1. Slide Number #1 Cara Gillette Finance for the Public Housing Director

2. Slide Number #2 Today’s Topics  Overview of the new operating fund formula  Stop-loss provision  Project-based accounting  Basic financial concepts and reports  Excess cash and fungibility

3. Building Blocks Project-based funding Project-based funding Project-based budgeting Project-based budgeting Project-based accounting Project-based accounting Project-based management Project-based performance assessment

4. Slide Number #4 The New Formula  Requires PHAs with 400 or more PH units to transition to project-based accounting, budgeting, and management  Threshold of 400 doesn’t apply to stop-loss PHAS  Is based on HUD’s multifamily industry  Will force the PH program to become more property-based

5. Slide Number #5 Hot Off the Press  PIH Notice 2008-16(HA)  PHAs with 250-400 units can exempt themselves  But the election for exemption is only authorized for CY 2008  PHAs that elect the exemption aren’t “grandfathered” in for future years  And there are lots of requirements

6. Slide Number #6 Key Implementation Dates  Determination of Asset Management Projects (AMPs) – CY 2006  Implementation of new Operating Fund Formula – CY 2007  Operating Subsidy by AMPs – Begins in CY 2008  Project-Based Budgeting/Accounting – Begins with PHA FYs July 1, 2007 and forward  Subsidy is fully fungible in CY 2008  Cost Reasonableness – Begins in Fiscal Year 2009

7. Slide Number #7 The New Model for PH  Fundamental shift for public housing  Historically, operating subsidy was calculated on an aggregate level  Op sub was allocated to the central office, which decided where the subsidy went  Now, subsidy is calculated for and allocated to each project

8. Slide Number #8 The New Model for PH  Funding goes to the projects, and projects pay for everything else  Any service to the project not at the project will come from a cost center  Every PHA will have a central office cost center  Direct, indirect, and allocated services

9. Slide Number #9 The New Model for PH  Two main components  Project-based management is decentralized property services tailored to the needs of each property, given the resources available to each property  Asset management is strategic oversight and centralized services tailored to the needs of the portfolio as a whole

10. Slide Number #10 AMPs – the Economic Engine of PH  Your PHA defined its asset management projects (AMPs) for purposes of project- based accounting, budgeting, and management  Each AMP has its own budget, financial statements, staffing, subsidy, capital plan, and will have its own performance scoring Not in book

11. Slide Number #11 AMPS – the Economic Engine  The PHA’s decision on the grouping of AMPS is based on:  Geographic location  Organizational structure  Size of the PHA  Housing stock Not in book  Resident population  Delivery systems  Maintenance delivery

12. Slide Number #12 Compliance with Asset Management  Best definition of compliance so far is notice to stop-loss agencies, since they have to comply early

13. Slide Number #13 Notice 2006-14(HA)  Even though these are the instructions for stop-loss agencies, this notice, and the Stop Loss Kit, is the clearest roadmap for all PHAs  The difference is in the deadline

14. Slide Number #14 Seven Criteria for Compliance with Asset Management 1.Project-based accounting  Monthly operating statements for each project – revenues and expenses vs. budget levels, including all fees from the COCC and Capital Fund  Must reasonably reflect the financial performance of each project

15. Slide Number #15 Seven Criteria for Compliance with Asset Management 2.Project-based management  Property management services are arranged or provided in the best interest of the property considering needs, cost, and responsiveness, relative to local market standards

16. Slide Number #16 Seven Criteria for Compliance with Asset Management 3.Central office cost center (COCC) must charge reasonable fees to the AMPs  COCC must operate on the allowable fees and other permitted reimbursements from its PH and S8 programs  In other words, the COCC must support itself

17. Slide Number #17 Seven Criteria for Compliance with Asset Management 4.Centralized services that directly support projects are funded using a fee-for-service approach or through other allowable charge-backs  Each project is charged for actual services received - must be reasonable compared to local market

18. Slide Number #18 Seven Criteria for Compliance with Asset Management 5.Review of project performance  PHA systematically reviews financial, physical, and management performance of each project, and identifies non-performing properties

