The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited HUD's multifamily housing subsidy payment review process based upon a HUD employee’s complaint. The complaint alleged that HUD lacked controls over its multifamily housing subsidy payment review process and voucher specialists were understaffed and underpaid. Our audit objective was to determine whether HUD had adequate controls over its multifamily housing subsidy payment review process.

HUD’s oversight of its multifamily housing subsidy payment review process needs improvement. Specifically, the review and processing of HUD’s multifamily housing subsidy payments relating to the vouchers that exceeded the threshold amount, were submitted manually, or were submitted at least 1 year later than the voucher date were inadequate. The Financial Operations Division of HUD’s Multifamily Office of Housing Assistance Contract Administration Oversight did not comply with its written voucher review procedures. Of the 85 vouchers reviewed, the required information was not present in the system to support $588,869 of the more than $1.2 million in housing assistance payments for 30 vouchers. In addition, more than $28.5 million was provided for 12 vouchers that were not in HUD’s Tenant Rental Assistance Certification System (system), and lacked a valid waiver for not being in system, and a review of these vouchers was not conducted as required by HUD’s regulations.

As of May 13, 2010, the Financial Operations Division had paid 106 vouchers for contracts administered by the traditional contract administrators that totaled more than $2.5 million in housing assistance for the period October 1, 2008, through November 30, 2009, without conducting a review as required by its system. In addition, based on our review of four vouchers for contracts administered by the performance-based contract administrators, all four vouchers did not have the required information in the system to support more than $131,000 in housing assistance payments.

The system generated an incorrect message requiring a review of the vouchers by the Financial Operations Division for contracts administered by the performance-based contract administrators. As of January 27, 2010, 1,472 vouchers for the period October 1, 2008, through November 30, 2009, had been identified by the system as requiring a review by the Financial Operations Division. Also, the system did not select nine vouchers for which the voucher amount exceeded the contract’s threshold amount, contrary to the voucher selection process. Further, staff other than the voucher specialists released payments on 34 vouchers for contracts administered by traditional contract administrators without a review. As a result, HUD lacked assurance that housing assistance payments totaling more than $77,600 were provided in accordance with its regulations.

We recommend that the Director of Office of Housing Assistance Contract Administration Oversight (1) require the property owners and/or contract administrators to correct deficiencies identified or offset subsidy payments totaling more than $830,000 and (2) implement adequate procedures and controls to address the findings cited in this audit report to correct an error in voucher processing at the rate of 26.8 percent or 1,054 of 3,932 vouchers.