1. Blosky & Associates1 PHADA Accounting Seminar Financial Planning in an Uncertain Environment Presented by Jack Blosky June 8, 2010

2. Blosky & Associates2 Budgeting in these uncertain Times

3. Blosky & Associates3 Project Based Budgeting 24 CFR 990.280  All PHAs must develop and maintain a system of budgeting & accounting for each project that allows for analysis of the actual revenues & expenses at the property level.  This applies to all programs & revenue sources under your ACC (Operating Fund, CFP, etc)  All Financial information will be budgeted & accounted for at the property level.  All Financial information will be in accordance with GAAP  Project-based financial statements  Upon completion of project-based accounting, PHA assets, liabilities, and equity shall be apportioned to the respective projects and/or HUD accepted Central Office cost centers

4. Blosky & Associates4 What is an Operating Budget?

5. Blosky & Associates5 Budget Planning Issues  Balancing  Timing  Accountability  Forecasting

6. Blosky & Associates6 Timing  The SAGIS funding calculation will be due March 1 st, 2010 for all authorities for Calendar Year 2010.  Authorities will maintain their fiscal year-end if you don’t coincide with a calendar year-end.  Thus, authorities will still prepare a budget for their fiscal year-end, but prepare funding calculations on a calendar year. Budget Planning Issues

7. Blosky & Associates7 Accountability Will force managers to be accountable to maintain budgets and effectively determine where weaknesses exist within their project Utilize Monthly Reports Budget Planning Issues

8. Blosky & Associates8 Forecasting The authority should forecast at the project level to determine: 1.Possible Funding Shortfalls 2.Uses of Capital Fund / Operations 3.Strategy to “fung” funds 4.Possible profit enhancement solutions 5.Property Management Fees are not enough to cover Central Office costs. Budget Planning Issues

9. Blosky & Associates9 Budgeting Budgeting & Administration  Responsibility of Reports & Reporting Once budgets are complete it is important to confirm what is actually happening. A central department (Finance Department) should design budget reports in order to coordinate various parts of the Authority. This would ensure the reports would be in proper form for comparisons and correlations. The manager in charge should know the form of information desired for the use of the departments and budget committee.

10. Blosky & Associates10 Budgeting Budgeting & Administration  Responsibility of Reports & Reporting The Property managers & Maintenance Managers need to be involve in this process and understand the budget for their grouping. Budgets will be prepared for each grouping.

11. Blosky & Associates11 Budgeting & Administration  Decentralized Responsibility, Centralized Control The lower staff levels in the Authority should be consulted regarding the budgets relative to their responsibilities, it is also true that they cannot do an adequate job unless they have information as to the plan of the Authority and they have formulated plans for their own cost centers. Communication amongst staff is key! Budgeting

12. Blosky & Associates12 Budgeting & Administration Budgeting must be recognized more than a flow of data, for it also involves educating the Authority about policies and plans. This will result in budget committee activity which will involve staff from different areas to discuss and harmonize their budgets. Staff and Directors should have the opportunity to discuss their budget and have the staff be apart of the budget process (delegation). Budgeting

13. Blosky & Associates13 According to HUD Guidebook 7475 and the Annual Contribution Contract (HUD Form 53012A), the authority must prepare an annual budget that will be approved by the board of commissioners 90 days before the fiscal year begins. New Requirement – Must have HUD 52574 (Board Resolution form) submitted to HUD prior to the beginning of your fiscal Year Budgeting for your Authority

14. Blosky & Associates14 Estimation of Revenue & Expenditures  Prior Year Experience  Prior Year Trends  i.e. 3 Years  Future Expectations  Known Changes  YTD Costs and Trending

15. Blosky & Associates15 The New Operating Fund Formula! (SAGIS)

16. Blosky & Associates16 The Operating Fund Formula Basic Formula doesn’t change, it is still --- EXPENSES - INCOME SUBSIDY ELIGIBILITY

17. Blosky & Associates17 PEL – Project Expense Level 24 CFR 990.165 HUD calculated a Project Expense Level for each of your projects based on the Harvard Cost Study model. Each PEL will be unique to each authority and measured in a Per Unit Month (PUM) cost. HUD used ten variables and associated coefficients.

