Chapter 5. Calculation Problem Areas

Chapter 5.Calculation Problem Areas

Chapter 5. Section 1. Introduction

Learning ObjectiveUnderstand and address those difficult aspects of

rent calculation where errors are most likely to occur

Introduction

• In this session, we will focus on the error-prone components of income and rent determination– Identified in HUD’s Policy Development and

Research report, “Quality Control for Rental Assistance Subsidies Determinations”

– Emphasized in RIM reviews

Introduction

• Purpose of the chapter– Identify common errors– Examine reasons for errors– Practice the more difficult calculations

• We will not cover every facet of rent calculation

Introduction

• Review of problem areas:– Employment income– Training program income – The earned income disallowance (EID)– Assets and asset income– Utility allowances– Payment standards

References

• Appendix A– Web Addresses (page A-1)– Training Program Income Notice (page A-5

through A-24)

• Appendix B– Regulation Excerpts (page B-1 through B-28)– HCV Guidebook Excerpts (page B-29 through

B-125)

Chapter 5. Section 2.Employment Income

Employment Income

• PD&R report found a 68% error rate for families with earned income (employment income)– 88% for families with more than 1 source of

earned income– Employment income is single strongest

predictor of errors in rent calculation

Employment Income

• Annual income from employment includes full amount, before payroll deductions, of:– Wages and salaries– Overtime pay, commissions, fees, tips and

bonuses– Other compensation for personal services

Employment Income

• Reported income will usually be in amounts over a period of time that are less than annual (hourly, weekly, bi-weekly, semi-monthly, monthly, etc.)– Hourly/full time: rate X 2080– Weekly: amount X 52– Semi-monthly: amount X 24– Bi-weekly: amount X 26– Monthly: amount X 12

Verification Issues

• Most errors are caused by lack of adequate verification

• Either PHAs do not obtain third-party employment verification, or the verification is received but not used

– Rent calculated using pay stubs

– File not documented as to why third party was not available

Verification Issues

• Learning Activity 5-1: (Page 5-5)• Paystubs vs. Employer Statement?• Purpose: Discrepancy Awareness

– Part 1: Calculate annual income using paystubs (page 5-5 through 5-8)

– Part 2: Re-calculate (page 5-8) using third-party verification completed by employer (page 5-9)

– Part 3: Group discussion

Unreported and Underreported Income

• Some families fail to report or underreport employment income– One common form of underreporting: reporting

net earnings, not gross

• Use UIV to identify unreported employment

• Inform applicants and participants of UIV sources to be checked

– Encourages more accurate reporting

Sporadic Income

• Temporary, nonrecurring, or sporadic income (including gifts) is not included in annual income

• Sporadic income is income that is neither reliable nor periodic

Sporadic Income Example

• Daniel Morgan – receives Social Security Disability plus works as handyman occasionally

• Claims only worked a couple times last year (no documentation)

• Answer the three questions.

Answer: Sporadic Income• Does this fit description of sporadic income?

– Yes, his earnings fit the category of nonrecurring, sporadic income

• How do you handle his working income?– Don’t include in annual income– Tell Mr. Morgan he must report any regular work or

steady jobs he takes

• What type of documentation should the PHA have in Daniel’s file to support its decision?– Note in file explaining situation and its decision– UIV documentation if PHA has access

Seasonal Employment

• People in some occupations regularly work less than 12 months per year– School employees– Agricultural workers– Construction trades

• HUD’s HCV Guidebook describes 2 acceptable calculation methods

Seasonal Employment• Method 1: Annualize current income

– Conduct interim reexam when income changes

• Method 2: Calculate anticipated income from all known sources for the entire year– No interim reexam– History of income from past years is needed

• Not useful when future income source is “unknown” or “none”

Seasonal Employment: Example

• Marcy Walsh is currently employed as a tile setter with ABC Construction, earning $1000 per month

• For the last 4 years, she has worked this job for 6 months per year during the construction season

• During the other 6 months of each year, she works part-time at Domino’s Pizza, earning $400 per month

Calculation: Sample Method 1

• Multiply current income ($1000/month) times 12 months– $12,000 per year

• When the construction season ends, conduct an interim reexam– Multiply income from Domino’s ($400/month)

times 12 months– $4800 per year

Calculation: Method 2

• Calculate anticipated income from all known sources for the entire year– ABC Construction:

