Finding Text
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires that participant annual income be determined using gross income in accordance with 24 CFR § 5.609 and 24 CFR § 5.611, and that such determinations be supported by adequate and verifiable source documentation. Recipients are required to maintain complete and accurate participant files, including signed income certifications, zero-income affidavits where applicable, and sufficient third-party or source documentation (e.g., pay stubs) to support income calculations. In accordance with 2 CFR § 200.303, organizations must establish and maintain effective internal controls over compliance to ensure that income determinations and rent calculations are accurate, complete, and properly documented. Conditions: Our testing of 18 tenant files identified deficiencies in income documentation and rent calculation support. Specifically, 2 tenant files lacked documented zero-income verification, 2 files contained insufficient supporting pay documentation, 1 file was missing a signed income certification, and in 2 instances rent calculations were based on net wages rather than gross wages. These results indicate that controls over income verification and rent calculation documentation are not consistently operating effectively. Cause and Effect: This condition appears to be due to inconsistent application of documentation requirements and the absence of a formalized review process to ensure completeness and accuracy of income determinations and rent calculations. We identified a significant deficiency in internal control over compliance related to income verification and rent calculation documentation. While rent calculations appeared reasonable based on available information and no questioned costs were identified, the control deficiencies increase the risk that errors or noncompliance could occur and not be detected in a timely manner. Recommendations: We recommend management enhance controls over income verification and rent calculation documentation by implementing standardized documentation requirements and file checklists to ensure all required support (e.g., pay stubs, zero-income affidavits, and calculation worksheets) is obtained and retained prior to approval of assistance. Additionally, a secondary review should be performed and documented to verify the completeness and accuracy of income determinations and rent calculations.