We performed an audit of the Orchard Court project, a Section 236 multifamily property, located in Bath, Maine. As part of our audit, we reviewed subsidy payments made to Orchard Court from Bath and Brunswick, Maine, Housing Authorities (Authorities). Our objective was to determine whether Section 8 voucher program subsidies paid to Orchard Court from the Authorities were for basic rent, rather than market rent. Basic rent is the minimum rent a tenant would pay under the Section 236 U.S. Department of Housing and Urban Development (HUD)-subsidized housing program, and market rent is the rent a property would obtain from any tenant if the rental unit was free of income restrictions and available for leasing.

The Authorities did not always pay basic rents failing to follow applicable HUD requirements in determining Section 8 rental subsidies for the tenants housed at the Orchard Court project. We recommended that the Director of the Office of Public Housing require the Bath and Brunswick Housing Authorities to recover from the Orchard Court project and reimburse $32,299 to the Section 8 program from nonfederal funds, and develop and implement controls and procedures to ensure that future subsidy payments made for Section 8 unit leases at multifamily developments do not exceed basic rents authorized under 24 CFR 982.521K.