7170 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 5 

[Docket No. FR–5054–P–01] 

RIN 2501–AD20 

Independent Public Accountant Roster 

AGENCY: Office of the Secretary, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

establish a roster of approved 

independent public accountants and 

public accounting firms (IPAs) that 

would be permitted to perform audits or 

related services required by participants 

in certain HUD programs and submitted 

to HUD. The proposed rule would also 

establish eligibility, application, and 

removal procedures for IPAs listed on 

the IPA Roster. HUD believes this 

proposed rule would implement an 

additional protection to ensure the 

accuracy of financial data submitted to 

HUD by its program participants. 

DATES: Comment Due Date: April 7, 

2008. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposed rule. There are two 

methods for comments to be submitted 

as public comments and to be included 

in the public comment docket for this 

rule. Additionally, all submissions must 

refer to the above docket number and 

title. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 10276, 

Washington, DC 20410–0001. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make them immediately available to the 

public. Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. 

Public Inspection of Public 

Comments. All properly submitted 

comments and communications 

submitted to HUD will be available, 

without charge, for public inspection 

and copying between 8 a.m. and 5 p.m. 

weekdays at the above address. Due to 

security measures at the HUD 

Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at (202) 708– 

3055 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

via TTY by calling the Federal 

Information Relay Service at (800) 877– 

8339. Copies of all comments submitted 

are available for inspection and 

downloading at www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: The 

Office of Public and Indian Housing, 

Real Estate Assessment Center (REAC), 

Attention: Elizabeth Hanson, Deputy 

Assistant Secretary, Department of 

Housing and Urban Development, Office 

of Public and Indian Housing Real 

Estate Assessment Center, 550 12th 

Street, SW., Suite 100, Washington, DC 

20410; telephone number (888) 245– 

4860 (this is a toll-free number). Persons 

with hearing or speech impairments 

may access this number through TTY by 

calling the toll-free Federal Information 

Relay Service at (800) 877–8339. 

Additional information is available from 

the PIH–REAC Internet site at http:// 

www.hud.gov/reac/. 

SUPPLEMENTARY INFORMATION: 

I. Background 

HUD’s regulations at 24 CFR part 5, 

subpart H (currently consisting of a 

single section, 24 CFR 5.801) establish 

uniform financial reporting standards 

for the Department’s public housing, 

Section 8 housing, and insured housing 

programs. The uniform financial 

reporting standards apply to those 

entities or individuals identified in 24 

CFR 5.801. They are: (1) Public housing 

agencies (PHAs); (2) owners of housing 

assisted under any Section 8 projectbased housing assistance payments 

program; (3) owners of multifamily 

projects receiving HUD assistance or 

with mortgages insured, coinsured, or 

held by HUD; and (4) HUD-approved 

Title I and Title II nonsupervised 

lenders, nonsupervised mortgagees, and 

nonsupervised loan correspondents 

(collectively referred to as ‘‘covered 

entities’’). The uniform financial 

reporting standards require these 

entities or individuals to submit annual 

financial information electronically and 

in accordance with Generally Accepted 

Accounting Principles (GAAP). HUD 

relies on this audited financial 

information to ensure the integrity of 

financial data submitted to HUD. 

II. This Proposed Rule 

For the financial information required 

of HUD program participants, as 

described in 24 CFR 5.801, HUD is 

proposing to establish an independent 

public accountant (IPA) roster (IPA 

Roster or Roster) and to provide 

eligibility, application, and removal 

procedures for the IPA Roster. The 

quality and accuracy of financial data 

submitted to HUD begins with selecting 

qualified IPAs who agree to comply 

with HUD’s requirements with respect 

to the provision of audits or related 

services. The IPA Roster would list IPAs 

that have been approved to perform 

audits or related services for covered 

entities. IPAs include individuals 

employed by public accounting firms 

(including a solo practice) or a State 

Auditor’s Office who are licensed by a 

regulatory authority of a State or other 

political subdivision of the United 

States both before and after December 

31, 1970. IPAs also include certified 

public accountants. As proposed, 

covered entities or individuals would be 

required to select an IPA that is listed 

on the IPA Roster for their particular 

jurisdiction to perform the audits or 

related services required by HUD. Any 

IPA seeking to perform audits or related 

services for the entities or individuals 

noted above would be required to be a 

listed IPA sole practitioner, be a 

member or partner of a listed IPA, or be 

a full-time employee of a listed IPA. 

It is important to note, however, that 

while HUD is committed to improving 

the quality and accuracy of the financial 

information submitted to it, the 

inclusion of an IPA on the IPA Roster 

would not create or imply any warranty 

or endorsement by HUD of a listed IPA 

to the entities listed in 24 CFR 5.801, or 

to any other organization or individual 

user of the resulting audited financial 

statements. Nor would such inclusion 

represent a warranty of the specific 

audits or related services performed by 

a listed IPA. Such inclusion would 

mean only that the IPA has met the 

qualifications and conditions prescribed 

by the Secretary for placement on the 

IPA Roster. 

A. IPA Roster Placement Procedure 

This proposed rule would establish 

the requirements for listing on the IPA 

Roster. In order to be placed on the IPA 

Roster, each IPA would be required to 

submit an application to HUD 

identifying the specific state(s), 

territory(ies), Commonwealth(s), or 

District of the United States in which 


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the IPA wishes to be considered for 

listing. HUD would review each IPA’s 

application to ensure that each 

requirement for eligibility is met for 

each of the specific jurisdictions in 

which the IPA has requested to be 

considered for listing. If HUD’s review 

of an IPA’s application demonstrates 

that the IPA is eligible in a particular 

jurisdiction, the IPA’s name would be 

placed on the IPA Roster for that 

jurisdiction. If HUD denies the IPA’s 

application, the IPA can request 

reconsideration, and the IPA would 

have 30 days in which to demonstrate 

that it was in fact eligible as of the date 

of its initial application. Should the IPA 

not be able to demonstrate eligibility as 

of the date of the IPA’s application, the 

IPA would not be listed, but could 

reapply at any time in the future. 

