Criteria: HUD’s Continuum of Care program (ALN 14.267) requires that participant eligibility determinations, including income calculations and rent reasonableness assessments, be accurate, properly supported, and in compliance with program requirements. These determinations should be subject to appropriate internal control procedures, including review controls, to ensure accuracy and reduce the risk of error or conflict of interest. In accordance with 2 CFR § 200.303, organizations must establish and maintain effective internal controls over compliance, including segregation of duties and ongoing monitoring activities. Additionally, 24CFR § 578.103 requires recipients to maintain sufficient documentation to support eligibility determinations and related compliance requirements. Conditions: In a nonstatistical sample of 18 tenant files tested, there was no evidence of documented supervisory review of eligibility determinations, income calculations, or supporting documentation. These results indicate that controls designed to ensure completeness and accuracy of eligibility determinations are not operating effectively. Cause and Effect: This condition appears to be due to the absence of a formalized policy or consistent practice requiring documented supervisory review of eligibility determinations. We identified a significant deficiency in internal control over compliance related to this process. Although eligibility determinations were generally appropriate based on testing, the lack of documented review indicates that a key control is not operating effectively. This increases the risk that errors or noncompliance could occur and not be detected in a timely manner. No questioned costs were identified as a result of this condition. Recommendations: We recommend management strengthen controls over eligibility determinations by requiring documented supervisory review of all initial eligibility decisions and periodic file reviews. This review should be evidenced by a formal sign-off (electronic or manual) and include verification of key eligibility criteria. Management may also consider implementing a standardized review checklist to ensure consistency and completeness of the review process.
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires that participant annual income be determined using gross income in accordance with 24 CFR § 5.609 and 24 CFR § 5.611, and that such determinations be supported by adequate and verifiable source documentation. Recipients are required to maintain complete and accurate participant files, including signed income certifications, zero-income affidavits where applicable, and sufficient third-party or source documentation (e.g., pay stubs) to support income calculations. In accordance with 2 CFR § 200.303, organizations must establish and maintain effective internal controls over compliance to ensure that income determinations and rent calculations are accurate, complete, and properly documented. Conditions: Our testing of 18 tenant files identified deficiencies in income documentation and rent calculation support. Specifically, 2 tenant files lacked documented zero-income verification, 2 files contained insufficient supporting pay documentation, 1 file was missing a signed income certification, and in 2 instances rent calculations were based on net wages rather than gross wages. These results indicate that controls over income verification and rent calculation documentation are not consistently operating effectively. Cause and Effect: This condition appears to be due to inconsistent application of documentation requirements and the absence of a formalized review process to ensure completeness and accuracy of income determinations and rent calculations. We identified a significant deficiency in internal control over compliance related to income verification and rent calculation documentation. While rent calculations appeared reasonable based on available information and no questioned costs were identified, the control deficiencies increase the risk that errors or noncompliance could occur and not be detected in a timely manner. Recommendations: We recommend management enhance controls over income verification and rent calculation documentation by implementing standardized documentation requirements and file checklists to ensure all required support (e.g., pay stubs, zero-income affidavits, and calculation worksheets) is obtained and retained prior to approval of assistance. Additionally, a secondary review should be performed and documented to verify the completeness and accuracy of income determinations and rent calculations.
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires that rental assistance payments comply with rent reasonableness requirements in accordance with 24 CFR § 578.49. Rent reasonableness must be determined and documented prior to execution of the lease and before assistance is provided, and must be based on accurate lease terms, unit characteristics, and comparable market data. Additionally, participant income used in determining rent contributions must be calculated in accordance with 24 CFR § 5.609 and 24 CFR § 5.611. In accordance with 2 CFR § 200.303, organizations are required to establish and maintain effective internal controls over compliance to ensure that rent determinations are accurate, properly supported, and performed in a timely manner. Conditions: Our testing of 18 tenant files identified deficiencies in the timeliness and accuracy of rent reasonableness determinations. Specifically, in 4 instances, rent reasonableness calculations were performed after lease execution, and in 5 instances, the calculations were based on incorrect lease amounts. These results indicate that controls over the timeliness and accuracy of rent reasonableness determinations are not consistently operating effectively. Cause and Effect: This condition appears to be due to inadequate internal controls and monitoring procedures to ensure that rent reasonableness determinations are completed prior to lease execution and that lease terms are verified for accuracy before performing the analysis. We identified a significant deficiency in internal control over compliance related to rent reasonableness determinations. The lack of timely and accurate determinations increases the risk that the program could approve rents that exceed market rates, resulting in potential noncompliance with program requirements and inefficient use of program funds. No questioned costs were identified as a result of this condition. Recommendations: We recommend management implement formal procedures requiring that rent reasonableness determinations are completed and documented prior to lease execution and approval of assistance. Management should establish standardized checklists or workflows to ensure rent reasonableness is performed as a required step before assistance is authorized. Additionally, staff should be trained on these procedures and the importance of timely compliance. A secondary review process should be implemented to verify lease terms, unit data, and calculation accuracy. Periodic supervisory reviews should also be conducted to ensure compliance with documentation and timing requirements.
