[Federal Register Volume 59, Number 39 (Monday, February 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4484]
[Federal Register: February 28, 1994]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 792 and 892
[Docket No. R-94-1708; FR-3487-F-01]
RIN 2501-AB65
Implementation of Section 129 of the Housing and Community
Development Act of 1992
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: This final rule establishes procedures for public housing
agencies and Indian housing authorities (HAs) to follow to permit HAs
to retain a portion of certain section 8 fraud recoveries from tenants
and owners for use in section 8 programs. Section 129 of the Housing
and Community Development Act of 1992 expands HA retention of section 8
fraud recoveries to include recoveries obtained through administrative
repayment agreements, as well as litigation (including settlement of a
lawsuit) or a court-ordered restitution. This rule applies to the
section 8 rental certificate, rental voucher, moderate rehabilitation
programs, and private owner/HA new construction and substantial
rehabilitation projects subject to an Annual Contributions Contract.
EFFECTIVE DATE: March 30, 1994.
FOR FURTHER INFORMATION CONTACT: For the Section 8 Rental Certificate,
Rental Voucher and Moderate Rehabilitation Programs: Madeline Hastings,
Director, Rental Assistance Division, Office of Assisted Housing, room
4226, Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410, (202) 708-1842. Hearing or speech-impaired
individuals may call HUD's TDD number (202) 708-0850.
For issues concerning computer matching/tenant income verification
matters: David L. Decker, Director, Computer Matching Activities
Division, room 4122, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC 20410, (202) 708-0099. Hearing or
speech-impaired individuals may call HUD's TDD number (202) 708-0850.
For Section 8 private owner/HA new construction and substantial
rehabilitation projects subject to an ACC between HUD and an HA: James
Tahash, Director, Planning and Procedures Division, Office of Insured
Multifamily Housing Development, room 6182, Department of Housing and
Urban Development, 451 Seventh Street, SW., Washington, DC 20410, (202)
708-3944. Hearing or speech-impaired individuals may call HUD's TDD
number (202) 708-4594.
(The telephone numbers cited above are not toll free numbers.)
SUPPLEMENTARY INFORMATION:
I. Background:
Some tenants receiving section 8 assistance submit false statements
which underreport income to obtain excessive housing assistance.
Similarly, some owners also commit fraud in order to receive section 8
rental assistance payments to which they are not entitled. Examples of
owner fraud include billing for vacant dwelling units, charging more
rent for assisted units than unassisted units in the same building,
receiving sidepayments from assisted tenants, and knowingly admitting
ineligible tenants into section 8 substantial rehabilitation and new
construction projects. Through various methods, such as direct
observation, informants, investigative action and computer matches, HAs
discover that tenants and owners have committed fraud in order to
receive either benefits or payments for which they were not entitled.
In 1981, Congress enacted legislation aimed at stemming this fraud
and abuse. Section 326(d)(1) of the Housing and Community Development
Amendments of 1981 (Pub. L. 97-35; hereafter referred to as ``1981 HCD
Act'') allowed HAs to retain ``out of judgments obtained by them in
recovering amounts wrongfully paid as a result of fraud and abuse'' a
portion of the fraud recoveries to encourage HAs to recover amounts
overpaid as a result of such fraud and abuse. On August 20, 1986 (51 FR
29633), the Department published a final rule implementing section
326(d)(1) of the 1981 HCD Amendments. In the final rule, HUD construed
the term ``judgments'' to allow HAs to retain amounts recovered by
means of litigation, including a settlement of litigation.
However, most section 8 fraud recoveries result from administrative
repayment agreements between the HA and the families, or between the HA
and the owner. As such, nearly all tenant and owner fraud recoveries
have gone to HUD, and HAs have had little monetary incentive to
identify tenant and owner fraud and pursue repayment.
Section 129 of the Housing and Community Development Act of 1992,
(Pub. L. 102-550, approved October 28, 1992; hereafter referred to as
``1992 HCD Act''), allows HAs to retain a portion of rental assistance
fraud recoveries obtained through litigation, court-ordered
restitutions, and administrative repayment agreements pursuant to an
administrative grievance procedure except in cases where HUD is the
principal party initiating or sustaining the recovery action. By
allowing HAs to retain a portion of the monies recovered under
administrative repayment agreements, the Act provides an additional
incentive for HAs to aggressively pursue cases of suspected fraud.