To be eligible for listing on the IPA 

Roster, an IPA would be required to: 

1. Be licensed or authorized to 

practice in each of the specific 

jurisdictions for which the IPA is to be 

listed; 

2. Not be, nor employ or contract with 

anyone for the performance of audits or 

related services who is, suspended, 

debarred, voluntarily excluded, subject 

to a limited denial of participation, or 

subject to any order of disbarment or 

other denial of right to practice before 

the Securities and Exchange 

Commission, or subject to a 

jurisdiction’s disciplinary action that 

has resulted in the revocation, 

suspension, or surrender of a license or 

authorization to practice public 

accounting; 

3. Agree to accept only those 

engagements for audits or related 

services where it meets the minimum 

qualifications specified by the Generally 

Accepted Government Auditing 

Standards (GAGAS); 

4. Agree to accept engagements for 

only those entities listed in 24 CFR 

5.801 that are located in jurisdictions in 

which the IPA is listed; 

5. Agree to establish and implement 

quality control procedures sufficient to 

satisfy the quality control standards of 

GAGAS; 

6. Agree to comply with the 

professional standards applicable to any 

audit or related service performed; 

7. Agree to comply with any 

accountancy laws and rules of each 

jurisdiction for which the IPA is to be 

listed; 

8. Agree to comply with all applicable 

HUD rules and instructions relating to 

financial reporting, audits, and related 

services performed for the entities listed 

in 24 CFR 5.801; 

9. Agree to submit to and cooperate 

with reviews by HUD of the IPA’s 

performance of audits or related services 

for those entities listed in 24 CFR 5.801; 

10. Agree to notify HUD if the IPA or 

any member or employee of the firm is, 

or has been, within the previous 5 years, 

indicted or otherwise charged with or 

convicted of any offense listed in 24 

CFR 24.800(a); 

11. Agree to notify HUD if the IPA or 

any member or employee of the firm is, 

or has been, within the previous 5 years, 

adjudged to be civilly liable for any of 

the offenses listed in 24 CFR 24.800(a); 

and 

12. Agree to comply with any requests 

for information made by HUD. The IPA 

would be required to comply with all 

agreements required to be listed on the 

IPA Roster immediately upon approval 

for such listing. 

B. Responsibilities of Listed IPAs 

An IPA who is eligible to perform 

audits or related services, and who is 

engaged by a covered entity or entities, 

has a contractual responsibility to those 

entities. Furthermore, the IPA also has 

a responsibility to HUD, whenever a 

covered entity or entities for which the 

IPA provides audits or related services 

are required to submit those audits to 

HUD. Therefore, IPAs listed on the IPA 

roster will be responsible for: (1) 

Complying with any agreements with 

HUD immediately upon their approval 

for listing on the IPA Roster and 

continually thereafter, including, but 

not limited to, agreements required for 

listing on the IPA Roster; (2) 

maintaining compliance with any other 

eligibility requirements for listing on the 

IPA Roster for each jurisdiction in 

which they are listed; and (3) notifying 

HUD within 30 days of any change in 

their continued compliance with 

eligibility requirements. 

C. IPA Roster Removal Procedure 

In order to safeguard the continued 

quality and accuracy of the audits and 

related services performed by listed 

IPAs and, ultimately, the integrity of the 

financial data submitted to HUD, this 

proposed rule would establish a 

removal process by which the listed 

IPAs may be removed from the IPA 

Roster. Removal of an IPA from the IPA 

Roster would not preclude HUD or the 

federal government from also bringing a 

false claims action, taking action against 

an IPA under 24 CFR part 24 

(‘‘Government Debarment and 

Suspension and Governmentwide 

Requirements for Drug-Free Workplace 

(Grants)’’), or from seeking any other 

remedy against an IPA available to HUD 

or the federal government by statute or 

otherwise. 

This proposed rule would allow HUD 

to remove an IPA from the IPA Roster 

who fails to fulfill its responsibilities as 

a listed IPA, for cause at any time. Cause 

for removal would include, but would 

not be limited to: (1) Failing to comply 

with any agreements with HUD, 

including, but not limited to, 

agreements identified at proposed new 

24 CFR 5.810(a) as requirements for 

eligibility; (2) failing to maintain 

compliance with any other eligibility 

requirements for listing on the IPA 

Roster for each jurisdiction in which the 

IPA is listed; (3) failing to notify HUD 

within 30 days of any change in their 

continued compliance with eligibility 

requirements; or (4) making, or causing 

to be made, any false certification to 

HUD. 

In certain circumstances described 

below, the proposed rule would require 

the automatic removal of an IPA from 

the IPA Roster, while in other 

circumstances the proposed rule would 

provide the IPA with an opportunity to 

respond and attend a conference before 

the IPA’s removal from the IPA Roster. 

