Finding Text
Formerly 2021-001: Special Test and Provisions – Reasonable Rental Rates:
Federal Program: Assistance Listing Nos.: 14.267 Continuum of Care Program
Condition: The Organization was unable to provide the HUD rent reasonableness checklist and certifications as well as comparable rent payments for the items selected for testing.
Criteria: Where grants are used to pay for rent for all or a part of a structure, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. In addition, the rent may not exceed rents currently being charged by the same owner for comparable unassisted space (24 CFR section 578.49(b)(1)). Where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Grant funds in an amount up to one month’s rent may be used to pay the non-recipient landlord for any damages to leased units by homeless participants (24 CFR sections 578.49(b)(2) and 578.51(g) and (j)).
Questioned Costs: There are no questioned costs.
Effect: It is more likely that the amount paid for rent could be excessive.
Cause: The Organization did not have good controls on maintaining the checklist and obtaining the rent monthly comparable from the landlord.
Recommendation: In order to prevent future occurrences of this deficiency, we recommend that management retain all checklist and documentation as needed. We also recommend that management obtain and keep the comparable rent cost from the landlord on file.
Perspective: This is a systemic issue in that controls over the requirement have not been developed to ensure no issues arise.
Repeat: This is a repeat finding.
Responsible Official’s View: The Organization agrees with the finding. See attached corrective action plan.