Financial Management

Handbook 7475.1 REV.

CHAPTER 2. PHA OPERATING BUDGETS

2-1. PURPOSE.

The purpose of this Chapter is to provide PHAs with conceptual

guidance regarding preparation and administration of the

Operating Budget. The Chapter cites specific regulatory

requirements, where applicable, including those related to the

Performance Funding System (PFS).

2-2. OPERATING BUDGET DEFINITION.

A budget is a realistic estimate of operating receipts and

expenditures for a given period of time to be used as a plan of

operation and a monitoring tool to measure an agency\'s

performance. It is an instrument through which the PHA

expresses its thoughts and actions as to proposed activities,

including overhead factors, and estimates and assigns available

resources to accomplish planned objectives and goals. The

purpose of the budget, as a financial summary and analysis of

immediate and long-range operating programs and plans, is to

provide the PHA with an effective instrument to control

operations and achieve operating objectives in a balanced and

business-like manner.

2-3. PHA ROLE IN THE OPERATING BUDGET PROCESS.

a\. Board of Commissioners

The PHA Board of Commissioners, acting through its

delegated officers, has the primary responsibility for

ensuring that the PHA is operated in an efficient and

economical manner and that its financial integrity is

maintained.

This responsibility is exercised through the review,

approval and control of the PHA Operating Budget(s) and

Operating Budget revision(s) prior to submission to HUD for

approval. Approval is expressed in a duly executed board

resolution.

PHAs under the PFS are required by 24 CFR 990.112 to

submit:

\"\...a certified copy of a Resolution of the Board of

Commissioners stating that the Board has reviewed and

approved the Operating Budget or Operating Budget

revision and has found:

\(1\) That the proposed expenditures are necessary in the

efficient and economical operation of the housing for

the purpose of serving low-income families.

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Financial Management

7475.1 REV. Handbook

\(2\) That the financial plan is reasonable in that:

\(i\) It indicates a source of funding adequate to

cover all proposed expenditures.

\(ii\) It does not provide for use of Federal funding in

excess of that payable under the provisions of

these regulations (24 CFR 990).

\(3\) That all proposed rental charges and expenditures

will be consistent with provisions of law and the

Annual Contributions Contract\".

The content of the board resolution for PHAs not under the

PFS is not specified but a similar resolution, duly

executed, would be acceptable.

b\. Executive Director

In most instances the Executive Director has the overall

responsibility for budget preparation. The Executive

Director is accountable for the soundness and validity of

the budget estimates. This responsibility should not be

delegated outside of the PHA (i.e., to a fee accountant).

Although outside experts can be helpful in the budget

preparation, the responsibility remains with the PHA.

c\. Principal Staff

To the maximum extent feasible, all departments within the

PHA should have input into the final budget estimates.

Smaller PHAs with limited staff should, at a minimum, seek

input from the maintenance staff.

2-4. OPERATING BUDGET FORMULATION.

a\. Since the PHA is required by the ACC to send its proposed

operating budget to the Field Office not later than 90 days

before the beginning of the PHA fiscal year, planning should

be developed sequentially beginning early in the \"Current

Budget Year.\" This calls for coordinated effort by principal

staff members, the Executive Director, and the Board. It

will help if staff assignments in connection with planning

and preparing a budget are made to each division of the

PHA\'s organization. For example, Project and Organization

Unit Managers should outline major operating problem areas

and recommend specific corrective actions and improvement

programs. The Maintenance Superintendent should develop

plans and programs for routine and non-routine (including

cyclical) maintenance of physical properties and essential

property

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Handbook 7475.1 REV.

improvements. The Occupancy Section or the responsible

staff official should develop plans and programs to

maximize rental income and occupancy of available units.

b\. More comprehensive planning of the \"Requested Budget\" will

be achieved if it is done as an adjunct to administration of

the \"Current Year\" budget. This will contribute to

effective execution of the PHA\'s program by providing a

continuity in financial planning. With respect to planning

and preparing the \"Requested Budget,\" the following schedule

is suggested:

\(1\) First through sixth month of current year:

\(a\) Review actual financial statements of past year\'s

activity. Compare actual activity of past year

against the Operating Budget estimates for that

year. Analyze differences between estimated

activity and actual activity.

\(b\) Place actual activity of past year into

historical data base. Review and analyze for

trends.

\(c\) Reappraise the budgetary program and financial

plan for the current budget year, taking into

account completed major work programs and the

present actual financial position.

\(d\) Make specific detailed staff assignments of

studies and planning for the requested budget.

\(e\) Begin preparing worksheets for requested year\'s

budget.

\(f\) Note progress of activities on major

administration and operating programs

\(g\) Review trends of receipts and expenditures,

relating them to the budgeted levels.

\(h\) Progress on the \"Current Budget\" year program

should be studied in summary by the Executive

Director and staff and tentative plans for formal

revision of the budget, if necessary, as soon as

possible after the close of the sixth month.