18. Blosky & Associates18 Utility Expense Level - UEL

19. Blosky & Associates19 Utility Expense Level - UEL 24 CFR 990.170 The UEL for each PHA is based on its consumption for each utility, the applicable rates for each utility, and an applicable inflation factor. The UEL for a given funding period is the product of the utility rate multiplied by the consumption level multiplied by the inflation factor. Utility Rate – the utility rate for each type of utility will be the actual average rate from the latest 12 months that ended June 30 preceding the start of the Calendar year. Cost (include taxes & tariffs) Consumption 24 CFR 990.170 The UEL for each PHA is based on its consumption for each utility, the applicable rates for each utility, and an applicable inflation factor. The UEL for a given funding period is the product of the utility rate multiplied by the consumption level multiplied by the inflation factor. Utility Rate – the utility rate for each type of utility will be the actual average rate from the latest 12 months that ended June 30 preceding the start of the Calendar year. Cost (include taxes & tariffs) Consumption

20. Blosky & Associates20 Utility Expense Level - UEL 24 CFR 990.170 Payable Consumption Level – The payable consumption level is based on the current consumption level adjusted by a utility consumption incentive. The incentive shall be compared by comparing current consumption level of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of a utility, the PHA shall retain 75% of this decrease. Alternately, if the comparison reflects an increase in the consumption of a utility, the PHA shall absorb 75% of the increase. 24 CFR 990.170 Payable Consumption Level – The payable consumption level is based on the current consumption level adjusted by a utility consumption incentive. The incentive shall be compared by comparing current consumption level of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of a utility, the PHA shall retain 75% of this decrease. Alternately, if the comparison reflects an increase in the consumption of a utility, the PHA shall absorb 75% of the increase.

21. Blosky & Associates21 Other Formula Expenses Add-Ons 24 CFR 990.190 PHAs can receive additional subsidy for the following add-ons: Self-Sufficiency – Reasonable costs of Program Coordinator & associated costs with HUD’s self- sufficiency program Loan Amortization for energy add-ons – PHA may qualify for payments of principal & interest for energy conservation measures Payments in Lieu of Taxes (PILOT) – Based on latest PILOT payment Cost of Audit – Based on latest actual audit cost Funding for resident participation Activities - $25 per occupied unit to be used for resident participation activities 24 CFR 990.190 PHAs can receive additional subsidy for the following add-ons: Self-Sufficiency – Reasonable costs of Program Coordinator & associated costs with HUD’s self- sufficiency program Loan Amortization for energy add-ons – PHA may qualify for payments of principal & interest for energy conservation measures Payments in Lieu of Taxes (PILOT) – Based on latest PILOT payment Cost of Audit – Based on latest actual audit cost Funding for resident participation Activities - $25 per occupied unit to be used for resident participation activities

22. Blosky & Associates22 Other Formula Expenses Add-Ons 24 CFR 190.190 PHAs can receive additional subsidy for the following add- ons: Asset Management Fee – PHAs with 250 units or more will receive a $4 PUM fee. PHAs with less than 250 units that elect to transition to a project- based accounting system will receive a $2 PUM fee. The fee is based on the total number of ACC units. Information Technology Fee – Each PHA will receive a $2 PUM fee for costs attributable to information technology, based on total number of ACC units 24 CFR 190.190 PHAs can receive additional subsidy for the following add- ons: Asset Management Fee – PHAs with 250 units or more will receive a $4 PUM fee. PHAs with less than 250 units that elect to transition to a project- based accounting system will receive a $2 PUM fee. The fee is based on the total number of ACC units. Information Technology Fee – Each PHA will receive a $2 PUM fee for costs attributable to information technology, based on total number of ACC units

