2012 Brown Bag Speaker Series Concludes "How to Sail Through An Audit"

Transcription

1 WELCOME

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3 2012 Brown Bag Speaker Series Concludes "How to Sail Through An Audit" LIHTC, HUD, and CHFA projects often require potentially stressful financial and compliance audits by the REAC, CHFA or limited partners. This Brown Bag Speaker Series event is designed to answer your questions, alleviate common problems encountered and lower your stress level. You'll leave this event better prepared and connected to helpful resources. Featuring Jill Korenek, Partner and Director of Audit Services, JDS Professional Group and Priscilla Fox, Program Compliance Officer, Colorado Housing and Finance Authority Wednesday, September 5th, :00 to 12:30pm Program 12:30 to 1:00pm Audience Q&A 1:00 to 1:30pm Informal Networking Volunteers of America Colorado Branch 2660 Larimer Street, Denver, CO Thanks to Our Platinum Sponsor! 2012 Brown Bag Speaker Series. Network. Learn. Discuss. Repeat.

4 Housing Colorado Presents Our 2012 Brown Bag Series Conclusion How to Sail Through An Audit" Sponsored By Chase Bank Wednesday, September 5, 2012 Volunteers of America Colorado Jill Korenek Partner and Director of Audit Services JDS Professional Group Priscilla Fox Program Compliance Officer Colorado Housing and Finance Authority

5 Jill E. Korenek Partner JDS Professional Group

6 FASB GASB AICPA GAO OMB HUD OIG HUD Program Office REAC

7 Most Popular Problems in HUD Compliance Audits and How to Avoid Findings and Management Letter Most Popular Findings #1 Unauthorized Distributions #2 Unauthorized Loans #3 Replacement Reserve Deposits #4 Other HUD High Risk Areas

8 Definition: any taking of project funds or assets other than surplus cash. Surplus Cash is the cash remaining after all necessary and reasonable expenses of the project have been paid or funds have been set-aside for such payments. Surplus cash is either computed at the end of the year or in some cases, semi-annually, if regulatory agreement permits.

9 Surplus cash is a HUD calculation. Calculation is based upon balance sheet information. Surplus cash is equal to Total Cash less Total Current Obligations.

10 Loans or Notes Payable (within 30 days) Should NOT include principal due on mortgage. Should NOT include loans or NP out of surplus cash. Should NOT include owner advances. Only notes approved by HUD to be paid out of project operations should be included. Accrued Expenses Include only accrued expenses expected to be paid within 30 days. Should NOT include amounts escrowed, i.e. property taxes, insurance, and MIP.

11 Interpretation of Partnership Agreement Order priority of how expenses need to be accrued in the books and be paid. For-profit motivated projects Surplus cash amount is available for distribution. Nonprofit projects Surplus cash amount is amount due to Residual Receipts Account. The numbers in surplus cash should be easily identified in balance sheet.

12 Definition: Unauthorized distribution that appears on the balance sheet as a receivable For example, Due from related parties Due from other projects or businesses Due from the management company Due from partners/owners

13 Underfunded deposits Unauthorized withdrawals

14 Mortgage Status Excess Management Fees Security Deposits (underfunded) Commingling of Funds intercompany payable/receivable As described in Unauthorized Loans

15 CHFA Management Reviews Physical Inspections 15

16 Scope of Management Reviews Frequency of Reviews File Review Required Documents Physical Inspection Questionnaire Management Review Report Reporting Non-Compliance Closing 16