The proposed rule would require the 

automatic removal of an IPA from the 

IPA Roster: (1) When the IPA fails to 

maintain compliance with eligibility 

requirements by being debarred, 

suspended, voluntarily excluded, 

subject to a limited denial of 

participation, or subject to any order of 

disbarment or other denial of right to 

practice before the Securities and 

Exchange Commission; or (2) when the 

IPA fails to maintain compliance with 

eligibility requirements by losing, 

whether by revocation, suspension, 

surrender, or other means, its license or 

authorization to practice in any 

particular jurisdiction. However, if the 

IPA’s license or authorization to 

practice lapsed or expired for reasons 

other than disciplinary actions, the IPA 

would be removed from the IPA Roster 

only for that specific jurisdiction. Under 

any of these automatic removal 

circumstances, the procedures for 

contestable removal set forth in 24 CFR 

5.814(d) would not be applicable. 

Except in the above cases of automatic 

removals, the removal procedures 

proposed by this rule would require 

HUD to give an IPA written notice of the 

proposed removal from the IPA Roster. 

Such notice would include the reasons 

for the proposed removal. The IPA 

would then be given 30 calendar days 

from the date of the removal notice to 

submit a written response opposing the 

removal. During this period, the IPA 

would also have the ability to submit a 

written request for a conference to 

discuss the proposed removal. If the IPA 

does not submit a response opposing the 


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proposed removal within 30 calendar 

days, the removal would become 

effective 30 calendar days after the date 

of HUD’s initial removal notice. 

If the IPA opposes the proposed 

removal, the Deputy Assistant Secretary 

of the Real Estate Assessment Center 

(REAC), or a designee (‘‘Reviewing 

Official’’), would: (1) Review the 

proposed removal notice along with any 

supporting information and the 

response to the notice; and (2) conduct 

the conference with the IPA, if 

requested, before making a 

determination as to whether the IPA 

should be removed from the IPA Roster. 

When a request for a conference is 

received, the Reviewing Official would 

schedule the conference within 30 

calendar days of the date the request is 

received. The Reviewing Official would 

be required to issue a determination 

within 30 calendar days of receiving the 

IPA’s written response, or, if a 

conference is requested, within 30 

calendar days of the closing of the 

conference. The Reviewing Official may 

affirm or deny the IPA’s proposed 

removal from the IPA Roster, or the 

Reviewing Official may find cause for 

removal but order the removal held in 

abeyance. In no instance would the 

Reviewing Official be the individual 

who made the initial determination to 

propose the IPA’s removal from the IPA 

Roster. 

The removal of the IPA would become 

effective on the date of HUD’s notice 

affirming its initial removal decision. 

When the IPA’s removal is held in 

abeyance, the effective date of the IPA’s 

removal would be set for a date 

specified in the future to allow the IPA 

to demonstrate that all causes for 

removal have been eliminated. If the 

IPA successfully demonstrates that all 

causes for removal have been 

eliminated, the order of termination 

would be withdrawn; however, if the 

IPA fails to demonstrate that all causes 

for removal have been eliminated, the 

IPA would be removed from the IPA 

Roster as of the effective date listed in 

the order of abeyance. 

Where HUD is considering the 

removal of an IPA who has, during the 

previous 3 years, performed audits or 

related services for covered entities 

covered by this rule, HUD will endeavor 

to ascertain whether those covered 

entities receive funds from other federal 

agencies. Where HUD determines that 

the IPA has performed audits or related 

services for covered entities receiving 

federal funds from other agencies, HUD 

will notify the agencies providing such 

funding prior to taking any removal 

action. 

D. Effect of Removal From IPA Roster 

An IPA who has been removed from 

the IPA Roster would not be permitted 

to enter into any contract or engagement 

for audits or related services with 

covered entities. While the IPA would 

be permitted to continue performance 

under any contract or engagement in 

effect at the time of the removal, the IPA 

would not be permitted to extend or 

renew any contract or engagement, with 

the exception of no-cost time 

extensions, unless the Reviewing 

Official were to grant an exception. The 

granting of any such exception would be 

within the sole discretion of the 

Reviewing Official and would be 

granted only when determined to be in 

the interest of HUD. Additionally, 

nothing in this rule would affect an 

entity’s discretion to terminate an 

existing contract or engagement as a 

result of the IPA’s removal, or due to the 

circumstances precipitating such 

removal. 

III. Implementation of This Rule and 

Cost Benefits of the Rule 

To ensure that IPAs affected by this 

rule have adequate time to register with 

HUD, HUD plans to delay, at the final 

rule stage, the implementation date of 

this rule for a period of 12 months 

following publication of the final rule. 

During this phase-in period, HUD plans 

to undertake outreach to covered 

entities and IPAs that have registered for 

a unique IPA identifier (UII) under the 

existing Uniform Financial Reporting 

Standards (UFRS) regulation of the 

transition to the new requirements that 

provide for listing on the IPA Roster. 

HUD intends to undertake such 

outreach utilizing email notifications, 

website postings, mailings, system 

messages, presentations at industry 

conferences and seminars, press 

releases, and, to the extent necessary, 

targeted phone calls, to ensure that all 

IPAs registered under existing 

regulations, and other interested IPAs, 

are aware of this new rule. HUD intends 

to begin its outreach efforts by ensuring 

that IPAs and covered entities are 

notified of this proposed rule, when 

published. HUD plans to increase these 

efforts following the publication of the 

final rule, continuing through the oneyear phase-in period following 

publication of the final rule. Thirty days 

prior to the expiration of the phase-in 

period, HUD plans to contact all IPAs 

registered with HUD under the current 

UFRS regulation and all covered entities 

notifying them of the expiration of the 

phase-in period and reminding them of 

the approaching implementation date of 

the IPA Roster regulation. HUD has set 

a goal of receiving applications from 90 

percent of currently registered IPAs 

during the phase-in period. 

