2022-001: Submission of Single Audit Reports (Material Weakness)
Federal Agency: U.S. Department of Agriculture (“USDA”)
Program Title: Section 538 Rural Rental Housing Loans
Assistance Listing Number: 10.438
Federal Award Source: Direct Funding
Pass-Through Entity: N/A
Pass-Through Identifying Numb...
2022-001: Submission of Single Audit Reports (Material Weakness)
Federal Agency: U.S. Department of Agriculture (“USDA”)
Program Title: Section 538 Rural Rental Housing Loans
Assistance Listing Number: 10.438
Federal Award Source: Direct Funding
Pass-Through Entity: N/A
Pass-Through Identifying Number: N/A
Corrective Action Plan: Fort Defiance Housing Corporation will incorporate a new procedure when qualifying residents for move-in. In accordance with USDA's 538 policy (shown below).
The Agency has established certain rent restrictions to preserve affordability of GRRHP units over time. The rent restrictions for the program are as follows:
• The monthly rent for any individual housing unit, including any tenant-paid utilities, must not exceed an amount equal to l /I 2'h of 30 percent of 115 percent of AMI, adjusted for family size (based on the income limits in the most recent update of RD Instruction 1980-D, Exhibit C).
• On an annual basis, the average monthly rent for a project, taking into account all individual unit rents, including any tenant-paid utilities, must not exceed l/12'h of 30 percent of 100 percent of a1mual AMI, adjusted for family size [7 CFR 3565.203). To comply with these rent restrictions, the borrower must establish an estimate of tenant-paid utility costs. The calculation for tenant-paid utilities
for each unit size and type of heating fuel must be made at initial occupancy
when the rent structure is established. Form RD 3560 Housing Project Budget/Ulility Allowance", may be used for this purpose.
In order to comply with the restrictions on rent stipulated in the USDA Handbook HB-1-3565,Chapter 8, section 5 Part E, Fort Defiance Housing will establish an estimate of tenant-paid utility costs at initial occupancy. In order to obtain this tenant paid utility cost estimate for the USDA section 538 residents, Fort Defiance housing will use the USDA section 515 tenant paid utility cost estimate provided by USDA as a proxy. This proxy will be available to all properties that have both section 538 and 515 homes located in the same county. These properties include Kayenta Estates and Church Rock Estates. The Rio Puerco Estates property consists only of section 538 properties and therefore we are not able to use the section 515 properties as a proxy. In order to comply with the USDA restrictions on rent policy, Fort Defiance Housing will use a 25% sample of utility bills from residents already residing in the same property. The sample will be broken down by unit size which is determined by the number of bedrooms and we will obtain a sample of 25% for each unit size in order to get a more accurate estimate. These estimates will be updated annually or when new information is received from utility companies of costs increases. Lastly, the analysis will be reviewed and approved by proper levels of management to evidence compliance with the requirements listed in the handbook.
In order to comply with the restrictions on rent stipulated in the USDA Handbook HB-1-3565,Chapter 8, section 5 Part E, Fort Defiance Housing will establish an estimate of tenant-paid utility costs at initial occupancy. In order to obtain this tenant paid utility cost estimate for the USDA section 538 residents, Fort Defiance housing will use the USDA section 515 tenant paid utility cost estimate provided by USDA as a proxy. This proxy will be available to all properties that have both section 538 and 515 homes located in the same county. These properties include Kayenta Estates and Church Rock Estates. The Rio Puerco Estates property consists only of section 538 properties and therefore we are not able to use the section 515 properties as a proxy. In order to comply with the USDA restrictions on rent policy, Fort Defiance Housing will use a 25% sample of utility bills from residents already residing in the same property. The sample will be broken down by unit size which is determined by the number of bedrooms and we will obtain a sample of 25% for each unit size in order to get a more accurate estimate. These estimates will be updated annually or when new information is received from utility companies of costs increases. Lastly, the analysis will be reviewed and approved by proper levels of management to evidence compliance with the requirements listed in the handbook. Please see below: 3 Bedroom - 44 homes -11 utility bills 4 Bedroom -28 homes - 7 utility bills 5 Bedroom -1 homes - 1 utility bill