19. Slide Number #19 Seven Criteria for Compliance with Asset Management 5.Review of project performance – a non- performing property has:  PHAS physical score below 70  Significant crime and drug problems  Below 95% occupancy  TARS that exceed 7% of monthly rent roll

20. Slide Number #20 Seven Criteria for Compliance with Asset Management 5.Review of project performance – a non- performing property has:  PHAS grade of “D” or below for vacant unit turnaround and work orders  Utility consumption more than 120% of agency average  Other major management problems Turnaround = D more than 30 days WOs = D more than 40 days

21. Slide Number #21 Seven Criteria for Compliance with Asset Management 5.Review of project performance  Long-term prospects for each property:  Maintain project as is  Identify capital improvements needed  Dispose of property (demo, sale, etc)  Financial condition of each project Stop-Loss FAQs 9/1/06

22. Slide Number #22 Seven Criteria for Compliance with Asset Management 6.Capital planning  Physical needs assessment and a five-year plan for each project  Five-year plan needs to consider revenue sources, market, tenancy, and project needs  Long-range energy consumption reduction

23. Slide Number #23 Seven Criteria for Compliance with Asset Management 7.Risk management responsibilities related to regulatory compliance  PHA not carrying out responsibilities if:  Designated troubled under PHAS  Any outstanding FHEO findings or voluntary compliance agreement not implemented…

24. Slide Number #24 Seven Criteria for Compliance with Asset Management 7.Regulatory noncompliance if:  No current energy audit…  Outstanding IG audit findings w/no progress  Not in compliance with ACOP  Unsatisfactory progress under RHIIP/RIM  PIC (50058) reporting rate under 95%  Any other major compliance deficiency

25. Slide Number #25 The Deal with Stop-Loss  Under the new op sub formula, about a third of PHAs gained, a third stayed the same, and a third lost op sub

26. Slide Number #26 The Deal with Stop-Loss  The PHAs who are “losers” under the new formula can stop the loss of subsidy by early conversion to asset management

27. Slide Number #27 Stop-Loss Provision  Deadline for Year 1 was October 15, 2007  If PHA demonstrated conversion by that date, the reduction of subsidy stopped at 5% of the difference for CY 2007  That means that 95% of the PUM difference will be added to the lower op sub level under the final rule

28. Slide Number #28 Stop-Loss Provision  For subsequent years, the % of loss goes up

29. Slide Number #29 Stop-Loss Provision  There will be additional requirements for subsequent years  Year 2 has more requirements than Year 1  HUD staff will have to monitor

30. Slide Number #30 Per Unit Month (PUM)  Budgeted income and expense items are shown in a monthly and yearly total dollar amount – and also in a per unit per month (PUM) Page 6-3

31. Slide Number #31 Per Unit Month (PUM)  PUM is an important concept  PUM applies to any line item ($) that:  Was spent, is being spent, or will be spent  Was earned, is being earned, or will be earned  Formula is: Any line item $ ÷ EUM = PUM

32. Slide Number #32 Per Unit Month (PUM)  PUM also allows the portfolio to be tracked over time as the number of units change  Example:  Last year the PHA had 1200 units  This year, due to demo/dispo, there are 1100 units

33. Slide Number #33 Per Unit Month (PUM)  PUM also allows sites to be compared – even if they aren’t of similar size type and age  If one AMP’s landscape cost is $26.82 and another’s of similar common grounds is $10.45, costs may need to be analyzed

34. Slide Number #34 Operating Subsidy Formula The Money is Driving the Changes Page 6-4

35. Slide Number #35 The New Operating Subsidy  The old op sub was aggregate - AEL  Under the new formula, subsidy is calculated and allocated by project - PEL  The op sub will go directly to the projects, and all other activities will be supported by fees paid by the projects  We see these in PUM (per unit month) figures

36. Slide Number #36 The New Operating Subsidy  Operating subsidy formula: Project expense level (PEL) +Utility expense level - Formula income frozen at 2004 level +Applicable add-ons =Operating subsidy

