asset management orientation for pha boards. overview of asset management orientation for pha boards...
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Asset Management Asset Management Orientation for PHA Boards Orientation for PHA Boards
Overview of Asset Management Overview of Asset Management Orientation for PHA BoardsOrientation for PHA Boards
Section 1: Overview of Asset Management
Section 2: Asset Management Building Blocks
Section 3: The Central Office Cost Center
Training FormatTraining Format
Designed for PHA Board membersDesigned for PHA Board members
Based on the curriculum presented at live, Based on the curriculum presented at live, regional training sessions conducted in 2007regional training sessions conducted in 2007
Features include:Features include: Fully narrated presentation slidesFully narrated presentation slides Ability to navigate between slides Ability to navigate between slides Exercises in each section Exercises in each section Ability to download the training to your Ability to download the training to your
computercomputer Access to reference materials and websitesAccess to reference materials and websites
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Basic Instructions for Presentation Basic Instructions for Presentation ViewerViewer
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Section 1: Overview of Section 1: Overview of Asset Management Asset Management
Overview of Asset Management Overview of Asset Management Learning ObjectivesLearning Objectives
Provide a brief history of the events Provide a brief history of the events leading up to Public Housing’s conversion leading up to Public Housing’s conversion to asset managementto asset management
Identify key dates associated with the Identify key dates associated with the transition to asset managementtransition to asset management
Define asset managementDefine asset management Distinguish asset management from Distinguish asset management from
property managementproperty management Describe key roles and responsibilities Describe key roles and responsibilities
under asset management, particularly the under asset management, particularly the PHA Board’s role as ownerPHA Board’s role as owner
History and BackgroundHistory and Background
1998: Quality Housing and Work 1998: Quality Housing and Work Responsibility ActResponsibility Act
1999: Negotiated-Rulemaking I, Funding of Harvard 1999: Negotiated-Rulemaking I, Funding of Harvard Cost StudyCost Study
2003: Cost Study Completed2003: Cost Study Completed 2004: Negotiated-Rulemaking II2004: Negotiated-Rulemaking II 2005: Final Rule on Operating Fund Program2005: Final Rule on Operating Fund Program
• New Operating Subsidy FormulaNew Operating Subsidy Formula• Asset Management Requirement for PHAs with 250+ UnitsAsset Management Requirement for PHAs with 250+ Units
2006: PIH Notice 2006-33 2006: PIH Notice 2006-33 (Interim Guidance/Financial Reporting)(Interim Guidance/Financial Reporting)
2007: PIH Notice 2007-09 (Final Guidance/Financial 2007: PIH Notice 2007-09 (Final Guidance/Financial Reporting)Reporting)
2008 Appropriations Bill (Include full name here)2008 Appropriations Bill (Include full name here)
A Look at the PHA InventoryA Look at the PHA Inventory
Size CategorySize Category Number of Number of PHAsPHAs
% of Total % of Total UnitsUnits
Less than 250 unitsLess than 250 units 2,3272,327 17%17%
250 or more units250 or more units 805805 83%83%
Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.
Gainers and Decliners Under the New Gainers and Decliners Under the New Operating Fund FormulaOperating Fund Formula
Gainers/Decliners Gainers/Decliners CategoryCategory
Number of Number of PHAsPHAs
% of Total % of Total PHAsPHAs
GainersGainers 2,3042,304 74%74%
DeclinersDecliners 814814 26%26%
Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.
““PHAs shall manage their properties PHAs shall manage their properties according to an asset management model, according to an asset management model, consistent with the management norms in consistent with the management norms in the broader multi-family management the broader multi-family management industry. PHAs shall also implement industry. PHAs shall also implement project-based management, project-based project-based management, project-based budgeting, and project-based accounting, budgeting, and project-based accounting, which are essential components of asset which are essential components of asset management.”management.”
Revisions to the Public Housing Operating Fund Program; Revisions to the Public Housing Operating Fund Program; Final RuleFinal Rule
HUD, September 19, 2005HUD, September 19, 2005
Central Tenet of Asset ManagementCentral Tenet of Asset Management
Key Implementation DatesKey Implementation Dates Determination of Asset Management Projects Determination of Asset Management Projects
(AMPs) – Calendar Year 2006(AMPs) – Calendar Year 2006
Implementation of new Operating Fund Formula – Implementation of new Operating Fund Formula – Calendar Year 2007Calendar Year 2007
Project-Based Budgeting/Accounting (PBB/A) – Project-Based Budgeting/Accounting (PBB/A) – Fiscal Year 2007Fiscal Year 2007
Cost Reasonableness Standards – Fiscal Year 2008Cost Reasonableness Standards – Fiscal Year 2008
New Public Housing Assessment System – Effective New Public Housing Assessment System – Effective Second Year of PBB/ASecond Year of PBB/A
Full implementation of Asset Management – Fiscal Full implementation of Asset Management – Fiscal Year 2011Year 2011
Effective Dates for ImplementationEffective Dates for Implementation
PHA Fiscal PHA Fiscal Year-EndYear-End
PBB and PBAPBB and PBA Cost Cost ReasonablenessReasonableness**
JuneJune 7/1/2007 through 7/1/2007 through 6/30/2008 6/30/2008
7/1/2008 through 7/1/2008 through 6/30/2009 6/30/2009
SeptSept 10/1/2007 through 10/1/2007 through 9/30/20089/30/2008
10/1/2008 through 10/1/2008 through 9/30/2009 9/30/2009
DecDec 1/1/2008 through 1/1/2008 through 12/31/2008 12/31/2008
1/1/2009 through 1/1/2009 through 12/31/2009 12/31/2009
MarMar 4/1/2008 through 4/1/2008 through 3/31/2009 3/31/2009
4/1/2009 through 4/1/2009 through 3/31/2010 3/31/2010
*Extension through 2011 on case-by-case basis*Extension through 2011 on case-by-case basis
Asset Management DefinitionAsset Management Definition
Asset management…is Asset management…is a processa process of of making making investment decisionsinvestment decisions for a for a collection (portfolio) of collection (portfolio) of assetsassets, based , based
on the on the mission, goals, and mission, goals, and objectives of the owner, lender, objectives of the owner, lender,
sponsor, or regulatory body.sponsor, or regulatory body.
