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Slide Number #1
Cara Gillette
Finance for the Public Finance for the Public Housing DirectorHousing Director
Slide Number #2
Today’s TopicsToday’s Topics
Overview of the new operating fund formula
Stop-loss provision Project-based accounting Basic financial concepts and reports Excess cash and fungibility
Building BlocksBuilding Blocks
Project-based fundingProject-based funding
Project-based budgetingProject-based budgeting
Project-based accountingProject-based accounting
Project-based managementProject-based management
Project-based Project-based performance assessmentperformance assessment
Slide Number #4
The New FormulaThe New Formula
Requires PHAs with 400 or more PH units to transition to project-based accounting, budgeting, and management Threshold of 400 doesn’t apply to stop-loss PHAS
Is based on HUD’s multifamily industry Will force the PH program to become more
property-based
Slide Number #5
Hot Off the PressHot Off the Press
PIH Notice 2008-16(HA) PHAs with 250-400 units can exempt
themselves But the election for exemption is only
authorized for CY 2008 PHAs that elect the exemption aren’t
“grandfathered” in for future years And there are lots of requirements
Slide Number #6
Key Implementation DatesKey Implementation Dates
Determination of Asset Management Projects (AMPs) – CY 2006
Implementation of new Operating Fund Formula – CY 2007
Operating Subsidy by AMPs – Begins in CY 2008
Project-Based Budgeting/Accounting – Begins with PHA FYs July 1, 2007 and forward
Subsidy is fully fungible in CY 2008
Cost Reasonableness – Begins in Fiscal Year 2009
Slide Number #7
The New Model for PHThe New Model for PH
Fundamental shift for public housing Historically, operating subsidy was calculated
on an aggregate level Op sub was allocated to the central office, which
decided where the subsidy went
Now, subsidy is calculated for and allocated to each project
Slide Number #8
The New Model for PHThe New Model for PH
Funding goes to the projects, and projects pay for everything else
Any service to the project not at the project will come from a cost center Every PHA will have a central office cost center
Direct, indirect, and allocated services
Slide Number #9
The New Model for PHThe New Model for PH
Two main components Project-based management is decentralized
property services tailored to the needs of each property, given the resources available to each property
Asset management is strategic oversight and centralized services tailored to the needs of the portfolio as a whole
Slide Number #10
AMPs – the Economic Engine of PHAMPs – the Economic Engine of PH
Your PHA defined its asset management projects (AMPs) for purposes of project-based accounting, budgeting, and management
Each AMP has its own budget, financial statements, staffing, subsidy, capital plan, and will have its own performance scoring
Not in book
Slide Number #11
AMPS – the Economic EngineAMPS – the Economic Engine
The PHA’s decision on the grouping of AMPS is based on: Geographic location Organizational structure Size of the PHA Housing stock
Not in book
Resident population Delivery systems Maintenance delivery
Slide Number #12
Compliance with Asset Compliance with Asset ManagementManagement
Best definition of compliance so far is notice to stop-loss agencies, since they have to comply early
Slide Number #13
Notice 2006-14(HA)Notice 2006-14(HA)
Even though these are the instructions for stop-loss agencies, this notice, and the Stop Loss Kit, is the clearest roadmap for all PHAs The difference is in the deadline
Slide Number #14
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
1. Project-based accounting Monthly operating statements for each
project – revenues and expenses vs. budget levels, including all fees from the COCC and Capital Fund
Must reasonably reflect the financial performance of each project
Slide Number #15
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
2. Project-based management Property management services are
arranged or provided in the best interest of the property considering needs, cost, and responsiveness, relative to local market standards
Slide Number #16
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
3. Central office cost center (COCC) must charge reasonable fees to the AMPs
COCC must operate on the allowable fees and other permitted reimbursements from its PH and S8 programs
In other words, the COCC must support itself
Slide Number #17
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
4. Centralized services that directly support projects are funded using a fee-for-service approach or through other allowable charge-backs
Each project is charged for actual services received - must be reasonable compared to local market
Slide Number #18
