Finding Text
Criteria: Continuum of Care Program, Assistance Listing 14.267, requires rent paid with CoC funds to be reasonable in relation to comparable unassisted units and not exceed the rent charged by the same owner for comparable unassisted units. Under 24 CFR 578.49(b)(1)–(2) and 24 CFR 578.51(g) and (j), rent reasonableness must be established and documented before rental assistance is approved or provided. The 2025 Compliance Supplement requires the recipient or subrecipient to maintain documentation supporting the rent-reasonableness determination. Condition: In a nonstatistical sample of 6 participant files, 2 rent-reasonableness assessments were completed after lease commencement rather than before the related lease and rental-assistance approval process was finalized. The assessments were ultimately completed; however, their late completion indicates that the control designed to establish and document rent reasonableness before assistance approval was not operating consistently. Cause and Effect: Procedures and supervisory controls were not operating consistently to ensure that rent-reasonableness assessments were completed, reviewed, and retained before the related lease and rental-assistance approval process was finalized. Late completion of rent-reasonableness assessments increases the risk that rental assistance could be approved or provided for a unit before management determines that the rent is reasonable and complies with applicable limits. This could result in unsupported or unallowable rental-assistance costs and limits management’s ability to demonstrate timely compliance with HUD requirements. No known questioned costs were identified; likely questioned costs, if any, could not be quantified based on the audit procedures performed. Repeat Finding: This is a repeat finding related to prior-year finding 2024-003. Recommendation: We recommend that the Organization implement a documented pre-approval control requiring the rent-reasonableness assessment to be completed and independently reviewed before rental assistance is approved or provided and, when required by the Organization’s procedures, before lease execution. The review should confirm that the assessment uses appropriate comparable units, does not exceed rent charged by the same owner for comparable unassisted units, and complies with the applicable HUD fair market rent limitation. The participant file should retain the dated assessment and reviewer approval, and assistance should not proceed until the review is complete.