Finding Text
According to 24 CFR 982.503(d) (3), "A PHA may establish exception payment standard amounts between 110 percent and 120 percent of the applicable FMR for such duration as HUD specifies by notice upon notification to HUD that the PHA meets at least one of the following criteria: (i) Fewer than 75 percent of the families to whom the PHA issued tenant-based rental vouchers during the most recent 12-month period for which there is success rate data available have become participants in the voucher program; (ii) More than 40 percent of families with tenant-based rental assistance administered by the agency pay more than 30 percent of adjusted income as the family share; or (iii) Such other criteria as the Secretary establishes by notice." Additionally, The PHA must determine that the rent to the owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a 10 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract) (24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507).
For 2023, the Housing Authority was approved by HUD to use 120% FMRs. During the audit, we found that the housing authority's approved a payment stndards for 2023 was 144% of the HUD's FMR standard. They were using this without approval from HUD.
During the audit, the auditor selected 40 tenants to test for eligibility and special tests. Out of the 40, 32 tenants on the 50058 used the 144% payment standard. Based on an error rate of 80%, the client's total HAP expense was 139.2% on the FMR. Total question costs due to the delta between the HUD approved 120% FMR and the error is $1,142,146.
Management incorrectly multiplied the 120% FMR twice to obtain the 2023 FMR used by the Housing Authority.
The Housing Authority used incorrect FMRs for the entire 2023 FMR year. This resulted in more HAP expense and revenue because tenants were housed in housing over the HUD approved 120% FMR rate. The auditor has calculated in question costs $1,142,146 of excess Housing Assistance Payments
The auditor reconments multiple levels of review before approving the incorrect payment standard. The 8 tenants tested who did not have errors were from 2024. The 2024 FMR is correct, so the housing authority is using the correct payment standards. The issues appears to be a one time mathmatical mistake.
Management Agrees, See Corrective Action Plan