Most Common File and Unit Deficiencies found at Senior LIHTC Properties

1. Most Common File and Unit Deficiencies found at Senior LIHTC Properties

2. Contact Information Rose Guerrero, Chief Compliance Section – The California Tax Credit Allocation Committee (CTCAC) 915 Capitol Mall, Rm 485 Sacramento, CA 95814 rguerrero@treasurer.ca.gov

3. Handouts For a copy of this power point presentation, please visit: www.lomod.org

4. Common File and Unit Deficiencies and How to Correct Them • Finding: Initial Tenant Application – missing 2 year housing history • Correction: Ensure your company’s application form contains a section that asks for a complete 2 year consecutive housing history • Make sure there is a section that asks “Rent or Own”?

5. Common File Deficiencies cont. • Finding: File -Missing 3rd party verification of assets over $5,000 • Correction: Obtain verification form, have tenant sign and date it for release of information and sent to source of asset income and recalculate the initial move-in income for applicant

6. Common File Deficiencies cont. • Finding: File – Missing 3rd party verification of disposition of home when it’s been foreclosed or sold • Correction: Need to obtain 3rd party verification of the current value of the home if sold on market today and if value is over $5,000 dollars, you must also impute the value of the home by the HUD passbook rate of 2% and use the higher of the amount from those 2 calculations on the TIC under Part IV - Assets

7. Common File Deficiencies cont. • Finding: File– MissingForeclosure documentation • Correction: A copy of the final foreclosure notification showing that the tenant is no longer on the title for the property or alternatively • A copy of the Grant Deed to show the tenant is no longer the owner of record for the property

8. Common File Deficiencies cont. • Finding: File – Missing self-employment verification. In particular, previous year’s tax return with Schedule C completed • Correction: Always request copies of previous year 1040 tax filing if applicant claims to be self-employed, filing must include Schedule C. If applicant claims they do not file a tax return, you must obtain verification of non-filing status by having applicant complete IRS Form 4506-T. Veri-tax.com – company that obtains 4506-T’s

9. Common Unit Inspection Deficiencies • Finding: Unit has – Inoperable smoke detectors • Correction: have maintenance check all units prior to a State Agency visit and check/fix/correct all smoke detectors in all units that need them

10. Unit Deficiencies cont. • Finding: Unit has – Flammable items stored in oven • Correction: make this a violation in your house rules and during your own management inspections check ovens and educate tenants on fire danger of storing flammable items in oven

11. Unit Deficiencies cont. • Finding: Unit has – Ingress/Egress issues • Correction: during tenant’s initial walk through of unit before they take possession, management should point out areas of unit that should not be blocked: entry way into unit, hallways, bedroom windows, patios. During management’s inspections of project, egress/ingress issues should be noted when found

12. Unit Deficiencies cont. • Finding: Building – Hallway Emergency Lighting inoperative • Correction: Avoid deficiency by having regularly scheduled inspections by vendor to ensure hallway emergency lighting is operational at all times and will work in case of an actual fire. Highly recommend your maintenance personnel to test on a regular schedule

13. Correction Period • Per IRS regulations the State Monitoring Agency must allow the owner an official “correction period” which is typically 30 days from the date of our findings report. • Extensions of time to the correction period may be approved if needed • CTCAC will work with an owner/management agent to help bring project back in full compliance

14. Agency Resource Material • Please visit our webpage at: www.treasurer.ca.gov/ctcac/compliance.asp • You will find: Compliance Manual for the LIHTC program, all State Agency Required Compliance Forms, copies of Policy Memos, copy of the IRS 8823 Guide and contact information for all Compliance Staff • Stay Informed and Up to Date: Plan to attend CTCAC’s annual Compliance Workshops held in February and March of each year

15. PARTING WORDS RELAX: We are not curing cancer -Most all issues of noncompliance found during a State Agency audit have a way of being corrected 

16. Common Compliance Discrepancies

17. Helpful Resources • HUD Handbook 4350.3 REV-1, CHG-3 • HUD Notice H 2011-21 (issued 8/17/11) • EIV HUD Webcasts http://www.hud.gov (multimedia) • RHIIP List Serv http://www.hud.gov/subscribe/mailinglist.cfm • HUDBlast www.rbdnow.com • HUD Clips www.hudclips.org

