Improving Controls Over Rent and Management Fees at Multifamily Housing Projects

RCED-84-118: Published: Apr 11, 1984. Publicly Released: Apr 11, 1984.

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Pursuant to a congressional request, GAO evaluated the Department of Housing and Urban Development's (HUD) procedures for controlling rents and management fees at multifamily housing projects.

As part of its oversight role in housing programs, HUD reviews and approves rent and management fee increases for multifamily rental housing projects. GAO found that inadequate controls resulted in excessive rents, higher management fees, and possible overpayment of HUD subsidies. Three HUD field offices processed or approved rent increases without receiving supporting documentation. Approved rents were overstated by about $510,000 at 17 projects, including overstatements of capital improvements, commercial income, expenses associated with providing rent-free apartments to management personnel, and calculation errors. GAO also found that: (1) capital improvements and commercial income were overstated because HUD personnel did not follow procedures; (2) current HUD instructions were unclear regarding the value of rent-free apartments; (3) in some cases, there was no evidence that supervisors reviewed the work of personnel who processed rent increases; (4) management fees were being approved under different criteria and rationales; and (5) field offices were not comparing the payment of management fees with approved fees. HUD is in the process of developing new procedures for the review of both rent increases and management fees.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Regulations were issued on June 6, 1986.

    Recommendation: The Secretary, HUD, should finalize and implement new procedures for improving controls over rents and management fees. These procedures should include clarification of what sources of project income are permitted in calculating the basis for the payment of management fees.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: Final regulations were issued on June 6, 1986.

    Recommendation: The Secretary, HUD, should finalize and implement new procedures for improving controls over rents and management fees. These procedures should include the establishment of a uniform method for approving management fees.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Not Implemented

    Comments: HUD has no immediate plans for finalizing and publishing procedures specifying the documentation required and the analyses needed for field offices to process and approve rent increases. HUD is developing a new computerized multifamily information processing system, which it anticipates using to monitor changes in rents, nationwide, by 1989. HUD will then decide on the need for improved controls.

    Recommendation: The Secretary, HUD, should finalize and implement new procedures for improving controls over rents and management fees. These procedures should include clarification of guidelines pertaining to the treatment of rent-free units in evaluating rent increase requests.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Not Implemented

    Comments: HUD has no immediate plans for finalizing and publishing procedures specifying the documentation required and the analyses needed for field offices to process and approve rent increases. HUD is developing a new computerized multifamily information processing system, which it anticipates using to monitor changes in rents, nationwide, by 1989. HUD will then decide on the need for improved controls.

    Recommendation: The Secretary, HUD, should finalize and implement new procedures for improving controls over rents and management fees. These procedures should include the development of more specific guidelines on the documentation required and the analysis needed for field offices to process and approve rent increases.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: Regulations for controlling management fees were issued on June 6, 1986. HUD has no immediate plans for revising its procedures to improve supervisory controls over the rent fee process.

    Recommendation: The Secretary, HUD, should finalize and implement new procedures for improving controls over rents and management fees. These procedures should include the development of guidelines for supervisory controls over the rent and management fee processes.

    Agency Affected: Department of Housing and Urban Development

 

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