Audit 412458

Finding 2025-001 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Housing Voucher Cluster - Section 8 Housing Choice Vouchers and Mainstream Vouchers Federal Assistance Listing Numbers: 14.871 and 14.879 Noncompliance - N. Special Tests and Provisions - Reasonable Rent Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: Reasonable Rent. The Authority must do the following: The Authority must determine that the rent to owner is reasonable at the time of initial leasing. Also, the Authority must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a 5 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The Authority must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract)(24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Condition: Based upon inspection of the Authority's files and discussions with management, there were newly leased units for which rent reasonableness evaluations were not performed. Context: There were approximately nineteen (19) newly leased Housing Voucher Cluster units. Of a sample size of two (2) newly leased units, rent reasonableness evaluations for one (1) unit were not performed timely. Our sample size is statistically valid. Known Questioned Costs: Amount is below threshold of $25,000. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to reasonable rent. Existing controls were not fully designed, implemented, or consistently maintained to ensure rent reasonableness requirements are consistently met. Effect: Failure to perform and document timely rent reasonableness determinations reduces the Authority's ability to demonstrate compliance with HUD requirements and increases the risk that housing assistance payments may be made for units with rents that are not reasonable compared to comparable unassisted units, potentially resulting in unnecessary program expenditures. Recommendation: We recommend the Authority design and implement internal control procedures that ensure all rent reasonableness determinations are performed and documented, in compliance with Uniform Guidance and the compliance supplement.