Submitting financial data to HUD’s Real Estate Assessment Center (REAC) should be routine, but the 2025-2026 reporting cycle introduced a complication that has tripped up owners, management agents, and auditors alike. The Financial Assessment Subsystem for Multifamily Housing (FASS-MF) still validates against the old $750,000 Single Audit threshold, even though the federal threshold rose to $1 million. If your property expended federal awards in the gap between those two numbers, a standard REAC submission will fail validation unless you follow a specific workaround and waiver process. This article explains how to submit correctly, why the mismatch exists, and how to document the exemption so HUD accepts your filing.
Quick answer: The Single Audit threshold is now $1,000,000, but the REAC FASS-MF system still validates at $750,000. If your entity expended between $750,000 and $999,999 in federal awards, you are not required to have a Single Audit, yet you cannot select “Less than $750K annually” without triggering a validation error. The correct approach is to create the submission as “Greater than or equal to $750K annually” (owner-certified), complete it, and then request a waiver of the audit requirement from the FASSUB main menu, explaining that the entity is above $750,000 but below $1,000,000 and therefore exempt from audit.
Why the FASS-MF Validation Mismatch Exists
The Office of Management and Budget revised 2 CFR Part 200, the Uniform Guidance, and raised the Single Audit threshold from $750,000 to $1,000,000. Under 2 CFR 200.501, a non-federal entity that expends $1,000,000 or more in federal awards during its fiscal year must have a single or program-specific audit conducted for that year. The revised threshold applies to fiscal years beginning on or after October 1, 2024.
The regulatory change was clean, but the systems supporting it were not updated in lockstep. HUD’s REAC platform, which receives owner and agent financial submissions through FASS-MF, continues to present and validate against the prior $750,000 figure. The data-entry screens ask whether federal awards were “Less than $750K annually” or “Greater than or equal to $750K annually,” with no option that reflects the new $1 million cutoff.
This creates a real problem for properties that fall in the $750,000 to $999,999 band. By regulation these entities are exempt from a Single Audit, but the REAC system has no field that lets them say so directly. The audit community, through AHACPA, flagged this issue during the 2025-2026 reporting cycle and published guidance on the only workable path forward.
The mismatch matters because financial submissions tie directly to compliance deadlines and risk ratings. A rejected or incorrectly coded submission can cascade into late-filing flags, follow-up correspondence, and unnecessary audit costs. Getting the coding right the first time protects both your compliance standing and your budget. It also avoids the awkward position of certifying to a figure that the system interprets differently than you intend.
How Do You Submit a REAC Filing Under the Threshold Mismatch?
The path you take depends on how much your entity actually expended in federal awards during the fiscal year. There are three distinct scenarios, and selecting the wrong one is the most common cause of failed submissions this cycle. Knowing which band you fall into before you log in saves rework.
If your entity expended $1,000,000 or more, select “Greater than or equal to $750K annually” and proceed with a full Single Audit submission. The system language is dated, but for entities at or above the new threshold the result is correct: you owe a Single Audit and you submit the audited financial statements accordingly. Nothing about the workaround applies to you, because the system’s expectation and the regulation point the same direction.
If your entity expended less than $750,000, select “Less than $750K annually.” You are below both the old and the new threshold, so no audit is required and no waiver is needed. This is the simplest case and the validation behaves as expected. The data-entry screen and the regulation agree, and the submission proceeds without intervention.
The difficulty sits entirely in the middle band. If your entity expended between $750,000 and $999,999, you are exempt from a Single Audit under the current Uniform Guidance, but you cannot select “Less than $750K annually.” Doing so triggers a validation error, because the system reads any figure that crosses $750,000 as requiring an audit. The error message warns that you are attempting an owner-certified submission with federal awards below $750,000 while your data shows total federal awards exceed $750,000. According to AHACPA’s guidance on the REAC threshold issue, you must instead create the submission as “Greater than or equal to $750K annually,” choose owner-certified on the next screen, and complete the filing.
The key insight is that the system’s “Greater than or equal to $750K annually” label no longer maps cleanly to “audit required.” For the middle band, that selection is the mechanical entry point into the workaround, not an admission that an audit is owed. The waiver step, covered next, is what corrects the record.
