HCV HUD ACCOUNTING AND REPORTING UPDATE

Transcription

1 HCV HUD ACCOUNTING AND REPORTING UPDATE Spring 2019 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. With You Today Nick Auriemma, CPA, CFE Managing Director nauriemma@bdo.com

2 Session Overview RAD Overview Basics of HCV Budgeting 3 Origins Of RAD Rental Assistance Demonstration Originally approved in HUD Appropriations Act of 2012 and additional units added in subsequent years Allows conversion of Public Housing stock to independently owned stock Project Based Vouchers Project Based Rental Assistance 4

3 Application Process HUD site contains the initial application to complete ation-materials There is currently a review list for RAD applications Letter of interest required ed from Executive Director to the RAD Applications department RADapplications@hud.gov 5 Letters Of Interest 6

4 Letters Of Interest 7 Waitlist Or Review List HUD Website RAD Details Due to increase in RAD CAP, the RAD Waitlist updates are no longer applicable Now called Applications Under Review and available through August 8, 2018 Still waiting even though not called waitlist Other portions of site still say waitlist 8

5 Application Considerations Application process extensive Awards increasingly competitive Applications should consider and address several factors General planning and overview Development budgets Operating budgets Resident processes Long term profitability Authority should consider post RAD COCC operations although not part of application 9 General Planning Financial feasibility of plan Conversion and construction costs Ability to operate post conversion Set priority projects All may not be approved Consider your competition PHAs will be evaluated compared to similar sized and located PHAs 10

6 General Planning Lenders or Investors Meetings Debt or equity may be needed from outside sources Prior debt in PHA name must be retired or settled Resident Meetings Two resident meetings should be held Provide information regarding resident responses and comments received 11 General Planning Initial Requirements Physical Conditions Assessment - PCA or RPCA Required to estimate costs of conversion if application is approved Due only 90 days after application approved Must be procured 12

7 General Planning New Requirements Capital Needs Assessment (CNA) Effective February 1, 2018 Must use e-tool online - ments/instructforcnatool.pdf page guide HUD site frequently refers to RPCA so be cautious 13 Development Budgets Like new conditions Construction should be sound for next 20 years General repairs and replacements will be expected Reserve accounts requirements determined to assure cash available when repairs needed No need for major reconstruction 14

8 Development Budgets Costs to bring property into required condition may impact the properties chosen and chance for application approval Acquisition costs Professional fees Developer fees (10%) Contractor costs Relocation costs 15 Development Budgets Debt must be paid No pre-existing lien or debt attached to buildings is allowed to be absorbed Title search to determine if any lenders or creditors have claim to property More of an issue with mixedfinance AMPs than traditional EPC debt will have to be settled during conversion process Will not come up on Title search 16

9 Development Budgets Factors to consider Newer properties will require less work for conversion Older properties more desirable to convert Current physical condition Estimated construction costs Planned sources of funding 17 Sources And Uses Report PHAs may have existing reserves or available capital funds Greatly simplifies process Cash in AMP when converted can be transferred to other AMPs If no other AMPs it goes to HUD Pre-development costs Capitalized with existing building cost PHA may use up to $100k in existing reserves without prior approval 18

10 Sources And Uses Report Debt from lenders Certain lending institutions or towns and municipalities can offer funding Investors Low Income Housing Tax Credits (LIHTC) offered to investors Receive 4% or 9% depending on arrangement Frequent source of funding 19 Tax Credits Certain projects require such extensive funding that equity in project is exchanged for funds Equity would not typically produce enough of a return for investment to warrant funding Created in 1986 and made permanent in 1993 Called an indirect federal subsidy Provides a reduction in federal tax liability in exchange for financing development 20

11 Tax Credits Credits provided to investors over a ten year period Projects must maintain status as low-income housing with restricted rents for 30 years After 30 years properties are in control of owner Returned to PHA New tax credits applied for Exchanged for debt default 21 Tax Credits Amount of tax credits provided to investors costs covered 4% credit is typically used for rehabilitation 9% credit is typically used for new construction Each year for ten years a tax credit equal to 4% or 9% of the qualified basis is claimed 4% covers 30% of subsidy 9% covers 70% of subsidy 22

12 Tax Credits Example 9% Investor provides $10M for new construction through LIHTC 9% or $900,000 annually for ten years is provided in tax credits $900,000 x 10 = $9M Adjustments for Net Present Value of money and interest arrive at estimate of $7M in actual credits received $7M of $10M is 70% of total investment received as credit 23 Tax Credits Example 4% Investor provides $10M for rehab construction through LIHTC 4% or $400,000 annually for ten years is provided in tax credits $400,000 x 10 = $4M Adjustments for Net Present Value of money and interest arrive at estimate of $3M in actual credits received $3M of $10M is 30% of total investment received as credit 24

13 Tax Credits Incentive Basis Reduction in taxes is typically much higher than general rate on return for investment Not expected that many investors can receive 30% or 70% return Considered a dollar-for-dollar incentive because every dollar goes into calculation of basis to determine the ultimate credit 25 Tax Credits Basis Calculation Determining basis for credits Acquisition costs include existing value of buildings (not land) and may require an appraisal PHA may provide Seller Take-Back Financing where PHA provides mortgage equal to value of buildings so investor receives basis without an immediate purchase or cash outlay Construction costs and reserves Developer fees 26

14 Operating Budgets Determine if future operations will be profitable HUD requires only consideration of property and not PHA Pro Forma must be built Projected income statement for the next 15 to 20 years 27 Operating Income Estimated future income based on RAD conversion rents Rent more complicated than initially expended under RAD HUD will provide these numbers based on PBRA and PBV Subsidy to be based on rent 28

15 Operating Expenses Estimated future expenses based on historical expenses adjusted for renovations made Maintenance costs PILOT vs Taxes Salaries and benefits Management fee agreement Formerly shared costs 29 Review Of Pro Forma HUD reviews as part of application process Investors review for profitability to assure basis is inclusive of any possible costs Developers review for accuracy of future repairs costs PHA should review to determine impact on remainder of agency 30

16 Resident Communication Two meetings required at a minimum for residents Questions must be recorded during these meetings Answers must be formally provided in writing Documentation of this required with the application Recommended to keep residents informed throughout process Some PHAs have postponed due to concern over reaction 31 Resident Relocation Right to return to original unit post conversion Relocation should be minimized as much as possible Relocation costs can be extremely extensive and must be included in any RAD application with detailed plan and source for funding PBV and PBRA have different post conversion mobility rules 32

17 Resident Participation Funding PHA formerly had resident services grants and was able to use Public Housing funds for certain resident services Post conversion the funding is set at $25 per unit per year which is a major decrease $15 of that total goes to resident council if applicable $10 goes to participation activities Indicative of change in objective 33 Application Processing CNA requirements are able to be met with set funding sources Estimated long term profitability of project is shown based on expected income and expenses Proper information and relocation of residents is communicated HUD determines if application is best depending on others received for area and size 34

18 Application Approval HUD issues a Commitment to enter into Housing Assistance Payment (CHAP) Sets criteria to meet in order to receive Housing Assistance Payments (HAP) contract and complete conversion 35 Awarding Of HAP Contract Project is removed from Public Housing inventory and ACC May only apply to portion of project HUD releases Declaration of Trust to allow for change in ownership from HUD to new party HAP contract effective first day of month after close 36

19 Funding Of HAP Contract Funding follows calendar year Operating funds received through Public Housing until December Project Based Voucher or Project Based Rental Assistance funding effective January of next calendar year 37 Sufficiency Of Funding Sources of HAP during conversion year will be equal to the remaining operating subsidy and a portion of capital funds HAP required based on new contracts may be in excess of funding available What can be done? Typically realized after deal closed 38

20 Sufficiency Of Funding HUD will not provide any additional funding HUD will allow PHA Operating Reserves to be used to cover any funding insufficiencies Must be listed with Finance Plan submitted with application Calculation should be prepared in advance of closing Estimate Operating Subsidy and future HAP expectation Compute amount to bridge gap 39 Impact On Remaining PHA And COCC 40

21 RAD And PHAS Scoring AMPs designated as converting to RAD will not be scored Issuance of CHAP defines moment when AMPs no longer scored If CHAP revoked then AMP will be scored retroactively If partial AMP converting then entire AMP not scored Post conversion the AMP will be scored again with remaining AMPs 41 RAD And PHAS Scoring CHAP issuance will not automatically stop scoring PIC must be updated to show AMP is designated as converting to RAD PIC inventory module is used to select AMP as having been awarded a CHAP If this is not done the AMP will still be scored regardless of CHAP 42

22 RAD And PHAS Scoring Check FDS before you enter data to determine if AMP is marked Yes for RAD PIC an REAC only connect when submission is created Entire FDS will need to be deleted and redone if AMPs are not checked for accuracy when FDS is created 43 RAD And PHAS Scoring 44

