HUD issues notice on administrative fee reserves

This week HUD’s Office of Public and Indian Housing (PIH) issued Notice PIH 2015-17 to provide guidance to PHAs on the use and reporting of administrative fee reserves, or unrestricted net position (UNP) accounts. The seven-page notice reissues with minor revisions Notice PIH 2010-7, providing updated guidance on the reporting of admin fee reserves and use of reserves when faced with insufficient funding. The new notice responds to recommendations by the Office of Inspector General (OIG) to implement controls and requires reconciliations of UNP. Below is a summary of the major differences:

• In terms of background, the new notice references the requirements to maintaining UNP, rather than UNA accounts. On an annual basis, PHAs credit to the UNP the total of: (1) The difference between program admin fees and program admin expenses for the fiscal year; plus (2) The net of revenue and expenses related to the administration of unabsorbed portability units; plus (3) Interest and other income earned on the investment of admin fee reserves; plus (4) The portion of fraud recoveries actually collected that flows to the admin fee reserves; plus (5) Any other miscellaneous admin revenues or equity transfers to the HCV admin fee reserve; minus (6) Any expenditures from the reserve account to cover excess HAP costs not covered by HAP funding and HAP reserves or other allowed uses of admin reserves.
• Regarding use of administrative fees, the notice clarifies that if a surplus of administrative fees remains at the end of the PHA’s fiscal year (FY), the amount by which the program admin fees paid by HUD for the FY exceeded the PHA’s HCV administrative expenses for the FY is added to the admin fee reserves.
• No substantive changes were made to the sections regarding pre-2004 and post-2003 admin fee reserves.
• In terms of the general depository agreement, the new notice clarifies that form HUD-51999 must be executed between the PHA and the depository, and must include all deposit account numbers in which HCV program funds are held.
• For reporting requirements, the new notice clarifies that PHAs must report post-2003 admin fee reserves separately from pre-2004 reserves on the FDS income statement in the details of the line 11170 memo account, and that specific FDS detail lines for pre-2004 and post-2003 admin fee reserves have been added to the FASS-PH system for the HCV program. These new line items must be completed and can be found in the detail link of FDS line 11170 on the income statement tab of the HCV program. As currently programmed, these lines must also include amounts associated with FDS line 508.4, Net Investments in Capital Assets. In a future FASS-PH release, FDS line 11170 will distinguish admin fee reserves and net investment in capital assets that will reconcile to FDS line 512.4, UNP.
• The new notice also states that UNP must be reported in VMS on a monthly basis in the field currently titled Unrestricted Net Assets (UNA) as of the Last Day of the Month, which will be changed in a coming VMS release to reflect the new language. Further, the new notice lists exactly what the UNP reported in the VMS should consist of, in addition to clarifying that excess admin fee disbursements from HUD are not added into the UNP on a monthly basis because these amounts to not become “unrestricted” until the end of the FY. During the FY, admin fee disbursements may only be used to cover current year admin expenses.
• The notice states that if a PHA has to dip into the UNP to cover excess admin expenses, it still may not increase the UNP during the FY by adding in excess current year admin fees in later months, even if the UNP balance remains below the previous FYE balance. Overall excess admin expenses may decrease the UNP from month to month during the FY, but excess admin fee disbursements from HUD should not generally increase the UNP from month to month during the FY. Only fraud recovery, port-in, interest, or other non-HUD revenue may increase the UNP from month to month during the FY.
• In terms of use of HAP funds, the new notice states that restricted net position (RNP) is reported in VMS in the field currently titled Net Restricted Assets as of the Last Day of the Month (likewise to be updated), and that RNP is the amount reported on the FDS balance sheet at line 511.4. The notice also lists what RNP should consist of as reported in VMS, and notes that as of January 1, 2012, interest earned on HAP and HAP investments was no longer a part of the RNP. As of January 1, 2014, the PHA may retain up to $500 in interest earned on HAP and HAP investments, but those funds are to be recorded and reported as administrative revenue flowing to the UNP.

No substantive changes were made regarding sanctions, however the new notice does state that the Quality Assurance Division (QAD) will continue to conduct on-site and remote reviews of PHA financial reporting and recording, and that incorrect reporting and recording will result in review concerns or findings for which corrective action plans must be developed by the PHA.

NMA offers two HCV finance classes: HCV Financial Management, with upcoming dates in Dallas and Cleveland, and HCV Financial Accounting and Reporting, with upcoming dates in Las Vegas, Louisville, and Seattle. Not sure which one to take? Email sales@nanmckay.com for further guidance.