The Low-Income Housing Tax Credit (LIHTC) program plays a vital role in promoting affordable housing. While participating owners receive tax credits, they are subject to audits to ensure compliance with program regulations. Navigating a LIHTC audit can be a complex and stressful process, but with proactive steps and careful preparation, owners can minimize the likelihood of audit findings.
Quadel’s LIHTC expert, Helena Widtfeldt, works with clients to prepare for LIHTC audits. She discusses common findings and proactive measures owners can take to achieve a successful audit.
Understand what LIHTC Auditors Look For
Auditors examine various aspects of a property owner’s records, including tenant income certifications, rent calculations and other financial documents. Widtfeldt noted that while auditors are reviewing a range of items, they are often most concerned with ensuring units are occupied by LIHTC-eligible households. This includes income verifications and student statuses. Typical findings in LIHTC audits include discrepancies in tenant files, missing or incomplete documentation and errors in income calculations.
“We always recommend properties utilize the same file protocol for each file so that an auditor can easily know where to expect to find a particular document and they are not spending time searching the file for items,” Widtfeldt said. “Your files should tell a story. When completing certifications, ensure all components are present and the completed household file clearly tells the story of household composition, income and assets, and student status.”
Conduct Regular Internal Audits
Widtfeldt recommends owners conduct periodic audits to identify and rectify potential issues before an official audit occurs. Internal audits can help property owners identify and address compliance gaps proactively.
“Reviewing even just 10 percent of a property’s files on a regular basis will provide a good understanding of the health of the files,” Widtfeldt said. “Are they all completed on time? Are they in compliance? Are there consistent errors that indicate staff need re-training? The quicker potential issues can be identified, the quicker they can be corrected.”
Utilize a Third-Party Vendor like Quadel
Quadel can provide valuable insights and ensure property adheres to all regulations to minimize the risk of findings during official audits. Widtfeldt and her team of compliance specialists offer review services to dozens of syndicators and property management companies.
“Having a review and feedback from an outside party is the best comparison to having an auditor review your files. Our new move-in reviews give a thorough review of the entire file before the TIC and lease are signed, ensuring units are leased to only LIHTC-eligible households,” Widtfeldt said. “We also review recertifications on a rolling basis or in bulk for sample audits. Our reports provide specific details on any errors and guidance on how to correct errors.”
Successfully navigating a LIHTC audit requires meticulous preparation, attention to detail and a proactive approach. For more information on how Quadel might be able to ensure your LIHTC compliance, visit here.
To request a custom quote for LIHTC technical assistance or training, contact us.