Don’t Take the FDS Lightly – Tips for a Successful FDS Submission

August 2017

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PART 2

Our first article on Financial Data Schedule (FDS) submission provided five tips to help prevent a FDS rejection by the Real Estate Assessment Center (REAC). This article will add additional tips to prevent FDS rejections and maximize your Financial Assessment (FASS) and Management Assessment (MASS) indicators.

 

1. 70400 Line - Tenant revenue - Other 

This FDS line represents revenue related to tenants other than dwelling rent.
 
All other tenant related revenue such as lock outs, maintenance charges, legal fees, etc. will be reported on this line and not FDS Line 70300, net tenant rental revenue. If other tenant revenue is reported on FDS line 70300, then it will reduce operating subsidy to the public housing program
 

2. FDS Line 70800 - Other government grants 

This FDS line represents all other federal, state, and local governmental grants (operating or capital) received by the Public Housing Authority (PHA) in the current year that are required to be recognized as revenue under GAAP that are considered to be non-HUD grants. Contributions received by the PHA from the state or local government where the PHA is a department or division of the state or local government would not be recorded here, but in FDS line 10020 - Operating transfers from/to primary government.
 
When preparing the data collection form of the FDS, each PHA must report the federal grants received by their Catalog of Federal Domestic Assistance (CFDA) number. Since FDS Line 70800 will report both federal and non-federal grants, the federal grant(s) reported on this FDS line number must be included on the data collection form.
 

3. FDS Line 71310 - Cost of sale of assets 

This FDS line represents the total cost of the assets that the entity has sold to its customers. This account was primarily set up to meet the requirements of the homeownership programs.
 
This is one of the few FDS line numbers that will allow an opposite value than the typically allowed value. Most of the amounts must be entered on the FDS as whole positive numbers, but when an amount is entered as a negative, the REAC reviewer will typically reject the submission because it is not GAAP. In a typical business, the cost of goods sold is an expense and reported as such. REAC’s argument is that this is similar for the sale of houses and this amount would be reported as part of the income statement.
 

4. FDS Line 91200 – Auditing fees 

This FDS line represents fees paid to independent public accountants for periodic audits of the PHA’s books of account. This line does not include costs related to reviews or compilations or costs associated with fee accountant services. These costs should be reported in FDS Line 91900.
 
Since the public housing program is funded for the cost of the audit, HUD will pull the audit costs for the subsidy calculation from this line item. If the PHA does not report the audit costs for the public housing program on this line, then the PHA may not be funded for audit costs on their subsidy calculation. If this does occur, the PHA will have to manually fill in the amount for audit costs on the subsidy calculation and provide supporting documentation. 
 

5. FDS Line 91810 - Allocated overhead 

This FDS line represents overhead (indirect costs) allocated to a project or program. This line item will be used by PHAs that maintain a cost allocation system for overhead costs as determined by the PHA’s cost allocation plan as required under 2 CFR Part 200 Subpart E and applicable appendices in lieu of a fee-for-service approach. This line item is not to be used for front-line (direct) costs that are allocated to projects and programs, e.g., central waiting lists. Examples of allocated overhead costs include: salaries and benefits of executive director and finance staff, rent or upkeep of central office, telephone charges for central office, etc. This line item is not required for PHAs that own or operate fewer than 400 public housing units but is recommended. However, line 91810 is required for PHAs that own or operate more than 400 public housing units and do not use the fee-for-service approach. For PHAs over 400 units, the type of expenses that are to be included in this line item are prescribed by HUD in the Supplement to HUD Handbook 7475.1 REV., CHG-1, and Financial Management Handbook.
 

6. FDS Line 97300 - Housing assistance payments 

This FDS line represents housing assistance payments (HAP) for the HCV or similar type program paid or accrued to the owners of dwelling units leased to eligible families. Also included in this line are HAP-related expenses such as contributions to FSS escrow accounts, utility reimbursements, and mortgage payments paid using HAP subsidy for a HCV homeownership program. In addition, this account includes, where applicable, HAP payments paid or accrued to owners for vacancies during and after rent-up pursuant to a housing assistance payments contract, and HAP payments paid or accrued to owners for reimbursement pursuant to the provisions of the housing assistance contract for any unpaid rent or damages caused by the tenants.

According to REAC this FDS line should match the VMS or should have a variance of no more than 3%. Many times if the variance is greater than 3% the FDS will be rejected. The FDS and the VMS have different reporting requirements for HAP reporting and the amounts should never equal. Unfortunately, REAC doesn’t see it that way. If there is a variance of 3% of more, we recommend including an explanation of the variance in the comments section of the FDS.
 

7. FDS Line 511.4 - Restricted Net Position (RNP)

This FDS line represents the difference between an entity’s assets and its liabilities and which do not meet the definitions of net investment in capital assets. Restricted net position is constrained in use: 1) as a result of requirements externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulation of other governments; or 2) imposed by law through constitutional provisions or enabling legislation. The amount cannot be negative. 
 
Note: FDS Line 511.4 replaces FDS Line 511.1 for FYE 12/31/2013 submissions and later.
 
Similar to HAP reporting on the FDS Line 97300, REAC expects RNP for the HCV program on the FDS to match the VMS. Again, due to different reporting requirements for the VMS and the FDS, these amounts should typically never match. We recommend explaining any variance on the comments section of the FDS. This will help prevent a rejection.

GAAP, GASB, and HUD regulations are constantly changing and we recommend staying up to date on the shifting reporting requirements to maximize MASS and FASS ratios and subsidy, as well as to prevent audit findings. These tips will not guarantee an approved submission, but will certainly deter any potential rejection comments. 

If you have questions regarding matters discussed above, please contact Brian Alten.

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