Finding Text
Department of Housing and Urban Development, Passed through Hearth Connections and
Passed through Dakota County, Continuum of Care, Federal Financial Assistance Listing #14.267
Special Tests and Provisions, Period of Performance
Material Weakness in Internal Controls Over Compliance
Grant Award Number: Affects all grant awards included under Federal Financial Assistance Listing 14.267 on the Schedule.
Criteria: When grant funds are used by the Organization to pay for rent, the Organization must ensure that the rents do not exceed rents currently being charged by the same owner for comparable unassisted units and the portion of grant funds may not exceed HUD-determined fair market rents. These calculations should be reviewed prior to the rent being paid and the review should also make sure the proper period of performance.
Condition: During our testing, we identified five instances where the participant’s file did not have documentation that the rent reasonableness test was performed in a timely manner or reviewed for compliance with the grant period of performance. In addition, we identified 32 instances where the participant’s file did not have documentation that the rent reasonableness test was reviewed.
Cause: The Organization’s controls did not operate as designed, which resulted in rent reasonableness tests not being performed timely and/or reviewed before the rent was paid.
Effect: Inadequate internal controls over compliance could result in noncompliance with the federal program.
Questioned Costs: N/A
Context/Sampling: A nonstatistical sample of 32 participants out of 160 were selected for testing.
Repeat Finding from Prior Years: Yes, prior year finding 2023-002.
Recommendation: We recommend management revise their internal controls to make sure that rent reasonableness tests are performed and reviewed by the appropriate personnel prior to the rent being paid.
Views of Responsible Officials: Management agrees with the finding.