Finding Text
United States Department of Housing and Urban Development Continuum of Care Program ALN: 14.267 Criteria: Grants used to pay rent for individual housing units should document that rent paid is reasonable in relation to rents being charged for comparable units, taking into account relevant features. In addition, the portion of rental assistance paid with Continuum of Care Program funds is subject to the applicable HUD Fair Market Rent limitation. The Organization's rent reasonableness procedures provide that the proposed gross rent should not exceed the average gross rent of comparable units by more than $100. Condition: Although the Organization strengthened its procedures during the current year and maintained rent reasonableness documentation within the tenant files selected for testing, there were instances in which the proposed gross rent exceeded the average gross rent of comparable units by more than the $100 limit established by the Organization. In addition, there were instances in which rental assistance paid with federal funds exceeded the applicable HUD Fair Market Rent after consideration of the applicable utility allowance, with no documentation supporting the amounts paid in excess of the applicable limit. Cause: The Organization's review procedures did not consistently identify instances in which proposed rents exceeded the limits established by its rent reasonableness procedures or rental assistance exceeded the applicable HUD Fair Market Rent. Effect: The Organization may pay rental assistance with federal funds for amounts that do not comply with its established rent reasonableness criteria or applicable HUD Fair Market Rent limitations. Identification of a Repeat Finding: This is a repeat finding from the prior year, 2024-003. The Organization improved its procedures during the current year by maintaining rent reasonableness documentation within the tenant files; however, exceptions identified during current-year testing indicate that additional improvements to the review process are necessary. Questioned Costs: The population consisted of 21 tenant files with total federal rental assistance expenditures of $310,607. We selected 10 tenant files for testing monthly payments, representing $184,884 of federal rental assistance expenditures. Exceptions were identified for 25 monthly payments related to the Organization's rent reasonableness procedures and applicable HUD rental assistance requirements. The questioned costs associated with the exceptions totaled $6,036. Recommendation: The Organization should strengthen its review procedures to ensure that, prior to approval of federal rental assistance, proposed rents comply with the Organization's established rent reasonableness criteria and applicable HUD Fair Market Rent limitations. The review should be documented and evidence resolution of any identified exceptions prior to the payment of rental assistance with federal funds. Views of Responsible Officials of Auditee: The Organization agrees with the finding and will strengthen its review procedures to ensure that rental assistance paid with federal funds complies with established rent reasonableness criteria and applicable HUD Fair Market Rent limitations.