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Transcript of Slide Number #1 © 2007 Nan McKay & Associates Hosted By: Cara Gillette Project-Based Accounting,...
Slide Number #1
©2007 Nan McKay & Associates
Hosted By:
Cara Gillette
Project-Based Accounting, Project-Based Accounting, Budgeting, and Management – Budgeting, and Management – Strategic DecisionsStrategic Decisions
©2007 Nan McKay & Associates
Slide Number #2
©2007 Nan McKay & Associates
The New ModelThe New Model
Slide Number #3
©2007 Nan McKay & Associates
OverviewOverview
The new formula:• Requires PHAs with 250 or more PH units to transition
to PBM• Is based on HUD’s multifamily industry• Will force the PH program to become more property-
based to ensure the viability of each property
Slide Number #4
©2007 Nan McKay & Associates
HUD’s TimetableHUD’s Timetable
2007 All PHAs with 250 or more PH units must be using project-based accounting
2009 HUD will consider revising the system to use actual costs
2011 All PHAs with 250 or more units must be asset-management compliant
Slide Number #5
©2007 Nan McKay & Associates
How the New Model WorksHow the New Model Works
Historically, operating subsidy was calculated on an aggregate level• Op sub was allocated to the central
office, which decided where the subsidy went
Slide Number #6
©2007 Nan McKay & Associates
The New ModelThe New Model
Subsidy now is calculated for and allocated to each project• All other activities are supported by fees paid by
the projects• In other words, all the money goes to the projects,
and projects pay for everything else
Slide Number #7
©2007 Nan McKay & Associates
Compliance with Asset Compliance with Asset ManagementManagement
Best definition of compliance so far is Stop-Loss Kit• Guidance on
successful conversion for stop-loss agencies
Stop-Loss ProvisionStop-Loss Provision
Year Two Kit• Attachment 1• This is a valuable
roadmap for all PHAs
Slide Number #9
©2007 Nan McKay & Associates
The Deal with Stop-LossThe Deal with Stop-Loss
PHAs who are losing operating subsidy in the new formula can stop the loss by early conversion to asset management
Slide Number #10
©2007 Nan McKay & Associates
Stop-Loss ProvisionStop-Loss Provision
The deadline is October 15, 2007 If PHA demonstrates conversion by that date,
the reduction of subsidy will be stopped at 5% of the difference for CY 2007 That means that 95% of the PUM difference will
be added to the lower op sub level under the final rule
Slide Number #11
©2007 Nan McKay & Associates
Stop-Loss ProvisionStop-Loss Provision
The added subsidy will continue to be received by the PHA each calendar year that the PHA remains in compliance with the asset management requirements• This means that the PHA must be in
compliance each year or go back to the original loss
Slide Number #12
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
1. Project-based accounting• Monthly operating statements for each project – revenues and
expenses vs. budget levels, including all fees from COCC and CFG
• Must reasonably reflect the financial performance of each project
Sum of operating statements = total PH
Slide Number #13
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
1. Project-based accounting second year: Project-specific balance sheets not required
Slide Number #14
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
2. Project-based management• Property management services are arranged
or provided in the best interest of the property considering needs, cost, and responsiveness, relative to local market standards
Slide Number #15
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
3. Central office cost center (COCC)• All central office fees must be reasonable• COCC must operate on the allowable fees and other
permitted reimbursements from its PH and S8 programs
• In other words, the COCC must support itself
Slide Number #16
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
3. Central office (COCC) second year:• PHA may not fund the COCC with:
Sale of assets acquired with PH funds Amounts from Capital Fund other than
permitted (e.g., can’t use “Management Improvement” funds to pay for general accounting staff)
Funds from state or local governments
Slide Number #17
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
4. Centralized services• Centralized services that directly support
projects are funded using a fee-for-service approach or through other allowable charge-backs
• Each project is charged for actual services received
• Must be reasonable compared to local market
Slide Number #18
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance• PHA systematically reviews financial,
physical, and management performance of each project, and identifies non-performing properties
Slide Number #19
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance – a non-performing property has:
• PHAS physical score below 70• Significant crime and drug problems• Below 95% occupancy• TARS that exceed 7% of monthly rent roll
FAQ clarifies this means rent…
Slide Number #20
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Review of project performance – a non-performing property has:
• PHAS grade of “D” or below for vacant unit turnaround and work orders
• Utility consumption more than 120% of agency average
