Finding Text
Finding 2025-006 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Project-Based Cluster - Project Based Rental Assistance Federal Assistance Listing Numbers: 14.195 Noncompliance - N. Special Tests and Provisions - Tenant Utility Allowances Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: Tenant Utility Allowances. The PHA must perform an annual review of tenant utility allowances to determine their reasonableness and adjust utility allowances, when appropriate, based on changes in utility rates and other factors affecting utility consumption (24 CFR sections 5.603, 880.610, 881.601, 882.510, 882.808(k), 883.701, 884.220, 886.126, 891.440 and 886.326). Condition: The Authority did not perform or document an annual review of tenant utility allowances during the audit period. Management was unable to provide evidence that utility allowances were evaluated for reasonableness, updated utility rate information was considered, or that a determination was made regarding whether adjustments to utility allowances were necessary. Known Questioned Costs: Unknown Cause: The Authority lacked procedures to ensure that annual utility allowance reviews were performed and documented in accordance with HUD requirements. Management was not aware of and did not adequately monitor the requirement to perform and retain documentation supporting the annual review process. Effect: Failure to perform and document annual utility allowance reviews may result in utility allowances that do not accurately reflect current utility costs. As a result, tenant rent calculations may be incorrect, increasing the risk of noncompliance with HUD requirements and potential inaccuracies in housing assistance calculations. Recommendation: We recommend that the Authority establish and implement procedures to perform and document annual reviews of tenant utility allowances. The review should consider current utility rates and other factors affecting utility consumption and should include documentation supporting management's determination of whether utility allowance adjustments are necessary. Documentation should be retained to demonstrate compliance with HUD requirements.