Finding Text
2025‐006 — Compliance over Rent Reasonableness – (Significant Deficiency) Federal Program Information: Funding Agency: Housing and Urban Development Title: Continuum of Care Assistance Listing Number: 14.267 Compliance Requirement: Special Tests and Provisions Award Year: July 1, 2024 to June 30, 2025 Condition: During our audit, we noted that Hopeworks was not following its policy for rent reasonableness. Five of the eight tenants tested had at least one comparable unit being built over 10 years different from the unit the tenant was living in. Criteria: Hopeworks has policies that when determining rent reasonableness, Hopeworks must review 3 comparable units documented to determine rent reasonableness and those comparable units must have been built within 10 years of the year the unit that tenant is living in was built. Effect: Hopeworks did not follow the required test for the rent reasonableness requirement. Questioned Costs: None Cause: There was turnover in the staff performing these tests during the fiscal year under audit and when the tests were being done they were done by employees who didn’t receive the proper training to understand what all was required for these procedures. Auditors’ Recommendation: We recommend that Hopeworks establish a system of internal controls to ensure that these requirements are documented and easily attainable so that if there is turnover the new staff know what they need to do. Management’s Response: Management concurs that program staff did not consistently follow the organization's written Rent Reasonableness Policy, which included a provision limiting eligible units to those less than 10 years old. Upon review of the applicable HUD Continuum of Care regulations and guidance, management determined that HUD rent reasonableness requirements focus on comparability of rent based on factors such as location, size, type, quality, amenities, facilities, and management services. HUD does not establish a prohibition based solely on the age of a unit. The units identified in the audit were determined to be rent reasonable based on market comparisons and otherwise met applicable program requirements. However, management acknowledges that the organization's written policy had not been updated to align with current HUD requirements and therefore was not followed as written. Corrective action has been taken to revise the Rent Reasonableness Policy to remove the age-based restriction and align the policy with HUD requirements. Staff have been retrained on the revised policy, and management review controls have been implemented to ensure future rent reasonableness determinations are documented and performed consistently with HUD regulations