23 RAD Impact On Agency Removing an AMP or even a partial AMP can have a substantial ripple effect on the Agency as a whole Some agencies looking to convert entire portfolio to RAD RAD application process puts no emphasis on the impact on the rest of the Agency 45 HUD Motivations For RAD HUD pushing RAD to help solve some major Public Housing problems Capital improvements backlog Serially underperforming projects Extensive ownership costs Demonstrate effectiveness and success of initiative 46

24 PHA Motivations For RAD Acquiesce to HUD requests Direct pressure from Field Office May receive favorable rents and want to retain profits Capital funds insufficient to provide needed renovations Legacy of executive staff 47 PHA Motivations For RAD Less involvement with LIPH rules and requirements Operating Fund proration Operating Subsidy calculations Changing Capital Funds Scoring concerns Become a small PHA Capital Fund Flexibility Removal of COCC if units decrease below 400 or

25 PHA Motivations For RAD Section 226 exemption available if less than 400 units All expenses allocated to active projects and programs under an allocated overhead account No fees paid within the Authority Small PHA No special exemption required for COCC to be removed If PHA is underperforming it will show on programs now instead of on a COCC 49 PHA Motivations For RAD Become a management company Some PHAs are looking to no longer own stock but continue to manage it and receive fees Fees are typically substantially lower for converted project than as a Public Housing property Level of staffing and service will need to be adjusted for reduced fees Point of contention at many PHAs Is this a good idea for PHAs? 50

26 PHA As Management Company Strongly recommended the PHA forms a new entity or business activity separate from COCC Keep fees completely non-federal Any remaining project or HCV fees still go to COCC Management fee charged to post conversion property goes to business activity 51 PHA As Management Company Pros Additional source of non-federal funds as management fees received Maintain similar staffing levels Cons Properties sold and not managed have led to substantial staff reductions Investors have excessive demands Different type of accounting/audit 52

27 PHA As Management Company Traps to avoid COCC and maintenance staff maintained at similar levels despite reductions in fees Reliance on uncertain revenue sources in the future PHA long term contracts for benefits or other costs not shifted when sold Beware of pressure to close deal and lack of focus on future of PHA 53 COCC Budgeting 54

28 Converted Project Balances Project is removed from Public Housing portfolio when converted Where do we report these balances going forward? This will depend on the purchase and the type of conversion done 55 Converted Project Balances Authority may retain ownership of property as a Business Activity or Component Unit Majority of balances transferred and cost allocations continue as in past Authority sells property to new owner and the balances and costs must be reallocated to different programs or projects Balances often go to remaining projects or to the COCC 56

29 Current Assets Cash balances may be transferred to other AMPs or new property as part of development deal Depends on developer and PHA incentive to make deals work Tenant receivables transfer to as part of consideration Simplifies collection process Shared current assets reallocated Prepaid expenses Central inventory 57 Current Liabilities Liabilities can be negotiated as to who will cover what between PHA and new owner PILOT balance Compensated Absences Accounts Payable Accrued Liabilities Security Deposits 58

30 Long-term liabilities AMP portion of debt must be removed or reallocated Often negotiated during sale Long-term compensated absences Authority policy typically dictates amount and balance held Pension and OPEB liabilities Government costs and liabilities 59 Compensated Absences Amounts can be reallocated to existing AMPs or be held as liability on COCC PHA should consider billing new owner for this portion of employee cost Item to factor in during negotiations 60

31 Pension/OPEB Liabilities GASB 68 and GASB 75 requirements This is a governmental accounting requirement, not required with for-profit entities Liability will remain with PHA Additional negotiating point to attempt to get consideration for these costs Agreements made based on future without RAD? 61 Shared Cost Reallocation Under Asset Management certain costs allocated to multiple AMPs or Programs Costs that used to be allocated to 5 AMPs at 20% per AMP have to be absorbed by some alternate methodology At 25% per AMP for four AMPs? COCC portions increase 62

32 Shared Cost Reallocation Certain costs may decrease as the properties convert Utilities Maintenance Costs that may not decrease Salaries/Benefits Insurance Software Office Expenses 63 Project Based Voucher Impact Additional Project Based Vouchers will require additional HCV staff Caseworkers Completion Additional VMS Reporting Focus on the Two Year Tool Restricted Net Position Calculation Shortfall Prevention 64

33 Project Based Rental Assistance Impact New system to learn if not familiar with PBRA Tenant Rental Assistance Certification System (TRACS) Completion Contract directly with HUD Multifamily reporting system Owner certified submissions Additional audit requirements 65 RAD Considerations RAD is not this doom and gloom program Many PHAs have seen great benefits through RAD Large developer fees received Improved housing for residents Remove trouble AMPs that were hard to maintain and hurt scores Proper planning and negotiating will help success of RAD deal What type of RAD could work best for your agency? 66

34 HCV Financial Basics Background Information for the Section 8 Program 67 Two Kinds Of Assistance Tenant Based Voucher Housing Choice Voucher Portable (tenant can move anywhere) PHA acts as middle man between HUD, tenant and private landlord 24 CFR 982 Project Based Contracts (Not HCV PBV) Subsidy stays with unit, not tenant New Construction 24 CFR 881 Moderate Rehabilitation 24 CFR

35 What Is The HCV Program? Units owned primarily by private landlords PHA is not responsible for: Maintenance of units Marketing units Security of units Will inspect units to meet physical standards 69 PHA s Role In The HCV Program Funds come from the Federal Government The PHA acts as a middle man Most of these funds pass through the PHA and go on to Section 8 Program landlords HUD PHA HAP Admin Landlord 70

36 Housing Assistance Payment (HAP) Funding PHA provides HAP to private landlords on behalf of eligible families UAP utility assistance payments assists tenants with energy bills FSS escrow payments for tenants in the FSS program 71 Administrative Fee The Administrative Fee is what the PHA receives as revenue to operate the day to day operations of the HCV program Fee paid by HUD to the PHA for administration of the program See 24 part Reported as Pre-2004 and Post

37 Maximizing Admin Fees HUD will pay an Administrative Fee based on the units leased as calculated on the 1st day of each month This calculation only occurs on the first of the month Therefore, it is the PHA s goal to have 1,200 unit months leased (UML) for the entire year All of the 100 units leased each month on the 1st of each month 73 Administrative Fees Take applications, maintain waiting list & process families for admission Determine whether rent requested by landlord is reasonable Verify facts related to income and rent Re-examine income & re-inspect units once each year Issue vouchers Inspect units Pay HAPs to landlords for leased units 74

38 Baseline & UMA The baseline number of vouchers refers to the number of voucher units a PHA has in their ACC The baseline is expressed as a total number of vouchers and as a total number of unit months available For example, if the baseline number of units a PHA s ACC is 100 (and these units are available for 12 months) then the PHA has 1,200 Unit Months Available (UMA) to lease 100 units x 12 months = 1,200 UMA % Lease Up What is the likelihood of meeting 100% of leasing on the 1st of each month, each and every month? Not very likely 76

39 Typical Leasing Chart 110 U n i t s L e a s e d Goal Leasing Actual Leasing Over-leasing PHAs can over-lease unit months on a fiscal year 3/31, 6/30, 9/30 PHAs cannot over-lease unit months on a calendar year 12/31 78

40 Section 8 Program Funding Overview Funding is awarded to PHAs on a calendar year basis regardless of the PHA s fiscal year HAP Admin Fee 79 Annual Budget Authority The amount of formula-driven HAP that a PHA is entitled to each Calendar Year is called the Annual Budget Authority (ABA) PHAs used to be funded so they could lease up to their baseline number of unit months This is no longer necessarily the case 80

41 HCV Program Funding PHAs are funded for HAP based on a formula and not on a per unit basis If a PHA has 100 units in their baseline or 1,200 UMA, the PHA may not be able to lease 100% of the UMA 81 Appropriations Calculation For Calendar Year 82

42 Appropriation Calculation HUD used VMS data from January to December of the prior calendar year Capping percentage HUD will make adjustments for the first-time renewal of certain vouchers These include tenant protection vouchers and special purpose vouchers such as Veterans Affairs Supportive Housing (VASH) vouchers First time increments not initially funded for twelve months will receive the additional funding required, as identified on the funding enclosures of the affected PHAs 83 Future Funding Periods Funding is made available to PHAs on a calendar year basis, future funding periods (future calendar years) cannot be used for current year expenditures For example, if a PHA utilizes all of their Annual Budget Authority (ABA), HUD-held Reserves and Restricted Net Position for HAP by November 2016, the PHA cannot borrow money from future funding for December 2016 HAP and pay it back from January 2017 funding 84

43 Financial Basics: Section 8 Program Funding Overview S8 funding to the PHA is broken into two portions, which must be carefully and separately monitored: Housing Assistance Payment (HAP) Administrative Fee (Admin Fee) 85 Cash Management HAP funding is no longer provided monthly evenly It is disbursed based on need Latest certified VMS data Need to make sure PHA is receiving enough funding monthly to cover HAP Front load if necessary 86

