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We audited the Stone Terrace Apartments’ Section 8 housing assistance payments program based on a citizen’s complaint alleging mismanagement of its housing assistance payments contract.  The audit was part of the activities in our fiscal year 2017 annual audit plan.  Our audit objective was to determine whether the management agent administered the project’s program in accordance with the owner’s contract with the U.S. Department of Housing and Urban Development’s (HUD) and its own requirements.

Stone Terrace Apartments’ management agent, East Lake Management Group, Inc., did not always administer the project’s program in accordance with HUD’s and its own requirements.  Specifically, it did not always correctly calculate and support housing assistance payments for the program households and properly administer the project’s waiting lists.  As a result, the project inappropriately received more than $85,000 in ineligible and more than $6,000 in unsupported housing assistance.  If the management agent does not correct its tenant certification process, HUD could overpay the project more than $76,000 in housing assistance over the next year.  In addition, housing assistance may have been unjustly denied or delayed for eligible applicants on the project’s waiting lists.

We recommend that the Director of HUD’s Chicago Office of Multifamily Housing Programs require the project owner to (1) reimburse HUD from non-project funds for the ineligible housing assistance payments, (2) reimburse the appropriate households for the underpaid housing assistance, (3) reimburse HUD for the overpayment of housing assistance due to unreported income, (4) support or reimburse HUD from non-project funds for the unsupported housing assistance payments, (5) update the waiting lists to include applicable notations, and (6) implement adequate policies, procedures, and controls to address the issues cited in this audit report.