HUD, PHAs Discuss Ongoing
Asset Management Issues
Draft guidance provided to PHAs earlier this month on the phase-in requirements for management fees was the topic of a HUD-convened April 28 conference call among Department staff, PHAs, and industry representatives. Among the issues discussed: ongoing issues related to financial reporting.

A key concern of CLPHA is that the guidance could handcuff PHAs by removing their authority to determine how to phase-in management fees.

First, some background: HUD has required that PHAs adhere to published management and other related fees by 2011. According to PIH Notice 2007-9, issued April 10, 2007, PHAs are not required to comply with the reasonableness requirements for management fees in the first year of project-based budgeting and accounting. Further, PHAs can obtain an additional two-year phase-in of management fees provided:

-- The PHA reasonably documents current fees needed to support operations at the current organizational levels;

-- The PHA presents a schedule to achieve fee reasonableness by 2011;

-- The request, including items 1 and 2, is included in the PHA’s Annual Plan.

In its supplemental draft guidance on phase-in requirements for management fees, HUD said PHAs would have two options if they choose to phase-in management fees over years two and three.

The first option (see chart, below) requires that a PHA meet minimal levels of progress when reducing fees during the transition period. In the example, the PHA determines that in year 1, the overhead charged to the Central Office Cost Center (COCC) is $90 Per Unit Month (PUM). The allowable fees for the program are determined to be $60 PUM. Based on the HUD draft guidance, the PHA must achieve 20% progress in year one and 40% progress in year two towards meeting the $30 difference between current overhead costs and final year allowable fees.

The second option, should a PHA determine that the 20% and 40% progress thresholds are not workable, would allow the PHA to submit supporting documents to the local field office, who would then transfer the documents to headquarters for review.

During the April 28 call, some participants asked why HUD is attempting establish a standard for reasonableness that was not established previously. HUD responded that they needed to define a safe harbor, but that doesn’t mean that the department will not approve plans that achieve the same goal by different means. Greg Byrne, director of HUD’s Real Estate Assessment Center (REAC), said he was unsure whether this guidance will apply to stop-loss agencies, but indicated that HUD will make a final determination prior to releasing the supplemental guidance.

Per PIH notice 2008-16, if a PHA decides to transfer capital funds for public housing operations, that PHA must use a cost allocation system of accounting rather than the fee for service system. All program funds are not defederalized, and subject to HUD review. The PHA would not create a COCC, and must instead maintain an overhead internal service fund.

The draft guidance indicated that PHAs opting to transfer capital funds for operations still must report costs at the project level. Rather than having a fee for service expense item, however, each project will have an "allocated overhead" expense item that can be attributed to costs that would normally have been covered by the COCC.

A Not-So-Hypothetical
Byrne provided the following example: a PHA has a [central] Manager shared by 2 Asset Management Projects (AMP). The PHA determines that the proper ratio is 60 percent at AMP 1 and 40 percent at AMP 2. Sixty percent of the costs for that manager shows up on the "allocated overhead" line item of the FDS for AMP 1, and 40 percent of the costs for that manager show up on the "allocated overhead" line item of the FDS for AMP 2. There will be no separate column for "management," rather there will be an "allocated overhead" row on each operating statement.

Byrne indicated that program funds attributed to "allocated overhead" may be subject to A-87 reviews, and that HUD will create guidance on how HUD will determine reasonable costs under the cost allocation method.

Byrne also led a discussion regarding allowable expenditures under the capital fund. He noted that PHAs opting to use labor paid by the force account for capital work would have to charge actual expenses rather than fees for service. Byrne reiterated that housing authorities that opt to use any capital fund money for "management improvements" to the COCC must switch to the cost allocation system of accounting, even if the transfer occurs mid year.

Finally, participants discussed new FDS reporting requirements. Byrne said that "HUD does not expect to change the currently available FDS, other than to add a line for ‘allocated overhead.’" He went on to say that HUD has decided to allow PHAs to extend from 60 days to90 days to submit unaudited financials during the first year. He was not sure, however, whether HUD will require that unaudited financials be submitted within 90-days of the end of the fiscal year, or within 90-days of the date that the submission system is made available.

