1. HUD Webcast Washington D.C. November 3, 2009 2 p.m. - 5 p.m. HUD Webcast Washington D.C. November 3, 2009 2 p.m. - 5 p.m. HCV Program Financial Management & Reporting

2. Opening Remarks David Vargas, CPA David Vargas, CPA Associate Deputy Assistant Secretary Opening Remarks David Vargas, CPA David Vargas, CPA Associate Deputy Assistant Secretary HCV Program Financial Management & Reporting

3. Presenter Ray Adair, MBA, CGFM Ray Adair, MBA, CGFM Vice President & Senior Associate Nan McKay and Associates, Inc. Presenter Ray Adair, MBA, CGFM Ray Adair, MBA, CGFM Vice President & Senior Associate Nan McKay and Associates, Inc. HCV Program Financial Management & Reporting

4. Today's topics:Today's topics: –How the Program is Funded –Basic Elements of Financial Management –Year-end Financial Reporting Basics Today's topics:Today's topics: –How the Program is Funded –Basic Elements of Financial Management –Year-end Financial Reporting Basics HCV Program Financial Management & Reporting

5. Topic One:Topic One: –How the Program is Funded Topic One:Topic One: –How the Program is Funded HCV Program Financial Management & Reporting

6. Renewal HAP Funding The Congress:The Congress: –Appropriates a set $ amount –Requires funding for PHAs be based on VMS leasing & cost data –Specifies FFY be used for VMS leasing & costs data –Requires the cost data be inflated by the AAF Renewal HAP Funding The Congress:The Congress: –Appropriates a set $ amount –Requires funding for PHAs be based on VMS leasing & cost data –Specifies FFY be used for VMS leasing & costs data –Requires the cost data be inflated by the AAF How The Program Is Funded

7. Renewal HAP Funding In addition, the Congress allows for certain adjustments to the cost base):In addition, the Congress allows for certain adjustments to the cost base): –First time renewals –FSS escrow deposits Renewal HAP Funding In addition, the Congress allows for certain adjustments to the cost base):In addition, the Congress allows for certain adjustments to the cost base): –First time renewals –FSS escrow deposits How The Program Is Funded

8. HAP Renewal Funding Formula Total HAP Costs From VMS (12 Month Period - FFY) New Units FSS Escrow Contributions Total HAP Cost Base + + =

9. HAP Renewal Funding Formula Total HAP Cost Base Annual Adjustment Factor (AAF) CY Budget Authority x =

10. HAP Renewal Funding Formula Total CY Budget Authority NRA Offset (as applicable) Net CY Budget Authority = -

11. Primary HAP Funding Sources CY Budget Authority NRA Balance Total Funds Available for HAP = +

12. Administrative Fee Funding The Congress:The Congress: –Appropriates a set $ amount –Requires HAs be paid based on lease-up, times a fee rate –Allows the Department to set the fee rate Administrative Fee Funding The Congress:The Congress: –Appropriates a set $ amount –Requires HAs be paid based on lease-up, times a fee rate –Allows the Department to set the fee rate How The Program Is Funded

13. Administrative Fee Formula Units Leased on 1st of Month Applicable Fee Rate (A, B, or C) Administrative Fees Earned x =

14. Excess Administrative Fees Yearly Administrative Fees Earned Amount used to cover program administration Amounts not used become part of Unrestricted Net Assets and continue to be bound by program restrictions.

15. Same formula as last yearSame formula as last year –FFY leasing & cost data as reported in VMS moved forward to FFY 2009. –Same types of adjustments to the HAP cost base –No offset to NRA Same formula as last yearSame formula as last year –FFY leasing & cost data as reported in VMS moved forward to FFY 2009. –Same types of adjustments to the HAP cost base –No offset to NRA Outlook for 2010

16. Topic Two:Topic Two: –Basic elements of good HCV program financial management Topic Two:Topic Two: –Basic elements of good HCV program financial management HCV Program Financial Management & Reporting

17. Good financial management involves:Good financial management involves: –Preparing a program budget –Monitoring actual to budget performance –Maintaining adequate cash –Investing excess cash Good financial management involves:Good financial management involves: –Preparing a program budget –Monitoring actual to budget performance –Maintaining adequate cash –Investing excess cash Financial Management