Upon the implementation date of the 

final IPA Roster rule, the UIIs of IPAs 

registered under the existing UFRS 

regulation that have failed to seek and 

obtain approval for listing on the IPA 

Roster will be deactivated. Any IPA 

whose UII has been deactivated remains 

able to apply for placement on the IPA 

Roster, in accordance with the 

procedures of any final IPA Roster rule. 

HUD recognizes the costs, in terms of 

time and resources, that will be 

committed to the implementation of an 

IPA Roster rule. However, the 

Department believes that the benefits to 

both the Department and the entities 

covered by this rule far outweigh any 

costs associated with an IPA Roster rule. 

Specifically, if adopted, the IPA Roster 

rule would provide the Department a 

significant measure of confidence that 

the audits being submitted to it have 

been performed by licensed IPAs in 

accordance with professional standards. 

Audits are a critical management tool 

for both the federal government and the 

recipients of federal funding, and it is 

essential to the effective oversight and 

monitoring of billions of federal dollars 

that these audits be performed properly. 

At this time, the Department does not 

have the ability to verify that IPAs are 

licensed or competent before an IPA is 

engaged to perform a covered service. 

Once implemented, the IPA Roster rule 

would provide the Department with a 

tool to ensure that those auditors being 

engaged to perform work for covered 

entities are, at a minimum, licensed in 

the jurisdictions in which they are 

performing those covered services and 

are willing to perform the covered 

services in accordance with professional 

standards. 

Additionally, the remedies currently 

available to the Department to address 

unlicensed or unprofessional auditors 

are the costly and very time-consuming 

actions for debarment or suspension. In 

the Department’s experience, such 

actions are generally complex and 

technical, and require an excessive 

amount of time and resources to 

prosecute. Once implemented, the IPA 

Roster rule would result in significant 

savings of departmental enforcement 

resources by enabling the Department to 

take action in a timely and efficient 

manner if it identifies an IPA that is not 

performing in accordance with 

established auditing standards or the 

provisions of the IPA Roster rule. Thus, 

the Department believes that the 

improved oversight of federal funds and 

program performance resulting from this 

rule, along with the time and monetary 


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savings associated with enforcement 

actions against IPAs, justify the 

establishment of this roster. 

HUD recognizes that this proposed 

rule, which would establish a roster of 

approved independent public 

accountants and public accounting 

firms, is an innovative method to 

attempt to improve the quality of the 

audits submitted to HUD and improve 

HUD’s oversight of federal funds and 

program performance. Establishing such 

a roster would also be unique to the 

federal government. For these reasons, 

HUD encourages the public to submit 

comments on the potential effectiveness 

of the rule and on the general concept 

of establishing a roster of approved 

independent public accountants and 

public accounting firms as a means to 

improve the quality of the audit of 

federal funds and program performance. 

IV. Small Business Concerns Related to 

Independent Public Accountant Roster 

In creating and maintaining the IPA 

Roster, or in taking action to remove a 

listed IPA, HUD is cognizant that 

section 222 of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (Pub. L. 104–121) (SBREFA) 

requires the Small Business and 

Agriculture Regulatory Enforcement 

Ombudsman to ‘‘work with each agency 

with regulatory authority over small 

businesses to ensure that small business 

concerns that receive or are subject to an 

audit, on-site inspection, compliance 

assistance effort or other enforcementrelated communication or contact by 

agency personnel are provided with a 

means to comment on the enforcement 

activity conducted by this personnel.’’

To implement this statutory provision, 

the Small Business Administration has 

requested that agencies include the 

following language on agency 

publications and notices that are 

provided to small business concerns at 

the time the enforcement action is 

undertaken. The language is as follows: 

Your Comments Are Important 

The Small Business and Agriculture 

Regulatory Enforcement Ombudsman and 10 

Regional Fairness Boards were established to 

receive comments from small businesses 

about federal agency enforcement actions. 

The Ombudsman will annually evaluate the 

enforcement activities and rate each agency’s 

responsiveness to small business. If you wish 

to comment on the enforcement actions of 

[insert agency name], you will find the 

necessary comment forms at 

www.sba.gov.ombudsman or call 1–888–

REG–FAIR (1–888–734–3247). 

As HUD stated in its notice describing 

HUD’s actions on the implementation of 

SBREFA, which was published on May 

21, 1998 (63 FR 28214), HUD will work 

with the Small Business Administration 

to provide small entities with 

information on the Fairness Boards and 

National Ombudsman program, at the 

time enforcement actions are taken, to 

ensure that small entities have the full 

means to comment on the enforcement 

activity conducted by HUD. 

V. Findings and Certifications 

Regulatory Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

OMB determined that this rule is a 

‘‘significant regulatory action,’’ as 

defined in section 3(f) of the Order 

(although not economically significant, 

as provided in section 3(f)(1) of the 

Order). The docket file is available for 

public inspection between the hours of 

8 a.m. and 5 p.m. weekdays in the 

Regulations Division, Office of General 

Counsel, Department of Housing and 

Urban Development, 451 Seventh Street, 

SW., Room 10276, Washington, DC 

20410–0500. Due to security measures 

at the HUD Headquarters building, an 

advance appointment to review the 

docket file must be scheduled by calling 

the Regulations Division at (202) 708–

3055. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule have 

been submitted to OMB under the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3520). In accordance with 

the Paperwork Reduction Act, HUD may 

not conduct or sponsor, and a person is 

not required to respond to, a collection 

of information, unless the collection 

displays a currently valid OMB control 

number. Interested persons are invited 

to submit comments regarding the 

information collection requirements in 

this rule. Comments must be received 

within 60 days from the date of this 

rule. The burden of the information 

collections in this proposed rule is 

estimated as follows: 

REPORTING AND RECORDKEEPING BURDEN

Section reference Number of 

parties 

Number of 

responses per 

respondent 

Estimated 

average time 

for 

requirement 

(in hours) 

Estimated 

annual burden 

(in hours) 

24 CFR 5.812 .................................................................................................. 7,137 1 1 7,137 

In accordance with 5 CFR 

1320.8(d)(1), HUD is soliciting 

comments from members of the public 

and affected agencies concerning this 

collection of information to: 

(1) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

(3) Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated collection 

techniques or other forms of information 

technology, e.g., permitting electronic 

submission of responses. 

