After closing
HUD annual audited financial statements: what is due, when and how
Owners of HUD-insured apartment properties must file an annual financial statement within 90 days after fiscal year end, prepared under GAAP and audited by an independent CPA under generally accepted auditing standards and Government Auditing Standards. It is filed electronically under 24 CFR 5.801 with the surplus cash computation; late filing is flagged against the owner's principals.
What is required
Two documents set the rule. HUD’s uniform financial reporting standards (24 CFR 5.801) require owners of multifamily projects with HUD-insured, coinsured or HUD-held mortgages, under Sections 207, 213, 220, 221(d)(4), 231, 241 and others, to give HUD annual financial information prepared under GAAP, submitted electronically, in the form HUD prescribes. And section 18 of the regulatory agreement turns that into a specific obligation for each property.
| Requirement | Source |
|---|---|
| Annual financial report for the fiscal year, based on the books and records, under GAAP | 24 CFR 5.801(b); regulatory agreement s. 18(a) |
| Due within 90 days after fiscal year end, or another period HUD sets in writing | 24 CFR 5.801(c)(2); s. 18(a) |
| Audit by an independent, licensed CPA under GAAS and Government Auditing Standards | s. 18(b)(i) |
| Agreed-upon procedures comparing the electronic data submitted to HUD with the audited report | s. 18(b)(ii) |
| Submission electronically, in the form HUD specifies | 24 CFR 5.801(b)(2); s. 18(b)(iii) |
| Surplus cash computation on form HUD-93486, audited and included | Handbook 4370.2, ch. 2 |
Certain nonprofit owners may have the audit requirement waived or modified under federal audit rules; the regulatory agreement says that waiver does not relieve them of anything else in section 18.
Books all year
The audit is only as good as the books behind it. Section 16 of the regulatory agreement requires books that are complete, accurate and current, posted to the ledger at least monthly, with year-end adjustments posted promptly, and open to HUD on reasonable notice. Any expense without enough documentation to identify its basis is an undocumented expense and becomes ineligible, as does an undocumented distribution. Books kept by a management agent follow the same rules and stay with the owner if the agent is replaced (section 17).
Handbook 4370.2 sets HUD’s chart of accounts and its rules for operating, reserve, security deposit and residual receipts accounts. The auditor confirms balances directly with the bank and the lender and checks support for disbursements.
What a late or missing statement costs
| Problem | Consequence |
|---|---|
| Statement overdue | Automatic Tier 3 previous participation flag; removed when filed or after five years |
| Three or more missed filings in seven years | Tier 2 flag, kept until five years pass with no missed filing |
| Repeated unresolved audit findings | Tier 2 flag for five years |
| Any failure to perform under section 18 | HUD may start a forensic audit of the owner’s books without first giving notice of violation |
| Reporting violations outstanding | Not eligible for monthly surplus cash distributions under ML 2022-16 |
Flags travel with the people, not the property, and are reviewed whenever those people apply for a new HUD loan or approval. See previous participation.
Practical points
- Engage the auditor early. The 90-day clock is short for a property with a mid-year sale, a large reserve draw or construction cost certification in the same year.
- Mid-year distributions. If you took a semi-annual distribution, the mid-year HUD-93486 goes in with the annual package. See surplus cash.
- After a sale. The buyer reports from the date it took financial responsibility; the seller reports the stub period ending at the HUD-approved transfer. See buying with a HUD loan.
- Portfolio purchases. HUD’s previous participation guide acknowledges that its financial assessment system can misread a new owner of a portfolio as having missed filings, and tells staff not to flag in that case. If it happens, raise it with the account executive.
Sources
- 24 CFR 5.801, Uniform financial reporting standards
- Form HUD-92466M, Regulatory Agreement for Multifamily Projects (6/18), sections 16 to 18
- HUD Handbook 4370.2 REV-1, Financial Operations and Accounting Procedures for Insured Multifamily Projects, chapter 2
- HUD Notice H 2016-15, previous participation flags for financial statement failures
- HUD Mortgagee Letter 2022-16, financial reporting conditions for monthly distributions
Checked against these sources on October 30, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
When is the HUD annual financial statement due?
Within 90 days after the end of the owner's fiscal year. That deadline is set both by HUD's uniform financial reporting rule (24 CFR 5.801(c)(2)) for owners of multifamily projects with HUD-insured mortgages and by section 18 of the regulatory agreement, unless HUD sets a different period in writing.
What are HUD's annual audit requirements for an insured apartment property?
The owner prepares a GAAP financial report for the fiscal year. An independent licensed CPA audits it under both generally accepted auditing standards and Government Auditing Standards, and separately performs agreed-upon procedures comparing the electronic financial data template submitted to HUD with the audited report. The audit report and related reports go to HUD electronically.
Does the audit include the surplus cash calculation?
Yes. Handbook 4370.2 says the HUD-93486 surplus cash computations are audited and included in the annual report, including any mid-year computation if the owner took a semi-annual distribution.
What happens if a HUD annual financial statement is filed late?
An overdue statement is automatically a Tier 3 flag on the owner's principals in HUD's previous participation system, removed when it is filed. Three or more missed filings in seven years is a Tier 2 flag kept until five years pass with no missed filings. The regulatory agreement also lets HUD order a forensic audit without first declaring a violation.
Does a new buyer file a full-year audit?
The regulatory agreement requires a report for the part of the fiscal year after the buyer took financial responsibility. The seller reports the part of the year that ended with the HUD-approved transfer.