18. Importance of having a HCV program budget:Importance of having a HCV program budget: –The program is budget based –Funds have prescribed uses –Funds are capped –How equity can be used is controlled by statute Importance of having a HCV program budget:Importance of having a HCV program budget: –The program is budget based –Funds have prescribed uses –Funds are capped –How equity can be used is controlled by statute Financial Management

19. Importance of PUC in monitoring HAP expense:Importance of PUC in monitoring HAP expense: –Determine trend in HAP costs (is it going up or down) –Set a target for the number of vouchers to lease –Set a target for monthly spending Importance of PUC in monitoring HAP expense:Importance of PUC in monitoring HAP expense: –Determine trend in HAP costs (is it going up or down) –Set a target for the number of vouchers to lease –Set a target for monthly spending Financial Management

20. How the PUC is calculatedHow the PUC is calculated Financial Management TotalUMLsTotalHAPCosts Dividedby = PUC

21. PUC calculation example:PUC calculation example: Financial Management 1000UMLs$500,000 In HAP Dividedby PUC then equals $500

22. Another PUC example:Another PUC example: Financial Management $500 PUC X12 $6,000,000 In ABA Dividedby Units supported equals 1,000

23. Yet another PUC example:Yet another PUC example: Financial Management $500 PUC X12 $500,000 In NRA Dividedby Units supported equals 83

24. Importance of maintaining cash flow:Importance of maintaining cash flow: –Budgets help to project –Monitoring revenue and expense helps to control –Deficit spending will deplete –NRA can't be used to cover admin expenses Importance of maintaining cash flow:Importance of maintaining cash flow: –Budgets help to project –Monitoring revenue and expense helps to control –Deficit spending will deplete –NRA can't be used to cover admin expenses Financial Management

25. Investing excess cash:Investing excess cash: –Maintain liquidity & preserve principle –Limit investments to approved types –Secure form HUD-51999, General Depository Agreement before depositing –Maintain required collateral Investing excess cash:Investing excess cash: –Maintain liquidity & preserve principle –Limit investments to approved types –Secure form HUD-51999, General Depository Agreement before depositing –Maintain required collateral Financial Management

26. Interest earned on investments:Interest earned on investments: –Interest earned on excess HAP funds is restricted and becomes part of NRA –Interest earned on excess admin fees is unrestricted and becomes part of unrestricted net assets Interest earned on investments:Interest earned on investments: –Interest earned on excess HAP funds is restricted and becomes part of NRA –Interest earned on excess admin fees is unrestricted and becomes part of unrestricted net assets Financial Management

27. VMS Overview Basics:VMS Overview Basics: –Web based reporting template –Used to monitor HA leasing & spending utilization –Replaces old paper HUD-52681 –Used to determine HAP renewal funding –Used to determine admin fees VMS Overview Basics:VMS Overview Basics: –Web based reporting template –Used to monitor HA leasing & spending utilization –Replaces old paper HUD-52681 –Used to determine HAP renewal funding –Used to determine admin fees Financial Management

28. VMS data gathered:VMS data gathered: –Leasing & HAP expense for regular & special use vouchers –Certain types of administrative expenses –Certain types of revenue items that ultimately impact the NRA VMS data gathered:VMS data gathered: –Leasing & HAP expense for regular & special use vouchers –Certain types of administrative expenses –Certain types of revenue items that ultimately impact the NRA Financial Management

29. VMS Common Reporting Errors:VMS Common Reporting Errors: 1)Lease-up & HAP expense reported in month paid instead of month it applies 2)Special use vouchers not reported or in wrong category VMS Common Reporting Errors:VMS Common Reporting Errors: 1)Lease-up & HAP expense reported in month paid instead of month it applies 2)Special use vouchers not reported or in wrong category Financial Management

30. VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 3)"Number of vouchers leased on the last day of the month" reported with 1st of month lease-up 4)"HA owned units" not reported but HA has owned units VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 3)"Number of vouchers leased on the last day of the month" reported with 1st of month lease-up 4)"HA owned units" not reported but HA has owned units Financial Management

31. VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 5)"All voucher HAP expense after the first of the month" reported with more than the pro-rate first time HAP 6)Interest earned on HAP funds not reported or in wrong month VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 5)"All voucher HAP expense after the first of the month" reported with more than the pro-rate first time HAP 6)Interest earned on HAP funds not reported or in wrong month Financial Management

32. VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 7)Fraud recovery recorded at: a)100% instead of 50% b)full amount of repayment agreement when it is booked to the balance sheet when it should be amount actually collected VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 7)Fraud recovery recorded at: a)100% instead of 50% b)full amount of repayment agreement when it is booked to the balance sheet when it should be amount actually collected Financial Management

33. VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 8)Total administrative fees earned is reported instead of expense 9)FSS Coordinator grant is recorded instead of actual expense incurred VMS Common Reporting Errors (continued):VMS Common Reporting Errors (continued): 8)Total administrative fees earned is reported instead of expense 9)FSS Coordinator grant is recorded instead of actual expense incurred Financial Management

34. Charging indirect costs to the HCV program:Charging indirect costs to the HCV program: −Two methods available, indirect cost plan or fee-for- service −Authority for found in OMB Cir A-87 −Guidance for fee-for-service found in Supplement to HB 7475.1 Charging indirect costs to the HCV program:Charging indirect costs to the HCV program: −Two methods available, indirect cost plan or fee-for- service −Authority for found in OMB Cir A-87 −Guidance for fee-for-service found in Supplement to HB 7475.1 Financial Management

35. Traditional indirect cost plans:Traditional indirect cost plans: −A plan document is normally prepared −Indirect costs are collected in a cost pool −Costs in the indirect cost pool are allocated to programs via a cost driver Traditional indirect cost plans:Traditional indirect cost plans: −A plan document is normally prepared −Indirect costs are collected in a cost pool −Costs in the indirect cost pool are allocated to programs via a cost driver Financial Management

36. Indirect Cost Plan Concept Diagram Cost Pool SalaryBenefitsSuppliesTelephoneTravelRentUtilitiesEtc. HCV Program Line 91810 PH Program Line 91810 Other Program Line 91810

37. Traditional indirect cost plans (continued):Traditional indirect cost plans (continued): −New FDS line 91810, Allocated Overhead used to record indirect costs Used by HAs covered by the operating fund rule who don't adopt fee-for-serviceUsed by HAs covered by the operating fund rule who don't adopt fee-for-service Optional for HCV only HAsOptional for HCV only HAs Traditional indirect cost plans (continued):Traditional indirect cost plans (continued): −New FDS line 91810, Allocated Overhead used to record indirect costs Used by HAs covered by the operating fund rule who don't adopt fee-for-serviceUsed by HAs covered by the operating fund rule who don't adopt fee-for-service Optional for HCV only HAsOptional for HCV only HAs Financial Management

38. Traditional indirect cost plans (continued):Traditional indirect cost plans (continued): −A good reference source for guidance in developing indirect cost plans is: "Cost Principles & Procedures for Developing Cost Allocation Plans" - publication of HHS"Cost Principles & Procedures for Developing Cost Allocation Plans" - publication of HHS Traditional indirect cost plans (continued):Traditional indirect cost plans (continued): −A good reference source for guidance in developing indirect cost plans is: "Cost Principles & Procedures for Developing Cost Allocation Plans" - publication of HHS"Cost Principles & Procedures for Developing Cost Allocation Plans" - publication of HHS Financial Management

39. Fee-for-ServiceFee-for-Service −Indirect cost are collected in a pool called the COCC −Indirect costs are not allocated out of the pool −The COCC charges programs a fee as allowed by the Department −Fee income is de-federalized Fee-for-ServiceFee-for-Service −Indirect cost are collected in a pool called the COCC −Indirect costs are not allocated out of the pool −The COCC charges programs a fee as allowed by the Department −Fee income is de-federalized Financial Management

40. Fee-For-Service Concept Diagram Central Office Cost Center (COCC) Central Office Cost Center (COCC) PHA AMP A PHA AMP B HCV Program Other HUD Program

41. Fee-for-Service (continued)Fee-for-Service (continued) −The Department allows a HCV program management fee equal to the higher of: 20% of available admin funding or20% of available admin funding or $12 per leased unit per month$12 per leased unit per month −In addition a bookkeeping fee of $7.50 per leased unit may be charged Fee-for-Service (continued)Fee-for-Service (continued) −The Department allows a HCV program management fee equal to the higher of: 20% of available admin funding or20% of available admin funding or $12 per leased unit per month$12 per leased unit per month −In addition a bookkeeping fee of $7.50 per leased unit may be charged Financial Management

