Day Spring Baxter Ave, Inc.

Finding 2025-002: FALN 14.181 – Supportive Housing for Persons with Disabilities – Significant Deficiency Criteria: The Project’s tenant files are required to be maintained in accordance with HUD guidelines to ensure tenant eligibility and accurate calculations of tenant rent and rental subsidy. The Project is also required to use the most current lease agreement for Section 811 when certifying or re-certifying tenants. Statement of Condition: Certain tenant rent calculated on the Form 50059 and reported to HUD is inaccurate due to the use of incorrect income calculations. Documentation to support tenant eligibility was not maintained in tenant files. Incorrect model leases were used for multiple tenants. Cause of Condition: The Project’s internal controls to ensure that tenant files are complete and required documentation for tenant eligibility screening is maintained, that the correct model leases are used, and that the calculation of tenant rent is accurate were not effective. Effect of Condition: Of the three tenant files sampled for the Project, we noted discrepancies between the information reported on the Form 50059 and the information in the tenant file for the income reported for one tenant. This resulted in the tenant underpaying their share of the monthly rent by $46 per month and HUD being overcharged by the same amount. We also noted that for all three tenants various documents to support eligibility screening were not maintained in the tenant files. For one of the three tenant files sampled, the incorrect model lease was used. Recommendation: The design of the current internal controls should be reviewed to ensure tenant files are complete and accurate. The information in the files should support the data used in preparing the Form 50059, and procedures for calculating income using HUD guidelines should be reviewed. The information in the files should also support that proper eligibility screening procedures have been completed, and updated lease agreements should be obtained for any tenant whose lease is not the correct model lease document. A corrected Form 50059 should be prepared to correct the tenant income discrepancy noted in the audit, and the required adjustment processed through the HUD voucher. In addition, management should review all files and report any additional discrepancies to HUD in a timely manner. View of Responsible Officials: Management agrees with the findings and will implement procedures to ensure tenant files are maintained in accordance with HUD guidelines and that tenant rent is calculated using accurate data under HUD guidelines. Corrected Form 50059s will be prepared and any necessary adjustments will be processed in a timely manner.