oversight

Louis Manor Apartments, Port Arthur, TX, Multifamily Section 8 Program, Subsidized Unsupported Tenants and Uninspected Units

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-08-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               Louis Manor Apartments,
                   Port Arthur, TX
  Multifamily Section 8 Project-Based Rental Assistance




Office of Audit, Region 6     Audit Report Number: 2018-FW-1006
Fort Worth, Texas                                 August 31, 2018
To:            Mary Walsh, Southwest Region Director, Multifamily Housing, 6AHMLA

               //signed//
From:          Kilah S. White, Regional Inspector General for Audit, 6AGA
Subject:       Louis Manor Apartments, Port Arthur, TX, Multifamily Section 8 Program,
               Subsidized Unsupported Tenants and Uninspected Units




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of Louis Manor Apartments.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG website. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
817-978-9309.
                    Audit Report Number: 2018-FW-1006
                    Date: August 31, 2018

                    Louis Manor Apartments, Port Arthur, TX, Multifamily Section 8 Program,
                    Subsidized Unsupported Tenants and Uninspected Units



Highlights

What We Audited and Why
We audited the multifamily Section 8 Project-Based Rental Assistance (PBRA) program at the
Louis Manor Apartments. We selected Louis Manor in accordance with our goal to review the
U.S. Department of Housing and Urban Development’s (HUD) multifamily housing programs
and because our analysis of Tenant Rental Assistance Certification System data showed red flag
indicators at Louis Manor that appeared to be similar to the conditions we found during our
previous multifamily audits. This is the fourth audit in a series of Office of Inspector General
Region 6 reviews of multifamily Section 8 PBRA programs. Our objective was to determine
whether the owner administered its Section 8 PBRA program in accordance with applicable
requirements.

What We Found
The owner did not administer its Section 8 PBRA program in accordance with applicable
requirements. Specifically, the owner (1) billed HUD for at least 14 tenants whose eligibility it
could not support, (2) did not complete annual recertifications in a timely manner, (3)
overhoused tenants, and (4) did not conduct the required annual inspections. These conditions
occurred because the owner and its identity-of-interest management agent did not implement
appropriate controls and lacked proper oversight of staff to ensure that its Section 8 PBRA
program was administered in accordance with HUD regulations. As a result, the owner received
$268,452 in housing assistance payments for 14 tenants whose eligibility and unit physical
condition standards it could not support. Further, the owner could not assure HUD that tenants
received subsidies based on accurate income information, which could adversely affect the
amount of funds available for other eligible families.

What We Recommend
We recommend that the Southwest Region Director of Multifamily Housing require the Louis
Manor owner to (1) support or repay HUD $268,452 for tenants whose eligibility the owner
could not support; (2) conduct annual recertifications in a timely manner; (3) properly house
tenants in the correct unit size; (4) perform the required annual inspections; and (5) implement
appropriate controls to ensure that tenants are eligible, housing assistance subsidies are accurate,
units are inspected as required, and tenant files contain all required documentation.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: Louis Manor Apartments Subsidized Unsupported Tenants and
         Uninspected Units ............................................................................................................. 4

Scope and Methodology ...........................................................................................9

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................12
         A. Schedule of Questioned Costs .................................................................................. 12

