Finding 1216688 (2025-001)

U.S. Department of Housing and Urban Development 14.267 Continuum of Care N. Special Tests and Provisions - Significant Deficiency in Internal Control 2025-001 Rent Reasonableness Certification: Criteria: Per 24 CFR sections 578.49 (b)(2) and 578.51 (g) and (j), where grant funds are used to pay for rent, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. Condition:The Organization uses an outside consultant to perform rent reasonableness calculations and certify the results in order to ensure rents paid with grant funds do not exceed HUD established fair market rental rates and that rents paid are reasonable in relation to rents being charged in the area for comparable space. Context:Rent reasonableness certifications were not performed timely for 4 of 5 leases tested. Cause:There is a potential that rents paid may not be within HUD compliance requirements if rent reasonableness certifications are not performed. Effect:Although certifications performed after year end validated rents paid during the year, the Organization did not follow its internal control procedures. Recommendation: RBT recommends that rent reasonableness certifications are performed timely for all lease renewals, when new participants are added, and when there are updates to existing leases or participants. Management's Response: See Corrective Action Plan.