44 HUD Held Reserves Amount of annual HAP funding awarded to an Authority, but not provided to the Authority because there was not a need due to cash management procedures HUD holds this money on behalf of the Authority The Authority does not lose the funds 87 Flow of Funds Funds From HUD HAP Subsidy ADMIN Subsidy PHA HAP subsidy spent on HAP Admin subsidy spent on operating costs Equity Net Position Excess HAP subsidy will go to equity at year-end Excess Admin subsidy will go to equity at year-end Reduction of UNP is realized immediately 88

45 Restricted vs. Unrestricted ADMINISTRATIVE FEE FUNDING HAP (considered FUNDING unrestricted) Received By PHA (considered restricted) excess HAP funding not used goes to Administrative Fee Funding (considered unrestricted) excess Admin funding not used goes to Restricted Net Position Unrestricted Net Position 89 Types Of Reserves HAP Administrative (Admin) There are two types: HUD-held Reserves program reserves Restricted Net Position PHA held reserves These reserves can only be used to pay for HAP expenses There are two types: Net Investment in Capital Assets Fixed Assets Unrestricted Net Position Excess Admin Fee Reserves Can be used to pay for any eligible HCV cost 90

46 Net Terms Restricted Net Position (RNP) was formally known as Net Restricted Assets (NRA) Unrestricted Net Position (UNP) was formally referred to as Unrestricted Net Assets (UNA) GASB Restricted Net Position Restricted Net Position (RNP) typically consist of excess HAP funding since January 1, 2005 that the PHA has accumulated in PHA-held reserves that has not been recaptured though funding offsets Could include: FSS Escrow Forfeitures Typically ½ of Fraud Recovery Excess HAP funding received Amounts should be minimal since the implementation of Cash Management in CY

47 Unrestricted Net Position UNP can also be referred to as Administrative Fee Reserve Funds are to be used for the dayto day operations of the HCV program These funds do not have a contractual restriction on their use Administrative Fees Unrestricted Interest Income ½ of Fraud Recovery Portable Income 93 Pre-2004 & Post-2003 Admin Fees Post-2003 Administrative Fee Funds Administrative fees funded from the FFY 2004 Appropriations Acts and subsequent appropriations require that administrative fee reserves provided from these appropriations shall only be used for activities related to the HCV Program, including related development activities Examples of related development activities could include: unit modifications to HCV units to provide accessibility features or project-based voucher development costs 94

48 Pre-2004 & Post-2003 Admin Fees Pre-2004 Administrative Fee Funds If funds in the administrative fee reserve are not needed to cover PHA administrative expenses (to the end of the last expiring funding increment under the consolidated ACC), the PHA may use these funds for other housing purposes permitted by State and local law However, HUD may prohibit use of the funds for certain purposes PIH Notice Cash Management The process of disbursing only the funds required for current HAP costs will result in the establishment of HUD-held program reserves HAP funds will remain obligated but undisbursed at the HUD level rather than held by the PHAs 96

49 HUD-Held Reserves The remaining ABA that is not provided to the PHA is considered HUD-Held reserves These reserves are rolled forward to the next year and can be used to fund HAP in the following year 97 FSS Program Family self-sufficiency program The program established by a PHA in accordance with 24 CFR part 984 to promote self-sufficiency of assisted families, including the coordination of supportive services 98

50 Portability Renting a dwelling unit with Section 8 tenant-based assistance outside the jurisdiction of the initial PHA An eligible family issued a housing choice voucher may use that voucher to lease a unit anywhere in the United States where there is a housing agency operating a housing choice voucher program 99 Initial and Receiving PHAs Initial PHA Where tenant originates Receiving PHA Where tenant moves to 100

51 Portability - Initial PHA The Initial PHA as a concept refers to both of the following scenarios: A PHA that originally selected a family that later decides to move out of the jurisdiction of the selecting PHA A PHA that absorbed a family that later decides to move out of the jurisdiction of the absorbing PHA 101 Portability - Receiving PHA A PHA that receives a family selected for participation in the HCV program of another PHA The receiving PHA issues a voucher and provides program assistance to the family 102

52 Budgeting for Section 8 How Much Funding Is Available For HAP? 103 The Elephant In The Room Do we have enough HAP funding to maximize Administrative Fees? 104

53 Determining Funding For HAP 1. Appropriation calculation for the calendar year 2. Restricted Net Position (RNP) 3. HUD-held Reserves 4. Set-Aside Funds 5. UNP** **UNP is available, but is generally not used to pay HAP Appropriations ABA 106

54 Appropriations Calculation For Calendar Year 107 Appropriation Calculation HUD used VMS data from January to December of the prior calendar year HUD will make adjustments for the first-time renewal of certain vouchers Capping percentage These include tenant protection vouchers and special purpose vouchers such as Veterans Affairs Supportive Housing (VASH) vouchers First time increments not initially funded for twelve months will receive the additional funding required, as identified on the funding enclosures of the affected PHAs 108

55 Appropriation Calculation HUD will apply an inflation factor 2019 s inflation factor and will be approximately??? (This is currently on your Two Year Tool) The 2019 HUD proration for HAP funding will be approximately 99.5% 109 Sample Renewal Funding Attachment Enclosure A Calculation of Calendar Year 2017 Renewal Funding Housing Choice Voucher Program 1 HA Number: MD999 2 HA Name: TERRAPIN HOUSING AUTHORITY CY 2017 Renewal Funding 3 CY 2017 HCV Renewal Funding after Offset and Amounts Owed HUD $5,496,791 CY 2017 Non-Renewal Funding 4 CY 2017 Non-Renewal Funding (TPVs, VASH, etc.) to Date $0 5 CY 2017 Estimated RAD 1 Funding For First Full Year After Conversion $0 6 Total CY 2017 HCV Renewal and Non-Renewal Funding $5,496,791 ELIGIBILITY 7 Total Unit Months Leased per VMS - CY ,793 8 Total Unit Months Available - CY ,148 9 Capping Percentage 100% 10 Total CY 2016 HAP Expenses per VMS $5,523, Total CY 2016 Capped HAP Expenses (Line 10 x Line 9) $5,523, Renewal Funding Inflation Factor Inflated Eligibility Sub-Total (Line 11 x Line 12) $5,666, First Time Renewals - Appendix II $0 15 Transfers In or Out $0 16 Total DHAP Eligibility $0 17 Total Renewal Eligibility (Line 13 + Line 14 + Line 15 + Line 16) $5,666, Proration Factor Prorated Eligibility (Line 17 x Line 18) $5,496,

56 Sample Renewal Funding Attachment OFFSET Calculation on Appendix I 20 Offset Amount (Calculations on Appendix I) $0 21 Total CY 2017 Renewal Funding after Offset (Line 19 - Line 20) $5,496,791 FUNDING 22 Total CY 2017 Renewal Funding after Offset $5,496, Renewal Funding Obligations, January through June 2017 $2,858, Remaining to Obligate for CY 2017 prior to reduction for funds due HUD (Line 22 - Line 23) $2,638, Reduction for Funds due HUD $0 26 Remaining to Obligate for CY 2017 after reduction for funds due HUD (Line 24 - Line 25) $2,638, Total Obligations Due Through June, 2017 (Line 22 x 50%) $2,748, Additional Obligations Due Through June, 2017 (Line 27 - Line 23, if Line 27 is higher; else 0) $0 29 Excess Obligations Through June, 2017 (Line 23 - Line 27, if Line 23 is higher; else 0) $109, CY 2017 Inflated Per Unit Cost $ This value is calculated as total inflated VMS Expenses, minus HAP Costs After the First of the Month, divided by total Unit Months Leased. 31 Comments 111 Sample Renewal Funding Attachment CY 2017 Offset Reallocation Appendix I CY 2016 End of Year Reserves $29,453 PROTECTED CATEGORIES A. Difference between the PHA's Eligibility and Prorated Eligibility $170,004 B. CY 2016 Amounts needed to fully lease VASH units $0 C. Difference between higher of December 2016 UMLs x 12 or CY 2016 UMLs up to baseline on units under ACC $83,389 D. CY 2016 New incremental BA- 1/2 of Eligibility $0 E. CY 2016 Set Aside Protection- 1/2 of Eligibility $0 F. Portion of CY 2017 Renewal Eligibility (Based on units under ACC): $226,672 4% and above units 6% to 499 units 12% - Less than 250 units Total Funds Available for Offset $0 Offset Amount (Total Funds Available for Offset x %) $0 Prorated Eligibility After Offset $5,496,791 PHA's that received 2016 Shortfall Set-Aside funds are exempt from this offset. 112

57 2. Restricted Net Position PHA Held Reserves 113 Restricted Net Position Restricted Net Position(RNP) typically consists of excess HAP funding since January 1, 2005 that the PHA has accumulated in PHA-held reserves that has not been recaptured though funding offsets It includes: FSS Escrow Forfeitures Typically ½ of Fraud Recovery Excess HAP funding Amounts should be minimal since the implementation of Cash Management in CY