Under the provisions of 5 CFR part 

1320, OMB is required to make a 

decision concerning this collection of 

information between 30 and 60 days 

after today’s publication date. Therefore, 

a comment on the information 

collection requirements is best assured 

of having its full effect if OMB receives 

the comment within 30 days of today’s 

publication. This time frame does not 

affect the deadline for comments to the 

agency on the proposed rule, however. 

Comments must refer to the proposal by 

name and docket number FR–5054–P–

01 and must be sent to: HUD Desk 

Officer, Office of Management and 

Budget, New Executive Office Building, 

Washington, DC 20503, Fax: (202) 395–

6974, and Directives Management 

Officer, Office of Public and Indian 

Housing, U.S. Department of Housing 

and Urban Development, 451 Seventh 


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Street, SW., Room 4116, Washington, 

DC 20410–8000. 

Environmental Impact 

This proposed rule establishes 

placement and removal procedures for 

HUD’s IPA Roster. This proposed rule 

does not direct, provide for assistance or 

loan and mortgage insurance for, or 

otherwise govern or regulate, real 

property acquisition, disposition, 

leasing, rehabilitation, alteration, 

demolition, or new construction, or 

establish, revise, or provide for 

standards for construction or 

construction materials, manufactured 

housing, or occupancy. Accordingly, 

under 24 CFR 50.19(c)(1), this proposed 

rule is categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321, et seq.). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601, et seq.) generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. The proposed 

rule establishes the procedure by which 

an IPA who has violated professional 

auditing or other HUD requirements 

may be removed from HUD’s IPA 

Roster. Accordingly, to the extent that 

this proposed rule impacts small 

entities, it is as a result of actions taken 

by small entities themselves; that is, 

violation of professional auditing, HUD, 

or other requirements. The proposed 

rule provides several procedural 

safeguards designed to minimize any 

potential impact on small entities. For 

example, the rule grants IPAs selected 

for removal from the IPA Roster with 

the opportunity to provide a written 

response and to request a conference 

regarding a proposed removal. The rule 

also specifies that the official designated 

by HUD to review an appeal may not be 

the same HUD official involved in the 

initial removal decision. 

Notwithstanding HUD’s 

determination that this rule does not 

have a significant economic impact on 

a substantial number of small entities, 

HUD specifically invites comments from 

all entities, including small entities, 

regarding less burdensome alternatives 

to this rule that will meet HUD’s 

objectives as described in this preamble. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531–

1538) (UMRA) requires federal agencies 

to assess the effects of their regulatory 

actions on state, local, and tribal 

governments, and on the private sector. 

This proposed rule does not impose any 

federal mandate on any state, local, or 

tribal governments, or on the private 

sector within the meaning of UMRA. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from publishing any rule that 

has federalism implications and either 

imposes substantial direct compliance 

costs on state and local governments 

and is not required by statute, or that 

preempts state law, unless the agency 

meets the consultation and funding 

requirements of section 6 of the 

Executive Order. This rule does not 

have federalism implications and does 

not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. 

List of Subjects in 24 CFR Part 5 

Administrative practice and 

procedure; Aged; Claims; Crime; 

Government contracts; Grant 

programs—housing and community 

development; Individuals with 

disabilities; Intergovernmental relations; 

Loan programs—housing and 

community development; Low and 

moderate income housing; Mortgage 

insurance; Penalties; Pets; Public 

housing; Rent subsidies; Reporting and 

recordkeeping requirements; Social 

security; Unemployment compensation; 

Wages. 

Accordingly, for the reasons stated in 

the preamble, HUD proposes to amend 

24 CFR part 5 as follows: 

PART 5—GENERAL HUD PROGRAM 

REQUIREMENTS; WAIVERS 

1. The authority citation for 24 CFR 

part 5 continues to read as follows: 

Authority: 42 U.S.C. 3535(d), unless 

otherwise noted. 

2. Add new §§ 5.802, 5.804, 5.806, 

5.808, 5.810, 5.812, 5.814, 5.816, 5.818, 

and 5.820 to read as follows: 

§ 5.802 Definitions. 

The following definitions apply to 

this subpart: 

Audit(s) or related service(s). Any 

audit, attestation, compilation, review, 

or other service that an IPA is required 

to perform in accordance with those 

financial reporting standards described 

in § 5.801. 

Covered entity(ies). Public housing 

agencies; contract administrators; 

owners; and Title I and Title II 

nonsupervised lenders, nonsupervised 

mortgagees, and loan correspondents 

that are subject to the requirements of 

24 CFR 5.801, for which HUD is the 

cognizant or oversight agency under the 

Single Audit Act Amendments of 1996. 

Independent Public Accountant (IPA). 

An accountant is an individual 

employed by a public accounting firm 

(including a solo practice) or a State 

Auditor’s Office, and licensed by a 

regulatory authority of a State or other 

political subdivision of the United 

States both before and after December 

31, 1970. All certified public 

accountants are considered to be 

independent public accountants. 

Jurisdiction. Any State, territory, 

Commonwealth, or District of the 

United States. 

