Chapter 5. Calculation Problem Areas

1
Chapter 5.Calculation Problem Areas
2
Chapter 5. Section 1. Introduction

• Learning Objective
• Understand and address those difficult aspects of
  rent calculation where errors are most likely to
  occur

3
Introduction

• In this session, we will focus on the error-prone
  components of income and rent determination
• Identified in HUDs Policy Development and
  Research report, Quality Control for Rental
  Assistance Subsidies Determinations
• Emphasized in RIM reviews

4
Introduction

• Purpose of the chapter
• Identify common errors
• Examine reasons for errors
• Practice the more difficult calculations
• We will not cover every facet of rent calculation

5
Introduction

• Review of problem areas
• Employment income
• Training program income
• The earned income disallowance (EID)
• Assets and asset income
• Utility allowances
• Payment standards

6
References

• Appendix A
• Web Addresses (page A-1)
• Training Program Income Notice (page A-5 through
  A-24)
• Appendix B
• Regulation Excerpts (page B-1 through B-28)
• HCV Guidebook Excerpts (page B-29 through B-125)

7
Chapter 5. Section 2.Employment Income
8
Employment Income

• PDR report found a 68 error rate for families
  with earned income (employment income)
• 88 for families with more than 1 source of
  earned income
• Employment income is single strongest predictor
  of errors in rent calculation

9
Employment Income

• Annual income from employment includes full
  amount, before payroll deductions, of
• Wages and salaries
• Overtime pay, commissions, fees, tips and bonuses
• Other compensation for personal services

10
Employment Income

• Reported income will usually be in amounts over a
  period of time that are less than annual (hourly,
  weekly, bi-weekly, semi-monthly, monthly, etc.)
• Hourly/full time rate X 2080
• Weekly amount X 52
• Semi-monthly amount X 24
• Bi-weekly amount X 26
• Monthly amount X 12

11
Verification Issues

• Most errors are caused by lack of adequate
  verification
• Either PHAs do not obtain third-party employment
  verification, or the verification is received but
  not used
• Rent calculated using pay stubs
• File not documented as to why third party was not
  available

12
Verification Issues

• Learning Activity 5-1 (Page 5-5)
• Paystubs vs. Employer Statement?
• Purpose Discrepancy Awareness
• Part 1 Calculate annual income using paystubs
  (page 5-5 through 5-8)
• Part 2 Re-calculate (page 5-8) using third-party
  verification completed by employer (page 5-9)
• Part 3 Group discussion

13
Unreported and Underreported Income

• Some families fail to report or underreport
  employment income
• One common form of underreporting reporting net
  earnings, not gross
• Use UIV to identify unreported employment
• Inform applicants and participants of UIV sources
  to be checked
• Encourages more accurate reporting

14
Sporadic Income

• Temporary, nonrecurring, or sporadic income
  (including gifts) is not included in annual
  income
• Sporadic income is income that is neither
  reliable nor periodic

15
Sporadic Income Example

• Daniel Morgan receives Social Security
  Disability plus works as handyman occasionally
• Claims only worked a couple times last year (no
  documentation)
• Answer the three questions.

16
Answer Sporadic Income

• Does this fit description of sporadic income?

• Yes, his earnings fit the category of
  nonrecurring, sporadic income

• How do you handle his working income?

• Dont include in annual income
• Tell Mr. Morgan he must report any regular work
  or steady jobs he takes

• What type of documentation should the PHA have in
  Daniels file to support its decision?