• Other major management problemsTurnaround = D more than 30 daysWOs = D more than 40 days
Slide Number #21
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
5. Non-performing property second year:• Significant drug and crime as defined by
Uniform Crime Reporting = exceeds the surrounding community by 120%
• For any projects identified as non-performing, PHA has management plan with set of recommendations and measurable goals
Slide Number #22
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
6. Capital planning• Physical needs assessment and a five-year
plan for each project Five-year plan needs to consider revenue
sources, market, tenancy, and project needs• PHA demonstrates commitment to long-range
energy consumption reduction
Slide Number #23
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Risk management responsibilities related to regulatory compliance
• PHA not carrying out responsibilities if: Designated troubled under PHAS Any outstanding FHEO findings or voluntary
compliance agreement not implemented…
Slide Number #24
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Regulatory noncompliance if:• No current energy audit…• Outstanding IG audit findings w/no progress• Not in compliance with ACOP• Unsatisfactory progress under RHIIP/RIM• PIC (50058) reporting rate under 95%• Any other major compliance deficiency
Slide Number #25
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Regulatory noncompliance:• Stop-Loss FAQs, published 9/1/06 clarifies:
Regulatory compliance is agency-wide for now
• But at some point it will be analyzed by project
Slide Number #26
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Regulatory noncompliance second year: Designated troubled under PHAS physical,
financial, management, or CFG Outstanding IG audit findings greater than 6
months old without progress Not in compliance with ACOP and other related
occupancy directives…
Slide Number #27
©2007 Nan McKay & Associates
Seven Criteria for Compliance Seven Criteria for Compliance with Asset Managementwith Asset Management
7. Regulatory noncompliance second year: Not meeting statutory Capital Fund obligation
and expenditure deadlines
Slide Number #28
©2007 Nan McKay & Associates
Follow the MoneyFollow the Money
How the op sub is calculated and allocated is driving these fundamental changes
Slide Number #29
©2007 Nan McKay & Associates
How the Money WorksHow the Money Works
The old op sub was aggregate - AEL Under the new formula, subsidy is
calculated and allocated by project - PEL• The op sub will go directly to the projects,
and all other activities will be supported by fees paid by the projects
• We see these in PUM (per unit month) figures
Slide Number #30
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Operating subsidy formula:Project expense level (PEL)
+ Utility expense level- Formula income frozen at 2004 level
+ Applicable add-ons
= Operating subsidy
Slide Number #31
©2007 Nan McKay & Associates
Operating Fund FormulaOperating Fund Formula
PEL uses 10 cost drivers or variables:1. Geographic variable
2. Location variable
3. Clientele (occupancy) variable
4. Property size
5. Building type
Slide Number #32
©2007 Nan McKay & Associates
Operating Fund FormulaOperating Fund Formula
PEL uses 10 cost drivers or variables:6. Bedroom mix (unit size)
7. Percent assisted
8. Property age
9. Neighborhood poverty
10. Ownership type
Slide Number #33
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Add-ons – PHA determines as applicable:1. Self-sufficiency
2. Energy loan amortization
3. PILOT
4. Audit cost – actual most recent
5. Resident participation - $25 per unit per yr
Slide Number #34
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Add-ons – the PHA determines:6. Asset management fee
$4 PUM for PHAs with 250 or more $2 PUM for smaller PHAS who transition to
PBM who have a COCC
7. Information technology fee $2 PUM
Slide Number #35
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Add-ons – the PHA determines:8. Asset repositioning fee – demo and dispo
9. Costs attributable to changes in federal law, regulation, or economy
Slide Number #36
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Approved vacancies – still get op sub:• Units undergoing mod (if on schedule)• Units approved for resident services• Units in court litigation• Units undergoing casualty loss settlement• Units vacant due to disaster (federal or
state)…
Slide Number #37
©2007 Nan McKay & Associates
The New Operating SubsidyThe New Operating Subsidy
Approved vacancies – still get op sub:• Units vacant due to changing market
conditions• Limited vacancies, up to 3%
The PHA will enter types of vacancies into PIC
Slide Number #38
©2007 Nan McKay & Associates
CostsCosts
Slide Number #39
©2007 Nan McKay & Associates
CostsCosts
All budgeted costs and expenses will fall into one of three general categories: Direct or frontline cost (at the project) Central office cost center (COCC)
• Direct services (e.g., central maintenance)• Indirect services • Allocated allocated services
Slide Number #40
©2007 Nan McKay & Associates
AMPAMP Frontline, or direct, costs of the AMP:
• Personnel costs of staff assigned to project• Repair and maintenance costs including
supplies, contracted repairs, make-readies, preventive maintenance, etc.
