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As part of the U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General's (OIG) strategic plan, we audited the Municipality of Caguas (authority) Section 8 Housing Choice Voucher program. Our audit objectives were to determine whether Section 8 units met housing quality standards in accordance with HUD requirements and whether the authority properly determined housing assistance subsidies.

Of the 10 units inspected, eight (80 percent) did not meet minimum housing quality standards, and three of those were in material noncompliance. The authority also failed to ensure that quality control inspections were performed in accordance with HUD requirements. As a result, the authority made housing assistance payments for units that did not meet standards.

The authority miscalculated Section 8 assistance, overhoused tenants, made duplicate payments, and did not abate rents. As a result, it made overpayments and underpayments totaling $14,074 and did not support $1,957 in assistance payments. We estimate that over the next year, the authority will disburse more than $6,800 in subsidy overpayments if it does not implement adequate controls.

We recommend that HUD require the authority to inspect the eight units that did not meet minimum housing quality standards to verify that the landlords took appropriate corrective actions to make the units decent, safe, and sanitary. If appropriate actions were not taken, the authority should abate the rents or terminate the housing assistance contracts. HUD should also require the authority to ensure that errors in tenant files are corrected and reimburse its program $13,086 and the tenants or landlords $988 for the identified errors that affected the assistance payments. We also recommend that HUD require the authority to submit supporting documentation that would justify the issuance of a voucher larger than the administrative plan allowed or reimburse its program $1,957 from nonfederal funds for the five unsupported vouchers. Additionally, we recommend that HUD require the authority to establish and implement controls to prevent $6,804 in overpayments because of incorrect payment standards.