37. Slide Number #37 The New Operating Subsidy  Ten components used to calculate PEL: 1.Geographic variable – one of the two most significant variables – where you are in the country 2.Central city variable 3.Clientele (occupancy) variable – family properties tend to cost 6% more Page 6-5

38. Slide Number #38 The New Operating Subsidy  Ten variables used to calculate op sub: 4.Property size variable – number of units 5.Building type variable – high-rise, garden walk-up, single family home, etc. 6.Bedroom mix variable – the other most significant variable

39. Slide Number #39 The New Operating Subsidy  Ten variables used to calculate op sub: 7.Percent assisted variable – 100% subsidized tends to cost 6% more 8.Property age variable 9.Neighborhood poverty variable 10.Ownership type variable – for-profits have costs that are 6% less

40. Slide Number #40 The New Operating Subsidy  National floor of $200 PUM for senior properties and $215 PUM for family properties  National ceiling of $420 PUM and 4% reduction for PUMs over $325

41. Slide Number #41 The New Operating Subsidy  Add-ons – the PHA determines which are applicable:  Self-sufficiency  Energy loan amortization  PILOT  Audit cost – actual most recent  Resident participation - $25 per unit per yr Page 6-6

42. Slide Number #42 The New Operating Subsidy  Add-ons – the PHA determines:  Asset management fee  $4 PUM for PHAs with 250 or more  $2 PUM for smaller PHAS who transition to PBM who have a COCC

43. Slide Number #43 The New Operating Subsidy  Add-ons – the PHA determines:  Information technology fee  $2 PUM  Asset repositioning fee (demo or dispo)  Costs attributable to changes in federal law, regulation, or economy

44. Slide Number #44 The New Operating Subsidy  Approved vacancies – still get op sub:  Units undergoing mod (if on schedule)  Units approved for resident services  Units in court litigation  Units undergoing casualty loss settlement  Units vacant due to disaster (federal or state)… Page 6-7

45. Slide Number #45 The New Operating Subsidy  Approved vacancies – still get op sub:  Units vacant due to changing market conditions  Up to a 3% vacancy  The PHA will enter types of vacancies into PIC

46. Slide Number #46 Costs Page 6-12

47. Slide Number #47 Costs  All budget costs and expenses will fall into one of three general categories:  Direct cost (at the project)  Central office cost center (COCC)  Indirect services  Other cost centers (optional)  For direct and allocated services

48. Slide Number #48 Cost Centers  Every PHA will have at least one cost center, the central office cost center (COCC)  Centralized maintenance may also be a cost center

49. Slide Number #49 Frontline (Direct) Costs  These are expenses of the project:  Personnel costs of staff assigned to project  Repair and maintenance costs including supplies, contracted repairs, make-readies, preventive maintenance, etc.  Utility costs  Costs related to the site office – phones, office supplies, computers, postage, etc.

50. Slide Number #50 Frontline (Direct) Costs  These are expenses of the project:  Advertising including procurement and employment notices  Costs of employee recruiting and screening  PILOT  Insurance (allocated)  Legal fees

51. Slide Number #51 Frontline (Direct) Costs  These are expenses of the project:  Property management fees, bookkeeping fees, and asset management fees  Audit costs (allocated)  Vehicle expense for site-based vehicles

52. Slide Number #52 Charging for Maintenance  Maintenance is an example of services that may need to be provided directly to projects that are centrally located and charged based on time spent or actual work performed

53. Slide Number #53 Charging for Maintenance  How to organize maintenance is an important PBM decision  A PHA can decide to organize maintenance:  Decentralized – front line  Supervised by the property manager  Centrally  A mix

54. Slide Number #54 Charging for Maintenance  If the PHA uses centralized maintenance, will be required to use fee-for-service method when charging the project  Project can only be charged for actual services provided  Could be a single blended hourly rate, separate hourly rates for various activities, or flat fee – must be reasonable

55. Slide Number #55 Centralized Maintenance  For all centralized maintenance staff providing direct services, the PHA can charge up to the market rate  Even if it’s above what the technician is actually paid