• Utility costs• Costs related to the site office – phones, office
supplies, computers, postage, etc…
Slide Number #41
©2007 Nan McKay & Associates
AMP Frontline (Direct) CostsAMP Frontline (Direct) Costs
These are expenses of the project:• Advertising including procurement and
employment notices• Costs of employee recruiting and screening• PILOT• Insurance (allocated)• Legal fees
Slide Number #42
©2007 Nan McKay & Associates
AMP Frontline (Direct) CostsAMP Frontline (Direct) Costs
These are expenses of the project:• Fees paid to the central office• Audit costs (allocated)
PHA should allocate a reasonable share of the audit cost to each AMP, COCC, and program
• Vehicle expense for site-based vehicles
Slide Number #43
©2007 Nan McKay & Associates
Cost CentersCost Centers
Any service provided to the project that doesn’t reside at the project will need to come from a cost center
• The projects will pay for the direct services that don’t reside at the project
Slide Number #44
©2007 Nan McKay & Associates
Cost CentersCost Centers
A cost center is a cluster of activities that indirectly or directly support an AMP but aren’t under the direct control of a property manager• Every PHA will have at least one cost center,
the central office cost center (COCC)• Centralized maintenance may also be a cost
center
Slide Number #45
©2007 Nan McKay & Associates
Central Office Cost Center Central Office Cost Center (COCC)(COCC)
The COCC is the PHA’s collection of indirect costs of operation - all programs
COCC will have its own column on FDS We’ll talk about the fees the COCC
charges to the projects a bit later
Slide Number #46
©2007 Nan McKay & Associates
COCC ActivitiesCOCC Activities• Executive director• Human resources• Regional PH mgmt• Corporate legal• Finance • IT• Risk management
• Centralized (if not an optional service center) Procurement Maintenance Work orders Inspections
Slide Number #47
©2007 Nan McKay & Associates
Other Cost (Service) CentersOther Cost (Service) Centers
Maintenance is an example of services that may need to be provided directly to projects that are centrally located and charged based on time spent or actual work performed
Slide Number #48
©2007 Nan McKay & Associates
Other Cost (Service) CentersOther Cost (Service) Centers
How to organize maintenance is an important PBM decision• A PHA can decide to organize maintenance:
Decentralized – front line• Supervised by the property manager
CentrallyA mix (i.e., highly skilled technicians are
central)
Slide Number #49
©2007 Nan McKay & Associates
Other Cost (Service) CentersOther Cost (Service) Centers
If the PHA uses centralized maintenance, will be required to use fee-for-service method when charging the project• Project can only be charged for actual
services providedCould be a single blended hourly rate, separate
hourly rates for various activities, or flat fee – must be reasonable
Slide Number #50
©2007 Nan McKay & Associates
Centralized Maintenance Centralized Maintenance
For all centralized maintenance staff providing direct services, the PHA can charge up to the market rate• Even if it’s above what the
technician is actually paid
May charge for actual materials used as well as labor
Slide Number #51
©2007 Nan McKay & Associates
Centralized MaintenanceCentralized MaintenanceHow Much Can the PHA Charge?How Much Can the PHA Charge?
