Management & Occupancy Reviews: What to Expect During COVID

Will your MOR be less?

The Section 8 Project-Based Rental Assistance program is subject to an annual audit and inspection known as a Management and Occupancy Review (MOR). It’s one of the tools HUD uses to monitor a site to ensure that the owner is complying with its HAP contract, management certification, and HUD rules and regulations. MORs ensure that HUD’s multifamily housing programs are administered as intended by identifying deficiencies to eliminate fraud, waste, and mismanagement. 

HUD has announced that Performance-Based Contract Administrators (PBCAs) and HUD field offices can resume Management and Occupancy Reviews (MORs) for operators of project-based Section 8 and other developments in areas where state or local laws don’t restrict them. Since May 22, HUD has lifted the suspension of MORs and established a “low touch” MOR for the safety of residents and staff. And a HUD memo issued on June 23 by the director of Asset Management and Portfolio Oversight offered supplemental guidance on the alternative methods PBCAs may choose to conduct the MORs.

We’ll go over how MORs will be different during the pandemic going forward.

Standard MOR Procedures

In a typical year, a PBCA contacts an owner no less than 14 days in advance to schedule a date and time for the MOR. The MOR is designed to be a transparent process. The 47-page HUD form 9834 and its addenda details every question that will be asked of a site. HUD form 9834 can be found at www.hud.gov/sites/documents/9834.PDF. The MOR process involves the following steps:

Desk review. The desk review is intended to provide a well-rounded view of the site and identify potential problems that must be targeted during the on-site review. At this stage, relevant site information is pulled and reviewed ahead of time. This stage helps in providing any technical assistance to the owner and maximizes the limited time available during the on-site review. Some questions in the desk review section of the HUD-9834 form refer only to HUD staff.

On-site review. At this stage, early on, the auditor will give management a list of tenant files it will review. This stage also examines materials such as maintenance-related documentation, REAC or physical property inspections, recent audits, preventative maintenance plans, and capital improvement plans. The reviewer will take an interview approach with the owner using HUD-9834 Part II, Categories A through G.

In addition to reviewing documentation and files, the auditor will also conduct a physical on-site inspection of the site and vacant units. The auditor also will perform a follow-up inspection of unit and site deficiencies cited in a REAC inspection.  

Exit interview. An exit interview occurs to discuss the discrepancies identified during the on-site portion of the MOR. At this time, owners are given the opportunity to provide additional information or documentation to resolve a discrepancy during the MOR exit meeting so that it doesn’t appear in the MOR report as a finding.

Summary report. This is sent to the owner and HUD within 30 days of the on-site review indicating the results and rating of the review. The reviewer will describe any conditions that require corrective action and provide a timeline for when corrections must be met to ensure errors or omissions don’t recur.

Pandemic Adjustments for MORs

PBCAs have the discretion to conduct MORs safely. Contract administrators must follow local guidelines. And if a site experiences an outbreak or has staff or residents in quarantine, the owner should contact the PBCA and discuss rescheduling. Management also should notify the PBCA if any employees have any symptoms that might be COVID-related and inform the PBCA of any on-site safety protocols in place such as taking temperature when coming onto the site.

The adjustments issued by HUD with regard to MORs as a result of the pandemic mainly target chances for person-to-person interactions during the on-site review. Generally, PBCAs should be limiting face-to-face contact with site staff as much as possible.

Private space and household files. Owners should expect to provide a private, clean, and sanitary space for the MOR. This space may be a closed-off community room, empty office, or vacant unit. HUD has advised PBCAs to review tenant occupancy files by selecting files in advance to be reviewed and then have staff place those files in a secure room. Selecting the files in advance and having them placed in the space will minimize contact between the site staff and the PBCA’s reviewers.

The PBCA can conduct an introduction interview over the phone and notify management prior to arrival on-site on the morning of the MOR of the files, EIV documents, and completed work order for unit turnaround and REAC inspections the auditor will need to review.

In the July 31 update to HUD’s COVID-19 Q&A, HUD allowed an option for owners to provide electronic tenant files for review. HUD stated that tenant file reviews may be conducted remotely when owners voluntarily create and transmit electronic tenant files to the PBCA in accordance with all requirements of Notice H 2020-4, “Electronic Signature, Transmission, and Storage–Guidance for Multifamily Assisted Housing Industry Partners,” which explains acceptable procedures for using e-signatures and transmitting or delivering documents electronically.

Before the July 31 update, HUD didn’t authorize the transfer, electronically or physically, of tenant files off-site. HUD’s concern is the security of the files. Properly encrypting and transferring the number of required files may be too much for a site. Remember that electronic transmission isn’t a requirement.

However, if this option is used, remember that personally identifiable information (PII) must be encrypted or transmitted and stored in a secure manner to prevent its release. Violations of the Privacy Act may be subject to fines up to $5,000. Owners/agents and reviewers must comply with EIV Data Sharing Agreements to prevent any prohibited use of or access to EIV records. And PBCAs must continue to conduct MORs in accordance with their approved workplans regardless of owners providing electronic tenant files.

Unit inspections and REAC follow-up. HUD says it will, until Sept. 30, 2020 (or such later date as HUD may determine), allow PBCAs to conduct on-site MORs, without entering resident units. Prior to the MOR, staff should inform residents the PBCA may be contact them if their unit required repairs due to a REAC inspection deficiency and that the PBCA will be on-site but won’t be entering resident units.

Even though PBCAs won’t enter resident units, auditors will still follow-up on REAC inspections made within the last 12 months. In determining whether Exigent Health & Safety (EH&S) and other deficiencies have been corrected, the PBCA must try to follow up on those affected units by contacting the resident by phone or email and documenting the results or attempts made on the MOR report. Site staff must provide this contact information to the PBCA.

In addition, a PBCA may also look at competed work orders to determine that required repairs were made. For uncorrected REAC inspection findings, be sure to add a clarification to the open work order explaining why repairs haven’t been done.

Auditors will look at any vacant units you have. If the PBCA and owner would prefer to avoid contact, management may be able to provide completed work orders and pictures of vacant units to show that the units are rent-ready and available for occupancy.

Site inspection. Auditors still need to walk the property to document general appearance, security, and visual assessment of buildings and grounds. HUD has specifically stated that a physical on-site visit to the site must still occur to document the physical conditions, general appearance, and security of the property, and the visit should include a visual assessment of each building, including the common areas, and the grounds of the site.

Entrance/exit interviews. HUD says an on-site, entrance/exit interview with the owner/agent should occur, except in instances where state or local law or ordinances prevent such meetings. In instances where these interviews are prohibited from occurring on-site, they should be conducted by telephone or email and documented as such in the MOR report.