Calculation and Submission of Operating Subsidy Training

Calculation and Submission of Operating Subsidy Training
June, July and August 2006 Forms HUD and HUD-52723

Training Modules Module 1 – Introduction
Module 2 – Unit and Unit Months Module 3 – UEL (Utility Expense Level) Module 4 – Other Formula Expenses (Add-ons) Module 5 – Formula Income Module 6 – Transition Policy/Completion of Form Module 7 – Deleted Units and Asset Repositioning Fee Module 8 – New Units In addition to the Introduction Module, this training includes seven other modules. Each module will cover aspects of the training curriculum related to completing different sections of HUD and HUD

Module 1: Introduction Calculation and Submission of Operating Subsidy Training This module is an introduction to the Calculation and Submission of Operating Subsidy training presentation. This module will explain the purpose of the training and review learning objectives. Other topics and information in this module include: The historical background of project based funding, including a list of HUD published notices and references to assist PHAs An introduction to the new HUD subsidy calculation forms HUD and HUD A timeline of relevant Operating Fund submission deadlines An introduction to the new operating subsidy formula and an overview of how it differs from the interim formula A review of how to fill out Section 1 and Section 3, Part A in HUD-52723

Training Objectives Understand Final Operating Fund Formula (“the Formula”) Complete Revised HUD and HUD Forms Emphasize Complex Parts of Formula and Forms The main objective of this training is to provide the audience with a thorough and complete understanding of the final Operating Fund formula and how to apply this knowledge to complete revised forms HUD and HUD (“the Forms”). The Operating Fund formula is strictly based on the regulations set forth in 24 CFR Part 990 (“the Rule”). However, there are special considerations to completing the Forms for which the Rule does not provide all necessary information. Because the final formula is very similar to the interim formula, many parts of the Forms will be familiar to the trainees. Thus, the training sessions will spend less time on these well-known sections and more time on the complex issues which may result in errors when completing the Forms. Complex issues will include measuring new and deleted units, defining vacant units and changing formula income calculations due to tenant utility allowances.

Historical Background
Quality Housing and Work Responsibility Act of 1998 (“QHWRA”) Negotiated Rulemaking 1999 Harvard Cost Study Negotiated Rulemaking 2004 Revision of 24 CFR Part 990 (“the Rule”) The events that resulted in the need for training for the calculation and submission of a project-based operating subsidy formula started with the enactment of the Quality Housing and Work Responsibility Act of 1998 (“QHRWA”). QHRWA is an amendment to section 9 of the original law which set up public housing, the United States Housing Act of QHRWA required that HUD or the Secretary “establish a formula for determining the amount of assistance provided to public housing agencies from the Operating Fund for a fiscal year.” The law also required that the formula “be developed according to procedures for issuance of regulations under the negotiated rulemaking procedure.” The final formula would replace the Performance Funding System (PFS) used to fund public housing since 1975. In response to QHRWA, in March 1999, a negotiated rulemaking (Neg-Reg) session was held. The Neg-Reg committee concluded that it was not possible to develop a final Operating Fund formula because committee members could not agree upon what was the “true” cost to operate a public housing authority. As a result, only an interim operating subsidy formula was agreed upon and Congress directed HUD to contract with the Harvard University Graduate School of Design (GSD) to complete a study which would answer the question of what it costs to operate a well-run public housing authority. The “Harvard Cost Study” was completed in July 2003 containing both a final Operating Fund formula and recommendations to convert public housing to Asset Management. As a result of the implications of the Harvard Cost Study, a second Neg-Reg was held in early 2004. The second Neg-Reg incorporated the findings of the Harvard Cost Study and delivered a report recommending significant revisions to 24 CFR Part 990 – The Public Housing Operating Fund Program (“the Rule”). After further review and changes by HUD and OMB with comment from the public, the Rule was finalized on November 19, 2005.

Reference Materials Final Rule (Sep. 19, 2005)
PIH (Nov. 2, 2005) – General Information FR-5016-N-02 (Jan. 5, 2006) – Calculation of PEL PIH (Feb. 3, 2006) – Guidelines to Identify AMPs PIH (Mar. 22, 2006) – Transition Calculation and Asset Management Compliance Since the Final Rule was published on September 19, 2005, HUD has published several notices to provide PHAs guidance on the implementation of the final Operating Fund formula and other aspects of the Rule. This includes: PIH (HA) – Information Regarding Implementation of the Final Rule to the Public Housing Operating Fund Program, 24 CFR Part 990 (November 2, 2005) – This 11-point notice provides guidance on several issues including, but not limited to, PEL appeals, timelines, and the FY 2006 funding period. FR-5016-N-02 – Public Housing Operating Fund Variable Coefficients for Public Housing Operating Fund Project Expense Levels; Correction (January 5, 2006) – This notice provides a step-by-step description of the computation of the PEL. PIH (HA) – Identification of Projects for Asset Management (February 3, 2006) – This notice provides guidance regarding the identification of projects for the purposes of asset management. PIH (HA) – Operating Fund Program Final Rule: Transition Funding and Guidance on Demonstration of Successful Conversion to Asset Management to Discontinue the Reduction of Operating Subsidy (March 22, 2006) – This notice provides information regarding the calculation of transition funding under the Operating Fund program final Rule. It also provides instructions to PHAs that wish to submit documentation of successful conversion to asset management in order to discontinue their reduction in operating subsidy, commonly referred to as the “stop-loss” provision.

Consequences of Final Rule
Project-Based Funding Direct funding of asset management properties Project-Based Budgeting and Accounting Training in the Fall Asset Management Primer Webcast Available The Final Rule Part 990 impacts PHAs in three primary ways. First, PHAs will be funded at the property level to support a system of project-based accounting and budgeting. The final Operating Fund formula is a project-based funding mechanism and a primary learning objective of this training. Most notably, the final formula replaces the Allowable Expense Level (AEL) with the Project Expense Level (PEL). The AEL estimated expenses for the average unit in an entire PHA, while the PEL estimates expenses for the average unit in a property only. Second, the Rule requires PHAs to begin budgeting at the property level, as well as keep financial and operational data at the property level. It further sets forth that PHAs will provide annual project-based financial statements to HUD in compliance with GAAP ( Project-based budgeting and accounting). Finally, the Rule requires PHAs to manage their properties according to an asset management model, consistent with the management norms in the broader multi-family management industry ( Overview “Asset Management”). An important component of asset management is property-based management, i.e. decision making at the property level geared specifically to the needs of the property ( – Project Based Management PBM).

Funding Shift PHA to Property
FY 2006 – PHA-Level Funding Interim Funding Formula (AEL) FY 2007 – PHA-Level Funding Final Funding Formula (WAPEL) FY 2008 – Property-Level Funding Final Funding Formula (PEL) HUD recognizes that the shift from PHA level funding to property level funding will require a transition. Although the Rule was published in 2005, there was not enough time to implement the final formula for FY Thus, in FY 2006 PHAs were funded using the interim funding method based on AEL. In FY 2007, PHAs will be funded using the final property-level formula, but still be funded at the PHA level. The PEL will be used to estimate expenses, but the PHA will be funded based on a weighted average of all its PELs, also known as the WAPEL. This training is primarily concerned with providing guidance for completing form HUD and HUD for the FY 2007 funding period. Finally, in FY 2008, all funding will be provided at the asset management property level using the PEL. Note: The Interim Funding Method is so called because after the first negotiated rulemaking session in 1999, some changes were made to the PFS system. Since that time the Operating Fund formula has been considered an interim formula until the final recommendations of the Harvard Study and the corresponding Neg-Reg are implemented.

Funding Method Comparison Interim Rule
Under the Interim Funding Method, HUD funded PHAs directly. The PHAs were then free to allocate those funds to its properties as the central management deemed appropriate. PHAs were only required to submit one HUD and one HUD for the entire PHA. Operating Fund Public Housing Authority

Funding Method Comparison Final Rule
Under the final funding formula, HUD will fund PHA properties individually. The PHAs will no longer allocate funds to properties. PHAs will provide services to their properties to obtain revenues to support their central offices. PHAs will need to submit one HUD and one HUD for each of its Asset Management properties. Note: For FY 2007 funding, PHAs will still only need to submit one set of Forms as funding will be at the PHA level. Operating Fund AMPs Public Housing Authority

Revised Funding Forms for FY 2007 Funding
HUD-52723: Operating Fund Calculation of Operating Subsidy HUD-52722: Operating Fund Calculation of Utilities Expense Level To obtain funding for their properties, PHAs must fill out and submit forms HUD-52723, Operating Fund Calculation of Operating Subsidy, and HUD-52722, Operating Fund Calculation of Utilities Expense Level to their respective field offices. The field offices will review the forms and work with the PHAs to accurately complete them. The forms will then be sent to HUD Headquarters for final approval. HUD is the main form, which determines a PHA’s operating subsidy formula amount and corresponding funding amount. The form employs historical financial and operating data to produce a PHA subsidy amount. The form strictly follows the calculations outlined in the Operating Fund formula under Part 990. HUD form is used to calculate the Utility Expense Level (UEL), which is an input to HUD The UEL is an estimate of PHA’s expected utility expenses by unit on a monthly basis. HUD receives historical utility rate and consumption data to estimate the UEL.

Eliminated Funding Forms
HUD-52722a: Calculation of Allowable Utilities Expense HUD-52722b: Adjustment for Utility Consumption and Rates HUD-52720a: Formula Data Collection HUD-52720b: Calculation of Formula and Delta HUD-52720c: Range Test and Determination of Base Year Expense Level HUD-52728: HA Calculation of Occupancy Percentage for a Requested Budget Year (RBY) As a result of the final funding formula, several forms which were necessary to estimate a PHA’s operating subsidy are no longer necessary. Either the forms have been consolidated or eliminated entirely. Previously the UEL was calculated using two forms, the 52722a and 52722b. These forms have now been combined.

Other Required Forms SF-424 Application for Federal Assistance
HUD Certification of Payments to Influence Federal Transactions PHAs are also required to submit the following forms in addition to forms HUD and HUD-52723 SF Required for any entity that requests federal funding subsidies HUD A one-page form certifying that the entity being paid federal funding did not unduly influence a member of Congress or other government officials.

Operating Fund Submission Timeline
Calculation and Submission of Operating Subsidy Training June 9 to August 15, 2006 Asset Management Properties (AMPs) Approved June 23, 2006 Weighted Average PEL (WAPEL) issued August 5, 2006 HUD and Submission Deadline to Field Office September 15, 2006 Field Office Review Completion Date Deliver to HUD October 31, 2006 FY 2007 Obligation January 1, 2007 HUD Revisions Deadline July 15, 2007 As per the Rule “PHAs shall submit data used in the formula on a regular and timely basis to ensure accurate calculation under the formula.” To assist PHAs in complying with this requirement HUD has set a specific timeline of deadlines for PHAs, field offices and HUD to follow for the FY 2007 funding process. The major tasks and dates are as follows: HUD will provide specific training to PHAs on how to complete forms HUD and HUD The training will take place from June to August in about 50 different locations across the United States. The Asset Management Properties (AMPs) classification requests made by PHAs will be reviewed and approved by HUD on June 23, As part of the new funding mechanism PHAs are allowed to designate projects as they deem most appropriate. The PHAs may continue to designate projects as currently constituted under the ACC (Annual Contributions Contract) or under new groupings that are reasonable and will lend themselves to project-based management. After HUD has approved the AMPs, it will calculate PELs for each of the AMPs, using the methodology described in (Computation of PEL) using each AMP’s characteristic data. For FY 2007, HUD will use a weighted average PEL to fund PHAs (or WAPEL). The final WAPEL will be calculated for each PHA using AMP units as the weighting statistic. HUD will publish the WAPEL for each PHA on August 5, 2006. PHAs must submit completed copies of HUD and HUD by September 15, 2006. Field offices will work closely with PHAs to review and revise HUD and HUD submissions, as necessary. By October 31, 2006 this process will be complete and the forms will be submitted to HUD for final review. HUD will review the completed Forms, and will work with Field Office staff to address and resolve any miscalculations or errors. HUD also intends to obligate nine months of eligible funding on January 1, HUD will hold three months of funding back to cover revisions that it anticipates will take place after January 1, 2007. PHAs may submit updates to the form with additional information or to correct errors through July 15, After July 15, 2007, HUD will obligate the final three months of funding for FY 2007.

Types of Revisions PHA Error New/Deleted Units Transition/Stop Loss
Extenuating Circumstances PHAs may make revisions to their original HUD forms submitted on or before September 15, 2006 until July 15, 2007, but only for specific reasons. These include: Obvious errors that the PHA finds after its initial submission Necessary information as a result of new or deleted units that was not available previously A change in transition funding due to a PHA being approved for Asset Management Compliance Other extenuating circumstances which must be approved by the field office and HUD Headquarters

Final Operating Subsidy Formula – Major Components
EUM – Eligible Unit Months PEL – Project Expense Level UEL – Utility Expense Level Add-ons – Non PEL/UEL expenses Formula Income – Rental Income k The final Operating Fund formula consists of five major components. A definition of each of these components follows: EUM (Eligible Unit Months) – the actual number of PHA units that are in eligible categories for funding. The units are expressed by the number of months in a period for which those units meet the requirements for one of the categories eligible for funding. PEL (Project Expense Level) – the estimated amount of non-utility expenses for a given Asset Management Project. The PEL is measured on a per unit month (PUM) basis, and is based on the model defined in the Rule. The PEL is inflated each year to correspond with the Funding Year. UEL (Utility Expense Level) – the estimated amount of utility expenses for a given Asset Management Project. The UEL is estimated based on prior year utility consumption and rate information. The UEL is measured on a PUM basis. Add-ons (Non PEL/UEL Expenses) - expenses not already accounted for in the PEL or UEL. They are specific to PHAs that have unique operating or program needs. Add-ons are measured on a total dollar basis rather than on a PUM basis. Formula Income – an estimate of a PHA’s annual rental income. It does not include PHA income from non-rental sources. Formula Income is measured on a PUM basis.

Operating Subsidy Formula Interim Rule
= [(AEL + UEL) x UMA] + Add-ons minus [Formula Income x UMA] The interim formula is shown above. The interim formula used AEL instead of PEL to estimate a PHA’s expense levels. The AEL was an expense estimate for the entire PHA, whereas the PEL is an expense estimate for only an asset management property. The interim formula also uses UMAs or Unit Months Available to count the number of eligible units. UMA is very similar in concept to EUM, but the method of calculation is different enough that the number of units funded will change. Add-ons are included in the interim formula as well, but these add-ons are different from the add-ons listed under the final formula. There were 12 potential add-ons under the interim formula. Under the interim formula, formula income included non-rental revenue. In addition, the incentives built into the system to increase PHA revenue have changed in the Final Rule formula.

Operating Subsidy Formula Final Rule
= [(PEL + UEL) x EUM] + Add-ons minus [Formula Income x EUM] Overall, the basic logic of the formula is the same. A project will be funded at a level that is the difference between its annual rental income and its expected annual expenses. If the PHA has more operating expenses than operating income, then it will receive funds from the Operating Fund. The most significant change in the final Operating Fund formula is the PEL. The PEL is calculated in terms of PUM cost and represents the costs associated with the project, except for utility and add-on costs. Costs associated with the PEL are administration, management fees, maintenance, protective services, leasing, occupancy, staffing and other expenses, such as project expense.

Operating Subsidy Formula Relationships
PEL Subsidy If a PHA’s expenses increase (PEL), other things being equal, then they will have a need for increased subsidy to cover those expenses.

EUM Subsidy If the number units that are being funded increase (EUM), other things being equal, then the PHA will have a need for increased subsidy to cover expenses for those additional units.

UEL Subsidy If a PHA’s utility expenses increase (UEL), other things being equal, then they will have a need for increased subsidy to cover the additional utility expenses.

Add-ons Subsidy If a PHA has new or increased add-on expenses, then its subsidy will increase.

Income Subsidy As PHA rental income increases, there is less of need for subsidy. The shortfall between revenue and expenses is decreased. Thus, as rental income rises, subsidy declines.

HUD-52723 Format Hard Copy Submission Excel Tool Signed copy
Mailed to HUD Excel Tool Auto-populated data Auto-calculation Submitted electronically Provides Historical Data PHAs must submit the HUD to the field offices and ultimately to HUD using two formats. PHAs will be required to complete and submit an excel tool that will be electronically ed to the field offices. The tool will include several functionalities that will assist in the accurate calculation of the form. First, it will include auto-populated lines, whose data will be provided by HUD from HUD data systems. This data will be protected and not subject to change without HUD’s consent. Secondly, the tool will autocalculate lines as necessary preventing mathematical mistakes. Finally, the tool will include warnings and other validations preventing PHAs from reporting unusual or “unrealistic” data. PHAs must submit a hard copy version of HUD executed by the PHA’s Executive Director. A copy of this form and any revisions will be kept at HUD Headquarters, to be used as the obligating document for operating subsidy funds.