56. Slide Number #56 Centralized Maintenance How Much Can the PHA Charge?  Sally is a maintenance worker $52.26Wages $23.52Benefits (45%) $75.78Hourly rate  If the market rate is $100, the hourly charge could be $100, regardless of what Sally is paid

57. Slide Number #57 Charging for Maintenance  Costs of overall labor cost include:  Gross salary, employer FICA contributions, federal unemployment tax, state unemployment tax, worker’s comp insurance, health insurance premiums, cost of fidelity or comparable insurance, performance incentives and or annual bonuses, and retirement benefits (pre and post retirement) Not in book

58. Slide Number #58 Charging for Maintenance  PHAs may charge for actual materials used as well as labor Not in book

59. Slide Number #59 Costs of Other Functions  Charging the project  Where it’s cost-effective, PHA can prorate across projects, the cost of centralized staff who perform frontline functions Page 6-17

60. Slide Number #60 Charging Back to the Project  These are called front line allocated costs  For example, collecting rent centrally, employee handing rent collection, as well as direct costs, could be charged back to applicable projects on any reasonable basis  Not necessary for the rent collection clerk to track his or her activity per AMP

61. Slide Number #61 Charging Back to the Project  Two exceptions to charging projects for centralized staff performing frontline functions:  Can’t charge projects for cost of a centralized supervisor  Can’t charge projects cost of centralized staff handling procurement

62. Slide Number #62 Update – Centralized Warehouse  FAQ December 1, 2006  If a warehouse at the COCC is for “storerooms” of scattered sites, with HUD approval, this can be an eligible frontline cost Not in book

63. Slide Number #63 Charging Back to the Project  HUD will allow charging back to project:  Central waiting lists, screening, leasing and occupancy – PHAs can prorate costs direct costs of these functions to the AMPs, including supervisory personnel  The proration can be based on the number of units leased at a project, average turnover at a project, or other reasonable allocation method Page 6-18

64. Slide Number #64 Charging Back to the Project  HUD will allow charging back to project:  Resident programs – PHA can prorate centralized resident programs across projects on a reasonable basis, including supervisory staff

65. Slide Number #65 Charging Back to the Project  HUD will allow charging back to project:  Protective services – PHAs can charge centralized protective services, either in-house or through local law enforcement, including supervisory staff  HUD eventually wants these tracked by project

66. Slide Number #66 Charging Back to the Project  HUD will allow charging back to project:  Work order processing  Although it is the norm in multifamily housing to handle work order processing on site, a PHA may charge the cost of centralized work order processing only if the PHA can document/justify that the cost pro rated is reasonable and necessary

67. Slide Number #67 Shared Resource Costs  HUD knows it may not make economic sense to have FT maintenance staff dedicated to one AMP  In this case the PHA may establish a reasonable method to spread these personnel costs to the AMPs receiving the service Page 6-19

68. Slide Number #68 Shared Resource Costs  Shared resource costs are distinguished from front line prorated costs in that the services being shared are limited to a few projects as opposed to being prorated across all projects  An example of a shared resource cost might be a maintenance person assigned to and paid for by two projects

69. Slide Number #69 Shared Resource Costs - What if there is PHA personnel who provide services both to the projects and the central office cost center?

70. Slide Number #70 Shared Resource Costs - For PHA staff who provide services both to the projects and the central office cost center, the PHA must separate the amount of time spent on providing services to the projects and the central office cost center, based on a reasonable methodology

71. Slide Number #71 Shared Resource Costs - The time spent by the staff on projects must be at an hourly rate that does not exceed the reasonable hourly fee for the service

72. Slide Number #72 Fees Allowed under PBM

73. Slide Number #73 Fees Allowed under PBM  Fees the projects will pay to the COCC:  Property management fees  Bookkeeping fees  Asset management fees  Capital fund management fees Page 6-20

74. Slide Number #74 Fees Allowed under PBM  Property management fee  Is “reasonable fee” paid by project to COCC for project oversight  HUD has established some “reasonability” guidelines  Notice: Guidance on Implementation of Asset Management, issued Sept 6, 2006

