Finding Text
Finding 2025-008: Eligibility, Flat Rent Requirements Public Housing Program, Assistance Listing #14.850 Material Weakness/Noncompliance- Repeat Finding Criteria: As required by the 2014 Appropriations Act, paragraph (2)(b)(i) Section 3(a) of the United States Housing Act of 1937, as amended by Section 201, establishes new parameters that PHAs must use when determining the flat rent amounts. Specifically, flat rents must now be set at no less than 80 percent of the applicable Fair Market Rent (FMR) and adjusted annually. In addition, most recently HUD issued Notice: PIH 2021-27 which clarifies HUD’s interpretation of the statutory amendment to flat rents and procedures to obtain specific exemptions. Condition: During our audit we noted the Agency did not adjust the flat rents during the calendar year 2025 until October 2025, which resulted in tenant not paying the appropriate amount of rent and resulted in a projected loss of income for the Agency of $5,880 for the year ended September 30, 2025. Cause: The Agency did not adjust the flat rents annually as required or obtain an appropriate exemption to reflect current market conditions. Effect or Potential Effect: Because the flat rents were not adjusted correctly, this resulted in an estimated loss of rental income of $5,880 and affected ten tenants. Recommendation: We recommend the Agency review the flat rents and adopt them according to the flat rent regulations on an annual basis. The Agency should review HUD Notice PIH 2021-27 for the updated procedures on flat rents and exemptions and to implement accordingly. View of Responsible Official: Management agrees with the Finding.