The U.S. Department of Housing and Urban Development – Office of Inspector General audited HUD’s Office of Multifamily Housing Programs, based on an internal audit suggestion expressing concern that multifamily property owners took unauthorized distributions or owner advances with no consequence. Our audit objective was to determine whether HUD enforced the requirements of the regulatory agreements and HUD handbooks that pertain to owner advances and distributions.

HUD did not always enforce the requirements of the regulatory agreements and HUD handbooks pertaining to owner advances and distributions. Of the 54 property owners reviewed, 10 had unauthorized distributions or owner advances that were not required to be repaid.

We recommend that the Acting Director of the Office of Asset Management and Portfolio Oversight provide guidance to multifamily property owners on the requirements of HUD Handbook 4370.1, chapter 2, and regulatory agreements to ensure that distributions are taken only from available surplus cash. In addition, we recommend that the Acting Director develop and implement detailed operational procedures to ensure the repayment of unauthorized distributions and owner advances and for the pursuit of civil money penalties for owners with a pattern of unauthorized distributions or owner advances.