• Note in file explaining situation and its
  decision
• UIV documentation if PHA has access

17
Seasonal Employment

• People in some occupations regularly work less
  than 12 months per year
• School employees
• Agricultural workers
• Construction trades
• HUDs HCV Guidebook describes 2 acceptable
  calculation methods

18
Seasonal Employment

• Method 1 Annualize current income
• Conduct interim reexam when income changes
• Method 2 Calculate anticipated income from all
  known sources for the entire year
• No interim reexam
• History of income from past years is needed
• Not useful when future income source is unknown
  or none

19
Seasonal Employment Example

• Marcy Walsh is currently employed as a tile
  setter with ABC Construction, earning 1000 per
  month
• For the last 4 years, she has worked this job for
  6 months per year during the construction season
• During the other 6 months of each year, she works
  part-time at Dominos Pizza, earning 400 per
  month

20
Calculation Sample Method 1

• Multiply current income (1000/month) times 12
  months
• 12,000 per year
• When the construction season ends, conduct an
  interim reexam
• Multiply income from Dominos (400/month) times
  12 months
• 4800 per year

21
Calculation Method 2

• Calculate anticipated income from all known
  sources for the entire year
• ABC Construction
• 1000 x 6 months 6000
• Dominos Pizza
• 400 x 6 months 2400
• TOTAL 8400
• NOTE There is no interim reexam when the
  participant changes jobs

22
Incorrect Calculation of Method 1

• If the PHA counted only the current income
  (1000/month) times the anticipated length of the
  job (6 months), annual income would be calculated
  as 6000
• Family would pay less than TTP required by
  regulations
• Common error

23
Seasonal Employment

• PHA needs a written policy for this situation
• Policy should be implemented consistently
• Families with seasonal employment should be
  informed of policy
• If PHA adopts Method 1, family needs to know
  interim reexam will be conducted
• If PHA adopts Method 2, family needs to know
  interim reexam will not be conducted

24
Chapter 5. Section 3.Training Program Income

• See Appendix A for Training Program Notice (page
  A-5) and CFR (page B-15)

25
Training Program Income

• HUD-Funded Training Program
• Exclude all amounts received under the training
  program while they are in the program

26
HUD-Funded Training

• The head of a tenant family receives 500 mo. in
  TANF. She enrolls in a HUD-funded training
  program operated by the PHA. TANF benefits stop.
  She receives 600 mo. while in the training
  program. Upon completion, she receives a job at
  the PHA earning 700 per month.
• What monthly income is counted during training?
• How long is income excluded?
• What is counted after completion?

None
During training only
700 (All)
27
Other Training Program Income

• 5.609(c)(8)(v)
• Exclude all incremental earnings and benefits
  resulting from participation in a qualifying
  State or local employment training program
• includes programs not affiliated with a local
  government
• no specific employment training programs cited

28
Training Program Income

• To qualify, an employment training program must
  have clearly defined goals and objectives.
• PHAs may adopt written policies that establish
  standards for these programs.

29
Training Program Income

• Training may include
• Occupational classroom training
• Subsidized on-the-job training
• Basic education

30
Training Program Income

• Incremental income
• Increase in total amount of welfare, benefits,
  and earnings of family member after enrollment in
  training program as compared to income before
  enrollment
• Only the incremental increase is excluded.

31
Training Program Income

• 5.609(c)(8)(v)
• Exclude incremental earnings and benefits only
  while the family member participates in the
  employment training program

32
Example of Other Training Program Income

• A family head receives 400 per month in TANF.
  He then enrolls in a qualified State employment
  training program and receives 550 per month in
  training income. TANF benefits stop.
• What income is counted?
• How long will income be excluded?

400 - the extra 150 is not counted
While he remains in the training program
33
Training Program Income Issues

• When new employment is reported, PHA needs to
  determine whether employment is part of a
  training program
• Notice PIH 2001-15 identified frequent errors in
  this component
• Recommends educating participants on eligible
  types of training programs
• Check data-gathering forms for questions

34
Chapter 5. Section 4.Earned Income Disallowance

• See Appendix A for Website Address
• For FAQs on EID

35
Earned Income Disallowance

• Final Rule
• Effective date 4/20/01
• Technical Amendments 2/13/02
• Regulations 24 CFR 5.617

36
Earned Income Disallowance

• Regulations are similar to earned income
  disallowance (EID) regulations for Public
  Housing, except
• For Section 8, will only apply to family members
  with disabilities
• PH EID regulations are not restricted to persons
  with disabilities

