Management Company Didn’t Always Maintain Proper Documentation

HUD’s Office of Inspector General (OIG) audited PK Management, LLC, based on: (1) media coverage of poor physical conditions associated with an apartment complex in Virginia that it managed; and (2) issues identified in a prior audit of the company in Birmingham, Ala. The audit objective was to determine whether PK Management assisted eligible tenants and maintained documentation to support the housing assistance payments it received for residents of the sites it managed in the Philadelphia region. The sites receive rental housing assistance payments from HUD’s multifamily project-based Section 8 program.

Auditors found that the management company didn’t always maintain documentation to show that it assisted eligible tenants and supported the housing assistance payments it received for residents in accordance with HUD. Specifically, it didn’t maintain eligibility documentation in 23 of the 60 tenant files reviewed. The missing tenant eligibility documentation included background checks for drugs and violent criminal activity, Citizenship Declaration Forms, authorizations for release of information and Privacy Act notices, copies of Social Security numbers, third-party verifications, and proof of disability.

In addition, the company didn’t always maintain other required documentation to support compliance in 27 of the 60 tenant files. The other missing required documentation included family composition; proof of proper selection from the waiting list; disclosure of lead-based paint certification to tenants; and unit inspections, including move-ins, move-outs, and annuals.

According to the auditors, these conditions occurred because PK Management didn’t have adequate controls to ensure that it maintained documentation to show that tenants were eligible for assistance and that housing assistance payments were supported. As a result, HUD had no assurance that housing assistance payments totaling $497,762, which it made on behalf of the residents at sites managed by PK Management, were correct and accurate.

Auditors recommended that HUD require PK Management to provide documentation to support housing assistance payments it received totaling $497,762 or reimburse HUD from non-project funds for any amount that it can’t support, and implement controls to ensure that it maintains documentation in the tenant files to show that tenants were eligible for assistance and that the housing assistance payments were supported.

• HUD Audit 2019-PH-1003