\(2\) Seventh month of current year:

\(a\) Complete any necessary revision of the \"Current

Year\" Budget.

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Financial Management

7475.1 REV. Handbook

\(b\) On the basis of revised work programs for the

current year and studies started earlier,

develop an outline of programs to be included in

the requested budget.

\(c\) Develop a tentative financial plan including a

calculation of operating subsidy eligibility

under the PFS.

\(3\) Eighth month of current year:

\(a\) Refine administrative and operating program

plans and related monitoring estimates.

\(b\) Develop a final financial plan.

\(c\) Complete drafts of budget schedules and

associated materials.

\(d\) Conduct formal staff and Board reviews of final

draft.

\(e\) Put the budget in final form for submission to

the Field Office prior to the close of the

month.

c\. Collect pertinent records throughout the year to be used in

the final PFS calculation and budget preparation. It is

recommended that a separate budget file be maintained for

each fiscal year. The file should contain copies of the

data used to prepare all the budget estimates.

Following are some suggested records or activities to be

developed, reviewed and/or maintained:

\(1\) Maintain copy of applicable rent roll at time of

actual preparation.

\(2\) Review performance in meeting tenant reexamination

schedules.

\(3\) Review current utility allowances to determine if

they are adequate.

\(4\) Review charges for tenant damages, excess utilities,

etc., to determine if they are adequate.

\(5\) Maintain cash/investment balances on the 10th, 20th

and 30th of each month (see Exhibit 2-2, Interest on

General Fund Investments pages 2-30 thru 2-40).

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Handbook 7475.1 REV.

\(6\) Review the Statement of Operating Receipts and

Expenditures, Form HUD-52599 (both the semi-annual

report for current year and the annual report for

previous year).

\(7\) Review the cost allocation system if more than one

program is administered by the PHA.

\(8\) Review Financial Workout Plan (FWP) for financially

troubled (FT) PHAs and Workout Plan (WP) for

operationally troubled (OT) PHAs, if applicable (see

Troubled Public Housing Agency Handbook 7475.14).

\(9\) Review Comprehensive Plan, if applicable (see CIAP

Handbook 7485.1 REV-2).

\(10\) Review Comprehensive Occupancy Plan, if applicable

(see Performance Funding System (PFS) Handbook

7475.13).

\(11\) Assure current posting of the general ledger.

\(12\) Review HUD correspondence, issuances, reports and

surveys (i.e., Project Engineering Surveys,

Maintenance Operation Reviews, Utilities Reviews,

Management Reviews, Occupancy Audits, etc.).

\(13\) Review latest fiscal audit.

\(14\) Review the Housing Manager\'s Certification status for

all required employees (see 24 CFR 967).

\(15\) Update salary comparability data for all

administrative positions.

\(16\) Review staff training needs.

\(17\) Record utility consumption and cost records using

Forms HUD-51466a, Gas Data; HUD-51466b, Electricity

Data; and HUD-51466c, Water and Sewage Disposal Data.

Review current rates. Contact utility companies to

see if rate changes have been approved.

\(18\) Review energy audit.

\(19\) Obtain Maintenance Wage Rate Determination from HUD.

\(20\) Review preventative maintenance schedule needs.

\(21\) Review maintenance inspection records.

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\(22\) Review current contracts.

\(23\) Review the insurance policies or insurance register.

\(24\) Review tenants\' accounts receivable for vacated

tenants\' accounts and determine what amount is not

collectible. Write off uncollectible amount by Board

action.

\(25\) Review the status of on-going development and

modernization program, including adequacy of funds.

\(26\) Obtain cost estimates for repair work, replacement of

equipment and any betterments and additions required

using your procurement policy.

\(27\) Review the status of ranges, refrigerators and

maintenance equipment. Will replacements be needed?

If so, when, how many and at what cost?

\(28\) Make notes of fund requirements when they come to

your attention.

\(29\) Review HUD repayment agreements (if applicable).

\(30\) Review current utility consumption records to

estimate possible mandatory (24 CFR 990.110c)

adjustment impact.

2-5. TIMING OF BUDGET SUBMISSIONS.

a\. Initial Operating Budget\--PHA Owned Rental Housing.

An Initial Operating Budget for such project must be

submitted by a PHA to the Field Office not later than 120

days before the estimated Date of Initial Occupancy of any

project. The Initial Operating Budget shall govern, on a

prorated basis operation of such project from the End of the

Initial Operating Period (EIOP) through the end of the first

full fiscal year. Thus, the initial Operating Budget would

cover a period which would be no less than 12 months nor

greater than 23 months.

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Handbook 7475.1 REV.

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PHA

Owned Rental

Housing

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Initial Operating Budget

submitted not later than

120 days

before the estimated date

of Initial Occupancy of

any project.