37
Earned Income Disallowance

• Effective 3/15/02, HUD revised the definition of
  qualified family
• Family no longer required to meet the regulatory
  definition of disabled family

38
Earned Income Disallowance

• EID excludes increases in income attributable to
  new employment or increased earnings over income
  received by that family member prior to
  qualifying for the disallowance.
• The exclusion applies only to the income of the
  family member with disabilities, not the entire
  household

39
EID Qualifications

• Family must be a program participant
• Already receiving HCV assistance
• Family must experience an increase in annual
  income as a result of one of the following
  reasons . . .

40
Qualifications

• Employment by a family member who
• Is a person with disabilities, AND
• Was previously unemployed for one or more
  years prior to employment
• definition includes a person who has earned not
  more than could be earned working 10 hrs/week, 50
  wks/year, at established minimum wage
• OR...

41
Earned Income Disallowance for Persons with
Disabilities

• 2. Increased earnings by a family member
• Who is a person with disabilities, AND
• Whose increased earnings occurred during members
  participation in an
• economic self-sufficiency program
• job-training program

42
HUD Definition of Economic Self-Sufficiency
Program

• Any program designed to encourage, assist, train
  or facilitate economic independence of assisted
  families or to provide work for such families.

43
HUD Definition of Economic Self-Sufficiency
Program

• Economic self-sufficiency programs can include

• job training
• employment counseling
• work placement
• basic skills training
• education

• English proficiency
• workfare
• financial or household mgmt
• apprenticeship
• activity necessary for work

OR...
44
EID Qualifications

• 3. New employment or increased earnings by a
  family member who is a person with disabilities
  AND has received TANF benefits or services within
  past 6 months
• No minimum amount if TANF is received in form of
  monthly maintenance
• If TANF is received in form of one-time payments,
  wage subsidies, or transportation assistance,
  total received over 6 month period must be at
  least 500

45
EID Initial 12-Month Exclusion

• During initial 12 month exclusion period
• Exclude the full amount of increase in income
  attributable to employment or increased earnings
• Initial full exclusion period begins on date
  qualified family member is
• employed or
• first experiences increase in income due to
  employment
• Initial full exclusion extends for a total of 12
  cumulative months (dont have to be consecutive
  months)

46
Determining The Incremental Increase

• Determine the annual income of the EID-qualified
  person prior to the qualifying change (earned
  and/or unearned)
• Calculate the annual income of the EID-qualified
  person after the qualifying change
• The difference is the incremental increase

47
Example 1

• Mary Jones had 4000 in TANF benefits at the time
  she became employed. She is earning 12,400 at
  her new job, and her TANF benefits have stopped.
• How much is the incremental increase?

48
Example 1 Think it Through

• TANF 4000
• Empl ___0
• Total 4000

• TANF 0
• Empl 12,400
• TOTAL 12,400

Did we exclude all of her earned income?
No
How much did we exclude?
8400
Why didnt we exclude the 12,400?
Only the amount which exceeds the baseline is
excluded
49
Example 2

• John Smith had no income at the time he became
  employed at 12,400 per year.
• How much is the incremental increase?

50
Example 2 Think it Through

• Other Inc 0
• Empl ___0
• Total 0

• Other Inc 0
• Empl 12,400
• TOTAL 12,400

Did we exclude all of his earned income?
Yes
How much did we exclude?
12,400
Why?
The baseline is zero
51
EID Second 12-Month Exclusion and Phase-In

• Exclusion is reduced to 50 of the increase
  attributable to employment or increased earnings
• Second 12-month exclusion period begins after
  qualified family member has received 12
  cumulative months of full exclusion
• Phase-in period extends for a total of 12
  cumulative months (not needed to be consecutive
  months)

52
EID Maximum 4 Year Disallowance

• 4 year lifetime maximum disallowance period
• Starts at beginning of initial exclusion period
  and ends exactly 48 months later
• No exclusion may be given after this lifetime
  limit has been reached

