Audit 368841

Finding 2024-001 – Special Tests and Provisions – Material Weakness in Internal Control over Compliance and Instance of Material Noncompliance Federal program information: Federal Agency/Pass-through Entity: U.S. Department of Housing and Urban Development/ Office of Community Planning and Development Program Name/Cluster: Continuum of Care Program ALN number: 14.267 Award number: WA0101L0T012215, WA0587L0T012300 WA0500Y0T012201, WA0575Y0T012100 Award period: 11/1/2023 – 11/30/2025 Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: Each of the 8 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2024, were selected for reasonable rental rate testing. No documentation supporting compliance with federal reasonable rental rates was provided. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization’s clients. Repeat Finding: Yes Effect: The Organization may be out of compliance with special tests and provisions requirements. Questioned costs: Known questioned costs were $163,808 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization’s clients. Views of Responsible Officials and Planned Corrective Actions: Management concurs with this finding. See the corrective action plan.