[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}

**Special Attention of: Notice** PIH 2005-31 (HA)

Public Housing Agencies

Public Housing Hub Office Directors Issued: August 22, 2005

Public Housing Program Center Directors

Regional Directors Expires: August 31, 2006

Field Office Directors
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Resident Management Corporation Cross References:

# 

# Subject: Federal Fiscal Year (FFY) 2006 Initial Determination and Obligation of Operating Subsidy

#  

**1. [Purpose]{.underline}**

This notice informs public housing agencies (PHAs) and field offices of
the procedures HUD will initially use to determine and obligate
operating subsidy for Federal Fiscal Year (FFY) 2006 considering two
major impacts on the Operating Fund Program:

-   The calendar year transition in accordance with the Consolidated
    Appropriations Act of 2005 (Public Law 108-447); and

-   The pending publication of a new operating fund rule.

**2. [Background ]{.underline}**

**Calendar Year Transition.** As described in PIH Notice 2005-27,
*Transition of Operating Subsidy Funding to a Calendar Year Basis and
Associated Modifications to the Federal Fiscal Year 2005 Calculation of
Operating Subsidy,* operating subsidy will be provided to PHAs based on
a calendar year. In the Consolidated Appropriations Act of 2005,
Congress provided the following language under the Public Housing
Operating Fund:

> "...*Provided further*, That any such 2005 payment shall be provided
> in an amount sufficient to cover only the period beginning with the
> start of a public housing agency's fiscal year and ending December 31,
> 2005: *Provided further*, That for fiscal year 2006 and all fiscal
> years thereafter, the Secretary shall provide assistance under this
> heading to public housing agencies on a calendar year basis...."

To comply with the appropriation language, all PHAs eligible to receive
operating subsidy will be provided with operating subsidy from the FFY
2005 appropriation through December 31, 2005, regardless of their fiscal
year. Therefore, these PHAs will need operating subsidy from the FFY
2006 appropriation from January 1, 2006, through December 31, 2006.

Because HUD will provide operating subsidy to all PHAs based on a
calendar year, PHAs will submit, field offices will review, and
Headquarters will process all form HUD-52723, Operating Fund Calculation
of Operating Subsidy, OMB approval number 2577-0029, at one time.

This transition of operating subsidy funding to a calendar year basis is
shown in the Funding Cycle Table, below:

**Funding Cycle Table**

  ------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------- ---------- ---------------- ----- ----- -----
  PHA Fiscal    2004                                                                2005                                                    2006                         
  Year                                                                                                                                                                   

                Qtr 1            Qtr 2            Qtr 3            Qtr 4            Qtr 1            Qtr 2            Qtr 3      Qtr 4      Qtr 1            Qtr 2 Qtr 3 Qtr 4

  PHA:          2004                                                                2005                                                    2006                         
  01/01-12/31   Appropriations                                                      Appropriations                                          Appropriations               

  PHA:                           2004                                                                2005                                   2006                         
  04/01-03/31                    Appropriations                                                      Appropriations                         Appropriations               

  PHA:                                            2004                                                                2005                  2006                         
  07/01-06/30                                     Appropriations                                                      Appro...              Appropriations               

  PHA:                                                             2004                                                          2005\...   2006                         
  10/01-09/30                                                      Appropriations                                                           Appropriations               
  ------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------- ---------- ---------------- ----- ----- -----

(Qtr 1 is January 1^st^ --March 31^st^; Qtr 2 is April 1^st^ -- June
30^th^; Qtr 3 is July 1^st^ -- September 30^th^; and Qtr 4 is October
1^st^ -- December 31^st^)

**Pending Publication of a New Operating Fund Rule.** HUD anticipates
the publication of a new operating fund rule in the near future. The
proposed operating fund rule was published in the [Federal
Register]{.underline} on April 14, 2005. Once the new operating fund
rule is published, PHAs will need adequate time to prepare, field
offices will need adequate time to review, and Headquarters will need
adequate time to process the FFY 2006 form HUD 52723, Operating Fund
Calculation of Operating Subsidy, OMB approval number 2577-0029.

