Audit 309564

Finding No. 2023-001 Significant deficiency for Major Program - U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program, Youth Homeless Demonstration Program (YHDP) – Assistance Listing No. 14.267. Condition: Rent was not deemed reasonable for one vendor included in the compliance test. Criteria: Compliance attribute “N” Special Tests and Provisions requires reasonable rental rates for this program as per the Compliance Supplement. Cause: There is a procedure in place to complete rent reasonableness via a few different methods including accessing the Section 8 Housing website and including 3 comparable properties to determine that the rent charged to the tenant and paid by Vita Nova is reasonable. The worksheet for the subject property stated that the requested rent was not reasonable and suggested a reduced rent amount. However, the actual rent paid was not reduced and was paid at the requested rate. Effect: The cost of rental assistance was potentially too high and could be disallowed. Context: We selected client tenants from the 4 largest vendors by expense as coded to the client rental assistance account during the fiscal year 10/1/2022 to 9/30/2023. Of those vendors, one of them had two tenants placed at a 2 bedroom/2 bath location. The rent reasonableness worksheet concluded that the requested rent of $1,600 was not reasonable and suggested a reduced rent of $1,200 per tenant per month to bring the rent in the reasonable range. The rent was charged and paid at the higher rate from the inception of the lease to the end of the fiscal year, plus one month’s rent for security deposit, which is allowed, but also at the higher rate. In total the overage of $400 per month plus security deposit for each tenant for the months of the lease in the fiscal year amounted to a $4,800 overage that could be considered unreasonable. Subsequent to year end the overage was found and the Program Director explained the issue to the landlord and negotiated a reduced rent so over the remaining months rent would be reduced by the overage of $4,800. Therefore, the issue was resolved within the lease term for each tenant, but crossed fiscal years. Recommendation: We recommend that when the rent reasonableness worksheet reflects that the proposed rent is not reasonable, the lease contracts should not be approved, and negotiations should begin with the landlord to get the rent within the reasonable range. To ensure this step is taken, we recommend that the Program Director initial each rent reasonableness worksheet before the lease is signed for the client tenant. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and has already implemented the process to approve the rent reasonableness worksheet by the Program Director. See the corrective action plan for the above finding no. 2023-001 for the year ended September 30, 2023, with respect to federal awards on page 30 of this report.

Finding No. 2023-001 Significant deficiency for Major Program - U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program, Youth Homeless Demonstration Program (YHDP) – Assistance Listing No. 14.267. Condition: Rent was not deemed reasonable for one vendor included in the compliance test. Criteria: Compliance attribute “N” Special Tests and Provisions requires reasonable rental rates for this program as per the Compliance Supplement. Cause: There is a procedure in place to complete rent reasonableness via a few different methods including accessing the Section 8 Housing website and including 3 comparable properties to determine that the rent charged to the tenant and paid by Vita Nova is reasonable. The worksheet for the subject property stated that the requested rent was not reasonable and suggested a reduced rent amount. However, the actual rent paid was not reduced and was paid at the requested rate. Effect: The cost of rental assistance was potentially too high and could be disallowed. Context: We selected client tenants from the 4 largest vendors by expense as coded to the client rental assistance account during the fiscal year 10/1/2022 to 9/30/2023. Of those vendors, one of them had two tenants placed at a 2 bedroom/2 bath location. The rent reasonableness worksheet concluded that the requested rent of $1,600 was not reasonable and suggested a reduced rent of $1,200 per tenant per month to bring the rent in the reasonable range. The rent was charged and paid at the higher rate from the inception of the lease to the end of the fiscal year, plus one month’s rent for security deposit, which is allowed, but also at the higher rate. In total the overage of $400 per month plus security deposit for each tenant for the months of the lease in the fiscal year amounted to a $4,800 overage that could be considered unreasonable. Subsequent to year end the overage was found and the Program Director explained the issue to the landlord and negotiated a reduced rent so over the remaining months rent would be reduced by the overage of $4,800. Therefore, the issue was resolved within the lease term for each tenant, but crossed fiscal years. Recommendation: We recommend that when the rent reasonableness worksheet reflects that the proposed rent is not reasonable, the lease contracts should not be approved, and negotiations should begin with the landlord to get the rent within the reasonable range. To ensure this step is taken, we recommend that the Program Director initial each rent reasonableness worksheet before the lease is signed for the client tenant. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and has already implemented the process to approve the rent reasonableness worksheet by the Program Director. See the corrective action plan for the above finding no. 2023-001 for the year ended September 30, 2023, with respect to federal awards on page 30 of this report.