Asset Management vs. Asset Management vs. Property ManagementProperty Management
Asset ManagementAsset Management Mission/goals/policiesMission/goals/policies Strategic decision makingStrategic decision making
Property ManagementProperty Management Day-to-day management/operationsDay-to-day management/operations
A Look at A Look at Entities, Roles and FunctionsEntities, Roles and Functions
PIHField Offices
PHA Staff or Mgmt
Company
PHA Board
Entity Role Function
Owner
Regulator
OperatorProperty
Management
Oversight and
Monitoring
Asset Management
Difference in PHA MissionsDifference in PHA Missions
Who to serveWho to serve Quality of housing Quality of housing Standard of affordabilityStandard of affordability Social goalsSocial goals
Operating Fund Program Final Rule Operating Fund Program Final Rule and Small PHAsand Small PHAs
PHAs with fewer than 250 units are not PHAs with fewer than 250 units are not required to convert to asset management. required to convert to asset management. Still, they will be:Still, they will be:• Subject to new funding formulaSubject to new funding formula• Required to use the new year-end financial Required to use the new year-end financial
reporting template (FDS, or Financial Data reporting template (FDS, or Financial Data Schedule)Schedule)
• Affected by change in PHASAffected by change in PHAS Small PHAs may choose to implement Small PHAs may choose to implement
asset management and follow the key asset management and follow the key business rules like any larger PHAbusiness rules like any larger PHA
PHA Board: Owner RolePHA Board: Owner Role
Review activities for conformance with Review activities for conformance with missions and goalsmissions and goals
Evaluate progress and recommend Evaluate progress and recommend corrective actioncorrective action
Monitor performance Monitor performance Stay up-to-date on industry informationStay up-to-date on industry information Foster relationships with key stakeholdersFoster relationships with key stakeholders
Asset Management Changes from Asset Management Changes from Appropriations Act of 2008Appropriations Act of 2008
The Consolidated Appropriations Act of 2008 The Consolidated Appropriations Act of 2008 contained two provisions which pertain directly to contained two provisions which pertain directly to asset management. The two provisions are:asset management. The two provisions are:
• PHA election to be exempt from asset management PHA election to be exempt from asset management for PHAs with 250-400 units for PHAs with 250-400 units
• Use of Capital Fund proceeds to pay for central Use of Capital Fund proceeds to pay for central office costsoffice costs
The first provision is only effective for CY 2008. The The first provision is only effective for CY 2008. The second is considered permanent legislation.second is considered permanent legislation.
400-Unit Exemption for CY 2008400-Unit Exemption for CY 2008
For the purpose of being exempt from asset For the purpose of being exempt from asset management, the size threshold increased from management, the size threshold increased from 250 units to 400 units250 units to 400 units
Does not change small PHA threshold for other Does not change small PHA threshold for other program areasprogram areas
PHAs between 250-400 units that elect to convert PHAs between 250-400 units that elect to convert will not have option of “alternative asset will not have option of “alternative asset management model” (available only for PHAs of management model” (available only for PHAs of less than 250 units) less than 250 units)
Exemption only authorized for CY 2008Exemption only authorized for CY 2008 PHA must notify HUD via CY 2008 operating PHA must notify HUD via CY 2008 operating
subsidy submissions by April 25, 2008subsidy submissions by April 25, 2008
400-Unit Exemption: Implications400-Unit Exemption: Implications
Will not implement fee for service model, Will not implement fee for service model, and will not create a COCCand will not create a COCC
Will not receive the $4 PUM asset Will not receive the $4 PUM asset management add-onmanagement add-on
All units will be combined into one AMP, All units will be combined into one AMP, possibly affecting Project Expense Levels possibly affecting Project Expense Levels (PELs)(PELs)
Refer to PIH Notice 2008-16 for additional Refer to PIH Notice 2008-16 for additional implicationsimplications
Capital Fund Program ChangesCapital Fund Program Changes
PHAs may transfer Capital Funds to Operations PHAs may transfer Capital Funds to Operations for payment of central office costs for payment of central office costs
In implementing this provision, PHAs must In implementing this provision, PHAs must maintain cost allocations for overhead costs (in maintain cost allocations for overhead costs (in lieu of fee-for-service/management fees) and, lieu of fee-for-service/management fees) and, therefore, not establish a COCCtherefore, not establish a COCC
Overhead costs must still be considered Overhead costs must still be considered reasonable and necessaryreasonable and necessary
Large PHAs may still only transfer up to 20% to Large PHAs may still only transfer up to 20% to “Operations”“Operations”
Workshop 1.1: Asset Management Workshop 1.1: Asset Management Change AssessmentChange Assessment
How might asset management change the How might asset management change the way your PHA does business? way your PHA does business?
