Blosky & Associates1 PHADA Accounting Seminar Financial Planning in an Uncertain Environment...

Blosky & Associates 1

PHADA Accounting Seminar

Financial Planning in an Uncertain

Environment

Presented by Jack Blosky

June 8 , 2010


Budgeting in these uncertain

Times


Project Based Budgeting

24 CFR 990.280 All PHAs must develop and maintain a

system of budgeting & accounting for each project that allows for analysis of the actual revenues & expenses at the property level. This applies to all programs & revenue

sources under your ACC (Operating Fund, CFP, etc)

All Financial information will be budgeted & accounted for at the property level. All Financial information will be in

accordance with GAAP Project-based financial statements Upon completion of project-based

accounting, PHA assets, liabilities, and equity shall be apportioned to the respective projects and/or HUD accepted Central Office cost centers


What is an Operating Budget?


Budget Planning Issues

Balancing

Timing

Accountability

Forecasting

http://www.phototour.minneapolis.mn.us/3985


Timing The SAGIS funding calculation will

be due March 1st, 2010 for all authorities for Calendar Year 2010.

Authorities will maintain their fiscal year-end if you don’t coincide with a calendar year-end.

Thus, authorities will still prepare a budget for their fiscal year-end, but prepare funding calculations on a calendar year.



Accountability

Will force managers to be accountable to maintain budgets and effectively determine where weaknesses exist within their project

Utilize Monthly Reports



ForecastingThe authority should forecast at the project level to determine:

1. Possible Funding Shortfalls2. Uses of Capital Fund / Operations3. Strategy to “fung” funds4. Possible profit enhancement

solutions5. Property Management Fees are

not enough to cover Central Office costs.



Budgeting Budgeting & Administration Responsibility of Reports &

ReportingOnce budgets are complete it is important to confirm what is actually happening. A central department (Finance Department) should design budget reports in order to coordinate various parts of the Authority. This would ensure the reports would be in proper form for comparisons and correlations. The manager in charge should know the form of information desired for the use of the departments and budget committee.


Budgeting

Budgeting & Administration

Responsibility of Reports & Reporting

The Property managers & Maintenance Managers need to be involve in this process and understand the budget for their grouping. Budgets will be prepared for each grouping.


Budgeting & Administration Decentralized Responsibility,

Centralized Control

The lower staff levels in the Authority should be consulted regarding the budgets relative to their responsibilities, it is also true that they cannot do an adequate job unless they have information as to the plan of the Authority and they have formulated plans for their own cost centers. Communication amongst staff is key!

Budgeting


Budgeting & AdministrationBudgeting must be recognized more than a flow of data, for it also involves educating the Authority about policies and plans. This will result in budget committee activity which will involve staff from different areas to discuss and harmonize their budgets. Staff and Directors should have the opportunity to discuss their budget and have the staff be apart of the budget process (delegation).

Budgeting


According to HUD Guidebook 7475 and the Annual Contribution Contract (HUD Form 53012A), the authority must prepare an annual budget that will be approved by the board of commissioners 90 days before the fiscal year begins. New Requirement – Must have HUD 52574 (Board Resolution form) submitted to HUD prior to the beginning of your fiscal Year

Budgeting for your Authority


Estimation of Revenue & Expenditures

Prior Year Experience Prior Year Trends

i.e. 3 Years

Future Expectations Known Changes

YTD Costs and Trending


The New Operating Fund Formula!

(SAGIS)


The Operating Fund Formula

Basic Formula doesn’t change, it is still ---

EXPENSES

- INCOME

SUBSIDY ELIGIBILITY


PEL – Project Expense Level

24 CFR 990.165

HUD calculated a Project Expense Level for each of your projects based on the Harvard Cost Study model.

Each PEL will be unique to each authority and measured in a Per Unit Month (PUM) cost.

HUD used ten variables and associated coefficients.


Utility Expense Level - UEL



24 CFR 990.170

The UEL for each PHA is based on its consumption for each utility, the applicable rates for each utility , and an applicable inflation factor. The UEL for a given funding period is the product of the utility rate multiplied by the consumption level multiplied by the inflation factor.

Utility Rate – the utility rate for each type of utility will be the actual average rate from the latest 12 months that ended June 30 preceding the start of the Calendar year.

