Finding Text
Finding 2025-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers Federal Assistance Listing Numbers: 14.871 Noncompliance - N. Special Tests and Provisions - Reasonable Rent Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: Reasonable Rent. The Authority must do the following: The Authority must determine that the rent to owner is reasonable at the time of initial leasing. Also, the Authority must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a 5 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The Authority must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract)(24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Condition: Based upon inspection of the Authority's files and discussions with management, there were newly leased units for which rent reasonableness evaluations were not performed. Context: There were approximately seventeen (17) newly leased Section 8 Housing Choice Voucher units. Of a sample size of two (2) newly leased units, rent reasonableness evaluations for one (1) unit was not performed. Our sample size is statistically valid. Known Questioned Costs: Amount is below threshold of $25,000. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to reasonable rent. Existing controls were not properly designed, implemented, or maintained to ensure that rent reasonableness requirements are consistently met. Effect: The Section 8 Housing Choice Vouchers program is in non-compliance with the special tests and provisions type of compliance related to reasonable rent. Recommendation: We recommend the Authority design and implement internal control procedures that ensure all rent reasonableness determinations are performed and documented, in compliance with Uniform Guidance and the compliance supplement.