Use Tracking Sheets to Organize and Guide Fraud Investigations

In these economic times, you may have experienced an uptick in qualified applicants applying for units at your tax credit site. Unfortunately, a small subset of these applicants is probably reporting false income in an attempt to take advantage of subsidized rent rates. Recently, the Worcester Housing Authority (WHA) in Massachusetts reported nearly $1.6 million in fraud over the past five years. According to the report, from 2008 to 2012, WHA staff and investigators reviewed 2,000 suspected cases of fraud. And as a result, a total of $664,775 was recovered, along with agreements for another $428,162 to be paid back. In addition, nine cases were taken to court, where a total of $62,769 was ordered to be repaid, according to the report.

            Most likely, your site has measures in place to deter fraud and verify applicant information. But there may be devious households that may have slipped through the cracks. In one recent case, a Minneapolis woman was sentenced in federal court for using an alternative identity to fraudulently receive government benefits, including more than $18,000 in rent benefits. In her plea agreement, she admitted that she applied for, and received, an alternate Social Security card under a fake name. She then used both Social Security numbers and identities to apply for and renew Minnesota identification cards and driver’s licenses, to seek and obtain employment, and to file federal and state tax returns. She had also used the false identity to receive a lower monthly housing rental rate by qualifying for a tax credit unit. According to reports, her fraud resulted in her underpaying more than $18,000 in rent since 2004.

            Suppose your staff gets an anonymous tip that a household at your tax credit site has more income or members than the household head reported. This can mean you certified some of your households as eligible when, in fact, they weren’t. You’ll need to investigate to discover whether you made compliance mistakes while relying on a tenant’s fraudulent information. But many things can go wrong with an investigation.

            Busy staffers may neglect or forget about an investigation. Or they may fail to keep good records of the steps they’ve taken and not follow up as needed. Worst of all, a tipster may tell the IRS or your state housing agency that he alerted you to a fraud but that you did nothing, says tax credit site consultant A.J. Johnson. If your agency uncovers a fraud at your site, mistakes may come back to haunt you and the owner may lose its credits, he warns.

            To ensure that investigations are handled promptly and run smoothly, we’ll give you a Model Form: Track Progress of Open Fraud Investigations, that you can use to track each investigation from the moment you spot an inconsistency in household information until you take steps to evict the household or you write the memo to file. Keep all these forms together in one binder so that it’s easier for a supervisor to oversee investigations. Here’s what you need to know about investigation tracking sheets.

How Tracking Sheet Helps

An investigation tracking sheet can help organize and streamline your investigation in four ways:

            Allows easy oversight. A tracking sheet shows the status of an investigation at a glance. A supervisor won’t have to review the entire file to find out what steps have been taken and what, if any, conclusions have been reached.

            Guides investigation. A tracking sheet serves as a handy outline to help staffers cover all the bases. It asks staffers for all the basic information right away. Then it leads staffers through the appropriate steps. The tracking sheet is also a useful way for staffers to reorient themselves if they return to an investigation after attending to other tasks.

            Keeps staff vigilant. Having a formal investigations binder—and prepared forms to use—helps to remind staffers of their ongoing responsibility to investigate inconsistencies. It’s easy for staffers to forget about investigations when the paperwork is informally kept or filed away out of sight.

            Shows your compliance. You can use tracking sheets and an investigations binder to show auditors from the IRS, your state housing agency, and others that you take seriously the possibility of fraud by households—and that your staff promptly carries out investigations.

Set Up Binder

You should gather tracking sheets in a binder or folder with two sections. In the front section, place tracking sheets for active investigations in chronological order (based on the investigation’s starting date).

            Completed tracking sheets can go in the back section, also in chronological order. When the binder is opened, the top tracking sheet will be for the oldest ongoing investigation. This provides immediate information on how quickly investigations are going.

What Tracking Sheet Covers

Your staff should start a tracking sheet any time they hear or see something that’s inconsistent with the relevant information you got from the household. For example, in the WHA fraud report, one household member living in an elderly community raised suspicions by having a luxury car. The WHA investigated and found the resident didn’t report his true income. And the resident was ordered to pay back $8,700 to the WHA.

            Our tracking sheet is divided into four sections. It assumes that the staffer who first becomes aware of the inconsistency fills out the first section and signs it. It also assumes that the rest of the tracking sheet is filled out and signed by the person or persons at your site responsible for investigating inconsistent information. But you may choose to assign these responsibilities differently and modify the tracking sheet to fit your procedures. At the end of the investigation process, have your staffers place a copy of the completed tracking sheet in the household’s file. Have them refile the original in the back of the binder with other tracking sheets for completed investigations.

            Basic data. The first section of the tracking sheet asks for basic data about the inconsistent information. In addition to the name of the site and the date, this section also asks for the identity of the household involved, how the inconsistency was discovered, and what the inconsistency concerns. The section includes checklists to make it easier for the staff member to provide details about the source of the inconsistent information (for example, a verification source) and the nature of the information (for example, unreported income); the staff member simply selects the appropriate item in the checklist.

            Status of investigation. The second section of the tracking sheet takes the staffer conducting the investigation through the appropriate steps—for example, contacting the household and sending verification forms. The tracking sheet monitors the progress of the investigation, since the staffer must fill in the date when each step is taken and the date when verification forms or other kinds of documentary evidence are received. There’s also space for the staffer to indicate what additional investigative steps—for example, interviewing neighbors—were taken and when.

            Results of investigation. The third section of the tracking sheet walks staffers through the steps to take if the investigation shows that the household gave false information. These steps include sending a warning letter to the household, meeting with the household (if its members choose to meet with you), and starting a legal action against the household. Next to each step is a space for the date the step was taken.

            Final documentation. In the last section, there’s a box to check to indicate that a memo on the discrepancy, the investigation, and the conclusions drawn was written and is on file. The staffer filling out the tracking sheet must check the box, enter the name of the person writing the memo and the date it was written, and sign his or her own name.

Insider Source

A.J. Johnson: President, A.J. Johnson Consulting Services, Inc., 3521 Frances Berkeley, Williamsburg, VA 23188; (757) 259-9920.