Finding 1156340 (2024-002)

Material Weakness Repeat Finding

Requirement

Questioned Costs

Year

2024

Accepted

2025-09-29

Audit: 368641

Organization: Housing Authority of Racine County (WI)

Auditor: Cliftonlarsonallen LLP

AI Summary

Core Issue: The Authority did not keep necessary documentation to show that rent was reasonable at the start of leases and during contract terms.
Impacted Requirements: Compliance with federal regulations requiring documentation of rent reasonableness as per 24 CFR sections.
Recommended Follow-Up: Review and improve internal controls and procedures to ensure compliance with documentation requirements.

Finding Text

2024 – 002: Reasonable Rent Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Choice Voucher Cluster Assistance Listing Number: 14.871, 14.879 Federal Award Identification Number and Year: WI183VO- 2024 Award Period: January 1, 2024 – December 31, 2024 Type of Finding: - Significant Deficiency in Internal Control over Compliance - Other Matters Criteria or specific requirement: The PHA must determine that the rent to 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 5 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The PHS must maintain records to document the bases 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). Condition: During our testing, we noted the Authority failed to maintain documentation of compliance with the requirements as stated in the criteria section of this finding. Questioned Costs: None Context: From a sample of sixty (60) program participant files selected for testing, two (2) tenant files did not include documentation of performance of rent reasonableness prior to the lease date. Cause: The Authority's system of internal controls included in the policies and procedures failed to identify the noncompliance as described in the condition section of this finding. Effect: The failure of the internal controls has resulted in noncompliance with the stated criteria. Repeat Finding: 2023-004 Recommendation: We recommend that the Authority review its system of internal control related to the policies and procedures in place to mitigate the risk of noncompliance with the requirements of the stated criteria. Views of responsible officials: There is no disagreement with the audit finding.

Corrective Action Plan

Recommendation: We recommend that the Authority review its system of internal control related to the policies and procedures in place to mitigate the risk of noncompliance with the requirements of the stated criteria. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: PHA identified weaknesses in a new operating model, and has continued to fine-tune tracking and transparencies towards improved compliance. SEMAP reports are pulled monthly, and internal file audits are being conducted. Standard operating procedures have been updated along with file checklists to ensure files are fully compliant. Name(s) of the contact person(s) responsible for corrective action: Katie Kasprzak, Executive Director Planned completion date for corrective action plan: 12/31/2025

Other Findings in this Audit

1156339 2024-001

Material Weakness Repeat
1156341 2024-003

Material Weakness Repeat
1156342 2024-004

Material Weakness Repeat

Programs in Audit

ALN	Program Name	Expenditures
14.871	Section 8 Housing Choice Vouchers	$11.32M
14.182	Lower Income Housing Assistance Program_section 8 New Construction/substantial Rehabilitation	$136,704
14.879	Mainstream Vouchers	$101,479
14.896	Family Self-Sufficiency Program	$72,000