Finding Text
Finding 2023-001
Type of Finding: Material weakness in internal control over compliance and noncompliance.
Federal program: HUD Section 223(f) Insured Mortgage (Assistance Listing #14.134)
Compliance Requirement: Eligibility
Criteria: In accordance with DH, Incorporated’s regulatory agreement with HUD for its HUD Section
223(f) Insured Mortgage and HUD Section 8 Housing Assistance Payments contract, DH, Incorporated
is required to annually recertify its tenants. It is the responsibility of management to design and
implement internal controls to ensure the tenants are recertified within the applicable timeframe
required by HUD. Additionally, HUD requires minimum security deposits of $50 to be collected for all
tenants.
Condition: DH, Incorporated did not perform recertifications for all tenants within the timeframe
specified by HUD. Additionally, we noted security deposits were not collected from several tenants. We
also noted a calculation error for one of the tenants’ adjusted income and tenant portion of rent and rent
assistance.
Cause: There were not properly designed or implemented internal controls to ensure the tenant
recertifications were performed accurately and in the timeframe required by HUD and to ensure security
deposits were collected as required.
Effect: The effect is material non-compliance with the terms of the HUD program listed above.
Questioned Costs: None.
Repeat Finding: Yes, see Finding 2022-002.
Context: We noted from review of the Forms HUD-52670 Schedule of Tenant Assistance Payments
Due and other client prepared schedules, several tenants had not been recertified during the fiscal year
as required. From the total 19 tenants at June 30, 2023, the annual recertifications for twelve tenants
were past due. We selected a sample of 6 tenants from a population of 19 for eligibility testing. The
sample was not a statistically valid sample. We performed procedures to determine whether the annual
tenant recertification occurred within the timeframe specified by HUD. We noted 1 instance in our
sample in which the tenant recertification had not been completed timely. As noted above, there were
also indications of additional late tenant recertifications for tenants that fell outside of our sample. From
our sample of 6 tenants, we noted one instance in which there was an error in the calculation of tenant
adjusted income and therefore the tenant portion of rent. There was a transposition in the income
amount used in the calculation from the actual income resulting in a minor error in the amount of tenant
adjusted income, tenant portion of rent and rent assistance. We also noted from the total 19 tenants,
there were 5 tenants that did not have security deposits collected as required.
Recommendation: We recommend management review the current internal control procedures and
implement additional procedures to ensure annual recertifications are performed as required by HUD.
Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.