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance PHA systematically reviews financial,
physical, and management performance of each project, and identifies non-performing properties
Slide Number #19
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance – a non-performing property has:
PHAS physical score below 70 Significant crime and drug problems Below 95% occupancy TARS that exceed 7% of monthly rent roll
Slide Number #20
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance – a non-performing property has:
PHAS grade of “D” or below for vacant unit turnaround and work orders
Utility consumption more than 120% of agency average
Other major management problems
Turnaround = D more than 30 daysWOs = D more than 40 days
Slide Number #21
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance Long-term prospects for each property:
Maintain project as is Identify capital improvements needed Dispose of property (demo, sale, etc) Financial condition of each project
Stop-Loss FAQs 9/1/06
Slide Number #22
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
6. Capital planning Physical needs assessment and a five-year
plan for each project Five-year plan needs to consider revenue
sources, market, tenancy, and project needs
Long-range energy consumption reduction
Slide Number #23
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Risk management responsibilities related to regulatory compliance
PHA not carrying out responsibilities if: Designated troubled under PHAS Any outstanding FHEO findings or
voluntary compliance agreement not implemented…
Slide Number #24
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Regulatory noncompliance if: No current energy audit… Outstanding IG audit findings w/no progress Not in compliance with ACOP Unsatisfactory progress under RHIIP/RIM PIC (50058) reporting rate under 95% Any other major compliance deficiency
Slide Number #25
The Deal with Stop-LossThe Deal with Stop-Loss
Under the new op sub formula, about a third of PHAs gained, a third stayed the same, and a third lost op sub
Slide Number #26
The Deal with Stop-LossThe Deal with Stop-Loss
The PHAs who are “losers” under the new formula can stop the loss of subsidy by early conversion to asset management
Slide Number #27
Stop-Loss ProvisionStop-Loss Provision
Deadline for Year 1 was October 15, 2007 If PHA demonstrated conversion by that date,
the reduction of subsidy stopped at 5% of the difference for CY 2007 That means that 95% of the PUM difference
will be added to the lower op sub level under the final rule
Slide Number #29
Stop-Loss ProvisionStop-Loss Provision
There will be additional requirements for subsequent years Year 2 has more requirements than Year 1
HUD staff will have to monitor
Slide Number #30
Per Unit Month (PUM)Per Unit Month (PUM)
Budgeted income and expense items are shown in a monthly and yearly total dollar amount – and also in a per unit per month (PUM)
Page 6-3
Slide Number #31
Per Unit Month (PUM)Per Unit Month (PUM)
PUM is an important concept PUM applies to any line item ($) that:
Was spent, is being spent, or will be spent Was earned, is being earned, or will be earned
Formula is: Any line item $ ÷ EUM = PUM
Slide Number #32
Per Unit Month (PUM)Per Unit Month (PUM)
PUM also allows the portfolio to be tracked over time as the number of units change Example:
Last year the PHA had 1200 units This year, due to demo/dispo, there are 1100
units
Slide Number #33
Per Unit Month (PUM)Per Unit Month (PUM)
PUM also allows sites to be compared – even if they aren’t of similar size type and age If one AMP’s landscape cost is $26.82 and
another’s of similar common grounds is $10.45, costs may need to be analyzed
Slide Number #34
Operating Subsidy FormulaOperating Subsidy Formula
The Money is Driving the Changes
Page 6-4
Slide Number #35
The New Operating SubsidyThe New Operating Subsidy
The old op sub was aggregate - AEL Under the new formula, subsidy is
calculated and allocated by project - PEL The op sub will go directly to the projects,
and all other activities will be supported by fees paid by the projects
We see these in PUM (per unit month) figures
Slide Number #36
The New Operating SubsidyThe New Operating Subsidy
Operating subsidy formula:Project expense level (PEL)
+ Utility expense level- Formula income frozen at 2004 level
+ Applicable add-ons
= Operating subsidy
Slide Number #37
The New Operating SubsidyThe New Operating Subsidy
Ten components used to calculate PEL:1. Geographic variable – one of the two most
significant variables – where you are in the country
2. Central city variable
3. Clientele (occupancy) variable – family properties tend to cost 6% more
Page 6-5
Slide Number #38
The New Operating SubsidyThe New Operating Subsidy
Ten variables used to calculate op sub:4. Property size variable – number of units
