Audit 413655

Criteria: Continuum of Care Program, Assistance Listing 14.267, requires participant income to be determined and documented in accordance with applicable program requirements. Under 24 CFR 578.77(c)(1)–(3), each program participant on whose behalf rental assistance payments are made must contribute toward rent as required by the regulation. Participant income must be calculated in accordance with 24 CFR 5.609 and 24 CFR 5.611(a), reviewed initially and at least annually thereafter, and supported by information or documentation sufficient to verify income. Applicable pass-through and organizational policies also require participant files to contain required reassessment and income-support documentation and for prescribed certification and reassessment procedures to be completed in the required order. Condition: Our testing of income verification, reassessment, and participant rent-calculation documentation identified instances in which required support was incomplete or procedures were not performed in the prescribed order. Specifically, in a nonstatistical sample of 6 participants, 2 participant files lacked sufficient pay documentation to verify the income used in the related rent calculation. One participant file also lacked required reassessment documentation, and in another instance required documentation was not completed in the prescribed order. These exceptions indicate that required documentation supporting participant reassessments, income determinations, and rent calculations was not consistently completed and maintained. Cause and Effect: The Organization’s participant reassessment and income-verification procedures were not consistently applied or documented, and controls did not consistently ensure that all required documentation was completed, retained, and performed in the prescribed order. Incomplete reassessment and income-support documentation, or completing required procedures outside the prescribed order, increases the risk that participant eligibility, income changes, or rent contributions will not be identified and addressed timely. This may result in incorrect tenant contributions or unsupported rental-assistance payments and limits management’s and auditors’ ability to verify compliance with program requirements. No known questioned costs were identified. Because documentation was insufficient to fully verify the affected income determination, reassessment, and related rent calculation, likely questioned costs, if any, could not be quantified based on the audit procedures performed. Repeat Finding: This is a repeat finding related to prior-year finding 2024-002. Recommendation: We recommend that the Organization implement a standardized participant-file checklist that identifies each required income-verification and reassessment document and the prescribed order of completion. Staff should complete and date each required step, and an independent supervisory reviewer should confirm that all documentation is present and procedures were completed in the required sequence before the reassessment and related rent calculation are finalized. Management should also review affected files and correct any identified documentation or calculation issues prospectively.

Criteria: Continuum of Care Program, Assistance Listing 14.267, requires rent paid with CoC funds to be reasonable in relation to comparable unassisted units and not exceed the rent charged by the same owner for comparable unassisted units. Under 24 CFR 578.49(b)(1)–(2) and 24 CFR 578.51(g) and (j), rent reasonableness must be established and documented before rental assistance is approved or provided. The 2025 Compliance Supplement requires the recipient or subrecipient to maintain documentation supporting the rent-reasonableness determination. Condition: In a nonstatistical sample of 6 participant files, 2 rent-reasonableness assessments were completed after lease commencement rather than before the related lease and rental-assistance approval process was finalized. The assessments were ultimately completed; however, their late completion indicates that the control designed to establish and document rent reasonableness before assistance approval was not operating consistently. Cause and Effect: Procedures and supervisory controls were not operating consistently to ensure that rent-reasonableness assessments were completed, reviewed, and retained before the related lease and rental-assistance approval process was finalized. Late completion of rent-reasonableness assessments increases the risk that rental assistance could be approved or provided for a unit before management determines that the rent is reasonable and complies with applicable limits. This could result in unsupported or unallowable rental-assistance costs and limits management’s ability to demonstrate timely compliance with HUD requirements. No known questioned costs were identified; likely questioned costs, if any, could not be quantified based on the audit procedures performed. Repeat Finding: This is a repeat finding related to prior-year finding 2024-003. Recommendation: We recommend that the Organization implement a documented pre-approval control requiring the rent-reasonableness assessment to be completed and independently reviewed before rental assistance is approved or provided and, when required by the Organization’s procedures, before lease execution. The review should confirm that the assessment uses appropriate comparable units, does not exceed rent charged by the same owner for comparable unassisted units, and complies with the applicable HUD fair market rent limitation. The participant file should retain the dated assessment and reviewer approval, and assistance should not proceed until the review is complete.

Criteria: Continuum of Care Program, Assistance Listing 14.267, requires recipients and subrecipients to provide a match of no less than 25% of grant funds, excluding leasing funds, using eligible cash or in-kind contributions from non-CoC sources. Match must be supported by records sufficient to demonstrate that the contributions are eligible, properly valued, from allowable sources, and applied to the applicable grant period. In addition, 2 CFR 200.303 requires the Organization to establish and maintain effective internal control over the federal award, including controls designed to support compliance with matching requirements. Condition: During testing of both match reports submitted during the audit period, representing 100% of the population, we noted that the match calculations and supporting documentation were not consistently subject to documented independent review before submission. Specifically, the same individual participated in portions of both the preparation and review process, and evidence of a separate supervisory review was not consistently retained. No unsupported or ineligible match amounts were identified from the documentation tested; however, the review control was not operating as designed. Cause and Effect: Written procedures did not clearly assign preparation and independent review responsibilities for match reporting, and evidence of review by an individual not involved in preparing the match calculations was not consistently retained. The lack of independent review and segregation of duties increases the risk that errors, unsupported amounts, or noncompliance with matching requirements could occur and not be detected in a timely manner. No known questioned costs were identified. The audit procedures did not identify unsupported or ineligible match amounts; therefore, no likely questioned costs were identified based on the information available. Repeat Finding: This is a repeat finding related to prior-year finding 2024-005. Recommendation: We recommend that the Organization implement procedures to ensure independent review and approval of match calculations and supporting documentation prior to submission. Where segregation of duties is limited, management should implement compensating controls, such as documented secondary review by an individual not involved in preparation.