HUD Inspector General Finds Office of Multifamily Programs Did Not Identify Properties with Successive Failing Physical Inspection Scores

HUD’s Office of the Inspector General (OIG) issued “Previous Participation Flags in Multifamily’s Active Partner Performance System,” an audit of the Office of Multifamily Programs (Multifamily). The audit is meant to determine whether Multifamily properly “flagged” Project-Based Section 8 Rental Assistance (PBRA) properties that received unacceptable physical inspection scores. The OIG audit, dated February 14, found that 13 of 21 reviewed properties with consecutive Real Estate Assessment Center (REAC) scores of less than 60 were missing the required “flags” for unacceptable physical conditions in Multifamily’s Active Partners Performance System (APPS). In six of those 13 instances, the property had more than one missing flag. Flags are considered risk factors that require appropriate mitigation.

According to OIG, the reasons for the shortcoming are (1) that Multifamily does not have a quality control program to ensure that Field Office-based Multifamily account executives manually enter flags in APPS and (2) that Multifamily does not have an automated process for flagging a property once it has received a second, consecutive REAC score of less than 60. Consequently, the health and safety of residents can be impacted. Senior Multifamily officials indicated that for several years the office had included modernizing APPS as an information technology (IT) business need; however, HUD determined that other departmental IT needs were higher priorities.

Within Multifamily, the Office of Asset Management and Portfolio Oversight (OAMPO) is responsible for overseeing Multifamily properties and coordinating with HUD’s Real Estate Assessment Center (REAC). OAMPO uses three flag tiers in APPS to identify risks:

  • Tier 1: Flags are considered an elevated risk.
  • Tier 2: Flags are considered an ongoing risk.
  • Tier 3: Flags are considered a single risk and a flag is removed when the reason for assigning the flag is resolved.

Properties that should receive a Tier 2 flag include those that:

  • Have received a REAC score of less than 30.
  • Have received two consecutive REAC scores of less than 60.
  • Have a history of receiving REAC scores of less than 60.
  • Have been found to have other repeated failures maintaining decent, safe, and sanitary conditions.

A property with a Tier 2 flag requires attention from two Multifamily officials in order to appropriately mitigate the substandard conditions. A Tier 2 flag can be removed when a property has not received a REAC score of less than 60 for five years.

Read the OIG audit report, “Previous Participation Flags in Multifamily’s Active Partner Performance System” (2023-KC-0002), February 14, 2023, at:

More information about Multifamily’s PBRA program is available on page 4-67 of NLIHC’s 2022 Advocates’ Guide.