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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited public housing agency compliance with HUD’s flat rent requirements.  We initiated this audit based on multiple external audits conducted by the HUD Office of Inspector General, which showed that housing authorities were unaware of or did not properly implement the flat rent requirements.  Our objective was to determine whether housing authorities complied with HUD’s flat rent requirements.

We found that housing authorities did not properly implement HUD’s flat rent requirements for more than half of the flat rent tenants reviewed.  They undercharged flat rents for 18 of the 60 tenants, which projects to a total of 10,119 undercharged flat rent tenants.  Additional housing authorities used the incorrect methodology to calculate flat rents for 10 tenants but complied with the minimum requirements, and 4 others incorrectly calculated flat rents but were correct for the sampled tenant during December 2016.  As a result, housing authorities undercharged flat rent tenants by an estimated $527,052 nationwide during December 2016 and could undercharge flat rent tenants by approximately $6.3 million during the next year if HUD does not correct this problem.  Housing authorities could also collect increased operating subsidies from HUD.

We recommend that HUD finalize and implement monitoring procedures to ensure that approximately $6.3 million is put to better use over the next year.  We also recommend that HUD clarify guidance to enhance housing authority understanding of the requirement and follow up with the housing authorities in our sample to ensure that their rents have been properly adjusted.