5. Building type variable – high-rise, garden walk-up, single family home, etc.
6. Bedroom mix variable – the other most significant variable
Slide Number #39
The New Operating SubsidyThe New Operating Subsidy
Ten variables used to calculate op sub:7. Percent assisted variable – 100%
subsidized tends to cost 6% more
8. Property age variable
9. Neighborhood poverty variable
10. Ownership type variable – for-profits have costs that are 6% less
Slide Number #40
The New Operating SubsidyThe New Operating Subsidy
National floor of $200 PUM for senior properties and $215 PUM for family properties
National ceiling of $420 PUM and 4% reduction for PUMs over $325
Slide Number #41
The New Operating SubsidyThe New Operating Subsidy
Add-ons – the PHA determines which are applicable:
Self-sufficiency Energy loan amortization PILOT Audit cost – actual most recent Resident participation - $25 per unit per yr
Page 6-6
Slide Number #42
The New Operating SubsidyThe New Operating Subsidy
Add-ons – the PHA determines: Asset management fee
$4 PUM for PHAs with 250 or more $2 PUM for smaller PHAS who transition
to PBM who have a COCC
Slide Number #43
The New Operating SubsidyThe New Operating Subsidy
Add-ons – the PHA determines: Information technology fee
$2 PUM Asset repositioning fee (demo or dispo) Costs attributable to changes in federal
law, regulation, or economy
Slide Number #44
The New Operating SubsidyThe New Operating Subsidy
Approved vacancies – still get op sub: Units undergoing mod (if on schedule) Units approved for resident services Units in court litigation Units undergoing casualty loss settlement Units vacant due to disaster (federal or
state)…
Page 6-7
Slide Number #45
The New Operating SubsidyThe New Operating Subsidy
Approved vacancies – still get op sub: Units vacant due to changing market
conditions Up to a 3% vacancy
The PHA will enter types of vacancies into PIC
Slide Number #47
CostsCosts
All budget costs and expenses will fall into one of three general categories: Direct cost (at the project) Central office cost center (COCC)
Indirect services Other cost centers (optional)
For direct and allocated services
Slide Number #48
Cost CentersCost Centers
Every PHA will have at least one cost center, the central office cost center (COCC)
Centralized maintenance may also be a cost center
Slide Number #49
Frontline (Direct) CostsFrontline (Direct) Costs
These are expenses of the project: Personnel costs of staff assigned to project Repair and maintenance costs including
supplies, contracted repairs, make-readies, preventive maintenance, etc.
Utility costs Costs related to the site office – phones, office
supplies, computers, postage, etc.
Slide Number #50
Frontline (Direct) CostsFrontline (Direct) Costs
These are expenses of the project: Advertising including procurement and
employment notices Costs of employee recruiting and screening PILOT Insurance (allocated) Legal fees
Slide Number #51
Frontline (Direct) CostsFrontline (Direct) Costs
These are expenses of the project: Property management fees, bookkeeping
fees, and asset management fees Audit costs (allocated) Vehicle expense for site-based vehicles
Slide Number #52
Charging for MaintenanceCharging for Maintenance
Maintenance is an example of services that may need to be provided directly to projects that are centrally located and charged based on time spent or actual work performed
Slide Number #53
Charging for MaintenanceCharging for Maintenance
How to organize maintenance is an important PBM decision A PHA can decide to organize maintenance:
Decentralized – front line Supervised by the property manager
Centrally A mix
Slide Number #54
Charging for MaintenanceCharging for Maintenance
If the PHA uses centralized maintenance, will be required to use fee-for-service method when charging the project Project can only be charged for actual
services provided Could be a single blended hourly rate,
separate hourly rates for various activities, or flat fee – must be reasonable
Slide Number #55
Centralized Maintenance Centralized Maintenance
For all centralized maintenance staff providing direct services, the PHA can charge up to the market rate Even if it’s above what the
technician is actually paid
Slide Number #56
Centralized MaintenanceCentralized MaintenanceHow Much Can the PHA Charge?How Much Can the PHA Charge?
