# Presentation: 097218

## Financial Assessment Subsystem Overview

## What Can FASS Tell Me About My Properties?

- FASS is based on information that can diagnose a PHAs financial ‘health’
- Areas of improvement that can increase the stability and quality of the services you provide
- Financial health enables you to make better investment and operating decisions and ensures that service will not be unnecessarily disrupted

## PHAS Scoreby Indicator

- Physical Condition				30  **pts.**
_**Financial Condition**__**	**_		**30  pts****.**
- Management Operations			30  **pts.**
- Resident Satisfaction Survey 		_10  __**pts**_**.**
- 			**Overall PHAS Score =****	****100 pts.**

## FASS Sub-indicators: 6 Keys To Financial Health

| SUB-INDICATOR (Points Available) | WHAT IS MEASURED?
 |
| --- | --- |
| Current Ratio (9.0) | 1.  How well prepared is your agency for covering its short-term obligations? |
| Months Expendable Funds Balance (9.0) | 2.  Do you have sufficient reserves to cover unexpected expenses? |
| Tenant Receivables Outstanding (4.5) | 3.  How well do you manage rent collections? |
| Occupancy Loss (4.5) | 4.  Are you maximizing your revenue through high occupancy? |
| Net Income (1.5) | 5.  Are you viable in the long-term? |
| Expense Management (1.5) | 6.  Do you have adequate cost controls? |

## 1.  How Well Prepared Is Your Agency To Cover Its Short-term Obligations?

- 		              _(Cash+Cash Equivalents) + Current Receivables_ 				           Current Liabilities

***Current Ratio****** =***

*Rule of Thumb*: Anything below one indicates risk!

*Solution*: Create Cash Management Programs, Conduct Timely Bank Reconciliation, Enforce Rent Collection Policies

*Straight Talk****:****** ****Can you pay all your short-term bills with the cash in the bank and the cash you expect to be paid by customers?   *

## 2.  Do You Have Sufficient Reserves To Cover Unexpected Expenses?

*Rule of Thumb*: At least one month’s EFB should be kept in reserve.

*Solution*: Implement Cost Control Measures, Assign Budget Responsibility/Targets, Maintain Budget & Perform Variance Analysis

*Straight Talk****:****** ****How much money do you have saved up for unexpected expenses or events compared with what you spend on a monthly basis?*

## 3.  How Well Do You Manage Rent Collection?

- 				         _Tenant Account Receivables_
- 				(Rental Income + Homebuyer Income)/365

***Tenant Receivables Outstanding***

**=**

*Rule of Thumb*: Lower is better. Scoring indicates performance against peer group.

*Solution*: Monitor Aging Account Receivables, Enforce Lease Policy & Procedures, Review Write-Off Procedures

*Straight Talk****:****** ****On average how long does it take to receive rent from your tenants? Are there many that are long overdue and may never pay?*

## 4.  Are You Maximizing Revenue Through High Occupancy?

***	******	******	******	******  ******	****** ***_Actual Days Vacant_
- 					Total Days Available

***Occupancy Loss****** ******=***

*Rule of Thumb*: Lower is better. Scoring indicates performance against peer group.

*Solution*: Marketing & Aggressive Outreach, Examine Occupancy Trends, Examine PASS and RASS Performance
*Data Source:* Financial Data Schedule

*Straight Talk****:****** ****Do you have the opportunity to increase income by focusing on more quickly re-renting units?*

## 5. How Viable Are You In The Long Term?

- 		         	        	_Net Income__	__	_		     			Expendable Fund Balance
***Measures:***   The impact of the results of operations (Net Income or
- Loss) on the PHA’s viability
**Straight Talk**: Am I spending more than I make? If so, do I have
- enough saved to continue to do this?
**Rule of Thumb: **Try to make money or keep operating losses at a
- minimum.
**Data Source*****:*** Income Statement and Balance Sheet

***Net Income as a Percent of EFB***

## 6. Do You Have Adequate Cost Controls?

**Expense Category****	****Weight**
- Administrative	34 %
- General Expenses	33 %
- Tenant Services	10 %
- Ordinary Maintenance & Operations	10 %
- Protective Services	10 %
- Utilities	_3 %_
- Total	100 %