$1000 x 6 months = $6000– Domino’s Pizza

$ 400 x 6 months = +$2400– TOTAL: $8400

• NOTE: There is no interim reexam when the participant changes jobs

Incorrect Calculation of Method 1

• If the PHA counted only the current income ($1000/month) times the anticipated length of the job (6 months), annual income would be calculated as $6000– Family would pay less than TTP required by

regulations– Common error

Seasonal Employment

• PHA needs a written policy for this situation– Policy should be implemented consistently– Families with seasonal employment should be

informed of policy• If PHA adopts Method 1, family needs to

know interim reexam will be conducted• If PHA adopts Method 2, family needs to

know interim reexam will not be conducted

Chapter 5. Section 3.Training Program Income

See Appendix A for Training Program Notice (page A-5) and CFR (page B-15)

Training Program Income

• HUD-Funded Training ProgramExclude all amounts received under the

training program while they are in the program

HUD-Funded TrainingThe head of a tenant family receives $500 mo. in TANF.

She enrolls in a HUD-funded training program operated by the PHA. TANF benefits stop. She receives $600 mo. while in the training program. Upon completion, she receives a job at the PHA earning $700 per month. What monthly income is counted during training?

How long is income excluded?

What is counted after completion?

$700 (All)

During training only

Other Training Program Income

• 5.609(c)(8)(v)– Exclude all incremental earnings and benefits

resulting from participation in a qualifying State or local employment training program• includes programs not affiliated with a local

government• no specific employment training programs

• To qualify, an employment training program must have clearly defined goals and objectives.

• PHAs may adopt written policies that establish standards for these programs.

• Training may include– Occupational classroom training – Subsidized on-the-job training – Basic education

Incremental income:

Increase in total amount of welfare, benefits, and earnings of family member after enrollment in training program as compared to income before enrollment

Only the incremental increase is excluded.

• 5.609(c)(8)(v)– Exclude incremental earnings and benefits

only while the family member participates in the employment training program

Example of Other Training Program Income

A family head receives $400 per month in TANF. He then enrolls in a qualified State employment training program and receives $550 per month in training income. TANF benefits stop.

What income is counted?

How long will income be excluded?

$400 - the extra $150 is not counted

While he remains in the training program

Training Program Income Issues

• When new employment is reported, PHA needs to determine whether employment is part of a training program

• Notice PIH 2001-15 identified frequent errors in this component– Recommends educating participants on

eligible types of training programs

• Check data-gathering forms for questions

Chapter 5. Section 4.Earned Income Disallowance

See Appendix A for Website Address

For FAQs on EID

Earned Income Disallowance

• Final Rule– Effective date 4/20/01

• Technical Amendments 2/13/02

• Regulations: 24 CFR 5.617

• Regulations are similar to earned income disallowance (EID) regulations for Public Housing, except:– For Section 8, will only apply to family

members with disabilities• PH EID regulations are not restricted to persons

with disabilities

• Effective 3/15/02, HUD revised the definition of “qualified family”– Family no longer required to meet the

regulatory definition of disabled family

• EID excludes increases in income attributable to new employment or increased earnings over income received by that family member prior to qualifying for the disallowance.– The exclusion applies only to the income of

the family member with disabilities, not the entire household

EID Qualifications

• Family must be a program participant– Already receiving HCV assistance

• Family must experience an increase in annual income as a result of one of the following reasons . . .

1. Employment by a family member who– Is a person with disabilities, AND– Was “previously unemployed”* for one or

more years prior to employment* definition includes a person who has

earned not more than could be earned working 10 hrs/week, 50 wks/year, at established minimum wage

OR…...

Qualifications

2. Increased earnings by a family member:– Who is a person with disabilities, AND– Whose increased earnings occurred during

member’s participation in an:• economic self-sufficiency program• job-training program

Earned Income Disallowance for Persons with Disabilities

HUD Definition of Economic Self-Sufficiency Program

• Any program designed to encourage, assist, train or facilitate economic independence of assisted families or to provide work for such families.

HUD Definition of Economic Self-Sufficiency Program

• Economic self-sufficiency programs can include:• job training

• employment counseling

• work placement

• basic skills training

• education

• English proficiency

• workfare

• financial or household mgmt

• apprenticeship

• activity necessary for workOR……...

