If you receive federal funding for affordable housing units that you own or manage, you likely will need to undergo an audit. The US Department of Housing and Urban Development (HUD) requires audits of property owners participating in its programs to curtail abuses.
With every new White House administration, regardless of political party, there’s seemingly always pressure on HUD to cut costs. HUD works to crack down on any number of fraudulent schemes, from misuse of disaster recovery grants to illegally inflating construction costs in order to get larger loan amounts under the low-income tax credit.
For rental properties, however, the most common offenses are tenant/applicant frauds, where applicants will falsify their true income and assets or family circumstances in order to be eligible for rental subsidies. In addition, some Section 8 landlords have been known to require additional side payments from tenants above the rents reported to the housing authority.
Of course, the mere fact that you’re reading this riveting blogpost on HUD audits means you’re likely a straightshooter. That said, there are a few documents to gather to ensure your next HUD audit goes smoothly:
- Monthly bank statements throughout the auditing period
- Real estate tax statements and related bills paid throughout the year
- Explanations of any legal issues with an assessment by management
- All tenant files
- IRS or state agency notices from the past year
- Any feedback from prior audits
We know collecting documents can be a bit daunting. As a general rule, save and organize all official correspondence connected with your HUD property.
As you evaluate CPA firms to conduct your HUD audit, make sure they offer you the flexibility to work around your busy schedule. You also should expect expedited service with reasonable fees. If you get pushback on any of those expectations, it might be time to switch CPA firms.
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