53
EID Maximum 4 Year Disallowance

• EID regulations call for a maximum of 12
  cumulative months for each of the two exclusion
  periods
• Thus, an individual can max out after receiving
  the EID for only two years
• 12 consecutive full-exclusion months followed by
• 12 consecutive phase-in exclusion months

54
EID Issues

• Remember, the disallowance does not apply for
  purposes of admission to HCV
• To ensure that every disabled HCV participant who
  is eligible for EID receives it and is calculated
  properly, PHA must consider
• 1. How will you document what evidence will
  you provide
• A. That the family is a qualified family?
• B. The income exclusion in the familys file?

55
EID Issues

• 2. How will you track the number of months
  income has been excluded and when the exclusion
  must end?

56
EID Issues

• Tracking can be complex
• In an ideal world, a person with disabilities who
  qualifies for the EID will receive
• The full exclusion for 12 consecutive months
• The phase-in exclusion for the next 12
  consecutive months
• Tracking would be easy

57
In an Ideal World
Count all income
100 of increase
50 of increase
58
EID Issues

• Tracking
• In reality, the exclusion may stop and start more
  than once, making it a challenge to figure out
  how much to disallow when there is a break during
  an exclusion period.

59
Reality may be.
9 months
6 months
9 months
100
50
50
100
Its over
60
EID Issues

• Tracking
• Or . . . The four-year maximum may be reached
  before the full 12 months of phase-in (or even
  initial full exclusion) have been used up.

61
Or.Reality may be
9 months
3 months
2 months
100
50
100
Its over
62
EID Issues

• Complexity of the regulation contributes to rent
  determination errors
• Per HUDs PDR report
• Difficulty in tracking exclusion periods
• PHA needs standardized system

63
EID Issues

• Calculation of incremental increase
• May necessitate conducting interim reexams
  throughout phase-in period
• Regardless of PHAs interim policy
• To simplify matters, PHA may align reexam date to
  coincide with the beginning of the phase-in
  period
• Best source for answers
• RHIIP www.hud.gov/offices/pih/programs/ph/rhiip/f
  aq.cfm
• EID www.hud.gov/offices/pih/phr/about/ao_faq.cfm
  

64
Earned Income Disallowance

• Learning Activity 5-2
• EID Calculation
• Read the case study
• Part 1 Calculate the prequalifying income and
  the exclusion amount and wages for EID member
• Parts 2-4 Recalculate for changes

65
Answers Baseline Income

• Katies prequalifying (baseline) income is
• 5,000

66
Part I, Step 1
Step 1 Calculate EID family members exclusion
amount.

9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
5,000
14,500
5,000
9,500
67
Part I, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
9,500
0
68
Part I, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W

7g. Total
5,000
5,000
9,500
9,500
0
5,000
69
Part 2, Step 1
Step 1 Calculate EID family members exclusion
amount.

9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
2,000
11,500
5,000
6,500
70
Part 2, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
6,500
3,000
71
Part 2, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W

7g. Total
2,000
2,000
9,500
6,500
3,000
5,000
72
Part 3, Step 1
Step 1 Calculate EID family members exclusion
amount.

9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
6,000
15,500
5,000
9,500
73
Part 3, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
9,500
0
74
Part 3, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W

7g. Total
6,000
6,000
9,500
9,500
0
6,000
75
Part 4, Step 1
Step 1 Calculate EID family members exclusion
amount.

9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50)
6,000
15,500
5,000
9,500
4,750
76
Part 4, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
4,750
4,750
77
Part 4, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W

7g. Total
6,000
6,000
9,500
4,750
4,750
10,750
78
EID Calculation Chart Learning Activity 5-2
79
Applying the EID Rules

• In this section, well walk you step-by-step
  through an in-depth example of the complexities
  that can arise in the application of the EID
  rules.

