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 ??