HUD Did Not Have Adequate Oversight To Ensure That Its Payments to Subsidized Property Owners Were Accurate and Supported When It Suspended Contract Administrator Reviews

In 2016, we began a series of audits in accordance with our goal to review the U.S. Department of Housing and Urban Development’s (HUD) multifamily housing programs. We issued five reports detailing violations found at Project-Based Rental Assistance (PBRA) properties in HUD’s Southwest Region. This assignment is a rollup of those five reports. In addition, we reviewed HUD’s controls to ensure that its housing assistance payment subsidies were based on accurate and supported information. Our audit objective was to determine whether HUD had adequate oversight of its PBRA program in the Southwest Region during the 5 years in which it suspended its project-based contract administrators’ management and occupancy reviews. We found that HUD did not have adequate oversight of its PBRA program in the Southwest Region during the 5 years in which it suspended its project-based contract administrators’ management and occupancy reviews. Specifically, during that time, HUD paid subsidies to property owners for nonexistent and unsupported tenants based on falsified, inaccurate, and unverified information. These conditions occurred because when HUD suspended the reviews of the assisted properties, it removed a major tool used by the contract administrators to verify housing assistance payment subsidies. Further, HUD’s contract amendment process created instability in the contract administrator’s operations. HUD did not adequately implement replacement procedures or its own onsite monitoring to reduce the deterioration and mismanagement risks to the properties it subsidized. This lack of monitoring resulted in owners’ not meeting contract requirements and incurring more than $5.6 million in questioned costs. When HUD reinstated the reviews, contract administrators faced many compliance issues resulting from the lack of onsite monitoring for 5 years. We recommend that the Office of Multifamily Housing Programs (1) enforce its written policies and procedures to ensure that the verification and payment of housing assistance payment subsidies for properties it subsidizes are based on accurate and supported information; (2) establish and implement policies to ensure effective contract administration, including providing project-based contract administrator contract amendments in a timely manner; and (3) develop contingency policies and procedures to ensure that the properties it subsidizes receive adequate and verifiable continuous monitoring.