CAPITAL FUND FINANCIAL REPORTING1

Pacific Southwest NAHRO Fall WorkshopScottsdale ArizonaSeptember 23-25, 2012

presented by

Pete Koziol, HUD Financial Analyst, Phoenix Offfice

Cap Fund Reporting: FDS2

Financial Data Schedule (FDS) Reporting Cap Fund expenditures are reported at the Project

level Each Project has two income statements- one for Low

Rent Public Housing and one for Capital Fund. The two income statement are combined for the Project income statement.

There is one balance sheet for each Project that combines the financial activity of both the Low Rent Public Housing and CFP program

Refer to Capital Fund Reporting Accounting Brief #15:

http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products/fass/pha_briefs

EXPENSE OR CAPITALIZE3

The general guideline for accounting for expenditures made after acquisition is that if the expenditures provide additional service potential beyond the current period they should be capitalized. An entity may produce future services potential by making current expenditures that:1. Extend the useful life of an asset2. Increase the quantity of services of an asset3. Increase the quality of services provided by an

asset If an expenditure causes one or more of these

results, then, according to GAAP the entity should capitalize.

Avoiding the additional record-keeping for fixed asset accounts is not a good reason to expense.

Cap Funds for Capitalized Expenditures

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Reported as Revenue in the Cap Fund Income Statement, FDS line item 70610

Equity transfer from Cap Fund to Low Rent for related amount (FDS line item 11040)

Memo accounts in CFP column (FDS #11610 to 11660) must be completed to match amount in line 70610

Project Balance Sheet: The amount in 70610 must also be distributed to asset accounts on the Project Balance Sheet. Additions to FDS accounts for Fixed Assets (#161 to 165) and Construction in Progress (#167) should equal the amount in 70610

CAP FUNDS FOR OPERATIONS (BLI 1406)

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Large PHA’s (250 +) limited to 20% of Cap Fund Award

Small PHA’s (non-troubled) : 100% of award as long as capital needs are being met

CFP funds used to supplement operations are reported as revenue on the Cap Fund portion of the income statement on FDS line 70600 with a corresponding Operating Transfer Out (#10020) entry

CFP funds for administrative expenses/management fee of CFP are also reported as 70600 (CFP Income Statement) with matching amount under administrative expenses of Cap Fund Income Statement

COCC cannot receive Cap Funds for Operations

CAP FUNDS FOR MANAGEMENT IMPROV. ( BLI 1408)

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Cap Funds for Management that are capitalized: Cap Fund Inc Statement: Revenue listed on FDS

line 70610 Memo accounts on Income Statement to be

completed Equity transfer to Low Rent and amount added to

Fixed Assets Cap Funds for Management that are expensed:

Treated as transfers to operations Revenue on 70600, Amount transferred to Low Rent Expensed with other expenses in Low Rent Column

Management Improvements are limited to Project uses

Cap Fund Income Statement

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The only operating expenses that should be showing on the Capital Fund Income Statement are administrative expenses such as: Management Fee Expense (COCC- fee for

service PHA) Admin Salaries and Admin Benefits (non-fee

for service PHA) Audit fee (allocation to Cap Fund)

Force Account Labor8

Force Account Labor refers to the use of PHA employees to capital and modernization work on its projects Capitalized Force Account Labor. Is used to support capital

works, the cost of such labor is capitalized and becomes an asset on the balance sheet of the project. From an FDS reporting standpoint, force account labor should be reported in the same way as other hard costs.

Non-Capitalized Force Account Labor. Is used to support capital-type work that does not meet a PHA’s Capitalization threshold. Is treated like Cap Fund transfers to Operations. Because Cap Fund transfers to operations lose their identity these expenses will be included as maintenance expenses in the Low Rent income statement and will lose their distinction as CFP funds or force account labor.

Projects: Dual Income Statements

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Audited/A-133 03/31/2011Project Name:

Low Rent Capital Fund Total Project

$406,427 $406,427

$69,544 $69,544

$475,971 $0 $475,971

$1,039,047 $191,452 $1,230,499

$400,000 $400,000

Submission Type:

70300 Net Tenant Rental Revenue

70400 Tenant Revenue - Other

70500 Total Tenant Revenue

70600 HUD PHA Operating Grants

70610 Capital Grants

70710 Management Fee

Income Statement Memo Accounts

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Low Rent Capital Fund Total Project

$0 $0 $0

$0 $400,000 $400,000

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

11610 Land Purchases

11620 Building Purchases

11630 Furniture & Equipment - Dwelling Purchases 11640 Furniture & Equipment - Administrative Purchases 11650 Leasehold Improvements Purchases 11660 Infrastructure Purchases

13510 CFFP Debt Service Payments 13901 Replacement Housing Factor Funds

Equity Transfer from Cap Fund to Low Rent

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Low Rent Capital Fund Total Project

$2,923,562 $0 $2,923,562

$400,000 ($400,000) $0

11030 Beginning Equity

11040 Prior Period Adjustments, Equity Transfers and Correction of Errors

INCOME STATEMENT: ACCOUNTS AFFECTED BY CAP FUND

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INCOME STATEMENT: CAPITAL FUND IMPACTS

Low Rent Capital Fund Total Project

$1,039,047 $191,452 $1,230,499

$400,000 $400,000

$155,000 $40,000 $195,000

$151,452 $151,452

($151,452) ($151,452)

$400,000 ($400,000) $0

$0 $400,000 $400,000

91300 Management Fee Exp

11620 Building Purchases

70600 HUD PHA Operating Grants

70610 Capital Grants

10010 Operating Transfer In

10020 Operating Transfer Out

11040 Prior Period Adjustments, Equity Transfer, and Correction of Errors

FIXED ASSET ACCOUNTS

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BALANCE SHEET ACCOUNTS 2010 PROJ ECT #3

161 Land $167,657

162 Buildings $8,548,375

163 Furniture, Equipment & Machinery - Dwellings 164 Furniture, Equipment & Machinery - Administration

$87,504

165 Leasehold Improvements

BALANCE SHEET ACCOUNTS 2011 PROJ ECT #3

161 Land $167,657

162 Buildings $8,948,375

163 Furniture, Equipment & Machinery - Dwellings 164 Furniture, Equipment & Machinery - Administration

$87,504

165 Leasehold Improvements