As a group, please discuss and provide an As a group, please discuss and provide an answer to the question above. answer to the question above.
End of Section 1End of Section 1
Section 2: Asset Management Section 2: Asset Management Building Blocks Building Blocks
Asset Management Building Blocks Asset Management Building Blocks Learning ObjectivesLearning Objectives
Introduce the five building blocks of asset Introduce the five building blocks of asset managementmanagement
Initial Priorities/Building BlocksInitial Priorities/Building Blocks
Project-based fundingProject-based funding
Project-based budgetingProject-based budgeting
Project-based accountingProject-based accounting
Project-based managementProject-based management
Project-based Project-based performance assessmentperformance assessment
Project-Based FundingProject-Based Funding
Separate subsidy form for each projectSeparate subsidy form for each project Project Expense Level (PEL) is a major Project Expense Level (PEL) is a major
componentcomponent Ensures appropriate resources are allocated Ensures appropriate resources are allocated
to each AMPto each AMP
Project-based fundingProject-based funding
The Flow of FundsThe Flow of Funds
• Property Management Fee
• Asset Management Fee
• Bookkeeping Fee
• Fee-for-Service
• Program Mgmt. Fees.
HUD PHAOLD$
HUD
AMP
NEW PHA/COCC
$ Subsidy $ Fees
Components of Formula FundingComponents of Formula Funding
To understand the amount of funds To understand the amount of funds available to any project, one must available to any project, one must understand the following:understand the following: Project Expense Level (PEL)Project Expense Level (PEL) Utility Expense Level (UEL)Utility Expense Level (UEL) Add-OnsAdd-Ons Frozen Formula IncomeFrozen Formula Income ProrationProration
Project Expense Level (PEL)Project Expense Level (PEL) Model-generated estimate of cost to operate a Model-generated estimate of cost to operate a
project on a per unit basis, exclusive of taxes, project on a per unit basis, exclusive of taxes, utilities, and add-onsutilities, and add-ons
Amount expressed in PUMs (per unit month)Amount expressed in PUMs (per unit month) Major coefficients that have a large impact on Major coefficients that have a large impact on
PELPEL Unit Size (Bedroom Mix)Unit Size (Bedroom Mix) Local MarketLocal Market Age of PropertyAge of Property Occupancy Type (Family vs. Elderly)Occupancy Type (Family vs. Elderly)
National average was $ 325 PUM in 2007 National average was $ 325 PUM in 2007 (excluding New York City Housing Authority)(excluding New York City Housing Authority)
Utility Expense Level (UEL)Utility Expense Level (UEL)
Represents the average utility consumption Represents the average utility consumption for a project over the past three years, for a project over the past three years, multiplied by recent utility ratesmultiplied by recent utility rates
Amount expressed in PUMsAmount expressed in PUMs
National average was $125.95 PUM in 2007National average was $125.95 PUM in 2007
Assigned UEL will vary by projectAssigned UEL will vary by project
2007 Add-Ons2007 Add-Ons
Add-OnsAdd-Ons AmountAmount PUMPUM
Self-SufficiencySelf-Sufficiency $ 13,093,430$ 13,093,430 $ 1.00$ 1.00
Energy Loan AmortizationEnergy Loan Amortization $ 16,844,422$ 16,844,422 $ 1.29$ 1.29
Payment in Lieu of TaxesPayment in Lieu of Taxes $ 95,199,853$ 95,199,853 $ 7.26$ 7.26
Cost of Independent AuditCost of Independent Audit $ 17,159,716$ 17,159,716 $ 1.31$ 1.31
Resident ParticipationResident Participation $ 24,860,325$ 24,860,325 $ 1.90$ 1.90
Asset Management FeeAsset Management Fee $ 42,777,668$ 42,777,668 $ 3.26$ 3.26
IT (Info. Technology) FeeIT (Info. Technology) Fee $ 26,215,754$ 26,215,754 $ 2.00$ 2.00
Asset RepositioningAsset Repositioning $ 43,329,841$ 43,329,841 $ 3.31$ 3.31
Total Add-Ons Total Add-Ons $279,481,009$279,481,009 $21.32$21.32
Frozen Formula IncomeFrozen Formula Income
Equal to a project’s rental income reported Equal to a project’s rental income reported on 2004 financial statements, adjusted for on 2004 financial statements, adjusted for changes in utility allowanceschanges in utility allowances
Effective for 2007 through 2009Effective for 2007 through 2009 National average was $181.09 PUM in National average was $181.09 PUM in
20072007
ProrationProration
Each year, total subsidy eligibility is Each year, total subsidy eligibility is compared with appropriations for the compared with appropriations for the Operating Fund program; the difference is Operating Fund program; the difference is prorationproration
