Depending on how your organization is financed and what regulations or compliance measures surround its operations, you may or may not need to perform an additional audit when you change your year-end date. Our firm specializes in auditing affordable housing and not-for-profit organizations, which is why we will consider these two industries for this question.
Affordable Housing (Including HUD)
When the owner or board of directors elect to change the year end of the property, it may add costs to your normal audit fee. HUD makes the ultimate decision whether you can file normally or if you have to submit a partial-year audit.
Audits typically cover a 12-month period, but under the circumstances of a changing year end, can cover up to 15 months. If the difference between the old year end and the new one extends the reporting period beyond 15 months, HUD will likely tell you to get a partial audit (also called a stub year) to cover the gap in reporting.
There are many reasons a not-for-profit organization would change their year-end date. Some decide to switch to accounting firms’ off season to save money, or because regulations dictate that they end their year during a specific time frame.
However, because the goal of an audit for non-profits is to check in and report financial information to the board of directors, it’s almost always more helpful to do a partial audit at the new year end rather than waiting to wrap it all up into one.
By doing this, your organization gets better, more relevant data at the new year end, establishing a benchmark for the first full audit the following year. Though it increases the audit fee for the current year, it’s worth the benefit to the board, who can make more well-informed decisions based on accurate financial statements.
If you’ve recently refinanced or changed your year-end date and need guidance on what to do next, feel free to contact our auditors today. We’re always here to serve!
Are RD’s compliance requirements the same as HUD’s?
They are similar but not exactly the same. For example, HUD requires tenant file testing, but RD does not. RD requires certain reports about the replacement reserve account, whereas HUD tests this area differently.