Sally is a maintenance worker $62.26 Wages
$17.50 Benefits (45%)
$79.76 Hourly rate
If the market rate is $100, the hourly charge could be $100, regardless of what Sally is paid
Slide Number #52
©2007 Nan McKay & Associates
Other FunctionsOther Functions
Charging back to the project• Where it’s cost-effective,
PHA can prorate across projects the cost of centralized staff who perform frontline functions
Slide Number #53
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
These are called front line allocated costs• For example, collecting rent centrally,
employee handing rent collection, as well as direct costs, could be charged back to applicable projects on any reasonable basis
Slide Number #54
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
Two exceptions to charging projects for centralized staff performing frontline functions:• Can’t charge projects for cost of a centralized
supervisor• Can’t charge projects cost of centralized staff
handling procurement
Slide Number #55
©2007 Nan McKay & Associates
Update – Centralized Update – Centralized WarehouseWarehouse
FAQ December 1, 2006 If a warehouse at the COCC is for
“storerooms” of scattered sites, with HUD approval, this can be an eligible frontline cost
Slide Number #56
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project:• Central waiting lists, screening, leasing and
occupancy – PHAs can prorate costs direct costs of these functions to the AMPs, including supervisory personnel The proration can be based on the number of units
leased at a project, average turnover at a project, or other reasonable allocation method
Slide Number #57
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project:• Resident programs – PHA can prorate
centralized resident programs across projects on a reasonable basis, including supervisory staff
Slide Number #58
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project:• Protective services – PHAs can charge
centralized protective services, either in-house or through local law enforcement, including supervisory staff
• HUD eventually wants these tracked by project
Slide Number #59
©2007 Nan McKay & Associates
Charging Back to the ProjectCharging Back to the Project
HUD will allow charging back to project:• Work order processing
Although it is the norm in multifamily housing to handle work order processing on site, a PHA may charge the cost of centralized work order processing only if the PHA can document/justify that the cost pro rated is reasonable and necessary
Slide Number #60
©2007 Nan McKay & Associates
Shared Resource CostsShared Resource Costs
- What if there is PHA personnel who provide services both to the projects and the central office cost center?
Slide Number #61
©2007 Nan McKay & Associates
Shared Resource CostsShared Resource Costs
HUD recognizes it may not make economic sense to have full-time staff dedicated to a specific project• In this case the PHA may establish a
reasonable method to spread these personnel costs to the AMPS that receive the service
Slide Number #62
©2007 Nan McKay & Associates
Shared Resource CostsShared Resource Costs Shared resource costs are distinguished
from front line prorated costs in that the services being shared are limited to a few projects as opposed to being pro rated across all projects• An example of a shared resource cost might
be a maintenance person assigned to and paid for by two projects
Slide Number #63
©2007 Nan McKay & Associates
Shared Resource CostsShared Resource Costs
- For PHA staff who provide services both to the projects and the central office cost center, the PHA must separate the amount of time spent on providing services to the projects and the central office cost center, based on a reasonable methodology
Slide Number #64
©2007 Nan McKay & Associates
Shared Resource CostsShared Resource Costs
- The time spent by the staff on projects must be at an hourly rate that does not exceed the reasonable hourly fee for the service
Slide Number #65
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Slide Number #66
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Fees the projects will pay to the COCC:• Property management fees• Bookkeeping fees• Asset management fees• Capital fund management fees
Slide Number #67
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Property management fee• Is “reasonable fee” paid by project to COCC
for project oversight• HUD has established some “reasonability”
guidelines Notice: Guidance on Implementation of Asset
Management, issued Sept 6, 2006
Slide Number #68
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Management fee – “reasonable”• Based on multifamily fee (annual letter from
field office); or • 80th percentile as established by HUD; or• Other compelling data of local market
Might include fees paid pay the PHA for private management of other properties
Updated April 10, 2007Updated April 10, 2007
Slide Number #70
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Management fee• Based on units leased (occupied units and
