We reviewed the U.S. Department of Housing and Urban Development (HUD), Office of Multifamily Asset Management and Portfolio Oversight.  We initiated the audit under the HUD Office of Inspector General’s (OIG) annual audit plan.  Our audit objective was to determine whether HUD adequately monitored its management agents to ensure that front line costs and direct costs were not excessive across the portfolios as identified in audits performed by OIG.

HUD did not adequately monitor its management agents.  HUD's monitoring of its management agents did not always include detailed reviews of management agents' front line costs and direct costs across their portfolios to ensure costs were not excessive.  This condition occurred because HUD chose to forego its requirements for monitoring the management agents’ portfolios, and performed other broader and less detailed assessments.  As a result, funds may not be available to maintain property conditions, and Section 8 reserves may be reduced if project funds are used to pay improper frontline and direct costs.

We recommend that the Director of HUD’s Office of Multifamily Asset Management and Portfolio Oversight comply with its handbook requirements that stipulate HUD must perform management reviews of the management agent’s central office activities as well as regular onsite reviews of functions carried out at the projects.  These central office reviews should be performed at least once every 18 months.