frequently asked questions
multifamily housing- submission requirements

1. Do all HUD-supported multifamily housing projects have to submit annual financial statement and compliance audit information to the HUD Real Estate Assessment Center's (REAC) Financial Assessment Subsystem for Multifamily Housing (FASS-MFH), to comply with the September 1, 1998 rule on Uniform Financial Reporting Standards for HUD Housing Programs?

Submissions are due from all projects with HUD-insured or HUD-held mortgages, or direct HUD loans or capital grants. Submissions are also due from owners of non-insured projects if there is a contractual requirement to submit financial statements. Contractual requirements are usually located in the Housing Assistance Payments contract or in a Use Agreement.

2. Do project owners still have to produce and maintain paper or hard copy audited financial statement reports, given HUD's new electronic submission requirements?

Yes. REAC is collecting supplemental financial and compliance data related to the audited financial statements, as well as certain audit information, but not the full audit report, or necessarily the actual audited financial statements themselves. Therefore, paper or hard copy financial statement audit reports should still be prepared and maintained as previously required by HUD Handbook requirements, except that the paper copy reports no longer have to be submitted to HUD, unless requested. The information on the FASS submission templates or screens can be printed or replicated for incorporation in the audit report, in lieu of the supplemental schedules previously produced in the hard copy audit report. Most project owners need an annual audit report for non-HUD purposes, such as obligations to limited partners, lenders or servicing mortgagees, and other fiduciary responsibilities. Beginning in the second cycle, project owners can give "read" access to their FASS-MFH data to other parties, through their Secure Connection systems coordinator.

3. Can project owners with more than one HUD project makes one submission of consolidated financial statement and audit information?

There are several instances in HUD's portfolio of multifamily projects where multiple projects were developed under a single owning entity (e.g. two or more projects sharing the same tax identification number). FASS is being modified to allow these owners to submit consolidated reports for both Profit Motivated projects and Non-profits. The consolidated report will consist of basic financial statements (balance sheet, statement of cash flows, etc.) covering the combined operations for all of the projects being submitted. The submissions will also require individual basic financial statements for each project submitted in the supporting data section of the report. There will also be a requirement to submit separate supporting data schedules (computation of surplus cash, schedule of reserve for replacements, etc.) for each individual project. The projects covered in the submission will share certain schedules and reports such as notes to financial statements, auditor's opinion, reports on compliance, etc. Owners having multiple projects that were developed under a single owning entity will have the choice of whether they want to do separate submissions for each project or a consolidated submission covering all of their projects.

Nonprofit owners will still have the ability to submit un-audited financial data within 90 days after the end of the fiscal year, and audited financial statement data within 9 months after the end of the fiscal year. The consolidated portion of the submission for non-profits can include operating information for non-HUD business that the entity may engage in. For example, if a nonprofit entity owns a thrift store, or a rehabilitation center, or other businesses, and also owns a HUD project under the same tax identification number as the parent corporation, then they can submit a consolidated audit that covers both HUD and non-HUD operations. The non-HUD operations would be included in the consolidated financial statements, and the HUD operations would be reported separately in the supporting data schedules.

The rules are slightly different in instances where a Public Housing Authority (PHA) is the owner of multifamily project(s). PHA's are required to submit consolidated financial statements to REAC via FASS-PHA. Since FASS-PHA submissions will include financial and audit information concerning HUD multifamily projects, HUD will not require PHA's to submit audited information on multifamily projects via Multifamily FASS. However, the PHA's must submit separate UN-audited information for each multifamily project via FASS-Multifamily. This only applies in instances where the PHA owns multifamily project(s) (the multifamily project(s) have the same tax identification number as the PHA).

4. Who is responsible for the electronic submission of required annual financial statement and audit information to REAC, and who is permitted to actually prepare and make the submission?

The project owner is responsible for assuring that the electronic submission is complete, accurate, and timely, in accordance with their regulatory and contractual obligations to HUD. Project owners agree to a "Program Participant's Use Agreement Regarding Electronic Data Submissions for HUD Programs" when they accept and place into use a systems identification (ID) number for HUD's Secure Connection System, enabling them to access and submit to FASS and other HUD systems. Project owners can be their own HUD Secure Connection Coordinator or rely on their own staff, management agent, project auditor or other service provider to perform the coordinator function to control access to HUD systems on the owner's behalf. Likewise, the project owner can be a FASS User for the electronic preparation and/or submission of project data, or authorize other FASS Users, such as their own staff, a management agent, or project auditor, to play a role in the preparation, proofing or submission of data to REAC through FASS. FASS is very flexible in that the project owner or their Secure Connection Coordinator can work in conjunction with any combination of FASS Users they authorize, to prepare and approve draft submission data before it is actually submitted to HUD in final form.

5. How will REAC assure that the data submitted by the owner is the same as the information contained in the hard copy audit report?

While the project owner is responsible for assuring that the electronic submission is complete, accurate and timely, REAC requires the CPA to attest to the audited financial data prior to submission to the REAC.

6. When are project owners expected to begin submitting their required annual financial statement and audit information electronically to REAC?

All required annual financial statement and audits information applicable to multifamily project fiscal years ending December 31, 1998, and thereafter, must be submitted to REAC electronically, through the FASS-MFH. Financial statement and audit information required of profit motivated and limited distribution projects are due within 90 days after the end of the project fiscal year. The Single Audit Act gave nonprofit projects the option to submit required audited financial statement information up to nine months after the end of the fiscal year. Non-profits are subject to HUD Notice 98-25 which requires non-profits with federal awards greater than $300K to submit owner-certified within the specified time of 90 days after the fiscal year end unless they have the audit ready for submission. Project under $300K in federal awards only have to file the owner-certified less than $300K. (Please note the $300K threshold has been changed effective December 31, 2003 to $500K).

 

No. In a Mark-to-Market project, surplus cash is divided between owner distributions and required debt service on the second mortgage. In most deals the owner is allowed to distribute 25 percent of surplus cash, and the remaining 75 percent must be used to make payments on the second mortgage. If the interest payable for the second mortgage were included in the computation of surplus cash, then surplus cash would be reduced. This would cause a corresponding reduction in the owner’s distribution and the required payments on the second mortgage. Since HUD’s goal is to maximize the repayment of the second mortgage and the return to the owner, interest liabilities for the second mortgage should be excluded from the surplus cash computation.

HUD requires that each financial submission include a full set of notes to financial statements prepared in accordance with Generally Accepted Accounting Principals (GAAP). More...