Finding Text
Finding: 2025-003 Program Name: Section 8 Project Based Cluster (14.195-CL) Federal Awarding Authority: Department of Housing and Urban Development Compliance Requirement: Special Tests - Contract Rent Adjustments Type of Finding: Significant Deficiency; Nonmaterial Noncompliance Criteria: The Authority must apply or ensure annual adjustments to contract rents are applied. Condition: Contract rent adjustments were not applied to the calculation of rent in 4 instances out of a sample of 40 calculations. Each tenant’s income used to calculate rent in the Form 50059 was less than the income per the documentation in the file, resulting in underpayment of rent by the tenant. Cause: The Authority did not have appropriate controls in place over contract rent adjustments to ensure the adjustments are applied to the calculation of rent. Effect: The Authority was not in compliance with the contract rent adjustments compliance requirements for the year ended December 31, 2025. Auditor Recommendation: The Authority should implement a process to verify contract rent adjustments are appropriately applied and supported by the file documentation. Questioned Costs: None. Management’s Response: Due to staffing challenges, some contract rent adjustments were implemented later than they should have been. We have since implemented a process to ensure contract rent adjustments are reviewed and applied timely. This process includes internal review procedures, and staff will receive annual training to reinforce contract rent requirements and help ensure adjustments are processed accurately and on time going forward.