• A 30% reduction by 2004

Baseline Estimates of Error

HUD's Office of Policy Development and Research (PD&R) collected data for the 2001 Quality Control for Rental Assistance Subsidies Determinations (QC) study in mid-2000 to establish a baseline of the extent of errors in the income and rent determinations that set the subsidies HUD pay on behalf of families who receive public housing and Section 8 program assistance. The study revealed that more than 60 percent of rent calculations contained some type of rent, administrative, or component error, resulting in more than $600 million in rent overpayments and $1.7 billion in underpayments.

Methodology

Onsite tenant interviews, file reviews, and third-party income verifications were conducted by an independent contractor for a nationally representative sample of families who received public housing and Section 8 subsidies. Using these data, the Department made income, rent, and subsidy determinations based on all HUD requirements and guidelines (e.g., Code of Federal Regulations, handbooks, and notices). These determinations were then compared with those made by local public housing and Section 8 occupancy staff.

Successive QC Studies

To track the effectiveness of the RHIIP initiative and progress made, PD&R began overseeing the 2003 Quality Control Rental Assistance Subsidies study. This study used the same methodology, sampling procedures, and sample sizes as the 2001 QC study. This includes:

• Collecting data from 2,403 households at 600 sites, including Section 8, Section 811, Section 202, and public housing
• Obtaining information by reviewing tenant files and conducting in-person interviews

The 2003 QC study results for the first half of FY 2003 show a significant reduction in erroneous payments attributed to program administrator income and rent determinations. The independent source of income data matching to determine tenant income reporting errors for the 2003 sample will not be available until the latter part of 2004, so the 2000 baseline estimates on that component continue to be reported.

For more information regarding the 2003 QC study covering the first half of FY 2003, see Note 17 in the 2003 Performance and Accountability Report and the December 19, 2003 Inspector General's Audit Report. The final report for the 2003 QC study will be available on this website for viewing when published.

Other Means of Error Measurement

Since the 2001 QC study was conducted, HUD began implementing the RHIIP initiative to address the causes of errors and reduce incorrect subsidy payments. This includes conducting Rental Integrity Monitoring (RIM) reviews, and, most recently, RIM Re-reviews. These reviews entail:

• Reviewing sample tenant files
• Identifying errors in income and rent calculations at targeted PHAs
• Analyzing identified income and rent errors to establish root causes and recommend corrective actions
• Monitoring the implementation of corrective actions and their impact on errors