Sally is a maintenance worker $52.26 Wages
$23.52 Benefits (45%)
$75.78 Hourly rate
If the market rate is $100, the hourly charge could be $100, regardless of what Sally is paid
Slide Number #57
Charging for MaintenanceCharging for Maintenance
Costs of overall labor cost include: Gross salary, employer FICA contributions,
federal unemployment tax, state unemployment tax, worker’s comp insurance, health insurance premiums, cost of fidelity or comparable insurance, performance incentives and or annual bonuses, and retirement benefits (pre and post retirement)
Not in book
Slide Number #58
Charging for MaintenanceCharging for Maintenance
PHAs may charge for actual materials used as well as labor
Not in book
Slide Number #59
Costs of Other FunctionsCosts of Other Functions
Charging the project Where it’s cost-effective,
PHA can prorate across projects, the cost of centralized staff who perform frontline functions
Page 6-17
Slide Number #60
Charging Back to the ProjectCharging Back to the Project
These are called front line allocated costs For example, collecting rent centrally,
employee handing rent collection, as well as direct costs, could be charged back to applicable projects on any reasonable basis
Not necessary for the rent collection clerk to track his or her activity per AMP
Slide Number #61
Charging Back to the ProjectCharging Back to the Project
Two exceptions to charging projects for centralized staff performing frontline functions: Can’t charge projects for cost of a centralized
supervisor Can’t charge projects cost of centralized staff
handling procurement
Slide Number #62
Update – Centralized WarehouseUpdate – Centralized Warehouse
FAQ December 1, 2006 If a warehouse at the COCC is for
“storerooms” of scattered sites, with HUD approval, this can be an eligible frontline cost
Not in book
Slide Number #63
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project: Central waiting lists, screening, leasing and
occupancy – PHAs can prorate costs direct costs of these functions to the AMPs, including supervisory personnel The proration can be based on the number of units
leased at a project, average turnover at a project, or other reasonable allocation method
Page 6-18
Slide Number #64
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project: Resident programs – PHA can prorate
centralized resident programs across projects on a reasonable basis, including supervisory staff
Slide Number #65
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project: Protective services – PHAs can charge
centralized protective services, either in-house or through local law enforcement, including supervisory staff
HUD eventually wants these tracked by project
Slide Number #66
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project: Work order processing
Although it is the norm in multifamily housing to handle work order processing on site, a PHA may charge the cost of centralized work order processing only if the PHA can document/justify that the cost pro rated is reasonable and necessary
Slide Number #67
Shared Resource CostsShared Resource Costs
HUD knows it may not make economic sense to have FT maintenance staff dedicated to one AMP In this case the PHA may establish a
reasonable method to spread these personnel costs to the AMPs receiving the service
Page 6-19
Slide Number #68
Shared Resource CostsShared Resource Costs
Shared resource costs are distinguished from front line prorated costs in that the services being shared are limited to a few projects as opposed to being prorated across all projects An example of a shared resource cost might
be a maintenance person assigned to and paid for by two projects
Slide Number #69
Shared Resource CostsShared Resource Costs
- What if there is PHA personnel who provide services both to the projects and the central office cost center?