One participant inquired about how PHAs can determine which projects should be reported, and which projects will get scored. Byrne mentioned that in the transition year, PHAs will not be scored on financials, and reiterated that a proposed rule, subject to industry comments, will be published regarding these questions. Byrne said that HUD will be holding training at headquarters once the FDS is finalized.

Byrne said that he will meet with staff, circulate notes from the call with participants, and that he hopes to hold another such call prior to publishing final guidance

CLPHA will continue to monitor the implementation of asset management and raise concerns as they arise. If any CLPHA members would be interested in participating in future conference calls on asset management, please contact Todd Thomas, Housing Policy Analyst, at .

 

Houston PHA Named ‘High Performer’
For Housing Choice Voucher Program
The Houston Housing Authority (HHA) has successfully re-positioned its operations to become a HUD-designated "high performer" for its operation of the Section 8 Housing Choice Voucher Program. This is the highest designation HUD awards for operating such programs nationwide.

A major emphasis by the Houston Housing Authority over the last several years was to make the Housing Choice Voucher Program more viable and efficient to those it serves. "Our immediate goal was to restore confidence in the program’s integrity, its effectiveness and operational accountability to clients, tax-payers and HUD," said Ernie Etuk, President and CEO of HHA.

The HUD designation "is a testimony of how the organization stayed committed and dedicated to their mission to improve lives by providing quality, affordable housing options and promoting education and economic self-sufficiency," said Timothy Seckinger, chair of the HHA Board of Commissioners. "This is one of my prouder moments for HHA."

HHA achieved its new rating even as it dealt with the aftermath of an influx of new residents to the community because of Hurricanes Katrina and Rita.

HHA implemented several initiatives to help raise the bar to increase efficiency and ensure that clients received quality services. Among those initiatives were intensive re-training of all technical and support staff, realignment of operations, enhanced technology and the use of customer satisfaction instruments to gauge our performance.

"In acknowledging this achievement, we are honored and proud of the work of our many dedicated employees and the meaningful collaborative alliance with the HUD Regional Office whose effort has led to this recognition," said Etuk. "As challenging and daunting as it may be," said Etuk, "it is now important that we view our work through the eyes of the people we serve, particularly those who are truly most vulnerable."

HHA currently assists more than 15,000 families with affordable housing through the Section 8 Housing Choice Voucher Program.

 

HUD Opposes Asset
Management Legislation
If the asset management legislation to be considered by the House Financial Services Committee next week was to reach President Bush’s desk, "his senior advisors would recommend he veto the bill." That message was sent last week by HUD Deputy Secretary Roy Bernardi in a letter to the committee’s chair, Rep. Barney Frank (D-MA). The "Public Housing Asset Management Improvement Act," was introduced by Rep. Albio Sires (D-NJ) earlier this month and is cosponsored by Frank and Rep. Kendrick Meek (D-FL).

HUD opposes provisions of H.R. 5829 that would make resident community service and work requirements optional, restore the Public Housing Drug Elimination Program, exempt PHAs with fewer than 500 units from asset management requirements, and requirements related to resident and tenant organization participation in asset management implementation.

Further, said Bernardi, eliminating restrictions on the amount of management and related fees that a PHA could charge through January 2011 would "promote program inefficiency, likely reduce funds available to directly assist tenant, and erode effective program oversight and accountability." Provisions of the bill that "giving wide latitude to a PHA’s determination and use of management fees are directly contrary to the interests of public housing residents" and "direct valuable resources away from the direct operation of public housing projects in favor of central overhead."

The asset management bill is strongly backed by CLPHA and its industry partners.

 

Section 8 Project-Based Problems
Scrutinized by House Appropriators
Private landlords are facing some of the same financial difficulties experienced by PHAs.

That was made evident last week as housing preservation advocates and representatives of the industry told a Congressional panel that private landlords will opt-out of the Section 8 Project-Based Voucher program in record numbers, neglect needed repairs, and default on their properties unless the Federal Government institutes a reliable payment system for the program.

The hearing focused not only the present and future, but on the recent past: Last summer HUD failed to make payments to project-based landlords because funds for the program were exhausted. Eventually, after payments were missed on project-based properties for two months or more, HUD used $300 million from another long term Section 8 account to support the program. But those testifying before the House Appropriations Subcommittee on Transportation and HUD told panel members that the funding problems are far from over and that the uncertainty highlighted by the missed payments endangers the program.

