Objectives

To determine whether project owners are receiving Rural Rental Assistance Program (RRAP) payments only for eligible units and are properly maintaining the units for which they receive RRAP payments, and whether the Housing Trust Fund Corporation (HTFC) is engaging in adequate outreach activities to make sure the program is reaching rural areas throughout the State. The audit covered the period from April 2019 through June 2024.

About the Program

HTFC, a component of Homes and Community Renewal, administers RRAP in partnership with the United States Department of Agriculture (USDA). RRAP provides rental subsidies for low-income elderly and family tenants residing in multi-family properties in rural areas of the State, with mortgages financed through the USDA’s Section 515 Program (Section 515 Program). The properties in these programs are referred to as “projects” by HTFC and USDA. Project owners are the borrowers whose mortgages are financed through the Section 515 Program, and include corporations, non-profits, and local housing authorities. HTFC provides the direct rental subsidies through contracts with project owners for units occupied by eligible tenants. HTFC provides the direct rental subsidies through contracts with project owners for units occupied by eligible tenants.

HTFC and USDA have a memorandum of understanding (MOU) that outlines the responsibilities of each agency for administering RRAP. According to the MOU, USDA is responsible for enforcing compliance with Section 515 Program regulations through triennial supervisory reviews. These reviews include interviews with project staff, reviews of tenant files, physical inspections of the projects and units, and verification of tenant eligibility and subsidy amounts. USDA is required to provide the results of its supervisory reviews to HTFC. USDA is also responsible for providing tenant data and certifications submitted by project owners, along with project worksheets, which support project subsidies to HTFC. Under the MOU, HTFC is responsible for contracting with property owners for RRAP assistance and making RRAP payments based on USDA’s monthly project worksheets and State rules and regulations. HTFC officials are also permitted to physically inspect projects and review tenant files to ensure payments are being made for eligible tenants under HTFC’s RRAP contract. Additionally, HTFC periodically advertises new opportunities for RRAP assistance through notices of funding availability (NOFAs). Eligible project owners evaluate and respond to these NOFAs to apply to participate or expand their participation in RRAP. Project owners are required to provide decent, safe, and sanitary housing for tenants receiving tenant applications, assessing eligibility, and calculating rental subsidies. According to HTFC’s data, in May 2024, HTFC paid subsidies totaling approximately $1.9 million for 4,211 of the 5,020 (84%) contracted units. For the period April 2019 through January 2024, HTFC spent about $99 million on RRAP subsidies.

Key Findings

Overall, we determined that HTFC is making RRAP payments to property owners for the correct number of units. We reviewed payments totaling $350,372 made for units at a sample of eight projects between January and May 2024 and determined that HTFC made payments for the correct number of RRAP-eligible units. We also determined that units and projects were maintained properly by project owners. For the 52 units at the eight projects in our sample, we found deficiencies in physical conditions in 14. However, these deficiencies were often tenant-specific and known to the property managers, rather than related to the overall property condition and maintenance. For example, we observed significant clutter blocking exits, a damaged sink, and unsanitary conditions. In these cases, tenants are issued notices by the management company to correct deficiencies within certain time frames and, if they fail to do so, a lease violation is issued.

We found opportunities for HTFC to better ensure it receives all the information it should from USDA as stated in the MOU that would allow HTFC officials to sufficiently monitor individual RRAP projects. Specifically, HTFC is not receiving the results of USDA triennial supervisory reviews as required under the MOU. USDA officials stated they are behind on completing these reviews and, due to USDA’s conversion from a hard copy to an electronic record-keeping system, we could not determine when officials last inspected each project. Also, according to HTFC officials, during the COVID-19 pandemic, beginning in 2020, USDA was not able to conduct reviews. However, according to project staff at one site we visited, USDA had not conducted a supervisory review since 2006, well before the COVID-19 pandemic began. Because HTFC does not regularly receive supervisory review results, officials may not be aware of the extent of the USDA backlog.

Key Recommendations

• Obtain and continue to receive the results of USDA triennial supervisory reviews in accordance with the MOU.
• Work with USDA to clarify language in the MOU to reflect current practices, including but not limited to, providing HTFC with the results of reviews conducted by USDA’s contractor