Finding 497284 (2023-002)

2023 – 002: Reasonable Rent Federal Agency: Housing Choice Voucher Program Federal Program Name: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.871 Federal Award Identification Number and Year: WI201VO2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding:  Material Weakness in Internal Control over Compliance  Material Noncompliance Criteria or specific requirement: The PHA must determine that the rent to owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a 5 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The PHS must maintain records to document the bases for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract) (24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Condition: During our testing, we noted the City failed to maintain documentation of compliance with the requirements of rent reasonableness schedule as stated in the criteria section of this finding. Questioned Costs: Known - None | Likely - Undeterminable Context: From a sample of sixty (60) program participant files selected for testing, seven (7) tenant files did not include documentation of performance of rent reasonableness prior to the lease date. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Cause: The City's system of internal controls included in the policies and procedures failed to identify the noncompliance as described in the condition section of this finding. Effect: The failure of the internal controls has resulted in noncompliance with the stated criteria. Repeat Finding: Yes; 2022-002 Recommendation: We recommend that the City review its system of internal control related to the policies and procedures in place to mitigate the risk of noncompliance with the stated criteria. Views of responsible officials and planned corrective action: There is no disagreement with the audit finding.