Finding 1073089 (2023-002)

2023 - 002 Rent Reasonableness Controls Assistance Listing Number: 14.267 Name of Program and Cluster: Continuum of Care Program Agency: U.S. Department of Housing and Urban Development Condition: HONOR does not complete annual rent reasonableness assessments for tenants. In addition, HONOR does not retain calculations of HUD portions or tenant portions in the Finance Department and passthrough rents paid did not have rent reasonableness paperwork. This is a repeat finding of 2022- 001 and 2022-002. Criteria: Per 2 CFR Part 200, Appendix IX, Compliance Supplement, rents paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, 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. Management is responsible for establishing and monitoring controls to ensure that the Organization complies with these requirements. Context: 7 of 9 tenants selected did not have Rent Reasonableness Certifications performed per the Organization's policy during 2023. 2 tenants did not have updated lease agreements, and no evidence of rent reasonableness testing was obtained from subrecipients. Cause: The Organization did not perform rent reasonableness certifications annually and the finance department does not track tenant portion of rents due. Effect: Due to lack of controls, the Organization was not in compliance with the Continuum of Care Special Tests requirement regarding Reasonable Rental Rates. Recommendation: RBT recommends that the Organization perform annual rent reasonableness certifications on all tenants whose rent is paid by COC funding. Rent reasonableness certification should document comparable rental units in the area, cost of other rental units from the same landlord and that the rent portion funded by COC funds is at or below the Fair Market Rent published annually. RBT also recommends that rent reasonableness certifications are obtained from subrecipients. Auditee's Response: See corrective action plan.