Mid-Year Compliance Check-In: Are Your Files Audit-Ready? 📂

We are officially halfway through 2026, which makes this a good time to ask an important question:

If an auditor selected your files today, would they be ready? 👀

Waiting until an audit notice arrives to start reviewing files is a risky approach. A structured mid-year compliance check gives your team an opportunity to identify inconsistencies, correct documentation issues, reinforce procedures, and address recurring problems before they become larger compliance findings.

For properties preparing for or implementing HOTMA-related changes, a mid-year review is also an opportunity to confirm that current policies, forms, calculations, and file practices align with the requirements applicable to your program and agency.

📋 Start with a Meaningful File Sample

You do not necessarily need to review every file to identify potential problems.

Start by selecting a representative sample of certifications completed since January. Depending on the size of your property or portfolio, reviewing approximately 10–15% of completed files may provide useful insight into where additional attention is needed.

Your sample should include a mix of:

• Move-in certifications

• Annual recertifications

• Interim recertifications, when applicable

• Files completed by different team members

• Households with multiple income sources

• Households with assets

• Student households

• Files involving program-specific exceptions or more complex eligibility determinations

The goal is not simply to find mistakes. The goal is to determine whether your current compliance processes are working consistently.

💡 TCC Insight: File sampling can be an effective way to identify trends and potential weaknesses in your compliance operations. However, when significant or recurring concerns are identified, expanding the review—or conducting a 100% file

review—may be necessary to fully understand the scope of the issue.

💰 Eligibility and Income Review

For each file selected, confirm that:

• Income calculations are supported by the documentation contained in the file.

• Anticipated annual income was calculated using the appropriate methodology.

• Required income and asset information was obtained for applicable household members.

• Verification documents are complete, current, and consistent with the information reported by the household.

• Discrepancies were identified, clarified, and documented.

• Student eligibility was properly reviewed and documented when applicable.

• Required forms were fully completed, signed, and dated.

Pay particular attention to files where the calculation may be technically correct but the documentation does not clearly show how the compliance determination was reached.

Remember: If someone reviewing the file cannot follow the decision-making process, additional documentation may be needed.

🔎 Review HOTMA-Related Policies and File Practices

HOTMA implementation continues to require careful attention to program requirements, agency guidance, and effective dates.

Your mid-year review should confirm that your team is using the appropriate:

• Policies and procedures

• Verification methods

• Asset requirements

• Income calculation methodologies

• Deductions, when applicable

• Hardship provisions

• Forms and certifications

Do not assume that updating one form or conducting one training means implementation is complete.

Review actual files to determine whether updated requirements have been incorporated consistently into day-to-day operations.

💡 TCC Insight: Policies may look good on paper, but the files tell you whether those policies are actually working. Recurring findings are often an indication that additional training, clearer procedures, or stronger quality control measures are needed.

🏘️ Income Averaging Properties

For LIHTC properties using the Average Income Test, confirm that:

• Each unit’s income designation is accurately reflected in the tenant file and applicable tracking systems.

• Unit designations are being monitored consistently.

• The project continues to satisfy applicable average income requirements.

• The Available Unit Rule is being applied based on the appropriate unit designation.

• Rent limits correspond with each unit’s designated income limitation.

• Transfers, vacancies, and changes in household income have been reviewed for potential compliance implications.

Income averaging requires ongoing monitoring. A designation error affecting one unit can create broader compliance concerns when it is not identified and addressed promptly.

🏠 Rent and Utility Allowance Review

Confirm that:

• The correct utility allowance was used when determining gross rent.

• The utility allowance in effect was properly documented.

• Tenant rent plus the applicable utility allowance does not exceed the allowable gross rent.

• Rent changes were implemented in accordance with applicable requirements.

• Required notices and supporting documentation are maintained in the file.

Utility allowance errors can affect multiple households, which means one incorrect process can quickly become a systemic issue.

⚠️ Common Issues Worth Watching

Mid-year file reviews often uncover issues such as:

Common Finding	Recommended Action
Outdated forms still being used	Remove outdated versions from shared drives and workflows and replace them with current forms
Inconsistent asset verification procedures	Review current program and agency requirements and retrain staff
Missing documentation supporting file decisions	Require clear notes and supporting documentation for exceptions, discrepancies, and compliance determinations
Income averaging requirements applied incorrectly	Review unit designations, rent limits, and Available Unit Rule procedures
Incorrect or outdated utility allowances	Confirm effective dates and review potentially affected certifications
The same finding appearing across multiple files	Treat the issue as a process or training concern rather than correcting files individually

🛠️ What Should You Do with the Issues You Find?

Finding an issue is only the first step.

For each finding:

1. Document the file reviewed, the issue identified, and the date of discovery.

2. Determine whether corrective action is necessary.

3. Complete and document the appropriate correction.

4. Determine whether other files may be affected.

5. Identify whether the issue resulted from an individual error or a larger breakdown in procedure.

6. Update policies, forms, training, or workflows when necessary.

This final step is especially important.

Correcting one file does not solve a systemic compliance problem.

If the same issue appears repeatedly, the solution may require additional training, clearer procedures, improved quality control, or changes to the organization’s compliance workflow.

📈 File Sampling or a 100% File Review: Which Do You Need?

Not every property or portfolio needs the same level of review.

A file sampling review may be appropriate when you want to:

• Evaluate overall file quality.

• Identify trends or recurring compliance concerns.

• Assess whether current procedures are being followed.

• Prepare proactively for an upcoming monitoring review.

• Determine whether a more extensive review may be necessary.

A 100% file review may be more appropriate when:

• Significant or recurring compliance issues have already been identified.

• The property has experienced staffing or management transitions.

• Files have not been reviewed consistently.

• The property is preparing for an acquisition, rehabilitation, resyndication, or agency review.

• Ownership or management needs a complete assessment of the current file condition.

• A smaller file sample identifies concerns that may affect additional households.

The right approach depends on your property, program requirements, and the level of risk identified.

🔄 Make Self-Auditing Part of Your Compliance Process

A mid-year review is valuable, but strong compliance operations do not wait until July or January to evaluate file quality.

Consider incorporating smaller file samples into your monthly or quarterly compliance process. Regular internal reviews can help your organization identify patterns earlier, reinforce accountability, and reduce the amount of corrective work required before an external review.

The question is not whether every file will always be perfect.

The question is whether your compliance process is designed to identify and address problems before someone else does. 👀

📂 Not Sure What Your Files Would Reveal?

The TCC Firm provides file sampling reviews and 100% compliance file reviews to help owners, management agents, and affordable housing teams identify compliance concerns, evaluate file quality, and address potential issues before they become larger findings.

Whether you need a targeted sample to assess current operations or a comprehensive review of your entire portfolio, our team provides practical findings and actionable guidance to help you determine what needs attention and what comes next.

Ready to find out whether your files are truly audit-ready?

👉🏾 Visit www.thetccfirm.com to learn more about our compliance file review services or contact our team to discuss the right review approach for your property or portfolio.

Compliance made manageable. Practical support. Real partnership.