PHAS and SEMAP Indicators for Commissioners August 27, :00 AM to 10:00 AM

Transcription

1 PHAS and SEMAP Indicators for Commissioners August 27, :00 AM to 10:00 AM Brian L. Nemeroff, CPA - Partner Bringing Solutions and Prosperity to Our Clients Since 1958.

2 Overview Learning Objectives Role of the Auditor (external) Annual Audit Budget to Actual PHAS (Public Housing Assessment) SEMAP (Section 8 Assessment)

3 Overview Monitor Monthly Financial Reports compare Budget to Actual Balance Sheet (statement of net position) Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows

4 Acronyms/Terms GAAP - U.S. generally accepted accounting principles. GASB -Gov t Accounting Standards Board GAAP Flyers (& accounting briefs, REAC website) AMP - asset management property COCC - Central Office Cost Center UFRS - uniform reporting financial standards FDS - financial data schedule OMB Circulars A-87 and A Office of Management and Budget A-133 Single Audit Act Yellow Book Gov t Auditing Standards GAGAS Generally Accepted Gov t Auditing Standards GAO Gov t Accountability Office

5 Jokes only and Accountant would find funny What do you call an accountant with an opinion? An auditor. An accountant is someone who solves a problem you didn't know you had in a way you don t understand. What's the difference between an accountant and a lawyer? The accountant knows he's boring. How many accountants does it take to change a light bulb? We didn t budget to change that particular bulb until next year How many did we budget for? Can we just work in the Dark?

6 Auditing Process Items Auditors are Concerned with Financial Report Financial Data Schedule (FDS) Grant Reconciliation Communication with Auditors Understand that the Auditor is External

7 Budgeting Utilize prior year funding formulas & other HUD information for best estimates. Focus should be on latest average rents and occupancy expectations. For asset management PHAs, management fees should be based on expected occupancy and leased vouchers.

8 Budgeting Continued Expenses should be based on the following: Review contract register for inclusion/adjustment. Call local utility companies and utilize web to estimate increases by utility type. Housing assistance payments should be based on latest average unit cost times estimated leased units (revenue & net restricted assets should cover this expense) times the expected pro-ration factor.

9 Budgeting Continued Expenses should be based on the following: Other housing choice voucher expenses should be limited to administrative revenue & net unrestricted assets. Insurance should be based on latest quotes. Employee benefits should be based on historical rates along with health insurance adjustment (generally a significant increase) and latest regulatory percentages along with staffing changes. Salaries should be based on anticipated staffing levels and rates

10 Budgeting Continued Historical data for other expenses should be reviewed and projected (sundry, collection costs, maintenance cost, etc.). Revenue should cover debt and depreciation to ensure sustainability Capital expenditures should be budgeted as well along with the source of funds to pay for these expenditures All programs need to individually be sustainable excluding items such as interest income and gain/loss on sale of assets (these vary based on economic factors and other factors - should never be dependent upon)

11 Financial Statements Balance Sheet (Statement of Net Position) The difference between what the PHA owns (assets) and what the PHA owes (liabilities) & cumulative earnings (equity). Statement of Revenues, Expenses and Changes in Net Position This statement presents how the PHA net assets increased or decreased during the current fiscal year. Includes non-cash items such as depreciation, amortization, gain/loss from sale of assets, etc. Ideal is to be positive and to cover non-cash items such as depreciation (shows the ability to maintain your assets through future capital expenditures). Statement of Cash Flows This statement shows how the net change in total cash receipts and cash disbursements of the Authority during the current fiscal year.

