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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 Ponce (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 paid program landlords and properly determined housing assistance subsidies.

Of the 54 units inspected, 39 (72 percent) did not meet minimum housing quality standards, and 12 of those were in material noncompliance. The authority also failed to ensure that annual housing quality inspections were performed in a timely manner. As a result, Section 8 program funds were not used to provide units that were decent, safe, and sanitary; and the authority made housing assistance payments for units that did not meet standards. We estimate that over the next year, the authority will disburse housing assistance payments of more than $190,000 for units in material noncompliance with housing quality standards if it does not implement adequate controls.

The authority did not pay program landlords in a timely manner. As a result, it owed landlords more than $185,000 in rental payments. The authority also did not apply utility allowances for tenant-supplied appliances. We estimate that over the next year, the authority will underpay more than $71,000 in housing assistance and/or utility allowance disbursements if it does not implement adequate procedures regarding its utility allowance policy.

We recommend that HUD require the authority to inspect all of the 39 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 tenants' vouchers. HUD should also require the authority to establish and implement adequate procedures and controls to prevent $190,080 from being spent on units with material housing quality standards violations and for the timely disbursement of more than $185,000 in back payments to landlords. We also recommend HUD require the authority to develop a utility allowance schedule that complies with program requirements and recognizes the costs of tenant-supplied appliances to ensure that $71,232 in program funds is used in accordance with HUD requirements.