1. Casterline Associates PC 11 Davis Rd, Bldg 2, Ste 225 Valley Forge, PA 19482-0962 www.casterline.net (800) 337-5088

2. Expected Formula: 2016 HAP Renewal Funding Calendar Year 2015 HAP expenses reported by the PHA to HUD through the VMS system (this information is updated annually and is referred to as “Re-Benchmarking”) X An annual adjustment factor (AAF) for inflation X An adjustment for proration = 2016 HAP Funding ~ At the date of this writing (mid-November 2015), no 2016 NRP / Program Reserve Offset/Recapture is expected! ~ 2

3. Excess HAP Funding Not Spent on HAP Expenses, Accumulates to Restricted Reserves  Excess HAP Funding held by the Housing Authority = Net Restricted Position (Restricted Equity), formerly known as NRA  Excess HAP Funding held by HUD = Program Reserve (a.k.a. HUD-Held HAP Reserve), this amount does not show up as an asset or equity on the PHA (unless you have zero HAP funds on hand and “negative” NRP[NRA] then you should Dr A/RHUD and Cr HAP Revenue) 3

4. Net Restricted Position / “NRP” (Formerly Known as NRA)  Net Restricted Position (“NRP”) = excess unspent HAP funding  Most PHAs know this under its former name, NRA (stands for Net Restricted Assets)  NRP/NRA = excess unspent HAP funding disbursed to the PHA since January 1, 2005, that has not been spent on HAP expenses incurred since January 1, 2005, plus other HAP-related revenue (FSS Forfeitures and up to 50% of Fraud Recovery Revenue) 4

5. HUD Getting Away from the Concept of NRP  Beginning 2012, under new so called “Cash Management” procedures HUD limits the funding actually disbursed to the Authority to those amounts immediately needed for HAP/UAP expenses. PHA’s funding disbursements are based upon HAP expense reported to HUD in VMS.  In addition, HUD in conjunction with implementing the new cash management procedures swept remaining NRP balances into the HUD-held HAP reserve (a.k.a. Program Reserve) during 2014.  The purpose of these two steps is to get away from the concept of NRP and for HUD (actually the Treasury) to hold on to any excess unspent HAP funds. 5

6. Understanding the Difference Between Net Restricted Position (NRP) and Program Reserve  Net Restricted Position (“NRP”) = excess unspent HAP funding on hand at the PHA  Program Reserve = excess unspent HAP funding held by HUD Program Reserve  HAP Funding that is allocated to the housing authority but not disbursed to the housing authority accumulates in a HUD-held Program Reserve 6

7. Targeting Your Utilization and HAP Spending  Determining how much you can afford to lease is more complicated than ever, especially with the implementation of so called Cash Management procedures.  Casterline Associates fears that some PHAs will target the amount of cash coming in each month, which may limit you from realizing your full leasing/spending potential.  In general, you should plan to spend – at a minimum – your Final Prorated HAP Renewal Funding (before Offset if any), plus any Set Aside Funding, Non Renewal Funding, Other HAP-Related Revenue, and Excessive NRP or Program Reserve that you want to CAUTIOUSLY spend down. 7

8. Three Easy Steps to Maximize the Use of HCV Program Resources Amidst all this confusion, the good news is that maximizing the number of families you can assist (that’s why we’re here of course!) can be – in most cases – broken down into three easy steps: 1) Determine how much money you have available to use for HAP, 2) Increase or reduce spending to a level equal to this amount, expressed on a monthly basis, 3) Monitor your cash carefully to ensure it is adequate and contact your FMC rep if you need more. 8

9. Details 1) Determine how much money you have available to use for HAP.  Total Prorated Calendar Year HAP Renewal Funding Eligibility before offset (trainer will tell you where to obtain this information, the forms vary by year).  Non Renewal Funding (for new vouchers if you have received some).  Set aside funding applicable.  Other HAP-Related Revenue (FSS Forfeitures, and up to 50% of Fraud Recoveries)  A portion of NRP and/or Program Reserve, if you have an excessive amount, to be used cautiously.  Question: What is an “Excessive” Amount of NRP / Program Reserve 9

10. 2) Increase or reduce spending to a level equal to this amount expressed on a monthly basis (total of above divided by 12). 3) Monitor your cash carefully to ensure it is adequate and contact your FMC rep if you need more (limited to the amount of your annual funding plus program reserves – more about program reserves later).  By the 10th of each month, estimate what your HAP expense will be for the following month.  Compare this to the amount HUD has indicated they will give you for that month on the disbursement schedule.  If the disbursement does not cover HAP expense, determine if there is sufficient NRP on hand to make up the difference.  If not, contact HUD immediately for additional funds (do not wait until you are near the beginning of the next month!). 10