58 3. HUD-held reserves Program reserves 115 HCV Cash Management Procedures Since CY 2005, PHAs have been accumulating RNP to pay for future HAP costs This amount has exceeded $1.5B in FY brought two new changes: HUD will also instituted the new Cash Management procedures outlined in PIH Notice Established HUD-held Reserves 116

59 Cash Management The process of disbursing only the funds required for current HAP costs will result in the reestablishment of HUD-held program reserves, whereby excess HAP funds will remain obligated but undisbursed at the HUD level rather than held by the PHAs New BA will be moved into the HUD-held reserves if it is not needed for current costs 117 Cash Management Procedures Monthly HAP funding will be based on the higher of Calculated need based on VMS expenses from the most recently validated month or Available funds (monthly renewal obligation plus HUD-held Reserves) 118

60 Disbursement Procedures HAP Date Received VMS Reporting Period ABA $ 4,000,000 1/1/2016 $ 300,000 October VMS ,700,000 2/1/ ,000 November VMS ,400,000 3/1/ ,000 December VMS ,100,000 4/1/ ,000 January VMS ,775,000 5/1/ ,000 February VMS ,450,000 6/1/ ,000 March VMS ,125,000 7/1/ ,000 April VMS ,795,000 8/1/ ,000 May VMS ,465,000 9/1/ ,000 June VMS ,135,000 10/1/ ,000 July VMS ,000 11/1/ ,000 August VMS ,000 12/1/ ,000 September VMS 2016 $ 130,000 $ 3,870,000 Chart assumes beginning HUD-held reserve balance of $0. *Program Reserves for CY HUD-held Reserves The remaining ABA that is not provided to the PHA is considered HUD held reserves These reserves are rolled forward to the next year and can be used to fund HAP in the following year 120

61 HUD-held Reserves Just because your PHA is not receiving funding from HUD doesn t mean that your PHA doesn t have funds in HUD-held Reserves or Annual Budget Authority (ABA) You must track your ABA and HUD-held Reserves monthly to ensure you are receiving the proper funding to administer your program! 121 Hud-held Reserves & Restricted Net Position Any HUD-held Reserves and RNP that are rolled forward to the next year can be subject to an offset for funding Use them or lose them!! HUD will combine your RNP and HUD-held Reserves at calendar year-end to determine your total reserves and use that number to determine a possible offset of funding 122

62 Additional Funding Requests PHAs whose monthly costs exceed the disbursements may submit a request for an additional advance/frontload to their Financial Analyst at the FMC The request should include leasing and expenses data for any month(s) not yet reported in VMS and the PHA s projected HAP expenses for the month to which the request applies Please note that advances are limited to available funding, which includes BA eligibility and available RNP 123 Final Reconciliation A final reconciliation will be performed at the end of the year This reconciliation will include updating actual HAP expenses for the year, as PHAs may have revised their prior VMS submissions after monthly reconciliations were completed 124

63 Set-Aside Funding HAP & Admin Funding 125 Typical Set-Aside Funding From Appropriations $75 Million Provided (For CY 2018, PIH ) 1. Prevention of terminations due to insufficient funding (two scenarios) 2. Split into two subcategories: a. 2a - Unforeseen circumstances b. 2b - Portability cost increases 3. Project Based Vouchers 4. HUD-VASH 126

64 Prohibited Sources Of Funding Used To Increase Leasing Of The Program 127 Prohibited Outside Sources of Funds To Expand the HCV Program HOME Funds Net Proceeds from Demo/Dispo of LIPH COCC Funds State Funds Donations Mod Rehab Admin Fees Current Year HCV Admin Fees PIH Notice

65 Reporting Prohibited Funds If a PHA did use any of these sources of funds to increase HCV leasing, the PHA cannot report the costs nor their associated leasing in the VMS This is to prevent inflated funding renewals in the following year 129 Prevention of Current Resident Termination There is an exception: Despite taking reasonable cost-saving measures, the PHA is in a HUDconfirmed shortfall position and need additional funds in order to prevent the termination of current participants In this instance, PHAs may use outside sources of funds as listed on the prior slide Prior HUD approval is required Amount would be reported in the VMS and built into renewal funding 130

66 So..What Comes Next? How many units can we lease to determine administrative fee revenue we need to budget for the year? UMA to lease based on funding A rate & B rate CY 2019 Proration 80%?? What to consider? Description Amount ABA $4,937,431 RNP 5,000 HUD-held Reserves 300,000 Total funds for HAP $5,242,431 Latest PUC from latest HAP register $580 Total unit months available to lease 9, Offset Funding Reduction of HAP Reserves to Provide Current Year Funding 132

67 Offset Methodology The Act provides that HUD may offset PHAs Funding allocations based on the excess amounts of PHAs Restricted Net Position (RNP), including HUD-held Reserves (in accordance with VMS data from the prior calendar year that is verifiable and complete), as determined by the Secretary 133 What Does Offset Mean? When a PHA accumulates too much Program Reserves [HHR] and RNP, then HUD will reduce the following year s funding HUD calculates at December 31st In the past, any amounts over 1 month of HAP expenses can be subject to offset the following years funding (ABA) 134

68 What Does an Offset Mean? For example, at end of calendar year 2016, the Terrapin HA had $600,000 in combined RNP and Program Reserves. One month HAP was about $200,000 Therefore Terrapin HA had $400,000 in excess reserves When HUD calculated the CY 2017 ABA (funding) they determined it be $2,400,000 before the offset Terrapin HA will only receive $2,000,000 $2,400,000 - $400,000 = $2,000, HUD-Held Reserves and Restricted Net Position HUD-Held reserves and RNP are rolled forward to the next year can be subject to an offset for funding Use them or lose them!! HUD will combine your RNP and HUD Held Reserves at calendar year-end to determine your total reserves and use that number to determine a possible offset of funding 136

69 Accounting For Restricted Funds Includes HAP, UAP, FSS Escrow, Port-Out, ½ of Fraud Recovery 137 Housing Assistance Payments (HAP) PHA provides HAP to private landlords on behalf of eligible families HAP could cover all or some of the rent, depending on tenant income Tenants pay the difference/balance of rent directly to the private landlord 138

70 Housing Assistance Payments (HAP) The maximum subsidy the PHA can pay is the payment standard minus the Total Tenant Payment (TTP) The maximum subsidy calculation is done at the time the family is issued a housing choice voucher It is important for the family to know the maximum the PHA will pay while searching for a unit The actual PHA subsidy can be calculated only after the family has selected a specific unit 139 Utility Reimbursement Payments (UAP) The amount of the utility reimbursement is the amount by which the HAP payment exceeds the rent to the owner When there is a utility reimbursement, the PHA pays the full amount of the rent to the owner and sends the utility reimbursement to the family or the utility company 140

71 Accounting Entries for HAP & UAP Account Description Amount 4715 HAP $ UAP Cash (Restricted) (550) To record HAP and UAP expense 141 Portability 142

72 Portability An eligible family that has been issued a housing choice voucher may use that voucher to lease a unit anywhere in the United States where there is a housing agency operating a housing choice voucher program This feature of the program is referred to as portability 143 Initial and Receiving PHAs Initial PHA Where tenant originates Receiving PHA Where tenant moves to 144

73 Portability The receiving PHA has the option to absorb or administer the tenant based on their ability to fund them from their HAP funding available If the receiving PHA decides to absorb, then the tenant is simply part of the receiving PHA s leasing PHA starts making payments from their own ACC There is no portability If the receiving PHA decides to administer, then the tenant is still part of the initial PHA s baseline and we have portability 145 Portability (Port-Out) Initial PHA: (where tenant originates) Will include tenant on their lease-up schedule Pays HAP/UAP expense to the Receiving PHA Pays an Admin Fee to the Receiving PHA (see next slide) Still remains part of the Initial PHA s baseline units Admin. Fee paid is recorded as General Expense HAP is reported as HAP expense 146

74 Portability (Port-Out) Initial PHA The Initial PHA must pay the Receiving PHA the lesser of 80% of the Initial PHA s B administrative fee or 100% of the Receiving PHA s B administrative fee The Initial PHA always gets to keep a percentage of administrative fee revenue and the Receiving PHA never gets more then their actual fee Remember to back out proration! 147 Portability Out Accounting Entries Account Description Amount HAP $ General Expense Cash (Restricted & Unrestricted) $(660) The HAP portion is paid to the Receiving PHA (Restricted) 80% of the B Rate Admin Fee (less proration) is paid to the Receiving PHA (Unrestricted) 148

75 Family Self-Sufficiency 149 The FSS Program The Family Self-Sufficiency (FSS) program is intended to promote the development of local strategies for coordinating the use of housing choice vouchers with public and private resources to help eligible families achieve economic independence 150