12 Audit Consider the Audit in two main sections The Basic FS (the numbers/dollars) Controls and Compliance (Rules and Regs) HUD Government auditing standards A-133 Single Audit Process Review financials to obtain reasonable assurance that the basic financial statements are free of material misstatements An audit includes assessing accounting principles used and significant estimates to evaluate the overall financial statement presentation

13 Audit Items generally tested for controls and compliance: Procurement files, Disbursements AP, Payroll and HAP Employee files, Housing choice voucher Tenant files, Waitlist, SEMAP Due to and from VMS NRP and UNP (Net restricted and unrestricted position) Public housing files Other major Programs

14 Audit Items Auditors are Concerned With: Overstatement of Revenue (and short term assets) Understatement of Expenses (and short term liabilities) Bias in the MDA (Management Discussion and Analysis) Fraud Litigation Subsequent Events Financial Report FDS Information is by Program/Project Unaudited and Audited version Grant Reconciliation

15 Auditors They provide a level of Assurance However, They are external, and not part of the normal internal controls They come in after the fact They test on a sample basis, and There is a chance they may not test the areas that are a concern of the Board

16 2 Key Indicators PHAS General Overview MASS FASS SEMAP SEMAP 101 Indicators Defined and Common Errors

17 TERMS AND DEFINITIONS PHAS Public Housing Assessment System 4 subcomponents MASS Management Assessment Subsystem FASS Financial Assessment Subsystem PASS Physical Assessment Subsystem CFP Capital Fund Program SEMAP Section Eight Management Assessment Program PHA s use a little s it is a Public Housing Authority

18 The Real Estate Assessment Center (REAC) The Unaudited Process- PHA Draft HUD - REAC Review Final Score* Approved Rejected Invalidated *If audit is not required 18

19 The Real Estate Assessment Center (REAC) The Audited process: 19

20 GAAP Flyers

21 Accounting Briefs

22 PHAS Purpose PHAS helps the delivery of services in public housing and enhances trust in public housing system among PHAs, public housing residents, HUD and the general public by providing a management tool for effectively and fairly measuring the performance of a PHA in essential housing operations, including rewards for high performers and consequences for poor performers.

23 PHAS Background PHAs are not owned by the Federal Government United States Housing Act of 1937 Section 6(j) (1) The Secretary shall develop and publish in the Federal Register indicators to assess the management performance of public housing agencies and resident management corporations. The indicators shall be established under section 553 of title 5, United States Code. Such indicators shall enable the Secretary to evaluate the performance of public housing agencies and resident management corporations in all major areas of management operations.

24 PHAS Background Decontrol Indicators Public Housing Management Assessment Program (PHMAP) 24CFR Part Present - Public Housing Assessment System (PHAS) 24CFR Part 902

25 PHAS Background October 1, 1998 PHAS Final Rule February 10, 2000 PHAS Amendments, Final Rule June 6, 2000 Transition Assistance for Certain PHAs Technical Correction, Final Rule July 24, 2003 Deregulation for Small PHAs, Final Rule

26 PHAS Background February 23, 2011 Interim PHAS Rule November 25, 2013 Capital Fund Program, Final Rule

27 PHAS Background

28 PHAS Background

29 Interim PHAS Data Sources

30 Scoring Summary of PHAS

31 PHAS Scoring

32 Improving PHAS Scores Monitor (too late if you wait until after year end) the status and accuracy of submissions frequently in eloccs, PIC, and Secure Systems. Utilize prior year PHAS score results to set annual goals. Plan ahead: be proactive in determining problem areas and fixing them at least 6 months in advance of PHAS due dates.

33 Ratios/formulas FASS

34 FASS 34

35 FDS Sample PHA: FYED: 3/31/14 Line Item No. Account Description Total AMPS Section 8 Housing Choice Voucher Program Cost Center Operating Fund Business Activities - Elimination 111 Cash - Unrestricted 1,823,090 67, ,462 17,476-2,333, Cash - Restricted - Modernization and Development Cash - other restricted 96,655 49, , Cash - Tenant Security Deposits 68, ,402-83, Cash - Restricted for payment of current liability Total Cash 1,988, , ,462 31,878-2,562,927 Total 35