80
Challenges for PHA Management

• Since EID is a statutory requirement and a major
  source of rent errors, management must take
  seriously the responsibility of ensuring that
  staff can apply the EID rules correctly.
• Rectifying a failure to provide this benefit when
  a family is entitled to it can be costly for a
  PHA. So can providing excess subsidy!

81
Challenges for PHA Staff

• Staff may be puzzled or confused by the results
  of correctly applying the EID rules such as
  families with these circumstances
• Family who has significant increase in earned
  income without having any increase in rent
• Family who has decreases in other income with no
  equivalent decreases in rent

82
Challenges for PHA Staff

• Other confusing areas
• Explaining to families why their rent is going up
  or down as a result of the EID rules
• Difficulty tracking a familys EID benefit as
  time passes and family circumstances change

83
Purpose of Effective Tracking System

• HCV participants must benefit only for the number
  of months for which they qualify
• PHA does not become liable for excess subsidy

84
In-Depth Example

• Franklin Family
• One member will become eligible for EID and will
  progress through two 12 month exclusion periods
• Case study will help us track the two exclusion
  periods as well as the 4-year maximum benefit
  period
• Time is divided into 4 12-month blocks
• See time lines (page 5-35)

85
In-Depth Example

• Franklin Family Scenario (page 5-36)

86
In-Depth Example

• For each scenario, we will follow these 3 steps
• Calculate the EID exclusion amount
• Calculate the family members wages after
  exclusion
• Complete Form HUD-50058 entries

87
Part I, Step 1
Step 1 Calculate EID family members exclusion
amount.

A. Earned income of EID family member 8,450
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 11,050
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 6,370
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
88
Part I, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 8,450
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 6,370
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
89
Part I, HUD 50058
90
Part 2, Step 1
Step 1 Calculate EID family members exclusion
amount.

A. Earned income of EID family member 13,520
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 16,120
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 11,440
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
91
Part 2, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 13,520
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 11,440
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
92
Part 2, HUD 50058
93
Part 3, Step 1
Step 1 Calculate EID family members exclusion
amount.

A. Earned income of EID family member 10,140
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 12,740
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 8,060
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
94
Part 3, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 8,060
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
95
Part 3, HUD 50058
96
Part 4, Step 1
Step 1 Calculate EID family members exclusion
amount.

A. Earned income of EID family member 10,140
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 12,740
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 8,060
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 4,030
97
Part 4, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 4,030
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 6,110
98
Part 4, HUD 50058
99
Part 5, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 0
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 2,600
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 0
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 0
100
Part 5, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 0
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 0
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 0
101
Part 6 Annual Reexams

• For the Franklin familys next 3 annual
  reexaminations, there is no change in family
  circumstances.
• June 1, 2005
• June 1, 2006
• June 1, 2007

102
Part 7, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 17,680
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 20,280
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 15,600
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 7,800
103
Part 7, Step 2
Step 1 Calculate EID family members exclusion
amount.
G. EID family members earnings (HUD-50058, 7d) 17,680
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 7,800
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 9,880
104
Part 7, HUD 50058
105
Part 7 After Exclusions End
106
Chapter 5. Section 5.Assets and Asset Income
107
Assets and Asset Income

• Value of assets may affect familys annual income
• PHA must
• Identify assets
• Verify market value of asset
• Convert from market to cash value

108
Assets and Asset Income

• To determine cash value of asset, start with the
  fair market value. Then subtract
• Any expenses involved in converting assets to
  cash
• Broker fees
• Legal fees
• Settlement costs
• Penalty for early withdrawal
• Any money owed on the asset, such as the mortgage
  balance

109
What Assets Include

• Savings and checking accounts
• PHAs establish policies for determining value of
  accounts
• May elect to count current balances or average
  balances for a given period (2 months, 6 months,
  etc.)

