Owner's On-Site Employees Falsified Tenant Eligibility

HUD’s Office of Inspector General (OIG) audited a project-based Section 8 site after receiving a complaint of potential fraud. In October 2015, HUD’s OIG received a complaint that a tenant had been denied assistance at a different apartment complex. The tenant was listed as an assisted tenant at the investigated site, although she had moved out two years earlier. The complainant also alleged that she paid cash to rent the unit when she lived at the site.

The auditors concluded the owner did not administer the project-based Section 8 program in accordance with HUD regulations. The audit determined that onsite managers engaged in identity theft and manipulated tenant income documents. It further determined that the managers and a local law enforcement officer stole more than $230,000 in more than 5,000 reimbursable utility allowance checks intended for 176 assisted tenants between 2009 and 2015 and obtained three convictions. The managers no longer work at the complex, and those who were convicted received sentences including time in prison.

The owner billed HUD for nonexistent tenants and for tenants with falsified and questionable income. As a result, HUD paid the owner more than $574,000 in subsidies for ineligible tenants and incurred more than $227,000 in subsidies for which the owner could not support the tenants’ subsidy amounts.

Auditors recommended that the Southwest Region Director of Multifamily Housing require the owner to repay HUD more than $574,000 for housing subsidies received for ineligible tenants and units and support or repay HUD more than $227,000 for units for which managers either did not have a tenant file or did not obtain required earned income verification reports to verify eligibility. In addition, auditors recommended HUD require its contract administrator for the site to ensure that the owner’s recently implemented quality control program is working as designed.

• HUD Audit 2017-FW-1009, June 2017