We audited the Eastwood Terrace Apartments multifamily Section 8 Project-Based Rental Assistance (PBRA) program.  We selected Eastwood Terrace in accordance with the Office of Inspector General’s (OIG) goal to review HUD’s multifamily housing programs and because the OIG Office of Investigation conducted an investigation and suggested that the complex might not have had appropriate controls to ensure tenant eligibility.  Our objective was to determine whether the owner administered its Section 8 PBRA program in accordance with U.S. Department of Housing and Urban Development (HUD) regulations and guidance; specifically, whether the owner ensured that tenants were eligible for the program and that housing assistance subsidies were correct.

We found that the owner did not administer its Section 8 PBRA program in accordance with HUD regulations and guidance.  It did not ensure that tenants were eligible for the program and that housing assistance subsidies were correct.  Specifically, the owner (1) billed HUD for at least 81 tenants without the required documentation for recertifications and did not ensure that it could support the eligibility of its tenants, as certified on its reimbursement requests to HUD, (2) housed tenants in units larger than their family size should have allowed, and (3) failed to ensure that required annual inspections were conducted.  These conditions occurred because the owner failed to implement appropriate controls and lacked proper oversight of its staff, which allowed onsite managers to mismanage its program and admit tenants with questionable qualifications into uninspected units.  As a result, HUD paid the owner more than $1.8 million for unsupported tenants and units that it could not assure HUD were decent, safe, or sanitary.

We recommend that the Southwest Region Director of Multifamily Housing require the Eastwood Terrace owner to (1) support or repay HUD more than $1.8 million for tenants whose eligibility the owner could not support, (2) properly house tenants in the correct unit size, (3) perform annual inspections as required, and (4) ensure that its recently implemented quality control program is working as designed and in accordance with HUD requirements.