Expressed as a percentageExpressed as a percentage Example: Example:
Eligibility = $4.0 billionEligibility = $4.0 billion Appropriation = $3.6 billionAppropriation = $3.6 billion Proration = 90%Proration = 90%
Determining Project Funding Determining Project Funding
Project Expense Level (PEL)Project Expense Level (PEL)
+ Utilities Expense Level (UEL)+ Utilities Expense Level (UEL)
+ Add-ons+ Add-ons
= Formula Expenses= Formula Expenses
- Formula Income- Formula Income
= Subsidy Eligibility= Subsidy Eligibility
- Proration- Proration
= Actual Subsidy= Actual Subsidy
+ Rental Income+ Rental Income
+ Other Income+ Other Income
+ Transfers+ Transfers
= Effective Income= Effective Income
Effective IncomeEffective Income
- Operating Expenses- Operating Expenses
= Net Income= Net Income
Project-Based BudgetingProject-Based Budgeting
Used for planning purposes Used for planning purposes Budgeted amounts must reconcile to FDSBudgeted amounts must reconcile to FDS Must be approved by PHA BoardMust be approved by PHA Board Not subject to HUD approval Not subject to HUD approval
Project-based funding
Project-based budgetingProject-based budgeting
Project-Based Budgeting Project-Based Budgeting (continued)(continued)
What are project-based budgets?What are project-based budgets? Itemized projection of income and Itemized projection of income and
expenses over a specific periodexpenses over a specific period Guideline for operating the projectGuideline for operating the project
Sample Conventional BudgetSample Conventional Budget
Gross Potential Income (GPI)Gross Potential Income (GPI)
- - Vacancy and Collection LossVacancy and Collection Loss
+ + Miscellaneous IncomeMiscellaneous Income
= Effective Gross Income (EGI)= Effective Gross Income (EGI)
- - Operating ExpensesOperating Expenses
= Net Operating Income (NOI)= Net Operating Income (NOI)
- - Reserves for ReplacementReserves for Replacement
- - Annual Debt Service (ADS)Annual Debt Service (ADS)
= Cash Flow= Cash Flow
Ratios Used for Expense Ratios Used for Expense BenchmarkingBenchmarking
Operating Expense Operating Expense
Ratio (%) = Ratio (%) =
Operating Expense Operating Expense
per Unit ($) = per Unit ($) =
Several variables may impact benchmarks Several variables may impact benchmarks Expense benchmarks can be used to Expense benchmarks can be used to
compare efficiencies across propertiescompare efficiencies across properties
Operating ExpensesOperating ExpensesIncomeIncome
Operating ExpensesOperating ExpensesNumber of UnitsNumber of Units
Workshop 2.1: Expense BenchmarksWorkshop 2.1: Expense Benchmarks
Consider data from two similar apartment Consider data from two similar apartment buildings shown on the next slidebuildings shown on the next slide
Calculate the Operating Expense Ratio and Calculate the Operating Expense Ratio and Operating Expense/Unit RatioOperating Expense/Unit Ratio
In groups, identify the project with the In groups, identify the project with the lowest costslowest costs
What other factors should be considered What other factors should be considered when evaluating the results of this cost when evaluating the results of this cost comparison?comparison?
Workshop 2.1: Expense BenchmarksWorkshop 2.1: Expense Benchmarks
Hamilton PlaceHamilton Place Southside Southside ApartmentsApartments
# of Units# of Units 2020 1010
IncomeIncome $175,000$175,000 $160,000$160,000
Operating Operating ExpensesExpenses
$150,000$150,000 $145,000$145,000
OpEx OpEx RatioRatio
OpEx/OpEx/UnitUnit
86%86% 91%91%
$7,500$7,500 $14,500$14,500
Calculating Expense BenchmarksCalculating Expense Benchmarks
Hamilton Place:Hamilton Place: Operating Expense Ratio: Operating Expense Ratio: $150,000 (Operating Expense)/$175,000 (Income) = 86%$150,000 (Operating Expense)/$175,000 (Income) = 86%
Operating Expense per Unit: Operating Expense per Unit: $150,000 (Operating Expense)/20 (Number of Units) =$150,000 (Operating Expense)/20 (Number of Units) =$ 7,500$ 7,500
Southside Apartments:Southside Apartments: Operating Expense Ratio: Operating Expense Ratio: $145,000 (Operating Expense)/$160,000 (Income) = 91% $145,000 (Operating Expense)/$160,000 (Income) = 91%
Operating Expense per Unit:Operating Expense per Unit:$145,000 (Operating Expense)/10 (Number of Units)=$145,000 (Operating Expense)/10 (Number of Units)=$ 14,500$ 14,500
Where Can I Find Benchmarks?Where Can I Find Benchmarks?