         B. Auditee Comments and OIG’s Evaluation ............................................................. 13




                                                                   2
Background and Objective
The Section 8 Project-Based Rental Assistance (PBRA) program was authorized by Congress in
1974 to provide rental subsidies for eligible tenant families residing in specific multifamily rental
properties. Under the program, the U.S. Department of Housing and Urban Development (HUD)
enters into long-term housing assistance payments contracts with project owners to provide
housing units to eligible tenants. HUD also contracts with project-based contract administrators
to monitor and enforce owner compliance with the terms of the contracts and HUD regulations
and requirements.
Louis Manor Apartments is a 132-unit complex at 1300 Joe Louis Avenue in Port Arthur, TX.
The Federal Housing Administration does not insure it, but Louis Manor is 100 percent HUD
subsidized through the Section 8 PBRA program. The owner of the property is B Properties -
Louis Manor LLC. The owner purchased the property from The Community Developers LLC
and received HUD approval to assume the Section 8 housing assistance payments contract on
September 30, 2015. The current management agent, B Properties – 2001 S Staples LLC, is an
identity-of-interest 1 company.
Between October 2015 and March 2018, HUD paid the owner more than $2.5 million in tenant
subsidies. HUD subsidized rents for the 132 units through a housing assistance payments
contract with the owner. The contract summarized the terms and conditions for subsidy
payments. Based on the tenant’s income, the owner determined how much rent each tenant was
responsible for and submitted monthly claims to HUD for the difference between the tenant’s
portion of the rent and the total approved rent for an adequate housing unit.
Southwest Housing Compliance Corporation was HUD’s performance-based contract
administrator for Louis Manor’s Section 8 PBRA program. Due to national litigation between
HUD and other parties, HUD amended its contracts with administrators throughout the country
to delete certain monitoring tasks, effective October 1, 2011. HUD reinstated the monitoring
tasks in May 2016. However, the administrator had not performed onsite monitoring reviews of
Louis Manor as of the end of our review period.
Our objective was to determine whether the owner administered Louis Manor’s Section 8 PBRA
program in accordance with applicable requirements.




1
    An identity-of-interest relationship exists when an individual or entity that provides management services to the
    project has a relationship with the project owner such that selection of the management agent and determination
    of the management fee will not be determined through an arms-length transaction.



                                                           3
Results of Audit

Finding: Louis Manor Apartments Subsidized Unsupported
Tenants and Uninspected Units
Louis Manor’s owner did not administer its Section 8 PBRA program in accordance with
applicable requirements. Specifically, the owner (1) billed HUD for at least 14 tenants whose
eligibility it could not support, (2) did not complete annual recertifications in a timely manner,
(3) overhoused tenants, and (4) did not conduct the required annual inspections. These
conditions occurred because the owner and its identity-of-interest management agent did not
implement appropriate controls and lacked proper oversight of staff to ensure that its Section 8
PBRA program was administered in accordance with HUD regulations. As a result, the owner
received $268,452 in housing assistance payments for 14 tenants whose eligibility and unit
physical condition standards it could not support. Further, the owner could not assure HUD that
tenants received subsidies based on accurate income information, which could adversely affect
the amount of funds available for other eligible families.

The Owner Billed HUD for Unsupported Tenants
The owner billed HUD for at least 14 tenants whose eligibility it could not support. A review of
14 tenant files showed that all of the files contained deficiencies. The files (1) lacked income
Enterprise Income Verification (EIV) reports, 2 third-party income verification, or both; (2) had
income discrepancies; (3) contained incorrect annual income; (4) lacked annual certification
forms HUD-50059, which are used to submit eligibility information to HUD for continued
housing assistance payments; (5) showed late recertifications; and (6) showed that Louis Manor
overhoused tenants. The table below summarizes Louis Manor’s deficiencies and the related
unsupported costs.

          Missing Missing                    Incorrect Missing          Late                       Unsupported
                                  Income                           recertification       Over-
Tenant      EIV third-party                   annual   annual                                        housing
                               discrepancies                                             housed
          reports verification                income certification                                  subsidies
    1        X                                                                              X           $14,536
    2        X          X             X                                                                  20,728
    3                                 X                         X                                        29,545
    4        X          X                                       X             X                          29,471
    5        X          X                                                                   X            19,549
    6        X                                                                X                          21,379
    7        X                                                                X                          23,612



2
    The Enterprise Income Verification system is a web-based computer system containing employment and income
    information on individuals participating in HUD’s rental assistance programs. Regulations at 24 CFR (Code of
    Federal Regulations) 5.233 and HUD Handbook 4350.3, REV-1, require its use as a third-party verification
    source.