76 2 Types of FSS Funding There are currently two types of funding for the FSS program: HAP Portion Restricted Net Position FSS Escrow payment Admin Portion Must apply for grant Will generally pay for salaries and benefits of the FSS Coordinator ROSS FSS grant 151 The FSS Program FSS is open to families in the HCV program who are un- or underemployed The objective is to assist these families in obtaining employment that will allow them to become self-sufficient, that is, not dependent on welfare assistance 152

77 The FSS Program 153 FSS Accounting Entries Account Description Amount FSS HAP (made out to PHA) $ Cash (Restricted) (200) To record FSS HAP for K. Richards FSS Cash (Restricted) $ FSS Liability (200) To record payment of FSS cash and record liability 154

78 FSS Program Forfeiture Accounting Entries Account Description Amount FSS Liability $ xx Other Income FSS Forfeitures (200) To record FSS Forfeiture Cash (Restricted) $ FSS Cash (Restricted) (200) Transfer cash based on FSS Forfeiture 155 Fraud Recovery 156

79 Fraud Recovery The PHA retains an amount as unrestricted cash, either the greater of: 50% of the amount recovered OR The actual and reasonable costs of recovery The other 50% or funds remaining must be used as restricted cash for HAP purposes 157 Accounting Entries Fraud Recovery - Example 1 Account Description Amount Cash (Restricted/Unrestricted) $ HAP Fraud Recovery HAP Portion (100) Admin Fraud Recovery Admin Portion (100) To record fraud recovery when the cost to recover the amount is less than ½ of the amount of being recovered. 158

80 Accounting Entries Fraud Recovery Example 2 Account Description Amount Cash (Restricted/Unrestricted) $ HAP Fraud Recovery HAP Portion (50) 3690.Admin Fraud Recover Admin Portion (150) To record fraud recovery when the cost of recovery is greater than ½ of amount being recovered 159 Accounting Entries for Fraud Recovery & Portability Step 1 Account Description Amount 1129 A/R Fraud Recovery $1, Admin Fraud Recovery Admin Portion (1,000) Receiving PHA recognizes fraud amount on general ledger 160

81 Accounting Entries for Fraud Recovery & Portability Step 2 Account Description Amount Cash Unrestricted $1, A/R Fraud Recovery (1,000) Receiving PHA collects the cash for Fraud 161 Accounting Entries for Fraud Recovery & Portability Step 3 Account Description Amount 4590 General Expense $ Cash (Unrestricted) (500) Receiving sends Initial PHA ½ of collections 162

82 Monitoring Program Subsidy Monthly Reconciliation of Restricted Net Position, HHR and PUC 163 Leasing & HAP Utilization Why is the maximizing leasing and HAP important? HUD will use a snapshot of prior year HAP expense data to fund the following year for HAP funding The more units that are leased, the more administrative fee revenue we can earn 164

83 Estimating Funding on an Annual Basis Each PHA is granted a baseline number of units The goal is to maximize leasing each month to earn the highest administrative fee revenue each month Additionally, the PHA wants to maximize HAP in the current year, to maximize HAP funding in the following year 165 Monitoring the Section 8 Program Monthly, we should monitor the financials of the Section 8 program: Cash Budget vs. Actual Leasing & HAP utilization 166

84 Other Factors Effecting Leasing What must your PHA consider to maximize leasing? Vouchers Looking Residents coming off program Fair Market Rent Payment Standards Unit Size Mid-Month Move-in (PIC) Other Funding Considerations Portability 167 HAP Expenses After 1st of the Month Intended to capture only HAP costs for contracts effective after the first of the month Does not include checks cut or issued after the first for contracts in place on the first Does not include manual payments unless they are for contracts after the first of the month 168

85 $0 HAP Participants Active participants at $0 HAP are counted for Purposes of UMLs and HAP costs It is accurate to include these in total UML and PUC Participants who are terminated or transferred to a different housing assistance program are not counted in either UMLs or HAP costs 169 Reporting Abated HAP A unit where the PHA has abated the HAP is still under HAP contract and lease HA reports the UML and reports $0 HAP during the abatement period PHA ceases reporting UML if contract is terminated If HAP is abated for HQS violations, HAP is not restored for abated period upon correction 170

86 Leasing & HAP Monitoring Section 8 Utilization Tool (a) (b) (c ) (d) (e) (f) (g) (h) (i) (j) (k) HAP HAP/UAP HAP Avg. ACC FSS Fort. Excess RNP Program Total Potential Month Received FSS/ HAP PO Utilization UML PUC % Leased Units Fraud Rec (Deficiency) Available Reserves Funding UML CY ABA $ 4,153,297 HUD Held Reserves 200,000 Balance Forward $ 100,000 4,353,297 $ 4,453,297 14,424 January 366, , % 1, % 1, (17,561) 82,439 3,986,358 4,068,797 13,179 February 366, , % 1, % 1, (18,711) 63,728 3,619,419 3,683,147 11,930 March 366, , % 1, % 1, (19,161) 44,567 3,252,480 3,297,047 10,677 April 1,300 - May 1,300 - June 1,300 - July 1,300 - August 1,300 - September 1,300 - October 1,300 - November 1,300 - December 1,300-1,100, ,157, ,748 15, , (55,433.00) 171 Leasing & HAP Utilization Schedule Column (a) Housing Assistance Payments (HAP) deposited into PHA s checking account For example, the PHA received HAP funds of $366,939 from HUD for each month Month CY ABA HUD Held Reserves (a) HAP Received Balance Forward January 366,939 February 366,939 March 366,

87 Leasing & HAP Utilization Schedule Column (b) HAP/UAP/FSS Escrow & Port Out HAP Represents the total HAP, UAP, FSS Escrow and Port Out Payments for each month paid by the PHA For example, the PHA had total HAP payments of $385,000 for the month of January made out to landlords, tenant s for UAP and FSS escrow payments Month CY ABA HUD Held Reserves (b) HAP/UAP FSS/ HAP PO Balance Forward January 385,000 February 386,000 March 386, Leasing & HAP Utilization Schedule Column (c) HAP Utilization Represents the total (HAP/UAP/FSS) paid divided by what the PHA received from HUD For example, the month of January Month CY ABA HUD Held Reserves (c ) HAP Utilization Balance Forward January 105% February 105% March 105% $385,000 $366,

88 Leasing & HAP Utilization Schedule Column (d) Unit Months Leased (UML) Represents the units the PHA has under lease on the 1st of the month For example, in the month of January, the PHA had 1,247 units under lease on January 1, 20xx Month CY ABA HUD Held Reserves (d) UML Balance Forward January 1,247 February 1,250 March 1, Leasing & HAP Utilization Schedule Column (e) Average Per Unit Cost (PUC) Represents the average HAP (HAP/UAP/FSS) Probably one of the most important numbers! Simply divide HAP costs, Column (b), by UML, Column (d) For example, the PHA s average HAP cost was $ per unit for the month of January Month CY ABA HUD Held Reserves (e) Avg. PUC Balance Forward January February March

89 Leasing & HAP Utilization Schedule Column (f) Leasing Utilization Represents the units leased for the month, compared to the baseline of the units We take the UML, Column (d), and divide by the UMA, Column (g) For example, in January, the PHA has 96% of available units leased Month CY ABA HUD Held Reserves (f) % Leased Balance Forward January 96% February 96% March 96% 177 Leasing & HAP Utilization Schedule Column (g) ACC Units Represents the units that are available each month to lease Typically called your baseline For example, the PHA has 1,300 units available to lease each month Month CY ABA HUD Held Reserves (g) ACC Units Balance Forward January 1,300 February 1,300 March 1,

90 Leasing & HAP Utilization Schedule Column (h) FSS Forfeitures & Fraud Recovery FSS forfeitures are the amounts collected from the tenant s escrow account due to the tenant not completing the program Fraud Recovery represents the amount of funds recovered for that represent the restricted portion. Month CY ABA HUD Held Reserves (h) FSS Fort. Fraud Rec Balance Forward January 500 February 350 March Leasing & HAP Utilization Schedule Column (i) Excess (Deficiency) of Funding Represents total cash deposits from HUD, interest earned, HAP portion of fraud recovery, FSS forfeitures, less payments to landlords and tenants for HAP, UAP and FSS For example, the deficiency of funding was $17,561 for January Month CY ABA HUD Held Reserves (i) Excess (Deficiency) Balance Forward January (17,561) February (18,711) March (19,161) 180

91 Leasing & HAP Utilization Schedule Column (J) Restricted Net Position (RNP) Available Represents the amount of funds available to pay for HAP, UAP and FSS escrow payments only Increases and decreases come from Column j For example, as of March 31th, the PHA has $44,567 in RNP (i) (j) Excess RNP Month (Deficiency) Available CY ABA HUD Held Reserves Balance Forward $ 100,000 January (17,561) 82,439 February (18,711) 63,728 March (19,161) 44, Leasing & HAP Utilization Schedule Column (k) Program Reserves Represents the amount of funds held by HUD (a) (k) HAP Program Month Received Reserves CY ABA $ 4,153,297 HUD Held Reserves 200,000 Balance Forward 4,353,297 January 366,939 3,986,358 February 366,939 3,619,419 March 366,939 3,252,