approved vacancies, but not the 3% limited vacancies) using average monthly lease-up rateStop-loss FAQs (question 12) says that the
PHA can use either the first day or last day of the month (but must be consistent)
Slide Number #71
©2007 Nan McKay & Associates
Property Management Fee Property Management Fee Calculation ExampleCalculation Example
X { + + }
PHA has:• 1200 Occupied Unit Months • 100 HUD-Approved Vacant Unit Months
80th percentile of FHA = $49.02 Calculation: 1200 + 100 x $49.02 = $63,726
PUM Prop Mgmt Fee
Occupied HUD-Approved Vacancy
Demo/DispUnit Mos
Not in book
Slide Number #72
©2007 Nan McKay & Associates
Property Management Fee Property Management Fee Calculation ExampleCalculation Example
X { + + }
What if the AMP has 120 units? That would be a potential 1340 Occupied Unit Months + HUD-Approved Vacant Unit Months
80th percentile of FHA = $49.02 Calculation: 1440 x 49.02 = $70,589
PUM Prop Mgmt
Fee
Occupied HUD-Approved Vacancy
Demo/DispUnit Mos
Not in book
Slide Number #73
©2007 Nan McKay & Associates
Property Management Fee Property Management Fee Calculation ExampleCalculation Example
X { + + }
In this case, the AMP’s property management fees are $6,863 less than optimum
If AMPs aren’t fully leased up, there needs to be a plan
PUM Prop Mgmt Fee
Occupied HUD-Approved Vacancy
Demo/DispUnit Mos
Not in book
Slide Number #74
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Bookkeeping fee• An extension of the management fee• For accounting for project funds, charged to
the project from the COCC• Based on occupied units and allowable
vacancies• HUD will consider $7.50 PUM reasonable
Slide Number #75
©2007 Nan McKay & Associates
Fees Allowed under PBMFees Allowed under PBM
Asset management fee• Fee paid by project to COCC for oversight of
portfolio • Based on total ACC• Must be reasonable, not to exceed $10 PUM• Only paid if the project has excess cash flow
(no limit first year)
Slide Number #76
©2007 Nan McKay & Associates
Asset Management Fee Asset Management Fee Calculation ExampleCalculation Example
X
AMP has 100 units:• 100 units x 12 months x $10
Calculation: 100 x 12 x $10 = $12,000
$10 PUMAsset Mgmt Fee
Total ACC Units
Not in book
Slide Number #77
©2007 Nan McKay & Associates
Asset Mgmt FeeAsset Mgmt Fee
• In the 1st year of PBM, there is no excess cash requirement for the payment of the fee
• In the 2nd year, each project must have excess cash to pay the asset management fee
• In the 3rd and subsequent years, excess cash must equal one month of operating expenses to pay the asset management fee
Slide Number #78
©2007 Nan McKay & Associates
Capital Fund Management Capital Fund Management FeeFee
Fee may be up to 10% of the CFG including replacement housing funds• The fee is paid by each AMP from CFG
proceeds
HUD is still defining the way the fee will be earned
Slide Number #79
©2007 Nan McKay & Associates
AttachmentsAttachments
Attachment 2 – table of fees Attachment 3 – PIH 2007-9
• Changes in financial reporting
Attachment 4 – Financial FAQs 7/27/07 Attachment 5 – Schedule of AMP provisions
Slide Number #80
©2007 Nan McKay & Associates
Costs of a ProjectCosts of a Project
Project
Front line costs:Direct admin costsDirect maintenanceDirect office costsUtilitiesFees paid by project Management fee Asset management fee Bookkeeping fee Other fees for services
Central OfficeCost Center
Slide Number #81
©2007 Nan McKay & Associates
How Cost Centers are FundedHow Cost Centers are Funded
Central OfficeCost Center
Central MaintenanceCost Center
Waiting ListEligibility
Cost recovery based on fees paid by projects and from other programs
Cost recovery will occur based billing projects for services performed
Some centrally provided service costs will be allowed to be allocated to projects
RevenuesRevenues
ProjectRevenues
- Dwelling rent
- Other tenant revenue
- Interest income
- Misc. income
- Operating subsidy
- Capital grant funds
-Management fees earned-Bookkeeping fees-Asset mgmt fees earned-Capital fund mgmt fees-S8 management fees-Other eligible reimbursements-No direct subsidy!!
COCCRevenues
Summary Summary Management
ActivityFrontline Activity
Method
Management Fees
AdministrativeRent CollectionSecurityScreening/WLOccupancyLeasingResident SvcsWork Orders
OtherAudit CostsWarehousing
MaintenanceTechnical Routine
Inspections
OtherPurchasingOther
Method
Proration Fees for Service None
Slide Number #84
©2007 Nan McKay & Associates
Strategic Decision PointsStrategic Decision Points
Slide Number #85
©2007 Nan McKay & Associates
General StrategiesGeneral Strategies
This is a fundamental shift for public housing• The projects are the economic engine of the
public housing program• How can I ensure the properties are performing
well or are turning around?• How can I ensure skilled staff at the sites?
Slide Number #86
©2007 Nan McKay & Associates
General StrategiesGeneral Strategies
Big change for staff• “I’ve always worked at the central office – and now
I have to work at a project?”• “I’ve been a property manager for years – and now
you’re going to hold me responsible for all these vacancies?”