Cost (include taxes & tariffs)Consumption

24 CFR 990.170

The UEL for each PHA is based on its consumption for each utility, the applicable rates for each utility , and an applicable inflation factor. The UEL for a given funding period is the product of the utility rate multiplied by the consumption level multiplied by the inflation factor.

Utility Rate – the utility rate for each type of utility will be the actual average rate from the latest 12 months that ended June 30 preceding the start of the Calendar year.

Cost (include taxes & tariffs)Consumption



24 CFR 990.170

Payable Consumption Level – The payable consumption level is based on the current consumption level adjusted by a utility consumption incentive. The incentive shall be compared by comparing current consumption level of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of a utility, the PHA shall retain 75% of this decrease. Alternately, if the comparison reflects an increase in the consumption of a utility, the PHA shall absorb 75% of the increase.

24 CFR 990.170

Payable Consumption Level – The payable consumption level is based on the current consumption level adjusted by a utility consumption incentive. The incentive shall be compared by comparing current consumption level of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of a utility, the PHA shall retain 75% of this decrease. Alternately, if the comparison reflects an increase in the consumption of a utility, the PHA shall absorb 75% of the increase.


Other Formula Expenses Add-Ons

24 CFR 990.190PHAs can receive additional subsidy for the following add-ons:

Self-Sufficiency – Reasonable costs of Program Coordinator & associated costs with HUD’s self-sufficiency program

Loan Amortization for energy add-ons – PHA may qualify for payments of principal & interest for energy conservation measures

Payments in Lieu of Taxes (PILOT) – Based on latest PILOT payment

Cost of Audit – Based on latest actual audit cost

Funding for resident participation Activities - $25 per occupied unit to be used for resident participation activities


Self-Sufficiency – Reasonable costs of Program Coordinator & associated costs with HUD’s self-sufficiency program

Loan Amortization for energy add-ons – PHA may qualify for payments of principal & interest for energy conservation measures

Payments in Lieu of Taxes (PILOT) – Based on latest PILOT payment

Cost of Audit – Based on latest actual audit cost

Funding for resident participation Activities - $25 per occupied unit to be used for resident participation activities


Other Formula Expenses Add-Ons


Asset Management Fee – PHAs with 250 units or more will receive a $4 PUM fee. PHAs with less than 250 units that elect to transition to a project-based accounting system will receive a $2 PUM fee. The fee is based on the total number of ACC units.

Information Technology Fee – Each PHA will receive a $2 PUM fee for costs attributable to information technology, based on total number of ACC units


Asset Management Fee – PHAs with 250 units or more will receive a $4 PUM fee. PHAs with less than 250 units that elect to transition to a project-based accounting system will receive a $2 PUM fee. The fee is based on the total number of ACC units.

Information Technology Fee – Each PHA will receive a $2 PUM fee for costs attributable to information technology, based on total number of ACC units



So now we have our Expenses portion of the formula ---

Project Expense Level (PEL)+

Utilities Expense Level (UEL)+

Add-Ons

This is then multiplied by the Eligible Unit Months

So now we have our Expenses portion of the formula ---



Add-Ons

This is then multiplied by the Eligible Unit Months


Eligible Unit Months

24 CFR 990.135

A PHA’s total number of eligible unit months will be calculated for the 12 month period from July 1 to June 30 that is prior to the first day of the applicable funding period.

The determination of whether a public housing unit satisfies the requirements of a unit month shall be based on the first or last day of each month as determined by the PHA.

24 CFR 990.135

A PHA’s total number of eligible unit months will be calculated for the 12 month period from July 1 to June 30 that is prior to the first day of the applicable funding period.

The determination of whether a public housing unit satisfies the requirements of a unit month shall be based on the first or last day of each month as determined by the PHA.



24 CFR 990.140

A PHA is eligible to receive operating subsidy for public housing units for each unit month they are under an ACC and occupied by a public housing eligible family lease.

24 CFR 990.140

A PHA is eligible to receive operating subsidy for public housing units for each unit month they are under an ACC and occupied by a public housing eligible family lease.