Form HUD-52723 – Section 1 Name and Address/ACC Number/DUNS
The first section of HUD includes background information about the PHA and information regarding the fiscal year. Three lines in this section will be auto-populated by the tool: “Name and Address of the Public Housing Agency”, “ACC Number” and “DUNS Number”. PHAs should verify that the auto-populated information on the form is correct. Name and Address/ACC Number/DUNS Auto-populated in Excel Tool Please Verify Information

Form HUD-52723 – Section 1 Type of Submission: Original vs. Revision
PHAs must indicate whether or not the HUD submission is the original submission for FY 2007 or revised version with new data. The original submission is due September 15, 2006. A PHA may submit as many revisions as necessary, but any final revisions must be submitted by July 15, 2007. Type of Submission: Original vs. Revision Original submission due Sept. 15, 2006 Final Revision Due July 15, 2007

Form HUD-52723 – Section 1 Funding Period
In Section 1, PHAs will need to identify the funding period for which the form is valid. For FY 2007, the funding period is from January 1, 2007 to December 31, 2007. Note: All PHAs are funded on a calendar year basis, regardless of whether or not a PHA’s fiscal year is the calendar year. Previously, PHAs were funded to match their fiscal years. Funding Period Funding Period Not Linked to PHA FYE FY 2007 = 01/01/2007 to 12/31/2007

Form HUD-52723 – Section 1 PHA Fiscal Year End
PHAs should indicate the fiscal year in which they currently operate. This data is not used in the calculation of the operating subsidy. It is collected for information purposes only. PHA Fiscal Year End Not in Operating Fund Calculation - Data Purposes Only

Form HUD-52723 – Section 1 Operating Fund Project Number
PHAs should indicate their operating fund project number. Operating Fund Project Number Use existing PHA Project Number

Section 3, Part A, Lines 01 through 04
Formula Expense Line Source PUM project expense level (PEL) 01 HUD Provided Inflation Factor 02 PUM Inflated PEL 03 Calculated PEL 04 In FY 2007 PEL will be replaced by WAPEL Section 3, Part A consists of four lines, some of which refer to “PEL”. It is important to remember that for FY 2007, HUD will employ a “WAPEL” when determining the subsidy amount for the funding period.

WAPEL Weighted Average PEL FY 2007 Only
Weighted by Asset Management Property Units Form HUD will not change for FY 2007 For FY 2007, PHAs will be funded using a WAPEL. The WAPEL is the weighted average PEL of all the asset management properties in a PHA. The formula for a WAPEL is as follows: WAPEL = ∑ (AMP Unitsi x PELi) where i equals the number of PHA properties. PHAs will be given the WAPEL by HUD to place in HUD However, because the WAPEL will only be used for one year, HUD will not be changed to read WAPEL, but will still use the PEL terminology. See Part A of Section 3.

Section 3, Line 01 – PUM Project Expense Level
Calculation Method – FY 2006 PEL (WAPEL) Provided by HUD PELs (WAPELs) are calculated for each Asset Management Property using the methodology described in of the Rule. The methodology used to calculate a PEL is not included as part of this training. When using the form to request funding for FY 2007, PHAs will use the HUD calculated WAPEL for FY 2006 to complete Line 01 (PUM project expense level (PEL)). As indicated earlier, HUD intends to provide this value for all PHAs by August 5, 2006.

Line 02 - Inflation Factor
As per the Rule ( ), each year the PEL will be adjusted by a local inflation factor. The local inflation factor is calculated as “the HUD-determined weighted average percentage increase in local government wages and salaries for the area in which the PHA is located and non-wage expenses.” HUD has assigned a weight of 60% for wage expenses and 40% for non-wage expenses in the past. The data for this line is provided by HUD. Weighted Average – Local Government Wages and Non-Wage Expenses Provided by HUD

Line 03 – PUM Inflated PEL FY 2007 PEL (WAPEL)
Line 03 (PUM inflated PEL) is calculated automatically and is the product of Line 01 (FY 2006 PEL) and Line 02 (Inflation factor). The Excel tool provided to the PHAs will make this calculation automatically. For FY 2007, this line will show the PHA’s WAPEL rather than a property PEL. FY 2007 PEL (WAPEL) Calculated Automatically

Line 04 – PEL PUM PEL x EUM Calculated Automatically
Line 04 (PEL) is calculated by multiplying the number of Eligible Unit Months (as reported in Section 2, Line 15, Column B) by Line A3 (PUM Inflated PEL). The Excel tool will calculate this amount automatically. Line 04 (PEL) converts the PUM expense level to a total dollar expense amount. PUM PEL x EUM Calculated Automatically

Module 2: Units and Unit Months
Calculation and Submission of Operating Subsidy Training In this module, we will review Section 2 of form HUD-52723, particularly those sections referring to Units and Unit Months. The main objective of this module is to explain how unit months, eligible unit months, and resident participation unit months are estimated.

Funding Period January 1 to December 31 of a given year
Example: For FFY 2007, it is Jan. 1, 2007 to Dec. 31, 2007 All PHAs will be funded for the same period, regardless of PHA fiscal year end The funding period is the calendar year for which HUD will distribute operating subsidy according to the Operating Fund formula. PHA funding in FY 2007 is based on the number of eligible unit months during the funding period. For example, for FFY 2007, the funding period is January 1, 2007 to December 31, 2007. It is important to note that all PHAs will be funded for the January 1 to December 31 period, regardless of the fiscal year end the PHA uses for accounting and budgeting purposes.

Reporting Period 12-month period from July 1 to June 30
Ends six months prior to the first day of the funding period Example: For FFY 2007, it is Jul 1, 2005 to Jun 30, 2006 Time period used to report unit information The reporting period is the 12-month period from July 1 to June 30 that ends six months prior to the first day of the funding period. For example, for FFY 2007, the reporting period is July 1, 2005 to June 30, 2006. The reporting period is the time period used to categorize all unit information used to determine funding eligibility for the funding period.

Section 2, ACC Units ACC Units on 7/1/__ (7/1/05) Units Added to ACC
Units Deleted from ACC ACC Units on 6/30/__ (6/30/06) In the first part of Section 2, the PHA must provide the following information about ACC units for the reporting period: ACC Units on 7/1/__ – Enter the total number of ACC units on the first day of the reporting period. For FFY 2007, this is 7/1/05. Units Added to ACC – Enter the total number of units that were added to the ACC during the reporting period. Units Deleted from ACC – Enter the total number of units that were removed from the ACC during the reporting period. ACC Units on 6/30/__ – Enter the total number of ACC units on the last day of the reporting period. For FFY 2007, this is 6/30/06. To double-check data, verify that the following calculation is valid: ACC Units on 6/30/__ = [ACC Units on 7/1/__] + [Units Added to ACC] – [Units Deleted from ACC]. Note: Reporting period for FY 2007 is July 1, 2005 – June 30, 2006.

Section 2, Lines 01 through 17 In essence, when completing lines 01 through 13 of HUD-52723, the PHA is categorizing each unit within its ACC (as reported above) as either: (1) occupied, (2) vacant, or (3) other, with the appropriate sub-category. It then calculates the number of months within the reporting period that each unit met the criteria for that category. In doing so, the PHA is calculating the individual data elements which are used to calculate: Column A – Unit Months – used to calculate asset management and IT fee (add-ons) Column B – Eligible Unit Months – main element in the operating subsidy formula Column C – Resident Participation Months – used for resident participation activities (add-on) Each of these three elements incorporates slightly different unit month information. Refer to the form – with attention to which elements are blacked out and which are not – to see the elements used in calculating each of these three summary data elements. Using the electronic form, the PHA enters the total unit months by category into Column A. Columns B and C are then automatically populated. (Note: the PHA must enter data into Lines 06a, and 17 for Column B, since data is not entered into Column A.)

ACC Unit Categorization
Calculate the number of months a unit meets the criteria for a particular category Two-Step Process: Identify under which category unit was classified Determine number of months unit was classified in that category during the reporting period To complete this section you must calculate the number of months a unit is in a particular category. The categories correspond to line numbers on the form. For example, Line 06 is the “Special use units” category. There is a simple two-step process to determine the unit months for a unit. First, identify under which category a unit was classified. Second, determine the number of months that unit was classified in that category during the reporting period. For example, a unit was occupied by a public housing eligible family for the entire reporting period. 12 months equals 12 unit months under Line 01, Occupied dwelling units – by public housing family under lease. It is possible that a particular unit can be classified in several categories during the reporting period.

Unit Categorization – First or Last Day of Month
PHA must choose first or last day Method must be consistent Example: Unit was vacant on Jul. 1, Unit was approved for special use on Sep. 20, PHA uses first day of month. Sep. 1 – Vacant Oct. 1 – Special Use Eligible month totals are based on the unit’s status as of either the first or last day of the month, as determined by the PHA. The method to determine unit status must be consistent. In other words, a PHA cannot use the first day of the month in some instances, and the last day of the month in other instances. For example, a unit was vacant on July 1, Unit was approved for special use on September 20, The PHA uses the first day of the month to determine unit status. On July 1, August 1, and September 1, the unit was vacant. Therefore, three unit months are considered vacant and not categorized. On the first day of each of the remaining months of the year, the unit was categorized as special use. Therefore, 9 unit months are categorized as special use.

Section 2, Column A Unit Months Includes all ACC units
Used to determine: Asset management and IT fee add-ons Column A is Unit Months. Note that Lines 06a and 14 are excluded for the purposes of calculating unit months. The unit data for these two lines are included in other lines. The total unit months is used to determine the asset management and information technology fee add-ons. For more information about unit months, refer to 24 CFR

Section 2 – Occupied Unit Categories
Line Category 01 Occupied dwelling units – by public housing eligible family under lease 02 Occupied dwelling units – by PHA employee, police officer, or other security personnel who is not otherwise eligible for public housing 03 New units – eligible to receive subsidy during the Funding Period but not included on Line 01 of this section 04 New units – eligible to receive subsidy from 10/1 to 12/31 of previous funding period but not included on previous Calculation of Operating Subsidy This chart displays the occupied unit categories, Lines 01 through 04. For more information about Section 2, Column A, Lines 01 and 02, refer to 24 CFR For more information about Section 2, Column A, Lines 03 and 04, refer to 24 CFR

Section 2, Line 01 01 – Occupied dwelling units – by public housing eligible Family Occupied by public housing eligible family under lease Residents meet the income/eligibility qualifications for public housing Line 01 must be provided by the PHA. It includes units that are occupied by public housing eligible families under lease. The residents meet the income/eligibility qualifications for public housing. For more information about Section 2, Column A, Line 01, refer to 24 CFR

Section 2, Line 02 02 – Occupied dwelling units – by PHA Employees, police officers Occupied by PHA employee, police officer, or other security personnel who is not otherwise eligible for public housing If these individuals are eligible for public housing, report on Line 01 (e) Line 02 must be provided by the PHA. It includes units that are occupied by PHA employees, police officers, and other security personnel who are not otherwise eligible for public housing. It is important to note an exception. If a PHA employee, police officer, or other security officer meets the income qualifications for public housing, the unit months must be entered in Section 2, Column A, Line 01. For more information about Section 2, Column A, Line 02, refer to 24 CFR (e).

Section 2, Line 03 03 – New units
Eligible to receive subsidy during the funding period but not included on Lines 01, 02, or of this section Discussed during “New Units” module (a)(1) and (b)(1) Line 03 must be provided by the PHA. It includes new units that are eligible to receive subsidy during the funding period, but parts or all of their unit month categorization data were not included on Lines 01, 02, or of this section. This line will be discussed during the “New Units” module. For more information about Section 2, Column A, Line 03, refer to 24 CFR (a)(1) and (b)(1).

Section 2, Line 04 04 – New units
Eligible to receive subsidy from 10/1 to 12/31 of previous funding period but not included on previous Calculation of Operating Subsidy Discussed during “New Units” module (a)(1) and (b)(1) Line 04 must be provided by the PHA. It includes new units that are eligible to receive subsidy from 10/1 to 12/31 of the previous funding period but were not reported in the previous year HUD This line will be discussed during the “New Units” module. For more information about Section 2, Column A, Line 04, refer to 24 CFR (a)(1) and (b)(1).

Section 2, Vacant Unit Categories
Line Category 05 Units undergoing modernization 06 Special use units 07 Units vacant due to litigation 08 Units vacant due to disasters 09 Units vacant due to casualty losses 10 Units vacant due to changing market conditions 11 Units vacant and not categorized above This chart displays the vacant unit categories, Lines 05 through 11. For more information about Section 2, Column A, Lines 05 through 11, refer to 24 CFR

HUD-Approved Vacancies
Vacancies approved by the HUD field office Approval is limited to the time period agreed to by the field office PHA must request renewal every two years In order for a unit to be classified under one of the vacant unit categories (Lines 05 through 10), the vacancy must be approved by a PHA’s local HUD field office. The approval for the vacancy is limited to the time period agreed to by the field office. If the vacancy continues, PHAs must request and receive approval every two years.

Section 2, Line 05 05 – Units undergoing modernization
Two possible scenarios Scenario 1 conditions Modernization contract awarded or force account work started; Construction on schedule according to HUD-approved PHA Annual Plan; and Unit is vacant to perform work. Line 05 must be provided by the PHA. It includes vacancies resulting from project modernization or unit modernization, such as work necessary to reoccupy vacant units. There are two possible scenarios under which units can be classified as undergoing modernization. In scenario 1, the modernization contract has been awarded or force account work has started, construction is on schedule according to a HUD-approved PHA Annual Plan, and the unit is vacant to perform the work. All three conditions must be established in order for the unit to be categorized as undergoing modernization.

Section 2, Line 05 Scenario 2 conditions 990.145(a)(1)
PHA treats unit as undergoing modernization in HUD-approved PHA Annual Plan; Time period for placing unit under construction not yet expired; and Unit is vacant to perform work. (a)(1) In scenario 2, the PHA treats the unit as undergoing modernization in a HUD-approved PHA Annual Plan, the time period for placing the vacant unit under construction has not yet expired, and the unit is vacant to perform the work. For more information about Section 2, Column A, Line 05, refer to 24 CFR (a)(1).

Section 2, Line 06 06 – Special use units Eligibility conditions apply
Resident services Resident organization offices Related activities, such as self-sufficiency and anti-crime initiatives Eligibility conditions apply (a)(2) and Notice PIH (HA) Line 06 must be provided by the PHA. It includes units approved for resident services, resident organization offices, and related activities such as self-sufficiency and anti-crime initiatives. Per Notice PIH (HA), the following eligibility conditions are required for special use units: The space for the service or activity is not available elsewhere in the locality; The space to be used is safe and suitable for its intended use or resources are committed to make the space safe and suitable; Other means of funding, exclusive of rental income, is not available to pay the non-utility operating costs; Field Offices may approve only one site within a development for a single unit or contiguous units (attached or adjoining units); and The number of units involved should be the minimum necessary to support the service or program. A unit can be approved for special use indefinitely, as long as it is used for a special use purpose. For more information about Section 2, Column A, Line 06, refer to 24 CFR (a)(2) and Notice PIH (HA).

Section 2, Line 07 07 – Units vacant due to litigation
Legally enforceable court order or settlement agreement Regulatory and statutory requirements to avoid potential litigation Voluntary compliance agreements with HUD or acceptable to HUD (b)(1) Line 07 must be provided by the PHA. It includes units vacant due to litigation, such as: Units that are vacant under a legally enforceable court order or settlement agreement; Units that are vacant in order to meet regulatory and statutory requirements to avoid potential litigation (should be covered in a HUD approved PHA Annual Plan); Units under voluntary compliance agreements with HUD or acceptable to HUD. Examples include, but are not limited to, units that are being held vacant as part of a court-order, HUD-approved desegregation plan, or voluntary compliance agreement requiring modifications to the units to make them accessible. Refer to 24 CFR (b)(1).

Section 2, Lines 08 and 09 08 – Units vacant due to disasters
Federally-declared, state-declared, and other-declared (b)(2) 09 – Units vacant due to casualty losses Delays in settling insurance claims (b)(3) Line 08 must be provided by the PHA. It includes units vacant due to disasters. Refer to 24 CFR (b)(2). Line 09 must be provided by the PHA. It includes units vacant due to casualty losses. Refer to 24 CFR (b)(3). For example, units that have been destroyed due to fire and cannot be leased until insurance funding allows the PHA to rebuild the unit.

Section 2, Line 10 10 – Units vacant due to changing market conditions
External reason for changing market conditions PHA has taken aggressive marketing and outreach measures HUD-approved vacancy through appeal process (c) Line 10 must be provided by the PHA. It includes units vacant due to changing market conditions. The reason for changing market conditions must be external to the PHA. For example, A PHA could appeal if it is located in an area experiencing population loss or economic dislocations that faces a lack of demand for housing in the foreseeable future. A PHA could appeal if a power plant is built next to one of its projects making it difficult to rent units. The changing market conditions alone do not mean the PHA qualifies for this vacancy. The PHA must have taken aggressive marketing and outreach measures to rent the units. The PHA must appeal to HUD and the appeal has to be approved. For more information about Section 2, Column A, Line 10, refer to 24 CFR (c).

Section 2, Line 11 11 – Units vacant and not categorized above Vacant
Available for occupancy Not included on Lines 01 through 10 above Line 11 must be provided by the PHA. It includes units that are vacant, available for occupancy, and not categorized on Lines 1 through 10.

Section 2, Other ACC Unit Categories
Line Category 12 Units eligible for asset repositioning fee and still on ACC (occupied or vacant) 13 All other ACC units not categorized above This chart displays the other ACC unit categories. For more information about Section 2, Line 12, refer to 24 CFR (h).

