On April 9, U.S. Citizenship and Immigration Services introduced audit guidelines for EB-5 regional centers as part of the EB-5 Reform and Integrity Act.[1] Prior to the RIA passage in 2022, USCIS infrequently conducted audits of regional centers, and there was no published guidance or statutory or regulatory consequences for a regional center's failure to comply with an audit. The RIA now requires USCIS to audit regional centers every five years to verify compliance with immigration and securities laws, and the flow of the EB-5 funds into the projects sponsored by the regional center. The new audit guidelines highlight the importance for regional centers of meticulous recordkeeping and strategic preparation prior to receiving an audit notification to maintain compliance and facilitate a seamless audit process. USCIS' regional center audits are intended to enhance the integrity of the EB-5 program by confirming the accuracy of regional center applications, certifications, and investor petitions. During audits, noncooperative regional centers may face designation termination, although negative findings do not immediately affect the entities or petitioners sponsored by the regional center unless deliberate noncompliance is discovered. From April 23, audits will align with generally accepted government auditing standards for consistency, and aim to ensure a thorough review of the regional centers' compliance with federal requirements. Regional centers should expect USCIS auditors to:
Review applications, certifications, and related records
Inspect public records and additional information about the regional centers
Verify supporting documentation submitted with applications and in annual statements
Perform in-person audits through a site visit, when applicable
Evaluate the effectiveness of internal controls related to the regional center's administration, oversight, and management functions
Review and analyze financial documentation
Review the flow of investor capital into capital investment projects; and Jennifer Hermansky Miriam Thompson
Interview personnel to confirm the validity of the information provided with applications and annual certifications.
Generally, USCIS will likely review updated project information and the flow of EB5 investor money for each project, the underlying job creation documentation and analysis for each project, any related securities filings for each sponsored new commercial enterprise, and financial information and payments made to third parties, including foreign finders for each project under the regional center's sponsorship. Importantly, this would also include records relating to pre-RIA projects under the sponsorship of the regional center. A regional center audit begins as of the date of the USCIS audit notification letter and requests for information. An audit includes several stages, including:
1. A virtual conference outlining the procedures and documents required to be prepared and sent before the in-person audit occurs;
2. USCIS' receipt and review of information submitted by the regional center;
3. An in-person or virtual site visit;
4. An exit conference;
5. A closeout memo; and
6. Final audit results