2024-001 – Annual Income Recertifications
Federal Program – U.S. Department of Housing and Urban Development
Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202)
Material Weakness & Noncompliance
Category of Finding – Eligibility
Criteria - The Compliance Supplement requires owners and management agents of properties with Section 202 project rental assistance contracts to complete annual income recertifications for all tenants. These recertifications must be conducted timely, with notices sent at least 120 days prior to the effective date and all required documentation collected to ensure accurate rent calculations and continued eligibility.
Condition - During the audit, a review of tenant files revealed that income recertifications were either not completed or not completed in a timely manner. Specifically:
• 1 out of 4 tenant files reviewed lacked completed income recertifications within the required timeframe.
• 1 out of 4 tenant files we reviewed did not contain evidence that tenants were notified of their obligation to provide updated income and family composition information.
Context - Of the total population of 35 units, 4 were tested. Questioned costs are not applicable to this finding. Based on our sample, inquiry of employees and a master list of late annual recertifications provided by management, we understand this finding to be prevalent at the Organization throughout the year.
Cause - The identified deficiencies appear to be due to inadequate oversight and ineffective tracking of the recertification process by property management. Factors contributing to the issue include not utilizing a tracking system to track recertification deadlines and timely distribution of recertification notices; insufficient staff training on federal compliance requirements; and staff turnover resulting in inconsistent adherence to required procedures.
Effect (Potential Effect) - Failure to complete or timely conduct income recertifications can lead to several compliance and financial risks, including: incorrect rent calculations, resulting in overpayment or underpayment of housing assistance subsidies; loss of subsidy for tenants who fail to complete recertification, potentially leading to eviction risks; increased administrative burden to resolve delayed recertifications and financial discrepancies; and risk of noncompliance findings in HUD’s Management and Occupancy Reviews (MORs), potentially leading to corrective actions or penalties.
Identification of repeat finding – No
Recommendation - To ensure compliance with HUD recertification requirements, management should utilize available tracking systems to monitor and enforce recertification deadlines; provide staff training on HUD Handbook 4350.3 recertification procedures and requirements; establish a quality control process to verify recertifications are completed on time and properly documented in tenant files; and conduct periodic internal audits to identify and correct any deficiencies in the recertification process.
Views of responsible officials and planned corrective actions - The Organization agrees with the finding and has continued to implement strategies to address the finding. To address this finding, management has assembled and deployed a team of external consultants and temporary workers to assist site staff in completing tenant recertifications and hired a team of additional roving property management/compliance teams to cover open property management positions and to support site staff in completing tenant recertifications. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025.
Finding 2024-002 – Tenant File Documentation
Federal Program – U.S. Department of Housing and Urban Development
Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202)
Material Weakness & Noncompliance
Category of Finding – Eligibility
Criteria - The Compliance Supplement requires that tenant files contain all necessary documentation to verify eligibility, rent calculations, and compliance with federal regulations. Required documents include, but are not limited to, original applications, verified bank accounts, resident screenings, Enterprise Income Verification (EIV) reports, unit inspections, and move-out documentation. Maintaining complete tenant files is essential for ensuring compliance with federal requirements and preventing improper subsidy payments.
Condition - During the audit, a review of tenant files revealed that required documentation was either missing or incomplete. Specifically:
• In 2 out of 4 tenant files reviewed, we were not provided evidence that all required documents were included in the tenant file. Missing documentation included Enterprise Income Verification (EIV) report and application.
Context - Of the total population of 35 units, 4 were tested. Questioned costs are not applicable to this finding. Based on our sample and inquiry of employees, we understand this finding to be prevalent at the Organization throughout the year.
Cause - The identified deficiencies appear to be due to inadequate file management and oversight. Contributing factors may include insufficient staff training on federal documentation requirements, staff turnover resulting in inconsistencies in maintaining tenant records, and not conducting routine internal file audits to ensure compliance.
Effect (Potential Effect) - Failure to maintain complete tenant files can lead to significant compliance and financial risks, including inability to verify tenant eligibility, which may result in improper subsidy payments, increased risk of findings in HUD’s Management and Occupancy Reviews (MORs) or audits, potential financial penalties or loss of subsidy funding, and risk of tenant disputes due to missing documentation.
Identification of repeat finding - No
Recommendation - To ensure compliance with federal requirements for tenant documentation, property management should conduct periodic internal file audits to identify and correct missing or incomplete documentation; provide staff training on proper file management and federal compliance requirements; establish a document tracking system to prevent missing files and ensure timely updates; and assign responsibility to designated staff for reviewing and maintaining complete tenant records.
Views of responsible officials and planned corrective actions - The Organization agrees with the finding. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025. Management is working with the new property managers to ensure they have procedures in place to document and maintain tenant files in accordance with the Compliance Supplement and will have routine internal audits of tenant files to ensure compliance with federal regulations. For properties not transitioning to new property management, management believes the reduced volume of properties at one property manager will reduce staff turnover and more efficiently provide the proper training to existing staff to improve compliance with tenant files.
