Finding Text
2023-003 Compliance and Significant Deficiency in Internal Control over compliance with Special
Tests and Provisions
U.S. Department of Housing and Urban Development
Direct Program
Program Name: Continuum of Care
AL#: 14.267
Condition: The Organization performed rent comparisons to the HUD fair market rent rates when determining if the rent was in excess of the allowable rents. If excess rent was calculated, the excess was used to determine the participants share.
Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In addition, the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year.
Context: Of the 10 cases selected for testing using leasing funds, 3 tenant’s rents paid exceeded the published fair market rent allowed for 2023. Of the 10 cases selected for testing using rental assistance funds, 3 tenant’s rents paid exceeded the published fair market rates. The program operated using these calculations throughout the year. Prior to the close of the year, adjustments were made to correct the effect of the incorrect calculations.
Cause: The Organization is properly calculating the excess rent charge, however under the leasing program, the excess must be paid from other than HUD leasing funds.
Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates throughout most of the year.
Identification of a This is a repeat finding from the immediate previous audit, 2022-001.
Repeat Finding
Recommendation: We recommend that the Organization download and use the COC Program Rent Determination Worksheets for Leasing and Rental Assistance provided by HUD for each recipient. The leasing worksheet will determine the Non COC and leveraged portion of the rent if allowable. We recommend that the completed document be signed and dated by the preparer and the reviewer. Any subsequent changes or updates should be saved as a separate document.
View of Responsible
Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 15 - 16.