Section 2, Line 12 12 – Units eligible for asset repositioning fee and still on ACC (occupied or vacant) Discussed during “Deleted Units” module (h) Line 12 must be provided by the PHA. It includes units eligible for the asset repositioning fee and still on the ACC, whether occupied or vacant. This line will be discussed during the “Deleted Units” module. For more information about Section 2, Column A, Line 12, refer to 24 CFR (h).

Section 2, Line 13 13 – All other ACC units not categorized above
Not eligible, but still on ACC Not included on Lines 01 through 12 Line 13 must be provided by the PHA. It includes all other ACC units not categorized on Lines 01 through 12. These units are not eligible to receive funding but still remain on the ACC. May include units: Occupied by over-income families, Leased out as office space, or That previously received an asset repositioning fee, and although no longer eligible for the fee, are still under ACC.

Section 2, Column A, Line 15 Total Unit Months
Sum of Section 2, Column A, Lines 01 through 04 Lines 05 through 11 Lines 12 through 13 Line 15 (Column A) is auto-calculated by the tool. It is calculated by adding Lines 01 through 04, Lines 05 through 11, and Lines 12 through 13.

Section 2, Column B Eligible Unit Months (EUMs) Used to determine:
Project Expense Level (PEL) Utilities Expense Level (UEL) Formula Income Column B is eligible unit months, or EUMs. Note that Lines 02, 11, 12, and 13 are excluded for the purposes of calculating eligible unit months. The total eligible unit months is used to determine the PEL, UEL, and Formula Income. For more information about eligible unit months, refer to 24 CFR

Section 2, Line 06a 06a – Units on Line 02 that are occupied by police officers and that also qualify as special use units Included in eligible unit months (EUMs) Special Use Unit Line 06a must be provided by the PHA. It includes units on Line 02 that are occupied by police officers and that also qualify as special use units. This line does not require a unit month value in Column A, because police units are already included in Line 02. However, because these police units are eligible for operating subsidy funding due to their special use functions, they need to be added to the EUM calculation in Column B. Ordinary police units are not included in the EUM.

Section 2, Line 14 14 – Limited vacancies
Used in column B PHAs with more than 100 units May receive subsidy for vacant units up to 3% of total unit months Calculation is lesser of: 3% of Section 2, Column A, Line 15; or Section 2, Column A, Line 11 Line 14 is auto-calculated by the Excel tool. HUD pays operating subsidy for a limited number of vacant units according the following rules. Used in column B only – for calculation of Eligible Unit Months (EUM) PHAs with more than 100 units: Would receive operating subsidy if the annualized vacancy rate is less than or equal to three percent of the PHA’s total unit inventory. The subsidy cannot exceed 100% of unit months. Determine which is less, 3% of Section 2, Column A, Line 15 or Section 2, Column A, Line 11.

Section 2, Line 14 14 – Limited vacancies (continued)
PHAs with 100 or less units May receive subsidy for up to five vacant units Calculation is lesser of: 60 unit months; or Section 2, Column A, Line 11 For PHAs with 100 or less units: Would receive operating subsidy for up to five vacant units The subsidy cannot exceed 100% of unit months (100% of unit months for five units equals 60 unit months). Determine which is less, 60 unit months or Section 2, Column A, Line 11. For more information about Section 2, Column B, Line 14, refer to 24 CFR

Section 2, Column B, Line 15 Total Unit Months (Eligible Unit Months)
Sum of Section 2, Column B, Line 1 Lines 3 through 4 Lines 5 through 10 Line 14 Line 15 (Column C) is auto-calculated by the Excel tool. It is calculated by adding Line 01, Lines 03 through 04, Lines 05 through 10, and Line 14.

Section 2, Column C Resident Participation Unit Months
Used to determine funding for resident participation activities add-on Column C is resident participation unit months. Note that Lines 05 through 14 are excluded for the purpose of calculating resident participation unit months. The total resident participation unit months is used to determine funding for the resident participation activities add-on.

Section 2, Column C, Line 15 Total Unit Months (Resident Participation Unit Months) Sum of Section 2, Column C, Line 1 through 4 Line 15 (Column C) is auto-calculated by the tool. It is calculated by adding Lines 01 through 04.

Section 2, Line 16 Units eligible for funding for resident participation activities = [Total Unit Months] ÷ [12] Section 2, Column C, Line 16 = [Section 2, Column C, Line 15] ÷ [12] Only in Column C Line 16 is auto-calculated by the tool. It is calculated by dividing the total unit months by 12. This is necessary because the add-on is equal to $25 per unit (not per unit month). The result should be rounded to the nearest whole number.

Section 2, Line 17 Unit months for which the actual consumption is included in Line 01 of form HUD and that were removed from Lines 01 through 11, above, because of removal from inventory, including eligibility for the asset repositioning fee Discussed during “Deleted Units” module Only in Column B Line 17 must be provided by the PHA. It is the unit months for which the actual consumption is included in Line 01 of HUD and that were removed from Lines 01 through 11 of HUD because of removal from inventory due to units receiving the asset repositioning fee. This line will be discussed during the “Deleted Units” module.

Exercise 1a and 1b Refer to “Units and Unit Months – Exercise 1a” and form HUD-52723, Operating Fund Calculation of Operating Subsidy Refer to “Units and Unit Months – Exercise 1b” and form HUD-52723, Operating Fund Calculation of Operating Subsidy

Module 3: Utilities Expense Level (UEL)
Calculation and Submission of Operating Subsidy Training This module is an overview of the Utilities Expense Level (UEL). The main objective of this module is to explain how to calculate the UEL using form HUD-52722, Operating Fund Calculation of Utilities Expense Level. The module includes a step-by-step explanation of each line with snapshots from the form. At the end of the module, the relationship to HUD-52723, Operating Fund Calculation of Operating Subsidy, will be explained.

UEL Summary Utility expense level (UEL) is based on:
PHA’s consumption of its utilities Actual average utility rates for each utility Inflation/deflation factor The UEL for a given funding period is the product of the utility rate multiplied by the payable consumption level multiplied by the inflation factor. The UEL is expressed in terms of PUM costs. Utility consumption and rate data is reported for the July 1 through June 30 reporting period regardless of a PHA’s fiscal year end. All records should be kept by utility and by project for each 12-month period ending June 30th. If a PHA has not maintained or cannot recapture utility data from its records for a particular utility, the PHA shall compute the UEL by: Using actual consumption data for the last complete year(s) of available data or data of comparable projects that have comparable utility delivery systems and occupancy Requesting field office approval to use actual PUM utility expenses for its UEL.

UEL Summary (Continued)
Sum of consumption of many utilities Historical utility data Utility consumption incentive Same reporting period as HUD-52723 The UEL is an estimate of all a PHA’s utility expenses in a given funding year. HUD uses historical consumption and rate data to estimate the expected UEL. In addition, the UEL calculation has a built-in incentive that promotes utility consumption savings.

Consolidated UEL Forms
New Form HUD-52722 Eliminated Form HUD A Form HUD B The new form HUD-52722, Operating Fund Calculation of Utilities Expense Level, replaces the two forms previously used to calculate the Utilities Expense Level (UEL) and the utility adjustment.

Section 1 – General Information
Name of Public Housing Agency ACC Number Operating Fund Project Number DUNS Number Section 1 of HUD includes general information about the PHA. The following general information must be provided by the PHA: Name of the Public Housing Agency ACC Number Operating Fund Project Number DUNS Number All information should match HUD

Funding Period Type of Submission Fiscal Year End PHAs must also provide the following information: Funding Period – PHAs will need to identify the funding period for which the form is valid. For FY 2007, the funding period is from January 1, 2007 to December 31, 2007. Type of Submission – PHAs must indicate whether or not the form is the original submission for FY 2007 or a revised version with new data. The original submission is due September 15, A PHA may submit revisions of form HUD only until September 15, 2006. Fiscal Year End – PHAs must indicate in which fiscal year they currently report for accounting purposes. This data is not used in the calculation of the utilities expense level, but is collected for information purposes only.

Unit Change Indicator Frozen Rolling Base Rate Reduction Incentive PHAs must select the following checkboxes only if applicable: Unit Change Indicator – PHAs must indicate if utility records for the reporting period contain consumption data for units for less than a 12-month period (e.g., new units, deleted units). If this applies, the PHAs must indicate the number of units, number of months associated, and related consumption for these units in Section 10, Remarks. Frozen Rolling Base – PHAs must indicate a HUD-approved frozen rolling base pursuant to 24 CFR (a)(1). Rate Reduction Incentive – PHAs must indicate a HUD-approved utility rate reduction incentive pursuant to 24 CFR (b). To qualify, the PHA must take action beyond normal public participation in rate-making proceedings (e.g., well-head purchase of natural gas, administrative appeals, or legal action to reduce the rate it pays for utilities).

Section 2 – Lines 01 and 01a 01 – Actual consumption
By type of utility For reporting period (7/1/__ to 6/30/__) 01a – Unit of consumption Unit of measurement for each type of utility in Line 01 Line 01 (Actual consumption) must be provided by the PHA. It is the actual consumption for the 12-month period ending June 30th that is 6 months prior to the first day of the funding period (by utility type). For FFY 2007, this translates to July 1, 2005 to June 30, Please note that this is the reporting period. Line 01a (Unit of consumption) must be provided by the PHA. It is the unit of measurement which relates to the consumption shown in Line 01 (by utility type). Examples of units of measurement include, but are not limited to: therms, kilowatt hours, gallons, and cubic feet. If a PHA has more than six utility types, the PHA should use additional forms as needed. For each form, the PHA should fill out Lines 01 through 17 pursuant to the instructions on the form. Lines 18 through 26 should be filled out only on the last form (if multiple forms HUD are being submitted).

Section 3 – Lines 02, 03 and 04 Jan. 1st minus 18 months Jan. 1st minus 30 months Jan. 1st minus 42 months 02, 03 and 04 – Rolling base year 1, 2, and 3 - actual consumption For 12-month period ending June 30th that is 18, 30, and 42 months prior to the first day of the funding period Lines 02, 03, and 04 (Rolling base year 1, 2, and 3 – actual consumption) must be provided by the PHA. They are the actual or adjusted consumption for the 12-month period ending June 30th that is 18, 30, and 42 months prior to the first day of the funding period (by utility type). For FFY 2007, this translates to: July 1, 2004 to June 30, 2005 on Line 02 July 1, 2003 to June 30, 2004 on Line 03 July 1, 2002 to June 30, 2003 on Line 04 Refer to “New Units” module for more information about consumption associated with new units.

Section 3 – Line 05 05 – Total consumption during 3-year rolling base period [Rolling base year 1, Line 02] + [Rolling base year 2, Line 03] [Rolling base year 3, Line 04] Line 05 (Total consumption during 3-year rolling base period) must be provided by the PHA. It is calculated by adding Line 01 (Rolling base year 1 – actual consumption), Line 02 (Rolling base year 2 – actual consumption), and Line 03 (Rolling base year 3 – actual consumption).

[Total consumption during 3-year rolling base, Line 05]
Section 3 – Line 06 06 – Average rolling base consumption [Total consumption during 3-year rolling base, Line 05] ÷ [3] Line 06 (Average rolling base consumption) must be provided by the PHA. It is calculated by dividing Line 05 by 3.

Section 3 – Lines 07 and 08 07 – Actual consumption for new units
Only if PHA has added units to ACC 08 – Rolling base consumption [Average rolling base consumption, Line 06] + [Actual consumption for new units, Line 07] Line 07 (Actual consumption for new units) must be provided by the PHA only if the PHA has added units to ACC during the reporting period. It is the actual consumption for any new units included in Line 01 that have less than 12 months of actual consumption data (by utility type). Refer to the “New Units” module for more information about consumption associated with new units. Line 08 (Rolling Base Consumption) must be provided by the PHA. It is calculated by adding Line 06 (Average rolling base consumption) and Line 07 (Actual consumption for new units).

Section 4 – Line 09 09 – Base Consumption Lesser of:
[Actual Consumption, Line 01] or [Rolling Base Consumption, Line 08] Line 09 (Base Consumption) must be provided by the PHA. It is calculated by taking the lesser of Line 01 (Actual Consumption) or Line 08 (Rolling Base Consumption).

Section 5 – Line 10 10 – Actual consumption > rolling base
If [Actual consumption, Line 01] is greater than [Rolling base consumption, Line 08], enter difference as positive If not, enter zero The payable consumption level in Section 6 of this form is based on the current consumption level adjusted by a utility consumption incentive. The incentive is computed by comparing current consumption levels of each utility to the rolling base consumption level. PHAs receive an incentive to maintain lower current consumption levels in comparison to the rolling base consumption levels. Line 10 (Actual consumption > rolling base) must be provided by the PHA and is calculated according to the following rules: If Line 01 (Actual Consumption) is greater than Line 08 (Rolling Base Consumption), Line 10 is the difference between Line 01 and Line 08 expressed as a positive number. If Line 01 (Actual Consumption) is less than Line 08 (Rolling Base Consumption), Line 10 is zero.

Section 5 – Line 11 11 – Actual consumption < rolling base
If [Actual consumption, Line 01] is less than [Rolling base consumption, Line 08], enter difference as positive If not, enter zero Line 11 (Actual consumption < rolling base) must be provided by the PHA and is calculated according to the following rules: If Line 01 (Actual Consumption) is less than Line 08 (Rolling Base Consumption), Line 11 is the difference between Line 01 and Line 08 expressed as a positive number. If Line 01 (Actual Consumption) is greater than Line 08 (Rolling Base Consumption), Line 11 is zero.

[Actual consumption > rolling base, Line 10]
Section 5 – Line 12 12 – 75%/25% Split Consumption increased [Actual consumption > rolling base, Line 10] x [0.25] If the comparison of the actual consumption and rolling base consumption reflects an increase in the consumption of a utility, the PHA is funded for only 25% of this increase through the calculation in Line 12. Line 12 (75%/25% Split) is the product of Line 10 (Actual consumption > rolling base) multiplied by 0.25.

[Actual consumption < rolling base, Line 11]
Section 5 – Line 13 13 – 75%/25% Split Consumption decreased [Actual consumption < rolling base, Line 11] x [0.75] If the comparison of the actual consumption and the rolling base consumption reflects a decrease in the consumption of a utility, the PHA retains 75% of the decrease through the calculation in Line 13. Line 13 (75%/25% Split) is the product of Line 10 (Actual consumption > rolling base) multiplied by 0.75.

Section 6 – Line 14 14 – Annualization of consumption for new units
Only if PHA added new units to ACC that are eligible for subsidy during funding period Line 14 (Annualization of consumption of new units) must be provided by the PHA only if the PHA added new units to the ACC during the reporting period but do not have a full 12 months of actual consumption data on Lines 01 and 07. Refer to the “New Units” module for more information about consumption associated with new units.

Section 6 – Line 15 15 – Payable consumption
[Base consumption, Line 09] + [75%/25% Split, Line 12] [75%/25% Split, Line 13] [Annualization of consumption for new units, Line 14] Line 15 (Payable consumption) must be provided by the PHA. It is calculated by adding Line 09 (Base Consumption), Line 12 (75%/25% Split), Line 13 (75%/25% Split), and Line 14 (Annualization of consumption of new units). Payable consumption is the consumption level for which the PHA will be paid operating subsidy.

Utility Consumption Incentive – Example
Consumption (in gallons) Line Description Increase 01 Actual consumption 100 08 Rolling base consumption 90 09 Base consumption 10 Actual consumption > rolling 11 Actual consumption < rolling 12 75%/25% Split (.25) 2.50 13 75%/25% Split (.75) 15 Payable consumption 92.50 The following chart is an example of the utility consumption incentive and its impact on payable consumption when actual consumption increases. The above chart shows an example of a consumption increase. Assume Line 06 (Average rolling base consumption) is 90 gallons and Line 07 (Actual consumption for new units) is 0 gallons. If there were no utility consumption incentive, the PHA would be funded 100 units of consumption. However, in this example, the PHA will only be funded for 92.5 units of consumption. The PHA was only funded for 25% of the increase in utility consumption.

Utility Consumption Incentive – Example
Consumption (in gallons) Line Description Decrease 01 Actual consumption 90 08 Rolling base consumption 100 09 Base consumption 10 Actual consumption > rolling 11 Actual consumption < rolling 12 75%/25% Split (.25) 13 75%/25% Split (.75) 7.50 15 Payable consumption 97.50 The chart shows an example of a consumption decrease. Assume Line 06 (Average rolling base consumption) is 100 gallons and Line 07 (Actual consumption for new units) is 0 gallons. If there were no utility consumption incentive, the PHA would be funded for only 90 units of consumption. However, in this example, the PHA will be funded for 97.5 units of consumption. The PHA was rewarded for decreasing consumption by being paid for an additional 7.5 units it did not consume.

Section 7 – Lines 16 and 17 16 – Actual utility costs
For consumption in Line 01 17 – Actual average utility rate [Actual average utility costs, Line 16] ÷ [Actual consumption, Line 01] Line 16 (Actual utility costs) must be provided by the PHA. It is the actual total utility costs for the reporting period by type of utility. The amount should be rounded to whole dollars. Line 17 (Actual average utility rate) must be provided by the PHA. It is calculated by dividing Line 16 (Actual average utility rate) by Line 01 (Actual consumption). The results are rounded to four decimal places.

