Today, the U.S. Department of Housing and Urban Development (HUD) issued its long-awaited revisions to Chapter 3 – HUD Multifamily Housing Programs and Chapter 4 – HUD Multifamily Hospital Program of the Consolidated Audit Guide for Audits of HUD Programs (the Guide). As previously noted in several GAQC Alerts, HUD is going through the process of updating the Guide (last revised on an overall basis in 2001) on a chapter-by-chapter basis. The new Chapter 3 is effective and can be used upon issuance. The requirements in Chapter 3 shall apply to audits of profit-motivated sponsors/entities with fiscal years ending on or after December 31, 2008. Chapter 4 is effective upon issuance. You can access the related HUD transmittal letters that further describe the issuance of Chapters 3 and 4 by clicking here or to learn more about HUD News visit the GAQC HUD Information Page.
The GAQC team has not yet been able to analyze the information in the newly released Guide chapters in detail. However, we will be reviewing the new HUD guidance and scheduling a GAQC member conference call to better inform you about the contents of the new chapters as soon as we can. Look for more information in a future GAQC communication. But for now, we wanted to make you aware of this important development. Read on for a brief synopsis of the new chapters.
The following are identified by HUD as representing significant changes in each chapter.
Chapter 3 – HUD Multifamily Housing Programs
· This new Chapter 3 is a revision of Chapter 4 in the previous 2001 version of the Guide on Multifamily Housing Programs. Multifamily Hospital Programs are now covered in the new Chapter 4 (see the following section for more on the new Chapter 4).
· “Group project-based sampling” is now permitted for certain areas of compliance when audits are performed for projects that are owned/managed by the same owner and/or management agent if certain conditions exist as described in paragraph 3-1.
· The listing of reference materials is updated to be current.
· Reporting requirements are updated to include current requirements as stated in existing HUD policies/procedures.
· Guidance on sample selection is added requiring attribute sampling and/or minimum sample sizes should another sampling system be used to provide sufficient evidential matter to support the audit opinion. See paragraph 3-4 and Appendix A.
· Paragraph 3-5(G) and Appendix B are added to establish a uniform understanding of equity skimming conditions to facilitate identification and reporting should the auditor find such conditions as a result of the audit.
· The following compliance areas are added to the Guide with specific audit steps:
o Paragraph 3-5(H) Cash Receipts
o Paragraph 3-5(I) Cash Disbursements
o Paragraph 3-5(K) Tenant Security Deposits
o Paragraph 3-6 Mark to Market Program (M2M Program)
· Audit finding reporting guidance is added to provide details on reporting audit findings that have been corrected or are being corrected before the completion of the audit.
· Auditors will be able to convey nonmaterial instances of noncompliance to management via a management letter or other type of auditor-written communication as long as the requirements of Chapter 2, paragraph F, of the Guide are followed. Chapter 2 requirements provide that the existence of a management letter or other type of auditor communication must be mentioned in the independent auditor’s report, the date of issuance is to be included, and those letters/communications must be provided to HUD with the audit report package.
· A point of contact is provided for programmatic questions or questions regarding the Financial Assessment Subsystem.
· Various audit steps are added to the compliance areas. Those changes and other changes made in this chapter are denoted between asterisks (for example. *All material instances of noncompliance *).
Chapter 4 – HUD Multifamily Hospital Program
· This Guide chapter is essentially the previous Chapter 4 from the 2001 version of the Guide. However, the title is revised to apply only to the Multifamily Hospital Program. Because Chapter 4 previously applied to more than just the Multifamily Hospital Program, portions will no longer be applicable. Auditors are expected to use professional judgment in applying this Guide to audits of the Multifamily Hospital Program.
· Audit finding reporting was added to provide guidance on uniform reporting of audit findings. Also, auditors will be able to convey nonmaterial instances of noncompliance to management via a management letter or other type of auditor-written communication as long as the requirements of Chapter 2, paragraph F, are followed.
· A point of contact is provided for programmatic questions or questions regarding the Financial Assessment Subsystem.
Remaining chapters to be updated by HUD include Chapters 1 and 2. HUD is currently working on both chapters. We will keep you apprised of any developments relating to these chapters as we become aware of them.