18. Common Lease Discrepancies • Finding: Initial lease term less than 1 year • Effect: O/As may not be able to enforce leases. • For Section 202/8 programs HUD requires initial lease terms of at least one year and automatically renews for successive one-month terms

19. Common Live-in Aide Discrepancies • Finding: Tenant file does not contain a fully executed (signed/dated) live-in aide addendum • Effect: O/A may not be able to enforce the Live-in Aide rules without signature and date of tenant • Corrective Action: Obtain and incorporate a signed/dated copy of the Addendum in the tenant file

20. Common Tenant Fee Discrepancies • Finding: Section 202/8 projects charging tenants a late payment of rent fee • Corrective Action: Revise all documents omitting late fees

21. Common EIV Discrepancies • Finding: O/A is not using EIV Income Report and/or Income Discrepancy Report to verify employment and income data within 90 days after move-in 59 submission to TRACS • Effect: Employment and income information reported to TRACS may be inaccurate • Correction: Print a copy of the report and verify the information reported to ensure accuracy

22. Common EIV Discrepancies cont. • Finding: Files missing evidence that O/A is resolving EIV Identity Verification Reports • Effects: Results in income reports not being able to be accessed at recertification or at other times as required • Corrective Action: Revise discrepancies listed on EIV reports and make corrections to the certifications and submit to TRACS. If discrepancy noted on EIV report is not valid, proper documentation is required in the tenant file to support why correction to HUD-59 was not needed

23. Common EIV Discrepancies cont. • Finding: Including Medicare buy-in on HUD-50059 in error (paid by third-party) • Corrective Action: Reimburse any HAP collected in error by processing a corrected certification. However, tenant may not be charged retroactively for any calculation error made by Owner/Agent

24. Common EIV Discrepancies cont. When Medicare Buy-In indicates “Yes” – DO NOTinclude as Medical Expense on HUD-50059

25. Common Medical Expense Discrepancies • Finding: Tenant files missing third-party verification of medical expenses • Corrective Action: • Obtain missing verifications for current certifications. If inconsistent information is noted when third-party is received, recalculate rent retroactively • Reimburse any HAP collected in error by processing a corrected certification. Note: Tenant may not be charged retroactively for any calculation error made by Owner/Agent

26. Common Medical Expense Discrepancies cont. • Finding: O/A using past, one-time nonrecurring medical expenses paid in full at move-in • Corrective Action: • Recalculate rent not using the medical expense and process an electronically corrected HUD-50059 and submit to TRACS • Reimburse any HAP collected in error by processing a corrected certification. Note: Tenant may not be charged retroactively for any calculation error made by Owner/Agent

27. Common Medical Expense Discrepancies cont. • Finding: O/A counting non-prescribed medicines and nutritional supplements as medical expense deductions although not recommended in writing by a medical practitioner • Corrective Action: • Recalculate rent not using the unacceptable medical expenses, process an electronically corrected HUD-50059 and submit to TRACS • Reimburse any HAP collected in error by processing a corrected certification. Note: Tenant may not be charged retroactively for any calculation error made by Owner/Agent ***When in doubt refer to Exhibit 5-3 of the HUD Handbook***

28. Common Third-Party Verification Discrepancies • Finding: Files missing documentation that third-party verifications were attempted • Corrective Action: • Obtain missing verifications for current certifications. If inconsistent information is noted when third-party is received, recalculate rent retroactively • Reimburse any HAP collected in error by processing a corrected certification. Note: Tenant may not be charged retroactively for any calculation error made by Owner/Agent REMINDER: EIV income report is not to be used to verify disability

29. File Missing Original Documents • Finding: File missing original documents which cannot be replicated (i.e. original leases, MI 59s, etc) • Corrective Action: A clarification record must be added to the tenant file explaining why original documents that cannot be replicated are missing from the tenant file.

30. Questions?

31. LA LOMOD Corporation Contacts DirectorAsst. Director Nancy Wesoff Erin Ferguson nancy.wesoff@hacla.org erin.ferguson@hacla.org Asst. Compliance ManagerAsst. Compliance Manager Greg Romero Earl Hearvey gregory.romero@hacla.orgearl.hearvey@hacla.org

32. HUD-Los Angeles Contacts Director of Asset Management Christina Wong christina.wong@hud.gov