Finding 1186588 (2025-003)

Finding 2025-003 - Tenant Lease Files - Material Weakness Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 223(f) HUD-Insured Mortgage Assistance Listing Number: 14.155 Federal Award Identification Number and Year: Not available Name of Pass-through Entity (if applicable): Not applicable Criteria: In accordance with §891.410, Selection and admission of tenants, the owner is responsible for determining tenant eligibility and maintaining lease files. Condition: During the procedures applied to a sample of 8 tenant lease files, we noted the following instances of noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. • 2 instances where the project did not perform timely income verification using the EIV system and this data was not maintained in the lease file. • 1 instance where the project did not obtain tenant’s consent to release income information and this data was not maintained in the lease file. • 1 instance where the project did not send the required recertification notifications to the tenant and this data was not maintained in the lease file. Cause: The Corporation failed to follow the policies and procedures which have been established for proper tenant file maintenance and determining tenant eligibility in accordance with HUD guidelines. Effect or Potential Effect: Noncompliance with HUD guidelines could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context: During the year ended October 31, 2025, management did not maintain the required documentation associated with making tenant eligibility determinations. Identification as a Repeat Finding: N/A Recommendation: Management should establish procedures and monitor compliance with those procedures to ensure that the determination of tenant eligibility and the maintenance of lease files are in accordance with guidelines specified by HUD. Views of Responsible Officials: Management agrees with the finding and is in the process of revising internal controls to address this issue.