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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited the Alton Housing Authority because it appeared to have flat rents set at a rate below 80 percent of the fair market rent in that area based on the information available in the Public and Indian Housing Information Center system.  Our objective was to determine whether the Authority complied with HUD’s flat rent requirements.

The Authority did not properly implement HUD’s flat rent requirements.  It improperly phased in flat rent increases for 13 tenants converting to a flat rent from an income-based rent, and it improperly required 19 tenants to pay annual increases in flat rent greater than 35 percent, the maximum annual increase allowed by HUD. As a result, it undercharged 13 flat rent tenants by $13,746 from November 1, 2014, to December 31, 2015, and it will undercharge these tenants by $28,332 during the next year if it does not correct the problem.  It also overcharged 19 flat rent tenants by $6,250 from November 1, 2014 to December 31, 2015, and it will overcharge these tenants by $10,200 during the next year if it does not correct the problem.  In addition, it will collect increased operating subsidies from HUD.

We recommend that HUD (1) monitor the Authority to ensure that it understands the flat rent requirements and has properly implemented them, thereby putting $28,332 to better use over the next year; (2) include the $13,746 in undercharged flat tenant rent to the appropriate operating subsidy calculations to ensure that it does not overpay operating subsidies; (3) require the Authority to immediately perform interim reexaminations to correct the 19 overcharged tenants’ rent so they will not overpay $10,200 over the next year; (4) require the Authority to credit the $6,250 in overcharged flat rent to the tenants’ accounts; and (5) require the Authority to update its policies and procedures to describe its methodology for calculating flat rents.