Finding Text
FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED)
Department of Housing and Urban Development Finding, 2024-005: Major Programs: Capital Advance Program, Federal Assistance Listing Number 14.U01 and Section 8 New Construction and Substantial Rehabilitation, Federal Assistance Listing Number 14.182
STATEMENT OF CONDITION
Five tenant files, out of 38 files reviewed, had incorrectly accounted for tenant’s income. Two tenants were overcharged a total of $2 a month in rent. Three tenants were undercharged a total of $118 a month in rent.
CRITERIA
HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to properly calculate tenants rent derived from the appropriate documents on file for the tenants.
EFFECT OF CONDITION
Two tenants were improperly overcharged $14 of rent and HUD was undercharged $14 of rental assistance payments for the year ended September 30, 2024. Three tenants were improperly undercharged $826 of rent and HUD was overcharged $826 of additional rental assistance payments for the year ended September 30, 2024.
CONTEXT
During audit fieldwork, thirty-eight tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria. Of the 38 tenant files examined, income for five tenants was incorrectly accounted for, resulting in the wrong calculation of tenant rent and HUD tenant assistance payments.
CAUSE OF CONDITION
Management mistakenly did not ensure the proper income was used to calculate the tenant’s rent.
RECOMMENDATION
The auditor recommends ensuring all tenant’s paperwork is thoroughly reviewed and accurately used in the calculation of the tenant’s required monthly rent and HUD’s tenant assistance payments.
VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS
Carrasquillo Management LLC acknowledges the audit finding related to rent miscalculations for five tenant files during the fiscal year ended September 30, 2024. These errors resulted in both minor tenant overcharges and undercharges, as well as corresponding discrepancies in HUD’s rental assistance payments.
Corrective Actions:
1. Financial Corrections
○ The Project will reimburse the two affected tenants a total of $14 to correct the overcharges.
○ The Project will submit a request to HUD to repay the $14 in overpaid rental assistance associated with these tenants.
○ For the three tenants who were undercharged a total of $826, the Project will bill the tenants for the rent differential in accordance with HUD regulations and provide HUD with reimbursement of the $826 in excess rental assistance paid.
2. File Review and Quality Control Measures
Management has implemented a secondary file review process for all certifications and recertifications to ensure that income is correctly verified, entered, and calculated in accordance with HUD Handbook 4350.3 requirements. All tenant income documentation will be double-checked by the compliance team prior to finalizing certifications.
3. Staff Training
All staff involved in income verification and rent calculation have been retrained on HUD rent calculation guidelines, including handling of paystubs, Social Security statements, and other income documentation. Training includes real-case scenarios and common error prevention techniques.
4. Compliance Oversight
Moving forward, Carrasquillo Management LLC will conduct quarterly internal audits of a random sample of tenant files to verify the accuracy of income calculations and ensure compliance with HUD regulations.
Carrasquillo Management LLC remains committed to ensuring the accuracy of tenant rent determinations and maintaining compliance with HUD’s income calculation requirements. All necessary reimbursements and corrective actions will be completed promptly and documented for HUD’s records.