Professional standards. (1) 

Accounting principles that are: 

(i) Established by the Government 

Accounting Standards Board or 

Generally Accepted Accounting 

Principles (GAAP), as applicable; 

(ii) Established by the Office of 

Management and Budget (OMB); 

(iii) Established by HUD; or 

(iv) Applicable to audit reports for 

particular covered entities or covered by 

the quality control system of a particular 

IPA listed on the IPA Roster. 

(2) Auditing standards. Standards for 

attestation engagements, quality control 

policies and procedures, ethical and 

competency standards, and 

independence standards that are issued 

or adopted by: 

(i) The American Institute of Certified 

Public Accountants (Generally Accepted 

Auditing Standards (GAAS)); 

(ii) The Government Accountability 

Office (Generally Accepted Government 

Auditing Standards (GAGAS)); 

(iii) The Office of Management and 

Budget (OMB Circular A–133); or 

(iv) HUD. 

§ 5.804 The Independent Public 

Accountant Roster (IPA Roster). 

(a) Independent Public Accountant 

Roster. HUD maintains a roster of 

independent public accountants and 

public accounting firms (IPAs) who are 

approved to perform audits or related 

services in specified jurisdictions for 

those entities that are required to submit 

audited financial statements to HUD 

under this subpart, and for which HUD 

is the cognizant or oversight agency 

under the Single Audit Act 

Amendments of 1996. 

(b) Disclaimer. The inclusion of an 

IPA on the IPA Roster does not create 

or imply any warranty or endorsement 

to any organization or individual, 

including any other potential user of the 


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audited financial statements, by HUD of 

a listed IPA, nor does it represent a 

warranty of any audits or related 

services performed by the listed IPA. 

The inclusion of an IPA on the IPA 

Roster means only that the IPA has met 

the qualifications and conditions, 

prescribed in this part, for inclusion on 

the IPA Roster. 

§ 5.806 Responsibilities of an IPA listed on 

the IPA Roster. 

An IPA listed on the IPA Roster is 

responsible for: 

(a) Complying with any agreements 

with HUD, including, but not limited to, 

agreements identified at § 5.810(a); 

(b) Maintaining any other eligibility 

requirements and compliance for each 

state or jurisdiction in which the IPA is 

listed; 

(c) Notifying HUD within 30 days of 

any change in the continued compliance 

of the IPA with eligibility requirements; 

and 

(d) Not making, or causing to be 

made, any false certifications to HUD. 

§ 5.808 Applicability of IPA Roster. 

(a) Any IPA that seeks to perform 

audits or related services in a particular 

jurisdiction for covered entities must be 

listed on the IPA Roster for that state or 

jurisdiction. 

(b) When the IPA wishes to perform 

audits or related services for covered 

entities with offices in numerous 

jurisdictions, the IPA need only be 

listed in the jurisdiction in which the 

covered entity maintains its 

headquarters. 

(c) Every IPA that is engaged to 

perform audits or related services, or 

who contracts with an IPA to perform 

any portion of audits or related services, 

must be listed on the IPA Roster 

individually or be an employee or 

member of an auditing firm listed on the 

IPA Roster. 

§ 5.810 Eligibility requirements for 

placement on the IPA Roster. 

To be eligible for placement on the 

IPA Roster: 

(a) Public accounting firms and State 

Auditor’s Offices must: 

(1) Be licensed or authorized to 

practice in each of the specific 

jurisdiction(s) for which the IPA is to be 

listed; 

(2) Not be, or employ or contract with 

anyone for the performance of audits or 

related services who is: suspended, 

debarred, voluntarily excluded, subject 

to a limited denial of participation, or 

subject to any order of disbarment or 

other denial of right to practice before 

the Securities and Exchange 

Commission, or subject to a 

jurisdiction’s disciplinary action that 

has resulted in the revocation, 

suspension, or surrender of a license or 

authorization to practice public 

accounting; 

(3) Agree upon approval for 

placement on the IPA Roster, to comply 

with the following to maintain 

placement on the IPA Roster: 

(i) Accept only those engagements for 

audits or related services that meet the 

minimum qualifications specified by the 

Generally Accepted Government 

Auditing Standards (GAGAS); 

(ii) In servicing covered entities, 

accept only those engagements for 

audits or related services for covered 

entities located in jurisdictions in which 

the IPA is listed on the IPA Roster; 

(iii) Establish and implement quality 

control procedures sufficient to satisfy 

the quality control standards of GAGAS; 

(iv) Comply with the professional 

standards applicable to any audits or 

related services performed for covered 

entities; 

(v) Comply with any accountancy 

laws and rules of each jurisdiction for 

which the IPA is to be listed; 

(vi) Comply with all applicable HUD 

rules and instructions relating to 

financial reporting, audits, or related 

services; 

(vii) Submit to and cooperate with 

reviews by HUD of the IPA’s 

performance of audits or related services 

for covered entities; 

(viii) Notify HUD if the IPA or any 

member or employee of the firm is, or 

has been within the previous 5 years, 

indicted or otherwise charged with or 

convicted of any offense listed in 24 

CFR 24.800(a); 

(ix) Notify HUD if the IPA or any 

member or employee of the firm is, or 

has been within the previous 5 years, 

adjudged to be civilly liable for any of 

the offenses listed in 24 CFR 24.800(a); 

and 

(x) Comply with any requests for 

information made by HUD. 

(b) Individual public accountants that 

wish to be listed on the IPA Roster must 

either: 

(1) Meet the eligibility requirements 

specified in § 5.810(a); or 

(2) Be a partner or member of a public 

accounting firm listed on the IPA 

Roster, or be a full-time employee of 

such a firm. 