36 Memo Accounts PHA: FYED: 3/31/14 Line Item No Account Description Total AMPS Section 8 Housing Choice Voucher Program Cost Center Operating Fund Business Activities - Elimination Excess (deficiency) of total revenue over (under) total expenses (76,967) (34,625) 150, , , Required annual debt principal payment - 98, , Beginning Equity 8,898, , , ,116-9,867,489 Prior Period Adjustments, Equity transfer and correction of errors Unit Months Available 4,995 3, , Number of Unit Months Leased 4,995 3, , Administrative Fee Equity - 59, , Housing Assistance Payments Equity - 42, , Excess Cash 1,594, ,594, Land Purchases Building Purchases Furniture & Equipment - Dwelling Purchases Furniture & Equipment - Administrative 18, ,231 Total 36

37 FASS 37

38 MENAR 38

39 Debt Service Coverage Ratio 39

40 FASS - Score Adjustments 40

41 Score Adjustments 41

42 MASS Summary 42

43 MASS

44 MASS - Occupancy

45 MASS - Occupancy

46 MASS TARS

47 MASS TARS

48 MASS Accounts Payable

49 MASS Accounts Payable

50 SEMAP Overview Importance of Section 8 to the Authority What % of the PHA federal funds is Section 8 (more than 60%, almost 80% in some cases) How big is your waitlist and how many vouchers do you have HAP expense is generally the largest expense for most PHAs

51 Overview What are the direct and material compliance areas? Waitlist Inspections Reporting Payment Standards/reasonable rent Utility Allowance Eligibility - Tenant recertifications Timely Accurate

52 SEMAP 101 The Section Eight Management Assessment Program (SEMAP) measures the performance of PHAs that administer the housing choice voucher program in 14 key areas. SEMAP is completed annually by each PHA that administers a Section 8 tenant-based assistance program. The SEMAP certification is required to be submitted within 60 days after the end of the fiscal year. 52

53 SEMAP 101 SEMAP will help HUD target monitoring and assistance efforts to PHA programs that need the most improvement. The 14 indicators of performance show how well PHAs help eligible families afford decent rental units at a reasonable subsidy cost as intended by Federal housing legislation. 53

54 SEMAP - 14 requirements 1. Wait list 2. Reasonable Rent 3. Adjusted income 4. Utility allowance 5. HQS Quality Control 6. HQS Enforcement 7. Expanding housing assistance 8. Payment standards 9. Annual exams 10. Correct Tenant rent 11. Pre-contract HQS inspections 12. Annual HQS Inspections 13. Family Self Sufficiency 14. Bonus Deconcentration Bonus indicator

55 How does SEMAP work? Remotely measures a PHAs performance and administration of the Housing Choice Voucher Program HUD annually assigns a score for each indicator and an overall performance rating: > 90% - high performer 60 89% - standard < 60% - troubled A few instances create an automatic rating of troubled Late submission Auditor unable to issue an opinion on the financial statements or the Schedule of Expenditures of Federal Awards Inadequate performance on any indicator and/or a troubled rating results in the need for remedial action 55

56 What does remedial action entail? HUD will conduct an on-site review of PHAs that are rated as troubled The PHA must implement a corrective action plan that HUD will monitor, to ensure improvement in program management 56

57 So who verifies a PHA s compliance with the 14 self assessed SEMAP indicators? Your Independent Auditor! 57

58 What do Auditors use to test compliance? The Code of Federal Regulations, Title 24- Housing and Urban Development, Chapter 9 Office of Assistance Secretary for Public and Indian Housing OMB Circular A-133 Compliance Supplement 58

59 #1 Requirement for a successful audit DOCUMENTATION! Auditors must have a paper trail to follow Per CFR Per audit standards Most common SEMAP error HINT: all items organized, documented and available for your auditor to review keeps them out of your way! 59

60 HUD FORM 52648

61 HUD FORM

62 Per the CFR

63 Per the CFR

64 Indicator 1: Selection from the Waiting List Definition a) The PHA has written policies in its administrative plan for selecting applicants from the waiting list. b) Applicants reaching the top of the waiting list and applicants admitted were properly selected from the waiting list for admission and met the selection criteria that determined their place on the waiting list and their order of selection. 64

