Finding Text
2023-006 Internal Controls and Compliance over Special Tests and Provisions – Reasonable Rental Rates (Significant Deficiency) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.49, when grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units, taking into account the location, size, type, quality, amenities, facilities, and management services. In addition, the rents may not exceed rents currently being charged for comparable units, and the rent paid may not exceed HUD-determined fair market rents. Condition: While the entity has adopted controls over compliance requirements related to special tests and provisions – reasonable rental rates, these controls have not been consistently implemented during the year. Additionally for a sample of files selected for scattered locations, no evidence of current rental reasonableness verification was available within the participant’s files. Cause: Turnover / inadequate staffing in the Organization throughout the year and absence of a senior financial management position resulted in these controls not being consistently implemented. Effect: Without internal controls operating effectively, it is possible that the Organization would be at risk to be out of compliance with the compliance requirements. The Organization cannot effectively manage its federal program with controls that do not operate effectively. Questioned Costs: Undeterminable Perspective: No observable evidence of controls being implemented consistently on the above compliance requirement. Additionally, for 6 of the 7 sample of files selected for scattered locations, no evidence of current year rental reasonableness verification was available within the participant’s files. Repeat Finding: Yes Recommendation: The Organization should establish procedures to ensure that controls related to special tests and provisions – reasonable rental rates are consistently implemented including maintaining documentation of the verification of rental reasonableness in the program participant's file. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.