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires recipients to maintain complete and accurate documentation to support participant eligibility and rental assistance in accordance with 24 CFR §578.103. Tenant-based rental assistance must be supported by a valid lease between the participant and landlord in accordance with applicable housing requirements (including 24 CFR § 982.305 and 24 CFR §982.309, as applicable through program guidance). Required participant protections and disclosures, including those under the Violence Against Women Act (VAWA), must be provided and documented in accordance with 24 CFR § 5.2005 and 24 CFR § 5.2009. In addition, housing quality standards and environmental requirements, including inspections and lead-based paint disclosures, must be completed and documented prior to assistance in accordance with 24 CFR § 982.401 and 24 CFR § 35.92. Furthermore, in accordance with 2 CFR § 200.303, organizations must establish and maintain effective internal controls to ensure required documentation is obtained, reviewed, and retained prior to the disbursement of federal funds. Where utilities are paid as a supportive service under 24 CFR § 578.51, appropriate documentation, including participant consent, must be maintained. Conditions: Our testing of 18 tenant files identified multiple instances of missing or incomplete required documentation. Specifically, 1 file lacked an executed lease agreement, 3 files contained leases with terms less than one year, 2 files were missing required RAP forms with VAWA addenda, 1 file lacked inspection documentation, 1 file was missing a Form W-9, and 1 file did not include a required lead-based paint disclosure. Additionally, among 2 Permanent Supportive Housing tenant files tested, 1 file lacked a required Consent to Pay Utilities form. These results indicate that controls over required documentation are not consistently operating effectively. Cause and Effect: This condition appears to be due to inadequate internal controls and monitoring procedures to ensure that all required documentation is obtained, completed, and retained prior to the approval and disbursement of rental assistance. Specifically, staff did not consistently utilize a standardized checklist or review process to verify file completeness. We identified a significant deficiency in internal control over compliance related to required documentation. The absence of required documentation increases the risk of noncompliance with program requirements, potential disallowance of costs, and repayment of federal funds. No questioned costs were identified as a result of this condition. Recommendations: We recommend management strengthen controls over required documentation by implementing a standardized pre-approval checklist to ensure all required documentation is obtained and verified prior to disbursement of assistance. This should include, at a minimum, a fully executed lease (including verification of lease term), RAP agreement and VAWA documentation, inspection and housing quality documentation, Form W-9, and required lead-based paint disclosures. For supportive services such as utility payments, required participant consent documentation should be obtained and retained prior to payment. Additionally, management should implement a documented secondary review process and perform periodic quality control reviews to ensure ongoing compliance. Staff should be trained on documentation requirements and file completion standards.
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires recipients to provide and document matching contributions in accordance with 24 CFR § 578.73. Recipients must maintain adequate records to support the source and allowability of match contributions in accordance with 24 CFR § 578.103. In addition, in accordance with 2 CFR § 200.303, organizations are required to establish and maintain effective internal controls over compliance, including appropriate segregation of duties and review procedures, to ensure that match calculations and supporting documentation are accurate, complete, and properly supported. Conditions: Our testing of 2 Permanent Supportive Housing tenant files related to matching requirements identified that, in both instances, match calculations and supporting documentation were not reviewed and approved by an individual independent of the preparer. These results indicate that controls over the review and approval of match documentation are not operating effectively. Cause and Effect: This condition appears to be due to inadequate segregation of duties and the absence of a formalized independent review process over match calculations and supporting documentation. We identified a significant deficiency in internal control over compliance related to the matching requirement. The lack of independent review increases the risk that errors or noncompliance in match reporting could occur and not be detected in a timely manner. Although no questioned costs or instances of noncompliance were identified as a result of our testing, this control is considered important to ensuring ongoing compliance with program requirements. Recommendations: We recommend management strengthen controls over match reporting by enhancing segregation of duties and implementing an independent review process for match calculations and supporting documentation. Where full segregation of duties is not feasible, compensating controls—such as documented supervisory review by an individual not involved in preparation—should be implemented. Management should also establish formal procedures and standardized checklists to ensure match contributions are properly supported, reviewed, and approved prior to reporting. Periodic monitoring procedures should be performed to ensure continued compliance.