3. New employment or increased earnings by a family member who is a person with disabilities AND has received TANF benefits or services within past 6 months

• No minimum amount if TANF is received in form of monthly maintenance

• If TANF is received in form of one-time payments, wage subsidies, or transportation assistance, total received over 6 month period must be at least $500

EID Qualifications

• During initial 12 month exclusion period: – Exclude the full amount of increase in income

attributable to employment or increased earnings• Initial full exclusion period begins on date

qualified family member is:• employed; or• first experiences increase in income due to

employment• Initial full exclusion extends for a total of 12

cumulative months (don’t have to be consecutive months)

EID Initial 12-Month Exclusion

Determining The Incremental Increase

• Determine the annual income of the EID-qualified person prior to the qualifying change (earned and/or unearned)

• Calculate the annual income of the EID-qualified person after the qualifying change

• The difference is the incremental increase

Example #1

• Mary Jones had $4000 in TANF benefits at the time she became employed. She is earning $12,400 at her new job, and her TANF benefits have stopped.

• How much is the incremental increase?

Example 1: Think it Through

• TANF $4000• Empl $___0

• Total $4000

• TANF $0• Empl $12,400

• TOTAL $12,400

Did we exclude all of her earned income?

How much did we exclude?

Why didn’t we exclude the $12,400?

Only the amount which exceeds the baseline is excluded

Example #2

• John Smith had no income at the time he became employed at $12,400 per year.

• How much is the incremental increase?

Example 2: Think it Through

• Other Inc $ 0• Empl $___0

• Total $ 0

• Other Inc $0• Empl $12,400

• TOTAL $12,400

Did we exclude all of his earned income?

How much did we exclude?

$12,400

The baseline is zero

• Exclusion is reduced to 50% of the increase attributable to employment or increased earnings

• Second 12-month exclusion period begins after qualified family member has received 12 cumulative months of full exclusion

• Phase-in period extends for a total of 12 cumulative months (not needed to be consecutive months)

EID Second 12-Month Exclusion and Phase-In

• 4 year lifetime maximum disallowance period– Starts at beginning of initial exclusion

period and ends exactly 48 months later– No exclusion may be given after this

lifetime limit has been reached

EID Maximum 4 Year Disallowance

• EID regulations call for a maximum of 12 cumulative months for each of the two exclusion periods– Thus, an individual can “max out” after

receiving the EID for only two years• 12 consecutive full-exclusion months followed by• 12 consecutive phase-in exclusion months

• Remember, the disallowance does not apply for purposes of admission to HCV

• To ensure that every disabled HCV participant who is eligible for EID receives it and is calculated properly, PHA must consider:1. How will you document – what evidence will you

provide:A. That the family is a “qualified family”?B. The income exclusion in the family’s file?

EID Issues

2. How will you track the number of months income has been excluded and when the exclusion must end?

EID Issues

• Tracking can be complex– In an ideal world, a person with disabilities

who qualifies for the EID will receive:• The full exclusion for 12 consecutive months• The phase-in exclusion for the next 12 consecutive

months

– Tracking would be easy

In an Ideal World

1212 2424 3636 4848

100% of increase

50% of increase

Count all incomeCount all income

1212 2424

EID Issues

• Tracking– In reality, the exclusion may stop and start

more than once, making it a challenge to figure out how much to disallow when there is a break during an exclusion period.

Reality may be….

9 months9 months 6 months6 months 9 months9 months

100%100%

100%100% 50%50%50%50%

It’s over…It’s over…

1212 2424 3636 4848

EID Issues

• Tracking– Or . . . The four-year maximum may be

reached before the full 12 months of phase-in (or even initial full exclusion) have been “used up.”

Or…….Reality may be

9 months9 months 3 months3 months

100%100%100%100% 50%50%

It’s over…It’s over…

2 months2 months

1212 2424 3636 4848

EID Issues

• Complexity of the regulation contributes to rent determination errors– Per HUD’s PD&R report

• Difficulty in tracking exclusion periods– PHA needs standardized system

EID Issues

• Calculation of “incremental increase”– May necessitate conducting interim reexams

throughout phase-in period• Regardless of PHA’s interim policy• To simplify matters, PHA may align reexam date to coincide

with the beginning of the phase-in period

• Best source for answers:– RHIIP:

www.hud.gov/offices/pih/programs/ph/rhiip/faq.cfm– EID: www.hud.gov/offices/pih/phr/about/ao_faq.cfm

• Learning Activity 5-2:

• EID Calculation

• Read the case study

• Part 1: Calculate the prequalifying income and the exclusion amount and wages for EID member

• Parts 2-4: Recalculate for changes

Answers: Baseline Income

• Katie’s prequalifying (baseline) income is:

• $5,000

Part I, Step 1

A. Earned income of EID family member

B. Other income of EID family member C. Total annual income of EID family member (A + B)

D. Prequalifying income of EID family member E. Full exclusion (C - D, but no more than A)

F. 50% exclusion during phase-in period, if applicable

(E x 0.50) N/A

Step 1: Calculate EID family member’s

exclusion amount.