Section 8 – Lines 18 and 19 18 – Base utilities expense level
[Payable consumption, Line 15] x [Actual average utility rate, Line 17] 19 – Surcharges for excess consumption Line 18 (Base utilities expense level) must be provided by the PHA. It is calculated by multiplying Line 15 (Payable consumption) by Line 17 (Actual average utility rate). The amount is rounded to whole dollars. In addition, the sum of all columns in Line 18 must be provided in the Total column. If multiple forms HUD are being submitted, the totals must be entered on the final summation form HUD Line 19 (Surcharges for excess consumption of PHA-supplied utilities) must be provided by the PHA. It is the amount of charges to residents for excess utility consumption for PHA-supplied utilities during the reporting period. The amount should be rounded to whole dollars.

Surcharges for Excess Consumption
PHA collects surcharges from tenants for excess utility consumption Surcharges are treated as “income” Surcharges are subtracted from base utilities expense level, resulting in less UEL PHAs may collect surcharges from tenants for their excess utility consumption. The surcharges are treated as income. Therefore, the surcharges are subtracted from the base utilities expense level, resulting in less UEL for the PHA.

[Base utilities expense level, Line 18]
Section 8 – Lines 20 and 21 20 – Base utilities expense minus surcharges [Base utilities expense level, Line 18] minus [Surcharges, Line 19] 21 – Utilities inflation/deflation factor Line 20 (Base utilities expense level minus surcharges) is calculated by subtracting the amount in the Total column of Line 19 (Surcharges for excess consumption of PHA-supplied utilities) from the amount in the Total column of Line 18 (Base utilities expense level). Line 21 (Utilities inflation/deflation factor) is provided by HUD pursuant to 24 CFR (d). The annual inflation/deflation factor is based upon the fuels and utilities component of the United States Department of Labor, Bureau of Labor Statistics (BLS) Consumer Price Index for All Urban Consumers (CPI–U). The inflation/deflation rate applied to each PHA will be localized and based on the most recent available data.

Section 9 – Line 22 22 – Utilities expense level adjusted for inflation/deflation [Base utilities expense level, Line 20] x [Utilities inflation/deflation factor, Line 21] Line 22 (Utilities expense level adjusted for inflation/deflation) must be provided by the PHA. It is calculated by multiplying Line 20 (Base utilities expense level) by Line 21 (Utilities inflation/deflation factor). The amount is rounded to whole dollars.

Section 9 – Line 23 23 – Energy rate incentive
PHA gets funding for 50% of the rate savings due to incentive Documentation to support rate savings required Line 23 (Energy rate incentive) must be provided by the PHA. It is calculated according to the following rules: If the PHA has no HUD-approved energy incentives, Line 23 is zero. If the PHA has been approved by HUD for the utility rate reduction incentive pursuant to 24 CFR (b), calculate actual utility costs as they would have been if the rate savings action had not been taken. If these costs are greater than actual utility costs on Line 16, calculate one-half the difference and enter on Line 23. Documentation to support these rate savings must be submitted with the HUD

Section 9 – Line 24 24 – Utilities expense level – whole dollars
[Utilities expense level adjusted for inflation/deflation, Line 22] + [Energy rate incentive, Line 23] Line 24 (Utilities expense level – whole dollars) must be provided by the PHA. It is calculated by adding Line 22 (Utilities expense level adjusted for inflation/deflation) and Line 23 (Energy rate incentive).

Section 9 – Line 25 25 – Eligible unit months, from Form HUD-52723, Column B [Total Unit Months, Line 15] + [Unit months for which actual consumption is included in Line 01 of form…, Line 17] minus [New units – eligible to receive subsidy from 10/1 to 12/31…, Line 04] Line 25 (Eligible unit months) must be provided by the PHA. The data necessary to calculate Line 25 is on form HUD-52723, Section 2, Lines 04, 15, and 17, Column B. Line 25 is calculated first by adding Line 15 to Line 17, and then subtracting Line 04. The summation in Line 25 ensures the utility consumption and expense levels in HUD are based on the same number of eligible unit months reported in HUD

Section 9 – Line 26 26 – Utilities Expense Level – PUM
[Utilities expense level – whole dollars, Line 24] ÷ [Eligible unit months, Line 25] Line 26 (Utilities expense level – PUM) must be provided by the PHA. It is calculated by dividing Line 24 (Utilities expense level – whole dollars) by Line 25 (Eligible unit months). The amount is rounded to two decimal places.

Enter PUM Utilities Expense Level
Form HUD-52723, Part A, Line 05 After completing HUD-52722, the PHA must take the amount in Section 9, Line 26 of the form and enter it in Section 3, Part A, Line 05 of HUD-52723, Operating Fund Calculation of Operating Subsidy. Enter PUM Utilities Expense Level on Line 05

Avoid Distortion of Rolling Base Consumption Level
A PHA shall report its rolling base consumption so as not to materially distort the rolling base period A PHA shall report its rolling base so as not to materially distort the rolling base period. The following events trigger a material distortion to the rolling base: a conversion to one energy source to another; interruptible service sufficient to cause discernible variance from normal consumption patterns; a switch from resident-purchased to PHA-supplied utilities; or a switch from PHA-supplied to resident-purchased utilities. Actual consumption of projects having the situations described above shall be established or adjusted in accordance with the instructions, below, and other guidance. The overriding consideration of all of the adjustments is that the consumption data shall not be distorted by including in Lines 02 through 08 consumption information that is not comparable to Line 01.

Situations Requiring Adjustments to Avoid Distortion of the Rolling Base Consumption Level
Conversion from one utility type to another type Switch of utilities from resident-purchased to PHA-supplied, or vice versa Interruptible service Unoccupied projects and units If a PHA converts from one utility type to another, then the PHA shall convert the discontinued utility consumption data into a comparable unit of consumption of the new utility. The PHA shall convert the rolling base consumption data into the same common unit of measurement. If the actual consumption data that would be reported in Line 01 contains consumption for both utility types, the PHA will convert the discontinued utility into the same common unit of measurement. If a PHA switches utilities from resident-purchased to PHA-supplied, then PHAs will the follow special instructions used for new units. This will be discussed in further detail in Module 8 – New Units. If a PHA switches utilities from PHA-supplied to resident-purchased, then PHAs will exclude all data (consumption, rates, rolling base, etc.) by utility for these units on the next original HUD This is very similar to the method will use adjust their utilities for deleted units, which will be discussed in the Deleted Units/Asset Repositioning module of this training. If a PHA has interruptible service, then the PHA must work with the field office to determine a reasonable method of reporting data on the form. If a PHA has a project that is temporarily unoccupied, the PHA will make no adjustments to the rolling base.

Frozen Rolling Base PHA freezes rolling base at level prior to energy conservation measures Rolling base remains frozen for length of energy conservation measure contract If a PHA undertakes energy conservation measures that are approved by HUD pursuant to 24 CFR (a)(1), the PHA will be allowed to freeze its rolling base consumption level. The PHA will freeze the rolling base at the level reported for the year during the which the energy conservation measures were implemented. Presumably, consumption will decrease after the energy conservation measure will have been implemented. As a result, the PHA will benefit from the reduction in consumption by being funded (Payable Consumption) for the consumption savings even though the PHA did not consume that amount. The rolling base will remain frozen for the length of the contract used by the PHA to fund the energy conservation measure. Contracts may include loans with a non-HUD entity to make physical improvements, management of costs under a performance contract or a shared savings agreement with a private energy service company. The rolling base will be unfrozen at the time the original contract (i.e. loan, agreement expires, etc.) expires using the consumption for the last three years of the contract.

Frozen Rolling Base (Continued)
Benefit: One time consumption decrease will benefit the PHA over the length of the contract rather than only for three years PHA is funded for 100% of consumption savings rather than only 75% of consumption savings The benefit of freezing the rolling base is that a PHA will benefit from the energy savings measure as consumption declines, however, the PHA will also benefit from the utility consumption incentive for more than 3 three years, as is normally the case. The rolling base incentive is limited as the PHA absorbs 75% of the consumption savings after one year, but after two more years the reduced consumption works its way through the rolling base. The PHA no longer receives 75% of consumption savings. However, if the rolling base is frozen, then the PHA will continue to receive the 100% consumptions savings for as long as the energy savings contract continues, which may in some cases last up to 20 years.

Frozen Rolling Base (Continued)
PHA must prepare separate forms for projects and utilities involved Follow specific frozen rolling base instructions on form HUD-52722, pages 6 and 7 (1) If a PHA has a rolling base incentive, it must submit a separate form HUD for the project for which the frozen rolling base is applicable and another form HUD for all other projects that report the rolling base normally. A third form, which combines the totals of the other two forms, will be needed to finalize the UEL estimate.

Exercise 2 Refer to “Utilities Expense Level – Exercise 2” and form HUD-52722, Operating Fund Calculation of Utilities Expense Level

Module 4: Other Formula Expenses (Add-Ons)
Calculation and Submission of Operating Subsidy Training This module is an overview of Other Formula Expenses, known as Add-Ons. The main objective of this module is to explain how add-ons are calculated.

Section 3, Part A, Lines 07 through 15
Add-On Line Source Self-sufficiency 07 PHA Reported Energy loan amortization 08 Payment in lieu of taxes (PILOT) 09 HUD Provided/FASS Cost of independent audit 10 Funding for resident participation activities 11 Auto-calculated Asset management fee 12 Information technology fee 13 Asset repositioning fee 14 Costs attributable to changes in federal law, regulation, or economy 15 Not Applicable Add-Ons are entered in Section 3, Part A, Lines 07 through 15 of HUD This chart displays the add-ons and the sources that report each of them. Note that only three add-ons are reported by the PHA. The remaining six add-ons are provided by HUD according to information in HUD systems, or auto-calculated based on data in other parts of the form. To complete the form, the PHA reports the whole dollar expense associated with the add-on.

Line 07 – Self-sufficiency
Elderly/Disabled Service Coordinator (EDSC) Program only (no other ROSS programs) Only applies to 1995 grant recipients Based on allowable amount in FY 2004, adjusted for inflation Line 07 (Self-sufficiency) must be provided by the PHA. Self-sufficiency applies only to the Elderly/Disabled Service Coordinator (EDSC) Program. It does not apply for any other ROSS (Resident Opportunity and Self-sufficiency) programs such as the Public Housing Family Self-Sufficiency (PH FSS) or Resident Services Delivery Model (RSDM) – Elderly and Persons with Disabilities. The maximum allowable Self-Sufficiency amount a PHA can report is based on the allowable amount in FY 2004 adjusted for inflation. The inflation factor used cannot be greater than PEL inflation factor.

Line 07 – Self-sufficiency (continued)
For reasonable cost of salary, fringe benefits, and related administrative costs Supporting documentation must be provided in Section 4, Remarks (a) Supporting documentation should include the costs associated with coordinator salary, coordinator benefits, and related administrative costs. For more information about the ROSS grant, refer to For more information about Section 3, Part A, Line 07, refer to 24 CFR (a).

Line 08 – Energy loan amortization
Must be HUD-approved Includes the following costs accrued during the funding period: Principal and interest for the energy conservation measures Other direct costs related to the energy project (a)(3) Line 08 (Energy loan amortization) must be provided by the PHA. In this add-on, the PHA receives operating subsidy for principal and interest payments of loans used for physical improvements that include energy conservation measures. The energy conservation measures must be HUD-approved. For more information about HUD-approved energy conservation measures, contact your local field office. If the cost savings for any year during the contract period are less than the amount of operating subsidy to be made available to pay for the energy conservation measure in that year, the deficiency will be offset against the PHA’s operating subsidy eligibility for the PHA’s next fiscal year. To calculate the energy cost savings, the actual cost of energy (of the type affected by the energy conservation measure) after the implementation of the energy conservation measure is subtracted from the expected energy cost had the measures not been implemented. If the energy cost savings are less than the amount necessary to meet amortization payments specified in a contract, the contract term may be extended (up to the 20-year limit) if HUD determines the shortfall is the result of changed circumstances rather than a miscalculation or misrepresentation of projected energy savings by the contractor or PHA. For more information about Section 3, Part A, Line 08, refer to 24 CFR (a)(3).

Line 09 – Payment in lieu of taxes
PILOT = 10% of shelter rent Shelter rent = [Net Tenant Rental Revenue, FDS Line 703] minus [Utility Costs, Financial Data Schedule Lines ] Line 09 (Payment in lieu of taxes) is auto-populated by HUD according to information in HUD systems. It is calculated by multiplying shelter rent by ten percent. Shelter rent is calculated by subtracting Utility Costs (sum of Financial Data Schedule Lines 931, 932, 933, 934, 935, 937, and 938) from Net Tenant Rental Revenue (Financial Data Schedule Line 703). Note: FDS line items are subject to change.

Line 09 – Payment in lieu of taxes (continued)
PHA receives 10% of shelter rent even if it has cooperation agreement with locality to pay less If shelter rent is a negative number, PHA receives $0 for PILOT PHAs will always receive 10% of the shelter rent, regardless of their actual cooperation agreement, which in many cases will be less or zero. However, if the calculated shelter rent is negative, the PHA will receive zero dollars.

Line 10 – Cost of an independent audit
Most recent actual audit costs from FDS submitted in FASS-PH From FDS, Line 912, Auditing fees Operating Fund portion only Line 10 (Cost of an independent audit) is auto-populated by HUD according to information in HUD systems. Depending on a PHA’s fiscal year end, the data used to determine the audit cost for the funding period January 1, 2007 to December 31, 2007, is the most recent FDS data available in FASS-PH.

Line 10 – Cost of an independent audit (continued)
If PHA does not intend to have audit for the period, must enter zero If PHA intends to have audit for the period, but has no recent actual audit cost in FASS-PH, PHA must work with FO to establish audit cost If funding for audit is requested, audit must be completed (d) PHAs must enter zero in this line if they do not intend to have an audit for the period. PHAs that have no recent actual audit cost in FASS-PH must work with their local field office to establish a cost. The following are examples of supporting documentation that can be used to establish the audit cost with the field office: contract between the PHA and its auditor; bids from auditors; and audit costs incurred by comparable PHAs. An audit must be completed if funding for an audit is requested by a PHA. For more information about Section 3, Part A, Line 10, refer to 24 CFR (d).

Line 11 – Funding for resident participation activities
$25 per unit Based on units occupied by: Public housing resident PHA employee, police officer, or other security personnel not otherwise eligible for public housing Line 11 (Funding for resident participation activities) is auto-calculated by the Excel tool based on data in other parts of the form. Each PHA’s operating subsidy calculation shall include $25 per occupied unit per year for resident participation activities, including, but not limited to, those described in 24 CFR Part 964. In any fiscal year, if appropriations are not sufficient to meet all funding requirements under this part, then the resident participation component of the formula will be adjusted accordingly.

Line 12 – Asset management fee
Based on total ACC unit months PHAs with at least 250 units: $4 per unit month PHAs with fewer than 250 units: Must transition to asset management to receive add-on $2 per unit month Line 12 (Asset management fee) is auto-calculated by the tool based on data in other parts of the form. The asset management fee is based on the total number of ACC units expressed in total unit months. Total unit months is calculated in Section 2, Column A, Line 15. PHAs with 250 or more units shall receive $4 PUM asset management fee. PHAs with fewer than 250 units that elect to transition to asset management shall receive an asset management fee of $2 PUM. PHAs with fewer than 250 units that elect to have their entire portfolio treated and considered as a single project as described in (b) or PHAs with only one project will not be eligible for the asset management fee.

Line 12 – Asset management fee (continued)
[Total Unit Months] x [$2 or $4] Section 3, Part A, Line 12 = [Section 2, Column A, Line 15] Asset management fee is calculated by multiplying Total Unit Months by $2 or $4. On HUD-52723, this translates to: Section 3, Part A, Line 12 = [Total Unit Months] x [$2 or $4]. Using $2 or $4 depends on the PHA’s unit count and decision to transition to asset management, as discussed on the previous slide. For more information about Section 3, Part A, Line 12, refer to 24 CFR (f).

Line 13 – Information technology fee
Based on total ACC unit months $2 per unit month Information technology fee = [Total Unit Months] x [$2] The information technology fee is based on the total number of ACC units expressed in total unit months. Total unit months is calculated in Section 2, Column A, Line 15. Information technology fee is calculated by multiplying Total Unit Months by $2.

Line 14 – Asset repositioning fee
Discussed in “Deleted Units” module Line 14 (Asset repositioning fee) must be provided by the PHA. For more information about Section 3, Part A, Line 14, refer to 24 CFR (h).

Line 15 – Costs attributable to changes in Federal law, regulation, or economy
No amount permitted at this time Bookmark for future use All PHAs must enter zero unless prescribed by HUD to do otherwise in the future. “A Placeholder for the Future” - In the event that HUD determines that enactment of a Federal law or revision in HUD or other Federal regulations has caused or will cause a significant change in expenditures of a continuing nature above the PEL and UEL, HUD may, at HUD’s sole discretion, decide to prescribe a procedure under which the PHA may apply for and may receive an adjustment in operating subsidy. For more information about Section 3, Part A, Line 15, refer to 24 CFR (i).