Project Expense Levels (PELs)Project Expense Levels (PELs) Project Level DataProject Level Data IREM Income/Expense AnalysisIREM Income/Expense Analysis®® Reports Reports
• www.irem.orgwww.irem.org Housing Finance AgenciesHousing Finance Agencies NeighborWorks (small properties)NeighborWorks (small properties) Rural DevelopmentRural Development Local and Regional Market StudiesLocal and Regional Market Studies
Project-Based AccountingProject-Based Accounting Year-end project statements submitted to Year-end project statements submitted to
HUDHUD Can only charge projects for services Can only charge projects for services
actually receivedactually received Fees must be Fees must be
considered considered reasonablereasonable
Project-based funding
Project-based budgeting
Project-based accountingProject-based accounting
Project-Based Accounting Project-Based Accounting (continued)(continued)
For conventional properties, the financial For conventional properties, the financial performance of each property is tracked performance of each property is tracked individually and reported to the ownerindividually and reported to the owner
This allows the manager and owner to This allows the manager and owner to make the best possible decisions for each make the best possible decisions for each individual propertyindividual property
Similarly, PHAs will assemble project level Similarly, PHAs will assemble project level financial datafinancial data
Project-Based AccountingProject-Based Accounting Under the Final Rule Under the Final Rule
Annual year-end financial statements on Annual year-end financial statements on each AMP will be requiredeach AMP will be required
Revenues, expenses, balance sheetRevenues, expenses, balance sheet To be included with the Financial Data To be included with the Financial Data
Schedule (FDS)Schedule (FDS) FDS will also be revised to include a column FDS will also be revised to include a column
for the COCCfor the COCC
Entity-Wide FDS Entity-Wide FDS Financial Reporting Model (Existing)Financial Reporting Model (Existing)
Balance SheetBalance Sheet
ProgramProgram
TotalTotalOperating Operating FundFund
Capital Capital FundFund
Section Section 8 8
Voucher Voucher ProgramProgram
Rural Rural HousingHousing
Statement of Statement of Net AssetsNet Assets
AssetsAssets $10,000,000$10,000,000 $500,000$500,000 $250,000$250,000 $750,000$750,000 $11,500,000$11,500,000
LiabilitiesLiabilities $5,000,000$5,000,000 $100,000$100,000 $200,000$200,000 $250,000$250,000 $5,550,000$5,550,000
Net AssetsNet Assets $5,000,000$5,000,000 $400,000$400,000 $50,000$50,000 $500,000$500,000 $5,950,000$5,950,000
Liabilities and Liabilities and Net Assets Net Assets $10,000,000$10,000,000 $500,000$500,000 $250,000$250,000 $750,000$750,000 $11,500,000$11,500,000
Asset Management Project FDS Asset Management Project FDS Financial Reporting Model (New)Financial Reporting Model (New)
Financial Financial StatementStatement
Asset Management ProjectsAsset Management Projects
TotalTotalProject 1Project 1 Project 2Project 2 Project 3Project 3
Balance Balance SheetSheet
AssetsAssets $3,434,000$3,434,000 $3,253,000$3,253,000 $3,131,000$3,131,000 $9,818,000$9,818,000
LiabilitiesLiabilities $1,649,000$1,649,000 $1,521,500$1,521,500 $1,503,500$1,503,500 $4,674,000$4,674,000
EquityEquity $1,785,000$1,785,000 $1,731,500$1,731,500 $1,627,500$1,627,500 $5,144,000$5,144,000
Operating Operating StatementStatement
RevenueRevenue $588,200$588,200 $527,500$527,500 $536,300$536,300 $1,652,000$1,652,000
ExpensesExpenses $462,400$462,400 $429,000$429,000 $421,600$421,600 $1,313,000$1,313,000
Net IncomeNet Income $125,800$125,800 $98,500$98,500 $114,700$114,700 $339,000$339,000
Project-Based ManagementProject-Based Management
Arrange services in the best interest of the Arrange services in the best interest of the projectproject
Assign management personnel to each Assign management personnel to each projectproject
Project-based funding
Project-based budgeting
Project-based accounting
Project-based Project-based
managementmanagement
Project-Based Management (PBM)Project-Based Management (PBM)
““The provision of property-management services The provision of property-management services that is tailored to the unique needs of each that is tailored to the unique needs of each property, given the resources available to that property, given the resources available to that property...Under PBM, these property property...Under PBM, these property management services are arranged, coordinated, management services are arranged, coordinated, or overseen by management personnel who have or overseen by management personnel who have been assigned responsibility for the day-to-day been assigned responsibility for the day-to-day operation of that property and who are charged operation of that property and who are charged with direct oversight of operations of that with direct oversight of operations of that property.”property.”
24 CFR 99024 CFR 990
Why Practice PBM?Why Practice PBM?
Maximizes performance at all levelsMaximizes performance at all levels Local staff are closer to market changes Local staff are closer to market changes
and community issuesand community issues On-site staff can monitor the projectOn-site staff can monitor the project Response to resident issues is faster and Response to resident issues is faster and
more personalmore personal
Common Characteristics of PBMCommon Characteristics of PBM
Each project has an operating budget to Each project has an operating budget to be approved by the ownerbe approved by the owner
The project is assigned dedicated The project is assigned dedicated management and maintenance personnel management and maintenance personnel who frequently work on sitewho frequently work on site
If a project is too small to afford full-time If a project is too small to afford full-time staff, the project may have part-time or staff, the project may have part-time or shared staffshared staff
Common Characteristics of PBM Common Characteristics of PBM (Continued)(Continued)
Site personnel have significant authority Site personnel have significant authority and responsibility over the day-to-day and responsibility over the day-to-day operationsoperations
Most project management tasks are Most project management tasks are handled or coordinated by the on-site staffhandled or coordinated by the on-site staff
Procurement is done by on-site Procurement is done by on-site management and reviewed by supervisormanagement and reviewed by supervisor
The person primarily in charge of the The person primarily in charge of the project on a day-to-day basis, including project on a day-to-day basis, including maintenance, is the site managermaintenance, is the site manager
Project-Based Management ExampleProject-Based Management Example
You own a group of restaurants.You own a group of restaurants. Would you have a budget for each Would you have a budget for each
restaurant?restaurant? Would you hire a manager for each Would you hire a manager for each
restaurant?restaurant? What roles would you assign to on-site What roles would you assign to on-site
staff vs. central staff? staff vs. central staff?