(original and 2 copies)

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Period Covered in

Operating Budget is from

End of Initial Operating

Period through the end of

the First Full Fiscal Year

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b\. Initial Operating Budget-Section 23 Leased.

PHAs shall submit their first operating budget to the Field

Office not later than the Date of Execution of the Annual

Contributions Contract (ACC) covering a Section 23 Project.

The first budget shall be prepared for the period from the

Date of Execution of the Contract through the end of the

first full fiscal year, as established under the terms of

the contract, and shall govern the operation of the project

for such period.

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7475.1 REV. Handbook

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Section 23 Leased

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First Operating Budget

submitted not later

than date of ACC

Execution (original

and 2 copies)

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Period covered in

Operating Budget is

from Date of

Execution of

Contract to the end

of PHA fiscal year

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c\. Subsequent Operating Budgets (Including Section 23 Leased).

PHAs shall submit subsequent operating budgets to their

respective HUD Field Offices not earlier than 150 days nor

later than 90 days before the expiration of the first and

each succeeding fiscal year.

Fiscal Year Fiscal Year Budget Due Budget Due

Beginning Ending not earlier Not Later

(FYB) (FYE) than 150 days than 90 days

10/1 9/30 5/1 7/1

1/1 12/31 8/1 12/1

4/1 3/31 11/1 1/1

7/1 6/30 2/1 4/1

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Financial Management

Handbook 7475.1 REV.

d\. Delayed Submissions.

A Field Office may authorize delayed submission of

operating budgets under the following circumstances:

\(1\) If the Performance Funding factors have not been

published and distributed by the due date (PHA-

owned projects only).

\(2\) If the PHA submits a written request for delayed

submission, indicating adequate justification for

the delay and the anticipated date of submission.

In no event will a budget be approved by the Field

Office after the end of the fiscal year involved.

2-6. BUDGET SUBMISSION REQUIREMENTS.

Each PHA operating a low-income public housing project under an

approved Annual Contributions Contract (ACC) with the

Department of Housing and Urban Development (HUD) must submit

for HUD approval an annual operating budget (Form HUD-52564).

The following tables provide a summary of forms and other

materials required when submitting an Operating Budget for

Rental Housing and Section 23.

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BUDGET MATERIAL

REQUIREMENTS

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PHA

OWNED RENTAL HOUSING

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OPERATING BUDGET MATERIALS

FORM HUD 52564 52571

52566 52573

52567

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PERFORMANCE FUNDING

SYSTEM (PFS) MATERIALS

FORM HUD 52720 1/ 52721A

52720A 1/ 52721

52720B 1/ 52722B

52720C 1/ 52728-A 2/

52720D 52728-B 3/

52722A 52728-C 3/

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Certificate of Reexamination of family

Income and Composition (24 CFR 960.209)

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Resolution of the Board of Commissioners

approving the Operating Budget (Exhibit 2-7)

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\- Extract from minutes of the meeting

\- Certificate of Recording Office

\- HUD 52158, Maintenance Wage Rate

Determination

\- List of Housing Manager and Assisted

Housing Manager positions in

accordance with Handbook 7460.2 dated

November 1980, paragraph 24(b).

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1/ No longer required starting FYB 4/1/86 and thereafter, unless PHA

experiences a change of 5 percent or 1,000 units, whichever is less,

or it is the PHA\'s initial request for subsidy other than audit cost

under PFS. Form HUD 52720B last used in calculating Allowable

Expense Level (AEL) must be attached to each PHA fiscal year original

operating budget submission.

2/ Form HUD-52728-A is required annually from PHAs requesting

operating subsidies.

3/ These forms comprise the Comprehensive Occupancy Plan which a

PHA may elect to submit if categorized as a low occupancy PHA, and

are not required otherwise.

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Financial Management

Handbook 7475.1 REV.

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BUDGET MATERIAL

REQUIREMENTS

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SECTION 23 LEASED

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OPERATING BUDGET MATERIALS

FORM HUD 52564 52571

52566 52573

52567

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REQUEST FOR PAYMENT OF SUBSIDIES FOR

OPERATIONS, - NON-PFS PROJECTS

FORM HUD 53087

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Resolution of the Board of Commissioners

approving the Operating Budget (Exhibit 2-7)

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Except for Form HUD-52564, PHAs may, with prior approval, use forms
other

than those prescribed above, provided the budget submission includes all

the information called for by the prescribed forms.

Budget submission requirements may be found in the following primary

references:

a\. Part Two, Consolidated Annual Contributions Contract, Article

II\. Operation, Section 407, Operating Budgets and Control of

Operating Expenditures.

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b\. Performance Funding System Handbook 7475.13 (PHA-owned projects

only).

c\. Field Office Monitoring Handbook 7460.7 REV. Change 4.