Line 16 – Total Add-Ons Sum of Part A, Lines 07 through 15
This line is automatically calculated. Total Add-Ons auto-calculated on Line 16

Line 17 – Total Formula Expenses
Sum of Part A, Lines 04, 06, and 16 Expenses in Section 3, Part A, Line 17 are automatically calculated. Total Formula Expenses auto-calculated on Line 17

Exercise 3 Refer to “Other Formula Expenses (Add-Ons) – Exercise 3” and form HUD-52723, Operating Fund Calculation of Operating Subsidy

Module 5: Formula Income
Calculation and Submission of Operating Subsidy Training This module is an overview of Formula Income. The main objective of this module is to explain how formula income is calculated. In addition, this module will explain the impact of changes in tenant utility allowances on formula income and operating subsidy. For more information about formula income, refer to 24 CFR and (e).

Formula Income Summary
Formula income is based on: Rent charged to tenants Unit months leased Data obtained from PHA’s 2004 audited financial information in the FDS submitted in FASS-PH For the purpose of the Operating Fund formula, formula income is equal to the amount of rent charged to tenants divided by the respective units months leased. Since it is divided by the unit months leased, the result is expressed as per unit month (PUM). The data used to derive formula income (i.e., the amount of rent charged to tenants and the unit months leased) is obtained from a PHA’s 2004 audited financial information in the FDS submitted in FASS-PH. Depending on a PHA’s fiscal year end (FYE), the data used is as follows: If FYE is March 31, data is from April 1, 2003 to March 31, 2004 If FYE is June 30, data is from July 1, 2003 to June 30, 2004 If FYE is September 30, data is from October 1, 2003 to September 30, 2004 If FYE is December 31, data is from January 1, 2004 to December 31, 2004 When audited data is unavailable in HUD’s information systems for the calculation of formula income, HUD may use an alternative methodology, including, but not limited to, certifications, hard copy reports, and communications with respective PHAs.

Frozen at 2004 Level Formula income frozen at 2004 level Exceptions:
Not recalculated for FFY 2007 through 2009 Exceptions: Appeal for severe local economic hardship Adjustment for changes in tenant utility allowances A key point to remember is that a PHA’s formula income will not be recalculated for fiscal years 2007 through The PUM formula income calculated using the PHA’s 2004 financial information will be used for funding years 2007, 2008, and 2009. The benefit of the frozen income base is that PHAs get to retain 100% of all increases in formula income from FY 2004 to FY 2009 without a reduction in operating subsidy. However, there are exceptions to freezing the formula income. First, a PHA can appeal by showing a severe local economic hardship that is impacting the PHA’s ability to maintain its formula income levels. For more information about this type of appeal, refer to 24 CFR (b). Second, an adjustment can be made for changes in tenant utility allowances.

Line 01 – PUM formula income
[Rent charged to tenants, 2004] (from FDS Line 703, Net tenant rental revenue) ÷ [Unit months leased, 2004] (from FDS Line 1121, Number of unit months leased) Line 01 (PUM formula income) is auto-populated by HUD. It is calculated by dividing the rent charged to tenants in 2004 (from FDS Line 703, Net tenant rental revenue) by the respective unit months leased in 2004 (from FDS Line 1121, Number of unit months leased).

Line 01 – PUM formula income
auto-populated by HUD on Line 01 The PUM formula income is auto-populated by HUD in Section 3, Part B, Line 01. The amount will be rounded to the nearest two decimal places.

Adjustments in Rental Income Changes in Tenant Utility Allowances
Rent collections and rental income will change as tenant utility allowances increase or decrease Frozen FY 2004 income level needs to be adjusted Exception: If PHA is HUD-approved to freeze the tenant utility allowance base as the result of energy conservation measures, then the PHA should not report the allowance in HUD-52723 A tenant utility allowance is given to tenants to assist them in paying utilities. However, because a tenant will not be required to pay more than a given percentage of income in total rent and utility costs, if a tenant’s utility allowance changes, then the tenant’s rent will also change. Adjustments in tenant utility allowances are obviously not relevant for PHAs that pay for utilities. PHAs would report changes in tenant utility allowances only if utilities are tenant-paid. If a PHA is HUD-approved to freeze the tenant utility allowance base due to energy conservation measures, it does not need to report changes in tenant utility allowances for the duration of the energy savings contract.

Changes in Tenant Utility Allowances
Results In: Tenant Utility Allowances Rental Income Increases in tenant utility allowances result in a decrease in rental income and an increase in operating subsidy. Operating Subsidy

Changes in Tenant Utility Allowances
Results In: Tenant Utility Allowances Rental Income Decreases in tenant utility allowances result in an increase in rental income and a decrease in operating subsidy. Operating Subsidy

Line 02 – PUM change in utility allowances
Enter PUM change in utility allowances on Line 02 The PUM change in utility allowances must be provided by the PHA in Section 3, Part B, Line 02. A decrease in utility allowances compared to 2004 must be entered as a positive number. An increase in utility allowances compared to 2004 must be entered as a negative number and in brackets. Decrease over 2004 entered as positive Increase over 2004 entered as negative in brackets

Calculation of Change in Utility Allowances Step 1
PUM Tenant utility allowances, 2004 = [Tenant utility allowances, 2004] (from PHA records) ÷ [Unit months leased, 2004] (from FDS line 1121, Number of unit months leased) To calculate the PUM change in utility allowances, first calculate the PUM tenant utility allowances for It is calculated by dividing tenant utility allowances in 2004 (from PHA records) by the respective unit months leased in 2004 (from FDS Line 1121, Number of unit months leased). Remember, the data used should correspond to a PHA’s 2004 audited financial information in the FDS submitted in FASS-PH. Depending on a PHA’s fiscal year end (FYE), the data used is as follows: If FYE is March 31, data is from April 1, 2003 to March 31, 2004 If FYE is June 30, data is from July 1, 2003 to June 30, 2004 If FYE is September 30, data is from October 1, 2003 to September 30, 2004 If FYE is December 31, data is from January 1, 2004 to December 31, 2004

PUM Tenant utility allowances, RP = [Tenant utility allowances, reporting period] (from PHA records) ÷ [Unit months leased, reporting period] Second, calculate the PUM tenant utility allowances for the reporting period. It is calculated by dividing tenant utility allowances in the reporting period (from PHA records) by the respective unit months leased in the reporting period (from PHA records). Note: The reporting period is July 1, 2005 to June 30, 2006.

PUM Change in utility allowances = [PUM tenant utility allowances, 2004] (Step 1) minus [PUM tenant utility allowances, reporting period] (Step 2) Finally, calculate the PUM change in utility allowances. It is calculated by subtracting the PUM tenant utility allowances in the reporting period (from step 2) from the PUM tenant utility allowances in 2004 (from step 1). The amount should be rounded to the nearest two decimal places.

Line 03 – PUM adjusted formula income
[PUM formula income] (Line 01) + PUM change in utility allowances (Line 02) Line 03 (PUM adjusted formula income) is auto-calculated by the Excel tool. PUM adjusted formula income is calculated by adding Line 01 (PUM formula income) and Line 02 (PUM change in utility allowances). The amount should be rounded to the nearest two decimal places.

Line 03 – PUM adjusted formula income
PUM adjusted formula income is auto-calculated on Line 03 Line 03 (PUM adjusted formula income) is auto-calculated by the Excel tool on Line 03.

Line 04 – Total Formula Income
[PUM adjusted formula income] (Section 3, Part B, Line 03) x [Total eligible unit months] (Section 2, Line 15, Column B) Line 04 (Total Formula Income) is auto-calculated by the Excel tool. It is calculated by multiplying PUM adjusted formula income (Section 3, Part B, Line 03) by Total eligible unit months (Section 2, Line 15, Column C). The amount should be in whole dollars.

Line 04 – Total Formula Income
Total Formula Income auto-calculated on Line 04 Total Formula Income is auto-calculated on Line 04.

Exercise 4 Refer to “Formula Income – Exercise 4” and form HUD-52723, Operating Fund Calculation of Operating Subsidy

Module 6: Transition Policy and Completion of Form
Calculation and Submission of Operating Subsidy Training The transition module provides an overview of HUD’s transition policy as the interim funding formula is replaced with the final funding formula. Notably, the transition policy provides an easing in of changes in PHA funding levels. PHAs that are due to have a decline in funding levels will not have their funds reduced completely between FY 2006 and FY Rather these PHA will have their funding reduced over a five year transition period. PHAs due to receive increases in funding levels will be transitioned over a two year period. This module reviews the transition schedule, its implementation, and its impact on HUD The transition policy also includes a stop-loss provision. One of the primary goals of the Rule is for PHAs to convert to an Asset Management approach. To give PHAs that will have a decline in funding an incentive to convert to Asset Management, these PHAs can have their funding decline stopped as soon as they convert to Asset Management. This module will review the stop loss schedule and tell the PHAs were to find the requirements for successful conversion to Asset Management. Finally, this module will walk through the final steps necessary to complete HUD

Objectives Review Transition Schedule/Transition Funding
Explain Stop Loss Provision Finalize HUD Form This module has three objectives. First, it will review the transition schedule and how it impacts transition funding over a five year period for PHA “decliners” and PHA “gainers”. Second, the module will explain the stop loss provision, how its calculated, implemented and reported on HUD Finally, the module will review the steps necessary to complete the related portion of HUD

Transition Policy Subpart F Notice PIH 2006-14
Sections – Notice PIH Detailed guidance on calculation of PUM Transition Amount Includes seven criteria for asset management compliance HUD transition policy is described in the Rule under Subpart F – Transition Policy and Transition Funding. The subpart describes the transition schedule for both PHAs that will experience a reduction in funding and PHAs that will experience an increase in funding. It also provides a description of the stop-loss provision. In addition to the Rule, “Notice PIH Operating Fund Program Final Rule: Transition Funding and Guidance on Demonstration of Successful Conversion to Asset Management to Discontinue the Reduction of Operating Subsidy” was published on March 22, 2006 to provide more detailed information on how to calculate transition funding. Specifically, in addition to reinforcing the information contained in the Rule, the notice provided additional information on how to calculate the Final Rule Operating Fund formula using FY 2004 data. As stated in the Rule, transition funding amounts are to be calculated based on FY 2004 data. In general, transition funding is the “difference in subsidy levels between the formula set forth in this part (the Final Rule Part 990) and the formula in effect prior to November 18, 2005 (Interim Rule).” However, because the Final Rule did not exist in FY 2004, some of the Final Rule formula inputs did not exist at the time. As a result, proxy data must be used to estimate what the Final Rule funding formula would have been in FY 2004.

Transition Funding Transition Funding
Transition Funding is similar to “Add-on” EUM x PUM Transition Amount Transition funding is reported in Section 3 – Part C Other Formula Provisions of HUD The transition calculation is completed independently and then reported on HUD Transition funding amounts will be provided by HUD. In general, transition funding is similar to an add-on expense because it is not part of the PEL, is reported on a total expenses basis rather than on a PUM basis, and must be calculated uniquely for each PHA. It is important to note that although transition funding is reported as a total expense amount, it is calculated on a PUM basis (please see upcoming slides for more detail) and then multiplied by the EUM amount as reported on HUD

PUM Transition Amount (Final Rule Subsidy Level) - (Interim Rule Subsidy Level) Use FY 2004 Data for Calculation Calculated on a PUM Basis Modified Final Rule Formula As per Subpart F, “The determination of the amount and period of transition funding shall be based on the difference in subsidy levels” of the Final Rule formula and the Interim Rule formula. The difference is not determined on a total basis but rather on a PUM basis. For example, if a PHA with 100 eligible unit months has a FY 2004, the Interim Rule subsidy level of $10,000 and a FY 2004 Final Rule level of $12,000, the transition amount is not equal to $2,000, but rather $20 PUM. This $20 PUM formula will then be used to estimate transition funding for future years (i.e. FY 2007 to FY 2011). As previously discussed, the Final Rule did not exist in FY 2004, thus data for some of the Final Rule formula components does not exist for FY As a result, the Final Rule formula used in the transition amount calculation is in reality a modified formula. Notice provides a crosswalk of what previous data should be substituted for specific components of the Final Rule. For example, in FY 2004, PHAs did not report eligible unit months (EUM) data but rather Unit Months Available (UMA) data, thus UMAs are used as a proxy for EUMs.

Transition Schedule - Decliners
Year % of PUM transition (FFY 2007) Year % of PUM transition (FFY 2008) Year % of PUM transition (FFY 2009) Year % of PUM transition (FFY 2010) Year % of PUM transition (FFY 2011) or Normal Funding under Final Rule For PHAs that will have a decline in funding, the transition schedule will last five years as shown above. Once the PUM transition amount has been determined as discussed in previous slides, the transition amount must be calculated for each of the funding years. The transition amount to be funded is based on a schedule that gradually reduces a PHAs funding over a five year period. Note: The transition schedule is on a PUM basis. Thus, to actually calculate transition funding the PUM amount must be multiplied by EUM. In Year 1 or FY 2007, a PHA’s reduction in funding will be limited to 24% of the transition amount. The PHA’s subsidy level is actually increased by 76% of its transition, which is based on FY 2004 data. In Year 2 of FY 2008 a PHA’s reduction will be limited to 43% of the transition amount or increased by 57% of the transition amount. In Years 3, 4 and 5 transition is limited to 62%, 81% and 100% of the PUM transition amount, respectively.

Transition Schedule - Gainers
Year % of PUM transition (FFY 2007) Year % of PUM transition (FFY 2008) or Normal Funding under Final Rule For PHAs that will have an increase in funding, the transition schedule will take place over a 2-year period as shown above. PHAs will not receive 100% of their funding increase in FY 2007, rather these PHAs will have their Final Rule funding amount decreased by 50% of their transition amount calculated using FY 2004 data. Thus, it can be said that the increase in funding is limited to 50% of the increase as calculated in FY 2004.

Transition Schedule - Decliners Example
Transition Amount – Decline of $100 PUM (Eligible Unit Months = 100) % Realized % Unrealized Realized Decrease Unrealized Decrease 2007 Year 1 24% 76% $24 PUM $76 PUM 2008 Year 2 43% 57% $43 PUM $57 PUM 2009 Year 3 62% 38% $62 PUM $38 PUM 2010 Year 4 81% 19% $81 PUM $19 PUM 2011 Year 5 Normal Funding Under Final Rule The chart above gives an example of a transition schedule and how it would be applied to a PUM transition amount for a PHA that is expected to lose $100 PUM as a result of the Final Rule funding formula. In FY 2007, 24% of the transition amount is realized or 76% is unrealized. Thus, instead of losing $100 PUM, the PHA would only lose $24 PUM. In FY 2008, the PHA would lose $43 PUM, in FY 2009 $62 PUM and in FY 2010 $81 PUM. Finally, in FY 2011, the transition is complete, 100% of the PUM transition amount is realized or more precisely the Final Rule in FY 2011 going forward is not to be adjusted by a Transition Funding amount.

Transition Schedule - Decliners Example
Transition Amount – Decline of $100 PUM (Eligible Unit Months = 100) Unrealized Decrease Eligible Unit Months* Total Transition Funding 2007 Year 1 $76 PUM 100 $7,600 2008 Year 2 $57 PUM $5,700 2009 Year 3 $38 PUM $3,800 2010 Year 4 $19 PUM $1,900 2011 Year 5 Normal Funding under Final Rule The chart above continues with the analysis of the previous slide. In this case, we now assume that the PHA, which has experienced the decline in funding of $100 PUM, has 100 eligible units. Thus, the $76 PUM of the unrealized transition amount in FY 2007 is multiplied by 100 EUM to determine the additional funding the PHA receives. Each year, the increase in funding gets progressively less based on the transition schedule. In FY 2008, the transition funding is only $5,700, in FY 2009 $3,800 and in FY 2010, $1,900. By Year 5 of the transition schedule, there is no transition funding. Transition funding for PHAs that will experience a decline in funding as a result of the Final Rule is reported as positive value. This positive amount is added to the operating subsidy formula calculation produced by the Final Rule. Note: In this example, it is assumed that EUMs stay constant from year to year. This may not be the case in actual practice. *Will vary year to year.

Transition Policy – Gainers Example
Transition Amount – Gain of $50 PUM ((Eligible Unit Months = 100) % Realized % Unrealized Realized Increase Unrealized Increase 2007 Year 1 50% $25 PUM 2008 Year 2 Full Funding The chart above gives an example of a transition schedule and how it would be applied to a PUM transition amount for a PHA that would gain $50 PUM as a result of the Final Rule funding formula. For these PHA gainers the transition amount is negative. The total transition formula will be subtracted from the PHA’s calculated operating formula amount. As per the Rule, 50% of the transition amount is realized in FY 2007 and correspondingly 50% is unrealized. Thus, instead of having an increase of $50 PUM, the PHA would only have an increase in funding of $25 PUM. After two years, the transition will be complete. The PHAs will receive full funding as per the Final Rule formula.