## Expense Management

***Measures:*** It measures: (1) PHA’s operating cost per unit in order to
- control expenses; (2) the PHA’s ability to maintain its expense ratios at
- a reasonable level relative to that of its peers and (3) not entity-wide
**Low Rent only.**
**Straight Talk: **How do my operating expenses compare with similar
- agencies (similar in size and in the same geographic region).
**Rule  of Thumb**: The lower the expenses, the better!
**Data Sources**: Income Statement.
***Data Source:***  Income statements

**Expense Management**

**Notes:**
The Expense Management indicator used to be comprised of ten sub-components. It was determined that several of the expense indicators were immaterial.  After analysis was conducted to ensure that removing these indicators would not negatively affect the interpretation of the score, the immaterial expenses were removed.
Currently the indicator is comprised of Administrative, Ordinary Maintenance, Utilities, General Expenses, and Non-routine expenditures. 
In GAAP, the Non-Routine expenses are replaced by Tenant Services and Protective services. The expenses are then weighted as follows:
Admin - 34%			Tenant - 10%
General - 33%			Protective 10%
Utilities - 3%
Maintenance - 10%
The weightings are designed to encourage PHAs to spend more on areas that benefit residents. Utilities are weighted very low because of the complex mechanisms PHAs have in place for paying utility costs. Some PHAs have tenant paid utilities and others receive subsidies. 

## Entity-Wide Assessment

Peer Groupings 
Size-Based
Region-Based 

Score Adjustments
Late Penalties
Audit Flags
Audit Findings and Penalties

**Peer Groupings**
**Size-Based**
**Region-Based **
**Score Adjustments**
**Late Penalties**
**Audit Flags**
**Audit Findings and Penalties**

- FASS-PH Scoring Process

- Scoring Thresholds

- Peer Groups (Region)

- Peer Groups (PHA Size)

## FASS-PH Scoring Process

- Peer Groupings
- _Size-Based Peer Groupings - 6 peer groups_
-  Very Large = 10,000+ units
-  Large = 1,250 - 10,000 units
-  High Medium = 500 - 1,249 units
-  Low Medium = 250 - 499 units
-  Small = 50 - 249 units
-  Very Small = 0 - 49 units
- _Region-Based Peer Groupings - 10 peer groups_
-  Based on geographic location
-  Only applies to Expense Management indicator

## FASS-PH Scoring Process

_**Score Adjustments**_
- Due to:
-  Late Penalties
-  Audit Adjustments
-  Material differences between Audited vs. Unaudited submission
-   Audit Flags

## Late Penalties

- Unaudited:
- One point deduction from PHAS score each 15-day period when a submission is past the due date.
- After 90 days beyond the due date, PHA receives a Late Presumptive Failure (LPF) score of zero.
- Audited:
- Late submission = 0 Score

**Notes:**
Reference of Material to Handouts:

Located in HUD Business Guidelines (FASS-PHA) -- 
 Late Penalties : page 6-4 (Late Submissions)

## FASS Submission Due Dates

| Fiscal Year End | 9/30/03  | 12/31/03 | 3/31/04 | 6/30/04 |
| --- | --- | --- | --- | --- |
| Unaudited Extension Request Deadline | 
11/15/03 | 
2/14/04 | 
5/16/04 | 
8/16/04 |
| Unaudited Due Date | 11/30/03 | 2/29/04 | 5/31/04 | 8/31/04 |
| Unaudited Penalties Start, minus 1 point every 15 days for 90 days | 
12/16/03 | 
3/16/04 | 
6/16/04 | 
9/16/04 |
| Final or Last Submission of Unaudited Data | 2/29/04 | 5/31/04 | 8/31/04 | 11/30/04 |
| Automatic Processing of 
Unaudited LPF | 3/1/04 | 6/1/04 | 9/1/04 | 12/1/04 |
| Audited Due Dates | 6/30/04 | 9/30/04 | 12/31/04 | 3/31/05
 |
| Automatic Processing of Audited LPF | 7/1/04 | 10/1/04 | 1/1/05 | 4/1/05 |

*** The above due dates do not include extensions**

**Notes:**
Unaudited submissions
Late penalties start 15 days after the due date.
A point is deducted for every 15 days a submission is late.

