Small Multifamily Housing Developments No Longer Require Audits

HUD recently issued Notice 2013-23 that revised the financial reporting requirements for small multifamily housing developments. Now, owners of small multifamily developments don’t have to submit audited financial statements if they receive less than $500,000 in combined federal financial assistance. The two sources of funding HUD is referring to are housing assistance payments and Federal Housing Administration (FHA)-insured mortgages.

In recent years, HUD has made an effort to streamline administrative processes and reduce costs. To achieve that goal, HUD participates in the Rental Policy Working Group, along with a number of other federal agencies. The working group’s goal is to align the financial reporting requirements of HUD and the U.S. Department of Agriculture’s multifamily housing programs, and otherwise find ways to reduce overlap and duplication.

This change will do more than just save owners the time and the burden of being audited. It is expected to save small development owners between $2,000 and $10,000 per year in financial reporting costs. And that is expected to encourage owners to renew existing Section 8 housing assistance payment, or HAP, contracts.

The notice applies to owners having a fiscal year that ends Dec. 31, 2013, and thereafter. The change applies to 2,174 properties at present. Small development owners will continue to submit financial statements to HUD electronically using the Real Estate Assessment Center’s Financial Assessment Subsystem-Multifamily. However, these submissions won’t be required to contain an auditor’s opinion or report.