Transition Policy – Gainers Example
Transition Amount – Gain of $50 PUM (Eligible Unit Months = 100) Unrealized Decrease Eligible Unit Months Total Transition Funding 2007 Year 1 $25 PUM 100 -$2,500* 2008 Year 2 Full Funding The chart above continues with analysis of the previous slide. In this case, we now assume that the PHA, which has experienced an increase in funding of $50 PUM and has 100 eligible units. Thus, the $25 PUM of the unrealized transition amount in FY 2007 is multiplied by 100 EUM to determine the reduction in funding for the PHA as a result of the transition policy. Thus, $2,500 should be subtracted from the PHA operating subsidy amount. In FY 2008, the PHA will receive its normal funding amount as per the Final Rule formula. *Value is negative because the PHA’s operating subsidy is reduced by transition policy.

Stop Loss Subpart H Opportunity to limit funding reduction
PHAs must be Asset Management Compliant Calculation based on PUM transition amount As per Subpart H of the Rule, if a PHA can demonstrate a successful conversion to the asset management requirements as outlined by HUD, HUD will discontinue a PHA’s funding loss during the next funding period. This gives PHAs an excellent opportunity to limit their funding losses by converting to Asset Management. It is important to remember that one of the primary objectives of the Rule is for PHAs to manage their properties using an Asset Management approach. The Rule is not merely a change in funding formula. As of the date of this training, HUD has established abbreviated requirements for PHAs to successfully demonstrate conversion to asset management and will follow up with extensive guidelines at a later date. The preliminary guidelines are included as part of Notice PIH This training will not review those guidelines, however it is important to note, as per the Rule, for a PHA to be approved as Asset Management compliant, an independent assessment must be completed verifying as such. Similar to transition funding, the stop loss provision is based on the PUM transition amount calculation. However, the stop loss schedule varies from the transition schedule.

Stop Loss – Asset Management Compliance Schedule
Date Stop Loss Effective As Of October 1, 2006 5% of PUM Transition Amount CY 2007 October 1, 2007 24% of PUM CY 2008 October 1, 2008 43% of PUM CY 2009 October 1, 2009 62% of PUM CY 2010 October 1, 2010 81% of PUM CY 2011 The chart above shows the stop loss schedule. The “Compliance Date” column shows the date by which a PHA must be Asset Management compliant in order to have its funding reduction stopped for the upcoming funding period. The “Stop Loss” column shows the percentage to which the PHA’s reduction in funding will be limited. The “Effective As Of” column shows the funding period for which the stop loss will first take place. Thus, if a PHA is Asset Management compliant prior to October 1, 2006, then its funding reduction will be limited to 5% of the PUM transition amount and this will be effective for the FY 2007 funding period. Note: Because the transition amount is calculated for FY 2004, though stated in the Rule, the last statement is not precise. The reduction in funding is not actually limited, rather the unrealized portion of the PUM transition amount is added to the Final Rule formula amount. If the calculation were to be completed in FY 2004, the two alternative calculation methods would be the same, however, in any other year, the two calculation methods will produce different results. Due to inflation, the gap between the Final Rule PUM and Interim Rule PUM will continue to grow each year. However, the stop loss provision does not take this increasing gap into consideration. The table below gives an illustration of why. Assume that there is an inflation rate of 20% between FY 2004 and FY 2005. Fiscal Year Final Rule PUM Interim Rule PUM Difference Transition $50 $100 $50 FY 2004 $50 $100 $50 FY 2005 $60 $120 $60 As per the table, the gap in FY 2005 is $60 PUM, however, the transition amount is unchanged at $50 PUM.

Transition Amount – Decline of $200 PUM (Eligible Unit Months = 100)
Stop Loss Example Transition Amount – Decline of $200 PUM (Eligible Unit Months = 100) Compliance Date Stop Loss Unrealized Reduction Incremental PUM Stop Loss Amount October 1, 2006 5% 95% $190 $19,000 October 1, 2007 24% 76% $152 $15,200 October 1, 2008 43% 57% $114 $11,400 October 1, 2009 62% 38% $76 $7,600 October 1, 2010 81% 19% $38 $3,800 The chart above shows an example of a PHA that experienced a decline of $200 PUM in funding based on FY 2004 data and has 100 EUMs. As the chart above indicates, the longer it takes the PHA to fully transition to Asset Management, the lesser the stop loss funding amount will be. Thus, there is an incentive to become Asset Management compliant as quickly as possible. If the PHA can become compliant prior to October 1, 2007, it will receive an additional $19,000 in funding into perpetuity. If it waits until October 1, 2008, it will only receive an additional $15,200 into perpetuity. If a PHA decides not to convert to Asset Management by October 1, 2011, it will have lost all opportunities to obtain the additional funding as provided for by the Stop Loss provision.

Moving-to-Work (MTW) Moving-to-Work (MTW) – Part C Line 1 990.165
If a PHA has an MTW agreement, it may enter an amount on this line if the amount would not be accurately classified on any other lines of this form in accordance with its MTW agreement and applicable HUD notices and guidance.

Moving-to-Work (MTW) PHAs
Block Grant PHAs Receive an operating subsidy as provided in Attachment A of MTW Agreements Continue to have the right to request extensions of, or modifications to, MTW Agreements Block Grant PHAs participating in the Moving to Work (MTW) Demonstration shall receive an operating subsidy as provided in Attachment A of their MTW Agreements executed prior to November They will continue to have the right to request extensions of, or modifications to, their MTW Agreements.

Part D Calculation of Formula Amount
Formula Calculation Part A – Part B + Part C (Formula Expenses) – (Formula Income) + (Other Formula Provisions) Part D Line 1 (Formula calculation) finalizes the calculation of the operating subsidy formula by summing all parts of the formula. This includes expenses, formula income and other formula provisions discussed in this module.

Cost of Independent Audit Same as Line 10 in Part A Part D, Line 2 (Cost of independent audit) reports the audit cost as estimated in the add-ons section in Part A. PHAs will always be funded for audits that they complete. This line is auto-calculated based on the value entered in Line 10 (Cost of Independent Audit) of Part A.

Greater of Formula Calculation or Audit Part D Line 3 (Formula amount) is the final formula amount estimated by the data in HUD It is the greater of the formula calculation in Line 1 (Formula calculation) or Line 2 (Cost of Independent Audit). The formula calculation for some PHAs will be negative. Thus, these PHAs normally would not be funded, however HUD always funds audit costs. A PHA can have negative formula amount if rental income is greater than formula expenses.

Part E Calculation of Operating Subsidy
Subpart E Use of HUD Databases to Calculate Formula PHA’s Responsibility to Submit Timely Data After the PHA’s formula amount has been calculated, the operating subsidy is calculated. Part E of HUD makes this calculation based on guidelines reported in Subpart E of the Rule. Important elements of Subpart E include: “HUD will use appropriate databases to complete formula calculations” and that “PHA’s are responsible for submitting timely and accurate data.” If the PHA’s do not submit timely and accurate data, “HUD will make a determinations to the PHA’s inventory, occupancy, and financial information using available or verified data, which may result in a lower subsidy.”

Formula amount Not Necessarily the Subsidy Amount Completed by HUD Part E Line 1 (Formula amount) reports the formula amount as per Line 3 (Formula Amount) in Part D. It is important to remember that the formula amount is not necessarily the subsidy amount. HUD completes this section of the form.

Adjustments due to availability funds Based on Proration of Formula Amount (Formula Amount) x (Proration %) Adjustments to the formula amount may be made based on availability of funds. Congress may not fully appropriate funds to cover formula expenses in FY If this occurs HUD will apply a proration amount to the formula amount. The proration amount will be applied equally for all PHAs.

HUD discretionary adjustments Will vary by PHA At HUD’s discretion, adjustments may be made to a PHA’s final funding amount. HUD anticipates this will rarely occur and only under unique circumstances.

Funds Obligated for Period (Formula Amount) – (Appropriations Adjustment) – (HUD Adjustment) The final funds to be obligated will reported in Line 4 (Funds Obligated for Period) of Part E. The amount reported is equal to the Formula Amount less prorated adjustments due availability of funds less any HUD discretionary adjustments.

Module 7: Deleted Units Calculation and Submission of Operating Subsidy Training This module will provide an explanation of what happens when a PHA removes units from its ACC due to demolition or disposition during and after the reporting period. In general, these removed units are called deleted units. Specifically, the module discusses what adjustments PHAs should make to both HUD and HUD In addition, because deleted units are directly linked to asset repositioning, the module reviews the calculation of the asset repositioning fee add-on.

Objectives Define Deleted Unit
Correctly Remove Deleted Unit Data from Reporting Period in HUD-52723 Understand Implications of Deleted Units on HUD-52722 Review Asset Repositioning Fee The primary objective of this module consists of understanding what adjustments need to be made to HUD and HUD as a result of units that have been removed from the EUM (Eligible Unit Month) calculation due to the asset repositioning fee. Units that are to be removed from the EUM may be reported on HUD as eligible for funding because they were eligible during the reporting period (7/1/2005 to 6/30/2006). These units should not receive operating subsidy, but rather an asset repositioning fee. The module will provide the definition of a deleted unit and review the asset repositioning fee calculation to be reported on Line 14 (Asset repositioning fee) of the add-ons section of HUD Only units that will receive asset repositioning fees will impact reporting on HUD

Definition All units in a project or an entire building in a project which are eligible for Asset Repositioning Fee Units removed from ACC without Asset Repositioning Fee Information regarding deleted units is found in Part – Addition and Deletion of Units of the Rule. A deleted unit is not defined in the Rule as such, the Rule language states that “projects or entire buildings in a project, that are eligible to receive an asset repositioning fee in accordance with (h) are not to be included in the calculation of EUMs.” Therefore, for the purposes of completing this form, only those units that meet the stated criteria listed in 24 CFR are to be removed from reporting period data to accurately calculate EUM. A deleted unit as related to this training, is any unit that is permanently removed from the EUM calculation due to it receiving an asset repositioning fee. Other units removed from the EUM/ACC not receiving an asset repositioning fee during the funding period do not require adjustments to HUD and only require adjustments to HUD if they represent more than 10% of units in a building or project. Thus, the “deleted” units, as defined above, concentrates mainly on units that will receive the asset repositioning fee. Further information regarding Asset Repositioning is found under Part Other Formula Expenses. Units receiving an asset repositioning fee are grouped by building or project.

Asset Repositioning Fee
Applications for Demolition or Disposition must be HUD Approved to receive Asset Repositioning Fee Supplements Demolition and Disposition Costs Asset Repositioning Fee replaces Operating Subsidy The asset repositioning fee is an add-on that reimburses PHAs for the costs involved with demolishing or disposing units in a building or property. In order to receive this add-on, PHA must apply and get HUD approval to demolish or dispose of the units. The fee is paid for three years for demolition units and two years for disposition units. The fees get progressively less each year. Demolition units consist of units in an entire building or project that are to be destroyed. Disposition units are all the units in an entire building or project that are to be sold to another entity and removed from the ACC. Once a project or entire building receives the asset repositioning fee, those units will no longer be included in the calculation of EUMs. A unit cannot receive both the asset repositioning fee and operating subsidy.

Asset Repositioning Fee Expenses
Administration and Management Tenant Relocation Minimum Protection and Services Asset repositioning is designed to cover three main expenses during the two or three year period it is paid. The first expense consists of management and administrative expenses incurred by the PHA to demolish or dispose units. Secondly, in order for PHA to obtain this funding, they must have an approved relocation plan for tenants currently living in the building/project. The plan would consider expenses associated with the time and effort of PHA personnel to find alternative housing for these tenants. This will also include temporary rents paid by the PHA to house these tenants, if no other ACC units are available to house them. Finally, the fee will pay for any limited services provided for the property or building during the demolition/disposition period. This might include security for vacant properties, ongoing utility payments, or limited maintenance of vacant buildings. Each PHA is responsible for accurately applying and maintaining supporting documentation on the start date of the Asset Repositioning transition period or is subject to forfeiture of this add-on.

Asset Repositioning Fee Schedule Demolition Units
75% of PEL for first 12 months 50% of PEL for second 12 months 25% of PEL for third 12 months As previously discussed, a PHA will receive an asset repositioning fee for demolition units for three years based on a formula. Beginning with the first quarter a PHA is eligible to receive the fee, the PHA will receive 75% of its FY 2007 PEL for 12 months for each demolished unit. The PEL is the value reported on Part A Line 04 (PEL) of Section 3 of HUD For example, if on January 1, 2007 a PHA is due to receive the asset repositioning fee for 10 demolished units and property PEL is $200 PUM, the PHA will receive $18,000 in asset repositioning fees. (10 units x 12 unit months x $200 PEL x 75%). In the second year, beginning January 1, 2008, the PHA will receive $12,000 (including an inflation factor) in asset repositioning fees. (10 units x 12 unit months x $200 PEL x 50%). In the third year, beginning January 1, 2009, the PHA will receive $6,000 (including an inflation factor) in asset repositioning fees. (10 units x 12 unit months x $200 PEL x 25%). Note: A PHA is funded on a calendar year. Thus, if the asset reposition fee overlaps a calendar year, the units will only be funded for the partial year. The rest of the fee will be funded in the next funding period. For example, if the units in the example were eligible for the asset repositioning fee on April 1, 2007 rather than January 1, The PHA would only receive funding for nine months, which results in a total fee of only $13,500. The rest of the $18,000 would be funded in FY 2008 (including an inflation factor). Consequently, the $12,000 to be funded at the 50% rate would only then be funded for nine months or at $9,000 in FY 2008 (including the inflation factor).

Asset Repositioning Fee Schedule Disposition Units
75% of PEL for first 12 months 50% of PEL for second 12 months PHA will receive an asset repositioning fee for disposition units for two years based on a formula similar to that of demolition units. Beginning with the first quarter a PHA is eligible to receive the fee, the PHA will receive 75% of its FY 2007 PEL for 12 months for each disposition unit. For example, if on January 1, 2007 a PHA is due to receive the asset repositioning fee for 10 disposition units and property PEL is $200 PUM, the PHA will receive $18,000 in asset repositioning fees. (10 units x 12 unit months x $200 PEL x 75%). In the second year, beginning January 1, 2008, the PHA will receive $12,000 (including the inflation factor) in asset repositioning fees. (10 units x 12 unit months x $200 PEL x 50%).

Asset Repositioning Fee Funding
Continues Despite Actual Expenses Continues Despite Actual Disposition or Demolition Schedule Continues Despite Replacement Vouchers or New ACC Units In some circumstances, the specific expenses for which the asset repositioning fee is necessary, may not be required for the entire two or three year period. For example, the tenants that have vacated a project may all receive Section 8 vouchers, therefore tenant relocation expenses are not necessary or new units have been built to replace the deleted units and the same tenants have occupied those units. However, the asset repositioning fee method does not consider these issues. The funding will last for the prescribed period of time regardless of actual PHA expenses.

Replacement of Prior Add-ons
Costs Attributable to Deprogrammed Units Phase Down for Demolitions Determine Remaining Asset Repositioning Schedule as of Jan 1, 2007 For demolitions or dispositions approved prior to January 1, 2007, a PHA must determine at what place these units would be in the asset repositioning fee methodology (i.e., six months into the process, 12 months into the process, etc.) The reason is that on January 1, 2007, funding for phase-down for demolitions and costs attributable for deprogrammed units will cease and the asset repositioning fees will begin. Thus, the asset repositioning fees will start midstream for these units.

Asset Repositioning Fee Timeline
“Fee begins on the first day of the next quarter six months after the date the first unit becomes vacant after the relocation date included in the approved relocation plan.” The transition from operating subsidy to asset repositioning fee does not occur immediately after a project or building is approved for demolition or disposition, rather the PHA will continue to receive operating subsidy for those units until the asset repositioning fee begins. The Rule states “Projects covered by applications approved for demolition or disposition shall be eligible for an asset repositioning fee on the first day of the next quarter six months after the date of the first unit becomes vacant after the relocation date included in the approved relocation plan.” In general, it will take six to nine months for a PHA to receive an asset repositioning fee from the date that the first tenant vacates the property after the approval date. In the example above, it is assumed that the PHA has gotten final approval to demolish one of its properties on February 3, The approval also includes a relocation plan of the property’s tenants. The first tenant vacates the property on March 12, At this point, the six month period begins and continues until September 12, The first day of the next quarter after September 12, 2007 is October 1, Thus the PHA will begin to receive the asset repositioning fee on October 1st, Note: Quarters are assumed to begin on January 1, April 1, July 1, and October 1.

Asset Repositioning Fee Timeline (continued)
HUD-approval of demolition or disposition with tenant relocation plan Date of first vacancy Add six months to vacancy date and determine the next quarter start date Asset repositioning can only begin on 1/1, 4/1, 7/1, or 10/1 In order to demolish or dispose of units a PHA must submit an application to be HUD approved. HUD approval of the application is the first step in determining when the asset repositioning fee will replace operating subsidy for the project units. Tenants residing in a project approved for demolition and disposition are still eligible for public housing. Thus, each application will include a tenant relocation plan. After HUD approval, tenants will begin vacating the project. The date of the first vacancy after approval is the key date. As per the Rule, add six months to the first vacancy date and then determine the next quarter start date. Assume that a quarter starts on January 1, April 1, July 1 or Oct 1. This is the date when the project should begin receiving the asset repositioning fee.