92 Leasing & HAP Utilization Schedule Column (l) Total Funding Represents the amount of total HAP funding available: ABA, HHR & RNP (j) (k) (l) RNP Program Total Month Available Reserves Funding CY ABA $ 4,153,297 HUD Held Reserves 200,000 Balance Forward $ 100,000 4,353,297 $ 4,453,297 January 82,439 3,986,358 4,068,797 February 63,728 3,619,419 3,683,147 March 44,567 3,252,480 3,297, Leasing & HAP Utilization Schedule Column (m) Potential UML Represents the possible unit months remaining to be leased For example, if you take funding remaining at the end of March $3,297,047 / $ PUC for March, it will provide the unit months remaining to be leased that funding can support: 10,672 (e) (l) (m) Avg. Total Potential Month PUC Funding UML CY ABA HUD Held Reserves Balance Forward $ 4,453,297 14,424 January ,068,797 13,179 February ,683,147 11,927 March ,297,047 10,

93 Restricted Net Position What happens if your RNP goes into a deficit position? 185 Restricted Net Position Calendar Year End Fiscal Year End If the RNP is in a deficit position, the PHA may be able to record an A/R from HUD ABA There should be ABA remaining and possibly some Program Reserves to record an A/R from HUD Program Reserves (HHR) Only the portion that represents the negative RNP; considered earned per GASB 186

94 Port-In Port-In HAP & Port-In Revenue - All Considered Un-resticted 187 Portability (Port-In) Receiving PHA: (where tenant moved to) Increase A/R from Initial PHA for HAP/UAP (not real HAP) to local landlord Increase A/R from Initial PHA for Admin Fee Receiving PHA is using UNP (Admin. Fee Reserve) to pay for HAP to local landlord and is reimbursed from initial PHA Not included on Receiving PHA s leasing schedule as a leased unit Is using FDS line for HAP reporting purposes 188

95 Portability (Port-In) Receiving PHA will receive the lesser of 80% of the Initial PHA s B administrative fee rate or 100% of their rate B administrative rate Calculation of both rates will include proration 189 Port-In Accounting Entries Account Description Amount 4715.xxx HAP $ Cash (Unrestricted) (600) Port Receivable (from PHA) Portability Income (Unrestricted) (660) The HAP portion is paid from Unrestricted cash since the tenant is Porting In from another PHA The Port Receivable is the HAP due to the administrating PHA and amount due for Administrative Fee 190

96 Port-In Reporting The $660 revenue will be reported on FDS line number 71500, Other Income The HAP portion we are paying out for the Portable payment will be reported on FDS line and accounted for an Port In HAP, not a true HAP 191 Reporting Interest Income 192

97 Interest Income Must properly report restricted and unrestricted interest income on the FDS to ensure amounts will flow to proper subsidiary equity schedule Unrestricted Interest Restricted Interest New will not be used for RNP 193 How to Report Restricted Interest Income VMS Reporting FDS Reporting Always report the interest attributable to RNP in the VMS for each month The first $500 will be reported as unrestricted interest income Any other restricted interest income earned over $500 will be reported as an A/P to HUD 194

98 Restricted Interest Income All interest income earned on RNP over $500 will be credited to Accounts Payable HUD and reported on FDS Line 331 No longer part of RNP Interest income of $500 and less can be retained by the PHA as unrestricted interest income 195 Returning Excess RNP Interest Income Sent to PHAs in June 2015 Interest earned on RNP must be returned in excess of $500 Use this website nding_requests/returning_interest.aspx 196

99 The Voucher Management System 197 VMS Users Guide Last updated as of April 2017 Version

100 Business Rules for Monthly Submissions Each submission includes data for the specified month only Enter data for the specified month only Enter all leasing and expense data in positive whole numbers without any punctuation marks or symbols (commas, dollar signs, and decimal points) 199 Business Rules for Monthly Submissions PHA is responsible for ensuring that all information is correct, and that wrong or missing Official HA data is updated in the PIC information system for future data collection use The fields that are official HA Data and come from PIC are: Name of Authorized HA Official Official Housing Authority Address 200

101 Business Rules for Monthly Submissions If your PHA has no report for a field, or if the reported value is zero (0), tab through the field and leave it blank; the exceptions are the following fields which do accept entries of zero: Net Restricted Assets (NRA) [now called RNP] Unrestricted Net Assets (UNA) [now called UNP] Vouchers Leased End of Month All Voucher HAP Expenses After the First of Month Vouchers issued but not under HAP contract as of the last day of the month Cash/Investments as of the last day of the month Administrative Expenses Non-MTW MTW- HCV Administrative Expenses 201 Business Rules for Monthly Submissions The following fields can accept rules negatives for monthly submissions Restricted Net Position (RNP) Unrestricted Net Position (UNP) 202

102 Business Rules for Monthly Submissions Vouchers administered on behalf of another PHA under the portability provisions, and for which HAP is reimbursed to your PHA, should not be reported by you as part of your leasing they will be reported by the PHA that is paying the HAP These are commonly referred to as Port-Ins Not true HAP expenses of administering PHA They will be reported by the PHA that is paying the HAP There is a separate section in VMS called Portables Vouchers Administered, with line items for reporting Portable Units Administered and HAP for Portable Units Administered These are the fields for reporting those vouchers for which HAP is reimbursed to your PHA 203 Business Rules for Monthly Submissions A voucher under lease must be reported in one, and only one, main category Exceptions: Vouchers reported under the sub-categories New Homeowners This Month and Enhanced Vouchers are also reported under the main categories of Homeownership and Tenant Protection, respectively If a leased voucher could appropriately be reported in more than one category, it should be reported in the category that reflects how the participant initially qualified for the voucher 204

103 Business Rules for Monthly Submissions However, if a participant initially qualified under All Other Vouchers, and later qualified under another category, that participant would be reported under the new category A participant initially qualified for a voucher under All Other Vouchers and later entered the Homeownership program - That participant would be reported under Homeownership A participant qualified for a voucher under the VASH program; that participant later ported - The PHA that initially qualified the participant under VASH would report that voucher as VASH rather than Port Vouchers Paid 205 RAD Component 1 and 2 Effective with April 2016 submissions, RAD component 1 and 2 vouchers under lease should be reported in the appropriate RAD 1 and 2 fields and should no longer be reported in the Tenant Protection field 206

104 Business Rules for Monthly Submissions All HAP expense data is to be reported in the voucher categories as of the first day of the month HAP expenses should be entered under the month to which they apply rather than under the month in which they are paid 207 HAP Reporting Example Month April HAP MAY HAP Revised April MAY Actual April $300,000 $315,000 MAY $305,000 $290,000 For example, actual HAP/UAP checks paid per the general ledger totaled $300,000 for April Actual HAP/UAP checks paid in May were $305,000 per the general ledger Of the $305,000 of HAP/UAP checks that were paid in May, $15,000 is applicable for April HAP The PHA must revise the April VMS submission for HAP and UAP expense and increase the about to $315,000 May VMS will only report $290,000 The PHA must also update the RNP for April 208

105 Business Rules for Monthly Submissions Contracts on hold are not reported as units leased as of the first day of the month Contracts on hold are defined as a contract that has been entered into the PHA's system but for which the PHA is awaiting a landlord signature Units are not reported as under lease until the HAP contract is negotiated Once the contract is signed, if the monthly submission is completed, the PHA should enter such units as a Prior Month Correction 209 Business Rules for Monthly Submissions Abated units are units that are currently under lease, but for which the HAP is being withheld for specific reasons, such as the unit failing to pass HQS inspection The PHA should enter the UML during the abatement period; the unit is under contract If the abatement is reversed, then the PHA can enter a Prior Month Correction for HAP for those months attributable to the abatement period Failure by the PHA to report the abated UML will skew the leasing and per unit costs for this agency 210

106 Business Rules for Monthly Submissions A separate line item on the Voucher UML and HAP tab, called "Voucher HAP Expenses for New Contracts Effective After the First of the Month," collects HAP costs incurred for new HAP contracts effective after the first of the month These costs are not reported elsewhere PHAs should include as HAP in the appropriate categories any amounts expended for utility reimbursements 211 Business Rules for Monthly Submissions The 5-Year Mainstream program (prior to 2015) is governed by different appropriation law and funded separately from the Voucher program Therefore, the 5-Year Mainstream program is NOT a category within the Voucher program in VMS In VMS, there are specific lines provided for 5-Year Mainstream Units Leased and HAP Expenses only These values are not included in the Voucher Leasing and HAP totals 212