How to Request a Waiver of the Audit Requirement
Coding the submission as “Greater than or equal to $750K annually” is only the first half of the process for the middle-band entity. On its own, that selection signals to HUD that an audit is expected. To correct that signal and document your actual exemption, you must request a waiver of the audit requirement. Skipping this step leaves your file looking like a missing-audit case.
After the submission is complete, return to the FASSUB main menu and request a waiver of the audit requirement. In the waiver explanation, state plainly that the submission reflects federal awards over $750,000 but below $1,000,000, and that the entity is therefore not subject to a Single Audit under the revised Uniform Guidance. This written rationale is what reconciles the dated system language with the current regulatory threshold, and it mirrors the explanation AHACPA instructs filers to provide.
Keep your own documentation supporting the federal award expenditure figure, including the schedule of expenditures of federal awards or its equivalent working papers. If HUD reviews the waiver, the supporting calculation showing you remained below $1,000,000 is your evidence. AHACPA has described this owner-certified submission plus waiver approach as the workable option available while HUD’s system update remains pending.
Owners and management agents who are unsure whether their expenditures cross the threshold should resolve that calculation before filing rather than after. The threshold is measured by federal awards expended during the fiscal year, not awards received or budgeted. That distinction can move an entity from one band to another, so it deserves careful attention. Our HUD accounting and compliance team regularly helps multifamily owners compute the expenditure figure correctly and decide whether a Single Audit applies for the year.
Deadlines and Documentation That Protect Your Submission
The annual financial statement submission for most HUD multifamily properties is due 90 days after the fiscal year end, which places the deadline for calendar-year entities at the end of March. Late submissions affect financial assessment scoring and can prompt enforcement attention, so the threshold workaround should not become a reason to miss the filing window. Treat the deadline as fixed and the coding question as something to settle in advance.
Build your file before you log in to REAC. Confirm the federal award expenditure total, identify which of the three threshold scenarios applies, and draft the waiver language in advance if you fall in the middle band. Entering the system with the decision already made reduces the chance of selecting the wrong option and having to recreate the submission. It also gives you a clean record of how you reached the figure, which matters if HUD asks.
Because the mismatch is a systems issue rather than a regulatory one, the rules themselves are not ambiguous: the $1,000,000 threshold under 2 CFR 200.501 governs whether an audit is required, and the REAC selection is simply the mechanism for reporting it. When the two disagree, the regulation wins, and the waiver is how you tell HUD that. For complex ownership structures, blended financing, or properties near the threshold, the team that handles HUD financial reporting and Single Audit work at Pease Bell CPAs can confirm the correct coding before you submit.
Frequently Asked Questions
What is the current Single Audit threshold for HUD multifamily entities?
The Single Audit threshold is $1,000,000 in federal awards expended during the fiscal year, under 2 CFR 200.501, and the revised threshold applies to fiscal years beginning on or after October 1, 2024. Entities that expend less than $1,000,000 are exempt from a Single Audit for that year, even though the REAC system still displays the prior $750,000 figure.
Why does the REAC system still show $750,000 instead of $1 million?
HUD’s FASS-MF platform was not updated when OMB raised the threshold, so its data-entry and validation screens still reference $750,000. The regulatory threshold is $1,000,000, but the system has not caught up, which is why entities in the $750,000 to $999,999 range must use a workaround and waiver rather than a direct selection.
How do I submit if my federal expenditures are between $750,000 and $1,000,000?
Create the submission as “Greater than or equal to $750K annually,” select owner-certified, and complete it. Then return to the FASSUB main menu and request a waiver of the audit requirement, explaining that your expenditures exceed $750,000 but fall below $1,000,000 and are therefore not subject to a Single Audit.
Do I still need to file by the normal REAC deadline while using the waiver process?
Yes. The threshold workaround does not change your submission deadline, which for calendar-year multifamily entities falls at the end of March, 90 days after the fiscal year end. File on time using the owner-certified plus waiver approach, since a late submission can affect your financial assessment scoring regardless of the audit exemption.