24 CFR 990.145

A PHA is eligible to receive operating subsidy for vacant public housing units each month they are under ACC and meet one of the following HUD approved vacancies:

1. Units undergoing on-schedule modernization when the vacancy is needed to do the work

2. Special Use Units (resident services, resident organizations, self-sufficiency and anti-crime activities)

Vacancies beyond the PHA control:

1. Litigation

2. Declared Disasters

3. Casualty Losses (during the time the claim is adjusted)

4. Changing Market conditions (HUD approval required)

24 CFR 990.145

A PHA is eligible to receive operating subsidy for vacant public housing units each month they are under ACC and meet one of the following HUD approved vacancies:

1. Units undergoing on-schedule modernization when the vacancy is needed to do the work

2. Special Use Units (resident services, resident organizations, self-sufficiency and anti-crime activities)

Vacancies beyond the PHA control:

1. Litigation

2. Declared Disasters

3. Casualty Losses (during the time the claim is adjusted)

4. Changing Market conditions (HUD approval required)



Formula Income Level

24 CFR 990.195

This revenue is equal to the amount of rent charged to tenants minus any utility allowances.

Based on the PHA’s June 2009 Rent Roll divided by the number of units under lease for the same time period (BY AMP)

24 CFR 990.195

This revenue is equal to the amount of rent charged to tenants minus any utility allowances.

Based on the PHA’s June 2009 Rent Roll divided by the number of units under lease for the same time period (BY AMP)



Now we have our Complete Subsidy Calculation



Add-Ons-

Income=

Subsidy

Now we have our Complete Subsidy Calculation



Add-Ons-

Income=

Subsidy


What’s in a “Year”?

• Fiscal Year– This will not change for you

and you cannot change it• Calendar Year

– Funding is now provided on a calendar year basis

• Data Year (7/1 – 6/30)– Much data you will need to

provide HUD will be for the time period of 7/1 – 6/30

• Utility information• Unit eligibility (vacancy rate)

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First need to identify capital needs for each project

Second need to prioritize these capital needs

Third need to obtain cost estimates for capital needs

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Now you can start putting these items into your budget in conjunction with the amount of funding you will be receivingOptions:1

Take 10% Of Grant and put it to 1410 firstTake 20% of Grant and put it to 1406What ever is remaining of your funding amount

distribute to Capital item needs

2Take 10% of Grant and put it to 1410 firstDistribute your capital items by prioritiesAny remaining amount of Grant put to 1406

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Operating Budget for the Section 8 Program


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• Even though this is not required by HUD you should still prepare an operating budget– Then use this to prepare monthly

financial reports showing budget v. actual

• Need to monitor Admin expenses not just HAP expense

• When preparing the budget project what your admin fees will be for the year and then distribute expenses

– Make sure allocation methods is realistic and financially feasible


Section 8 Operating budget

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• Need to project what your admin fees will be– Admin fees based on units leased

now, not a fixed amount• Based on data submitted through the

VMS system– Need to make sure this data is

accurate– Need to make sure you maximize your

units leased, within the funding constraints

– Can not exceed for the year your total baseline units



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• You can use the same forms from the LIPH budget to obtain expense amounts for the section 8 budget– Salaries & benefits– Admin expenses– Insurance




HCV Program Management Fees

• COCC may charge as management fee to HCV program the higher of

– 20% of its annual administrative fee as provided by Department each calendar year

or– $12 PUM per voucher leased

• PHAs can also charge the HCV program a $7.50 PUM bookkeeping fee


McKean County Housing Authority

Section 8 Voucher Program Operating Budget

September 30, 2009

Revenue

HUD Subsidy - HAP 966,828

HUD Subsidy - Admin Fees 151,677

Other Income 4,000

Interest 35,000

Total Revenue 1,157,505

Administrative Expenses

Salaries 96,087

Benefits 33,930

Legal 0

Training 2,000

Travel 2,000

Accounting 3,500

Auditing 4,000

Misc. Office expenses 12,750

Contract costs 8,000

Total Admin Expenses 162,267

HAP Expense 930,000

Total Expenses 1,092,267

Profit(Loss) including HAP expense & Funding 65,238

Profit(Loss) excluding HAP expense & Funding 28,410


• HAP Equity:

– The Amount of excess funding your PHA has rec’d for HAP expenses since 2005

• Admin Equity:

– The Amount of excess funding your PHA Rec’d for Admin Expenses since the start of your program

• Section 8 reserves need to be broken out between these 2 Equity amounts on the FDS


What is my Section 8 Equity?


• Calculate HAP Equity (excess HAP Funding) at the end of your fiscal Year – See Schedule– If this is a large amount you need to

spend this money. If not HUD will be recapturing it

• Remember you can not lease over your baseline number of units in total for the year.