107 Business Rules for Monthly Submissions If a value greater than zero (0) was entered in any field under Voucher Units, a value greater than zero (0) must be entered in the corresponding Voucher HAP Expenses field Question Mark (?) - For every field containing this symbol, a pop up description of the data entry required for the field, or an explanation of the field will be provided This field description appears only once for the many occurrences of the (?) Box symbol 213 Business Rules for Monthly Submissions Leasing and HAP expense data for each category of voucher are now reported on the same line Fields that have been grayed out are prefilled by HUD and are not editable Data used for these fields reflect the current system information, and are automatically updated when changes are made to prior months The PHA must report UMLs for Zero HAP Units These are units for which the HAP has been calculated to be $0 The units are to be reported in the same voucher category as they would if the HAP was a positive dollar amount After 180 days at $0 HAP, the HAP contract terminates automatically Refer to 24 CFR for termination 214

108 Business Rules for Monthly Submissions Tenants who were in place at the time of a RAD Conversion have $0 HAP and should be reported in VMS as long as the family is in place. The 180 day limit does not apply to them Tenants leased after the conversion are limited to 180 limit for $0 HAP 215 TAB 2 Other Income & Expenses Unrestricted Net Position (UNP) as of the last day of the month Cash/Investments as of the last day of the month Voucher Program only UNP is equal to total Administrative Fee (AF) revenue minus total HCV administrative expenses and any AF used for housing assistance payments (HAP) or other activities for Section 8 Tenant Based related purposes UNP (referred to as Administrative Fee Reserve in the HCV program regulations) is the amount by which administrative fees paid by HUD for a PHA fiscal year exceeded the PHA administrative expenses for the fiscal year, plus any interest earned on the AF reserve No additions permitted during CY Will only include interest and ½ fraud recovery Cash/Investments as of the last day of the month are the total amount of HAP and AF cash and investments for the HCV program Amounts reported include all cash and investments as they relate to RNP and UNP balances as of the last PHA FYE, do not include FSS cash and other current liabilities 216

109 TAB 2 Other Income & Expenses Restricted Net Position (RNP) as of the last day of the month RNP is the amount of Housing Assistance Payments (HAP) Equity for HCV Equal to total HAP revenue minus total HAP expense for eligible unit months leased on a calendar year basis o Total HAP expense should include expenses for regular vouchers as well as expenses for certain HCV special purpose vouchers including Non-Elderly Disabled (NED), Family Unification Program (FUP), HOPE VI, One Year Mainstream (MS1), Litigation, o Tenant Protection (TP), and Homeownership Total HAP revenue is defined as total funding eligibility for calendar years 2005 and later (including pro-rated renewal eligibility plus funding for incremental vouchers) minus any offsets for 2008 and 2009, and should equal the amount actually disbursed to the PHA The amount reported must include all interest earned, fraud recovery portions returned to HAP, and Family Self-Sufficiency (FSS) forfeitures 217 VMS & Unrestricted Net Position Unrestricted Net Position (UNP) is being reported in the Vouchers Management System (VMS) in the field called Unrestricted Net Position as of the last day of the month UNP is the amount reported on the balance sheet at line 1117 Administrative Fee Equity (at year end on your FDS) The UNP reported in the VMS must be updated through the end of each reporting month for interest and fraud recoveries 218

110 VMS & Unrestricted Net Position Note that the total Admin Fee revenue used to calculate the UNP reported in this field does not include AF received during the current PHA FY, because excess AF received does not accumulate to the UNP until the end of the PHA s FY The excess fees received during the PHA s current FY will not be reported in the UNP field until after the PHA s FYE 219 VMS & Unrestricted Net Position Monthly, the PHA reports the total of (1) the most recent PHA FYE UNP balance plus (2) any interest earned and fraud recovery allocated to the UNP through the end of the reporting period, minus (3) any funds expended from the UNP through the end of the reporting period This includes all funds held in the Administrative Fee Reserve prior to the establishment of the UNP 220

111 VMS & Unrestricted Net Position UNP Example 1 Line Description Amount 1 PHA s Beginning Balance (FY) $300,000 2 Add: Interest Earned 30 3 Add: Fraud Recoveries Less: Funds Expended 0 5 PHA s Ending Balance for Reporting Period (VMS) $300,530 This example will only report an increase for interest and fraud recovery (admin portion) If admin fees earned are greater then admin expenses, we don t increase the VMS s UNP by the amount of excess admin fees 221 VMS & Unrestricted Net Position UNP Example 2 Line Description Amount 1 PHA s Beginning Balance (FY) $300,000 2 Add: Interest Earned 30 3 Add: Fraud Recoveries Less: Funds Expended (1,000) 5 PHA s Ending Balance for Reporting Period (VMS) $299,530 This example will only report an increase for interest and fraud recovery (admin portion) Since the PHA utilized Admin Fee reserves to pay for admin expenses, we must report the reduction in the UNP 222

112 Common VMS Reporting Errors Not reporting as of the first of the month Including Port-In in UML as all other vouchers as well as related HAP expense Reporting Vouchers in more than one category Reporting under incorrect voucher type VASH Vouchers are reported as VASH regardless whether tenant Ports out Once tenant protection always tenant protection 223 Common VMS Reporting Errors Including Vouchers leased after first of the month as being under lease on first of month Including Vouchers on hold Issued but not under HAP contract In contrast, HAP Vouchers in abatement are included Incorrect remaining under lease at end of month data Should include all Vouchers remaining under lease on last day of month 224

113 Common VMS Reporting Errors Including Port-Out administrative fees as HAP expense Reporting on the after first of the month HAP line item all HAP paid with mid-month check run, rather for those vouchers leased after the first of the month Reducing HAP expenses by fraud recovery and FSS forfeitures Reporting HAP under more than one category Duplicate HAP reporting Reporting HAP on a Cash basis in VMS rather then an Accrual basis Retro-active Vouchers 225 Common VMS Reporting Errors Reporting 100% of fraud recovery collected Reporting total fraud recovery receivables as fraud recovery collected Total amount of repayment agreement Reporting $0 in fraud recovery, keeping 100% as UNP without justification Incorrect reporting cash & investments Failing to report RNP and UNP 226

114 HUD s Upcoming HCV Funding Disbursement Changes PIC-NG And e-vms To Replace Current Cash Management Process 227 Overview Upcoming Changes To HCV Disbursement Process HUD has been working on a high-priority project to convert the HCV disbursement formula from the current process utilizing VMS data, to a new and improved process using PIC The process will include adding two new sections to PIC Section 18 which is referred to as HAP Register (not to be confused with Section 18 demo/dispo), containing the information needed to determine HAP needs, and Section 19 which is referred to as Other VMS Data, to include items such as UNP, RNP, Cash Balance, etc. 228

115 Overview Upcoming Changes To HCV Disbursement Process The project led to what has been referred to as an Enhanced Proof of Concept (EPOC) involving 9 PHAs including a couple of BDO PHA Finance clients. The 9 PHAs participated in the testing and development of the new process, which is also referred to as e-vms HUD then held a series of listening sessions throughout the United States during 2018, to present and gather feedback on their planned approach based upon the results of the EPOC 229 Overview Upcoming Changes To HCV Disbursement Process Next, HUD plans to publish a notice in 2019 inviting approximately 200 PHAs to apply to participate in a pilot program, to more fully test e-vms in a real-world environment Once HUD determines they are fully ready to go (estimated at 2 years from now), they plan to eliminate VMS and replace it with PIC-based e-vms, to be described below 230

116 Enhanced Proof Of Concept (EPOC) The EPOC, along with input from the listening sessions, will lead to a Voucher Disbursement Demonstration Program The purpose of the Voucher Demonstration is to Test a new HCV Payment process; revised form; and PIC-NG functionalities Initial build(s) will focus on non- MTW PHAs only (specific payment processing for MTW PHAs is not included in this listening session) 231 Enhanced Proof Of Concept (EPOC) Success Indicators Accuracy The EPOC calculated HAP need within functional zero, defined as the threshold of 97% accuracy in comparison to a PHA s VMS and HAP Register reporting Scalability In April 2018, evms calculated $156 million of HAP need, representing 10.3% of the HCV program s total monthly budget for contract renewals. This is a statistically valid sample size that illustrates evms s scalability Funding Statements Provide monthly PHA funding statements 232

117 Enhanced Proof Of Concept (EPOC) Success Indicators PHA Payment Processing evms enables HUD to demonstrate progress towards processing payments monthly. Using realtime family-level data, HUD is able to (1) make payments from monthly actual expense submissions, (2) provide PHAs payment validation, (3) include retro monthly adjustments 233 PHA Objectives As Expressed By EPOC Participants Funding to follow a family that ports rather than inter-pha billing (this one unfortunately will not be included) Streamlined and consolidated process to allow more time for other tasks (versus manual and complicated VMS submissions) 234