Workshop 2.2: Assignment of Common Workshop 2.2: Assignment of Common TasksTasks
The table on the following slide list tasks The table on the following slide list tasks commonly associated with managing Public commonly associated with managing Public HousingHousing
As a group, determine whether each task As a group, determine whether each task should be performed on-site or centrally should be performed on-site or centrally under project-based managementunder project-based management
Workshop 2.2: Assignment of Common Tasks Workshop 2.2: Assignment of Common Tasks (Answers)(Answers)
TaskTask On-SiteOn-Site CentralCentral
Leasing units and enforcing the leaseLeasing units and enforcing the lease
Processing families for admission and submitting Processing families for admission and submitting 50058 forms as required50058 forms as required
Grant-writing and other predevelopment activitiesGrant-writing and other predevelopment activities
Reviewing project-level budgets and reportsReviewing project-level budgets and reports
Inspecting units, structures, and systems on a Inspecting units, structures, and systems on a frequent basisfrequent basis
Taking applications for admissionTaking applications for admission
Interacting with local government and HUDInteracting with local government and HUD
Overseeing the portfolio including tracking occupancy Overseeing the portfolio including tracking occupancy trendstrends
Preparing budgets for the propertyPreparing budgets for the property
Purchasing and ordering goods/servicesPurchasing and ordering goods/services
Deciding when a property needs revitalization, Deciding when a property needs revitalization, demolition, or dispositiondemolition, or disposition
Project-Based Project-Based Performance AssessmentPerformance Assessment
Revise PHAS to emphasize AMP Revise PHAS to emphasize AMP performanceperformance
Development of internal PHA monitoring Development of internal PHA monitoring mechanismsmechanisms
Project-based funding
Project-based budgeting
Project-based accounting
Project-based management
Project-based Project-based performance assessmentperformance assessment
HUD Oversight and the Public Housing HUD Oversight and the Public Housing Assessment System (PHAS) Assessment System (PHAS)
Each project will be evaluated on financial, Each project will be evaluated on financial, managerial, and physical aspects in managerial, and physical aspects in addition to use of Capital Funds addition to use of Capital Funds
New system will:New system will: Be consistent with the norms in multifamily Be consistent with the norms in multifamily
housinghousing Avoid PHA self-certificationsAvoid PHA self-certifications Rely on existing data sourcesRely on existing data sources Emphasize on-site management reviewsEmphasize on-site management reviews
Internal PHA Monitoring MechanismsInternal PHA Monitoring Mechanisms
Develop mechanisms to collect data to Develop mechanisms to collect data to measure actual AMP performance against measure actual AMP performance against goalsgoals
Goals must be clearly articulated in annual Goals must be clearly articulated in annual plans and budgets. For example, budget plans and budgets. For example, budget goals may include monthly income and goals may include monthly income and expenditures. expenditures.
Project GoalsProject Goals
In order to measure performance, goals In order to measure performance, goals must be articulatedmust be articulated
Annual budget preparation includes goals:Annual budget preparation includes goals:
Rent collectionsRent collections
VacanciesVacancies
Unit turnaroundsUnit turnarounds
InspectionsInspections
Maintenance services Maintenance services
Sample Monthly Project ReviewSample Monthly Project Review
55thth of month: Financial statements made of month: Financial statements made available available
77thth of month: Manager’s monthly Project Report of month: Manager’s monthly Project Report due to Regional Managerdue to Regional Manager
99thth of month: Meeting with Site Manager and of month: Meeting with Site Manager and Regional Manager to review performanceRegional Manager to review performance
1010thth of month: Regional Manager forwards of month: Regional Manager forwards narrative variance report to Director of PM and narrative variance report to Director of PM and ED, accompanying monthly financial reportED, accompanying monthly financial report
12th–1512th–15thth of month: ED reviews performance of month: ED reviews performance with Board and Committeeswith Board and Committees
Long-term Capital PlanningLong-term Capital Planningand Asset Repositioning and Asset Repositioning
Key information needed:Key information needed: Physical needs assessmentPhysical needs assessment Market dataMarket data Asset valueAsset value Funding sourcesFunding sources
Long-Term Capital PlanningLong-Term Capital Planningand Asset Repositioning: Strategiesand Asset Repositioning: Strategies
Asset strategies: Asset strategies: Hold/defer Hold/defer Hold/modernizeHold/modernize RefinanceRefinance Sale/disposition/demolitionSale/disposition/demolition
Each strategy must be compared against the Each strategy must be compared against the mission and goals of the agency mission and goals of the agency
End of Section 2End of Section 2