Slide Number #70
Shared Resource CostsShared Resource Costs
- For PHA staff who provide services both to the projects and the central office cost center, the PHA must separate the amount of time spent on providing services to the projects and the central office cost center, based on a reasonable methodology
Slide Number #71
Shared Resource CostsShared Resource Costs
- The time spent by the staff on projects must be at an hourly rate that does not exceed the reasonable hourly fee for the service
Slide Number #73
Fees Allowed under PBMFees Allowed under PBM
Fees the projects will pay to the COCC: Property management fees Bookkeeping fees Asset management fees Capital fund management fees
Page 6-20
Slide Number #74
Fees Allowed under PBMFees Allowed under PBM
Property management fee Is “reasonable fee” paid by project to COCC
for project oversight HUD has established some “reasonability”
guidelines Notice: Guidance on Implementation of
Asset Management, issued Sept 6, 2006
Slide Number #75
Fees Allowed under PBMFees Allowed under PBM
Management fee – “reasonable” Based on multifamily fee (annual letter from
field office); or 80th percentile as established by HUD; or Other compelling data of local market
Might include fees paid pay the PHA for private management of other properties
Slide Number #77
Fees Allowed under PBMFees Allowed under PBM
Management fee Based on units leased (occupied units and
approved vacancies, but not the 3% limited vacancies) (EUM) using monthly lease-up rate Stop-loss FAQs (question 12) says that the
PHA can use either the first day or last day of the month (but must be consistent)
Slide Number #78
Eligible Unit Months (EUM)Eligible Unit Months (EUM)
The AMP’s eligible unit months (EUM) is used to monitor on a per unit basis, and to calculate property management fees the AMP will pay to the COCC
Slide Number #79
Eligible Unit Months (EUM)Eligible Unit Months (EUM)
Occupied units are those occupied by: Eligible families Police officers Security PHA employees
Slide Number #80
Property Management Fee Property Management Fee Calculation ExampleCalculation Example
X { + + }
The Elms has 120 units = 1440 total unit months 1200 occupied unit months last year 100 HUD-Approved Vacant Unit Months
Management fee = $45 Calculation: 1200 + 100 x $45 = $58,500
PUM Prop Mgmt Fee
OccupiedHUD-
Approved Vacancy
Demo/DispUnit Mos
Slide Number #81
Fees Allowed under PBMFees Allowed under PBM
Property Management Fee – Demolition Year 1 75% of PUM management fee Year 2 50% of PUM management fee Year 3 25% of PUM management fee
Slide Number #82
Fees Allowed under PBMFees Allowed under PBM
Property Management Fee – Disposition Year 1 75% of PUM management fee Year 2 50% of PUM management fee
Slide Number #83
Fees Allowed under PBMFees Allowed under PBM
Bookkeeping fee An extension of the management fee For accounting for project funds, charged to
the project from the COCC Based on occupied units and allowable
vacancies HUD will consider $7.50 PUM reasonable
Page 6-22
Slide Number #84
Fees Allowed under PBMFees Allowed under PBM
Asset management fee Fee paid by project to COCC for oversight of
portfolio Based on total ACC Must be reasonable, not to exceed $10 PUM Only paid if the project has excess cash flow
(no limit first year)
Slide Number #85
Fees Allowed under PBMFees Allowed under PBM
In the 1st year of PBM, there is no excess cash requirement for the payment of the asset management fee
In the 2nd year, each AMP must have excess case to pay the asset management fee
In the 3rd year, excess cash must equal specific assets minus current liabilities minus one month’s operating expenses
Slide Number #86
Asset Management Fee Asset Management Fee Calculation ExampleCalculation Example
X
AMP has 120 units: $10 x 120 units x 12 months = $14,400
$10 PUMAsset Mgmt Fee
Total ACC Units
Slide Number #87
Capital Fund Management FeeCapital Fund Management Fee
CFG management fee will be an optional fee paid to the central office to cover all costs of the central office’s oversight and management (program administration) of the CFG
Page 6-22
Slide Number #88
Capital Fund Management FeeCapital Fund Management Fee
Fee may be up to 10% of the CFG including replacement housing funds The fee is paid by each AMP from CFG
proceeds
HUD is still defining the way the fee will be earned
Slide Number #89
Capital Fund Management FeeCapital Fund Management Fee
Examples of costs covered by the CFG management fee include the physical needs assessment, planning, preparation of the Annual Plan, processing of LOCCs draw downs, preparation of reports, budgeting, accounting, and procurement paid for with CFG
Slide Number #90
Capital Fund Management FeeCapital Fund Management Fee
This fee is not intended to cover costs associated with construction supervision and inspection These costs are considered frontline costs to