42. Fee-for-Service Flow of Funds Direct program administration Unused admin fees Unrestricted Net Assets ManagementFee COCC Admin Fees Earned

43. Fee-for-Service (continued)Fee-for-Service (continued) −HAs began using fee-for- service last year −Most adopted it entity wide because of conversion to asset management in public housing −If used, there should be no indirect costs charged to the HCV program Fee-for-Service (continued)Fee-for-Service (continued) −HAs began using fee-for- service last year −Most adopted it entity wide because of conversion to asset management in public housing −If used, there should be no indirect costs charged to the HCV program Financial Management

44. Fee-for-Service (continued)Fee-for-Service (continued) −We have provided examples you can print out of: Typical cost pool showing allocated overhead to programsTypical cost pool showing allocated overhead to programs Typical COCC showing fees earned from programsTypical COCC showing fees earned from programs Fee-for-Service (continued)Fee-for-Service (continued) −We have provided examples you can print out of: Typical cost pool showing allocated overhead to programsTypical cost pool showing allocated overhead to programs Typical COCC showing fees earned from programsTypical COCC showing fees earned from programs Financial Management

45. Topic Three:Topic Three: –Year-end Financial Reporting Basics Topic Three:Topic Three: –Year-end Financial Reporting Basics HCV Program Financial Management & Reporting

46. Reporting Requirements: −HAs must submit year-end financial information in accordance with GAAP −Authority to require is at 24 CFR 5.801 (UFRS) −Also applies to HCV only HAs −Data submitted electronically over the web using FDS Reporting Requirements: −HAs must submit year-end financial information in accordance with GAAP −Authority to require is at 24 CFR 5.801 (UFRS) −Also applies to HCV only HAs −Data submitted electronically over the web using FDS Year-end Financial Reporting

47. Reporting Requirements: −REAC has responsibility to collect and review −Generally two submissions required: Un-audited 60 days after year- endUn-audited 60 days after year- end Audited 9 months after year- endAudited 9 months after year- end Reporting Requirements: −REAC has responsibility to collect and review −Generally two submissions required: Un-audited 60 days after year- endUn-audited 60 days after year- end Audited 9 months after year- endAudited 9 months after year- end Year-end Financial Reporting

48. Differences Between VMS & FDS:Differences Between VMS & FDS: −Financial data is "locked" after a reporting period, VMS is not −Data collected not always the same −Timing of accrued expenses Differences Between VMS & FDS:Differences Between VMS & FDS: −Financial data is "locked" after a reporting period, VMS is not −Data collected not always the same −Timing of accrued expenses Year-end Financial Reporting

49. Understanding the HCV Equity Accounts:Understanding the HCV Equity Accounts: −Equity means "ownership" −HCV equity is reported in three separate accounts: −Invested in Capital Assets, Net of Related Debt −Restricted Net Assets −Unrestricted Net Assets Understanding the HCV Equity Accounts:Understanding the HCV Equity Accounts: −Equity means "ownership" −HCV equity is reported in three separate accounts: −Invested in Capital Assets, Net of Related Debt −Restricted Net Assets −Unrestricted Net Assets Year-end Financial Reporting

50. Invested in Capital Assets Net of Related Debt:Invested in Capital Assets Net of Related Debt: −Represents the "equity" in the HAs fixed assets −Represents assets at cost less accumulated depreciation and associated debt −Depends on HA's capitalization threshold Invested in Capital Assets Net of Related Debt:Invested in Capital Assets Net of Related Debt: −Represents the "equity" in the HAs fixed assets −Represents assets at cost less accumulated depreciation and associated debt −Depends on HA's capitalization threshold Year-end Financial Reporting

51. Restricted Net Assets:Restricted Net Assets: −Equity that has use restrictions place on it by an outside entity −Outside entity (Congress) has placed use restrictions on HAP funding Restricted Net Assets:Restricted Net Assets: −Equity that has use restrictions place on it by an outside entity −Outside entity (Congress) has placed use restrictions on HAP funding Year-end Financial Reporting

