Good File Organization

by William Whalen, Compliance Analyist

Recently, I conducted a file audit /unit inspection of a tax credit property. The audit took longer than I anticipated because each file was set up different, there were no calculation sheets and no clarification sheets in the files.  I could have easily finished the files in just over half that time had the files been organized well or even uniformly. As a compliance monitor, I will say that file reviews go the quickest when each of the files are organized and set up the exact same way.

All of your files should be uniform.  Each file should be set up the exact same way. Create a template for the tax credit files so each employee knows exactly how the files should be organized. A good way to do this is with a “dummy” file. A dummy file is a file that contains blanks paperwork showing the exact order it should be placed in each file.  This should be updated as new forms and regulations come out, but an up to date and accurate dummy file is a great model for all employees to refer to when putting together a tax credit file in your office.

Here are some helpful hints to keeping your files organized:

1. The most recent tenant income certification (TIC) should be on top. This is what we use to obtain the information we put in our software from each file. Make sure the TIC is complete, signed and dated. We use the rest of the file to verify the information we take from the TIC.

2. Calculation sheets are not required, but they certainly make a file easier to review. Often when going through a file, we spend a lot of time with a calculator trying to figure out how management came up with the income totals. A calculation sheet in the file just after the TIC shows us your math. And be sure to list the math here, don’t just list the total. Just listing the total negates the usefulness of the calculation sheet.

3. As for third party verifications, it’s quite helpful to have them in the same order in the file as they appear on the TIC. This goes for both income verifications, as well as asset verifications.

4. Also, even if you cannot get someone to respond to your a third party verifications, make sure your attempts are documented in the file.  And this is where you would place the documents you used instead of the third party verifications, along with a clarification sheet as to why the third party documents are blank.

5. Clarification sheets are an amazing tool to give a difficult file a narrative. Not every file is going to be straight forward and easy. Files where a tenant only receives social security benefits and has little to no assets are easy for everyone involved. However, many files contain various jobs, pensions and public assistant amounts. And there are those files that have multiple assets all varying in type and amount. These are the files that can be a nightmare to review without clarification sheets. Good clarification sheets can make even the thickest file easy to review.

6. Also, make sure you have supporting documentation for each income amount on the TIC. Nothing is more frustrating than seeing a significant amount of income on a TIC without one single piece of documentation verifying this income.

7. A good rule of thumb to remember is if an auditor has a question while reviewing a file, the next page in the file should contain the answer. For instance, if I’m looking at the employment verification and I see the employer did not answer the question regarding tips, commissions and bonuses, the next page in the file should be a telephone clarification sheet listing the missing information.

8. Everything you do in the file should be documented in one way or another. The obvious information will be documented on the various tax credit forms when filled out correctly. However, often management will make a change somewhere and just assume the auditor will figure it out. For instance, I had a property that included the COLA when calculating the anticipated social security income. However, there were no calculation sheets, adding machine tape or even a note on the social security benefit letter. Not only did they not list that they added the COLA, but they didn’t list that they had only used two months at the current benefit rate and ten months with the COLA added to it. It turned a simple equation into Algebra. And a quick review into a lengthy one.

There’s no better feeling for the site staff then when they can confidently give their files to an auditor and know the files are in good order and all necessary documentation is in place. Well maybe that feeling comes second to how it feels when the auditors finishes your files and tells you that they were in great shape and there were no issues to report.

Good file management is key to running a good tax credit property. It’s a snapshot of your tenants and their income. Files organized efficiently at move in will make for an easy and smooth recertification process. If something is listed on the TIC, there should be a verification supporting it. If something is left blank on a verification document, the next page should have the missing information. Every income amount should have a calculation to back it up. Well organized files not only make life easier for an auditor, they make life easier for the management and the onsite staff.

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