Section 3: The Central Office Section 3: The Central Office Cost CenterCost Center
The Central Office Cost Center: Learning The Central Office Cost Center: Learning ObjectivesObjectives
Explain the concept and requirements of Explain the concept and requirements of the Central Office Cost Center (COCC) the Central Office Cost Center (COCC) under the Final Rule under the Final Rule
Describe the allowable fees charged by the Describe the allowable fees charged by the COCCCOCC
Central Office Cost Center (COCC)Central Office Cost Center (COCC)
Owners of Multifamily properties employ Owners of Multifamily properties employ property management companies for the property management companies for the day-to-day operation of propertiesday-to-day operation of properties
The Central Office Cost Center will operate The Central Office Cost Center will operate like a property management companylike a property management company
Final Rule requires all large PHAs (250 or Final Rule requires all large PHAs (250 or more units) to establish a COCCmore units) to establish a COCC
Central Office Cost CenterCentral Office Cost Center
Business unit within the PHA that earns Business unit within the PHA that earns income from fees and/or by overseeing income from fees and/or by overseeing other business activityother business activity
Simplifies administrative requirementsSimplifies administrative requirements Provides greater flexibility to support Provides greater flexibility to support
mission of PHAmission of PHA
Review: The Flow of FundsReview: The Flow of Funds
• Property Management Fee
• Asset Management Fee
• Bookkeeping Fee
• Program Management Fees
• Fee-for-Service
HUD PHAOLD$
HUD
AMP
NEW PHA/COCC
$ Subsidy $ Fees
Types of Fee Income Types of Fee Income
Property management feeProperty management fee
Bookkeeping fee Bookkeeping fee
Asset management feeAsset management fee
Program management fees and other Program management fees and other business activitybusiness activity
Fee-for-service (e.g., centralized painting or Fee-for-service (e.g., centralized painting or extermination)extermination)
Property Management FeeProperty Management Fee
Fee charged to AMPs for oversight Fee charged to AMPs for oversight provided by COCCprovided by COCC
Replaces traditional PHA overhead Replaces traditional PHA overhead allocationsallocations
Based on occupied units and HUD-Based on occupied units and HUD-approved vacancies (not including limited approved vacancies (not including limited vacancies)vacancies)
Average management fee in HUD’s Average management fee in HUD’s multifamily housing programs was $35 multifamily housing programs was $35 PUM (2004)PUM (2004)
Methods of DeterminingMethods of DeterminingProperty Management FeesProperty Management Fees
8080thth percentile of fees paid by market percentile of fees paid by market
Local HUD multifamily fee schedulesLocal HUD multifamily fee schedules
Other compelling local market dataOther compelling local market data
Bookkeeping FeeBookkeeping Fee
COCC is permitted to charge a COCC is permitted to charge a bookkeeping fee for the project accounting bookkeeping fee for the project accounting function of $7.50 PUMfunction of $7.50 PUM
Based on occupied units and HUD-Based on occupied units and HUD-approved vacancies (not including limited approved vacancies (not including limited vacancies)vacancies)
Average bookkeeping fee in HUD’s Average bookkeeping fee in HUD’s multifamily housing programs was multifamily housing programs was approximately $3.50 PUM (2004)approximately $3.50 PUM (2004)
Asset Management FeeAsset Management Fee
Fees charged to AMPs for those tasks that Fees charged to AMPs for those tasks that would be residual if all property would be residual if all property management functions were contracted to management functions were contracted to a third-party ($10 PUM)a third-party ($10 PUM)
Subject to the availability of excess cashSubject to the availability of excess cash Based on total number of ACC unitsBased on total number of ACC units
Capital Fund Program Capital Fund Program Management FeeManagement Fee
Fee charged to the Capital Fund Program Fee charged to the Capital Fund Program for management related to capital for management related to capital activitiesactivities
COCC may charge up to 10% of total COCC may charge up to 10% of total Capital Fund Program grant as Capital Fund Program grant as management feemanagement fee
Housing Choice Voucher Program FeeHousing Choice Voucher Program Fee
Fees charged for all administrative work Fees charged for all administrative work performed by COCC staff related to the performed by COCC staff related to the operation of HCV programoperation of HCV program
Two different fees can be charged:Two different fees can be charged:• HCV Management Fee – Higher of either HCV Management Fee – Higher of either
20% of annual administrative fee or $12 20% of annual administrative fee or $12 PUM based on number of vouchers leased PUM based on number of vouchers leased
• HCV Bookkeeping Fee – $7.50 PUM based HCV Bookkeeping Fee – $7.50 PUM based on number of vouchers leasedon number of vouchers leased
Public Housing DevelopmentPublic Housing Development
Other HUD Programs (ROSS, HOPE VI, etc.)Other HUD Programs (ROSS, HOPE VI, etc.)
