Finding 1084677 (2023-001)

III. FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS 2023-001 – Special Tests and Provisions – Reasonable Rental Rates U.S. Department of Housing and Urban Development 14.267 – Continuum of Care N. Special Tests and Provisions – Significant Deficiency Condition: The Organization did not properly document controls over reasonable rental rates. 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)(l)). 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 considering 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 G)). Cause: The Organization utilizes a rent reasonableness checklist prior to leasing but does not maintain the determination certification to document the controls in place over reasonable rental rates. Effect: The Organization could have grant expenditures for rent exceeding the Fair Market Rent rates. Questioned Costs: None identified. Perspective: Although the actual rent did not exceed the fair market rents, 13 out of 13 selections did not have documented controls over reasonable rental rates. Repeat Finding: Not a repeat finding. Recommendation: In order to prevent future occurrence of this deficiency, we recommend the Organization maintains the signed determination checklist and certification in each file to document controls performed to ensure they are able to provide reasonable assurance that all rental rates are reasonable. Auditee’s Response: See corrective action plan.