the project
Slide Number #91
Management Fees for Other PIH & Management Fees for Other PIH & HUD GrantsHUD Grants
If a fee rate has not been established for a grant: The COCC can charge up to 15% of the grant
amount as a management fee Where administrative costs are set through other
notices, regulations and existing grant agreements these policies and agreements are controlling
Slide Number #92
Fee Income Non-Program Fee Income Non-Program IncomeIncome
Reasonable fees charged to AMPs and programs are not considered federal program income for the purposes of 24 CFR part 85 Fee income is considered local revenue Control over its use is subject only to state or
local requirements imposed on individual PHAs
Slide Number #93
COCC – Working CapitalCOCC – Working Capital
Working capital for the COCC: HUD will allow the COCC to be initially
funded (year 1) with working capital of up to six months of property management, bookkeeping, and asset management fees based on 100% occupancy of all ACC units
Slide Number #94
Costs of a ProjectCosts of a Project
Project
Front line costs:Direct admin costsDirect maintenanceDirect office costsUtilitiesFees paid by project Management fee Asset management fee Bookkeeping fee Other fees for services
Central OfficeCost Center
Slide Number #95
How Cost Centers are How Cost Centers are FundedFunded
Central OfficeCost Center
Central MaintenanceCost Center
Waiting ListEligibility
Cost recovery based on fees paid by projects and from other programs
Cost recovery will occur based billing projects for services performed
Some centrally provided service costs will be allowed to be allocated to projects
RevenuesRevenuesProject
Revenues
- Dwelling rent
- Other tenant revenue
- Interest income
- Misc. income
- Operating subsidy
- Capital grant funds
-Management fees earned-Bookkeeping fees-Asset mgmt fees earned-Capital fund mgmt fees-S8 management fees-Other eligible reimbursements-No direct subsidy!!
COCCRevenues
Summary – All Together NowSummary – All Together NowManagement
ActivityFrontline Activity
Method
Management Fees
AdministrativeRent CollectionSecurityScreening/WLOccupancyLeasingResident SvcsWork Orders
OtherAudit CostsWarehousing
MaintenanceTechnical Routine
Inspections
OtherPurchasingOther
Method
Proration Fees for Service None
Slide Number #99
Key Financial TermsKey Financial Terms
Financial Data Schedule (FDS) is the HUD-required financial statement that’s submitted electronically to HUD FDS is submitted for each program of PHA PHAs will now be preparing the FDS to report
financial activity at the AMP level Balance sheet and income statement
Slide Number #102
Financial ReportsFinancial Reports
Income statement reports on an accrual basis how much the project has earned (revenue) and subtracts expenses, resulting in how much your project has made or lost in the period Gives you a sense of how well the project is
operating for the period of time assessed
Page 6-32
Slide Number #103
Financial ReportsFinancial Reports
Balance sheet shows the overall status of your project’s finances at a fixed point in time – a snapshot Totals all assets and subtracts liabilities to
compute overall net worth (or net loss) What the project owns, what it owes, what
it’s worth
Assignment of Assets and Assignment of Assets and LiabilitiesLiabilities
At the end of the first year of project-based accounting PHAs will assign all items on the balance sheet between the COCC, AMPs, and other programs
PHA Fiscal Year End Allocation Date
June June 30, 2008
September September 30, 2008
December December 31, 2008
March March 31, 2009
Slide Number #105
The BudgetThe Budget
The budget is a management tool Each AMP will have
its own budget Property managers
need to manage to their budgets
Page 6-65
Slide Number #106
Financial ReportsFinancial Reports
Budget is a financial forecast Estimates what each AMP expects to spend
(expenses) and earn (revenue) for period of time
It’s important for the PHA to train property managers to understand their AMP budgets and manage to them
Slide Number #107
Key Budgetary ConceptsKey Budgetary Concepts
Itemized projection of income and expenses over a specific period
Guideline for operating the project Tool to prevent fraud and theft Measure of project’s financial health Measure of staff performance
Slide Number #108
The BudgetThe Budget
Operating budget should be a realistic estimate and should contain: Operating receipts Operating admin Tenant service Utility expenses Maintenance
Protective services General expenses Nonroutine expenses
Slide Number #109
An AMP BudgetAn AMP Budget
Stop Loss Kit provides template Budgets for each projects must total budget of PH Budgets should include all charges and fees from
