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On Friday, August 10th, HUD posted Housing Notice 2012-14 to HUDClips. The Notice indicates that beginning with vouchers submitted within 60 days of the Notice, HUD will require all "New Regulation" Section 8 Housing Assistance Payments (HAP) contracts to utilize any existing residual receipts to offset HAP payments.
New Regulation contracts are as follows:
- 24 CFR Part 880 - Section 8 Housing Assistance Payments Program for New Construction
- 24 CFR Part 881 - Section 8 Housing Assistance Payments Program for Substantial Rehabilitation
- 24 CFR Part 883 - Section 8 Housing Assistance Payments Program - State Housing Agencies
- Section 202/811 - Projects subject to New Regulation HAP Agreements are also included
Payments made under a Project Rental Assistance Payment Contract (PRAC) are NOT included. In short, if HAP restricts distributions, then this Notice applies. HAP Contract without similar restrictions will continue to submit the amount of the entire voucher.
Summary of Requirements:
- To the extent that Residual Receipts are available at a new regulation project, Owners are allowed an initial reserve ("Retained Balance") in an amount equivalent to $250 per unit to use for project purposes.
- To the extent Residual Receipts are available at a new regulation project, Owners may use Residual Receipts to fund a Service Coordinator program, subject to HUD approval. The $250 per unit Retained Balance is net of the Residual Receipts necessary to fund a Service Coordinator program. That is, Residual Receipts funds in excess of the Retained Balance may be used to fund a Service Coordinator Program prior to offsetting Section 8 HAP payments.
- Residual Receipts account balances in excess of $250 per unit must be applied on a monthly basis to offset Section 8 HAP payments up to the full amount of the monthly subsidy request, depending upon the amount of Residual Receipts available for the offset. Monthly offsets must continue until the Residual Receipts account reaches the Retained Balance level of $250 per unit.
- Owners must follow the instructions in Section VI to voucher for offset of Section 8 HAP payments.
- Owners of projects with Residual Receipts account balances at or below the Retained Balance shall voucher for full monthly HAP payments through the Tenant Rental Assistance Certification System (TRACS) in accordance with existing procedures.
- At the end of the project's fiscal year, all surplus cash remaining after payment of any permissible distributions must be deposited into the project's Residual Receipts account.
- If, after all Residual Receipts have been applied to offset Section 8 HAP payments and the Residual Receipts account balance again exceeds the Retained Balance level of $250 per unit due to an annual deposit of surplus cash, offsets of Section 8 HAP payments must be re-initiated.
Owners must follow the instructions in the Notice for the submission of the monthly payment request and will compute surplus cash at the end of each annual fiscal period. Owners not required to submit audited financial statements will submit owner-certified statements to the local HUD office providing total disbursements as well as beginning and year end balances in the Residual Receipts account. At this point, HUD has not issued any guidance on how to account for these transactions. AHACPA has requested guidance on how to account for these transactions. The primary questions appear to be: - Is this just a simple transfer of cash from one account to another? Or,
- Should these amounts be recorded in Gross Potential Rent and if so, how should they be recorded? And,
- Will the management agent earn management fees on amounts paid from residual receipts?
Practitioners should be prepared to address these issues in the upcoming audit season. AHACPA will notify members if HUD issues any further accounting guidance.
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