General Contractor Cost Certifications for Low-Income Housing Projects

With heightened accountability and state agencies increasing oversight to mitigate fraud risk, General Contractor Cost Certifications (GCCCs) for low-income housing projects are becoming more common as a regulatory requirement. 

General contractors must contend with inaccurate or incomplete accounting records, unpleasant and avoidable fire drills, and extra costs if they do not properly execute on GCCCs. Given that GCCC requirements are relatively new in some states, many contractors are not aware of their rules and nuances – which could lead to significant problems if not understood. 

Understanding State Requirements 

Researching and understanding the differences between state agencies is key to a successful GCCC. To begin understanding these differences, the state agency websites, qualified application plans, and underwriting rules are all adequate research resources; however, the most effective method is contacting a CPA experienced with the various state regulations. 
The following requirements are unique to almost every state: 

• Guidelines of GCCC testing and reporting requirements
• Forms for reporting the costs certified
• Cost classification definitions and requirements
• Calculations of total certifiable costs: including calculations for determining the proper amount of overhead, profit, and general requirements that would be allowed 

This means, general contractors in the low-income housing space may be very familiar with the GCCC rules for one state, but unfamiliar with the unique rules of another. 

Clear Bookkeeping for Accurate GCCCs 

While a general contractor might be focused on the construction of a project, the most common challenges encountered on GCCCs are related to inaccurate, incomplete, or unclear bookkeeping, and these problems can be the most pervasive and daunting issues to contend with. 

For example, many states publish reporting templates with cost categories into which certified costs must fit. Most of these state templates require the costs to be organized by cost code and vendor. For some states, these costs must be additionally categorized by cost types: including amenities, new construction, rehabilitation, and accessory structures. Some templates additionally require segregating subcontracted costs/contracted costs from material costs. 

Most states further require auditors to confirm the costs incurred by vendors and vouch invoices for individual vendors. Contractors who clearly delineate specific costs in their bookkeeping system using cost codes, like that of both state agencies and industry standards, improve the accuracy of their GCCC applications. Likewise, an ability to clearly separate amenity/accessory structure costs from the other costs of construction also contributes to the accuracy of the applications. 

Trying to construct or adjust accounting records that might go back multiple years with that level of detail is, at best, onerous and time consuming. At worst, it is completely impossible, so General Contractors should work to understand the reporting requirements prior to construction cost being recorded rather than waiting to concern themselves with it after construction completion. The first items requested by auditors when completing a GCCC are job cost reports by vendor (preferably in Excel format) and vendor contact listings (so that confirmations can be distributed). Having these items accurately completed and readily accessible for the auditor is a great start toward a successful GCCC outcome. 

Early Auditor Involvement 

Prior to delivering the required report to the state agency, the most significant delays occur when the work starts behind schedule. Many clients seek support for a GCCC after being informed by the state agency that it was required after the submission of the tax credit cost certification. This notification results in an immediate crisis for everyone involved. However, the audit work can begin when construction is approximately 95% complete, which helps expedite the completion of the cost certification as substantial completion is achieved. 

This timelier involvement allows us to consult with and help the contractor and owner understand: 

• State reporting and testing requirements
• Items necessary to complete the certification
• How to address any unusual issues that may arise 

How to Have a Successful GCCC 

General Contractors and owners work hard to construct and develop a successful Low-Income Housing Tax Credit (LIHTC) property, and a successful General Contractor Cost Certification begins long before the draft report is issued. It starts with understanding the rules, having clear and accurate recordkeeping, and involving the auditors early and throughout the process. Accordingly, it is critical to take the appropriate measures to make sure that the final steps in the process are not impeded by a lack of knowledge of the requirements or poor record keeping. 

Do you need help assessing the rules and nuances of General Contractor Cost Certifications for your low-income housing project? Contact us to discuss how we can support you.