Project Based Accounting & Asset Management Julie Miles, Financial Analyst HUD-Kansas City, KS 913-551-5529 Welcome to HUD’s presentation of Project Based Accounting and Asset Management. The slide number is in the lower-right corner. Please turn to slide 2.

Agenda All PHAs Small PHAs (Less Than 250 PH Units) Project-Based Budgeting & Accounting Small PHAs (Less Than 250 PH Units) Single AMPs Multiple AMPs Large PHAs (250+ PH Units) Decliners Accelerate AM Implementation for Stop-Loss

Asset Management Asset Management (AM) Project-Based Management (PBM) Project-Based Accounting (PBA) Project-Based Budgeting (PBB)

PBB & PBA Project Level Budgeting Accounting Financial Statement Reporting Applies To All Programs & Revenue Sources Supporting Projects Under ACC

PBM Focus on Operation & Management of Project Address Project Needs With Project Resources Day-to-Day Responsibilities & Decision-Making at Project Level—not Central Office Project-Specific: Marketing Leasing Resident Services Routine and Preventative Maintenance Lease Enforcement Protective Services

AM AM = PBM + PBB + PBA PHA-Wide Policy & Direction Long-Term Capital & Administrative Planning Property Management Performance Review of Entity-wide Financial Information Long-Term Viability of Properties Risk Management Property Repositioning & Replacement

Applicability PBM & AM Optional PBB & PBA Required for All PHAs FYBs 7/1/07 & Later PBM & AM Required FY 11 PHAs With 250 or More PH Units Accelerate AM Implementation for Stop Loss PBM & AM Optional PHAs With Less Than 250 PH Units & 1 AMP Elect AM Implementation for Stop Loss Incentive

PBB Budget Required for Each AMP Budget Recommended for Central Office Cost Center (COCC) Stop-Loss Requires COCC Budget Board Approval of Each AMP on 1 Resolution Unless Troubled, Budget Submission to HUD Not Required Submit Board Resolution to HUD Field Office

PBB Format Revise Existing Budget Forms No Uniform Budget Format, but Must: Reconcile to FDS Allow Comparison to Actual Revenues & Expenses Include All Revenues & Expenses of the Operating & Capital Funds Include Estimate of Operating Subsidy Proration Include Fungibility Transfers (ex. CFP for Operations) Include Anticipated Uses of Excess Cash

New FDS Format AMP Level Financial Reporting Operating Fund and Capital Fund Reporting at AMP Level vs. PHA Level New Columns AMP & COCC Columns Replace Low-Rent and CFP Columns Elimination Column Subtracts Internal COCC/AMP Transactions from Entity-Wide Totals

New FDS Line Items Fee Revenues & Expenses More Expense Detail Other Operating-Administrative Ordinary Maintenance & Operations-Contract Costs Insurance Premiums Memo Accounts Measure Revenue Loss Unit Month Detail CFP Expenditure Data

New FDS—PHA Level Net Income $370 $10 $15 $30 $425 $ Thousands Program Total Total AMPs S8 HCV Rural Housing COCC Elim. Assets $10,100 $300 $750 $400  -$50 $11,500 Liabilities $4,850 $200 $250 - $50 $5,550 Equity $5,250 $100 $500   $5,950 Revenue $1,730 $1,000 $575 $270 -$250 $3,325 Expenses $1,360 $990 $560 $240 $2,900 Net Income $370 $10 $15 $30 $425

Asset Management Projects New FDS—AMP Level $ Thousands Asset Management Projects Total Project 1 Project 2 Project 3 Other AMP Assets $3,434 $3,254 $3,130 $282 $10,100 Liabilities $1,649 $1,522 $1,503 $176 $4,850 Equity $1,785 $1,732 $1,627 $106 $5,250   Revenue $588 $527 $536 $78 $1,730 Expenses $462 $429 $421 $47 $1,360 Net Income $126 $98 $115 $31 $370