It is the responsibility of the PHA to submit a compete Operating

Budget package to the Field Office for review. An Operating Budget

Checklist (Exhibit 2-1) has been developed to reflect the materials

required for budget submissions. It is recommended that the PHA

complete the Operating Budget Checklist and submit it with the budget

package to the Field Office. Upon receipt, the Field Office shall

review the budget package for completeness using the Operating Budget

Checklist. In instances of incomplete budget submission, PHAs shall

receive written notification identifying the missing materials. A

Budget Checklist also has been developed for Field Office use

(Exhibit 3-2) as an attachment to the written notification of

missing materials. Field Offices may use the sample letters found in

Exhibit 3-3 as notification to a PHA that budget submission is

incomplete.

2-7. GUIDANCE FOR COMPLETION OF BUDGET DOCUMENTS

\(1\) The following are supporting documents to the Operating Budget

(Form HUD-52564):

a\. Summary of Budget Data and Justifications, Form HUD-52573

(4 pages). See Exhibit 2-2 for the form with instructions.

b\. Schedule of All Positions and Salaries, Form HUD-52566 (1

page). See Exhibit 2-3 for the form with instructions.

c\. Schedule of Administration Expense Other Than Salaries,

Form HUD-52571 (1 page). See Exhibit 2-4 for the form with

instructions.

d\. Schedule of Nonroutine Expenditures, Form HUD-52567 (1

page). See Exhibit 2-5 for the form with instructions.

\(2\) Complete these documents in conjunction with the corresponding

line items on the Operating Budget. Unless specified herein,

follow the instructions included on the forms. A copy of the

instructions for Form HUD-52564 is shown in Exhibit 2-6. The

Operating Budget (Form HUD-52564) and all the above mentioned

supporting documents can be submitted on computer generated

forms instead of the manually completed ones as long as the form

conforms to the original.

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3/89 2-12

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Handbook 7475.1 REV.

2-8. OPERATING BUDGET EXECUTION.

The approved operating budget should be used to schedule

activity on operating programs. Thus, the budget will be a

\"master plan\" for management efforts and will provide a

comprehensive checkpoint for staff and Board evaluation and

control of progress in achieving operating objectives.

2-9. CONTROL OF BUDGETARY PROGRAMS.

Although the Executive Director, in most cases, is responsible

for directing the budgetary program, the job of carrying out the

program will be easier if each principal staff member is

assigned the job of initiating action phases of the program

related to his/her specialty, and each principal organizational

unit official is delegated all necessary authority and

responsibility to ensure the adequacy and effectiveness of

budget execution and control with respect to his/her functional

area. Periodically, the Executive Director should evaluate

progress on the total program. The review should be related to

the current financial situation, both actual and budgetary.

This will provide an opportunity to pinpoint those phases of the

program which require accelerated effort and to plan revision of

the program, if necessary, because of current and prospective

financial circumstances or other factors.

a\. The budget control methods and systems required will depend

on the PHA\'s size and organization and the scope and

complexity of its operations.

Exhibits 2-8 and 2-9 provide sample budget controls that

PHAs may wish to adopt.

Exhibit 2-9 provides a sample budget control for all

accounts included in the Statement of Operating Receipts and

Expenditures (Form HUD-52599). The Executive Director may

wish to utilize this type of a control to personally review

income and expenditures on a monthly basis.

Larger PHAs may find it necessary to develop a series of

formal organizational unit control reports and schedules.

In any case, those additional records essential for clear

evaluation of major budget elements should be developed.

The detail and depth of analysis can be determined as

individual circumstances demand.

b\. At a minimum, the system should incorporate a method to (a)

review the level and trend of rental and other income items

in order to determine the effectiveness of budgetary

programs related to them, (b) earmark funds budgeted for

specific routine purposes such as salaries, utilities,

contracts, and materials, (c) measure the rate of

expenditures to assure

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7475.1 REV. Handbook

prudent use of operating funds and to evaluate

adequacy of budgetary estimates, and (d) relate

cumulative expenditures for each non-routine work

program to its budgetary limitation, and determine the

rate of progress toward its completion. The last named

control will help in planning succeeding years\'

programs and financial requirements if carryover work

appears probable or if current year budget revision

is required.

2-10. BUDGET REVISION SUBMISSION REQUIREMENTS.

Budget revisions are required when necessary to achieve

operations within controlled accounts enumerated in

paragraph 2-13. As a general rule, formal budget revisions

changing expenditures should not be prepared prior to the

end of the first six months of operation in the fiscal year

involved. Satisfactory evaluation of the need for a budget

revision probably cannot be made at an earlier date. The

Statement of Operating Receipts and Expenditures (Form HUD-

52599\) covering the first six-month period should be the

basis for the mid-year review of the first six months of

operations. In the event a budget revision is required

because of anticipated overruns of controlled accounts, the

revision should also reflect any significant changes

(increases or decreases) in all budgeted receipts and

expenditures. During the balance of the fiscal year

following the mid-year review, a budget revision may be

prepared and processed at any time if it appears that any

controlled account will be overrun. No budget revision

should be submitted solely because of a known increase in

any one item without a determination that such increase

cannot be absorbed in underruns of other items in the same

controlled account of the consolidated budget (see

paragraph 2-14, Budget Overruns). However, in order to

give the Field Office adequate time for review, budget

revisions should be submitted not later than 30 days prior

to the end of the PHA fiscal year. In no event will a

budget revision be approved by a Field Office after the

end of the PHA fiscal year.

