HUD’s Office of Inspector General (OIG) audited the Lake View Towers Apartments’ Section 8 housing assistance payments program. HUD made housing assistance payments for the project under the Section 8 contract, which covered 395 of the 500 units. During the audit period, HUD provided the owner with nearly $8.5 million in Section 8 housing assistance payments.

The audit’s objective was to determine whether the site’s management agent administered the project’s program in accordance with the owner’s contract with HUD and its own requirements. Specifically, auditors wanted to determine whether the management agent correctly calculated and paid housing assistance, obtained and maintained required eligibility documentation, and administered the waiting lists in accordance with HUD’s and its own requirements.

Auditors found that the management agent didn’t always administer the project’s program in accordance with HUD’s and its own requirements. Specifically, it didn’t always correctly calculate and support housing assistance payments for its program households. Auditors reviewed 120 certifications to determine whether the management agent correctly calculated housing assistance payments for the period November 2016 through October 2018. For the 120 certifications 66 had unsupported or incorrectly calculated housing assistance.

Auditors also found that the assistant manager and the occupancy specialist lacked adequate knowledge and understanding of HUD’s requirements. They weren’t aware that:

• Annual income is the amount of income anticipated to be received by the household from all outside sources during the 12-month period following admission or annual recertification, which includes tips and overtime income;
• All adult tenants with zero income must self-certify that they don’t have income;
• Tenants must provide the most recent four to six consecutive paystubs to support income;
• EIV income reports must be checked during recertifications for unreported or underreported income;
• Tax returns used to support income must be complete and final; and
• EIV income reports should be used to identify underreported income, etc.

According to the project’s assistant manager and occupancy specialist, although they were responsible for performing household certifications, they didn’t receive training on HUD’s program requirements until 2017. But auditors found the recertifications completed by the project’s assistant manager and occupancy specialist after the training occurred still had errors. The management agent’s contract with the owner requires the agent to prepare and verify eligibility certifications and recertifications in accordance with the HUD’s requirements.

According to the auditors, HUD inappropriately paid nearly $57,000 in ineligible and more than $399,000 in unsupported housing assistance. If the management agent doesn’t correct its tenant certification process, HUD could overpay more than $54,000 in housing assistance over the next year. In addition, housing assistance may have been unjustly denied or delayed for eligible applicants on the project’s waiting lists.

Auditors recommended that the Director of HUD’s Chicago Office of Multifamily Housing Programs require the project owner to reimburse HUD for the ineligible housing assistance payments; reimburse the appropriate household for the underpaid housing assistance; support or reimburse HUD for the unsupported housing assistance payments; conduct criminal record background checks; update its waiting lists to include applicable notations; and implement adequate policies, procedures, and controls to address the issues found by auditors.

• HUD Audit 2019-CH-1003