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  • 1. HCV Program Financial Management & Reporting HUD Webcast Washington D.C. November 3, 2009 2 p.m. - 5 p.m.
  • 2. HCV Program Financial Management & Reporting Opening Remarks David Vargas, CPA Associate Deputy Assistant Secretary
  • 3. HCV Program Financial Management & Reporting Presenter Ray Adair, MBA, CGFM Vice President & Senior Associate Nan McKay and Associates, Inc.
  • 4. HCV Program Financial Management & Reporting • Today's topics: – How the Program is Funded – Basic Elements of Financial Management – Year-end Financial Reporting Basics
  • 5. HCV Program Financial Management & Reporting • Topic One: –How the Program is Funded
  • 6. How The Program Is Funded Renewal HAP Funding • 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
  • 7. How The Program Is Funded Renewal HAP Funding • In addition, the Congress allows for certain adjustments to the cost base): – First time renewals – FSS escrow deposits
  • 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 x Annual Adjustment Factor (AAF) = CY Budget Authority
  • 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. How The Program Is Funded Administrative Fee Funding • 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
  • 13. Administrative Fee Formula Units Leased on 1st of Month x Applicable Fee Rate (A, B, or C) = Administrative Fees Earned
  • 14. Excess Administrative Fees Amount used to Yearly cover program Administrative administration Fees Earned Amounts not used become part of Unrestricted Net Assets and continue to be bound by program restrictions.
  • 15. Outlook for 2010 • Same 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
  • 16. HCV Program Financial Management & Reporting • Topic Two: –Basic elements of good HCV program financial management
  • 17. Financial Management • Good financial management involves: – Preparing a program budget – Monitoring actual to budget performance – Maintaining adequate cash – Investing excess cash
  • 18. Financial Management • 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
  • 19. Financial Management • 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
  • 20. Financial Management • How the PUC is calculated Total Divided Total HAP = PUC by UMLs Costs
  • 21. Financial Management • PUC calculation example: $500,000 Divided 1000 In HAP by UMLs PUC then equals $500
  • 22. Financial Management • Another PUC example: $500 PUC $6,000,000 Divided by X In ABA 12 Units supported equals 1,000
  • 23. Financial Management • Yet another PUC example: $500 PUC $500,000 Divided by X In NRA 12 Units supported equals 83
  • 24. Financial Management • 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
  • 25. Financial Management • Investing excess cash: – Maintain liquidity & preserve principle – Limit investments to approved types – Secure form HUD-51999, General Depository Agreement before depositing – Maintain required collateral
  • 26. Financial Management • 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
  • 27. Financial Management • 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
  • 28. Financial Management • 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
  • 29. Financial Management • 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
  • 30. Financial Management • 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
  • 31. Financial Management • 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
  • 32. Financial Management • 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
  • 33. Financial Management • 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
  • 34. Financial Management • 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
  • 35. Financial Management • 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
  • 36. Indirect Cost Plan Concept Diagram Cost Pool HCV Program Salary Line 91810 Benefits Supplies PH Program Telephone Line 91810 Travel Rent Utilities Other Program Etc. Line 91810
  • 37. Financial Management • 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-service • Optional for HCV only HAs
  • 38. Financial Management • 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
  • 39. Financial Management • Fee-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
  • 40. Fee-For-Service Concept Diagram PHA AMP A Central Office PHA AMP B Cost Center HCV Program (COCC) Other HUD Program
  • 41. Financial Management • Fee-for-Service (continued) − The Department allows a HCV program management fee equal to the higher of: • 20% of available admin funding or • $12 per leased unit per month − In addition a bookkeeping fee of $7.50 per leased unit may be charged
  • 42. Fee-for-Service Flow of Funds Admin Fees Direct program Earned administration Management Unused admin Fee fees Unrestricted COCC Net Assets
  • 43. Financial Management • 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
  • 44. Financial Management • Fee-for-Service (continued) − We have provided examples you can print out of: • Typical cost pool showing allocated overhead to programs • Typical COCC showing fees earned from programs
  • 45. HCV Program Financial Management & Reporting • Topic Three: –Year-end Financial Reporting Basics
  • 46. Year-end Financial Reporting 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
  • 47. Year-end Financial Reporting Reporting Requirements: − REAC has responsibility to collect and review − Generally two submissions required: • Un-audited 60 days after year- end • Audited 9 months after year- end
  • 48. Year-end Financial Reporting • 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
  • 49. Year-end Financial Reporting • 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
  • 50. Year-end Financial Reporting • 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
  • 51. Year-end Financial Reporting • 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
  • 52. Year-end Financial Reporting • Restricted Net Assets: − In the HCV program this account represents: • Unused HAP • Interest earned on invested HAP proceeds • Fifty percent of fraud recoveries • Forfeited FSS escrow amounts
  • 53. Year-end Financial Reporting • Unrestricted Net Assets: − Represents the accumulation of excess admin fees and: • Interest earned on invested excess admin fees • Fifty percent of fraud recoveries • Admin fees received under portability
  • 54. Year-end Financial Reporting • 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
  • 55. Year-end Financial Reporting • 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
  • 56. Year-end Financial Reporting • 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.
  • 57. Year-end Financial Reporting • HCV Program Balance Sheet reporting issues: − Using inter-funds to make inappropriate transfers of HCV funds to other programs
  • 58. Year-end Financial Reporting • 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 payable
  • 59. Year-end Financial Reporting • 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.
  • 60. Year-end Financial Reporting • 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.
  • 61. Year-end Financial Reporting • HCV Program Income Statement reporting issues: − Failure to report restricted interest income when there is significant excess HAP funds available.
  • 62. Year-end Financial Reporting • HCV Program Income Statement reporting issues: − Recording allocated overhead to line 96200, Other General Expense instead of line 91810, Allocated Overhead.
  • 63. Questions − We now have some time to take your questions.