## FASS-PH Scoring Process

**Audit Flags**
- The FASS system uses the information from the Data Collection Form, and where applicable, deducts points according to a pre-established system of Audit Flags and Tier Classifications.
- Analysts will restore flag deductions when the audit flag was due to incorrect reporting by the PHA.

## Score Adjustments

**Auditor’s Opinion**: If the auditor’s opinion is anything other than unqualified, points will be deducted from the PHA’s audited financial score
**Failure To Submit**: If either the audited or unaudited financials are not submitted on time, then point deductions will be assessed. This includes the possibility of a late presumptive score of zero for the financial indicator

- Note: Failure to submit unaudited financials within the required timeframe will result in a late presumptive score of zero for both the unaudited and audited financial data submissions - resulting in substandard financial and troubled designation.

## Helpful Hints for PHAs

- Review Accounts For Proper Classifications.
- Institute Budgeting Practices: Departmental Responsibility, Variance Analysis, etc.
- Age Receivables
- Enforce Rent Collection Policies
- Address Market Demand Problems Using PASS & RASS Data If Necessary
- Plan Ahead – Ensure That You Have An Accountant and Auditor For Yearend

## FYE + 2 MONTHS = UNAUDITED DUE DATE

Due Date + 1 Day 		1 Day Late Letter 
Due Date + 46 Days 	46 Day Late Letter 
Due Date + 3 Months 	Late Presumptive Failure

FYE + 7 Months  		7 Month Audit Letter 

FYE + 9 Months  		Late Presumptive Failure (Audited 					FASS)

	NOTE:  For FASS & MASS the first 15 days after the Due Date there will be “0” Late Points assessed.  Starting on the 16th Day and EACH 15 day period thereafter, one (1) Late Point will be assessed up to a maximum of 5 Late Points, per 24 CFR 902.60 (e) (1).

**Due Date + 1 Day ****	****	****1 Day Late Letter **
**Due Date + 46 Days ****	****46 Day Late Letter **
**Due Date + 3 Months ****	****Late Presumptive Failure**
**FYE + 7 Months  ****	****	****7 Month Audit Letter **
**FYE + 9 Months  ****	****	****Late Presumptive Failure (Audited ****	****	****	****	****	****FASS)**
**	****NOTE:  For FASS & MASS the first 15 days after the Due Date there will be “0” Late Points assessed.  Starting on the 16****th**** Day and EACH 15 day period thereafter, one (1) Late Point will be assessed up to a maximum of 5 Late Points, per 24 CFR 902.60 (e) (1).**

- Dates To Remember

## Critical Dates for a 12/31 FYE PHA

- It is advised that PHAs secure an IPA prior to year end

**December 31st**
- Close books for the year

**February 28th**
- Unaudited financials submitted to HUD and to IPA for review

**September 30th**
- Audited financials submitted to HUD

## Working With Your IPA

**PHA enters data in Secure Systems & sends audit package to Independent Public Accountant (IPA)**

**IPA reviews, approves, and sends submission back to the PHA**

**PHA submits audited financial data submission in Secure Systems by established due dates**

**  ****Financial Data Submission is the responsibility of the PHA**

## PHAS is the Responsibility of the PHA

**PHA Asks Employee or IPA to Submit**

**PHA**

**Delegate**

**Secure Systems**

**It is the responsibility of the PHA to ensure that its information is submitted in a timely and accurate manner regardless to whom it may be delegated **

- ?

- Apartment Building

- Man on Phone

- Question mark

- Check mark

## Summary

- The Financial Assessment provides valuable information about the financial health of your PHA
- Improving your score helps ensure quality service for your customers

## FASS Contacts

**Technical Assistance Center (TAC)**  1 (888) 245-4860
- (7:00 am to 8:00 p.m., Eastern Standard Time)
**Nick Miele**, FASS-PH Program Manager, (202) 475-8788
**Steven Bolden**, FASS-PH System Operations, (202) 475-8706
** **