Protect & Utilize Your LIPH Operating Reserves

June 2017

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The Low Income Public Housing (LIPH) program’s operating reserves are reaching levels that HUD considers to be high. The last time PHAs had excess LIPH operating reserves, HUD offset [reduced] subsidy; this occurred as recently as 2012 with the offset forcing PHAs to use their operating reserves to pay for monthly operating expenses. HUD is estimating that LIPH operating reserves levels are about one years’ worth of operating subsidy.

PHAs must strategically plan to better maximize their Financial Assessment Sub-System (FASS) ratios, while utilizing their reserves so they do not get offset through a future subsidy reduction. BDO PHA Finance created a few tips to help with your strategy.

1. Prepare a correct Financial Data Schedule (FDS) to ensure operating reserves are not over stated.

2. Strategically transfer excess cash between AMPs to help move cash out of the AMPs and into the Central Office Cost Center (COCC). Even though the COCC fee revenues may eventually be refederalized, flexibility should remain with the COCC to use the funds for any Section 8 or Section 9 use.

3. Identify much needed repairs and deferred maintenance items that are either below capitalization thresholds for large PHAs or above them for small PHAs.

4. Improve curb appeal for residents.

5. Correct management deficiencies identified by HUD, the IG, the auditor, and even the PHA

6. Pay down any long-term liabilities such as debt, OPEB, and pension.

7. Allow the COCC to charge the maximum management fees to transition the funds out of the AMPs. The COCC can always transfer the funds back to the AMPs.

8. Complete timely budgets and budget revisions to issues request for proposals and obligate operating reserves.

9. Reduce the use of the Capital Fund grant for operational items such as BLI 1406, BLI 1408, and BLI 1410.

10. If your PILOT is waived, consider paying the PILOT to the municipality, then having the municipality grant the money back to your non-profit to further affordable housing. Thus, the money gets moved from the AMP to the non-profit.

These ten tips above may help prevent some or all of your future LIPH operating subsidy being offset at your agency and will allow you to better utilize your operating reserve levels for the administration of your public housing program.

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

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