Finding Text
Federal Program Title: Section 8 Project Based Cluster Assistance Listing Number: 14.195 & 14.856 Award Period: 1/1/2021-12/31/2021 Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or Specific Requirement: In accordance with HUD regulations under 24 CFR Sections 880.609, 881.601, 882.410, 882.808(e), 883.701, 884.109, 886.112, and 886.312, Section 8 projectbased properties are required to annually adjust contract rent, which may include special adjustments when necessary. Condition: During our testing, we noted instances where the Authority did not follow the internal controls in place to ensure compliance with contract rent increase requirements. Questioned Costs: $5,685 Content: Testing of property files found exceptions with one of the four building rent files as noted below: - For one of the four building rents tested, CLA noted that the new contract rents were not implemented. Cause: The delay in implementing the contract rent increase occurred during a period of significant operational disruption caused by the COVID-19 pandemic. During 2021, the Authority’s administrative offices were closed to the public, many staff were working remotely, and documentation flow and approval processes were modified to maintain continuity of service. At the same time, the Authority was completing a major software system conversion and experiencing staff turnover within the Section 8 Project-Based program. As responsibilities were being reassigned and new staff were being trained under pandemic conditions, the tracking and verification process for contract rent adjustments was temporarily interrupted, resulting in the delayed implementation of the approved rent change for one property. Effect: The Authority is not ensuring the proper and timely accounting of contract rent changes and the Authority is not in compliance with HUD regulations. Repeat Finding: No Recommendation: We recommend that management review their procedures to ensure that contract rent changes are implemented and evidenced timely and accurately and establish a method that ensures compliance. Views of Responsible Officials: The Authority concurs with this finding. During the audit period, program operations were impacted by both pandemic-era staffing disruptions and a major software conversion. The Section 8 Project-Based program experienced significant staff turnover during 2021, and the transition of portfolio management responsibilities to newly trained staff led to delays in processing certain contract rent adjustments. Specifically, for one of the four property’s contract rent files tested, the approved contract rent increase was implemented 4 months later than the effective date. This resulted in a loss of $5,685 in reimbursement to the property. Once identified, the rent adjustment was corrected prospectively and has remained accurate since the correction. It is important to note that this issue was isolated to a single property, and no systemic errors in contract rent calculation were identified during the remaining sample testing. The Authority’s standard rent adjustment process otherwise complied with HUD regulations.