23. Blosky & Associates23 The Operating Fund Formula So now we have our Expenses portion of the formula --- Project Expense Level (PEL) + Utilities Expense Level (UEL) + Add-Ons This is then multiplied by the Eligible Unit Months So now we have our Expenses portion of the formula --- Project Expense Level (PEL) + Utilities Expense Level (UEL) + Add-Ons This is then multiplied by the Eligible Unit Months

24. Blosky & Associates24 Eligible Unit Months 24 CFR 990.135 A PHA’s total number of eligible unit months will be calculated for the 12 month period from July 1 to June 30 that is prior to the first day of the applicable funding period. The determination of whether a public housing unit satisfies the requirements of a unit month shall be based on the first or last day of each month as determined by the PHA. 24 CFR 990.135 A PHA’s total number of eligible unit months will be calculated for the 12 month period from July 1 to June 30 that is prior to the first day of the applicable funding period. The determination of whether a public housing unit satisfies the requirements of a unit month shall be based on the first or last day of each month as determined by the PHA.

25. Blosky & Associates25 Eligible Unit Months 24 CFR 990.140 A PHA is eligible to receive operating subsidy for public housing units for each unit month they are under an ACC and occupied by a public housing eligible family lease. 24 CFR 990.140 A PHA is eligible to receive operating subsidy for public housing units for each unit month they are under an ACC and occupied by a public housing eligible family lease.

26. Blosky & Associates26 24 CFR 990.145 A PHA is eligible to receive operating subsidy for vacant public housing units each month they are under ACC and meet one of the following HUD approved vacancies: 1.Units undergoing on-schedule modernization when the vacancy is needed to do the work 2.Special Use Units (resident services, resident organizations, self-sufficiency and anti-crime activities) Vacancies beyond the PHA control: 1.Litigation 2.Declared Disasters 3.Casualty Losses (during the time the claim is adjusted) 4.Changing Market conditions (HUD approval required) 24 CFR 990.145 A PHA is eligible to receive operating subsidy for vacant public housing units each month they are under ACC and meet one of the following HUD approved vacancies: 1.Units undergoing on-schedule modernization when the vacancy is needed to do the work 2.Special Use Units (resident services, resident organizations, self-sufficiency and anti-crime activities) Vacancies beyond the PHA control: 1.Litigation 2.Declared Disasters 3.Casualty Losses (during the time the claim is adjusted) 4.Changing Market conditions (HUD approval required) Eligible Unit Months

27. Blosky & Associates27 Formula Income Level 24 CFR 990.195 This revenue is equal to the amount of rent charged to tenants minus any utility allowances. Based on the PHA’s June 2009 Rent Roll divided by the number of units under lease for the same time period (BY AMP) 24 CFR 990.195 This revenue is equal to the amount of rent charged to tenants minus any utility allowances. Based on the PHA’s June 2009 Rent Roll divided by the number of units under lease for the same time period (BY AMP)

28. Blosky & Associates28 The Operating Fund Formula Now we have our Complete Subsidy Calculation Project Expense Level (PEL) + Utilities Expense Level (UEL) + Add-Ons - Incom e = Subsidy Now we have our Complete Subsidy Calculation Project Expense Level (PEL) + Utilities Expense Level (UEL) + Add-Ons - Incom e = Subsidy

29. Blosky & Associates29 What’s in a “Year”? Fiscal Year –This will not change for you and you cannot change it Calendar Year –Funding is now provided on a calendar year basis Data Year (7/1 – 6/30) –Much data you will need to provide HUD will be for the time period of 7/1 – 6/30 Utility information Unit eligibility (vacancy rate)

30. Blosky & Associates  First need to identify capital needs for each project  Second need to prioritize these capital needs  Third need to obtain cost estimates for capital needs 30

31. Blosky & Associates  Now you can start putting these items into your budget in conjunction with the amount of funding you will be receiving  Options:  1  Take 10% Of Grant and put it to 1410 first  Take 20% of Grant and put it to 1406  What ever is remaining of your funding amount distribute to Capital item needs  2  Take 10% of Grant and put it to 1410 first  Distribute your capital items by priorities  Any remaining amount of Grant put to 1406 31