2-11. BUDGET REVISION MATERIAL REQUIREMENTS ARE:

a\. HUD-52564 Operating Budget, as well as revised

schedules, if any of the schedules listed under Budget

Material Requirements (see pages 2-9 thru 2-11) are

affected by the submission.

b\. A narrative statement explaining and giving the

justification for all significant revisions of the

budget.

c\. The Operating Budget or Operating Budget Revision

Board of Commissioners Resolution and Certification

(see Exhibit 2-7).

d\. If a budget revision is made to incorporate a PFS

utility adjustment, Form HUD-52722B, Adjustment for

Utility Consumption and Rates, must be submitted along

with a Revised

2-14

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

Handbook 7475.1 REV.

Form HUD-52721A, Calculation of Performance Funding

System Operating Subsidy, for the fiscal year of the

respective adjustment and Form HUD-52721, Direct

Disbursement Payment Schedule Data - Operating

Subsidy.

e\. If a budget revision is made to incorporate a PFS

investment income or estimated rental adjustment,

submit a Revised Form HUD-52721A for the fiscal year

of the respective adjustments.

f\. If a budget revision is made because there are

allowable changes, up or down, to the projected

occupancy percentage used in the original budget

submission, the PHA will submit Form HUD-52728-A, PHA

Occupancy Percentage for a Requested Budget Year

(RBY), along with a Revised Forms HUD-52721A for the

fiscal year of the respective adjustments and Form

HUD-52721.

g\. If a budget revision is being made that incorporates

several adjustments, for the same fiscal year the

adjustments may be consolidated and displayed on the

Revised Form HUD-52721A for the fiscal year of the

respective adjustments and Form HUD-52721.

2-12. NUMBER OF COPIES REQUIRED.

PHAs are required to submit an original and 2 copies of

Budget Documents for review and approval, unless otherwise

advised by the Field Office.

2-13. CONTROLLED CATEGORIES.

a\. PHAs subject to a limited budget review.

The controlled category for PHAs subject to a limited

budget review is Total Operating Expenditures, Line

890 of the Operating Budget. Therefore, a budget

overrun will not occur unless the PHA incurs

expenditures in excess of the Total Operating

Expenditures approved by HUD in the applicable budget

or budget revision.

Where the budget includes provision for extraordinary

maintenance or substantial betterments and additions,

Field Office approval of the budget will be

conditioned on the PHA using the funds so provided

solely for such work or for uncompleted work from the

previous year under the provisions of Chapter 3,

paragraph 3-14 (see Uncompleted or Deferred Work

items).

2-15

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

7475.1 REV. Handbook

Examples:

\(1\) If the approved budget includes three

ranges at a total cost of \$900 and the actual

cost for the three ranges is \$975, an overrun

would not occur unless the PHA incurs

expenditures in excess of the Total Operating

Expenditures approved by the Field Office.

\(2\) If the approved budget includes three

ranges at a total cost of \$900, the PHA cannot

buy one riding lawn mower at a total cost of \$900

instead without prior HUD approval.

\(3\) If the fiscal year 1986 approved budget

included \$20,000 for replacing a roof but the

cost was not incurred until fiscal year 1987, the

amount is automatically approved to be carried

forward for an expenditure during 1987. It is,

however, recommended that the PHA include the

roof replacement in a budget or budget revision

for fiscal year 1987.

b\. PHAs subject to a detailed budget review (including Section

23 Leased).

The controlled categories for PHAs subject to a detailed

budget review are:

\(1\) Total Administrative Expenses, Line 190 of the

Operating Budget.

\(2\) Total Routine Expenses, Line 600 of the Operating

Budget.

\(3\) Total Rent to Owners of Leased Dwellings, Line 610 of

the Operating Budget - Section 23 Leased only.

\(4\) Extraordinary Maintenance, Line 710 of the Operating

Budget. Both the total dollar amounts and the

specific individual items are controlled.

\(5\) Replacement of Equipment, Line 720 of the Operating

Budget. Both the total dollar amounts and the

specific individual items are controlled.

\(6\) Betterments and Additions, Line 730 of the Operating

Budget. Both the total dollar amounts and the

specific individual items are controlled.

2-16

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

Handbook 7475.1 REV.

