Are You Filing Your HUD Financial Statements Correctly?

10 Sep 2024 Are You Filing Your HUD Financial Statements Correctly?

Authored by H. Brent Stratton, CPA

If you’re a landlord or property manager participating in HUD housing programs, it’s important to ensure your financial statements are filed correctly to maintain compliance and avoid penalties. Recent updates indicate that the Real Estate Assessment Center (REAC) is stepping up enforcement of the requirement to file GAAP-based financial statements for HUD Housing Programs. This aligns with the “Uniform Financial Reporting Standards for HUD Housing Programs” final rule, effective for all financial statements reviewed after October 31, 2004.

Here’s what you need to know to stay compliant:

1. Preparation in accordance with GAAP:

All financial statements must be prepared according to Generally Accepted Accounting Principles (GAAP). Think of GAAP as the “recipe book” for financial reporting—it ensures everyone reports their financials in a consistent and comparable way, which is critical for maintaining transparency and accountability in HUD housing programs.

2. Electronic Submission:

HUD requires all financial statements to be submitted electronically through their REAC reporting system. This digital approach streamlines the review process and ensures efficient handling of submissions. Make sure you’re familiar with the REAC system to avoid any technical issues that could delay your filing.

3. Complete and Accurate Documentation:

Your financial statements must be thorough and free from material errors, omissions, or misstatements. HUD will scrutinize submissions for completeness and accuracy, and any missing information or mistakes will require correction. Be especially careful with calculations involving transfers, payments to owners, and surplus cash distributions.

4. Review and Resubmission Process:

Once submitted, your financial statements will be reviewed by HUD’s REAC. If any issues are identified—such as incomplete notes, material errors, or misstatements—the submission will be archived, and you will need to correct and resubmit the financial statements within 41 days. Failing to meet this deadline can lead to serious consequences.

5. Penalties for Non-Compliance:

If corrected financial statements are not resubmitted within the required 41-day period, the matter will be referred to the Departmental Enforcement Center (DEC). This could result in civil money penalties imposed on the owner and increased scrutiny from HUD, impacting your ability to participate in HUD programs.

Avoid Penalties and Ensure Compliance

Adhering to these requirements is crucial to ensure accurate and compliant financial reporting. It’s essential to double-check your work and ensure that all documentation is complete and error-free. Non-compliance not only leads to penalties but can also jeopardize your standing with HUD, leading to increased oversight and potential disqualification from future HUD programs.

Need Help with HUD Financial Reporting?

Navigating the complexities of HUD financial reporting and the REAC system can be challenging, especially if you’re transitioning from cash-based or tax-based accounting to GAAP. At Haynie & Company, we specialize in helping property managers and landlords make this transition smoothly and ensure all reporting is done correctly. Contact us today for assistance, to submit an RFP, or to schedule a free consultation. We’re here to help you stay compliant and steer clear of potential challenges

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