Finding Text
2025-002 Finding – Federal Awards – AL #14.267 – Continuum of Care Program Type: Significant Deficiency in Internal Control over Compliance – Special Tests: Rent Reasonableness Criteria / Requirement: 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition / Context: In testing Special Tests - Rental Reasonableness one out of four sample selected did not have a documented file review. The file appeared complete and there was no noncompliance noted, however there was no documented internal control over the rent reasonableness calculation. Cause: The process for file review was updated during the year to include a HUD file checklist not previously used. Three of the four files included the checklist which documents the review by the Housing Program Manager; however, one file was created before the checklist was in use. No other documentation of the review of the file was maintained, other than the associated check issued to the rental property company. Effect: Rental payments made on behalf of the Organization’s clients could be made for amounts above the HUD guideline’s maximum amount for the area, and therefore out of compliance with the federal award. Questioned Costs: None Recommendation: We recommend that the Organization continue with the internal controls established later in the year and ensure that Rent Reasonableness testing is documented including the file review. Additionally, as there have been recent revisions to the Uniform Grant Guidance (2 CFR 200) that now require documented internal controls over compliance, we also recommend that a specific policy be established for Rent Reasonableness to give clear directives of how the Organization determines rent reasonableness, how it is documented, and retained, ensuring there is current documentation of the internal controls over compliance. Management’s Response: Management concurs with the finding and has implement effective internal controls over Special Tests – Rent Reasonableness.