The most common mistakes made during a HUD audit are related to financial records and tenant details. Financial records should include all documents like your property’s balance sheet, statement of profit and loss, statement of cash flows, and descriptions of accounting policies. Year-end statements for associated bank accounts — for your operating account, your replacement reserve account, and your security deposit account — are also essential.
The audit will also assess how the property is handled with respect to its tenants — both present and those applying or waitlisted. The auditor will need to fully understand the procedure for accepting applications, determining eligibility, and how rental rates are set. As part of this process, the auditor will generally examine a sample of tenant files, which include accepted and rejected tenants, from the past fiscal year. These files will be used to ensure processes are in place, are working correctly, and are not violating HUD requirements on discrimination.
Not having the necessary financial records and tenant details on hand is the most common mistake made during a HUD audit. It is important to be prepared and have all the necessary documents ready for the audit.