Section 202 Owner Generally Managed Site in Accordance with Requirements

HUD’s Office of Inspector General (OIG) audited a Section 202 site owner because of concerns raised by HUD’s Departmental Enforcement Center regarding the management of the site. The owner had failed to submit annual financial statements for fiscal years 2013 to 2015. The audit’s objective was to determine whether the owner managed the project in accordance with its regulatory agreement and HUD requirements.

The site receives project-based Section 8 assistance for 47 of its 48 housing units available to seniors and persons with disabilities. Auditors reviewed participant eligibility and their selection from the waiting list; the accuracy of and support for housing assistance payments; the management of security deposits and rental receipts; the use of operating funds; the management and use of reserve for replacement funds; maintenance of the property; whether the project made mortgage payments; and whether the project submitted annual financial statements.

Auditors found that the owner generally managed its project in accordance with its regulatory agreement and HUD requirements. But it didn’t maintain adequate documentation to show that participants were selected from its waiting list as required and didn’t submit financial statements for fiscal years 2013 through 2016. These conditions occurred because the site lacked procedures to ensure that it maintained documentation to show that it selected participants from the waiting list appropriately and lacked funds to pay an independent accounting firm to audit its financial statements. As a result, HUD had no assurance that the project treated applicants fairly and consistently in accordance with program requirements and was unaware of the project’s financial position. During the audit, HUD began working with the owner to have an independent accounting firm prepare the missing financial statements.

OIG recommended that HUD require the owner to develop and implement procedures to ensure that it maintains documentation to show that it selected participants from the waiting list in accordance with applicable requirements. It did not make a recommendation regarding the missing financial statements because HUD was working with the owner to correct the situation.

·       HUD Audit 2018-PH-1004