Finding Text
Condition During audit testing, the auditor identified four instances in which tenants’ annual HUD‑50059, Owner’s Certification of Compliance with HUD’s Tenant Eligibility and Rent Procedures (tenant recertification), were not completed in a timely manner. Specifically, recertifications were completed three to twelve months after the required annual effective date, resulting in significant delays between the effective date and execution of the certification. In addition, one tenant recertification file lacked adequate income support documentation to substantiate tenant eligibility and the calculation of the tenant portion of rent. Criteria The terms and conditions of the federal award require the auditee to determine tenant eligibility and calculate the tenant portion of rent based on supported and documented income information on at least an annual basis. Cause The condition occurred because management had insufficient internal controls and monitoring procedures to ensure that tenant recertifications were completed within required timeframes and that income documentation was consistently obtained, reviewed, and retained prior to determining eligibility and calculating tenant rent. Effect or Potential Effect Untimely tenant recertifications increase the risk that tenants may occupy assisted units without documented eligibility for the applicable period. As a result, subsidy rents charged during uncertified periods may not be allowable under the terms and conditions of the federal award. Additionally, because income support documentation was not maintained for one tenant, the auditee was unable to demonstrate that eligibility requirements were met or that the tenant’s portion of rent was calculated correctly, which could result in unallowable subsidy payments. Context Testing was performed on 16 tenant files selected from a population of 40 tenant files for the program. Questioned Costs $13,560 Repeat Finding No Recommendation The auditor recommends that management strengthen internal controls and monitoring procedures to ensure tenant recertifications are completed timely, including periodic supervisory review. In addition, management should implement procedures to ensure that income documentation is obtained, reviewed, and retained prior to determining tenant eligibility and calculating rent amounts. Management Response Management agrees with the finding and has prepared an attached corrective action plan to address the issue.