• “What decisions is the executive team making behind closed doors? Why is it secret?”
Slide Number #87
©2007 Nan McKay & Associates
General StrategiesGeneral Strategies
Big change for staff• “Hey – I’m union!”• “I’ve been a maintenance tech for 30 years and
have always reported to Joe, and now I have to report to Cindy?”
Slide Number #88
©2007 Nan McKay & Associates
The Central OfficeThe Central Office
You should be running your numbers now• Project-based
accounting
Slide Number #89
©2007 Nan McKay & Associates
The Central OfficeThe Central Office
Every position (salaries and benefits), post-retirement obligation, every cost, every receivable, every asset goes into an AMP column or the COCC column (or, if there is another cost center, that column)
ColumnsColumns
Slide Number #91
©2007 Nan McKay & Associates
The Central OfficeThe Central Office
You should be running your numbers • After running your pro-formas (accounting for
every cost and source of income), how much money do you estimate coming into your COCC?
• How much does your COCC actually cost?
Sample Proforma – Attachment 6Sample Proforma – Attachment 6
Slide Number #93
©2007 Nan McKay & Associates
HUD Budget ToolHUD Budget Tool
At HUD’s asset management page: • http://www.hud.gov/offices/pih/programs/p
h/am/fm.cfm
Slide Number #94
©2007 Nan McKay & Associates
The Central OfficeThe Central Office
If all the PH fees, HCV admin fees, and fees from other programs total $3,298,030, and if your COCC actually costs 3,000,000
You’re good to go
Slide Number #95
©2007 Nan McKay & Associates
The Central OfficeThe Central Office
If all the PH fees, HCV admin fees, and fees from other programs total $3,298,030
BUT your COCC actually costs 3,500,000 You’ve got a $201,970 shortfall
Slide Number #96
©2007 Nan McKay & Associates
The Central Office - StrategiesThe Central Office - Strategies
You’ve got a shortfall – strategic decisions• Place more staff at the AMPs• Ensure property managers are skilled• Cut unnecessary costs• Update job descriptions and ensure staff is
working to their job descriptions• Right-size the central office
The Central Office - StrategiesThe Central Office - Strategies
You need to analyze whether PH or HCV is paying more than its share of COCC costs• Year 2 Stop-loss Kit calls out for much more
detail on HCV costs
Slide Number #99
©2007 Nan McKay & Associates
MaintenanceMaintenance
Since maintenance is one of the biggest expenses in public housing, maintenance delivery will be a key issue
Slide Number #100
©2007 Nan McKay & Associates
MaintenanceMaintenance
Key issues:• Maintenance staff longevity – highly paid
compared to same skill set in private sector• Benefits• Overtime• May be reporting to a new boss (property
manager)
Slide Number #101
©2007 Nan McKay & Associates
MaintenanceMaintenance
Strategic decisions:• Decentralize routine maintenance• For highly skilled technicians, their pay must
be reasonable compared to the market• Reduce overtime• Some PHAs are assigning maintenance to
be property managers – new learning
Slide Number #102
©2007 Nan McKay & Associates
UnionsUnions
We can see that some jobs may be affected• New assignments• New skills• More accountability
Slide Number #103
©2007 Nan McKay & Associates
Unions - StrategiesUnions - Strategies
Communicate now• And keep communicating• Educate the union how the money works
Educate everyone together – your board, the union, your executive staff, all staff
You’re all in this together – everyone needs to see they have shared interests in making this work
Slide Number #104
©2007 Nan McKay & Associates
Property ManagersProperty Managers
The property managers’ knowledge, skills, abilities, and accountability are key to making the projects work
Slide Number #105
©2007 Nan McKay & Associates
Property ManagersProperty Managers
Some new/increased skill sets:• Marketing• Higher supervision skills
Some will be supervising maintenance for the first time
• Budgeting and working within budget
Slide Number #106
©2007 Nan McKay & Associates
Property ManagersProperty Managers
Some new and increased skill sets:• More rigorous oversight of annual and
interim reexams• Nondiscrimination – reasonable
accommodation• Risk management - keeping liability down• Procurement and contract management
Slide Number #107
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
If it’s going well, keep doing what you’re doing
If improvement is needed:• Leadership, a plan,
and some hard work
Slide Number #108
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
Leadership• A leader is someone with a vision and has the
ability to articulate the vision• Communicate, communicate, communicate -
don’t think all PBM decisions must be made before you educate your staff!
