Finding 571830 (2024-002)

Significant Deficiency
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-07-23

AI Summary

  • Core Issue: Metro West Housing Solutions failed to determine rent reasonableness for 2 tenants and did not follow internal controls for 3 others.
  • Impacted Requirements: Compliance with HUD regulations regarding reasonable rent determinations for the Housing Choice Voucher program.
  • Recommended Follow-Up: Management should review and strengthen controls to ensure proper documentation and compliance with rent determinations.

Finding Text

2024-002 Direct Program Department of Housing and Urban Development FFAL #14.871 Section 8 Housing Choice Vouchers Special Tests and Provisions: Reasonable Rent Immaterial Instance of Noncompliance and Significant Deficiency in Internal Control over Compliance Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal controls to provide reasonable assurance of compliance with these requirements. The Housing Choice Voucher program requires that recipients must determine that rent to the owner is reasonable in comparison to rent for other comparable unassisted units. Condition: Metro West Housing Solutions did not determine rent reasonableness for 2 tenants during 2024. In addition, Metro West Housing Solutions did not follow their internal controls in place to determine rent reasonableness for 3 tenants, and internal controls in place did not prevent the missing determinations on the tenants noted. Cause: Controls over reasonable rent determination that are a part of special tests and provisions were not properly designed to ensure that comparisons were taking place. Effect: As a result of the failure to determine reasonable rent for units leased under the Housing Choice Voucher program, there is an increased risk that Metro West Housing Solutions is overpaying landlords, which can result in noncompliance with HUD regulations. Questioned Costs: None reported Context/Sampling: We tested 60 out of a population of over 250 new leases during 2024 based on maximum risk of material noncompliance. Repeat Finding from Prior Year(s): No Recommendation: We recommend management revisit controls to ensure that reasonable rent determinations are conducted and documented in accordance with HUD requirements. Views of Responsible Officials: There is no disagreement with the audit finding.

Corrective Action Plan

Finding 2024-002 Federal Agency Name: Department of Housing and Urban Development Assistance Listing Number: 14.871 Program Name: Section 8 Housing Choice Vouchers Program Initial Fiscal Year Finding Occurred: 2024 Finding Summary: Metro West Housing Solutions did not determine rent reasonableness for 2 tenants during 2024. In addition, Metro West Housing Solutions did not follow their internal controls in place to determine rent reasonableness for 3 tenants, and internal controls in place did not prevent the missing determinations on the tenants noted. Corrective Action Plan: In response to the recent audit finding related to missing rent reasonableness determinations, Metro West Housing Solutions has implemented the following corrective actions and is strengthening internal controls to ensure compliance with HUD regulations at 24 CFR § 982.507. Actions implemented: • Discontinued using Nelrod rent reasonableness system, which we found to have inconsistent and outdated comparable rent data. MWHS has also discontinued using the “point system” as a control measure. • The recently implemented rent reasonableness control measure requires that the proposed rent for the assisted unit must be within 10% of the rents for comparable, unassisted units in the private market. A unit is considered rent reasonable if none of the selected comparable units are more than 10% below or above the proposed rent. • Yardi Rent Reasonableness module is now being used to determine reasonable rent in accordance with 24 CFR § 982.507(b). This system enables automated, consistent comparisons based on key HUD criteria. • Staff will conduct periodic Yardi Rent Reasonableness system reviews to confirm comparable market data is current and geographically appropriate • Enhanced compliance protocols have been implemented to ensure all staff are receiving frequent, standard training. In addition, individual file audits will be conducted more frequently. Responsible Individual(s): Director, Housing Choice Vouchers Anticipated Completion Date: September 2025

Categories

HUD Housing Programs Significant Deficiency Special Tests & Provisions Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 571829 2024-001
    Material Weakness Repeat
  • 1148271 2024-001
    Material Weakness Repeat
  • 1148272 2024-002
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $22.09M
14.239 Home Investment Partnerships Program $499,000
14.218 Community Development Block Grants/entitlement Grants $20,000