Finding Text
Federal Agencies: Department of Housing and Urban Development Federal Assistance Listing Numbers: 14.267 Program: Continuum of Care Program Award/Pass-Through Entity Identifying Numbers: CA0802L9D012416, CA0802L9D012315, CA1348L9D012410, CA1348L9D012309, CA1510L9D012409, CA1510L9D012308, CA1883L9D012405, CA1883L9D012304, SIHI-25-07, HHI-26-08, SIHI-25-18, HHI-26-11 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 24 CFR §578.51(g), “HUD will only provide rental assistance for a unit if the rent is reasonable. The recipient or subrecipient must determine whether the rent charged for the unit receiving rental assistance is reasonable in relation to rents being charged for comparable unassisted units, taking into account the location, size, type, quality, amenities, facilities, and management and maintenance of each unit. Reasonable rent must not exceed rents currently being charged by the same owner for comparable unassisted units.” Condition: In accordance with 24 CFR §578.51(g), we noted that: • 1 out of 60 rental payments tested did not have a comparable unit analysis conducted upon rent increase. • 8 out of 60 rental payments did not have a comparable unit analysis completed in a timely manner prior to the tenant’s move-in or prior to increases in rent. • 4 of the 60 rental payments that did have rent reasonableness performed did not have rent reasonableness analyzed in the past 12-months of the rent payment. • 1 out of the 60 rental payments were paid in excess of rent per the lease agreement. Cause: The Village did not appropriately retain or produce documentation verifying that rent reasonableness was assessed prior to move-in or during changes to lease terms, as required by its policies. Furthermore, not all supporting documentation for initial or changes to lease terms was obtained or retained. Effect or Potential Effect: The insufficient retention or creation of rent reasonableness forms and supporting documentation has led to ineffective operation of rent reasonableness controls, thereby not appropriately identifying rental amounts for the Village’s clients in need of rental assistance. Consequently, this deficiency could result in incorrect charges being applied to the Federal program. Questioned Costs: Known Questioned Costs: None above the $25,000 reporting threshold. Likely Questioned Costs: None above the $25,000 reporting threshold. Context: This is a condition identified per review of the Village’s compliance with specified requirements not using a statistically valid sample. Questioned costs were determined as the amounts paid without supporting rent reasonableness documentation. The total costs subject to rent reasonableness amounted to $2,153,333. Repeat Finding: 2024-006 Recommendation: We recommend that the Village enhance existing policies to ensure rent reasonableness is performed on all rental assistance. In addition, we recommend management ensures determinations are performed prior to move-in or rent changes being charged, and documentation is maintained for both the rent amount and reasonableness of the rent. We further recommend a policy be enacted for reviewing rent reasonableness on a periodic basis (i.e. annually) for those tenants that have not had a change in rent during the period. Views of Responsible Officials: Management agrees with the finding. Management is in the process of enhancing and enforcing existing policies and procedures as well as performing a comprehensive tenant record review.