§ 5.812 IPA Roster Placement Procedures. 

(a) Application. An IPA seeking to be 

listed on the IPA Roster must submit an 

application to HUD. The application 

must specifically identify each 

jurisdiction in which the IPA seeks to be 

listed, and must demonstrate that the 

IPA meets the eligibility requirements 

described in § 5.810 for listing in each 

such jurisdiction. The application must 

be in a form, and delivered in a manner, 

prescribed by HUD. 

(b) Approval for listing on the IPA 

Roster. Once received by HUD, the 

application will be reviewed and a 

decision issued within 45 days of HUD’s 

receipt of the application, unless HUD 

extends this time by providing notice to 

the IPA. 

(1) Approval. If HUD determines that 

the IPA meets the eligibility 

requirements described in § 5.810 for 

listing in a particular jurisdiction, the 

IPA will be listed on the IPA Roster for 

that particular jurisdiction. 

(2) Denial. If the IPA fails to 

demonstrate that it meets all the 

eligibility requirements described in 

§ 5.810, the application will be denied. 

(i) If a denial of the application is 

issued, the IPA will be notified of the 

reasons for the denial and will be given 

30 days from the date of the denial to 

request reconsideration and 

demonstrate that the IPA did meet all 

eligibility requirements for listing in a 

particular jurisdiction at the time of the 

initial application. 

(ii) If the IPA demonstrates that it did 

meet all eligibility requirements for 

listing in a particular jurisdiction at the 

time of the initial application, the IPA 

will be listed on the IPA Roster for that 

particular jurisdiction. 

(iii) If the IPA fails to demonstrate 

that it met all eligibility requirements, 

the denial of the application is final and 

the IPA will be required to submit a new 

application to be considered for future 

placement on the IPA Roster. 

§ 5.814 IPA Roster Removal Procedures. 

(a) Removal from the IPA Roster. 

(1) An IPA may be voluntarily 

removed from the IPA Roster by 

notifying the Department in writing, and 

specifying from which jurisdiction(s) 

the IPA wishes to be removed. 

(2) An IPA that fails to fulfill its 

responsibilities as a listed IPA is subject 

to involuntary removal from the IPA 

Roster. 

(b) Involuntary automatic removal. 

HUD may automatically remove an IPA 

from the IPA Roster for all applicable 

jurisdictions, without the benefit of a 

conference or other opportunity to 

respond, if the IPA: 

(1) Fails to maintain compliance with 

eligibility requirements by being 

debarred, suspended, voluntarily 

excluded, subject to a limited denial of 

participation, or subject to any order of 

disbarment or other denial of right to 

practice before the Securities and 

Exchange Commission; 


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(2) Fails to maintain compliance with 

eligibility requirements by incurring a 

jurisdiction’s disciplinary action that 

results in the revocation, suspension, or 

surrender of a license or authorization 

to practice; or 

(3) Fails to maintain compliance with 

eligibility requirements by allowing 

licensing or authorization to practice to 

expire, not due to jurisdiction 

disciplinary action in any jurisdiction 

for which the IPA is listed on the IPA 

Roster. 

(4) Automatic removal of an IPA from 

the IPA Roster for any jurisdiction will 

constitute automatic removal from the 

IPA Rosters for all jurisdictions. 

However, automatic removal under 

paragraph (b)(3) of this section for 

failure to maintain licensing or 

authorization constitutes removal for 

only the jurisdictions in which the IPA 

has allowed its licensing or 

authorization to practice to lapse, and 

does not affect the listing of the IPA on 

the IPA Roster for any other jurisdiction 

in which the IPA remains eligible. 

(c) Causes for contestable removal. 

Causes for contestable removal include, 

but are not limited to: 

(1) Failing to comply with any 

agreements with HUD, including, but 

not limited to, agreements identified at 

§ 5.810(a); 

(2) Failing to maintain compliance 

with any other eligibility requirements 

for listing on the IPA Roster for each 

jurisdiction in which the IPA is listed; 

(3) Failing to notify HUD within 30 

days of any change in the continued 

compliance of the IPA with eligibility 

requirements; or 

(4) Making, or causing to be made, 

any false certification to HUD. 

(d) Procedure for contestable removal. 

Unless an IPA is subject to automatic 

removal from the IPA Roster under 

paragraph (b) of this section, the 

following procedures apply: 

(1) HUD will provide the IPA with 

written notice of the proposed removal 

from the IPA Roster. The notice of 

proposed removal will include the 

reasons for the proposed removal of the 

IPA from the IPA Roster. 

(2) The IPA has 30 calendar days from 

the date of the notice of proposed 

removal to submit a written response 

objecting to the proposed removal and/ 

or requesting a conference. If an IPA 

submits a timely written objection to the 

proposed removal, the Deputy Assistant 

Secretary of the Departmental Real 

Estate Assessment Center (REAC) or a 

designee (‘‘Reviewing Official’’), will 

review the proposed removal and the 

IPA objection, and conduct a conference 

with the IPA, if requested. When a 

request for a conference is received, the 

Reviewing Official will schedule the 

conference within 30 calendar days of 

the date the request is received. In no 

instance will the Reviewing Official be 

the same individual who made the 

initial determination to propose removal 

of the IPA from the IPA Roster. 

(3) The Reviewing Official will issue 

a determination within 30 days of 

receiving the IPA’s written response, or, 

if a conference is requested, within 30 

days of the closing of the conference. 

The Reviewing Official may extend the 

time for issuance of a final decision by 

providing the IPA with notice. 