110
What Assets Include

• Accessible amount of trusts available to family
• Stock, bonds, money market funds
• Equity in real property, other capital
  investments
• Retirement savings accounts

111
What Assets Include

• Contributions to company retirement/pension funds
• Before retirement, count only amounts family can
  withdraw without retiring or quitting
• After retirement, count regular periodic payments
  as income

112
What Assets Include

• Assets held in the name of more than one person
  that allow unrestricted access
• Lump sum receipts which are retained and
  verifiable
• Inheritances, capital gains, lottery winnings
• Social security SSI lump sum payments

113
What Assets Include

• Personal property held as investment
• gems, jewelry,
• coin collections,
• Surrender value of life insurance policies

114
Assets Disposed of For Less Than Fair Market Value

• Imputed Assets Assets disposed of within two
  years prior examination or reexamination for less
  than fair market value

115
Assets Disposed of For Less Than Fair Market Value

• Cash value of an imputed asset is the difference
  between the actual cash value of the asset and
  the amount received for it
• Example Home market value
• 155,000
• Fees incurred 5,000
• Actual Cash value 150,000
• Amount received 100,000
• Imputed Cash Value 50,000

116
Assets Disposed of For Less Than Fair Market Value

• PHA can establish a minimum threshold for
  counting assets disposed of for less than fair
  value
• Threshold of 1,000 would be reasonable

117
Assets Disposed of For Less Than Fair Market Value

• Generally NOT considered to include those
  disposed of due to
• divorce or separation
• bankruptcy
• foreclosure
• PHA should develop applicant/participant
  certification form for verifying assets disposed
  of for less than fair market value

118
Assets Disposed of For Less Than Fair Market Value

• Learning Activity 5-3 Assets disposed of for
  less than fair market value (page 5-50)

119
Income from Assets

• Market value of asset
• is used to determine anticipated income from
  asset
• Formula to determine anticipated income from
  interest bearing accounts
• Market value x interest rate anticipated
  income
• What is the market value of a 4,000 savings
  account?

120
Income from Assets

• Learning Activity 5-4
• Interest Income from Assets (page 5-52)

121
Section 6 Assets
Edith
1
Savings
400 x .023
400
9
400
9
028
0
9
122
Imputed Asset Income

• Income that would be received from an asset if it
  were converted to cash and the cash were placed
  in a savings account earning a HUD-determined
  passbook rate.
• The cash value of an asset is used to determine
  the imputed income from the asset.

123
Imputed Asset Income

• Remember, when calculating the cash value of an
  asset, PHAs must take into account the expenses
  involved in converting the asset to cash such as
• Penalties for early withdrawal
• Broker or legal fees
• Closing costs (for real estate)

124
Imputed Asset Income

• Imputed asset income comes into play on the HUD
  50058 only when the total cash value of all
  assets is greater than 5000.

125
Imputed Asset Income

• When total cash value of all assets is 5000 or
  less, use the actual income from assets

126
Imputed Asset Income

• If the total cash value of all assets exceeds
  5,000 must use the greater of
• actual income from assets
• imputed income from assets (HUD passbook rate
  times total cash value of all assets)

127
Assets and Asset Income

• Learning Activity 5-5
• Assets and Asset Income (page 5-57)

128
Section 6 Assets
Edith
1
Savings
400
9
6000 x.020
Stocks
6000-480
5520
120
Edith
1
5920
129
.0225
133
133
129
What Assets Do Not Include

• Necessary items of personal property such as
  furniture and automobiles
• Assets not accessible to the family
• Interest in Indian Trust lands
• Value of a home currently being purchased with
  HCV homeownership assistance

130
Asset Issues

• Staff should know that market value is used to
  calculate actual income on certificate of
  deposits and other instruments that carry a
  penalty for early withdrawal
• Cash value only used to determine imputed asset
  income only if total cash value of all assets
  exceeds 5000

131
Asset Issues

• The actual anticipated income from a
  interest-bearing asset (savings account) is based
  on the interest rate actually paid by the bank or
  other institution where the account is located.
• The HUD-determined passbook rate is not used to
  determine actual income.
• The HUD-determined passbook rate is used only to
  determine imputed interest on assets totaling
  more than 5000.

