Finding Text
Untimely Update of Tenant Rent Records in HUD 50059: Internal Control
Weakness Impacting HUD Compliance
Findings Resolution Status: In Process
Information on Universe Population Size: 32 Tenants
Sample Size Information: 5 Samples
Auditor Non-Compliance Code Drop-Down: Eligibility
Criteria: According to HUD regulations, property owners are required to maintain accurate and
up-to-date rent records. This is essential for ensuring compliance with HUD's requirements and
avoiding discrepancies that could lead to improper subsidy payments, audit findings, or
regulatory noncompliance. Specifically, HUD Handbook 4350.3 outlines the need for accurate
tenant rent records and rent calculations to accurately match with the HUD Form 50059.
Additionally, HUD emphasizes the importance of timely updates to tenant rent records to reflect
any changes in rent amounts. Failure to comply with these requirements, even for a short period,
needs to be documented to ensure transparency and accountability.
Condition: During eligibility testing, the following discrepancies were identified between HUD
50059 vs. Rent Roll as to:
1. HUD Assisted Payment and Tenant Rent: All of 5 tenant files reviewed contained
discrepancies between the HUD-assisted payment amounts recorded on Form HUD
50059 and the subsidy amounts reflected on the rent roll. Additionally, 3 of these files
showed inconsistencies between the tenant rent as stated on Form HUD-50059 and the
resident rent reported on the rent roll.
2. Security Deposit- For 3 tenant files, the security deposit amounts indicated in the HUD
50059 forms were not reflected in the Rent Roll.
Cause of Condition: The discrepancies were primarily due to:
a) Insufficient review procedures to ensure consistency between Form 50059, Rent Roll and
tenant files.
b) Absence of internal controls or periodic reconciliations to identify and correct
discrepancies.
Potential Effect of Condition: Failure to maintain accurate tenant subsidy records in HUD
Form 50059 may result in:
- HUD non-compliance, which could trigger audit findings, corrective actions, or potential
penalties.
- Improper subsidy payments, leading to potential financial adjustments or repayments.
Questioned costs: The auditors have identified questioned costs of $4,807 for annual rental
subsidies. These questioned costs pertain only to the sample tested.
Reporting Views of Responsible Officials: The Organization agrees with the findings and
recommendations and will adhere to the corrective action plan.
Context: All 5 selected samples for testing contained discrepancies in rent and subsidy amounts
recorded on Form HUD-50059 compared to the Rent Roll, suggesting a 100% occurrence within
the sample tested. This indicates a potential systemic issue rather than an isolated instance. The
inconsistencies arose across multiple rent-related categories (tenant rent, HUD-assisted
payments, and security deposits), reflecting a breakdown in reconciliation and review
procedures.
Recommendation: To address the identified discrepancies and improve compliance, we
recommend the following actions:
1. Establish a Routine Reconciliation Process – Implement a structured process to regularly
reconcile HUD-50059 forms with the rent roll, ensuring that subsidy amounts are
accurate and promptly updated.
2. Enhance Internal Controls – Introduce stricter review and approval workflows for tenant
eligibility documentation and rent roll updates to prevent inconsistencies.
3. Conduct Staff Training – Provide periodic training for staff on HUD compliance
requirements and the importance of maintaining accurate tenant and rent records.
4. Implement Regular Audits – Schedule internal reviews and audits to detect and correct
discrepancies early, reducing the risk of compliance issues.
5. Improve Documentation Procedures – Strengthen record-keeping policies to ensure that
updates to subsidy amounts and rent adjustments are consistently documented and
retained.
By implementing these recommendations, the organization can enhance compliance, improve
data accuracy, and reduce risks associated with subsidy discrepancies.
Management Response: Management is currently conducting a comprehensive review of the
process to ensure alignment with compliance requirements and identify areas for improvement.