Asset Repositioning Units Impact on HUD-52723
Units no longer eligible for Operating Subsidy due to Asset Repositioning Must “Delete” Data in Reporting Period from Lines 01 to 11 “Deleted” Units Reported on Line Units Eligible for Asset Repositioning Fee Once a unit begins to receive asset repositioning fees, it is no longer eligible to receive operating subsidy, as per Part (b)(2). However, these units may still have been eligible during the reporting period and thus the Form is incorrectly counting PHA eligible unit months. These units need to be removed from Section 2 of HUD If they are not, then the PHA would be receiving both operating subsidy and asset repositioning fees for these units. The units that are “deleted” from Lines 1 to 11 are still in the ACC and must be reported. These units are reported in Line 12 (Units Eligible for Asset Repositioning Fee) until both the asset repositioning fee funding ends and the units are demolished/disposed. Single units which have been removed from the ACC and do not receive asset repositioning fees will also be reported during the reporting period. However, the EUM amounts for these units do not need to be removed from Section 2 of HUD The Rule language only refers to “Projects, or entire buildings in a project” when declaring that units need to be removed from the EUM. These units will continue to receive operating subsidy during the funding period, despite they are no longer eligible.

Section 2 - Lines 01 through 11
Unit Month Category Line Source Occupied Dwelling Units…. 01 PHA Provided Occupied Dwelling Units – (Security)… 02 Unit undergoing modernization 05 Special Use Units 06/6a Units vacant due to litigation 07 Units vacant due to disasters 08 Units vacant due to casualty losses 09 Units vacant due to changing market conditions 10 Units vacant and not categorized above 11 The line items that may be impacted in HUD are those included in the Categorization of Unit Months in Section 2. The unit month data for deleted units that are not eligible for operating subsidy, but will receive asset repositioning fees, need to be removed from these line items.

Categorization of Unit Months
Delete Unit Month Data by Categorization Use Reporting Period Data Delete based on Asset Repositioning Date From the moment a unit begins receiving the asset repositioning fee, it will no longer be eligible for operating subsidy. However, these units may have been eligible during the reporting period and thus HUD will show a unit month count for these units. The unit months for these units need to be removed from Lines 01 to 11 to properly count the EUMs to be funded. The PHA must determine from which category to remove these unit months. If asset repositioning begins during the reporting period, then the PHA should simply remove the appropriate unit months based on the data in the reporting period. If asset repositioning begins after the reporting period, but prior to the funding period, then the PHA should remove all unit month data for these units. However, if asset repositioning begins during the funding reporting, it is uncertain from which category a PHA should remove a unit month. For example, if asset repositioning begins October 1, 2007, three unit months must be removed from Lines 01 to 11, but how does one categorize those units. This will be explained in the following slides.

Asset Repositioning Unit Months
Line 12 – Units eligible for asset repositioning Unit months removed from Lines 01 to 11 should be reported on Line 12 Units eligible for the asset repositioning fee must be reflected on Line 12 (Units eligible for asset repositioning…). Because these units are not eligible for operating subsidy, they must be removed from the EUM. However, because these units should still be reported on the ACC, they must be included in the calculation used to determine the Asset Management and Information Technology fees. The unit months deleted from Lines 01 to 11 should equal the unit months added to Line 12.

Categorization Chart of Deleted Units
Asset Repositioning Begins # of Months Reported in Line 12 # of Months Removed from Lines 01 to 11 Months Deleted 10/1/2005 9 3 Jul to Sep 1/1/2006 6 Jul to Dec 4/1/2006 Jul to Mar 7/1/2006 12 Jul to Jun 10/1/2006 1/1/2007 4/1/2007 Oct to Jun 7/1/2007 Jan to Jun 10/1/2007 Apr to Jun The chart above shows how the PHA should remove deleted units from Lines 01 to 11 by the date the Asset Repositioning fee begins. The first column indicates the point in time units start to receive asset repositioning fees and are removed from EUM. Notice that each of the dates is the beginning of a quarter during the reporting period until the last quarter begin date in the Funding Period. The second column indicates the number of unit months reported on Line 12 (Units eligible for asset repositioning..) during the reporting period. The third column indicates the number of unit months that need to be removed from Lines 01 to 11. Finally, the fourth column indicates in which month a unit’s category should be determined in the reporting period and then removed.

How to Identify Unit Month Category
Funding Period Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Reporting Period Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Crosswalk – Alignment of Reporting and Funding Period Category in Reporting Period Determines Line to Remove Once units are eligible to receive an asset repositioning fee, they must not be included on Lines 01 to 11 of HUD Instead that unit month data will be reflected on Line 12 (Units eligible for asset repositioning….). The PHA must determine from which unit category to remove unit months and replace on Line 12 (Units eligible for asset repositioning….). If asset repositioning begins prior to the funding period, all EUM data from these units should be removed from all categories. However, if asset repositioning begins during the funding period, then the PHA should use the crosswalk shown above. For example, if asset repositioning begins October 1, 2007, then the PHA should report three unit months on Line 12 (October, November, December). Correspondingly, three unit months should be removed from Lines 01 to 11. These units are not eligible. Based on the crosswalk, the three unit months should be removed from the category to which they belonged during the reporting period of the months April, May and June, respectively.

Asset Repositioning Fee Impact on HUD-52722
Actual Consumption (Reporting Period) Actual Utility Costs (Reporting Period) Rolling Base Multi-Year Impact Deleted units will also have an impact on HUD Most notably, an adjustment will need to be made to the rolling base if less than 12 months of consumption data is reported for the deleted units. These adjustments will need to be made several years after the units have been deleted to ensure that the consumption data of these deleted units are not included in the rolling base. Revisions due to deleted units will not require a change in HUD

HUD-52722 Impacted Line Items
Formula Expense Line Impact by Year Actual Consumption…. 01 Year 2 Rolling Base Year 1… 02 Year 2 to 3 Rolling Base Year 2… 03 Year 2 to 4 Rolling Base Year 3… 04 Year 2 to 5 Actual Utility Costs… 16 Several line items in HUD will be impacted as a result of deleted units. This will include Line 01 (Actual consumption), the rolling base lines and Line 16 (Actual utility costs).

Asset Repositioning Fee Deletion of Consumption Data
Based on First Vacancy Date after HUD Approved Relocation Date Scenario #1 12 Months of Utility Data in Line 1 – Actual Consumption Scenario #2 Less than 12 Months of Utility Data in Line 1 – Actual Consumption As of the first vacancy date after the asset repositioning fee is approved, PHAs should no longer report utility consumption data. However, because the first vacancy date may occur during the reporting period or after the reporting period, consumption data for deleted units would be reported in Line 1 (Actual consumption), Line 16 (Actual utility costs) and necessarily in the rolling base lines. If a full year of consumption data is reported for the deleted units in Line 1 (Actual consumption), then it is reasonable to compare this consumption data with the rolling base period data. Thus, do not remove any consumption or utility rate data from HUD However, if only partial year consumption data is reported in Line 1 (Actual consumption), then this consumption data needs to be removed. If the partial data is not removed, then the comparison between actual consumption and the rolling base would be inaccurate. Accordingly, the consumption for the rolling base periods must also be removed. This would include removing consumption data for deleted units that have been removed from Line 1 (Actual consumption). Finally, utility rate data from the deleted units must also be removed from Line 16 (Actual utility costs).

Deletion of Consumption Data Example
First unit in a project approved for asset repositioning vacated on 1/1/2007 Unit generated 100 kwh of electricity consumption annually Unit kwh consumption cost $100 annually The above bullet points show the necessary information to make an adjustment to HUD for a project that will begin receiving the asset repositioning fee during the FY 2007 funding period. The first vacancy of the project after HUD approval of the demolition plan will take place on January 1, At this point the PHA will no longer report utility consumption data in Line 1 (Actual Consumption) of HUD It is assumed that the unit consumes 100 kwh of electricity annually and the utility costs are $100. The next three slides show the necessary adjustments to HUD to avoid the distortion in the rolling base due to “deleted” units.

Actual Consumption of Deleted Unit Line Item FY 2007 (7/1/05 to 6/30/06) FY 2008 FY 2009 FY 2010 FY 2011 Line 1 - Actual Consumption 100 50 Line 2 - Rolling Base Year 1 Line 3 - Rolling Base Year 2 Line 4 - Rolling Base Year 3 Line 16 – Actual Utility Costs $100 $50 $0 The table above shows the electricity consumption of the example described in the previous slide. The example assumes that the PHA reported 100 kwh during the FY 2007 reporting period (7/1/2005 to 6/30/2006) representing a full year of data. It then reported 50 kwh of consumption for six months in the FY 2008 reporting period (7/1/2006 to 6/30/2007). The first vacancy date is assumed to be January 1, 2007. Electrical costs consisted of $100 in FY 2007 and $50 in FY 2008 for the deleted unit. Partial Year of Data Full Year of Data

Adjustments in Consumption Data of Deleted Unit Line Item FY 2007 (7/1/05 to 6/30/06) FY 2008 FY 2009 FY 2010 FY 2011 Line 1 - Actual Consumption 100 -50 Line 2 - Rolling Base Year 1 -100 Line 3 - Rolling Base Year 2 Line 4 - Rolling Base Year 3 Line 16 – Actual Utility Costs $100 -$50 $0 The table above shows the adjustments that need to be made to HUD as a result of the deleted unit. The PHA is reporting partial year data for the unit by FY If a “deleted” unit reports only partial year utility consumption data, that utility data for that unit must be removed from HUD In order to equalize the actual consumption in the reporting period with the rolling base Lines 01, 02 and 03, kwhs of the deleted unit must be removed from these lines. In addition, actual utility costs for the deleted unit also needs to be removed. See Line 16 (Actual utility costs) above. In FY 2009, the deleted unit is no longer reported under actual consumption in Line 01 (Actual consumption), but still needs to be removed from rolling base years 1, 2 and 3. The deleted unit is no longer included as part of actual utility costs. In FY 2010, the deleted unit kwh consumption still needs to be removed for rolling base years 2 and 3. In FY 2011, kwh consumption data still needs to be removed from rolling base year 3. Adjustment Full Year of Data

Special Provision for Calculation of UEL
Unit Months for which actual consumption is included….. Reinserts deleted units into Eligible Unit Months calculation for HUD-52722 Units reported in Line 17 still include consumption data in HUD-52722 j Line 17 (Unit months…) is categorized as “unit months for which actual consumption is included on Line 01 (Actual Consumption) of HUD and that were removed from Lines 01-11, above, because of removal from inventory, including eligibility for the asset repositioning fee”. The deleted units have been removed in HUD in the calculation of EUM. However, the corresponding utility consumption for these units have not been removed from Line 01 (Actual Consumption) of HUD Thus, instead of removing the consumption data from HUD-52722, one will reinstate the removed EUMs in the calculation of the UEL in HUD This is accomplished in Line 25 (Eligible unit months) of HUD Line 25 (Eligible unit months) is the sum of Line 15 (Total Unit Months) and Line 17 (Unit months…) from the HUD less Line 4 (New Units). Line 17 also does not include eligible unit months as reported in Line 4 (New Units – eligible to receive subsidy from 10/1 to 12/31…). This is done because utility consumption data is not reported in HUD in Line 01 (Actual consumption) for these units.

Other Criteria for “Deleted Unit” Rolling Base Adjustment
Units removed from ACC without Asset Repositioning Fee Switch from PHA Paid to Tenant Paid Utilities In addition to deleted units due to asset repositioning, other circumstances may require an adjustment to the rolling base and actual consumption in HUD in the same manner reviewed in the example on previous slide. This includes: Units that are “deleted” or removed from the ACC that do no receive an asset repositioning fee. Although these units do not need to be removed from EUM in HUD-52723, they will still create a distortion in the rolling base. Thus, adjustments need to be made in HUD Switch from PHA paid to tenant paid utilities. As tenant paid utilities are not reported on HUD-52722, if a unit converts to being tenant paid, then consumption data for that unit will be reported in the rolling base but not in the Line 1 (Actual Consumption).

Demolition and Disposition Units Adjustment to Rolling Base
If less than 10% of Units in a Building are Demolished/Disposed No Adjustment to 52722 If less than 5 Units in a Building are Demolished/Dispose Consumption data flows through Rolling Base Adjustments to HUD need only be made if demolition/disposition affects more than 10% of the units in a given building. If less than 10% of units in a building are to be disposed or demolished then the utility consumption data will not be deleted from HUD but passed through. The assumption is that the number of units is small enough that it won’t have a significant impact on the rolling base incentive. For smaller buildings, the threshold is five or fewer units rather than 10%. For example, if a building has 20 units and four are to disposed, HUD will not be adjusted based on these four deleted units. Although, four is greater than 10% of 20, it is still fewer than the five or fewer threshold.

Exercise 5 Refer to “Deleted Units – Exercise 5” and forms HUD and HUD-52722

Module 8: New Units Calculation and Submission of Operating Subsidy Training This module provides an overview of how to report new units added to a PHA’s ACC during the reporting period and up and through the final revision due date on July 15, The module will cover adjustments that need to be made to both HUD and HUD

Objectives Define New Unit
Correctly Place New Unit Data on Form HUD-52723 Understand Implications of New Units on HUD – (Rolling Base) This module has three primary objectives. First, the module will describe the criteria a unit must meet to be considered “new” and therefore be eligible for operating subsidy. Second, the module will show the proper way to report new unit data on the HUD Most notably, it will show how to report new unit data in Lines 01, 03 and 04 of Section 2. Finally, the module will show the proper way to report new unit data on HUD It will give directions on how to estimate consumption data for partial year data and incorporate that information into the rolling base incentive.

Definition 990.155 Unit Added to ACC Occupied by Eligible Family
Added During or After Reporting Period The discussion and rules regarding new units are described in Subpart B Section – Addition and deletion of units. The Rule states that “to generate a change to its formula amount within each one-year funding period, PHAs shall periodically report” new units during the funding period. Further, the Rule states that a new unit must meet the following criteria: (1) it must be added to the ACC and (2) be occupied by a family during the reporting or funding period. PHAs must consider any new units that come “online” during the reporting period (7/1/2005 to 6/30/2006) and after the reporting period. New units coming online during the reporting period will only be partially reported. Thus, for a PHA to receive full funding for those new units, the difference between reported Unit Months and the total Unit Months for one full year will need to be calculated and reported. New units coming online after the reporting period would receive funding for a full 12 months if they were reported prior to the funding period (1/12007 to 12/31/2007) or would receive partial funding if they were to come online during the funding period.

New Unit Status First Day of Month Last Day of Month
Consistency – Same for Both New Units and Unit Categorization Assumed to be Fully Occupied for Funding Period As previously discussed in the Unit and Unit Months module, PHAs must decide if they will report units on the first day of the month or last day of the month. For example, if a PHA has a new unit come online on March 23, 2007, then it may receive funding for the unit for March 2007 or may not receive funding. If the PHA has chosen the first day of the month to count units, then it would not receive funding for that new unit (i.e. the PHA counted its units on March 1 and that unit was not eligible). However, if the PHA has chosen the last day of the month to count units, then it would receive funding for that unit. (i.e. On the 31st of March the unit was eligible.) A PHA must be consistent in how it counts its units. If it chooses to use the first day of the month, then it must use the first of the month for both new units and changes in unit status (e.g. a change from vacancy to occupied). It is in the PHA’s interest to use the last day of the month for new units, however, it may be detrimental to the PHA if a unit becomes vacant during the middle of the month using this reporting method. Finally, when no data (or only partial data) for new units is reported in the reporting period, it is not known whether or not those units will be vacant or occupied during the funding period. Thus, the Rule assumes that these new units are occupied and eligible to receive full funding during the funding period.

Impact on HUD-52723 Eligible Unit Months Resident Participation
Asset Management Fee IT Fee UEL/PEL/Formula Income New units will impact HUD in several ways. Most importantly, the number of units and eligible unit months reported under Section 2 of the form will increase. Specifically, the number of unit months reported on Lines 01, 03 and 04 will be impacted. Other parts of the form that are directly related to EUMs will also change. This includes the calculation for the Resident Participation, Asset Management Fee and IT Fee add-ons. As previously discussed in the Add-ons Module, Resident Participation is the product of $25 and the number of EUM reported in Line 16 (Units eligible for funding for resident participation activities) of Section 2. The Asset Management Fee is the product $4 ($2 for PHAs with less than 250 low-rent units) and the EUM reported in Line 15 (Total Unit Months) of Section 2. The IT Fee is the product of $2 and Total Unit Months reported in Line 15 (Total Unit Months) of Section 2. Of course, the total dollar value of PEL, UEL and Formula Income, which are reported on a PUM basis, will also be impacted by the additional units.

Section 2, Lines 01 through 04 Unit Category Line Source
Occupied Dwelling Units….. 01 PHA Provided New Units – Eligible to Receive Subsidy During the Funding Period….. 03 New Units – Eligible to Receive Subsidy from 10/1 to 12/31 of Previous Funding Period….. 04 During the next slides, the module will discuss how new units will impact Line 01 (Occupied dwelling units), Line 03 (New Units Eligible to Receive Subsidy During the Funding Period), and Line 04 (New Units Eligible to Receive Subsidy from 10/1 to 12/31 of the Previous Funding Period). It is important to note, Lines 03 and 04 include only data regarding new units. Line 01 (Occupied dwelling units) includes data from “existing” units and “new” units. Thus, when discussing new units and Line 01 (Occupied dwelling units), the module is always referring to the new portion of the data in Line 1. Finally, each of these line items will be provided by the PHA. The Excel tool (See the Introduction Module) will not auto-populate or calculate these line items.