"Owners throughout the nation received letters that explicitly provided that while the owner is asked to sign a year-long contract, HUD does not have sufficient funds to provide Section 8 through the terms of that contract," Michael Bodaken, president of the National Housing Trust, told the subcommittee. "The owner is left in the position of hoping that HUD will eventually continue the contract after the first few months of the contract," said Bodaken.

J. Kenneth Pagano, representing the National Affordable Housing Management Association, shared Bodaken’s assessment. "At every anniversary date for multi-year contracts, HUD is notifying owners when it does not have enough funding to pay for the full 12 month annual increment," said Pagano. "HUD’s letters state how much funding will be provided to cover a specific number of months and that HUD will obligate additional funding when appropriations are available."

Opt-Outs Possible
The uncertain funding stream, said Pagano and Bodaken, makes opting out of the program a strong temptation.

"It is unrealistic to expect in desirable neighborhoods to put up with the status quo indefinitely," said Pagano. "Stop-and-go contract funding, along with complicated, expensive regulatory requirements, are making it difficult for management agents to convince owners to stay in the program. I am personally feeling pressure to opt-out from the partners on some properties I manage."

Said Bodaken, "There is little question that owners of these properties will have every incentive to opt out of the program so long as HUD does not provide a full year, annual contract. Indeed, some will argue that owners should file 12 month notices to opt out of the program simply to protect their investment."

HUD bears much of the blame for the situation, Larry Minnix, president and CEO of the American Association of the Homes and Services for the Aging, told the panel. "HUD has repeatedly requested too little funding for the project-based Section 8 account to meet the existing need. HUD has borrowed from long-term contracts within its project-based Section 8 portfolio – those that received full funding initially – to meet the current funding obligations for contract renewals and now there are no more contract from which to borrow."

Subcommittee Chair John Olver (D-MA) was also critical of HUD and the Office of Management and Budget (OMB). "In FY 2007, HUD’s legal office determined that the ‘short-funding’ of contracts … constituted a potential violation of the Anti-Deficiency Act (ADA)," said Olver. "…it was the wholly inadequate response to this legal opinion, by both HUD and OMB that created the current crisis in the Section 8 Program. Instead of requesting additional funding from Congress to cover the shortfall, HUD began to issue 3 to 5 month contracts to landlords, instilling a crisis of confidence in the long-term viability of the program."

Meanwhile, said Bodaken, owners unable to opt-out may choose another bad option.

Defaults Could Occur
"While technical defaults over depleted reserves can often be worked out with considerable effort among all parties, when projected rents do not materialize, simple real estate math can’t be negotiated. If we don’t have sufficient funds to pay the mortgage and run the property safely and soundly, our lender will foreclose," he said. Bodaken estimated the total amount of FHA Insurance exposure to nonpayment of Section 8 contracts by HUD at approximately $230 million. "Especially now, foreclosure is not an option to inject into the rent housing industry in this country," he said.

Further, warned Minnix, "HUD’s short-funding of project will have a growing effect on the physical properties due to deferred capital improvement, and even routine maintenance. With short –term contracts, providers are understandably hesitant to enter into long-term project and repairs that they may not have the funding to pay for in the near future."

Federal Housing Commissioner Brian Montgomery acknowledged "that there have been challenges in the administration of this program" and apologized for the lapsed payments. But, he said, HUD believes it can meet FY 2008 contract renewal funding needs. "With the amounts now available in FY 2008, and the request for FY 2009, we are confident that HUD will be able to avoid the unfortunate disruptions in project-based Section 8 HAP payments that occurred during 2007."

Olver expressed some skepticism. "The Administration has proposed $7 billion [for FY 2009], which is over $600 million more than we provided last year, as well as an advance appropriation of $400 million to help extend contracts into the new fiscal year. This is clearly a step in the right direction, but with an estimated funding gap of about $2.8 billion, we still have a long way to go to stabilize and restore confidence in the program."