$ 9,500$ 5,000$14,500$ 5,000$ 9,500

Part I, Step 2

G. EID family member’s earnings (HUD-50058, 7d)

H. Exclusion (E or F, as applicable) (HUD-50058, 7e)

I. EID family member’s earned income after

exclusions (G – H) (HUD-50058, 7f)

$ 9,500

Step 2: Determine EID family member’s wages after exclusion.

Part I, HUD 50058

Form HUD-50058

7a. Family member name

No. 7b. Income Code

7c. Calculation

(PHA use)

Dollars per year

7e. Income Exclusions

7f. Income after exclusions (7d minus 7e)

Katie 1 N

Katie 1 W

7g. Total

$5,000 $ 5,000$9,500 $ 9,500 0

$ 5,000

Part 2, Step 1

(E x 0.50) N/A

exclusion amount.

$ 9,500$ 2,000$11,500$ 5,000$ 6,500

Part 2, Step 2

$ 9,500

$ 6,500

$ 3,000

Part 2, HUD 50058

Form HUD-50058

No. 7b. Income Code

7c. Calculation

(PHA use)

Dollars per year

Katie 1 N

Katie 1 W

7g. Total

$2,000 $ 2,000$9,500 $ 6,500 $ 3,000

$ 5,000

Part 3, Step 1

(E x 0.50) N/A

exclusion amount.

$ 9,500$ 6,000$15,500$ 5,000$ 9,500

Part 3, Step 2

$ 9,500

Part 3, HUD 50058

Form HUD-50058

No. 7b. Income Code

7c. Calculation

(PHA use)

Dollars per year

Katie 1 N

Katie 1 W

7g. Total

$6,000 $ 6,000$9,500 $ 9,500 0

$ 6,000

Part 4, Step 1

(E x 0.50)

exclusion amount.

$ 9,500$ 6,000$15,500$ 5,000$ 9,500$ 4,750

Part 4, Step 2

$ 9,500

$ 4,750

Part 4, HUD 50058

Form HUD-50058

No. 7b. Income Code

7c. Calculation

(PHA use)

Dollars per year

Katie 1 N

Katie 1 W

7g. Total

$6,000 $ 6,000$9,500 $ 4,750 $ 4,750

$ 10,750

INCOME BEFORE NOW (Part 1)

Part 2 Part 3 Part 4

Wages 0 9500 9500 9500 9500 Alimony 5000 5000 2000 6000 6000 TOTAL 5000

(Baseline) 14,500 11,500 15,500 15,500

MINUS BASELINE

5000 5000 5000 5000

EXCLUSION 9500 6500 10,500 9500

10,500 9500 x 50%

EID Calculation Chart:Learning Activity 5-2

Applying the EID Rules

• In this section, we’ll walk you step-by-step through an in-depth example of the complexities that can arise in the application of the EID rules.

Challenges for PHA Management

• Since EID is a statutory requirement and a major source of rent errors, management must take seriously the responsibility of ensuring that staff can apply the EID rules correctly.

• Rectifying a failure to provide this benefit when a family is entitled to it can be costly for a PHA. So can providing excess subsidy!

Challenges for PHA Staff

• Staff may be puzzled or confused by the results of correctly applying the EID rules such as families with these circumstances:– Family who has significant increase in earned

income without having any increase in rent – Family who has decreases in other income

with no equivalent decreases in rent

Challenges for PHA Staff

• Other confusing areas– Explaining to families why their rent is going

up or down as a result of the EID rules– Difficulty tracking a family’s EID benefit as

time passes and family circumstances change

Purpose of Effective Tracking System

• HCV participants must benefit only for the number of months for which they qualify

• PHA does not become liable for excess subsidy

In-Depth Example

• Franklin Family– One member will become eligible for EID and

will progress through two 12 month exclusion periods

– Case study will help us track the two exclusion periods as well as the 4-year maximum benefit period

• Time is divided into 4 12-month blocks• See time lines (page 5-35)

In-Depth Example

• Franklin Family Scenario (page 5-36)

In-Depth Example

• For each scenario, we will follow these 3 steps:

1. Calculate the EID exclusion amount

2. Calculate the family member’s wages after exclusion

3. Complete Form HUD-50058 entries

Part I, Step 1

A. Earned income of EID family member 8,450B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 11,050D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 6,370F. 50% exclusion during phase-in period, if applicable

(E x 0.50)N/A

exclusion amount.