\(7\) Other Nonroutine Expenditures, Line 740 of the

Operating Budget. Both the total dollar amounts and

the specific individual items are controlled.

2-14. BUDGET OVERRUNS.

a\. Definition.

A budget overrun is defined as any expenditure

incurred in controlled categories in excess of the

amount approved by HUD on the applicable Operating

Budget or Operating Budget Revision (Form HUD-52564).

Permissible exceptions not requiring prior HUD

approval are as follows:

\(1\) Expenditures incurred in emergencies where

necessary to eliminate an immediate serious

hazard to life, health or safety of the residents

of a specific project.

\(2\) Overruns attributed to increased utility expenses

or terminal leave payments (i.e., if the

difference between estimated and actual utility

cost is equal to or greater than the overrun in

Total Routine Expenses).

\(3\) Uncompleted or deferred work items of

extraordinary maintenance or betterments and

additions budgeted (with HUD approval) in the

prior year but not completed during that year.

All or any portion of the overrun may be declared an

ineligible expenditure by the Field Office in

accordance with Chapter 3 paragraph 3-15 on ineligible

expenditures.

b\. ACC Requirements.

The Annual Contributions Contract, Part Two, Article

II, Section 407, Subsection H, states:

\"(H) The PHA shall not (1) at any time after the end

of the Initial Operating Period for any project incur

any Operating Expenditures with respect to such

project except pursuant to and in accordance with an

approved Operating Budget for such Project, nor (2)

during any Fiscal Year or other budget period, incur

with respect to any Project expenditures in excess of

the amounts included in approved Operating Budgets for

Controlled Accounts as may be specified by the

Government, nor (3) incur Operating Expenditures for

any purpose or in any amount contrary to any condition

or modification imposed by the Government upon any

Operating Budget: Provided, that nothing in this

subsection (H) shall preclude the incurring of

expenditures in emergencies where necessary to

eliminate an

2-17

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

7475.1 REV. Handbook

immediate serious hazard to life, health, or safety of the

occupants of a Project, and that the amount of any such

emergency expenditures shall be reported promptly to the

Government and the Operating Budget amended accordingly.\"

c\. Corrective Procedures for Overruns.

Operating budget overruns are a matter of serious concern

to HUD. They may be indicative of poor financial

management controls and have an adverse effect on the

serviceability, efficiency, economy or stability of the

PHA\'s housing operations. A PHA with an overrun needs to

give prompt attention to identifying its cause and to

implement corrective actions. In order to secure

compliance, the Field Office may take several actions

including:

\(1\) Subjecting the PHA\'s operating budget and/or budget

revisions to a detailed budget review;

\(2\) Imposing explicit conditions or limitations on budget

expenditures that are reasonably related to the

overrun cause; and

\(3\) Taking follow-up actions, such as special reporting

requirements or field visits, to assure that

corrective procedures are being made.

Additional information on overruns and their consequences

may be found in Chapter 3, paragraph 3-15.

2-18

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

Handbook 7475.1 REV.

EXHIBIT 2-1 PAGE 1 OF 4

PHA

OPERATING BUDGET CHECKLIST

Submission (Check One)

\_ \_ \_

\_ Original \_ Resubmission No. \_\_\_\_ \_ Revision No. \_\_\_\_

PHA NAME \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ FYE
\_\_\_\_\_\_\_\_\_\_\_\_\_

(The documents (original and 2 copies) checked are included in the

operitlng budget package)

PHA USE OPERATING BUDGET FORMS FIELD OFFICE USE

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ HUD-52564 (2 pages) \_\_ \_\_

Included Missing Operating Budget Included Missing

\_\_ \_\_ HUD-52566 Schedule of \_\_ \_\_

\_\_ \_\_ All Positions and \_\_ \_\_

Included Missing Salaries Included Missing

\_\_ \_\_

\_\_ \_\_ HUD-52567 Schedule of \_\_ \_\_

\_\_ \_\_ Nonroutine Expenditures Included Missing

Included Missing

\_\_ \_\_ HUD-52571 Schedule of \_\_ \_\_

\_\_ \_\_ Administration Expense \_\_ \_\_

Included Missing Other Than Salaries Included Missing

\_\_ \_\_ HUD-52573 (4 pages) \_\_ \_\_

\_\_ \_\_ Summary of Budget Data \_\_ \_\_

Included Missing and Justifications Included Missing

PFS FORMS

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ HUD-5272O, Funding Formula \_\_ \_\_

Included Missing Data Collection Form Included Missing

2-19

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

7475.1 REV. Handbook

EXHIBIT 2-1 PAGE 2 OF 4

PHA

OPERATING BUDGET CHECKLIST

PHA NAME \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ FYE
\_\_\_\_\_\_\_\_\_\_\_\_\_\_

PHA USE PFS FORMS (con\'t) FIELD OFFICE USE

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ HUD-52720A Worksheet \_\_ \_\_