                                                        4
         Missing   Missing                  Incorrect Missing          Late                  Unsupported
                                 Income                                             Over-
Tenant     EIV   third-party                 annual   annual      recertification              housing
                              discrepancies                                         housed
         reports verification                income certification                             subsidies
   8        X                                                                         X           10,408
   9        X                                  X           X             X                        21,432
  10        X                                  X                                      X            7,404
  11         X                                                                                    18,405
  12        X                                                                                     15,378
  13        X                                                                         X           16,387
  14        X                                                                                     20,218
Totals      13         3           2            2          3             4            5          268,452

Missing Income Verification
Thirteen reviewed files had missing EIV reports, third-party income verification, or both for 1 or
more years. HUD required the use of the EIV system for verification of employment and income
of tenants and for reducing administrative and subsidy errors and required third-party verification
of the income. 3
In one instance, Louis Manor used the EIV system to determine whether household members
received assistance at another location before the family moved into the unit in October 2015.
However, the tenant file did not contain required EIV income reports for the family within 90
days after move-in or for the 2016 and 2017 annual recertifications, resulting in $29,471 in
unsupported costs. Regarding third-party income verification, EIV reports in two tenant files
showed that the tenants were employed, but there was no evidence of employment income
verification. Further, the form HUD-50059 in another tenant file showed gift income of $600
per year for the recertification, effective April 1, 2017, but there was no gift income verification
in the file. Without collecting or maintaining EIV reports and third-party income verification as
required, the owner could not assure HUD that it based tenant subsidies on accurate information.
Income Discrepancies
Two tenant files contained income discrepancies. Income on the forms HUD-50059 did not
include income disclosed by EIV reports, and onsite staff did not properly investigate and
resolve EIV income discrepancies. For instance, an EIV report showed that a tenant had
employment income of $11,661. However, the form HUD-50059 submitted to HUD showed
that the tenant had gift income of only $50 per month. The file contained an employment
verification request form, dated May 5, 2016, for the recertification, effective August 1, 2016. A
handwritten note on the form said it was the fourth request, but there was no evidence that the
verification was mailed or that there was follow up with phone contact. EIV reports showed that
the tenant had employment income from 2015 through 2017. There was no evidence in the file
that Louis Manor addressed the income discrepancies. In this case, the owner collected HUD
subsidies based on a fraction of the tenant’s income, making limited subsidies for waiting


3
    24 CFR 5.233



                                                    5
families who properly reported their income unavailable because the owner certified, without
verification, understated income reported by this tenant. When income discrepancies are not
resolved, HUD could pay higher subsidies than warranted for a tenant, while that tenant paid less
toward rent than he or she should, which would leave fewer subsidies available for other
qualified families.
Incorrect Annual Income
The onsite manager used incorrect annual income for two tenants. In one file, both the
certification questionnaire signed by the tenant and the phone verification showed gift income of
$200 per month. However, the form HUD-50059 showed $0 income. In another file, the written
employment verification, dated January 17, 2017, showed that anticipated annual income was
$4,000. However, the form HUD-50059 for December 1, 2016, showed employment income of
only $2,400 per year, which was based on verbal verification. HUD’s acceptable method of
verification is that owners use written third-party verification before verbal verification. 4 The
onsite manager should have used the accepted method of verification, which could have assisted
in preventing the errors.

Missing Annual Recertifications
Three annual certification forms HUD-50059 were missing. HUD Handbook 4530.3, REV-1,
chapter 7, requires owners to certify tenant eligibility at least annually. Without the required
forms, the owner could not assure HUD that eligible tenants occupied the subsidized units.

Late Recertification
Four annual recertifications were late. The owner was required to conduct a recertification of
family income and composition at least annually. 5 Three recertifications were late, with
submissions ranging from 34 to 57 days after the required date. In addition, there was no
evidence that the owner conducted an annual recertification for one family. Conducting annual
recertifications late or not at all hinders the owner’s ability to consider possible changes in the
tenant’s income and family composition, which affects the subsidies HUD provides.

Overhoused Families
Five families were living in units larger than their household size should have allowed. HUD
required Louis Manor to assign a family to a unit of appropriate size, taking into consideration
all persons residing in the household. 6 A family of two was assigned a three-bedroom unit
without justification for the additional bedroom. Louis Manor assigned four other families the
appropriate unit size at move-in but allowed the families to keep the same unit size after one or
more household members moved out. According to Louis Manor’s policy and procedures for
occupancy standards, it placed households on the unit transfer waiting list when there was a
family composition change that resulted in the household’s no longer being eligible for the
current bedroom size. The property could not provide a unit transfer waiting list. Further, the
waiting list the property maintained did not contain any of the identified overhoused tenants.