2024-001 – Annual Income Recertifications
Federal Program – U.S. Department of Housing and Urban Development
Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202)
Material Weakness & Noncompliance
Category of Finding – Eligibility
Criteria - The Compliance Supplement requires owners and management agents of properties with Section 202 project rental assistance contracts to complete annual income recertifications for all tenants. These recertifications must be conducted timely, with notices sent at least 120 days prior to the effective date and all required documentation collected to ensure accurate rent calculations and continued eligibility.
Condition - During the audit, a review of tenant files revealed that income recertifications were either not completed or not completed in a timely manner. Specifically:
• 1 out of 4 tenant files reviewed lacked completed income recertifications within the required timeframe.
• 1 out of 4 tenant files we reviewed did not contain evidence that tenants were notified of their obligation to provide updated income and family composition information.
Context - Of the total population of 35 units, 4 were tested. Questioned costs are not applicable to this finding. Based on our sample, inquiry of employees and a master list of late annual recertifications provided by management, we understand this finding to be prevalent at the Organization throughout the year.
Cause - The identified deficiencies appear to be due to inadequate oversight and ineffective tracking of the recertification process by property management. Factors contributing to the issue include not utilizing a tracking system to track recertification deadlines and timely distribution of recertification notices; insufficient staff training on federal compliance requirements; and staff turnover resulting in inconsistent adherence to required procedures.
Effect (Potential Effect) - Failure to complete or timely conduct income recertifications can lead to several compliance and financial risks, including: incorrect rent calculations, resulting in overpayment or underpayment of housing assistance subsidies; loss of subsidy for tenants who fail to complete recertification, potentially leading to eviction risks; increased administrative burden to resolve delayed recertifications and financial discrepancies; and risk of noncompliance findings in HUD’s Management and Occupancy Reviews (MORs), potentially leading to corrective actions or penalties.
Identification of repeat finding – No
Recommendation - To ensure compliance with HUD recertification requirements, management should utilize available tracking systems to monitor and enforce recertification deadlines; provide staff training on HUD Handbook 4350.3 recertification procedures and requirements; establish a quality control process to verify recertifications are completed on time and properly documented in tenant files; and conduct periodic internal audits to identify and correct any deficiencies in the recertification process.
Views of responsible officials and planned corrective actions - The Organization agrees with the finding and has continued to implement strategies to address the finding. To address this finding, management has assembled and deployed a team of external consultants and temporary workers to assist site staff in completing tenant recertifications and hired a team of additional roving property management/compliance teams to cover open property management positions and to support site staff in completing tenant recertifications. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025.
Finding 2024-002 – Tenant File Documentation
Federal Program – U.S. Department of Housing and Urban Development
Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202)
Material Weakness & Noncompliance
Category of Finding – Eligibility
Criteria - The Compliance Supplement requires that tenant files contain all necessary documentation to verify eligibility, rent calculations, and compliance with federal regulations. Required documents include, but are not limited to, original applications, verified bank accounts, resident screenings, Enterprise Income Verification (EIV) reports, unit inspections, and move-out documentation. Maintaining complete tenant files is essential for ensuring compliance with federal requirements and preventing improper subsidy payments.
Condition - During the audit, a review of tenant files revealed that required documentation was either missing or incomplete. Specifically:
• In 2 out of 4 tenant files reviewed, we were not provided evidence that all required documents were included in the tenant file. Missing documentation included Enterprise Income Verification (EIV) report and application.
Context - Of the total population of 35 units, 4 were tested. Questioned costs are not applicable to this finding. Based on our sample and inquiry of employees, we understand this finding to be prevalent at the Organization throughout the year.
Cause - The identified deficiencies appear to be due to inadequate file management and oversight. Contributing factors may include insufficient staff training on federal documentation requirements, staff turnover resulting in inconsistencies in maintaining tenant records, and not conducting routine internal file audits to ensure compliance.
Effect (Potential Effect) - Failure to maintain complete tenant files can lead to significant compliance and financial risks, including inability to verify tenant eligibility, which may result in improper subsidy payments, increased risk of findings in HUD’s Management and Occupancy Reviews (MORs) or audits, potential financial penalties or loss of subsidy funding, and risk of tenant disputes due to missing documentation.
Identification of repeat finding - No
Recommendation - To ensure compliance with federal requirements for tenant documentation, property management should conduct periodic internal file audits to identify and correct missing or incomplete documentation; provide staff training on proper file management and federal compliance requirements; establish a document tracking system to prevent missing files and ensure timely updates; and assign responsibility to designated staff for reviewing and maintaining complete tenant records.
Views of responsible officials and planned corrective actions - The Organization agrees with the finding. Currently, management plans to transition 50% of its real estate portfolio to new property management in 2025. Management is working with the new property managers to ensure they have procedures in place to document and maintain tenant files in accordance with the Compliance Supplement and will have routine internal audits of tenant files to ensure compliance with federal regulations. For properties not transitioning to new property management, management believes the reduced volume of properties at one property manager will reduce staff turnover and more efficiently provide the proper training to existing staff to improve compliance with tenant files.