How to Track Verifications for Certifications, Recertifications

In dealing with the constraints imposed by the pandemic, many state housing agencies have successfully transitioned to virtual household file reviews. The IRS’ recent notice reflects this reality in splitting compliance-monitoring requirements for household file reviews from the requirements for physical inspection. Household file reviews must still be completed this year. But the required 15-day notice in advance of household file audits have been loosened to 30 days until the end of this calendar year.

Keeping household files organized and up to date with proper documentation is a critical factor in demonstrating compliance with tax credit requirements. To calculate and verify household income at tax credit sites, owners and managers often follow the rules set out in HUD Handbook 4350.3 (Occupancy Requirements of Subsidized Multifamily Housing Programs). Specifically, sections 1 and 3 of Chapter 5 (Determining Income and Calculating Rent) set out the rules for you to follow for calculating and verifying income.

However, be sure to check your state housing agency’s guidance on verification, too. Each state has specific rules on how to satisfy income verification requirements for the LIHTC program. And state agencies monitor compliance for the LIHTC program and report noncompliance to the IRS, so failure to document income in the manner preferred by that agency could result in red flags during the household file review process.

To help you get the verification information you need, at a glance, we’ll show you how to format a verification tracking sheet. It identifies what household information the site needs to verify and shows how verification efforts are progressing.

Basics on HUD Verification Rules

An applicant or household isn’t qualified for a low-income unit at your site unless you have the verifications to prove it. Owners and managers must make sure that every source of income is verified. If you accept a household without verifying all its income, the owner won’t be able to claim tax credits for the household’s unit. And if the owner needs to count the unit to meet the minimum set-aside, the owner won’t be able to claim credits.

According to the HUD Handbook, the most acceptable method of verification is upfront income verification. This is verification of income before or during a certification and/or recertification, through an independent source that systematically and uniformly maintains income information in a computerized form. Next, in order of acceptability, is written verification from the appropriate third party. This is current and complete documentation sent directly by the third-party source by mail or electronically by fax, email, or internet.

Third-party oral verification is next. When verifying information over the telephone, it’s important to be certain that the person on the telephone is the party he or she claims to be. Generally, it’s best to telephone the verification source rather than to accept verification from a source calling the property management office. Oral verification must be documented in the file [HUD Handbook, par. 5-13(B)(1)(b)]. If third-party verification isn’t available, owners must document the tenant file to explain why third-party verification wasn’t available [HUD Handbook 4350.3, par. 5-13(A)].

Benefits of Verification Tracking Sheet

Using our Model Form: Use Form to Help Keep Household Files Complete, Track Verification Efforts can help you in three ways:

Check progress quickly. A tracking sheet lets you quickly check the status of verification efforts. For example, you can tell at a glance how long has passed since you sent the written verification form to a third party.

Help ensure compliance. By comparing the results of certification interviews with the verification tracking sheet, you can make sure that your staff took steps to verify all of the household information you’re required you to verify. The completed sheet also gives you an easy way to show your state housing agency that you’re following the verification protocols.

Avoid unnecessary reverification. For mixed-income sites with annual recertification requirements, if you keep the completed verification tracking sheets in residents’ files, you can tell quickly what household information you’ve verified in the past. Some information, such as date of birth, needn’t be verified again because it isn’t subject to change. The completed tracking sheets give you a record of facts you’ve verified.

How to Use Verification Tracking Sheet

At the top of each sheet, you or your staff members should fill in the name of the household head, the building identification number (BIN), and the household’s unit number. This helps ensure that the sheets always find their way back to the right household files.

Identify each event. Before you begin entering information on new verification efforts, devote a row of the table to identifying the event that has prompted the need to verify. Doing this will show what verification efforts you undertook for each event, so that you can make sure you verified all information you’re required to verify. Also, if you need to confirm that you’ve verified a particular fact and you can recall the occasion when you did so, separating the entries by event makes it easier to find the information you need.

List information to verify. The next step is to fill in the first three columns of the verification tracking sheet for each piece of information that needs verifying. If you seek verification from several sources, devote one row to each.

Track your progress. Fill in the remaining columns to show the progress of the verification process.

Purpose of Each Column

The columns in the model verification tracking sheet ask for the following information:

Household member. In the first column, you or your staff members should fill in the name of the individual household member to whom the information that must be verified relates.

What must be verified. The second column is for you or your staff members to describe the information you’re trying to verify. The description needn’t be overly specific. For example, if you’re trying to verify whether a household member is disabled due to a heart condition, you need only fill in “disability,” not “disability due to a heart condition.” You’re not likely to need to verify that any particular household member has more than one disability, and the briefer description better protects confidentiality if the sheet is inadvertently left where office visitors can see it.

Source name. The third column is for you or your staff members to fill in the name of the third-party verification source identified by the household.

Date form sent. The fourth column is for you or your staff members to fill in the date you sent the verification form to the verification source. This will allow you to tell at a glance whether an adequate time period has passed. If written verification is impossible, draw a line through the box and go on to the next column.

Date form returned. The fifth column is for you or your staff members to fill in the date you get back a completed verification form from the source. After filling in this column, skip to the last column of the form. You may draw a line through the boxes in between, since they concern other means of verification that won’t be necessary.

Date oral verification sought. If you don’t get back a completed verification form, the sixth column of the form is for you or your staff members to fill in the date oral verification was sought from the verification source. This will serve as a reminder if, for example, you’re forced to leave a telephone message.

Date oral response received. The seventh column of the form is for you or your staff members to fill in the date when you receive oral verification. Once you do this, skip to the last column of the form, crossing out the intervening boxes.

When verifying information by phone, be sure to record and include in the tenant’s file the following information:

• Third-party’s name, position, and contact information;
• Information reported by the third party;
• Name of the person who conducted the telephone interview; and
• Date and time of the telephone call [HUD Handbook 4350.3, par. 5-18(C)].

Document(s) reviewed and date. If you’re unable to get third-party verification, the eighth column of the form is for you or your staff members to describe the documents you relied upon for documentary verification. For example, cancelled checks indicating payment amount and frequency, school records, and copies of validated deposit slips may be documentary evidence provided by the applicant or tenant. HUD Handbook 4350.3, appendix 3, has more examples. 

The ninth column of the form is for you or your staff members to fill in the date you reviewed the documents.

Date resident certification signed. The tenth column is for you or your staff members to fill in the date you got a signed resident certification. In those rare cases when you can rely on a resident certification as the primary verification method, you may cross out the boxes under the headings “Third-Party Verification” and “Documentary Verification,” simply filling in this box and going on to the next.

Information verified? The last column is for you or your staff members to indicate with a yes or no whether the information you identified in the second column was finally verified. The fact that you got back a completed verification form or reviewed documents doesn’t always mean that you verified the information.