Included Missing No. I: Multiplications Included Missing

\_\_ \_\_ HUD-5272OB Worksheet No. II: \_\_ \_\_

\_\_ \_\_ Calculation of Variable \_\_ \_\_

Included Missing Products and Formula Expense Included Missing

Level

\_\_ \_\_ HUD-5272OC (4 Pages) \_\_ \_\_

\_\_ \_\_ Worksheet No. III: \_\_ \_\_

Included Missing Calculating Allowable Included Missing

Expense Level (First PFS

Year Only)

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ HUD-5272OD Worksheet No. IV: \_\_ \_\_

Included Missing Calculating Revised Allowable Included Missing

Expense Level

\_\_ \_\_ HUD-52722A Calculation of \_\_ \_\_

\_\_ \_\_ Allowable Utilities Expense \_\_ \_\_

Included Missing Level Included Missing

\_\_ \_\_

\_\_ \_\_ HUD-52721A (2 Pages) \_\_ \_\_

\_\_ \_\_ Calculation of PFS Operating Included Missing

Inclucled Missing Subsidy

\_\_ \_\_ HUD-52721 (5 Pages) \_\_ \_\_

\_\_ \_\_ Direct Disbursement Payment \_\_ \_\_

Included Missing Schedule Data - Operating Included Missing

Subsidy

1/ Forms should be submitted with a budget revision.

2-20

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Management

Handbook 7475.1 REV.

EXHIBIT 2-1 PAGE 3 OF 4

PHA

OPERATING BUDGET CHECKLIST

PHA NAME \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
FYE \_\_\_\_\_\_\_\_\_\_\_\_\_

PHA USE PFS FORMS (con\'t) FIELD OFFICE USE

\_\_ \_\_ HUD-52722B Adjustment for \_\_ \_\_

\_\_ \_\_ Utility Consumption and \_\_ \_\_

Included Missing Rates 1/ Included Missing

\_\_ \_\_ HUD-52728-A: PHA \_\_ \_\_

\_\_ \_\_ Occupancy Percentage for a \_\_ \_\_

Included Missing Request Budget Year (RBY) Included Missing

\_\_ \_\_ HUD-52728-B: Vacancy \_\_ \_\_

\_\_ \_\_ Reduction Goal for Low \_\_ \_\_

Included Missing Occupancy PHAs Included Missing

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ HUD-52728-C: Comprehensive \_\_ \_\_

Included Missing Occupancy Plan Schedule Included Missing

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ Estimated Investment Income \_\_ \_\_

Included Missing (EII) Schedule Included Missing

\_\_ \_\_ \_\_ \_\_

\_\_ \_\_ Target Investment Income \_\_ \_\_

Included Missing (TII) Schedule 1/ Included Missing

\_\_ \_\_ Certification of Reexamination \_\_ \_\_

\_\_ \_\_ of Family Income and Compo- \_\_ \_\_

Included Missing sition (24 CFR 960.209) Included Missing

1/ Forms should be submitted with a budget revision.

2-21

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Financial Handbook

7475.1 REV. Handbook

EXHIBIT 2-1 PAGE 4 OF 4

PHA

OPERATING BUDGET CHECKLIST

PHA NAME \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
FYE \_\_\_\_\_\_\_\_\_\_\_\_\_\_

PHA USE PFS FORMS (con\'t) FIELD OFFICE USE

\_\_ \_\_ Resolution of the Board \_\_ \_\_

\_\_ \_\_ of Commissioners Approving \_\_ \_\_

Included Missing the Operating Budget Included Missing

\_\_ \_\_ Extract from Minutes of \_\_ \_\_

\_\_ \_\_ the Meeting \_\_ \_\_

Included Missing Included Missing

\_\_ \_\_ Certificate of Recording \_\_ \_\_

\_\_ \_\_ Officer \_\_ \_\_

Included Missing Included Missing

\_\_ \_\_ HUD-52158 Maintenance Wage \_\_ \_\_

\_\_ \_\_ Rate Determination \_\_ \_\_

Included Missing Included Missing

\_\_ \_\_ List of Housing Manager and \_\_ \_\_

\_\_ \_\_ Assistant Housing Manager \_\_ \_\_

Included Missing Positions in accordance with Included Missing

Handbook 7460.2 dated 11/80

paragraph 24(b)

2-22

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7475.1 REV. CHG-1

EXHIBIT 2-2 PAGE 9 OF 29

INTEREST ON GENERAL FUND INVESTMENTS (Continued)

The formulas for Interest on General Fund Investments (Estimated
Investment

Income (EII) and/or Target Investment Income (TII) calculations) for
PHAs

under the PFS are as follows:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1\. End of the Month Cash End of the