– Should be monitoring HAP Expense v. HAP Funding on a monthly basis (See Schedule)


How Should I monitor my Section 8 Funding &

Reserves?

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HAP Equity (Net Restricted Assets) @ 12-31-08 79,889 (Per HUD 2009 Funding Calculation - Enclosure B, Line 25)Amount of 2008 excess HAP Equity to be recaptured by HUD 0 (Per HUD 2009 Funding Calculation - Enclosure A, Line 17)

79,889

HAP Expenses 2009 (Per VMS) Jan '09 - Jun 09 -86,797HAP Funding 2009 (Per HUD Disbursement Schedule) Jan '09 - Jun 09 96,189

9,392

Excess HAP Funding (Equity) @ 6-30-09 89,2811/2 of Fraud Recovery for 2009 931 1/2 of Interest Income for 2009 (Excess HAP * .15%) 102

Total HAP Equity 90,313

Line 513 on FDS 169,340

Total Admin Fee Equity 79,027

Any Housing Authority HAP & Admin Equity

6/30/2009


Monitoring The Section 8 Program


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HAP HAP Units HAP EquityFunding Expense Difference Leased Balance

HAP Equity (NRA) @ 06/30/09 90,313.00 (per HUD Enclosure B & W/P)

Jul-09 12,687.00 14,871.00 (2,184.00) 39 88,129.00 Aug-09 12,687.00 14,713.00 (2,026.00) 39 86,103.00 Sep-09 12,687.00 14,612.00 (1,925.00) 38 84,178.00 Oct-09 12,687.00 16,195.00 (3,508.00) 39 80,670.00 Nov-09 12,687.00 15,666.00 (2,979.00) 38 77,691.00 Dec-09 12,687.00 15,628.00 (2,941.00) 38 74,750.00 Jan-10 14,359.00 15,821.00 (1,462.00) 38 73,288.00 Feb-10 14,359.00 16,101.00 (1,742.00) 39 71,546.00 Mar-10 14,934.00 16,149.00 (1,215.00) 39 70,331.00 Apr-10 14,551.00 15,770.00 (1,219.00) 39 69,112.00

May-10 14,551.00 15,658.00 (1,107.00) 39 68,005.00 Jun-10 (Estimated) 14,551.00 16,000.00 (1,449.00) 67,663.00 Jul-10 (Estimated) 14,551.00 16,000.00 (1,449.00) 66,214.00

Aug-10 (Estimated) 14,551.00 16,000.00 (1,449.00) - 64,765.00 Sep-10 (Estimated) 14,551.00 16,000.00 (1,449.00) - 63,316.00 Oct-10 (Estimated) 14,551.00 16,000.00 (1,449.00) - 61,867.00 Nov-10 (Estimated) 14,551.00 16,000.00 (1,449.00) - 60,418.00 Dec-10 (Estimated) 14,551.00 16,000.00 (1,449.00) - 66,214.00

250,733.00 283,184.00 (32,451.00) 425

Any Housing AuthorityHAP Equity Calculation

as of 12/31/10

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NMHA - HCV

Calendar Year 2009

MO/YR UNDER Baseline HAP HUDHAP

Over/(Under) Average

of Month LEASE Units EXPENSE SUBSIDY Subsidized HAP

Jan 89 92 25,307.00 23,017.00 2,290.00 284.35

Feb 92 92 22,818.00 23,017.00 -199.00 248.02

Mar 94 92 27,556.00 23,254.00 4,302.00 293.15

Apr 91 92 23,721.00 14,929.00 8,792.00 260.67

May 91 92 25,033.00 14,925.00 10,108.00 275.09

June 93 92 26,625.00 20,950.00 5,675.00 286.29

July 93 92 28,305.00 14,925.00 13,380.00 304.35

Aug 93 92 25,714.00 15,022.00 10,692.00 276.49

Sept 92 92 25,727.00 14,925.00 10,802.00 279.64

Oct 92 92 25,638.00 14,925.00 10,713.00 278.67

Nov 92 92 25,638.00 14,925.00 10,713.00 278.67

Dec 92 92 25,638.00 14,925.00 10,713.00 278.67

TOTALS 1104 1104 232,039.00 140,451.00 91,588.00 278.67

NRA 108,189.00Available NRA 16,601.00

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Blosky & Associates1 PHADA Accounting Seminar Financial Planning in an Uncertain Environment...

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