Finding 538004 (2024-002)

2024-002 – SPECIAL TEST & PROVISIONS: RENT REASONABLENESS Material Weakness/Material Noncompliance U.S. Department of Housing and Urban Development CFDA #: 14.871 – Housing Voucher Cluster CRITERIA The PHA may not approve a lease until the PHA determines that the initial rent to an owner is a reasonable rent. (2) The PHA must redetermine the reasonable rent: (i) Before any increase in the rent to an owner; (ii) If there is a 10 percent decrease in the published FMR in effect 60 days before the contract anniversary (for the unit size rented by the family) as compared with the FMR in effect 1 year before the contract anniversary. (iii) If directed by HUD. The PHA may also redetermine the reasonable rent at any other time. At all times during the assisted tenancy, the rent to owner may not exceed the reasonable rent as most recently determined or redetermined by the PHA. (24 CFR 982.507) CONDITION We identified 11 instances in which the Authority was required to perform an assessment to determine if the rent requested by the landlord is reasonable. In all eleven, the Authority did not perform properly perform the rent reasonableness assessment. CAUSE The Authority experienced turnover in the administrative department. EFFECT The Authority cannot ensure that HAP payments to landlords were reasonable. QUESTIONED COSTS Likely questioned costs - $2,528,345. CONTEXT We selected a sample of 40 from a population of 137. This was not a statistically valid sample. REPEAT FINDING Repeat of finding 2023-002. RECOMMENDATION We recommend the Authority use a third party service to ensure all required documentation is obtained and rent reasonableness procedures are performed. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.