65 Indicator 1: Selection from the Waiting List - Purpose This indicator shows whether the PHA has written policies in its administrative plan for selecting applicants from the waiting list and whether the PHA follows these policies when admitting new tenants. Ensures that all eligible citizens are given a fair and equal chance to receive assistance. 65

66 Indicator 1: Selection from the Waiting List - Score Based on the quality control samples selected, documentation shows that 98% of the families in both samples were properly selected from the waiting list Yes 15 points No 0 Points 66

67 Indicator 1: Selection from the Waiting List - Sample Quality Control (QC) sample is an annual sample of files/records drawn in an unbiased manner and reviewed by the PHA supervisor Per 24 CFR 985.2(b): 67

68 Indicator 1: Selection from the Waiting List - Sample Per 24 CFR 985.3(a)(3)(i)(B) Note you must draw 2 separate samples to properly test this indicator Applicants reaching the top of the waiting list Applicants admitted to the program 68

69 Indicator 1: Selection from the Waiting List Common Errors and Mistakes Improper samples Inadequate documentation to verify proper procedures Incorrect use of preferences Management override of admission policies Improper scoring If you do not meet the 98% threshold for both samples you must check No in the PHA response (All or nothing) 69

70 Indicator 2: Reasonable Rent Definition The PHA has and implements a reasonable written method to determine and document that the rent to owner is reasonable based on current rents for comparable unassisted units: At the time of initial leasing Before any increase in rent to owner At the HAP contract anniversary if there is a 5% decrease in published FMR in effect 60 days before the anniversary date 70

71 Indicator 2: Reasonable Rent Definition The PHA s method should also take into consideration the location, size, type, quality, and age of the program unit and similar unassisted units, and any amenities, housing services or utilities provided by owners 71

72 Indicator 2: Reasonable Rent Purpose To ensure that landlords are not inflating their rent thresholds due to the fact that the unit is being subsidized by the government To ensure that tenant rent payments are adjusted for any decreases in the FMR if applicable 72

73 Indicator 2: Reasonable Rent Score The PHA follows its written policy for determining rent reasonableness and has documented that rent is reasonable for: 98% of the units sampled 20 points 80 97% of the units sampled 15 points < 80% of the units sampled 0 points 73

74 Indicator 2: Reasonable Rent Sample Per 24 CFR 985.2(b) 74

75 Indicator 2: Reasonable Rent Common Errors and Mistakes Lack of documentation Comparing dissimilar units Using outdated information 75

76 Indicator 3: Determination of Adjusted Income - Definition The PHA s quality control sample of tenant files shows that at the time of admission and reexamination, the PHA properly obtained a third party verification of adjusted income or documented why third party verification was not available. 76

77 Indicator 3: Determination of Adjusted Income - Definition The PHA must also show that they used verified information in determining adjusted income; properly attributed allowances for expenses; and, when the family is responsible for utilities under a lease, the PHA used the appropriate utility allowances for the unit leased in determining the gross rent 77

78 Indicator 3: Determination of Adjusted Income - Purpose To ensure that the tenant rent payment is being calculated based on current and accurate information Remember the other side of the tenant payment is your HAP!! 78

79 Indicator 3: Determination of Adjusted Income - Score The PHA uses independent verification of income, properly attributes allowances and uses the appropriate utility allowances for: 90% or more of the families sampled 20 points 80 89% of the families sampled 15 points < 80% of the families sampled 0 points 79

80 Indicator 3: Determination of Adjusted Income - Sample Per 24 CFR 985.2(b) 80

81 Indicator 3: Determination of Adjusted Income Common Errors and Mistakes Lack of proper documentation Use of outdated information Incorrect annualization of third party information Incorrect calculation of medical expenses (pay attention to detail) Lack of support for a student > 18 years old Use of incorrect utility allowances Zero income tenants 81