PBA-CFP CFP for AMPs Only—Except COCC CFP Management Fee Unobligated Grants: Actual Costs Actual Costs for Unobligated Grant Prior to AM Future Grants: Fee-for-Service if Implement AM Transfers to Operations Allowed with Current Regulatory Limits Work Item Fungibility Continues Future Transition of BLIs to FDS

PBA-PHAS New PHAS Assessment Starting FYE 6/30/08 AMP-Level Score Rolled Up to PHA-Level Score First Year Transitional Scores First Year CFP Bonus Based on Previous PHAS Score

Stop-Loss Transition Calculation FFY 04 Subsidy Eligibility if New Operating Subsidy Formula Implemented 5-Year Loss Phase-in Year 1 CY 07 5% Limit = 95% Add-on Year 2 CY 08 24% Limit = 76% Add-on Year 3 CY 09 43% Limit = 57% Add-on Year 4 CY 10 62% Limit = 38% Add-on Year 5 CY 11 81% Limit = 19% Add-on Stop-Loss Limits Loss to Applicable Percent in Year Stop-Loss Approved

Stop-Loss Due Dates Year 1 Due 10/15/07 Year 2 Due 4/15/08

Stop-Loss for Large PHAs 250 PH Units or More COCC Multiple AMPs Traditional Asset Management

Stop-Loss for Small PHAs Less Than 250 PH Units Alternate Asset Management (No COCC) if PUM Admin Doesn’t Exceed Admin Threshold Admin Threshold Published in Supplement to PIH Notice 2007-09, Financial Management Handbook, Table 9.1 Admin Threshold Updated Annually, Schedule of Management Fees, Table 2, 80th Percentile Administrative Costs http://www.hud.gov/offices/pih/programs/ph/am/accounting.cfm

PUM Admin Calculation + Admin Salaries + Admin Benefits + Outside Management Expense + Other Admin + Admin Costs CFP BLI 1408 Mgmt Improvements ÷ Occupied Units & Approved Vacancies ***Calculation Excludes Audit Expense & Excludes Limited Vacancies

Appeal for Changing Market Conditions May Increase Subsidy if Vacant Unit Months Exceeded Limited Vacancies Decreases PUM Admin Cost Appeal With OpSub Calculation or by OpSub Revision Deadline List of Unit Numbers & Periods Vacant Narrative Explaining Specific Changing Market Conditions (ex. Population Decline, Competing Project, etc.) Narrative Explaining Marketing Efforts Certify No Waiting List for Unit Months in Appeal Certify Unit Months in Appeal Ready to Rent (not Downtime or Make-Ready)

AM 250+ PH Units To Qualify for Stop-Loss, Decliners Less Than 250 PH Units & Exceeds Admin Limit

AM COCC $4 PUM AM OpSub Add-on if 2+ AMPs Monitor Cash Flow at AMP Level Bank Account Per AMP Not Required Replace Cost Allocation with Fee-for-Service

AM—Balance Sheet Allocation Required 1st Year of AM Assign to AMP/COCC/Other Program if Direct Relationship Exists Assign Equipment to Controlling AMP/COCC/Other Program

Legacy Costs & Associated Unfunded Liabilities Allocate to AMP, COCC & Other Programs to Ensure All Bear Proportionate Share—May Consider Ability to Pay

Compensated Absences Allocate Based on Current Employee Assignment Transfer Associated Liability & Liquid Asset if Employee Transfers—A/P & A/R if No Liquid Asset Available COCC May Setup A/R from AMPs & Other Programs for COCC Share At Initial Balance Sheet Allocation Not Subject to Excess Cash Rules Eliminate A/R & A/P on FDS

Pension & Other Post-Employment Benefits (OPEBs) Current & Retired Employees Pension, Retiree Medical & Other Related Expenses Accounting & Contributions Based on Retirement Plan Allocate Annual Contribution Based on Employee Assignment

Other Post-Employment Benefits (OPEBs) Historically Pay-As-You-Go GASB 45 Requires Liability Recording Annual Required Contribution (ARC) Normal Annual Cost Share of Unfunded Liability—Not to Exceed 30 Years Charge to COCC for All Employees

