Save Time & Money

Summary of Changes and How to Save Time and Money

Wilson & Associates, CPAs HUD Audit Guide – 2017 and Summary of Changes

There are a number of things that you can do to save money and prepare for your annual audit. This HUD Audit Guide goes over some major Program Changes for the year ended 2016 and examines a number of areas that can help prepare you and make the Audit process go smoother and save you time and money.

OFFICIAL HUD CONSOLIDATED AUDIT GUIDE YEAR END 2016

Download link:
https://www.hudoig.gov/reports-publications/audit-guides/consolidated-audit-guides

MULTIFAMILY PROGRAM CHANGES FOR THE YEAR END 2016

The following are areas of legislative and administrative changes that occurred in 2016:

  • HUD’s Office of Multifamily Housing Programs has reinstated Management and Occupancy Reviews (MOR), effective May 1, 2016.
    Management and Occupancy Reviews, which monitor project operations are required to ensure that HUD’s multifamily housing programs are administered as intended by identifying deficiencies to eliminate fraud, waste, and mismanagement.  Documented monitoring activities also provide support for enforcement actions when owners/agents will not correct deficiencies.
    https://www.nhcinc.org/ContractAdministrationOwnersAgents/ManagementOccupancyReviews/tabid/100/Default.aspx
  • Physical Inspection Sub-System Quality Assurance.
    Physical Inspection Sub-System Quality Assurance is responsible for evaluating and systematically monitoring REAC’s Physical Inspection Program to ensure reliable, replicable, and reasonable inspections and providing technical assistance and training to inspector candidates and contract inspectors, HUD assisted properties, industry groups, other housing related organizations, and other federal, state, and local agency staff.  UPCS Guidance & Protocol Clarifications updated as May 23, 2016.
    https://portal.hud.gov/hudportal/documents/huddoc?id=GuidProtoClarif.pdf
  • Updated Industry User Guides Issued in July 2016.
    The Industry User Guide for the Financial Assessment Subsystem – Multifamily Housing (FASSUB 7.3.3.0) revised as of July 8, 2016. The FASS-FHA submissions templates were changed to require additional details for the balance sheet account 1330 – Other Reserves, and the statement of cash flows account S1200-255 – Net Deposits to Other Reserves. Submitters will now be required to disclose additional information about these accounts if account values are $1,000 or more.
    https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products/fass/fassmf_guide
  • ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs.
    The FASB published ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, on April 7, 2015.For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued.
    http://fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176165915303&acceptedDisclaimer=true
  • REAC Account Changes.
    The REAC FASS-FHA team is modifying the FASSUB system to align it with ASU 2015-03. Several changes will be made to the current chart of accounts including the following:
    Account 1520 – Deferred Financing Costs.
    Account 2340 – Debt Issuance Costs.
    Account 2300T – Total Long-term Liabilities.
    Account S1200-486 – Amortization of Debt Issuance Costs.
    https://portal.hud.gov/hudportal/documents/huddoc?id=fasb_asu2015-03.pdf
  • An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statement.
    This Statement on Auditing Standards is effective for integrated audits for periods ending on or after December 15, 2016. As a result of its Attestation Clarity Project, the Auditing Standards Board (ASB) has issued Statement on Auditing Standards (SAS) No. 130, An Audit of Internal Control Over Financial Reporting That Is Integrated With an Audit of Financial Statements (AICPA, Professional Standards, AU-C sec. 940).
    https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/SAS_130_Summary.pdf

LENDER PROGRAM CHANGES FOR THE YEAR END 2016

HUD Audit Guide Chapter 7, FHA-Approved Lenders Audit Guidance is revised October 2016.

  • Quality Control Changes
    • Compliance Requirement. The adoption and implementation of a quality control plan is a required element of a lender’s application for approval to participate in FHA programs.
    • Implementation. FHA-approved lenders must implement a quality control plan consistent with their needs and the above-referenced guidance to assist corporate management in determining whether their personnel are following HUD requirements and corporate policies and procedures.
    • Audit Procedures. Auditors are required to test Compliance and Implementation of Quality Control as detailed in HUD Audit Guide Chapter 7.

    https://portal.hud.gov/hudportal/documents/huddoc?id=20004c07OIGH.pdf

  • FHA Single Family Housing Policy Handbook 4000.1 is revised September 2016
    The Federal Housing Administration’s (FHA) Single Family Housing Policy Handbook 4000.1 (SF Handbook) is a consolidated, consistent, and comprehensive source of FHA Single Family Housing policy.
    https://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf
  • Change to Annual Recertification on LEAP
    On August 1, 2016, FHA implemented revised certification statements. The changes will be applied starting with lenders with Fiscal Year End July 2016.The following documents describe changes and a comparison of the previous versions to the current versions by mortgagee type.