52. Restricted Net Assets:Restricted Net Assets: −In the HCV program this account represents: Unused HAPUnused HAP Interest earned on invested HAP proceedsInterest earned on invested HAP proceeds Fifty percent of fraud recoveriesFifty percent of fraud recoveries Forfeited FSS escrow amountsForfeited FSS escrow amounts Restricted Net Assets:Restricted Net Assets: −In the HCV program this account represents: Unused HAPUnused HAP Interest earned on invested HAP proceedsInterest earned on invested HAP proceeds Fifty percent of fraud recoveriesFifty percent of fraud recoveries Forfeited FSS escrow amountsForfeited FSS escrow amounts Year-end Financial Reporting

53. Unrestricted Net Assets:Unrestricted Net Assets: −Represents the accumulation of excess admin fees and: Interest earned on invested excess admin feesInterest earned on invested excess admin fees Fifty percent of fraud recoveriesFifty percent of fraud recoveries Admin fees received under portabilityAdmin fees received under portability Unrestricted Net Assets:Unrestricted Net Assets: −Represents the accumulation of excess admin fees and: Interest earned on invested excess admin feesInterest earned on invested excess admin fees Fifty percent of fraud recoveriesFifty percent of fraud recoveries Admin fees received under portabilityAdmin fees received under portability Year-end Financial Reporting

54. Issues to be aware of with FDS reported data for HCV program - ground rules:Issues to be aware of with FDS reported data for HCV program - ground rules: −Assumed the learner is familiar with the FDS −Majority of learners are not experts in reviewing FDS financial data Issues to be aware of with FDS reported data for HCV program - ground rules:Issues to be aware of with FDS reported data for HCV program - ground rules: −Assumed the learner is familiar with the FDS −Majority of learners are not experts in reviewing FDS financial data Year-end Financial Reporting

55. HCV Program Balance Sheet issues - example:HCV Program Balance Sheet issues - example: −508.1, Invested in capital assets net of related debt - $17,139 −511.2, Restricted Net Assets - $277,967 −512.1, Unrestricted Net Assets - $442,945 HCV Program Balance Sheet issues - example:HCV Program Balance Sheet issues - example: −508.1, Invested in capital assets net of related debt - $17,139 −511.2, Restricted Net Assets - $277,967 −512.1, Unrestricted Net Assets - $442,945 Year-end Financial Reporting

56. HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Running deficits on the admin side without a balance in the Unrestricted Net Asset Account can mean HAP funds are being used for admin expenses. HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Running deficits on the admin side without a balance in the Unrestricted Net Asset Account can mean HAP funds are being used for admin expenses. Year-end Financial Reporting

57. HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Using inter-funds to make inappropriate transfers of HCV funds to other programs HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Using inter-funds to make inappropriate transfers of HCV funds to other programs Year-end Financial Reporting

58. HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Reporting an accounts receivable or payable from HUD for HAP funding Could be accounts receivable from HUD for admin fees or deferred revenue, but not payableCould be accounts receivable from HUD for admin fees or deferred revenue, but not payable HCV Program Balance Sheet reporting issues:HCV Program Balance Sheet reporting issues: −Reporting an accounts receivable or payable from HUD for HAP funding Could be accounts receivable from HUD for admin fees or deferred revenue, but not payableCould be accounts receivable from HUD for admin fees or deferred revenue, but not payable Year-end Financial Reporting

59. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −If using fee-for-service, there will be management fee and bookkeeping fee expense, but there should not be any allocated overhead. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −If using fee-for-service, there will be management fee and bookkeeping fee expense, but there should not be any allocated overhead. Year-end Financial Reporting

60. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −If using a cost allocation plan, there will be allocated overhead but no management fee and or bookkeeping fee expense. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −If using a cost allocation plan, there will be allocated overhead but no management fee and or bookkeeping fee expense. Year-end Financial Reporting

61. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −Failure to report restricted interest income when there is significant excess HAP funds available. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −Failure to report restricted interest income when there is significant excess HAP funds available. Year-end Financial Reporting

62. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −Recording allocated overhead to line 96200, Other General Expense instead of line 91810, Allocated Overhead. HCV Program Income Statement reporting issues:HCV Program Income Statement reporting issues: −Recording allocated overhead to line 96200, Other General Expense instead of line 91810, Allocated Overhead. Year-end Financial Reporting

63. −We now have some time to take your questions. QuestionsQuestions