Balances for 12 months, Month Cash

DIVIDE by 12. The Balances for

result equals Average 12 months = Average Monthly Cash

Monthly Cash Balance. \_\_\_\_\_\_\_\_\_\_\_ Balance

12

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. DEDUCT \$10,000 or \$10

times total number of \$10,000 or

units, whichever is Average \$10 times Estimated or

greater (not to exceed Monthly - total number = Actual Cash

\$250,000), from Cash of units, Available

Average Monthly Cash Balance whichever is for

Balance to obtain greater (not Investment

Estimated Cash to exceed

Available for \$250,000)

Investment or Actual

Cash Available for

Investment.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

3\. Estimated Cash

Available for

Investment or Actual FYE estimated Estimated

Cash Available for Estimated or actual Investment

Investment, TIMES or Actual average Income

FYE estimated or Cash X 91-day = (EII) or

actual average 91-day Available Treasury Target

Treasury Bill Rate, for Bill Rate Investment

equals Estimated Investment Income

Investment Income (EII) (TII)

or Target Investment

Income (TII).

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4\. Estimated Investment Estimated Investment PUM Interest

Income (EII) or Target Income (EII) or Target on General

Investment Income (TII) Investment Income (TII) Fund

DIVIDED by Unit Months \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ =
Investments,

Available (UMA) equals Unit Months Available Line 19, Form

Per Unit Per Month (PUM) (UMA) HUD-52723

Interest on General Fund

Investments, Line 19

Form HUD-52723.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

These instructions are not

included in those provided

on Form HUD 52573

2-31 3/89

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7475.1 REV. CHG-1

EXHIBIT 2-2 PAGE 10 OF 29

INTEREST ON GENERAL FUND INVESTMENTS (Continued)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

To Determine EII or TII Calculations

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The end of the month cash balances for each month. Include Development

Funds Available after EIOP. Exclude cash balances representing Security

Deposits, Account 1114, when the interest earned thereon is either

\(1\) returned to the tenants or (2) used for tenant services or
activities

in accordance with 24 CFR 966.4(b)(3)(ii), and General Fund Account
1111.2.

(Unapplied Debt Service Fund) do not reflect in the calculation of EII
or

TII any credit balances in cash accounts, e.g., resulting from
overdrafts.

Cash Balances Used Represent:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1111.1 Cash-General Fund, after exclusion of above items;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1111.3 CIAP (Modernization) funds;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1117 Petty Cash;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1118 Change Fund;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1155 Advances - Limited Revolving Fund;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1156 Advances- Unlimited Revolving Fund;

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1157 Advances - Master Account; and

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Account 1162 Investments General Fund, after exclusion of

Development Investments representing Investment of

Development Funds before EIOP.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

These instructions are not

included in those provided

on Form HUD 52573

3/89 2-32

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7475.1 REV. CHG-1

EXHIBIT 2-2 PAGE 11 OF 29

INTEREST ON GENERAL FUND INVESTMENTS (Continued)

To calculate Estimated Investment Income (EII), not later than 60 days

before the beginning of the Fiscal Year, use available balances from

preceding 12 months (include figures from two different fiscal years,

as necessary).

To calculate Target Investment Income (TII), not later than 30 days
after

the receipt of the actual average 91 - day Treasury Bill Rate - - , use

actual balances for that fiscal year ONLY.

Following are suggested formats, with examples of each, to determine

Interest Earned on General Fund Investments:

1\. FORMAT: Schedule of Cash Balances for FYE Computation of

Estimated/Targeted Investment Income Funds Available after EIOP

(page 2 - 34),

2\. EXAMPLE: Schedule of Cash Balances for FYE Computation of

ESTIMATED INVESTMENT INCOME Funds Available after EIOP for ROOP

HOUSING AGENCY FOR FYE 12/31/85 (page 2 - 35),

3\. EXAMPLE: Schedule of Cash Balances for FYE Computation of

TARGET INVESTMENT INCOME Funds Available after EIOP for ROOP

HOUSING AGENCY FOR FYE 12/31/85 (page 2 - 36),

4\. FORMAT: Estimated/Target Investment Income Calculation (page 2 -
37),

5\. EXAMPLE: ESTIMATED/TARGET INCOME CALCULATION for ROOP HOUSING AGENCY

FOR FYE 12/31/85 (page 2 - 38),

6\. FORMAT: Year-End Reconciliations (page 2 - 39), and

7\. EXAMPLE: YEAR-END RECONCILIATIONS for ROOP HOUSING AGENCY FOR FYE

12/31/85 (page 2 - 40).

These instructions are not

included in those provided

on Form HUD 52573

2-33 3/89

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7475.1 REV. CHG-1

EXHIBIT 2-2 PAGE 12 OF 29

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INTEREST ON GENERAL FUND INVESTMENTS (Continued)

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3/89 2-34

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7475.1 REV. CHG-1

EXHIBIT 2-2 PAGE 13 OF 29

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INTEREST ON GENERAL FUND INVESTMENTS (Continued)

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