Impact on Line 01 – Occupied Dwelling Units
Includes Only Partial Year of New Unit Data 0 to 12 Unit Months per Unit In Line 1 (Occupied dwelling units) the PHA reports dwelling units occupied by a tenant/family. It is assumed that any new units that have come online during the reporting period will be reported here. The requirement for a PHA to add units states that the unit be on the ACC and be occupied by an eligible family. However, it is possible that the unit may change categories during the reporting period after it comes online. In that case, the unit would be reported on lines other than on Line 01. (Note: In rest of this module it will be assumed that only new unit data is being referred to in Line 01.) Any new units that have come online during the reporting period will be reported in Line 01 (Occupied dwelling units). PHAs will not need to make any adjustments to this line. However, because new units will be eligible for a full year of funding, but Line 01 (Occupied dwelling units) only reports a partial year of data for new units, the information is incomplete. PHAs will need to know the number of unit months reported for new units in Line 01 (Occupied dwelling units). The number of unit months per unit will range from 0 to 12 months. Further details on filling out this line will be provided in upcoming slides.

Impact on Line 03 – New Units
New Units – Eligible in FY 2007 Eligible for Funding but Not Reported Eligible for 0 to 12 Unit Months per Unit Line 03 (New units – eligible to receive subsidy during the funding period…) reports new unit months eligible for funding and not included in Line 01, 02 or 05 to 13 of Section 2. As discussed in the previous slide, Line 01 (Occupied dwelling units) is an incomplete estimate of the number of new units to fund. Either Line 01 (Occupied dwelling units) reports partial year data or no data, but the new unit should be funded for a up to 12 months. Thus, the reported value for this cell will vary from 0 to 12 unit months per unit. Further details on filling out this cell will be provided in upcoming slides.

Impact on Line 04 – New Units
New Units – Eligible in FY 2006 Not Included in FY 2006 Funding Eligible for 0 to 3 Unit Months per Unit New units may come online during a period which results in them not receiving funding even though they were eligible. This happens when a new unit comes online after the final revision deadline but before the end of the calendar year. For example, a new unit that comes online on November 1, 2006 is eligible to receive funding for November and December of However, the final HUD will have been submitted by July 15, 2006 (the final revision deadline). Thus, the PHA would not have been funded for the two unit months in FY 2006. Due to recent changes in federal budgeting law, PHAs can only be given operating subsidy for FY 2006 using FY 2006 funds. FY 2007 funds cannot be used to fund FY 2006 eligibility. However, there is a loophole, which will allow HUD to fund eligible unit months for the months of October, November and December. The federal fiscal year runs from October to September, but a PHA is funded on a calendar year basis. Thus, the months of October, November and December 2006 overlap with the federal fiscal year OMB has thus given HUD permission to fund these months using FY 2007 funds if the months were not funded in the previous year. The reported value for this cell will vary from zero to three unit months per unit, as funding is only for the months of October, November, and December. Further details on filling out this cell will be provided in upcoming slides.

New Unit Categories Category #1: Units Added During Reporting Period (7/1/2005 to 6/30/2006) Category #2: Units Added After Reporting Period but Before FY 2006 Final Revision (7/1/2006 to 7/15/2006) Category #3: Units Added After Reporting Period and After FY 2006 Final Revision in CY 2006 (7/16/2006 to 12/31/2006) Category #4: Units Added in Funding Period (1/1/2007 to 7/15/2007) As previously discussed, it is possible that a unit will be brought online from the beginning of the reporting period (7/1/2005) until the final revision for FY 2007 (July 15, 2007). The date during this period that the unit comes online will impact how unit months are calculated and reported. As such, new units can be categorized by intervals as follows: Added During the Reporting Period (7/1/2005 to 6/30/2006). These units will be reported in Lines 01 and 03 and receive 12 months of funding. Added after the reporting period but prior to the final revision due date for FY 2006 (7/1/2006 to 7/15/2006). These units will be reported in Line 03 (New units..) and receive 12 months of funding. Note: The final revision due date may change year to year. Added after the final FY 2006 revision due date but in CY These units will be reported in Line 03 (New Units…) and Line 04 (New Units…). These units will receive between 12 and 15 months of funding. Added in FY 2007 but before the final FY 2007 revision due date. These units will be reported in Line 03 (New Units…) only. These units will receive five to 12 months of funding.

Category #1: Units Added During Reporting Period
The above chart shows a timeline for Category #1 – Units Added During Reporting Period. In this example, new units are added on February 18, 2006 and the PHA uses the last day of the month to report unit months. The first timeline shows the number of eligible unit months (in red) for the new units during the reporting period. As shown above the new units are eligible for funding for February, March, April, May and June. The second timeline (FY 2007 Funding Period) shows the number of unit months reported on Lines 01 and 03 of Section 2. The five unit months shown in the first timeline are reported in Line 01. The remaining seven unit months (in green) are reported in Line 03. Finally, these new units have already been funded for FY 2006 because they came online prior to the final FY 2006 revision due date. Thus, no units are reported in Line 04 (New units..) as shown in third timeline (FY 2006 Funding Period).

Category #2: Units After Reporting Period Prior to FY 2006 Final Revision
The above chart shows a timeline for Category #2 – Units Added After the Reporting Period but prior to the final FY 2006 revision due date. In this example, new units are added on July 1, 2006 and the PHA uses the last day of the month to report unit months. The first timeline shows the number of eligible unit months (in red) for the new units during both the reporting period and final 6 months of FY As shown above the new units are not eligible for funding during the reporting period but are eligible during the funding period. The second timeline (FY 2007 Funding Period) shows the number of unit months reported on Lines 01 and 03 of Section 2. No unit months are reported in Line 01 (Occupied dwelling units). 12 unit months (in green) are reported in Line 03 (New Units…). Finally, these new units have already been funded for FY 2006 because they came online prior to the final FY 2006 revision due data. Thus, no units are reported in Line 04 (New Units…) as shown in third timeline (FY 2006 Funding Period).

Category #3: Units Added After Reporting Period and After FY 2006 Final Revision
The above chart shows a timeline for Category #3 – Units Added After the Reporting Period and after the final FY 2006 revision due date. In this example, new units are added on September 30, 2006 and the PHA uses the last day of the month to report unit months. The first timeline shows the number of eligible unit months (in red) for the new units during both the reporting period and final 6 months of FY As shown above the new units are not eligible for funding during the reporting period but may be eligible for final four months of FY 2006 and beyond. The second timeline (FY 2007 Funding Period) shows the number of unit months reported on Lines 01 and 03 of Section 2. No unit months are reported in Line unit months (in green) are reported in Line 03. Finally, these new units were not funded in FY 2006 because they came online after the final FY 2006 revision due date. Thus, three units are reported in Line 04 as shown in the third timeline (FY 2006 Funding Period).

Category #4: Units Added During Funding Period
The above chart shows a timeline for Category #4 – Units Added in CY In this example, new units are added on April 26, 2007 and the PHA uses the last day of the month to report unit months. The first timeline shows the number of eligible unit months (in red) for the new units during the entire period a new unit can be added and still receive funding for FY 2007. The second timeline (FY 2007 Funding Period) shows the number of unit months reported on Lines 01 and 03 of Section 2. No unit months are reported in Line unit months (in green) are reported in Line 03. Finally, these units became eligible in FY 2007 and thus not eligible for funding in FY As shown in the final timeline (FY 2006 Funding Period) Line 04 will report zero unit months.

Impact on HUD-52722 Need to Annualize New Unit Consumption
Rolling Base Changes Multi-Year Impact In addition to impacting HUD-52723, new units will also impact HUD Some important points include: PHAs will not only have to report new units but will also report utility consumption data for those new units (water, electricity, etc.) Because new unit data will be included in the current year estimate of consumption for each utility unit but not in prior year rolling base consumption data, adjustments to the rolling base will need to be made. The methodologies for these adjustments will be discussed in upcoming slides. Not only will new units impact HUD in the current fiscal year, but because of the rolling base incentive, they will also will impact HUD for an additional three years after the initial funding period.

Impact on HUD-52722 New Unit Revisions
No Changes to HUD Due to New Unit Revisions New Units Added After Reporting Period do not require update to UEL Calculation UEL is PUM Base, Utility Expense Funded through EUM Increase New Unit Revisions, which include new unit data submitted after the reporting period, will not be incorporated into HUD PHAs will continue to use the UEL as calculated per the original HUD submission. Trying to incorporate revisions after the original submission would be very difficult given the requirements of the rolling base and utility consumption estimates for annualization. However, PHAs will still be funded for the utility expenses of those new units in FY The added subsidy will result due to the increased EUM count on HUD-52723, which is multiplied by the PUM UEL to estimate total utility expense levels.

If new unit consumption data needs to be reported in HUD-52722, then Line 04 – Unit Change Indicator of Section 1 – General Information must be marked off as yes. Unit Change Indicator Box

HUD-52722 Impacted Line Items
Impact by Year Actual Consumption…. 01 Year 1 to Year 5 Actual Consumption for New Units….. 07 Year 1 and Year 2 Annualization of Consumption for New Units 14 Year 1 Only Rolling Base Year 1….. 02 Year 2 to 5 Rolling Base Year 2….. 03 Year 3 to 5 Rolling Base Year 3….. 04 Several line items on HUD will be impacted by new units. This includes: Line 01 (Actual Consumption), which will impact reporting in the original funding year (Year 1) and the four years thereafter (Years 2 and 5). Line 07 (Actual Consumption) for New Units, which will impact reporting in HUD in Year 1 and Year 2. Line 14 (Annualization of Consumptions for New Units) will impact reporting in Year 1 only. Each of the rolling base year consumption line items will also be impacted. These will be impacted in Years 2 to 5.

Section 2 – Current Consumption
Line 1 – Actual Consumption Matches Reporting Period (7/1/2005 to 6/30/2006) Includes New and Existing Unit Consumption Data Consumption data for new units that come online during the reporting period (7/1/2005 to 6/30/2006) needs to be reported in Line 01 (Actual Consumption). This consumption data is in addition to the consumption data reported for “existing” units. Consumption should be reported for the period of time during the reporting period that the new units were eligible. Thus, if the new units were eligible from May 1, 2006 to June 30, 2006, then utility consumption data should reported for only those two months, even if utility data exists prior to May 1. Note: Utility data must be reported for each applicable utility type (i.e. Sewerage and Water, Gas, etc.)

Section 3 – Rolling Base Consumption
Line 7 (Actual Consumption for New Units) is the new unit value reported on Line 01 (Actual Consumption for New Units) during the reporting period. The amount reported should be less than 12 unit months. This line is necessary to add the new unit consumption data to the rolling base. By adding Line 7 (Actual Consumption for New Units) to Line 6 (Average Rolling Base), the rolling base will now include new unit consumption data in Line 8 (Rolling Base Consumption), which can now be compared directly with Line 1 (Actual Consumption). Note: Utility data needs to be reported for each applicable utility type (i.e. Sewerage and Water, Gas, etc.) Line 7 – Actual Consumption for New Units New Consumption Data is added to Rolling Base

Section 6 – Payable Consumption
Line 14 – Annualization of Consumption for New Units Estimates missing new unit consumption data from reporting period Line 7 + Line 14 should equal 12 months of consumption Line 14 (Annualization of consumption for new units) is the line where a PHA estimates the expected consumption for new units that were not reported on Line 01 (Actual consumption). New units are eligible for funding for 12 months if they come online prior to 1/1/2007, however, only partial year consumption data will exist based on the reporting period. The total value on Line 14 (Annualization of consumption for new units) added to the total value on Line 7 (Actual consumption for new units) should equal 12 months of utility consumption. Note: Utility data needs to be reported for each applicable utility type (i.e. Sewerage and Water, Gas, etc.) To annnualize partial year new unit consumption data, estimates of consumptions must be made. These estimates shall be determined by using the consumption experience of a project or units with the same utility and likely to have comparable unit levels of consumption based on the physical characteristics of project buildings. It does not matter if the comparable project or units are owned by the PHA or from another PHA. The annnualization should take into account differing utility usage based on seasonal differences.

HUD-52722 Additional Reporting Requirements
Consumption Data attached with HUD-52722 Consumption Estimate Methodology attached with HUD-52722 In addition to HUD-52722, PHAs will be required to submit supplemental data, showing how the new unit actual and estimated consumption data was calculated or obtained. For data that needs to be estimated (i.e. Line 14 – Annualization of consumption data), PHAs should provide the methodology and background data used to complete the analysis.

Section 3 – Rolling Base Consumption
Does not include New Unit Utility Consumption Data In order to include the rolling base incentive for new units, new unit consumption data will need to be added to Lines 2 to 4. However, in the original funding year for new units, new unit consumption data does not exist for prior reporting periods. Thus, the new unit consumption data reported for these line items is equal to zero. Note: Utility data needs to be reported for each applicable utility type (i.e. Sewage and Water, Gas, etc.)

Impact on Rolling Base Year 1 - New Units Added
No New Unit Consumption Data reported in Rolling base Use Line 07 – Actual Consumption for New Units In the first year, new units are funded (Year 1), there is no impact on Lines 02 03, or 04. The additional new unit consumption is considered in Line 7 (Actual consumption for new units) for rolling base incentive purposes.

Impact on Rolling Base Years 2 to 5 After New Units Added
Line 2 (Rolling base year 1) = Partial Year Data Report zero in rolling base year 1 Use Line 7 – Actual Consumption for New Units Line 2 (Rolling base year 1) = Full Year Data Rolling base year 1 as reported Rolling base year 2 or 3 as reported or previous rolling base year Line 7 equals 0 In years after new units become eligible (Years 2 to 5), the utility consumption incentive is included in HUD in two ways. If the consumption data of new units for Line 2 (Rolling Base Year 1) consists of only a partial year data, then report zero for the rolling base line items – Line 02, 03 and 04. The additional data will be included in Line 7 (Actual consumption for new units). However, if the incremental consumption data of new units for Line 2 consists of a full year of data, then Line 7 (Actual consumption for new units) should equal zero, and Lines 02, 03 and 04 should include new unit consumption data. If new unit data for Line 03 (Rolling base year 2) and Line 04 (Rolling base year 3) does not exist or only consists of a partial year of data, use the new unit amount from the earlier rolling base year.

Adjustment of Consumption Data Example
Unit is added to the ACC and occupied by an eligible family on February 1, 2006 Unit consumed 50 kwh of electricity consumption during reporting period Unit is expected to consume 120 kwh of electricity consumption annually The above bullet points show the necessary information to make an adjustment to HUD for a unit that was added to the ACC and occupied by an eligible family on February 1, 2006. The unit consumed 50 kwh of electricity during the reporting period from February to June This represented a partial year of data. Based on the best estimates of utility experts, the unit should consume 120 kwh annually.

Adjustments to HUD-52722 New Unit Consumption Data
Line Item FY 2007 (7/1/05 to 6/30/06) FY 2008 FY 2009 FY 2010 FY 2011 Line 1 - Actual Consumption 50 115 130 140 150 Line 2 - Rolling Base Year 1 Line 3 - Rolling Base Year 2 Line 4 - Rolling Base Year 3 Line 7 - Actual Consumption for New Units Line 14 - Annualization of Consumption for New Units 70 The table above is an example of how to complete HUD if new units are added. The example assumes that new units are added in FY 2007, 50 utility units of consumption given five unit months are included in Line 01 (Actual consumption). Correspondingly, the 50 utility units are reported in Line 7 (Actual consumption for new units). Finally, based on an average of ten utility units per unit month, it is estimated that 70 more utility units need to be reported in Line 14 (Annualization of consumption for new units). In FY 2008, 115 utility units are reported in Line 1 (Actual consumption). Normally, the number of utility units reported in Line 02 (Rolling base year 1) would be equal to 50 utility units from the previous year. However, because those 50 utility units only represent partial year data, the value reported in Line 2 (Rolling base year 1) should be zero. Accordingly, the values for rolling base Lines 3 and 4 should also equal zero. In order to consider the 115 new utility units in the utility consumption incentive, these units are reported in Line 07 (Actual consumption for new units). Line 14 (Annualization of consumption for new units) is equal to zero, because Line 7 (Actual consumption for new units) consists of a full year of data. In FY 2009, 130 utility units are reported in Line 1 (Actual consumption) and 115 utility units are reported in Line 2 (Rolling base year 1) based on the amount in Line 1 (Actual consumption) from the previous year. The 115 utility units consist of full year data. As a result, new unit consumption data should be reported in Lines 2, 3 and 4. However, because new unit utility data does not exist for Rolling Base Years 2 and 3, the value reported in Lines 3 and 4 will equal Line 2. Line 7 (Actual consumption for new units) is now equal to zero. In FY 2010, data exists for Actual Consumption, Rolling Base Year 1 and Rolling Base Year 2. Thus, Lines 1, 2, and 3 should be reported as is. Line 4 should equal Line 3 (Rolling base year 3). In FY 2011, new units can be treated as any other units. Data exists for the current year of consumption and all rolling base years. Partial Year of Data Full Year of Data Adjustment

Exercise 6 Refer to “New Units – Exercise 6” and forms HUD and HUD-52722

Calculation and Submission of Operating Subsidy Training

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