| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #8652 | Closed | public | Multifamily | Les Sparks |
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I have a client with a 6/30 year end that had a physical inspection on 7/3. This particular client never has findings, receives outstanding HUD file reviews, and has had above average physical inspections in the past. 3 years ago they received a 91b. In July they received a 55c. The issue wasn’t with what they found, it is the points deducted for the findings. 3 items resulted in 25 point deductions. Examples include a missing door plate and a missing drain cover in a room that nobody has access to and has never had a drain cover. Her HUD PM tells her that she believes the property is in great shape but her hands are tied. My client filed an appeal which got denied. What are the ramifications for a score below 60? Are you seeing this with other properties? What are the audit ramifications? Any advice you could give to myself or my client would be greatly appreciated! |
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In 2015 there was a new notice regarding Physical Inspections with failing scores. Les Sparks provided the following additional information on what this means for your client, and for the audit report: Failure to meet these guidelines will result in a noncompliance flag in APPs. The rules apply to all insured and noninsured projects with project-based assistance under Section 8 or a “contract for similar project-based assistance.” There is no mention of applicability to projects with only a HUD-insured mortgage. What this means to You: HUD has issued no specific guidance in the HUD Audit Guide related to these recent changes. Chapter 3 of the Guide mentions physical inspections twice. Once in Item F – Distributions, and Item M – Management functions. Neither of the procedures mentions a specific inspection score. All that is required is to determine that owners have complied with or responded to all outstanding notices from HUD regarding maintenance of the project. However, auditors are required to list any such findings as a result of the inspection under item #3 in the Schedule of Prior Audit Findings. In our opinion, if the required corrections have not been completed by the date required under the Notice, then the auditor would have to consider whether to generate a finding to be included in the Schedule of Findings and Questioned Costs. New Housing Notice on Physical Inspections with Failing Scores |