75. Slide Number #75 Fees Allowed under PBM  Management fee – “reasonable”  Based on multifamily fee (annual letter from field office); or  80 th percentile as established by HUD; or  Other compelling data of local market  Might include fees paid pay the PHA for private management of other properties

76. Updated April 10, 2007

77. Slide Number #77 Fees Allowed under PBM  Management fee  Based on units leased (occupied units and approved vacancies, but not the 3% limited vacancies) (EUM) using monthly lease-up rate  Stop-loss FAQs (question 12) says that the PHA can use either the first day or last day of the month (but must be consistent)

78. Slide Number #78 Eligible Unit Months (EUM)  The AMP’s eligible unit months (EUM) is used to monitor on a per unit basis, and to calculate property management fees the AMP will pay to the COCC

79. Slide Number #79 Eligible Unit Months (EUM)  Occupied units are those occupied by:  Eligible families  Police officers  Security  PHA employees

80. Slide Number #80 Property Management Fee Calculation Example X { + + }  The Elms has 120 units = 1440 total unit months  1200 occupied unit months last year  100 HUD-Approved Vacant Unit Months  Management fee = $45  Calculation: 1200 + 100 x $45 = $58,500 PUM Prop Mgmt Fee Occupied HUD- Approved Vacancy Demo/Disp Unit Mos

81. Slide Number #81 Fees Allowed under PBM  Property Management Fee – Demolition  Year 175% of PUM management fee  Year 250% of PUM management fee  Year 325% of PUM management fee

82. Slide Number #82 Fees Allowed under PBM  Property Management Fee – Disposition  Year 175% of PUM management fee  Year 250% of PUM management fee

83. Slide Number #83 Fees Allowed under PBM  Bookkeeping fee  An extension of the management fee  For accounting for project funds, charged to the project from the COCC  Based on occupied units and allowable vacancies  HUD will consider $7.50 PUM reasonable Page 6-22

84. Slide Number #84 Fees Allowed under PBM  Asset management fee  Fee paid by project to COCC for oversight of portfolio  Based on total ACC  Must be reasonable, not to exceed $10 PUM  Only paid if the project has excess cash flow (no limit first year)

85. Slide Number #85 Fees Allowed under PBM  In the 1 st year of PBM, there is no excess cash requirement for the payment of the asset management fee  In the 2 nd year, each AMP must have excess case to pay the asset management fee  In the 3 rd year, excess cash must equal specific assets minus current liabilities minus one month’s operating expenses

86. Slide Number #86 Asset Management Fee Calculation Example X  AMP has 120 units:  $10 x 120 units x 12 months = $14,400 $10 PUM Asset Mgmt Fee Total ACC Units

87. Slide Number #87 Capital Fund Management Fee  CFG management fee will be an optional fee paid to the central office to cover all costs of the central office’s oversight and management (program administration) of the CFG Page 6-22

88. Slide Number #88 Capital Fund Management Fee  Fee may be up to 10% of the CFG including replacement housing funds  The fee is paid by each AMP from CFG proceeds  HUD is still defining the way the fee will be earned

89. Slide Number #89 Capital Fund Management Fee  Examples of costs covered by the CFG management fee include the physical needs assessment, planning, preparation of the Annual Plan, processing of LOCCs draw downs, preparation of reports, budgeting, accounting, and procurement paid for with CFG

90. Slide Number #90 Capital Fund Management Fee  This fee is not intended to cover costs associated with construction supervision and inspection  These costs are considered frontline costs to the project

91. Slide Number #91 Management Fees for Other PIH & HUD Grants  If a fee rate has not been established for a grant:  The COCC can charge up to 15% of the grant amount as a management fee  Where administrative costs are set through other notices, regulations and existing grant agreements these policies and agreements are controlling

92. Slide Number #92 Fee Income Non-Program Income  Reasonable fees charged to AMPs and programs are not considered federal program income for the purposes of 24 CFR part 85  Fee income is considered local revenue  Control over its use is subject only to state or local requirements imposed on individual PHAs