82 Indicator 4: Utility Allowance Schedule Definition The PHA maintains an up-to-date utility allowance schedule The PHA reviews utility data once every 12 months and adjusts its utility allowance schedule if there is a change of 10% or more in the rates 82

83 Indicator 4: Utility Allowance Schedule Purpose To ensure that the tenant rent payment is being calculated based on current and accurate information 83

84 Indicator 4: Utility Allowance Schedule Score Documentation shows that the PHA reviewed utility rate data and properly adjusted the utility allowances if necessary Yes 5 points No 0 Points 84

85 Indicator 4: Utility Allowance Schedule Sample No sample for this indicator, you either did it or you didn t 85

86 Indicator 4: Utility Allowance Schedule Common Errors and Mistakes Not obtaining utility rate data every 12 months Not obtaining reliable data Not updating the allowances when required Not updating the information in the system when a change is made 86

87 Indicator 5: HQS Quality Control Inspections - Definition A PHA supervisor (or other qualified person) re-inspected a sample of units during the PHA fiscal year, for quality control of HQS inspections 87

88 Indicator 5: HQS Quality Control Inspections - Purpose To verify that HQS inspections are being performed timely and accurately and are properly tracked by the PHA HQS inspections are performed in order to ensure that the subsidized units are an adequate living environment for the tenants 88

89 Indicator 5: HQS Quality Control Inspections - Score Documentation shows that the PHA reperformed HQS inspections over a cross section of neighborhoods and inspectors Yes 5 points No 0 Points 89

90 Indicator 5: HQS Quality Control Inspections - Sample Per 24 CFR 985.2(b) The PHA s reinspected sample must be drawn from recently completed HQS inspections and represents a cross section of neighborhoods and the work of a cross section of inspectors. 90

91 Indicator 5: HQS Quality Control Inspections Common Errors and Mistakes Annual inspections are not performed Lack of documentation Re - inspections were not performed, or not performed by a supervisor or other qualified individual Sample was not representative of a cross section of neighborhoods and/or inspectors The intent of the reinspection is a QC on the initial inspection. Not an inspection because we need an inspection. ( Quality Control of the Initial Inspection) 91

92 Indicator 6: HQS Enforcement Definition The PHA s quality control sample of case files with failed HQS inspections shows that for all cases sampled: any cited life-threatening deficiencies were corrected within 24 hours from the inspections all other cited HQS deficiencies were corrected within no more than 30 calendar days (or less per admin plan could be 14 days) from the inspection or any PHA approved extensions 92

93 Indicator 6: HQS Enforcement Definition If the HQS deficiencies were not corrected within the required time frame the PHA must: Stop housing assistance payments beginning no later than the first of the month following the specified correction period (abatement) or Take prompt and vigorous action to enforce the family obligations 93

94 Indicator 6: HQS Enforcement Purpose To ensure that HCVP tenants are living in acceptable conditions To ensure that the landlord is properly maintaining the property 94

95 Indicator 6: HQS Enforcement Score Documentation shows that the PHA s QC sample of failed inspections were properly corrected or abated within the appropriate time frame > 98% - 10 points < 98% - 0 points 95

96 Indicator 6: HQS Enforcement Sample Per 24 CFR 985.2(b) 96

97 Indicator 6: HQS Enforcement Common Errors and Mistakes Annual inspections are not performed Incorrect universe used in selecting the sample Follow up of failed inspections not performed timely HAP not abated timely 97

98 SEMAP - 14 requirements 1. Wait list 2. Reasonable Rent 3. Adjusted income 4. Utility allowance 5. HQS Quality Control 6. HQS Enforcement 7. Expanding housing assistance 8. Payment standards 9. Annual exams 10. Correct Tenant rent 11. Pre-contract HQS inspections 12. Annual HQS Inspections 13. Family Self Sufficiency 14. Bonus Deconcentration Bonus indicator

99 Questions or Comments? 99