4
    HUD Handbook 4350.3, REV-1, chapter 5, section 5-13
5
    HUD Handbook 4350.3, REV-1, chapter 7, paragraph 7-4.A.1
6
    HUD Handbook 4350.3, REV-1, chapter 3, section 3-23, and Louis Manor Policies and Procedures, section 6.0



                                                       6
The Owner Billed HUD for Uninspected Units
All 14 files had missing inspection reports for 1 or more years. For example, one tenant file did
not contain inspection reports for 3 consecutive years. Further, more than half of the files had
inspection reports when a family moved in but were missing at least one report in later years.
HUD required the owner to complete annual inspections to ensure that the units were decent,
safe, sanitary, and occupied or available for occupancy. 7 Neither the owner nor the management
agent reviewed the files to ensure that the units had been inspected. Without evidence of
completed annual inspections, Louis Manor could not support that the subsidized units met
physical condition standards.

The Owner and Management Agent Needed To Make Improvements
The owner and its identity-of-interest management agent needed to make improvements to Louis
Manor’s Section 8 PBRA program. Specifically, they needed to implement appropriate controls
over eligibility, housing assistance subsidies, inspections, and maintaining required
documentation, as discussed above. The owner and its management agent did not have
appropriate oversight or policies and procedures to detect or prevent these deficiencies, which
resulted in the owner’s certifying to the accuracy of its monthly subsidy requests to HUD based
on deficient records. The owner hired a quality control specialist in September 2016 to monitor
EIV reports, train its property managers, and conduct site visits at its 16 properties at least once a
year. The specialist visited Louis Manor in June 2017 and stated that she reviewed EIV income
discrepancies, checked EIV Multiple Subsidy Reports, and verified tenant identities during her
visit and in desk reviews conducted in May, July, and October 2017. However, the specialist did
not identify substantial deficiencies within the tenant files. By not identifying issues within the
files, the same deficiencies could remain without correction. Further, HUD could continue to
subsidize tenants and units that the owner’s records could not support.
In addition, Louis Manor required its staff to use checklists at each tenant’s eligibility
certification or annual recertification. However, none of the 14 files reviewed contained
certification checklists. Further, the checklists were insufficient to ensure that the tenant files
contained all required documentation. For example, the checklists did not include steps to ensure
that annual inspections were completed or that families were housed in the appropriate-size units.
When brought to Louis Manor’s attention, its compliance manager updated the checklists to
include an occupancy overview for each certification completed. If the owner plans to rely on
checklists to help ensure that its certifications to HUD are accurate, they must cover
requirements and be used consistently.
Conclusion
The owner violated its housing assistance payments contract with HUD for its Section 8 PBRA
program by submitting certifications to bill HUD for unsupported tenants and charging HUD for
units that it failed to ensure were decent, safe, and sanitary. This condition occurred because the
owner and its identity-of-interest management agent lacked oversight and did not implement
appropriate controls to ensure that Louis Manor’s tenants were eligible and that housing
assistance payments from HUD were based on accurate information. As a result, the owner


7
    24 CFR 5.705



                                                   7
collected housing assistance payments of $268,452, which it could not support. Further, the
owner could not assure HUD that tenants received subsidies based on accurate income
information, which could adversely affect the amount of funds available for other eligible
families.

Recommendations
We recommend that the Southwest Region Director of Multifamily Housing require the Louis
Manor Apartments’ owner to
       1A.    Support that the subsidies for 14 tenants with missing income verifications,
              income discrepancies, incorrect annual income, and missing annual certifications
              were adequately supported and accurate or repay HUD $268,452 for those
              subsidies. Repayment must be from nonproject funds.
       1B.    Implement appropriate controls to ensure that it conducts annual recertifications
              for all tenants in a timely manner, as required.
       1C.    Properly house the five families discussed in the finding in the correct unit size
              when an appropriate sized unit is available and ensure that its other tenants are
              housed in the correct unit size.
       1D.    Perform inspections for the units that lacked inspection reports
       1E.    Implement appropriate controls to ensure that it performs annual inspections, as
              required.
       1F.    Implement appropriate controls to ensure that tenants are eligible, housing
              assistance subsidies are accurate, and tenant files contain all required
              documentation.




