Finding 501662 (2023-002)

Finding 2023-002: Special Tests and Provisions; Rent Reasonableness Calculations Federal Program Title: Department of Housing and Urban Development Assistance Listing No. 14.267 – Continuum of Care Award year: IL1651L5T142002 August 1, 2021 – July 31, 2022; IL0315l5T142114 July 1, 2022 – June 30, 2023; IL1780L5T172100 and IL1651L5T142103 August 1, 2022 – July 31, 2023 Criteria: The Special Test provision for the Continuum of Care program requires that, where grants are used to pay for rent for all or part of a structure, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. In addition, the rent may not exceed rents currently being charged by the same owner for comparable unassisted space. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure enrollment reporting is completed properly. Condition: Documentation of rent reasonableness determination could not be located for program recipients whose rental units were located outside of the two main rental locations where participants are housed. The total costs associated with these units was $58,847. Cause and Effect: There were no controls in place to ensure that rent reasonableness determinations be performed, and evidence of such calculations be maintained for the Rapid Rehousing grants. As a result, the cost of assistance may be disallowed. Questioned Costs: $58,847 Context: A sample of 7 seven rental payments totaling $14,563 was selected from a population of payments totaling $271,155. The test found that 5 five of the payments, totaling $3,866, did not have documentation of rent reasonableness calculations. All 5 five of our exceptions related to the Rapid Rehousing grants. Total Rapid Rehousing costs make up $58,847 of the $271,155 population. Repeat Finding: No. Recommendation: We recommend that management perform a reasonableness review of all rental units under the program and should establish internal controls to ensure such calculations are performed and retained for all units going forward. Views of Responsible Officials: Management agrees with this finding. See corrective action plan.