Part I, Step 2

G. EID family member’s earnings (HUD-50058, 7d) 8,450

H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 6,370

exclusions (G – H) (HUD-50058, 7f)2,080

Part I, HUD 50058

Part 2, Step 1

(E x 0.50) N/A

exclusion amount.

Part 2, Step 2

Part 2, HUD 50058

Part 3, Step 1

(E x 0.50) N/A

exclusion amount.

Part 3, Step 2

Part 3, HUD 50058

Part 4, Step 1

(E x 0.50)4,030

exclusion amount.

Part 4, Step 2

Part 4, HUD 50058

Part 5, Step 1

A. Earned income of EID family member 0B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 2,600D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 0F. 50% exclusion during phase-in period, if applicable

(E x 0.50)0

exclusion amount.

Part 5, Step 2

G. EID family member’s earnings (HUD-50058, 7d) 0

H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 0

exclusions (G – H) (HUD-50058, 7f)0

Part 6: Annual Reexams

• For the Franklin family’s next 3 annual reexaminations, there is no change in family circumstances.– June 1, 2005– June 1, 2006– June 1, 2007

Part 7, Step 1

(E x 0.50)7,800

exclusion amount.

Part 7, Step 2

exclusion amount.

Part 7, HUD 50058

Part 7: After Exclusions End

Chapter 5. Section 5.Assets and Asset Income

Assets and Asset Income

• Value of assets may affect family’s annual income

• PHA must:– Identify assets– Verify market value of asset– Convert from market to cash value

• To determine cash value of asset, start with the fair market value. Then subtract:– Any expenses involved in converting assets

to cash:• Broker fees• Legal fees• Settlement costs• Penalty for early withdrawal

– Any money owed on the asset, such as the mortgage balance

What Assets Include

• Savings and checking accounts– PHAs establish policies for determining

value of accounts– May elect to count current balances or

average balances for a given period (2 months, 6 months, etc.)

What Assets Include

• Accessible amount of trusts available to family

• Stock, bonds, money market funds• Equity in real property, other capital

investments• Retirement savings accounts

What Assets Include

• Contributions to company retirement/pension funds– Before retirement, count only amounts family

can withdraw without retiring or quitting– After retirement, count regular periodic

payments as income

What Assets Include

• Assets held in the name of more than one person that allow unrestricted access

• Lump sum receipts which are retained and verifiable– Inheritances, capital gains, lottery winnings– Social security & SSI lump sum payments

What Assets Include

• Personal property held as investment– gems, jewelry, – coin collections,

• Surrender value of life insurance policies

Assets Disposed of For Less Than Fair Market Value

• Imputed Assets: Assets disposed of within two years prior examination or reexamination for less than fair market value

• Cash value of an imputed asset is the difference between the actual cash value of the asset and the amount received for itExample: Home market value =

$155,000– Fees incurred 5,000

Actual Cash value $150,000- Amount received 100,000

Imputed Cash Value $ 50,000

• PHA can establish a minimum threshold for counting assets disposed of for less than fair value

• Threshold of $1,000 would be reasonable

• Generally NOT considered to include those disposed of due to:– divorce or separation– bankruptcy– foreclosure

• PHA should develop applicant/participant certification form for verifying assets disposed of for less than fair market value

• Learning Activity 5-3: Assets disposed of for less than fair market value (page 5-50)

Income from Assets• Market value of asset

is used to determine anticipated income from asset– Formula to determine anticipated income from interest bearing accounts:

Market value x interest rate = anticipated income

What is the market value of a $4,000 savings account?

Income from Assets

• Interest Income from Assets (page 5-52)

Section 6: Assets

Edith 1 Savings 400 x .023 400

400 9028

Imputed Asset Income

• Income that would be received from an asset if it were converted to cash and the cash were placed in a savings account earning a HUD-determined passbook rate.

• The cash value of an asset is used to determine the imputed income from the asset.

• Remember, when calculating the cash value of an asset, PHAs must take into account the expenses involved in converting the asset to cash such as:– Penalties for early withdrawal– Broker or legal fees– Closing costs (for real estate)

• Imputed asset income comes into play on the HUD 50058 only when the total cash value of all assets is greater than $5000.

