We audited the Detroit Housing Commission’s Section 8 Moderate Rehabilitation Program as part of the activities in our fiscal year 2015 annual audit plan.  We selected the Commission based upon a citizen’s complaint alleging mismanagement in the administration of the Commission’s former program projects, Colony Arms and Fisher Arms Apartments.  Our audit objectives were to determine whether the Commission appropriately (1) maintained required program eligibility documentation and a waiting list to select applicants for housing and (2) recaptured overpaid housing assistance after households were terminated from the program or moved out of assisted units. 

The complainant’s allegation of mismanagement in the administration of the Commission’s former program projects was partially valid.  The Commission appropriately determined households’ program eligibility; however, it did not maintain a waiting list or use its Section 8 program waiting list to refer applicants to the projects’ owner or management agent for housing.  In addition, our testing identified one additional issue with the Commission’s operation of its program.  Specifically, the Commission did not always recapture overpaid housing assistance after households were terminated from the program or moved out of assisted units.  As a result, the Commission and the U.S. Department of Housing and Urban Development (HUD) lacked assurance that applicants were properly selected to reside in an assisted unit in the projects.  Further, the Commission overpaid nearly $101,000 in housing assistance. 

We recommend that the Director of HUD’s Detroit Office of Public and Indian Housing determine whether the households residing in the projects’ assisted units received housing in accordance with the program’s requirements and if not, consider a referral to HUD’s Office of Fair Housing and Equal Opportunity.  We also recommend that HUD require the Commission to (1) reimburse HUD nearly $101,000 from non-Federal funds for the overpayment of housing assistance and (2) implement adequate controls to address the findings cited in this audit report.