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We audited the multifamily project-based Section 8 program at the Beverly Place Apartments.  We selected Beverly Place because we received a complaint of potential fraud, suggesting that the complex did not have appropriate controls to ensure tenant and unit eligibility.  Our objective was to determine whether the owner administered its project-based Section 8 program in accordance with U.S. Department of Housing and Urban Development (HUD) regulations and guidance.

The owner did not administer the project-based Section 8 program at Beverly Place in accordance with HUD regulations.  It assisted at least 97 tenants who were either ineligible for assistance or whose eligibility could not be supported.  This condition occurred because the owner did not establish effective control systems, which allowed the onsite employees to commit fraud.  The employees falsified tenant eligibility and did not properly verify tenant income as required by HUD.  As a result, HUD paid the owner more than $574,000 in subsidies for ineligible tenants and incurred more than $227,000 in subsidies for which the owner could not support the tenants’ subsidy amounts.

We recommend that the Southwest Region Director of Multifamily Housing require the Beverly Place owner to (1) repay HUD more than $574,000 for housing subsidies received for ineligible tenants and units and (2) support or repay HUD more than $227,000 for units for which managers either did not have a tenant file or did not obtain required earned income verification reports to verify eligibility.  In addition, HUD should require its contract administrator for Beverly Place to ensure that the owner’s recently implemented quality control program is working as designed.

Recommendations
Recommendation Status Date Issued Summary
2017-FW-1009-001-A Closed June 29, 2017 We recommend that the Southwest Region Director of Multifamily Housing require Beverly Place’s owner to repay HUD $574,930 for subsidized units that were not occupied by qualified tenants. Repayment must be from non-Federal funds.
2017-FW-1009-001-B Closed June 29, 2017 We recommend that the Southwest Region Director of Multifamily Housing require Beverly Place’s owner to provide support to show that the subsidies for 11 tenants with falsified income were accurate or repay HUD $150,082 for those subsidies. Repayment must be from non-Federal funds.
2017-FW-1009-001-C Closed June 29, 2017 We recommend that the Southwest Region Director of Multifamily Housing require Beverly Place’s owner to provide support to show that the subsidies for 18 tenants without files or without adequate income documentation in their files were accurate or repay HUD $77,621 for those subsidies. Repayment must be from non-Federal funds.
2017-FW-1009-001-D Closed June 29, 2017 We further recommend that the Southwest Region Director of Multifamily Housing require its contract administrator for Beverly Place to verify that the owner’s recently implemented quality control program is working as designed.
2017-FW-1009-001-E Closed June 29, 2017 We further recommend that the Southwest Region Director of Multifamily Housing ensure that the project-based contract administrator’s review process includes steps to obtain reasonable assurance that tenants being reported as subsidized at Beverly Place live in the subsidized units.