93. Slide Number #93 COCC – Working Capital  Working capital for the COCC:  HUD will allow the COCC to be initially funded (year 1) with working capital of up to six months of property management, bookkeeping, and asset management fees based on 100% occupancy of all ACC units

94. Slide Number #94 Costs of a Project Project Front line costs: Direct admin costs Direct maintenance Direct office costs Utilities Fees paid by project Management fee Asset management fee Bookkeeping fee Other fees for services Central Office Cost Center

95. Slide Number #95 How Cost Centers are Funded Central Office Cost Center Central Maintenance Cost Center Waiting List Eligibility Cost recovery based on fees paid by projects and from other programs Cost recovery will occur based billing projects for services performed Some centrally provided service costs will be allowed to be allocated to projects

96. Revenues Project Revenues - Dwelling rent - Other tenant revenue - Interest income - Misc. income - Operating subsidy - Capital grant funds - Management fees earned - Bookkeeping fees - Asset mgmt fees earned - Capital fund mgmt fees - S8 management fees - Other eligible reimbursements - No direct subsidy!! COCC Revenues

97. Summary – All Together Now Management Activity Frontline Activity Method Management Fees Administrative Rent Collection Security Screening/WL Occupancy Leasing Resident Svcs Work Orders Other Audit Costs Warehousing Maintenance Technical Routine Inspections Other Purchasing Other Method ProrationFees for ServiceNone

98. Slide Number #98 Some Basic Financial Concepts Page 6-26

99. Slide Number #99 Key Financial Terms  Financial Data Schedule (FDS) is the HUD-required financial statement that’s submitted electronically to HUD  FDS is submitted for each program of PHA  PHAs will now be preparing the FDS to report financial activity at the AMP level  Balance sheet and income statement

100. Slide Number #100 Financial Data Schedule

101. Slide Number #101 Financial Data Schedule

102. Slide Number #102 Financial Reports  Income statement reports on an accrual basis how much the project has earned (revenue) and subtracts expenses, resulting in how much your project has made or lost in the period  Gives you a sense of how well the project is operating for the period of time assessed Page 6-32

103. Slide Number #103 Financial Reports  Balance sheet shows the overall status of your project’s finances at a fixed point in time – a snapshot  Totals all assets and subtracts liabilities to compute overall net worth (or net loss)  What the project owns, what it owes, what it’s worth

104. Assignment of Assets and Liabilities At the end of the first year of project-based accounting PHAs will assign all items on the balance sheet between the COCC, AMPs, and other programs PHA Fiscal Year EndAllocation Date JuneJune 30, 2008 SeptemberSeptember 30, 2008 DecemberDecember 31, 2008 MarchMarch 31, 2009

105. Slide Number #105 The Budget  The budget is a management tool  Each AMP will have its own budget  Property managers need to manage to their budgets Page 6-65

106. Slide Number #106 Financial Reports  Budget is a financial forecast  Estimates what each AMP expects to spend (expenses) and earn (revenue) for period of time  It’s important for the PHA to train property managers to understand their AMP budgets and manage to them

107. Slide Number #107 Key Budgetary Concepts  Itemized projection of income and expenses over a specific period  Guideline for operating the project  Tool to prevent fraud and theft  Measure of project’s financial health  Measure of staff performance

108. Slide Number #108 The Budget  Operating budget should be a realistic estimate and should contain:  Operating receipts  Operating admin  Tenant service  Utility expenses  Maintenance  Protective services  General expenses  Nonroutine expenses

109. Slide Number #109 An AMP Budget  Stop Loss Kit provides template  Budgets for each projects must total budget of PH  Budgets should include all charges and fees from the COCC, and Capital expenses  One budget spreadsheet will reflect PUM, and one budget spreadsheet will reflect annual figures

110. Slide Number #110 An AMP Budget  Sample AMP budget

111. The Budget

112. Sample Conventional Budget Gross Potential Income (GPI) - Vacancy and Collection Loss + Miscellaneous Income = Effective Gross Income (EGI) - Operating Expenses = Net Operating Income (NOI) - Reserves for Replacement - Annual Debt Service (ADS) = Cash Flow

