Finding Text
2023-006 Reasonable Rents Documentation
Federal Program – Continuum of Care
Assistance Listing # 14.267
Compliance & Significant Deficiency
Category of Finding – Special Tests and Provisions
Criteria – Assistance Listing 14.267 requirements state that a non-federal entity using grant funds for rents must insure the rents be reasonable in relation to rents being charged in the area for comparable space (i.e. not exceeding the HUD-determined fair market rents). Good controls around this process would ensure that the process be documented and that a review be performed by someone other than the preparer.
Condition – During our procedures for testing the reasonable rent rates, we noted files that did not have the proper compliance documentation for controls.
Cause – This occurred because there was no procedure in place to document the source of the reasonable rent check, when the reasonable rent check was performed, or who reviewed the results.
Context – We tested 4 of a population of 40 case files. None of the files had documentation of when review was performed of the rental rate check. Additional, 2 of the 4 case files tested did not have documentation around when the reasonable rent check was run.
Effect – Participants of this program may receive rents in excess of the HUD-determined fair market rents or receive rent payments that are not comparable to units in the applicable area. As a result, the Organization may be overcharging the grant for ineligible costs.
Recommendation – We recommend that the Organization adopt a policy to consistently document the source of the reasonable rent check, when the reasonable rent check was performed, and who reviewed the results of the rent check.
Auditee's comments and response – Management has reviewed the current practice and has implemented a new form for documenting the determination and approvals in the case files.
Responsible party for corrective action: Laura Straw, Finance Director and Elizabeth Machart, Director of Contracts, Compliance, & Special Initiatives
Repeat Finding: No