Audit 401931

Condition During audit testing of tenant eligibility documentation, the auditor was unable to locate one out of eight tenant files selected for testing. In addition, management disclosed that nine out of forty tenant files for the program could not currently be located. As a result, required documentation supporting tenant eligibility and compliance with federal program requirements was not available for review. Criteria The Uniform Guidance requires that federal awards be administered in compliance with the terms and conditions of the federal award and that auditees maintain sufficient records to support compliance and amounts charged to federal programs, with such documentation being accessible for audit and oversight purposes. Cause The missing tenant files appear to be attributable to deficiencies in record retention and file management controls, including inadequate procedures to ensure that tenant records are properly maintained, safeguarded, and retrievable for monitoring and audit purposes. Effect or Potential Effect The absence of tenant files may limit the auditee’s ability to demonstrate compliance with federal award requirements. Without supporting documentation, the allowability of costs charged to the program for affected tenants may not be able to be verified, increasing the risk that federal funds may have been expended for tenants who did not meet eligibility requirements. Context One out of eight original tenant files selected for testing were not able to be located. In addition, management disclosed that nine out of population of forty tenant files for the program could not currently be located. Questioned Costs None Repeat Finding No Recommendation The auditor recommends that management strengthen record retention and file management controls to ensure that all tenant eligibility documentation is properly maintained and readily available. Improved procedures should include monitoring, periodic reconciliation of tenant files to program records, and safeguards to prevent loss or misplacement of documentation required to support compliance with federal award requirements. Management Response Management agrees with the finding and has prepared an attached corrective action plan to address the issue.

Condition During audit testing, the auditor identified four instances in which tenants’ annual HUD‑50059, Owner’s Certification of Compliance with HUD’s Tenant Eligibility and Rent Procedures (tenant recertification), were not completed in a timely manner. Specifically, recertifications were completed three to twelve months after the required annual effective date, resulting in significant delays between the effective date and execution of the certification. In addition, one tenant recertification file lacked adequate income support documentation to substantiate tenant eligibility and the calculation of the tenant portion of rent. Criteria The terms and conditions of the federal award require the auditee to determine tenant eligibility and calculate the tenant portion of rent based on supported and documented income information on at least an annual basis. Cause The condition occurred because management had insufficient internal controls and monitoring procedures to ensure that tenant recertifications were completed within required timeframes and that income documentation was consistently obtained, reviewed, and retained prior to determining eligibility and calculating tenant rent. Effect or Potential Effect Untimely tenant recertifications increase the risk that tenants may occupy assisted units without documented eligibility for the applicable period. As a result, subsidy rents charged during uncertified periods may not be allowable under the terms and conditions of the federal award. Additionally, because income support documentation was not maintained for one tenant, the auditee was unable to demonstrate that eligibility requirements were met or that the tenant’s portion of rent was calculated correctly, which could result in unallowable subsidy payments. Context Testing was performed on 16 tenant files selected from a population of 40 tenant files for the program. Questioned Costs $13,560 Repeat Finding No Recommendation The auditor recommends that management strengthen internal controls and monitoring procedures to ensure tenant recertifications are completed timely, including periodic supervisory review. In addition, management should implement procedures to ensure that income documentation is obtained, reviewed, and retained prior to determining tenant eligibility and calculating rent amounts. Management Response Management agrees with the finding and has prepared an attached corrective action plan to address the issue.