OPEBs (Continued) Non-COCC Employee Share: AMPs & Other Programs Transfer Liquid Assets Annually to COCC to Cover ARC COCC Employee Share Covered by Fees Earned A/P & A/R if No Liquid Assets Available Not Subject to Excess Cash Rules

Other Liabilities Lawsuits, Legal Actions, Lead-Based Paint, Asbestos Record at COCC Recover from AMPs & Other Programs Based on Reasonable Method Not Subject to Excess Cash Rules A/P & A/R if No Liquid Assets Available

AM—Balance Sheet Allocation Restricted Assets Real & Personal Property Assigned to COCC Restricted Assets Subject to Federal Program Rules Future Guidance on COCC Asset Disposal

AM—Working Capital Assign Cash to COCC Equivalent of Up to 6 Months Estimated Property Management, Bookkeeping, and AM Fees Based on 100% Occupancy of All ACC Units Not Subject to Excess Cash Restrictions If Cash Not Available at AMP, May Record Receivable/Liability Receivable/Liability Must Be Paid Prior to Payment of Additional AM Fees or AMP Fungibility Transfer

Cost Assignment Front Line (AMP) Expenses Related to Direct Operation of the Property vs. Management Fee (COCC) Expenses Related to Corporate Support Guidance Asset Management Planning Document Attachment B PIH Notice 2007-9, Financial Management Handbook Supplement Table 7.2 Multifamily Management Agent Handbook, HUD 4381.5, Chapter 6

Central Front-Line Admin Reasonably Prorate Direct Labor, Supplies & Equipment to AMPs Prorated Costs Include Equipment Purchased with Capital or Operating Funds remain AMP Program Assets Document Proration Method Adjust to Actual Costs at Year-End At Minimum Cannot Exceed Cost if Performed On-site Can’t Prorate if On-site Staff Also Perform Task

Prohibited Central Front-Line Admin Supervision Cost of Front-Line Admin—Except for Central Waiting Lists, Central Resident Services, and Central Protective Services Procurement/Warehousing—Unless Cheaper than Project-Based Procurement/Warehousing & HUD Approves Rent Collection—Unless Listed in Employee’s Job Duties Resident Services—Unless Can’t Reasonably Track Costs to AMPs Protective Services—Unless Can’t Reasonably Track Costs to AMP & Plan for Future Direct Deployment if Extensive Central Services

Central Front-Line Maintenance Technical & Routine Maintenance Must Use Fee-for-Service Begins 2nd Year of PBB/PBA Actual Services Only Can’t Exceed Market Rates Supporting Documents for Rates Can’t Prorate Unrecovered Costs Due to Under-Utilization or Unreasonable Low Rates Can’t Charge Projects for Costs of Centralized Supervisor or Admin Assistants

Shared Resource Costs Spread Cost to AMPs Receiving Service Few AMPs Sharing Resource vs. All AMPs If Staff Shared between AMPs & COCC, Prorate Based on Time Spent on AMPs & COCC Limited to Reasonable Labor Rates

COCC Not Subject to Program Income Rules if Fees Reasonable State and Local Restrictions May Still Apply May Include Business Activities Example: Management Fees for Non-Profit or Private Properties

Fees Property Management Bookkeeping Asset Management CFP Management HCV Program Management Other PIH & HUD Program Management Non-Federal Program Management

Property Management Fee Multifamily Property Management Fee Schedule—Federally Subsidized Properties 80th Percentile Property Management Fees—For-Profit and Limited Divided FHA Properties Other Local Market Data

Property Management Fee Reasonable in 2nd + Years Additional 2 Year Extension Available Stop-Loss Requires Reasonableness in 1st Year Earned Monthly for Occupied & HUD-approved Vacancy, but Not Limited Vacancies COCC Retains Difference Between Fee Charged to AMP and Fee Paid for Private Management, Including Mixed Finance Projects. COCC Earns Fee if Manages Mixed Finance Property Demo/Dispo: 75% Year 1, 50% Year 2 Demo: 25% Year 3