the COCC, and Capital expenses One budget spreadsheet will reflect PUM, and one
budget spreadsheet will reflect annual figures
Sample Conventional BudgetSample Conventional Budget
Gross Potential Income (GPI)
- Vacancy and Collection Loss
+ Miscellaneous Income
= Effective Gross Income (EGI)
- Operating Expenses
= Net Operating Income (NOI)
- Reserves for Replacement
- Annual Debt Service (ADS)
= Cash Flow
Slide Number #113
The Budget ProcessThe Budget Process
To approach developing a budget, look at actual data from the past – see where the project underspent and overspent Decide what needs to change and what needs
to stay the same For example, a major marketing campaign may
be needed to improve lease-up Costs may need to be cut in some areas
Page 6-72
Slide Number #114
Excess Cash and FungibilityExcess Cash and Fungibility
Overview There are limitations and
freedoms on the use of project income depending whether your project has excess cash
Slide Number #115
Excess Cash and FungibilityExcess Cash and Fungibility
Excess cash is the project’s net liquid assets, or “surplus cash”
After the first year, calculation is based on prior year-end financial statements
Audited statements will determine final excess cash amount
Slide Number #116
Uses of Excess CashUses of Excess Cash
Retain funds for future project use Transfer funds to other AMP Pay as asset management fee to COCC Use for other HUD-approved eligible
purposes Financing new units, handling lawsuits,
covering accrued pension and retirement
Slide Number #117
Excess Cash and FungibilityExcess Cash and Fungibility
Uses of excess cash not permitted: Loaning or giving COCC cash other than as
the asset management fee Proceeds from the sale of assets to the
COCC – these belong to the AMP Except with HUD approval
Slide Number #118
Excess Cash DefinedExcess Cash Defined
Excess cash will be calculated from the FDS – it’s the sum of certain current assets minus the sum of all current liabilities, minus one month’s operating expenses for the AMP
Slide Number #119
Calculation of Excess CashCalculation of Excess Cash
Calculation of excess cash:Sum of asset accounts on the FDS
- Sum of ALL current liabilities- One month operating expenses for AMP
= Excess cash
Slide Number #120
FungibilityFungibility
Fungibility effective date Prior to first project-based submissions, on
or after July 1, 2008, all funds are considered fully fungible, including to the COCC Once the PHA has reported PBM data,
excess cash restrictions and limitations apply
Slide Number #121
FungibilityFungibility
In the 1st year of project-based accounting, full fungibility of op funds between projects
In the 2nd year, fungibility is allowed provided project has excess cash
In the 3rd year, fungibility will require that excess cash must equal at least one month of operating expenses
Slide Number #122
Allowable FungibilityAllowable Fungibility
Is this transfer fungible? Yes No
Transfer cash from AMP 1 to AMP2 Transfer cash from AMP 1 to COCC Transfer cash from HCV to AMP1 Transfer cash from Cap Fund to AMP1 Transfer cash from COCC to AMP1
Slide Number #124
Project-Based FundingProject-Based Funding
Separate subsidy form for each project
Project Expense Level (PEL) is a major component
Ensures appropriate resources are allocated to each AMP based on unique characteristics
Project-based fundingProject-based funding
Slide Number #125
Project-Based BudgetingProject-Based Budgeting
Used for planning purposes Budgeted amounts must reconcile
to FDS Must be approved by PHA Board Not subject to HUD approval
Project-based funding
Project-based budgetingProject-based budgeting
Slide Number #126
Project-Based AccountingProject-Based Accounting
Income & expense are reported at the project level
Project financial statements are submitted to HUD at year end
Can only charge projects for services actually received
Fees must be reasonable Project-based funding
Project-based budgeting
Project-based accountingProject-based accounting
Slide Number #127
Project-Based ManagementProject-Based Management
Arrange property management services in the best interest of the project
Assign skilled management personnel to each project Project-based funding
Project-based budgeting
Project-based accounting
Project-based Project-based
managementmanagement
Slide Number #128
Project-Based Project-Based Performance AssessmentPerformance Assessment
PHAS will be revised to emphasize project-based monitoring
Each project will be evaluated on financial, managerial, physical condition, and Capital Fund Project-based funding
Project-based budgeting
Project-based accounting
Project-based management
Project-based Project-based performance assessmentperformance assessment
Slide Number #130
Summary of Building BlocksSummary of Building Blocks
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