 

PHAs Look To Project-
Based Strategies
Large PHAs are increasingly looking to project-based vouchers to meet the housing needs of their communities. That is among the preliminary findings of an ongoing survey CLPHA is conducting on the use of project-based vouchers by its members.

Among the reasons cited for increased use of project-based vouchers:

-- Preservation of units and support for replacement housing funds;

-- New development, particularly mixed-income development;

-- Supportive housing for homeless families;

-- Leveraging of resources with non-profits; and

-- To achieve deconcentration through the equitable distribution of affordable housing.

Project-based vouchers as a percentage of total vouchers in a PHA’s portfolio ranged from a low of less than one percent to more than 20 percent among survey respondents. Several housing authorities have converted public housing units to project-based voucher units.

CLPHA is continuing to gather data on how its members use project-based vouchers. If you have yet to respond to the CLPHA survey but have information that might be useful to the effort, please contact Housing Policy Analyst Alison Bell at .

 

Senators Back Boost in Capital
And Operating Funds
A bi-partisan group of 27 senators are urging their colleagues on the Appropriations Committee to support public housing Capital and Operating funding levels recommended by CLPHA.

"As you consider the Fiscal Year 2009 Transportation, Housing and Urban Development and Related Agencies Appropriation bill, we urge you to increase funding for public housing and provide $5.3 billion for the Public Housing Operating Fund and $3.5 billion for the Public Housing Capital Fund," said the April 24 "Dear Colleague" letter addressed to Sens. Patty Murray (D-WA) and Christopher Bond (R-MO), chair and ranking member of the Appropriations Subcommittee on Transportation, HUD and Related Agencies.

"Full funding for these public housing programs will prevent … disruption of services and allow the public housing authorities to continue operating their projects in a safe and affordable manner," says the letter.

Meanwhile, in written testimony submitted April 25 to the subcommittee, CLPHA urged support for the same level of funding requested by the senators in their letter. CLPHA also called on the subcommittee to fund the HOPE VI program at $800 million, fully fund the tenant-based Housing Choice Voucher program and Tenant Protection Vouchers, provide $1.54 billion in Section 8 administrative fees, appropriate $310 million for the Public Housing Drug Elimination Program and $55 million for the Resident Opportunity Supportive Services program, and fully fund Service Coordinators for the elderly and disabled at $50 million.

 

Chief Financial Officer
The Housing Authority of the City of El Paso seeks a Chief Financial Officer. Reports to the Executive Director.

The CFO is responsible for planning, directing, monitoring and coordination of financial functions involving accounting, budget administration, treasury management, tenant billing, payroll and financial reporting. The CFO provides professional leadership in economic, financial and investment planning. Assists the Executive Director in determining the Housing Authority’s strategic plan and short and long-term financial goals. Oversees the acquisition, accountability and disposal of fixed assets. Prepares reports, grant applications and statistics as required by the United States Department of Housing and Urban Development (HUD.)

Qualifications: Bachelor’s Degree from an accredited college or university in Business Administration with emphasis in accounting, finance or related field and seven (7) years of progressively responsible experience in accounting of non-profit or government administration including five (5) years in a supervisory capacity; or an equivalent combination of experience and education. Must be a Certified Public Accountant (CPA) or must attain certification within one year of hire. Must possess a valid United States Driver’s License; be bondable and eligible for coverage under fleet auto insurance.(Copies of all pertinent educational qualification and any other relevant certification received must be enclosed with the application.)Starting Salary: $100,000.00 (May vary depending on education and experience.) Deadline: Open until filled.

Submit Applications to: Human Resources Dpt., 5300 E. Paisano Dr., El Paso, Texas 79905, or email resume to jobs@hacep.org. Equal Opportunity Employer. Note: Background checks and drug screening test will be conducted. For Applications, visit http://www.hacep.org/.

Section 8/Rental Housing Administrator.
Work in the beautiful resort city of Virginia Beach, Virginia. Manage all aspects of a 1,900 unit housing choice voucher program and related rental housing programs. Insure high performance on all HUD requirements as well as meet city expectations for performance. Manage staff of 15 and budget of $14 million as part of a dynamic city department. Experience as an HCV supervisor or administrator is highly preferred. For details and to apply, visit www.vbcareers4gov.com/. The deadline for applications is May 16.