Under the Act and this regulation, an HA can retain the greater of:
(1) 50 percent of the amount collected or (2) the actual, reasonable,
and necessary expenses related to the collection, including the cost of
investigation, legal fees and collection fees. The recoveries may be
obtained through litigation (including settlement of a lawsuit), a
court-ordered restitution, or an administrative repayment agreement
pursuant to an administrative grievance procedure. The rule applies to
the Section 8 Rental Certificate, Rental Voucher, Moderate
Rehabilitation Programs and private owner/HA new construction and
substantial rehabilitation projects subject to an Annual Contributions
Contract (ACC) between HUD and an HA.
Finally, in August of 1986, the Department added a final rule
implementing section 326(d)(1) of the 1981 HCD Amendments as a new part
892. This final rule transfers the requirements of 892 to a new part
792, and removes part 892. The rule also changes the reference from
public housing agency (PHA) to housing agency (HA) to recognize
definitional changes resulting from the Indian Housing Act of 1988
(Pub. L. 100-358).
II. Other Matters
A. Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(k) of the HUD regulations,
the policies and procedures contained in this rule relate only to HUD
administrative procedures and, therefore, are categorically excluded
from the requirements of the National Environmental Policy Act.
B. Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
states or their political subdivisions, or the relationship between the
Federal government and the states, or on the distribution of power and
responsibilities among the various levels of government. Specifically,
the rule increases the amount a housing agency may recover in fraud and
abuse cases. As such, the rule will not impinge on the relationship
between the Federal and state and local governments, and the rule is
not subject to review under the order.
C. Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being, and, thus, is not subject to review under the
order. No significant change in existing HUD policies or programs will
result from promulgation of this rule, as those policies and programs
relate to family concerns.
D. Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities, because the number of
recoveries by housing agencies is expected to be small and so the
number of small public housing agencies affected will be small. In any
event, the effect on small entities is expected to be positive rather
than negative.
E. Paperwork
The changes made by this final rule to the regulatory text in 24
CFR part 892, which now appears as 24 CFR part 792, will not add any
additional information collection burden than that already approved by
the Office of Management and Burden under the Paperwork Reduction Act
and assigned OMB approval number 2577-0053.
F. Regulatory Agenda
This rule was listed as item no. 1655 in the Department's
Semiannual Agenda of Regulations published on October 25, 1993 (58 FR
56402, 56453) in accordance with Executive Order 12991 and the
Regulatory Flexibility Act.
G. Justification for Final Rulemaking
In general, the Department publishes rules for public comment
before their issuance for effect, in accordance with its own
regulations on rulemaking, 24 CFR part 10. However, part 10 provides
exceptions from that general rule where the agency finds good cause to
omit advance notice and public participation. The good cause
requirement is satisfied when prior public procedure is
``impracticable, unnecessary, or contrary to the public interest'' (24
CFR 10.1). The Department finds that good cause exists to publish this
rule for effect without first soliciting public comment, in that prior
public procedure is unnecessary because the changes being made to part
892, which now appears as part 792, merely implement statutory
amendments that do not involve the exercise of any discretion by the
Department.
H. The Catalog of Federal Domestic Assistance program number(s) are
14.156, Lower Income Housing Assistance Programs.
List of Subjects in 24 CFR Parts 792 and 892
Fraud, Grant programs--housing and community development, Rent
subsidies, Reporting and recordkeeping requirements.
Accordingly, for the reasons set forth in the preamble, title 24 of
the Code of Federal Regulations is amended by redesignating part 892 as
part 792 and by revising the newly designated part 792 to read as
follows:
PART 792--HOUSING AGENCY SECTION 8 FRAUD RECOVERIES
Subpart A--General Provisions
Sec.
792.101 Purpose.
792.102 Applicability.
792.103 Definitions.
Subpart B--Recovery of Section 8 Funds
792.201 Conduct of litigation.
792.202 HA retention of proceeds.
792.203 Application of amounts recovered.
792.204 Recordkeeping and reporting.
Authority: 42 U.S.C. 1437f note; 42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 792.101 Purpose.
The purpose of this part is to encourage public housing agencies
and Indian housing authorities (HAs) to investigate and pursue
instances of tenant and owner fraud and abuse in the operation of the
section 8 housing assistance payments programs.
Sec. 792.102 Applicability.
(a) This part applies to an HA acting as a contract administrator
under an annual contributions contract with HUD in any section 8
housing assistance payments program. To be eligible to retain section 8
tenant or owner fraud recoveries, the HA must be the principal party
initiating or sustaining an action to recover amounts from families.
