HUD Proposed IPA Roster

DEAR CENTER MEMBERS If your firm performs certain audits under the Department of Housing and Urban Development (HUD) Consolidated Audit Guide or of governments or not-for-profit organizations that receive HUD funding and are subject to a single audit, you should be aware that HUD issued a proposed rule in today's Federal Register (Volume 73, No. 25, page 7170) titled, Independent Public Accountant Roster, that may have an effect on you. The proposed rule would modify HUD's existing regulations in 24 CFR Part 5 to establish a roster (that is, the IPA Roster or the Roster) of approved independent public accountants and public accounting firms (IPAs) that would be permitted to perform audits or related services on covered entities. Covered entities as defined in the proposed rule include public housing agencies; contract administrators; owners; and Title I and Title II nonsupervised lenders, nonsupervised mortgagees, and loan correspondents that are subject to the requirements of 24 CFR 5.801 (see attached for this section of the CFR), for which HUD is the cognizant or oversight agency under the Single Audit Act Amendments of 1996.  The proposed rule would establish eligibility, application, and removal procedures for IPAs listed on the IPA Roster. A PDF version of the proposed rule is also attached for your convenience.   According to HUD, the quality and accuracy of financial data submitted to HUD begins with selecting qualified IPAs who agree to comply with HUD's requirements with respect to the provision of audits or related services. HUD believes this proposed rule would implement an additional protection to ensure the accuracy of financial data submitted to HUD by covered entities. Comments are due to HUD by April 7, 2008 and instructions for submitting comments are included in the proposed rule. In the upcoming weeks, the GAQC staff, working with members of the GAQC Executive Committee, will be analyzing the proposed rule and developing comments on behalf of the AICPA. If you perform audits that would be subject to the proposed rule, we strongly encourage you to comment directly to HUD. However, if you would also like the GAQC staff to consider your individual comments for inclusion as part of the AICPA comment letter, please send a copy of your feedback to gaqc@aicpa.org by March 21, 2008.   The following is a summary of the HUD proposal for your convenience and for your information. However, for purposes of commenting on the proposal, you should refer to the actual proposed rule and the related sections that are referred to throughout the document.   How Would the Proposed IPA Roster Work? The IPA Roster would list IPAs that have been approved to perform audits or related services for covered entities. IPAs include individuals employed by public accounting firms (including a solo practice) or a State Auditor's Office who are licensed by a regulatory authority of a State or other political subdivision of the United States. All certified public accountants are considered to be IPAs. As proposed, covered entities or individuals would be required to select an IPA that is listed on the IPA Roster for their particular jurisdiction to perform the audits or related services required by HUD. Any IPA seeking to perform audits or related services for the entities or individuals noted above would be required to be a listed IPA sole practitioner, be a member or partner of a listed IPA, or be a full-time employee of a listed IPA.   What are the Eligibility Requirements to be Included on the Roster? Specifically, to be eligible for listing on the IPA Roster, an IPA would be required to: Be licensed or authorized to practice in each of the specific jurisdictions for which the IPA is to be listed; Not be, nor employ or contract with anyone for the performance of audits or related services who is, suspended, debarred, voluntarily excluded, subject to a limited denial of participation, or subject to any order of disbarment or other denial of right to practice before the Securities and Exchange Commission, or subject to a jurisdiction's disciplinary action that has resulted in the revocation, suspension, or surrender of a license or authorization to practice public accounting; Agree to accept only those engagements for audits or related services where it meets the minimum qualifications specified by the Generally Accepted Government Auditing Standards (GAGAS); Agree to accept engagements for only those entities listed in 24 CFR 5.801 (see attachment) that are located in jurisdictions in which the IPA is listed; Agree to establish and implement quality control procedures sufficient to satisfy the quality control standards of GAGAS; Agree to comply with the professional standards applicable to any audit or related service performed; Agree to comply with any accountancy laws and rules of each jurisdiction for which the IPA is to be listed; Agree to comply with all applicable HUD rules and instructions relating to financial reporting, audits, and related services performed for the entities listed in 24 CFR 5.801 (see attachment); Agree to submit to and cooperate with reviews by HUD of the IPA's performance of audits or related services for those entities listed in 24 CFR 5.801(see attachment); Agree to notify HUD if the IPA or any member or employee of the firm is, or has been, within the previous 5 years, indicted or otherwise charged with or convicted of any offense listed in 24 CFR 24.800(a) (we have provided a copy of this CFR section for your convenience); Agree to notify HUD if the IPA or any member or employee of the firm is, or has been, within the previous 5 years, adjudged to be civilly liable for any of the offenses listed in 24 CFR 24.800(a) (see attachment); and Agree to comply with any requests for information made by HUD. The IPA would be required to comply with all agreements required to be listed on the IPA Roster immediately upon approval for such listing. What Are the Requirements to be Listed in the IPA Roster? In order to be placed on the IPA Roster, each IPA would be required to submit an application to HUD identifying the specific state(s), territory(ies), Commonwealth(s), or District of the United States in which the IPA wishes to be considered for listing. HUD would review each IPA's application to ensure that each requirement for eligibility (see previous section) is met for each of the specific jurisdictions in which the IPA has requested to be considered for listing. If HUD's review of an IPA's application demonstrates that the IPA is eligible in a particular jurisdiction, the IPA's name would be placed on the IPA Roster for that jurisdiction. If HUD denies the IPA's application, the IPA can request reconsideration, and the IPA would have 30 days in which to demonstrate that it was in fact eligible as of the date of its initial application. Should the IPA not be able to demonstrate eligibility as of the date of the IPA's application, the IPA would not be listed, but could reapply at any time in the future.   