17 Frequency of Management Reviews Program FHA Insured Risk Share - 542(c) 223(f) - 221(d)3-221(d)4 Physical Inspection Number of Units to Inspect Minimum of 2 units of each size File Review Number of Files to Review 15% or minimum of % if less than 10 units Review and Inspection Frequency Annually SMART - CHFA/HOF FAF/HOF All non-fha insured Loans 20% or a minimum of % if less than 10 units 15% or minimum of % if less than 10 units Every 3 rd year or annually if necessary LIHTC 20% of the Tax Credit Units or a minimum of 10 Tax Credit Units 20% of the Tax Credit Units or a minimum of 10 Tax Credit Files 1 st year conducted within 12-months of Placed in Service Date LIHTC Post Y % if less than 10 units 10% of the Tax Credit Units or a minimum of 10 Tax Credit Units 100% if less than 10 units 10% of the Tax Credit Units or a minimum of 10 Tax Credit Files Subsequent review and inspections conducted at a minimum of every 3 years Minimum of every 5 years 100% if less than 10 units 100% if less than 10 units RTC Minimum of 2 units of each unit size 15% of the RTC files or a minimum of 10 Minimum of every 3 years 80/20 Minimum of 2 units of each unit size 10% of the 80/20 files or a minimum of 10 maximum of 20 Minimum of every 3 years 17

18 File Review Complete Application Income Questionnaire Student Status if LIHTC or PAB Asset Verification -3 rd party verified if total exceeds $5,000 Income Verifications 3 rd party verified Self Employment all supporting documentation Child Support and supporting documents (Divorce Decree, Family Support Registry) Unemployment Affidavit (18 and under 62) Lease + Affordable Housing Lease Addendum/language Tenant Income Certification (TIC) Demographic information Recertifications 18

19 Physical Inspections CHFA conducts inspections based on the Uniform Physical Condition Standards (UPCS). Some emergency items that must be cured within 72 hours Smoke and Carbon Monoxide Detectors missing or not working Expired Fire Extinguishers Emergency Fire exits blocked Gas odor detected Any leaks near electrical equipment Exposed wires Emergency Access Depending on the severity and number of affected units, the above list may result in an 8823 violation if a LIHTC property. 19

20 Management Questionnaire File Findings Physical Deficiencies Management Practices Fees Recertification Utility Allowance Schedules Self Audits Annual Submissions Complete Report and send to Owner/Management 30-day cure period 20

21 Reporting Non-compliance CHFA is required to report certain deficiencies whether cured or not. If LIHTC or Private Activity Bonds (PAB) the IRS is notified via form If a CHFA loan- the loan will be in regulatory default and CHFAs Asset Quality Manager is notified. 21

22 Reporting Requirements Most Common deficiencies: Over income at move-in Incomplete TICs Gross Rent violation Set-aside not met Utility allowance change (90 day) Student Rule Violation Next Available Unit Rule Serious physical deficiencies Patterns of deferred maintenance Health and safety concerns Units not suitable for occupancy Unallowable fees 22

23 Owner & Management Due Diligence Be aware of all program types and rules Have copies of all Regulatory Agreements Hire qualified employees offer training Have organized files Don t wait! Conduct periodic file audits and unit inspections Ask your Program Compliance Officer (early) if unsure about a compliance issue Find it! Fix it! 23

24 Contact Information Jill Korenek Partner and Director of Audit Services JDS Professional Group ,ext 3146 Priscilla Fox Program Compliance Officer Colorado Housing and Finance Authority

25 Thank you! Questions?

26 Upcoming Housing Colorado Educational Event 2012 Forum Series Conclusion Veterans Update 2012 "A Toolkit For Success" Thursday, November 29, :00pm 5:30pm Mile High United Way REGISTER SOON ONLINE AT Thanks to Platinum Sponsor

27 ABOUT THE CONFERENCE Join us for the region s premier affordable housing conference, the 24th Annual Housing Colorado NOW! Conference, Homes Today Sustain Tomorrow. Hone your skills with over 40 competitively selected workshops offering beginner and advanced practitioners with the information and resources needed to adapt and thrive. Learn from the experts and make valuable connections through a variety of social and peer-to-peer learning opportunities. EARLY REGISTRATION DISCOUNTS END FRIDAY, SEPTEMBER 7 TH For More Information and to REGISTER NOW go to Thanks to Housing Colorado NOW! Presenting Sponsor