(4) The Reviewing Official may affirm 

or deny the proposed removal from the 

IPA Roster, or the Reviewing Official 

may, in his or her sole discretion, find 

cause for the removal but order that the 

removal be held in abeyance pending 

further action. 

(e) Removal held in abeyance. (1) 

When the Reviewing Official has 

determined that cause for removal 

exists, the Reviewing Official may, 

instead, in his or her sole discretion, 

issue an order of abeyance, deferring the 

removal of the IPA from the IPA Roster 

until a future date specified in the order 

of abeyance. 

(2) The order of abeyance provides the 

IPA with the opportunity to 

demonstrate to the satisfaction of the 

Reviewing Official that all causes for the 

removal have been addressed prior to 

the effective date for removal specified 

in the order of abeyance. 

(3) The Reviewing Official shall 

consider any relevant evidence 

submitted by an IPA as of the date 

specified in the order of abeyance, to 

determine whether all causes for 

removal have been addressed. Upon 

request by the IPA, the Reviewing 

Official, in his or her discretion, may 

review such evidence at any time prior 

to the date specified in the order of 

abeyance. 

(f) Other action. Nothing in this 

subpart prohibits HUD or the federal 

government from taking such other 

action against an IPA as provided under 

24 CFR part 24, or from seeking any 

other remedy against an IPA available to 

HUD or the federal government by 

statute or otherwise. 

(g) Effective dates of removal from the 

IPA Roster. (1) Unless an IPA is subject 

to automatic removal from the IPA 

Roster under paragraph (b) of this 

section, the following effective dates 

apply. 

(i) If the IPA does not submit a written 

response within 30 calendar days of the 

date of the notice of proposed removal, 

the removal becomes effective 30 

calendar days after the date of HUD’s 

removal notice. 

(ii) If the IPA submits a written 

response within 30 calendar days of the 

date of the notice of proposed removal, 

and the removal decision is affirmed, 

the effective date of the removal is the 

date of HUD’s notice affirming its initial 

removal decision. 

(2) If the IPA is subject to automatic 

removal, the removal is effective as of 

the date the IPA receives notice of the 

removal. 

(3) If the removal is held in abeyance, 

the order of abeyance will specify the 

effective date of the removal, which will 

be effective should the IPA fail to 

demonstrate to the satisfaction of the 

Reviewing Official that all causes for the 

removal have been eliminated by the 

effective date. 

(h) Notification of other federal 

agencies. Where HUD is considering the 

removal of an IPA who has, during the 

previous 3 years, performed audits or 

related services for a covered entity, 

HUD will endeavor to ascertain whether 

any audited covered entity receives 

funds from any other federal agency. 

Where HUD determines that the IPA has 

performed audits or related services for 

a covered entity receiving federal funds 

from another agency, HUD will notify 

that agency prior to taking any removal 

action against the IPA. 

§ 5.816 Consequences of removal from the 

IPA Roster. 

(a) If an IPA is removed from the IPA 

Roster, the IPA can no longer be 

engaged to perform audits or related 

services for covered entities. 

(b) If the IPA is currently engaged to 

perform audits or related services for 

covered entities, the IPA is not 

prohibited from completing those 

contracts or engagements. However, the 

IPA may not renew or extend (other 

than no-cost time extensions) any 

contract or engagement, unless the 

Reviewing Official grants an exception. 

The granting of any such exception lies 

within the sole discretion of the 

Reviewing Official and will be granted 

only when the Reviewing Official 

determines that an exception is in the 

interest of HUD. 

(c) HUD’s action to remove an IPA 

from the IPA Roster does not affect the 

ability of covered entities to, in their 

discretion, terminate an existing 

contract or engagement as a result of the 

removal of the IPA from the IPA Roster 

or the circumstances precipitating the 

removal of the IPA. 

§ 5.818 Consequences of a removal action 

that is held in abeyance. 

(a) If the IPA demonstrates, to the 

satisfaction of the Reviewing Official, 

that all causes for removal have been 


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eliminated within the specified time 

period before the effective date of the 

removal, the removal action against the 

IPA will be terminated and the IPA will 

remain listed on the IPA Roster, subject 

to continued eligibility. 

(b) If the IPA fails to demonstrate 

elimination of all causes for removal, to 

the satisfaction of the Reviewing 

Official, before the effective date, the 

IPA will be removed from the IPA 

Roster as of the effective date. 

§ 5.820 Reinstatement to the IPA Roster. 

(a) Reinstatement. Except as specified 

in paragraph (b) of this section, an IPA 

may request reinstatement of its listing 

on the IPA Roster no earlier than one 

year following the effective date of the 

removal from the IPA Roster. 

(1) The request for reinstatement must 

contain all the information and comply 

with all the requirements for initial 

application for placement on the IPA 

Roster. 

(2) The IPA must submit a written 

explanation of the circumstances 

surrounding the removal from the IPA 

Roster. 

(3) The IPA must submit 

documentation demonstrating that all 

causes resulting in the removal from the 

IPA Roster have been eliminated. 

(b) Reinstatement following automatic 

removal due to expiration of license or 

authorization to practice. If the IPA has 

been automatically removed due to the 

expiration of licensing or authorization 

to practice in a jurisdiction, not due to 

disciplinary action, the IPA may request 

reinstatement and be reinstated at any 

time by submitting evidence 

demonstrating the renewal of licensing 

or authorization to practice in that 

particular jurisdiction. 

Dated: January 7, 2008. 

Roy A. Bernardi, 

Deputy Secretary. 

[FR Doc. E8–2097 Filed 2–5–08; 8:45 am] 

BILLING CODE 4210–67–P 


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