                                                8
Scope and Methodology
We performed our fieldwork at Louis Manor’s office located in Port Arthur, TX, and the OIG
Offices of Audit in Houston, TX, from April through June 2018. Our audit period was October
1, 2015, through March 31, 2018.
To accomplish our objective, we
    •    Reviewed relevant HUD regulations and requirements.
    •    Reviewed the management agent’s policies and procedures.
    •    Reviewed the contract administrator’s management and occupancy review for Louis
         Manor, dated June 15, 2011.
    •    Reviewed utility records subpoenaed by the Office of Audit.
    •    Reviewed the monthly housing assistance payment requests for the audit period.
    •    Reviewed TRACS move-in – move-out reports, TRACS assistance payment reports, and
         unit payment history reports.
    •    Reviewed the project’s audited financial statements and rent rolls.
    •    Interviewed the tenants’ reported income contributors when we could locate them.
    •    Interviewed the property manager, compliance officer and quality control specialist.
    •    Contacted HUD’s staff and contract administrator for information needed for the review.

Scope limitation
According to Louis Manor’s compliance officer, 30 tenant files were destroyed during Hurricane
Harvey. Further, 53 families living on the first floor had to move out after the hurricane in
September 2017. While the units were empty, Louis Manor did not collect housing assistance
subsidies for these tenants. The restriction on access to tenant files and the inhabitability of
units, which resulted in reduced HUD subsidies to the owner, limited the records available for
review.
Of the 217 8 subsidized tenants during the review period, we selected an original sample of 14
files for tenants (1) having limited tenant income of $2,400 or less and receiving utility
allowance reimbursements, (2) with subsidy amounts of more than $10,000, and (3) with income
that was reduced after move-in. We replaced two sample tenant files destroyed during Hurricane
Harvey with two other files. We also compared information from the subpoenaed utility records
to TRACS reports, including rent rolls, move-in – move-out reports, and payment histories, to



8
    The number of assisted tenants (217) exceeded the number of assisted units (132) due to tenant move-ins and
    move-outs during the review period.



                                                         9
determine whether there were any payments for ghost tenants 9 or vacant units in our sample. We
determined that there was no evidence of ghost tenants or payments for vacant units. This
determination also factored into our decision to limit our review to the 14 original sample files.
The prior owner or management agent processed certifications completed before September 30,
2015. Therefore, we questioned only certifications completed after September 30, 2015, the date
on which the current owner assumed responsibility for the housing assistance payments contract.
To achieve our audit objective, we relied on computer-processed data regarding the unit payment
history and TRACS reports to determine the unsupported subsidy amount for each tenant. We
assessed the reliability of the computer-processed data and determined that the data were
generally reliable. The test results refer only to the tenants sampled and cannot be projected to
the population of tenants.
This is the fourth audit in a series 10 of Office of Inspector General (OIG) Region 6 reviews of
multifamily Section 8 PBRA programs.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




9
     Ghost tenants refer to subsidized units, which Section 8 PBRA tenants did not occupy but the owner billed HUD
     for those tenants on its certified reimbursement requests.
10
     We also conducted the following audits: (1) The Beverly Place Apartments, Groves, TX, Subsidized
     Nonexistent Tenants, Unqualified Tenants, and Tenants With Questionable Qualifications, audit report 2017-
     FW-1009, issued June 29, 2017; (2) Villa Main Apartments, Port Arthur, TX, Subsidized Nonexistent Tenants,
     Unsupported Tenants, and Uninspected Units, audit report 2018-FW-1002, issued January 31, 2018; and (3)
     Eastwood Terrance Apartments, Nacogdoches, TX, Multifamily Section 8, Subsidized Questionable Tenants,
     Overhoused Tenants and Uninspected Units, audit report 2018-FW-1005, issued August 2, 2018.