(b) This part applies only to those instances when a tenant or
owner committed fraud, and the fraud recoveries are obtained through
litigation brought by the HA (including settlement of the lawsuit), a
court-ordered restitution pursuant to a criminal proceeding, or an
administrative repayment agreement with the family or owner as a result
of an HA administrative grievance procedure pursuant to, or
incorporating the requirements of, Sec. 882.216 or 887.405. This part
does not apply to cases of owner fraud in HA-owned or controlled units,
or where incorrect payments were made or benefits received because of
calculation errors instead of willful fraudulent activities.
(c) This part applies to all tenant and owner fraud recoveries
resulting from litigation brought by the HA (including settlement of
the lawsuit), or a court-ordered restitution pursuant to a criminal
proceeding obtained on or after October 8, 1986, and to all tenant and
owner fraud recoveries obtained through administrative repayment
agreements signed on or after October 28, 1992.
Sec. 792.103 Definitions.
Fraud and abuse. Fraud and abuse means a single act or pattern of
actions:
(1) That constitutes false statement, omission, or concealment of a
substantive fact, made with intent to deceive or mislead; and
(2) That results in payment of section 8 program funds in violation
of section 8 program requirements.
HA (Housing Agency). HA (Housing Agency) means any State, county,
municipality, or other governmental entity or public body, including
any Indian Housing Authority, acting as a section 8 contract
administrator under an annual contributions contract with HUD.
Judgment. Judgment means a provision for recovery of section 8
program funds obtained through fraud and abuse, by order of a court in
litigation or by a settlement of a claim in litigation, whether or not
stated in a court order.
Litigation. A lawsuit brought by a HA to recover section 8 program
funds obtained as a result of fraud and abuse.
Principal party in initiating or sustaining an action to recover.
Principal party in initiating or sustaining an action to recover means
the party that incurs more than half the costs incurred in:
(1) Recertifying tenants who fraudulently obtained section 8 rental
assistance;
(2) Recomputing the correct amounts owed by tenants; and
(3) Taking needed actions to recoup the excess benefits received,
such as initiating litigation.
Costs incurred to detect potential excessive benefits in the
routine day-to-day operations of the program are excluded in
determining the principal party in initiating or sustaining an action
to recover. For example, the cost of income verification during an
annual recertification would not be counted in determining the
principal party in initiating or sustaining an action to recover.
Repayment agreement. Repayment agreement means a formal document
signed by a tenant or owner and provided to an HA in which a tenant or
owner acknowledges a debt, in a specific amount, and agrees to repay
the amount due at specific time period(s).
Subpart B--Recovery of Section 8 Funds
Sec. 792.201 Conduct of litigation.
The HA must obtain HUD approval before initiating litigation in
which the HA is requesting HUD assistance or participation.
Sec. 792.202 HA retention of proceeds.
(a) Where the HA is the principal party initiating or sustaining an
action to recover amounts from tenants that are due as a result of
fraud and abuse, the HA may retain, the greater of:
(1) Fifty percent of the amount it actually collects from a
judgment, litigation (including settlement of lawsuit) or an
administrative repayment agreement pursuant to, or incorporating the
requirements of, Sec. 882.216 or Sec. 887.405; or
(2) Reasonable and necessary costs that the HA incurs related to
the collection from a judgment, litigation (including settlement of
lawsuit) or an administrative repayment agreement pursuant to, or
incorporating the requirements of, Sec. 882.216 or Sec. 887.405.
Reasonable and necessary costs include the costs of the investigation,
legal fees and collection agency fees.
(b) If HUD incurs costs on behalf of the HA in obtaining the
judgment, these costs must be deducted from the amount to be retained
by the HA.
Sec. 792.203 Application of amounts recovered.
(a) The HA may only use the amount of the recovery it is authorized
to retain in support of the section 8 program in which the fraud
occurred.
(b) The remaining balance of the recovery proceeds (i.e., the
portion of recovery the HA is not authorized to retain) must be applied
as directed by HUD.
Sec. 792.204 Recordkeeping and reporting.
To permit HUD to audit amounts retained under this part, an HA must
maintain all records required by HUD, including:
(a) Amounts recovered on any judgment or repayment agreement;
(b) The nature of the judgment or repayment agreement; and
(c) The amount of the legal fees and expenses incurred in obtaining
the judgment or repayment agreement and recovery.
(Approved by the Office of Management and Budget under Control
Number 2577-0053)
Dated: February 17, 1994.
Henry G. Cisneros,
Secretary of Housing and Urban Development.
[FR Doc. 94-4484 Filed 2-25-94; 8:45 am]
BILLING CODE 4210-32-P