118 Current HCV Cash Management In 2012, as instructed by Congress, HUD implemented a system known as Cash Management in the HCV program for disbursing HAP funding Immediately prior to the start of Calendar Year 2012, HUD published PIH Notice describing the process 235 Current HCV Cash Management HUD announced that they would disburse HAP funding based upon HAP expenses as reported in the Voucher Management System (VMS) VMS would be used by HUD s to determine how much a PHA is actually spending on HAP monthly HAP funding would only be disbursed to the extent that the PHA needs the funds for immediate HAP expenditures The remaining HAP funding allocation would be held back, to be retained in the Treasury in a HUD Held Reserve (also known as Program Reserve) 236

119 HCV Cash Management: VMS Versus e-vms HCV Cash Management as delivered through the VMS process, resulted in a lot of problems for PHAs In the beginning, PHAs were confused by the process and the reports and reconciliations ed by HUD In addition, just due to the nature of the process, HUD utilizes VMS data that is three months old or more. - The time lag in capturing the data versus providing the funding leaves the PHA with too little or too much HAP disbursement funding, because conditions are constantly changing 237 HCV Cash Management: VMS Versus e-vms When a PHA is short on funding, they sometimes struggle to convince their HUD rep that they need more, leading to delays and consequently the need to step up with other resources to cover HAP expenses, until made whole e-vms, rather than utilizing aggregated VMS HAP expense data that is months old, will allow the PHA to stream the HAP register to HUD just 15 days before the HAP disbursement date The information will be populated automatically from the PHA s software into a new section in PIC (HUD has the PHA software vendors involved in this conversation) 238

120 HCV Cash Management: VMS Versus e-vms Therefore the data used by HUD to determine HAP disbursements, while not fully real-time, will be much more current than the VMS method used now HUD will compare the streamed HAP register data to other PIC data and generate an error report for the PHA to review The PHA will have some time to fix the errors (a couple or few days?), but if not, then the errors may be fixed in the subsequent month Errors not fixed, can result in HUD revising that portion of the disbursement to be based upon PIC data 239 PIC To Include New HAP Register Section The new PIC HAP Register / Section 18, (and as explained earlier, not to be confused with Section 18 demo/dispo!), will include the information needed for HUD to estimate how much the PHA s HAP needs will be for the upcoming month PHA software vendors, if they want to continue to serve PHAs, will need to upgrade their software to create an automated interface to take certain information from the HAP data base (the module in which the software maintains the HAP register) and to stream the information to HUD through PIC Section 18 HUD describes this as a once a month process, with opportunity to make corrections if needed after HUD validates the information (more information about that part later) 240

121 Section 18 ( HAP Register ) Of PIC To be completed only by PHAs in Voucher Demonstration program once the demonstration begins full implementation timeframe not known but estimated at two years from now Contains data fields required for The payment of HAP and administrative fees Data not associated with a current (e.g., non-family level 5008 data such as fraud recovery, FSS forfeitures, PBV not under lease, etc.) Includes multiple HAP payment lines to allow for HAP information to be associated with various payees (i.e., landlord, utility reimbursement, trailer pad, etc.) 241 Also On Its Way: Section 19 Of Form ( Other VMS Data ) Contains VMS data fields not captured in Section 18 (e.g., lead-based paint) and program / budget information (e.g., UNP, RNP, Cash balance) and do not have funding implications At both family and non-family level Also to be completed only by PHAs in Voucher Demonstration program 242

122 Monthly Processing / Section 18 Although the Section 18 data is populated from the PHA s HAP Register database as maintained in the PHA s software, much of the information is elsewhere in PIC This will allow HUD to review the Section 18 data in comparison to PIC data for validation / quality control purposes 243 Monthly Processing / Section

123 Exception Processing If the PHA does not submit Section 18 data in time for processing or the Section 18 data as a whole contains material errors, then HUD will still disburse funds to the PHA to be made available on the 1st of the month Disbursement will be based on either Current data; Last month s section 18 data for recurring payments Note: HUD funding will not be provided for non-recurring payments (including corrections of prior month data portion in previous months section 18 record) 245 Section 18 Components Note 1 used for funding of activities that are in process and therefore the record is incomplete (e.g. vouchers issued and abatement 246

124 Section 18 Record Layout 247 Section 18 Program Codes 248

125 Section 18 Voucher Sub-Program Codes 249 Section 18 HAP Reason Codes 250

126 Section 18 Record Layout Non-Family Funding 251 Section 19 of the HUD s goal is to eliminate VMS, and replace it with what is described here, known as e- VMS There is certain information needed by HUD currently residing in VMS, that does not make sense to include in Section 18 - because it is not head of household based and/or is not gathered at the participant level This information will be reported in Section 19 of the revised

127 Other VMS Data (New Section 19 of HUD-50058) 253 Validation Checks HUD will compare the Section 18 to other data Current & prior months will be validated Each Section 18 record will be marked as either pass or fail In most cases, the HUD disbursement will be based upon passed and failed records An error report will be sent to the PHA The PHA will have a some time to correct before funding disbursement If the PHA does not make the corrections in the prescribed timeframe, they must be made in the following month 254

128 Administrative Fees Administrative Fees will also be based upon Section 18 of the 50058, since VMS will be going away Admin Fees will be calculated in accordance with current rules based upon the number of units under HAP contract - the main change being that Section 18 will be the basis for unit count rather than VMS HUD will validate the Admin Fee calculation by comparing units under HAP contract per Section 18, with the other information submitted in the Periodic reconciliations will occur, as they do now 255 Voucher Demonstration HUD will post a notice in the federal register for a 60 day period to provide specifics for how a PHA may apply The notice will provide information on selection criteria and general participation requirements PHAs may file an application with HUD to try out the new Voucher Disbursement under a demonstration. The purpose will be to Test and evaluate the revised HCV disbursement process, the revised form, and PIC-NG 256

129 SEPHAS Pre Rulemaking, Pre Listening Session Feedback 257 OIG & SEMAP August 2012 SEMAP lacked an adequate system of management controls for effectively accomplishing its objective HUD headquarters management and field staff had no confidence in the program, given its heavy reliance on self-certified scores and annual audit reports In addition, due to a reduction in public housing staff resources, HUD was severely limited in the number of onsite confirmatory reviews it could perform As a result, SEMAP s objective of identifying underperforming agencies was not always achieved HUD hopes to achieve SEMAP s goal via Next Generation Management System & improved quality standards 258

130 SEMAP s Changes Are Relatively Urgent HUD must close OIG SEMAP findings Self certified challenge HQS: 2008 report - HUD cannot independently assess the quality of inspections Missing financial component for an $18B program REAC is coordinating with the HCV Program office Currently still just modeling the process Not yet in proposed rulemaking PHAS/SEMAP Listening Sessions HUD hosted listening sessions during the summer of 2016 Various locations across the country Jacksonville, FL (July 12 & 13, 2016) Phoenix, AZ (August 2 & 3, 2016) Hartford, CT (August 23 & 24, 2016) Detroit, MI (August 25 & 26, 2016) Kansas City, KS (September 20 & 21, 2016) Ft. Worth, TX (September 22 & 23, 2016) Philadelphia, PA (September 27 & 28, 2016) 260

131 HUD Guiding Principles Assessment should be based on data currently collected by HUD Limit additional PHA reporting requirements Measurement should be outcome based, not process based Results oriented Increases in scores/designation cannot be based on self-certification of data Minimize PHA burden and provide flexibility 261 Alternate Framework for Consideration Incentives Target secondary program goals Like locational outcomes/ vacant unit turns Performance indicators Governance & program controls Target key areas of program operations Such as unit condition, inspections, occupancy Target board oversight Key admin policies & procedures 262

132 Let s Discuss the Two New Elements of the Preproposed New Framework: Incentives Performance indicators Governance & program controls 263 Incentives Incentives are bonus points that are applied to the performance indicator score A PHA s assessment score can only be increased (i.e., a PHA cannot lose points) for not having met an incentive standard Incentives are targeted at improving HUD-specific goals but allow for a PHA s local discretion in prioritizing the activity Incentives must be measurable using data currently available to HUD Incentives must be outcome-based and the outcome must be mostly in the control of the PHA A PHA may not be able to earn points for each incentive Max cap is 10 incentive points 264

133 Possible SEMAP Incentives Worth up to 18 Points w/10 Point Cap Reaching program objectives that provide opportunities for families to improve self-sufficiency or live in better economic areas PHA locational outcomes (10 pt max) FSS (5 pt max) Reaching leasing targets for serving special populations: VASH leasing not included in utilization, possible incentives for program success here (3 pt max) 265 Governance & Program Control Surveys SEMAP Governance just one survey if you have PH too Surveys reflect minimum standards for Board oversight and administration Surveys would be completed and self-certified by PHA via HUD online system Surveys would be pass/fail, scored separately PHA would not earn points for passing surveys Overall designation could be lowered for fails Governance Survey topics Governance Program Control survey topics Waitlist management: placement and selection Rent determination Rent reasonableness 266