Other business activityOther business activity
Program Management Fees and Other Program Management Fees and Other IncomeIncome
Fee for Service: Centralized Front-Line Fee for Service: Centralized Front-Line FunctionsFunctions
PHAs may choose to centralize various PHAs may choose to centralize various front-line expense activities and charge front-line expense activities and charge AMPs a fee for these servicesAMPs a fee for these services
ExamplesExamples MaintenanceMaintenance Legal ServicesLegal Services
Fee for Service GuidelinesFee for Service Guidelines
PHAs must adhere to the following:PHAs must adhere to the following: Fees must be based on the market rate for Fees must be based on the market rate for
the work received and not the actual costthe work received and not the actual cost PHAs must use the fee for service approach PHAs must use the fee for service approach
for centrally provided maintenance for centrally provided maintenance Centrally provided front-line services must Centrally provided front-line services must
be in the best interest of the AMPs and be in the best interest of the AMPs and cannot cost more than if performed on-sitecannot cost more than if performed on-site
PHAs must maintain documentation for the PHAs must maintain documentation for the fees charged to the AMPsfees charged to the AMPs
Sample COCC Revenue from FeesSample COCC Revenue from Fees
Fee Fee Fee Calculation Fee Calculation Amount Amount
Management Fee Management Fee $40 x 1,000 units x 12 $40 x 1,000 units x 12 months x 97% occupancy months x 97% occupancy
$465,600 $465,600
Bookkeeping Fee Bookkeeping Fee $7.50 x 1,000 units x 12 $7.50 x 1,000 units x 12 months x 97% occupancy months x 97% occupancy
$87,300 $87,300
Asset Management Asset Management Fee Fee
$10 x 1,000 units x 12 $10 x 1,000 units x 12 months months
$120,000 $120,000
Extermination Extermination Fee-for-ServiceFee-for-Service
$50 x 1000 treatments$50 x 1000 treatments $50,000 $50,000
TotalTotal $722,900 $722,900
Front-Line Expenses Front-Line Expenses vs. Fee Expenses vs. Fee Expenses
Unlike in the past, front-line expenses and Unlike in the past, front-line expenses and administrative expenses, called fee administrative expenses, called fee expenses, will need to be separatedexpenses, will need to be separated
Fee Expenses:Fee Expenses: An expense of the COCCAn expense of the COCC Paid for by fee income Paid for by fee income
generated by COCCgenerated by COCC
Front-Line Expenses:Front-Line Expenses: An expense of the An expense of the
AMPAMP Paid for by AMP Paid for by AMP
income (e.g. subsidy income (e.g. subsidy and rent)and rent)
What is Classified as a Fee Expense?What is Classified as a Fee Expense?
Certain personnel costs, including:Certain personnel costs, including:• Executive DirectorExecutive Director• Regional ManagersRegional Managers• Human ResourceHuman Resource• Finance and accountingFinance and accounting
Equipment, furniture, and services Equipment, furniture, and services necessary to sustain COCCnecessary to sustain COCC
Central servers and software supporting Central servers and software supporting COCCCOCC
Refer to Table 7.2 of the Supplement to Refer to Table 7.2 of the Supplement to PIH Notice 2007-09PIH Notice 2007-09
What is Classified as a Front-Line What is Classified as a Front-Line Expense?Expense?
Onsite personnelOnsite personnel• Housing ManagerHousing Manager• Maintenance TechnicianMaintenance Technician• Resident ServicesResident Services
Equipment, furniture, and services Equipment, furniture, and services required to maintain site-based officerequired to maintain site-based office
AMP utility costsAMP utility costs Refer to Table 7.2 of the Supplement to Refer to Table 7.2 of the Supplement to
PIH Notice 2007-09PIH Notice 2007-09
Summary and Online ResourcesSummary and Online Resources
Benefits of Asset ManagementBenefits of Asset Management
Improved services provided to each AMPImproved services provided to each AMP Organizational structure allows for greater Organizational structure allows for greater
efficiencyefficiency Onsite staff provide greater service to Onsite staff provide greater service to
tenantstenants System enhancements will allow PHAs to System enhancements will allow PHAs to
operate more efficientlyoperate more efficiently
Online ResourcesOnline Resources http://www.hud.gov/offices/pih/programs/ph/amhttp://www.hud.gov/offices/pih/programs/ph/am
Revisions to the Public Housing Operating Fund Revisions to the Public Housing Operating Fund Program; Final Rule - 24 CFR Part 990Program; Final Rule - 24 CFR Part 990
Preparing for Asset Management Under the New Preparing for Asset Management Under the New Public Housing Operating Fund Rule (24 CFR 990): Public Housing Operating Fund Rule (24 CFR 990): A Planning DocumentA Planning Document
Demonstration of a Successful Conversion to Demonstration of a Successful Conversion to Asset Management (Stop-Loss) Submission Kit Asset Management (Stop-Loss) Submission Kit Year 2Year 2
Demonstrating Successful Conversion to Asset Demonstrating Successful Conversion to Asset Management: A Site Visit to the Charlotte Housing Management: A Site Visit to the Charlotte Housing AuthorityAuthority
Online ResourcesOnline Resources (continued)(continued)
http://http://www.hud.gov/offices/pih/programs/ph/amwww.hud.gov/offices/pih/programs/ph/am
PIH Notice 2007-09, Changes in Financial PIH Notice 2007-09, Changes in Financial Management and Reporting for Public Housing Management and Reporting for Public Housing Agencies Under the New Operating Fund Rule (24 Agencies Under the New Operating Fund Rule (24 CFR Part 990), issued April 10, 2007 CFR Part 990), issued April 10, 2007
Asset Management Help Desk Asset Management Help Desk • Email: Email: [email protected]@hud.gov• Toll-Free Telephone: 1-800-511-8478Toll-Free Telephone: 1-800-511-8478
End of Section 3End of Section 3