Finding Text
Significant deficiency in internal controls over compliance and instance of noncompliance related to special tests
and provisions.
Federal Agency: Department of Housing and Urban Development
Program Title: Continuum of Care
Assistance Listing Number: 14.267
Award Number: OR0215L0E012106; OR0215L0E012207; OR0214L0E12106; OR0214L0E012207
Award Period: September 1, 2022 - August 31, 2023; September 1, 2023 - August 31, 2024;
September 1, 2022 - August 31, 2023; September 1, 2023 - August 31, 2024
Criteria
Per guidance contained in 24 CFR 578.49(b)(2) “when grants are used to pay for rent for individual housing units,
the rent paid must be reasonable in relation to rents being charged for comparable units, taking into account the
location, size, type, quality, amenities, facilities and management services.” Per the Rent Reasonableness and Fair
Market Rent Under the Continuum of Care (CoC) Program as issued by the United States Department of Housing
and Urban Development (HUD), “Recipients and subrecipients must establish their own…policies and procedures
for documenting comparable rents and ensure that they are followed when documenting rent reasonableness in
the case file” and “the recipient’s policy would also specify the definition of ‘reasonable’”. Further, it states, “If the
gross rent for the unit exceeds the rent reasonableness standard, CoC Program recipients or subrecipients are
prohibited from using CoC Program funds for any portion of the rent.”
Condition/Context for Evaluation
During our audit, from a sample of 8 rent transactions tested for rent reasonableness, we identified:
‐ One instance where the rent charged of $1,650 was in excess of the $1,605 maximum reasonable
rent calculated per the League’s rent reasonableness procedures.
‐ One instance where documentation showing the calculation of rent reasonableness for a specific unit
could not be produced for the latest lease renewal. However, rent reasonableness could be provided
for comparable units which supported this specific unit to be rent reasonable and a rent
reasonableness form was completed at the time of entering into the original master lease in
accordance with the League’s policies. Controls did not operate to ensure that documentation existed
to support that the unit remained rent reasonable after the initial master lease was entered into.
Effect or Potential Effect
The League charged to the federal award rental costs for a unit that supporting documentation determined was
not rent reasonable.
Cause
The League’s controls did not operate effectively document that units were rent reasonable or to detect rental
costs deemed to not be reasonable.
Questioned Costs
$4,950
Repeat Finding
No
Recommendation
We recommend the League develop written policies and procedures around rent reasonableness calculations,
outlining the frequency of those calculations, what documentation should be retained supporting rent
reasonableness with a clear definition of the Leagues determination of rent reasonable. Further, the League
should strengthen controls around identifying any charges incurred on units determined to not be rent reasonable
to ensure they are not charged to the grant.
Views of Responsible Officials of Auditee
Management concurs with the finding and has provided the accompanying corrective action plan.