Handling Issues with EIV Discrepancies

How to Handle the Complex World of EIV Discrepancies... In 2001, the President's Management Agenda was released and established the reduction of erroneous payments as a key government-wide priority and required government agencies to measure improper payments annually, develop improvement targets and corrective actions and track results.

Based on a HUD study, it was estimated that 3.2 billion dollars (yes, billion!!) of improper payments were being paid out on an annual basis. As a result of this and the President's Management Agenda, HUD established a Rental Housing Integrity Improvement Project, otherwise known as the RHIIP initiative. The goal of the initiative was to address the causes of errors and improper payments and to ensure "the right benefits go to the right persons." To assist in meeting RHIIP's goals, HUD developed and began implementation of the UIV (Upfront Income Verification) which is now known as the Enterprise Income Verification (EIV) system. In the first four years of EIV's implementation, there was a 60% reduction in gross improper payments. Bottom line: EIV is an effective tool and the system has eliminated a huge amount of improper payments. A critical piece of EIV that assists with reducing improper payments is the EIV Income Discrepancy Report. Knowing how to resolve and properly document the tenant file is key. EIV Income Discrepancy Reports identify when there is a difference of $2400 or more annually in what's reported in EIV and what's reflected on the current HUD-50059.

• Why is the threshold $2400?
• Because HUD requires tenants to report income changes to management when income cumulatively increases $200 / or more per month.

Those unfamiliar with utilizing EIV Income Discrepancy Reports may feel a bit intimidated when reviewing a report:

At first glance, a thought bubble may look something like: "I know there's a discrepancy, but what in the world does this mean and what do I do now?" Once you've mastered the terminology and figured out what the report is telling you, you'll find discrepancy reports relatively easy to decipher. Here are some helpful definitions:

• Projected Annual Wages and Benefits from Form HUD-50059 = the income reflected on the most current HUD-50059 successfully transmitted to TRACS
• Period of Income Start Date = the start date of the income information received to compare to the income projected. The start date is 15 months prior to the certification date
• Period of Income End Date = 12 months from the period start date

In the example above, the HUD-50059 reflects no income. EIV reflects the actual annual income of $22018.70 and annualized last quarter income of $19518.57. This results in a 100% income discrepancy of possible unreported income. Hence, you're faced with an EIV Income Discrepancy. What do you do now? Here are some guidelines to assist you on your journey.

The first step is an investigation of the tenant file to determine the validity of the discrepancy.

Potential outcomes for the first example (above):

• There are no wages reported on the HUD-50059, which happens to be the move-in certification. It's confirmed management verified termination of employment prior to move-in and the wages reflected in EIV were earned prior to moving in. This discrepancy is considered invalid and the tenant file can simply be documented with results of the investigation and no further action is necessary. Easy as that!
• A current tenant has resided at the property for two years. After reviewing the file, it is apparent the tenant did not disclose this income to management at the time of recertification. The discrepancy appears to be valid. Below are the steps that HUD requires:
  • Obtain third party verification of the tenant's income
  • Process correction(s) to prior HUD-50059(s) to include any unreported or under-reported income
  • Notify tenant of funds due and his/her obligation to reimburse HUD
  • Collect funds due from the tenant and/or enter into a repayment agreement and reimburse HUD for funds collected, less any amounts retained for pursuing collection

• When the investigation results in the tenant's under-reporting of income and the tenant is required to reimburse HUD, below are some guidelines to keep in mind:
• The tenant can repay the amounts due in a lump sum payment, or by entering into a repayment agreement or a combination of a lump sum payment and repayment agreement.
• Tenants who do not agree to repay amounts due will be in non-compliance with their lease and may be subject to termination of tenancy.
• Monthly rent cannot be applied towards repayment amounts that would result in an accumulation of late rent payments.
• If a repayment agreement is entered, the monthly payment plus the amount of the current total tenant payment cannot exceed 40% of the tenant's monthly adjusted income unless the tenant agrees to a higher amount. Here's an example:
  • A tenant owes $2000 for unreported income. The tenant has chosen to enter into a repayment agreement. The tenant's current adjusted income is $200 per month and total tenant payment (TTP) is $60 per month. The monthly repayment agreement should not exceed $20 per month:
    • $200 adjusted monthly income x 40% = $80 – the max amount that can be collected for both rent and repayment agreement
    • $80 - $60 TTP = $20
• Owners/Agents may retain portions of repayments that are collected to help defray the cost of pursuing these cases. The amount that can be retained is limited to the lesser of actual costs or 20% of the amount received from the tenant.
  • Examples of expenses include but are not limited to staff time for verifying unreported income, meeting with the tenant, drafting repayment agreements, generating and sending monthly invoices, making voucher adjustments, etc.

Per HUD guidelines, tenants may report decreases in their income and an interim recertification will likely be processed. But what if at the time of annual recertification, you find that a tenant over-reported wages, unemployment and/or Social Security income by $200 or more per month? The first step again is to investigate. If it's discovered that management made a rent calculation error and the tenant over-paid rent, corrections to the prior certification(s) must be processed and the discrepancy needs to be discussed with the tenant. The owner must also provide the tenant with written notification which includes:

• A notice of rent change, effective retroactively to when the error occurred
• The new monthly rent the tenant is required to pay
  The amount of the over-payment of rent due to the tenant; and
• A form for the tenant to sign and return stating whether the tenant wishes to:
  • Receive a full, immediate refund; or
  • Apply the overpayment to future monthly rent payments

To comply with EIV Income Discrepancy guidelines, HUD also requires:

• The EIV Discrepancy Reports being printed at the same time as the Income Report. The reason for this is a completely NEW report is generated weekly in EIV and previous data is over-written. If it's not printed, it cannot be re-created.
• Review and resolve discrepancies at time of recertification or within 30 days of the EIV Income Report date
• Maintaining EIV Income Discrepancy Reports along with detailed resolution information in the tenant file – regardless if the discrepancy is valid or not.
• Confirmation that the information in TRACS agrees with the HUD-50059 in the tenant file. If it doesn't agree, the HUD-50059 needs to be retransmitted to TRACS.
• Following HUD guidelines on Investigating and Resolving Income Discrepancies (please reference HUD Notice H-2013-06) and HUD Handbook 4350.3, REV-1, CHG-4.

The EIV Income Discrepancy Report is an invaluable tool in the affordable housing industry. It supports the agenda of reducing improper payments - making sure the right benefits go to the right people – and it really does work!