113. Slide Number #113 The Budget Process  To approach developing a budget, look at actual data from the past – see where the project underspent and overspent  Decide what needs to change and what needs to stay the same  For example, a major marketing campaign may be needed to improve lease-up  Costs may need to be cut in some areas Page 6-72

114. Slide Number #114 Excess Cash and Fungibility  Overview  There are limitations and freedoms on the use of project income depending whether your project has excess cash

115. Slide Number #115 Excess Cash and Fungibility  Excess cash is the project’s net liquid assets, or “surplus cash”  After the first year, calculation is based on prior year-end financial statements  Audited statements will determine final excess cash amount

116. Slide Number #116 Uses of Excess Cash  Retain funds for future project use  Transfer funds to other AMP  Pay as asset management fee to COCC  Use for other HUD-approved eligible purposes  Financing new units, handling lawsuits, covering accrued pension and retirement

117. Slide Number #117 Excess Cash and Fungibility  Uses of excess cash not permitted:  Loaning or giving COCC cash other than as the asset management fee  Proceeds from the sale of assets to the COCC – these belong to the AMP  Except with HUD approval

118. Slide Number #118 Excess Cash Defined  Excess cash will be calculated from the FDS – it’s the sum of certain current assets minus the sum of all current liabilities, minus one month’s operating expenses for the AMP

119. Slide Number #119 Calculation of Excess Cash  Calculation of excess cash: Sum of asset accounts on the FDS - Sum of ALL current liabilities - One month operating expenses for AMP =Excess cash

120. Slide Number #120 Fungibility  Fungibility effective date  Prior to first project-based submissions, on or after July 1, 2008, all funds are considered fully fungible, including to the COCC  Once the PHA has reported PBM data, excess cash restrictions and limitations apply

121. Slide Number #121 Fungibility  In the 1 st year of project-based accounting, full fungibility of op funds between projects  In the 2 nd year, fungibility is allowed provided project has excess cash  In the 3 rd year, fungibility will require that excess cash must equal at least one month of operating expenses

122. Slide Number #122 Allowable Fungibility Is this transfer fungible?YesNo Transfer cash from AMP 1 to AMP2 Transfer cash from AMP 1 to COCC Transfer cash from HCV to AMP1 Transfer cash from Cap Fund to AMP1 Transfer cash from COCC to AMP1

123. Slide Number #123 Summary of Building Blocks

124. Slide Number #124 Project-Based Funding  Separate subsidy form for each project  Project Expense Level (PEL) is a major component  Ensures appropriate resources are allocated to each AMP based on unique characteristics Project-based funding Project-based funding

125. Slide Number #125 Project-Based Budgeting  Used for planning purposes  Budgeted amounts must reconcile to FDS  Must be approved by PHA Board  Not subject to HUD approval Project-based funding Project-based budgeting Project-based budgeting

126. Slide Number #126 Project-Based Accounting  Income & expense are reported at the project level  Project financial statements are submitted to HUD at year end  Can only charge projects for services actually received  Fees must be reasonable Project-based funding Project-based budgeting Project-based accounting

127. Slide Number #127 Project-Based Management  Arrange property management services in the best interest of the project  Assign skilled management personnel to each project Project-based funding Project-based budgeting Project-based accounting Project-based Project-based management management

128. Slide Number #128 Project-Based Performance Assessment  PHAS will be revised to emphasize project- based monitoring  Each project will be evaluated on financial, managerial, physical condition, and Capital Fund Project-based funding Project-based budgeting Project-based accounting Project-based management Project-based performance assessment

129. Slide Number #129 Summary  Thank you for attending!  Join us again

130. Slide Number #130 Summary of Building Blocks  Thank you for attending!  Join us again

131. Slide Number #131 Upcoming Lunch ‘n’ Learns  April 4 – Adjusted Income  April 25 – Housing 101: Overview for New Managers and Directors  May 2 – Verification Issues  May 9 – Managing PHAS  May 16 – Managing SEMAP