    • Supervised/Non-supervised Mortgagees Investing/Government Mortgagees.
    • A lender that does not wish to retain its FHA approval must submit a request for voluntary withdrawal of FHA approval.

    https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/lender/approvals_renewals/sfh_recertification

How To Save Time & Money

  1. Be sure your accounting records are in good shape and all Balance Sheet accounts are supported by backup documentation. Your accounting staff can create what is called a lead sheet for all Balance Sheet accounts. A lead sheet details all account activities including attachments that support all major entries. I would recommend you have a qualified accountant do this step as it can save you money if done right. Be sure you give your accountant full access to the general ledger and books or record.
  2. Be sure any Section 8 project has its required DUNS number. You obtain this number from Dun & Bradstreet for each physical location of your business for U.S. Government Contracts.
  3. For Section 8 Housing be sure you hire a competent Property Manager who is familiar with Section 8 housing and the voucher subsidy system. Good Property Managers familiar with Section 8 housing will have competent staff who are trained with filing voucher subsidy requests plus handling all the complicated paperwork necessary for a Section 8 housing project.
  4. Be sure you have read your Regulatory Agreement and understand it. Too many clients neglect this step and find themselves in serious trouble for not adhering to all the agreements they have made with HUD. If you have any questions about your agreement, please contact my office.
  5. Be sure you respond to any requests from the Contract Administrator in a timely fashion as these can overwhelm an onsite Property Manager who is not experienced in Section 8 housing.
  6. Be sure any HUD physical inspection exceptions are handled in a timely fashion.
  7. Have a dedicated Company Officer work with the external auditor and answer all questions in a timely fashion.
  8. Use HUD Chart of Accounts when you can.
  9. Comply with all HUD document requirements in a timely fashion. An example would be Repair and Replacement requests.
  10.  Get all audit work papers “audit ready” for your accountant by the first week of February as the Financial Statements need to be filed with REAC by March 31 or March 30 if in a leap year.
  11. Make sure all REAC access to your financial statement file is obtained well before the REAC financial statement filing deadline date, as the process can be time consuming.
  12. Get your REAC filing started early because since most Financial Statements are filed the week before the filing deadline.
  13. With a new property, be sure the property is completely registered in the HUD system well before the financial statement reporting time deadlines.
  14. On Section 8 Housing, be sure you have reviewed all your tenant files for accuracy before your auditor asks to see them.
  15. For lender client, be sure you have reviewed all your loan files.
  16. For lender client, make sure you are familiar with the Quality Control changes as revised October 2016.
  17. For lender client, make sure you are familiar with the HUD Audit Guide Chapter 7FHAApproved Lenders Audit Guidance as revised October 2016.

IMPORTANT LINKS

Online resources for multifamily housing:

HUD Website
HUD website contains a wealth of information from phone numbers of HUD staff to excerpts from recent Congressional hearings.
http://www.hud.gov

HUD Mailing Lists
Sign up for Multifamily Housing Rental Housing Integrity Improvement Program Tips
https://portal.hud.gov/hudportal/HUD?src=/subscribe/signup&listname=Multifamily%20Housing%20RHIIP%20(Rental%20Housing%20Integrity%20Improvement%20Program)%20Tips&list=MFH-RHIIP-TIPS-L

Tenant Rental Assistance Certification System (TRACS)
TRACS is a HUD computer system developed to help improve financial controls over assisted housing programs by automating manual procedures and incorporating automated controls.
http://www.hud.gov/offices/hsg/mfh/trx/trxsum.cfm

Tenant Rental Assistance Certification System (TRACS)
TRACS is a HUD computer system developed to help improve financial controls over assisted housing programs by automating manual procedures and incorporating automated controls.
http://www.hud.gov/offices/hsg/mfh/trx/trxsum.cfm

If you have any questions, contact Gregory K. Wilson CPA

www.wilsoncpa.net

3525 Fourth Avenue

San Diego, CA  92103

619-296-1652

greg@wilsoncpa.net