Finding Text
Criteria: Federal regulations and grant and contract conditions specify where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units taking into account relevant features. In addition, the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Condition and context: A total of 8 landlords/property managers who received rental payments from the Organization during the fiscal year ended December 31, 2022 were randomly selected for reasonable rental rate testing. For 4 landlords/property managers, a signed certification letter from the landlord/property manager was provided stating the locations and each month?s rent payments received from the Organization were residential units with rent comparable to other units operated by the management and the Organization was not asked to pay more in rent than other tenants in comparable units. For 4 landlords/property managers, no documentation supporting compliance with federal reasonable rental rates was provided. Questioned costs: Known questioned costs were $106,329 of rent paid to landlords/property managers that it was unknown whether rent was over or under charged. Likely questioned costs are believed to be above the questioned cost threshold and program materiality for this program. Cause: Policies and procedures have not been implemented properly to ensure compliance with federal reasonable rental rates compliance requirements. The Organization did not have an effective control system in place to ensure that documentation was retained to support the reasonableness of the rents being paid to landlords/property managers to house the Organization?s clients. Repeat finding: This was not previously reported as a finding. Effect: The Organization may be out of compliance with special tests and provisions requirements. Recommendation: The Organization should improve the controls over the reasonable rental rates compliance requirements, which includes the documentation, review, and approval of reasonableness of all rental rates charged by landlords to house the Organization?s clients. Management?s Response: Management concurs with this finding. See the corrective action plan.