Slide Number #109
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
Leadership• The executive director and team should
understand how this worksNot just the finance officer
• The executive director should ensure that the board understands how this works
Slide Number #110
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
Leadership• Leaders will need to decide how transparent
department budgets will be It will be important for property managers to
know how their properties are doing, if they are to be held accountable
And how their properties are affecting the COCC
Slide Number #111
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
Leadership• Leaders will need to decide how much
discussion, agreement, and discord will be accepted when fees are charged to the projects, when excess cash is transferred to other AMPs, and when the fees are allocated to individual departments
Slide Number #112
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• A strategic plan will need to be articulated,
specific, shared with everyone, and fairWith benchmarks and timelines
• Good electronic reporting from sites is a must• Supervision and quality control is essential• Drill PHAS down to the sites now
Slide Number #113
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan for each project:• Maintain project as is• Identify capital improvements needed• Dispose of property (demo, sale, etc)• Neighborhood revitalization• Increased community collaboration• Political ramifications
Not in bookStop-Loss FAQs 9/1/06
Slide Number #114
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Skilled staff at the sites
Articulated individual development plans, to help staff increase knowledge and skills
The property manager must be the business manager of that property – and must have the skills and tools
Slide Number #115
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Skilled staff at the sites
How does performance of the property affect the evaluation of the property manager?
What about the property manager who specializes in “turning around” a nonperforming property? Is he or she paid more? How transparent is everyone’s salary?
Slide Number #116
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Skilled staff at the sites
How far up, and down, into the agency will the responsibility for achieving goals of project-based management go?
Slide Number #117
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Attracting and retaining higher income
tenants• Coordinating and collaborating resources so
existing tenants can increase income
Slide Number #118
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Senior leadership plays a vital role
• With involvement early on and continued involvement – leaders are visible and accessible
• Employees see the leaders as the source of communication
Slide Number #119
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Over communication is impossible
• Honest and open communication of what’s happening is what employees most want from leadership
• And the communication must be two way, with management listening to employees
Slide Number #120
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• If downsizing becomes necessary, planning
should include senior leadership, HR, and labor Incentives such as early retirement and
buyouts can help employees and preserve morale
Slide Number #121
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• If downsizing becomes necessary
Career counseling, career transition planning, outplacement assistance, resume writing assistance, access to office equipment, paid time off, financial counseling, and access to job fairs and internet job placement sites are all tools that have been used successfully
Slide Number #122
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Information not normally required in the
PHA’s day-to-day operations becomes criticalManagement must have information for
planning and monitoring, and employees need information so they know how things are going and can make decisions
Slide Number #123
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Successful planning includes the
development of business plans from various departmentsThis helps ensure that the managers of PH,
HR, Finance, Procurement, Maintenance, etc. are involved, and builds support
Slide Number #124
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Identification of work processes that will not
be needed is vital to the success of the planThis will also protect those processes that are
key to the PHA
Slide Number #125
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• It will be a combination of multiple strategies
that will make this workSome strategies won’t work well, and others
will exceed expectations
Slide Number #126
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Monitoring progress is a chief component of
successful transitionPHAs need to keep close track of performance
of the properties, periodically review their policies and procedures, learn from their mistakes as well as successes, and incorporate what was learned
Slide Number #127
©2007 Nan McKay & Associates
What Will Make This WorkWhat Will Make This Work
A plan• Success or failure of big transitions depends
on the workforce• A well-planned, thought-out, and managed
process, which all employees perceive as being fair and humanely administered, promotes trust and faith in management and the future of the agency
Slide Number #128
©2007 Nan McKay & Associates
SummarySummary
Q &A
Slide Number #129
©2007 Nan McKay & Associates
Thank you for attending!Thank you for attending!Upcoming Lunch ‘n’ Learns:Sept 7 – HCV Ownership
Hosted by Annie StevensonSept 6 – Public Housing Community Service and Pets
Hosted by Terry ProvanceSept 14 – HCV Legislative and Regulatory Update
Hosted by Nan McKaySept 28 – Public Housing Supervision
Hosted by Patti Zatarian-Menard