• When total cash value of all assets is $5000 or less, use the actual income from assets

• If the total cash value of all assets exceeds $5,000 must use the greater of:– actual income from assets

– imputed income from assets (HUD passbook rate times total cash value of all assets)

• Assets and Asset Income (page 5-57)

Section 6: Assets

Edith 1 Savings 400

5920 129.0225

133133

9Edith 1 Stocks 6000-480 5520 120 6000 x.020

What Assets Do Not Include

• Necessary items of personal property such as furniture and automobiles

• Assets not accessible to the family

• Interest in Indian Trust lands

• Value of a home currently being purchased with HCV homeownership assistance

Asset Issues

• Staff should know that market value is used to calculate actual income on certificate of deposits and other instruments that carry a penalty for early withdrawal– Cash value only used to determine imputed

asset income only if total cash value of all assets exceeds $5000

Asset Issues

• The actual anticipated income from a interest-bearing asset (savings account) is based on the interest rate actually paid by the bank or other institution where the account is located.– The HUD-determined passbook rate is not

used to determine actual income.– The HUD-determined passbook rate is used

only to determine imputed interest on assets totaling more than $5000.

Asset Issues

• PHA staff should be reminded that:– All assets count, regardless of their value– Assets may have a cash value and produce no actual

income– There is no maximum asset limit for applicants or

participants

• PHA may not pass cost of asset verification to families– Bank verifications– Appraisals

Chapter 5. Section 6.Utility Allowances

Utility Allowances

• PHAs are required to establish and maintain Utility Allowance schedules (see CFR 982.517)

• A Utility Allowance is that amount approved by the PHA for reasonable monthly costs of local utility consumption in its area

• Cost of each utility must be stated separately– For different sizes/types of units

Utility Allowances

• Schedule must be reviewed annually– Must be revised if any utility rate has changed

10% or more

• If family leases a unit smaller or larger than the Voucher size (called the family unit size), the PHA must use the utility allowance for actual unit size unit leased.– Regardless of voucher bedroom size

Utility Allowances

• Current utility allowance must be applied at reexaminations

• Common reasons for utility allowance errors in subsidy determinations:– PHA failure to review or revise utility

schedules as required– PHA staff failure to apply revised allowances

at reexaminations– Failure to compare RFTA, lease and HAPC

Utility Allowances

• Two suggestions for avoiding errors:– Require the use of a checklist– Conduct quality control reviews

Chapter 5. Section 7. Payment Standards

Payment Standards

• Used to calculate total subsidy for the family

• PHA’s Payment Standard is maximum subsidy amount that the family may receive

• For details on establishing payment standards see Section 7 (page 5-61)

Use of Payment Standard

• If a family’s unit (voucher) size is not the same as the size of the unit that the family selects, the PHA must use the lower of:– PS for family unit (voucher) size; or– PS for size of unit actually selected

• During a HAP Contract, changes in the payment standard must be handled as follows:– If the PHA has decreased the payment standard

during the term of the HAP contract, the PHA must use:

• The higher (old) payment standard at the first regular annual reexam

• The lower (new) payment standard at the second regular rexam (unless the payment standard has been increased in the interim)

During a HAP Contract, if PHA has increased the PS:• Use the new, higher Payment Standard at the 1st regular

(annual) reexam after the Payment Standard increase• Do not use the higher payment standard for interim

reexams– Use PS in effect at last annual reexam

• If the family’s unit size changes during the term of the HAP contract, the PHA must use the payment standard for the new family unit size at the next annual reexam.– Regardless of whether the PHA has made

any changes in the PS schedule– Family unit size is Voucher size.

Payment Standard Issues

• At times, PHA may not have up-to-date PS amounts available when processing annual reexams that will become effective at a later date. – Problem generally arises around the time

HUD publishes FMRs for the coming year (October 1 or thereabouts)

Payment Standard Issues• If PS increases between the time the PHA

completes a batch of reexams and the date the reexams become effective, PHA must re-calculate rents for those families or delay adoption of new schedule for reasonable period (as long as the current payment standard is within the basic range).

• Example: – Reexams processed in August for November effective

date– PHA increases PS effective November 1– PHA would re-process all November reexams using

higher PS unless adoption of new schedule was delayed

Payment Standard Issues

• Common errors:– Wrong PS used when actual unit size is

smaller than family unit size (voucher size)– Failure to apply correct PS when change in

family size results in a different family unit (voucher) size

– Applying increased PS at interim reexams

Learning Objective

• Understand and address those difficult aspects of rent calculation where errors are most likely to occur

Chapter 5. Calculation Problem Areas

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