Bookkeeping Fee Up to $7.50 PUM Reasonable in 2nd + Years Additional 2 Year Extension Available Stop-Loss Requires Reasonableness in 1st Year Earned Monthly for Occupied & HUD-approved Vacancy, but Not Limited Vacancies Cannot charge if Project Accounting Functions Also Performed On-site & Charged as Front-line/AMP Cost Can Also Charge to HCV Program

Asset Management Fee 1st Year—Up to $10 PUM 2nd+ Years—Up to $10 PUM and Not To Exceed Excess Cash Calculation Earned Monthly for All ACC Units Earned For Demo/Dispo Units Until Vacant PHAs With 250+ PH Units PHAs With Less than 250 PH Units & 2+ AMPs & COCC No Accruals

CFP Management Fee Up to 10% to Admin BLI 1410 & Counts Toward 10% Admin Limit Available to Earn & Draw When Grant Awarded & Available Prior to AM Implementation & Beginning With FFY 2007, Can’t Draw Unobligated Funds Under Admin BLI 1410 of Open CFP Grants as CFP Management Fee

CFP Management Fee (Continued) FFY 2007 Charge Management Fees Commencing with Start of First Year PBB/PBA May Have Partial Year Actual Cost & Partial Year Fees Subject to Fee Reasonableness in 2nd Year FYEs 6/30/09, 9/30/09, 12/31/09, 3/31/10

HCV Program Management Fee Voluntary Higher of 20% of HCV Admin Revenue or $12 PUM per Voucher Leased Guidance HCV Program Management Fee vs. Front-Line Costs PIH Notice 2007-9, Financial Management Handbook Supplement Table 7.2

Other Management Fees Development Activities 3% Total Project Budget Up to 6% if HUD Approved Other PIH & HUD Grants Management Up to 15% Grant Amount, if No Fee Rate Established Non-Federal Program Management Voluntary Fee-for-Service

Fee Payment & Documentation Invoice Recommended Documentation Supporting How Fees Earned Occupancy Fee Reasonableness

Fungibility 1st Year AM: Full Fungibility AMP/COCC 2nd Years AM: Fungible Only Between AMPs & Subject to Positive Excess Cash Restriction 3rd+ Years AM: Fungible Only Between AMPs & Subject to 1-Month Excess Cash Restriction No Restriction on Transfers from COCC to AMPs FDS Must Be Submitted & Accepted

Excess Cash Calculation: 2nd Year Based on Prior Year FDS Adjust Excess Cash Limit for Audited FDS Submission + Unrestricted Cash + Cash-Tenant Security Deposits + Cash-Restricted for Payment of Current Liabilities + Total Receivables, Net of Allowance for Doubtful Accounts + Unrestricted Investments + Interprogram Due From Current Liabilities ***Must Be Positive**

Excess Cash Calculation: 3rd+ Years Based on Prior Year FDS Adjust Excess Cash Limit for Audited FDS Submission + Unrestricted Cash + Cash-Tenant Security Deposits + Cash-Restricted for Payment of Current Liabilities + Total Receivables, Net of Allowance for Doubtful Accounts + Unrestricted Investments + Interprogram Due From - Current Liabilities - Average Monthly Operating Expenses

Excess Cash Uses AMP Reserve Transfer to other AMPs Pay Asset Management Fee to COCC, but No Loan/Transfer Other Eligible Purposes Develop New Units-to Extent Allowed Under Program Rules Legal Costs Incurred Prior to AM Legacy Costs

Resources PIH Notice 2006-14 PIH Notice 2006-35 http://www.hudclips.org/sub_nonhud/html/pdfforms/06-14PIH.doc PIH Notice 2006-35 http://www.hudclips.org/sub_nonhud/html/pdfforms/06-35PIH.doc Stop-Loss Submission Kit http://www.hud.gov/offices/pih/programs/ph/am/docs/stoplosskit.pdf Asset Management Planning Guide http://hudstage.hud.gov/offices/pih/programs/ph/am/docs/pham.pdf PIH Notice 2007-9 http://www.hudclips.org/sub_nonhud/cgi/pdfforms/07-9PIHSupp.doc