Audit 369536

Finding 2024-002 Significant deficiency in internal controls over compliance and instances of noncompliance related to special tests and provisions. Federal Agency: Department of Housing and Urban Development Program Title: Continuum of Care Program Assistance Listing Number: 14.267 Awards Numbers: WA0295L0T002208 and WA0295L0T002309 Award Periods: June 1, 2023 through May 31, 2025 Criteria The Department of Housing and Urban Development requires that where grants are used to pay for rent for all or a part of a structure, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. In addition, the rent may not exceed rents currently being charged by the same owner for comparable unassisted space (24 CFR 578.49(b)(1) and 24 CFR 578.51(g)). 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. Grant funds in an amount up to one month’s rent may be used to pay the non-recipient landlord for any damages to leased units by homeless participants (24 CFR sections 578.49(b)(2) and 578.51(g) and (j)). Condition/Context Wellspring’s controls require that a rent reasonableness assessment is performed prior to participants receiving rental assistance for renting a new unit. In a sample of 21 transactions there were two transactions identified in which the rent reasonableness form was not fully completed, or other documentation of rent reasonableness check was not retained. Cause Wellspring’s internal controls related to special tests were not sufficient to prevent or detect errors in compliance with the standards and to ensure consistent treatment with policies and procedures. Effect/Potential Effect Wellspring was unable to substantiate awarded rental assistance to two participants were compared to similar units and assessed for reasonableness based on documentation retained. Questioned Costs Not applicable. Repeat Finding No Recommendation We recommend that management add a control procedure to review filed rent reasonableness assessment forms for completeness before rental assistance is approved. Views of Responsible Officials Management agrees with the finding and has provided the corrective action plan following the Single Audit Report.