132
Asset Issues

• PHA staff should be reminded that
• All assets count, regardless of their value
• Assets may have a cash value and produce no
  actual income
• There is no maximum asset limit for applicants or
  participants
• PHA may not pass cost of asset verification to
  families
• Bank verifications
• Appraisals

133
Chapter 5. Section 6.Utility Allowances
134
Utility Allowances

• PHAs are required to establish and maintain
  Utility Allowance schedules (see CFR 982.517)
• A Utility Allowance is that amount approved by
  the PHA for reasonable monthly costs of local
  utility consumption in its area
• Cost of each utility must be stated separately
• For different sizes/types of units

135
Utility Allowances

• Schedule must be reviewed annually
• Must be revised if any utility rate has changed
  10 or more
• If family leases a unit smaller or larger than
  the Voucher size (called the family unit size),
  the PHA must use the utility allowance for actual
  unit size unit leased.
• Regardless of voucher bedroom size

136
Utility Allowances

• Current utility allowance must be applied at
  reexaminations
• Common reasons for utility allowance errors in
  subsidy determinations
• PHA failure to review or revise utility schedules
  as required
• PHA staff failure to apply revised allowances at
  reexaminations
• Failure to compare RFTA, lease and HAPC

137
Utility Allowances

• Two suggestions for avoiding errors
• Require the use of a checklist
• Conduct quality control reviews

138
Chapter 5. Section 7. Payment Standards
139
Payment Standards

• Used to calculate total subsidy for the family
• PHAs Payment Standard is maximum subsidy amount
  that the family may receive
• For details on establishing payment standards see
  Section 7 (page 5-61)

140
Use of Payment Standard

• If a familys unit (voucher) size is not the same
  as the size of the unit that the family selects,
  the PHA must use the lower of
• PS for family unit (voucher) size or
• PS for size of unit actually selected

141
Use of Payment Standard

• During a HAP Contract, changes in the payment
  standard must be handled as follows
• If the PHA has decreased the payment standard
  during the term of the HAP contract, the PHA must
  use
• The higher (old) payment standard at the first
  regular annual reexam
• The lower (new) payment standard at the second
  regular rexam (unless the payment standard has
  been increased in the interim)

142
Use of Payment Standard

• During a HAP Contract, if PHA has increased the
  PS
• Use the new, higher Payment Standard at the 1st
  regular (annual) reexam after the Payment
  Standard increase
• Do not use the higher payment standard for
  interim reexams
• Use PS in effect at last annual reexam

143
Use of Payment Standard

• If the familys unit size changes during the term
  of the HAP contract, the PHA must use the payment
  standard for the new family unit size at the next
  annual reexam.
• Regardless of whether the PHA has made any
  changes in the PS schedule
• Family unit size is Voucher size.

144
Payment Standard Issues

• At times, PHA may not have up-to-date PS amounts
  available when processing annual reexams that
  will become effective at a later date.
• Problem generally arises around the time HUD
  publishes FMRs for the coming year (October 1 or
  thereabouts)

145
Payment Standard Issues

• If PS increases between the time the PHA
  completes a batch of reexams and the date the
  reexams become effective, PHA must re-calculate
  rents for those families or delay adoption of new
  schedule for reasonable period (as long as the
  current payment standard is within the basic
  range).
• Example
• Reexams processed in August for November
  effective date
• PHA increases PS effective November 1
• PHA would re-process all November reexams using
  higher PS unless adoption of new schedule was
  delayed

146
Payment Standard Issues

• Common errors
• Wrong PS used when actual unit size is smaller
  than family unit size (voucher size)
• Failure to apply correct PS when change in family
  size results in a different family unit (voucher)
  size
• Applying increased PS at interim reexams

147
Learning Objective

• Understand and address those difficult aspects of
  rent calculation where errors are most likely to
  occur