What Will Cause Removal from the IPA Roster? The proposed rule establishes a removal process by which the listed IPAs may be removed from the IPA Roster. Removal of an IPA from the IPA Roster would not preclude HUD or the federal government from also bringing a false claims action, taking action against an IPA under 24 CFR part 24 (Government Debarment and Suspension and Governmentwide Requirements for Drug-Free Workplace), or from seeking any other remedy against an IPA available to HUD or the federal government by statute or otherwise. HUD would also be allowed to remove an IPA from the IPA Roster who fails to fulfill its responsibilities as a listed IPA, for cause at any time. Cause for removal would include, but would not be limited to: Failing to comply with any agreements with HUD, including, but not limited to, agreements identified at proposed new 24 CFR 5.810(a) as requirements for eligibility; Failing to maintain compliance with any other eligibility requirements for listing on the IPA Roster for each jurisdiction in which the IPA is listed; Failing to notify HUD within 30 days of any change in their continued compliance with eligibility requirements; or Making, or causing to be made, any false certification to HUD. According to the proposed rule, certain circumstances described below, would require HUD to automatically remove an IPA from the Roster, while in other circumstances the proposed rule would provide the IPA with an opportunity to respond and attend a conference before the IPA's removal from the Roster. Automatic removal of an IPA from the Roster would occur when: (1) the IPA fails to maintain compliance with eligibility requirements by being debarred, suspended, voluntarily excluded, subject to a limited denial of participation, or subject to any order of disbarment or other denial of right to practice before the Securities and Exchange Commission; or (2) the IPA fails to maintain compliance with eligibility requirements by losing, whether by revocation, suspension, surrender, or other means, its license or authorization to practice in any particular jurisdiction. However, if the IPA's license or authorization to practice lapsed or expired for reasons other than disciplinary actions, the IPA would be removed from the Roster only for that specific jurisdiction.   Is There Due Process for Removal from the IPA Roster? The proposed rule includes a description of due process for removal from the IPA Roster, except in the case of automatic removals (described in the previous section), that would require HUD to give an IPA written notice. Such notice would include the reasons for the proposed removal. The IPA would then be given 30 calendar days from the date of the removal notice to submit a written response opposing the removal. During this period, the IPA would also have the ability to submit a written request for a conference to discuss the proposed removal. If the IPA does not submit a response opposing the proposed removal within 30 calendar days, the removal would become effective 30 calendar days after the date of HUD's initial removal notice. However, if the IPA opposes the proposed removal, the Deputy Assistant Secretary of the Real Estate Assessment Center (REAC), or a designee ("Reviewing Official"), would: (1) review the proposed removal notice along with any supporting information and the response to the notice; and (2) conduct the conference with the IPA, if requested, before making a determination as to whether the IPA should be removed from the IPA Roster. When a request for a conference is received, the Reviewing Official would schedule the conference within 30 calendar days of the date the request is received. The Reviewing Official would be required to issue a determination within 30 calendar days of receiving the IPA's written response, or, if a conference is requested, within 30 calendar days of the closing of the conference. The Reviewing Official may affirm or deny the IPA's proposed removal from the IPA Roster, or the Reviewing Official may find cause for removal but order the removal held in abeyance. In no instance would the Reviewing Official be the individual who made the initial determination to propose the IPA's removal from the IPA Roster.   What is the Impact on the IPA if Removed from the IPA Roster? Any IPA who has been removed from the IPA Roster would not be permitted to enter into any contract or engagement for audits or related services with covered entities. While the IPA would be permitted to continue performance under any contract or engagement in effect at the time of the removal, the IPA would not be permitted to extend or renew any contract or engagement, with the exception of no-cost time extensions, unless the Reviewing Official were to grant an exception. The granting of any such exception would be within the sole discretion of the Reviewing Official and would be granted only when determined to be in the interest of HUD. Additionally, nothing in this rule would affect an entity's discretion to terminate an existing contract or engagement as a result of the IPA's removal, or due to the circumstances precipitating such removal.   *        *        *        *        *   As noted above, we will be analyzing the HUD proposal in more detail in the next few weeks and will provide you with any new information relating to the proposal as it becomes available. Sincerely,   Amanda Nelson, CPA Chair GAQC Executive Committee   Mary M. Foelster, CPA Director AICPA Governmental Auditing and Accounting   Back to top  STAY INFORMED As a member of the Center, your firm will receive periodic updates on important developments related to governmental audits, as well as the activities of the Center. To stay abreast of these and other relevant events, please visit the Center Web site at gaqc.aicpa.org. Also, we welcome any suggestions or questions. Please send them by e-mail to GAQC@aicpa.org. 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