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.
Recommendations
Housing
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Status2017-CH-1005-001-AOpenClosed$52,932.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on April 11, 2019Reimburse HUD $52,932 from non-project funds for the overpayment of housing assistance and utility allowances due to incorrect calculations.
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Status2017-CH-1005-001-BOpenClosed$566.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on December 15, 2018Reimburse the appropriate households $566 from non-project funds for the underpayment of housing assistance due to incorrect calculations.
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Status2017-CH-1005-001-COpenClosed$32,334.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on April 16, 2019Reimburse HUD $32,334 for the overpayment of housing assistance due to unreported, and underreported income, or income reported late. This reimbursement is either from non-project funds or collections from applicable households.
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Status2017-CH-1005-001-DOpenClosed$6,444.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on May 07, 2019Support or reimburse HUD $6,444 from non-project funds for the unsupported payments of housing assistance cited in the finding.
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Status2017-CH-1005-001-EOpenClosed$76,107.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on October 12, 2018Implement adequate quality control procedures to ensure that housing assistance payments are appropriately calculated and supported. These procedures and controls should ensure that $76,107 in program funds are appropriately used for future payments.
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Status2017-CH-1005-001-FOpenClosedClosed on October 12, 2018
Document the implementation of the quality control plan and the completed reviews of the tenant certification process.
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Status2017-CH-1005-001-GOpenClosedClosed on August 24, 2018
Revise its occupancy standards to include policies and procedures to prevent underuse of the project’s units.
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Status2017-CH-1005-001-HOpenClosedClosed on August 24, 2018
Review and update the project’s internal transfer waiting list to include the applicants’ move-in dates, and the project’s external waiting list to include notations showing the reasons why applicants were not admitted into the project’s program and why applicants were bypassed.
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Status2017-CH-1005-001-IOpenClosedClosed on October 12, 2018
Develop and implement adequate procedures and controls to ensure that the project complies with HUD’s requirements and its own policies regarding the management of its waiting list.