Finding Text
REFERENCE NUMBER: 2025-002 FEDERAL PROGRAM: Section 8 Housing Choice Vouchers ASSISTANCE LISTING NUMBER: 14.871 NAME OF FEDERAL AGENCY: U.S Department of Housing and Urban Development (HUD) COMPLIANCE REQUIREMENT: Special Test and Provisions: Inspections and Rent Reasonableness REPEAT FINDING: No Criteria Under 2 CFR § 200.514(d), the auditor is required to perform transaction tests and other audit procedures necessary to determine whether the recipient complied with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each major program. The OMB Compliance Supplement identifies compliance requirements that the federal government expects auditors to consider in a Uniform Guidance compliance audit, and use of the Compliance Supplement is mandatory. The Section 8 Housing Choice Voucher program is administered by PHAs under an Annual Contributions Contract with HUD and is governed by 24 CFR parts 5 and 982–985. The program is intended to assist eligible families in leasing safe, decent, and affordable housing. For the Housing Choice Voucher program: • Rent reasonableness: 24 CFR § 982.507 requires the PHA to determine that the rent to owner is reasonable before approving a lease and at other required times. • Inspections / Housing Quality Standards: 24 CFR § 982.405 and 24 CFR part 982, subpart I establish inspection and housing quality standards requirements applicable to assisted units. Condition During our testing of tenant files for the Section 8 Housing Choice Voucher major program, we selected a sample of 3 tenant files from a population of 24 tenant files / voucher participants for the fiscal year ended September 30, 2025. We noted the following exceptions related to Special Tests and Provisions: • We noted one instance in which the tenant files did not include evidence that the Authority completed and retained the required rent reasonableness determination. • We noted one instance in which the tenant file did not include evidence that the required inspection was performed and documented. Cause The Authority did not appear to have adequate controls to ensure that required rent reasonableness determinations and inspection documentation were completed, reviewed, and retained in tenant files before HAP payments were approved or continued. Existing tenant file review procedures did not consistently identify missing documentation. Questioned Costs – None No questioned costs were identified as a direct result of this finding because the audit procedures did not identify specific ineligible HAP payments. However, the absence of required documentation increases the risk that unsupported or ineligible payments could have occurred. Effect Failure to document rent reasonableness determinations may result in the Authority approving rents that are not supported as reasonable in accordance with HUD requirements. Failure to document required inspections may result in HAP payments being made for units for which the Authority cannot demonstrate compliance with applicable housing quality standards or inspection requirements. These conditions increase the risk that HAP payments may be made for units with unsupported rent levels or units that have not been documented as meeting required inspection standards. The HCV program is intended to provide assistance for safe, decent, and affordable housing. The auditor should evaluate the significance of nonmonetary noncompliance using professional judgment, including the exception rate when applicable. Recommendation We recommend that the Authority strengthen controls over inspections and rent reasonableness determinations by: • Requiring completion and supervisory review of rent reasonableness documentation before lease approval, rent increase approval, or execution of the HAP contract, as applicable. • Maintaining standardized rent reasonableness forms or system-generated documentation in each tenant file. • Requiring inspection documentation to be completed, reviewed, and retained before HAP payments are initiated or continued, as applicable. • Implementing a tenant file checklist that includes PIC reporting, rent reasonableness, inspection documentation, lease approval, HAP contract execution, and other required eligibility and special test elements. • Performing periodic internal quality control reviews of tenant files to verify that required documentation is present and complete. • Providing training to program staff on HUD requirements for rent reasonableness determinations, inspections, and retention of supporting documentation. • Reviewing the population of tenant files active during the audit period to determine whether additional files are missing rent reasonableness or inspection documentation and taking corrective action where needed.Management’s response: The Authority agrees with the finding. Management will strengthen documentation and supervisory review controls to ensure rent reasonableness determinations and required inspections are completed, supported, and retained in tenant files in accordance with HUD requirements.