**3. [Initial FFY 2006 Funding]{.underline}**

**PHA-Owned and Mixed Finance Rental Housing.** HUD does not want to
burden PHAs, fee accountants, and field offices by requiring the FFY
2006 form HUD-52723, Operating Fund Calculation of Operating Subsidy,
OMB approval number 2577-0029, for all PHAs to be submitted at one time
under the existing operating fund rule, and then again under the new
operating fund rule when published.

Instead, beginning January 1, 2006, HUD will provide two calendar
quarters of operating subsidy (subject to proration) to PHAs based on
their FFY 2005 form HUD-52723, Operating Fund Calculation of Operating
Subsidy, OMB approval number 2577-0029, expires June 30, 2006. Once the
new operating fund rule is effective, HUD will issue another notice
informing PHAs to submit a FFY 2006 form HUD-52723, Operating Fund
Calculation of Operating Subsidy, OMB approval number 2577-0029, and
supporting forms, and providing detailed instructions about their
submission. HUD will also provide appropriate training to PHAs and field
offices prior to the required submission of the FFY 2006 form HUD-52723,
Operating Fund Calculation of Operating Subsidy, OMB approval number
2577-0029. **Accordingly, PHAs do NOT need to submit and field offices
do NOT need to review FFY 2006 form HUD-52723, Operating Fund
Calculation of Operating Subsidy, OMB approval number 2577-0029, nor
supporting forms until further notice.**

Once PHAs submit the FFY 2006 form HUD-52723, Operating Fund Calculation
of Operating Subsidy, OMB approval number 2577-0029, HUD will determine
the amount of operating subsidy that should be obligated to these PHAs
under the new operating fund rule for the calendar year beginning
January 1, 2006. HUD will then deduct the amount of operating subsidy
that has already been obligated to PHAs for the first two calendar
quarters based on their FFY 2005 form HUD-52723, Operating Fund
Calculation of Operating Subsidy, OMB approval number 2577-0029, expires
June 30, 2006, to determine the additional amount of operating subsidy
that must be obligated to PHAs for the remainder of the calendar year
under the new operating fund rule. Funding for new units and
deprogrammed units will be adjusted accordingly when PHAs submit their
FFY 2006 form HUD-52723, Operating Fund Calculation of Operating
Subsidy, OMB approval number 2577-0029.

PHAs will receive a letter from HUD notifying them of the amount of
operating subsidy provided to them for the first two calendar quarters
of 2006, based on the FFY 2005 form HUD-52723, Calculation of Operating
Subsidy, OMB approval number 2577-0029, expires June 30, 2006. This
letter will serve as the interim obligating document. Once the new FFY
2006 form HUD-52723, Operating Fund Calculation of Operating Subsidy,
OMB approval number 2577-0029, have been processed, another interim
obligating document will be issued, informing PHAs of the amount of
operating subsidy provided to them under the new operating fund rule for
the third calendar quarter of 2006. At the end of the FFY, form
HUD-52723, Operating Fund Calculation of Operating Subsidy, OMB approval
number 2577-0029, the final obligating document, will be issued to PHAs.
All funding will be made available through the electronic Line of Credit
Control System.

**PHA-Owned Mutual Help and Turnkey III Homeownership Opportunity
Projects.** These projects will receive operating subsidy beginning
January 1, 2006, based on their FFY 2005 form HUD-53087, Calculation of
Subsidies for Operations -- Non-Rental Housing, OMB approval number
2577-0029, expires June 30, 2006. FFY 2006 submissions for these
projects will be due at the same time the FFY 2006 form HUD-52723, OMB
approval number 2577-0029, Operating Fund Calculation of Operating
Subsidy, are due.

**Moving-to-Work Agencies.** The provisions, above, shall also apply to
Moving-to-Work agencies.

**4. [Fiscal Year Reporting Requirements ]{.underline}**

As stated in PIH Notice 2005-27, the transition of operating subsidy
funding to a calendar year basis does not affect a PHA's fiscal year nor
change any fiscal year related reporting requirements, such as the
operating budgets, financial statements, or the audit. At this time, the
Department is not approving fiscal year end changes based solely on this
calendar year transition.

[/s/]{.underline}

Paula O. Blunt, General Deputy Assistant

Secretary for Public and Indian Housing