32. Blosky & Associates Operating Budget for the Section 8 Program Blosky & Associates32

33. Blosky & Associates Even though this is not required by HUD you should still prepare an operating budget –Then use this to prepare monthly financial reports showing budget v. actual Need to monitor Admin expenses not just HAP expense When preparing the budget project what your admin fees will be for the year and then distribute expenses –Make sure allocation methods is realistic and financially feasible Blosky & Associates33 Section 8 Operating budget

34. Blosky & Associates Need to project what your admin fees will be –Admin fees based on units leased now, not a fixed amount Based on data submitted through the VMS system –Need to make sure this data is accurate –Need to make sure you maximize your units leased, within the funding constraints –Can not exceed for the year your total baseline units Blosky & Associates34 Section 8 Operating budget

35. Blosky & Associates You can use the same forms from the LIPH budget to obtain expense amounts for the section 8 budget –Salaries & benefits –Admin expenses –Insurance Blosky & Associates35 Section 8 Operating budget

36. Blosky & Associates36 HCV Program Management Fees COCC may charge as management fee to HCV program the higher of –20% of its annual administrative fee as provided by Department each calendar year or –$12 PUM per voucher leased PHAs can also charge the HCV program a $7.50 PUM bookkeeping fee

37. Blosky & Associates37 McKean County Housing Authority Section 8 Voucher Program Operating Budget September 30, 2009 Revenue HUD Subsidy - HAP966,828 HUD Subsidy - Admin Fees151,677 Other Income4,000 Interest35,000 Total Revenue 1,157,505 Administrative Expenses Salaries96,087 Benefits33,930 Legal0 Training2,000 Travel2,000 Accounting3,500 Auditing4,000 Misc. Office expenses12,750 Contract costs8,000 Total Admin Expenses 162,267 HAP Expense 930,000 Total Expenses 1,092,267 Profit(Loss) including HAP expense & Funding65,238 Profit(Loss) excluding HAP expense & Funding28,410

38. Blosky & Associates38 HAP Equity : –The Amount of excess funding your PHA has rec’d for HAP expenses since 2005 Admin Equity : –The Amount of excess funding your PHA Rec’d for Admin Expenses since the start of your program Section 8 reserves need to be broken out between these 2 Equity amounts on the FDS Blosky & Associates38 What is my Section 8 Equity?

39. Blosky & Associates39 Calculate HAP Equity (excess HAP Funding) at the end of your fiscal Year – See Schedule –If this is a large amount you need to spend this money. If not HUD will be recapturing it Remember you can not lease over your baseline number of units in total for the year. –Should be monitoring HAP Expense v. HAP Funding on a monthly basis (See Schedule) Blosky & Associates39 How Should I monitor my Section 8 Funding & Reserves?

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41. 41 Monitoring The Section 8 Program Blosky & Associates41

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43. 43Blosky & Associates43 NMHA - HCV Calendar Year 2009 MO/YRUNDERBaselineHAPHUD HAP Over/(Under)Average of MonthLEASEUnitsEXPENSESUBSIDYSubsidizedHAP Jan899225,307.0023,017.002,290.00284.35 Feb92 22,818.0023,017.00-199.00248.02 Mar949227,556.0023,254.004,302.00293.15 Apr919223,721.0014,929.008,792.00260.67 May919225,033.0014,925.0010,108.00275.09 June939226,625.0020,950.005,675.00286.29 July939228,305.0014,925.0013,380.00304.35 Aug939225,714.0015,022.0010,692.00276.49 Sept92 25,727.0014,925.0010,802.00279.64 Oct92 25,638.0014,925.0010,713.00278.67 Nov92 25,638.0014,925.0010,713.00278.67 Dec92 25,638.0014,925.0010,713.00278.67 TOTALS1104 232,039.00140,451.0091,588.00278.67 NRA108,189.00 Available NRA16,601.00

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