                                                         10
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   effectiveness and efficiency of operations,
•   reliability of financial reporting, and
•   compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

•   Policies and procedures that Louis Manor’s owner implemented to ensure that its Section 8
    PBRA program was administered in accordance with HUD’s rules and regulations.
•   Policies and procedures that Louis Manor’s owner implemented to provide adequate
    oversight of onsite managers at Louis Manor.
•   Policies and procedures that Louis Manor’s owner implemented to ensure that its monthly
    HUD billings were accurate and included only occupied units.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

    •   The owner and former management agent lacked oversight and did not have sufficient
        controls to ensure that they implemented the Section 8 PBRA program in accordance
        with HUD’s rules and regulations, including that their monthly billings to HUD were
        accurate (finding).




                                                  11
Appendixes

Appendix A


                             Schedule of Questioned Costs
                           Recommendation
                                             Unsupported 1/
                               number
                                   1A              $268,452

                                 Totals             268,452



1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1




Comment 2
Comment 3




Comment 4
Comment 5
Comment 6




                               13
Ref to OIG
Evaluation   Auditee Comments




                                14
                         OIG Evaluation of Auditee Comments


Comment 1   The owner disagreed with the conclusion that the ownership of Louis Manor
            Apartments did not administer its Section 8 PBRA program in accordance with
            applicable requirements. The owner acknowledged that it would continue to work
            with HUD to clear up the items contained in the audit report.
            We found deficiencies in all 14 files reviewed. We maintain our position as
            described in the finding and did not make any changes to the report. We
            encourage the owner to work with HUD to resolve the finding and
            recommendations during the audit resolution process.
Comment 2   The owner stated that it did EIV checks but they were kept in a separate and
            secure area apart from the main files and that documentation was not provided to
            our office.
            We maintain our position as stated in the report. HUD Handbook 4350.3 Rev-1,
            Exhibit 9-5 required the owner to retain copies of EIV reports in the tenant files.
            The tenant files reviewed did not always contain the required EIV. Therefore, the
            owner could not assure HUD that tenants received subsidies based on accurate
            income information. The owner should provide its documentation to HUD for
            consideration during the audit resolution process.
Comment 3   The owner agreed that some recertifications were not performed in a timely
            manner. The owner recommended that OIG consider that mitigating
            circumstances could lead to those occurrences, such as non-responsive residents
            and associated due process requirements, employers being unwilling to provide
            third party verifications, eviction proceedings requirements, and on site
            management failures. The owner stated it required weekly reports from the site
            management for recertification status. The owner also believed that late
            recertifications were not a compliance issue.
            HUD required the owner to conduct a recertification of family income and
            composition at least annually. Therefore, late recertifications did not comply with
            HUD requirements. Further, the management usually started the recertification
            process about three months before the due date, leaving it sufficient time to work
            through mitigating circumstances to complete the recertification in a timely
            manner. In addition, the reviewed files did not contain information regarding
            mitigating circumstances or issues that affected the recertification. We commend
            the owner for implementing procedures to prevent late recertifications.
Comment 4   The owner agreed that it did not perform inspections in some isolated instances
            during 2016 due to a change in management during this time frame and that the
            owner’s oversight led to the change.




                                             15
            As discussed in the report, we found that all 14 files had missing inspection
            reports for 1 or more years during 2015, 2016 and 2017. We encourage the owner
            to work with HUD to resolve the finding and recommendations during the audit
            resolution process.
Comment 5   The owner asserted that it saw no evidence that some units were not recertified at
            all as the report showed. It looked forward to providing the Office of Multifamily
            Housing with documentation to clear up the matter.
            We maintain our position that there was no evidence that the owner conducted an
            annual recertification for one family and that three annual certification forms
            HUD-50059 were missing. The owner should submit its supporting
            documentation to HUD and work with HUD during the audit resolution process to
            satisfy the recommendations.
Comment 6   The owner agreed that residents were overhoused in a few instances and that
            mitigating circumstances often make it necessary to allow such cases. The owner
            also agreed that a waiting list should be kept, documented, and updated to track
            those overhoused families. The owner committed to taking action immediately.
            We commend the owner’s efforts to take corrective action. The owner should
            work with HUD during the audit resolution process to satisfy the
            recommendations.




                                             16