HUD Regulatory and Compliance Issues

PRESENTED BY:SUSAN G. WILSON, CPA

• HUD Insured Mortgage• HUD Regulatory Agreement

• Project-Based Section 8• HAP Contract

• Other• Use Agreement/Operating Agreement

HUD Governing Documents

• Occupancy Requirements of Subsidized Multifamily Housing Programs (4350.3)

• Financial Operations and Accounting Procedures for Insured Multifamily Programs (4370.2)

• The Management Agent Handbook (4381.5)

Policies and Procedures Handbooks

COMPLIANCE ISSUES

WITH ALL PROJECTS

Relating to fair housing and internal controls

• Missing or non-current Affirmative Fair Housing Marketing Plan

• Failure to maintain waiting list

• Inadequate documentation of rejected applicants and evictions

Fair Housing

• Ineffective controls or lack of controls over cash receipts and/or disbursements

• Failure to comply with established internal control procedures for cash receipts and/or disbursements

• Lack of adequate documentation of internal control procedures being correctly followed

• Failure to deposit cash on a timely basis

Internal Controls

COMPLIANCE ISSUES

WITH SECTION 8

Regulations target protecting tenants

• Missing applicant waiting list

• Missing tenant file documentation

• Missing signatures

• Improper tenant selection plan

Tenant and Applicant Documentation

• Underfunded Security Deposit Cash Account

• Borrowing money from Security Deposit Account to fund operations

Security Deposit Account

• Overpayment of Property Management Fees

• No “Employee Dishonesty” Insurance

• Improper Tenant Charges

Management Functions

COMPLIANCE ISSUES

WITH HUD INSURED MORTGAGES

Regulations target protecting the assets and shielding lender from risk

• Late payments

Mortgage Payments

• Bad books mean unrecorded liabilities and missing assets

Poor Recordkeeping

• Generally, distributions are only allowed twice a year• Project must be in surplus cash position• Includes related parties• Includes advances to fund operations

Distributions to Owners

• Distributions when no surplus cash is available• Loans of project funds (including “due

from…”)• Payments on related party and “other” loans• Commingling of funds among projects

Perceived “Equity Skimming”

QUESTIONS ??