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Section 3: The Central Office Cost Center

Section 3: The Central Office Cost Center. The Central Office Cost Center: Learning Objectives. Explain the concept and requirements of the Central Office Cost Center (COCC) under the Final Rule Describe the allowable fees charged by the COCC. Central Office Cost Center (COCC).

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Section 3: The Central Office Cost Center

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  1. Section 3: The Central Office Cost Center

  2. The Central Office Cost Center: Learning Objectives • Explain the concept and requirements of the Central Office Cost Center (COCC) under the Final Rule • Describe the allowable fees charged by the COCC

  3. Central Office Cost Center (COCC) • Owners of Multifamily properties employ property management companies for the day-to-day operation of properties • The Central Office Cost Center will operate like a property management company • Final Rule requires all large PHAs (250 or more units) to establish a COCC

  4. Central Office Cost Center • Business unit within the PHA that earns income from fees and/or by overseeing other business activity • Simplifies administrative requirements • Provides greater flexibility to support mission of PHA

  5. $ OLD HUD PHA NEW HUD PHA/COCC $ Fees $ Subsidy AMP Review: The Flow of Funds • Property Management Fee • Asset Management Fee • Bookkeeping Fee • Program Management Fees • Fee-for-Service

  6. Types of Fee Income • Property management fee • Bookkeeping fee • Asset management fee • Program management fees and other business activity • Fee-for-service (e.g., centralized painting or extermination)

  7. Property Management Fee • Fee charged to AMPs for oversight provided by COCC • Replaces traditional PHA overhead allocations • Based on occupied units and HUD-approved vacancies (not including limited vacancies) • Average management fee in HUD’s multifamily housing programs was $35 PUM (2004)

  8. Methods of DeterminingProperty Management Fees • 80th percentile of fees paid by market • Local HUD multifamily fee schedules • Other compelling local market data

  9. Bookkeeping Fee • COCC is permitted to charge a bookkeeping fee for the project accounting function of $7.50 PUM • Based on occupied units and HUD-approved vacancies (not including limited vacancies) • Average bookkeeping fee in HUD’s multifamily housing programs was approximately $3.50 PUM (2004)

  10. Asset Management Fee • Fees charged to AMPs for those tasks that would be residual if all property management functions were contracted to a third-party ($10 PUM) • Subject to the availability of excess cash • Based on total number of ACC units

  11. Capital Fund Program Management Fee • Fee charged to the Capital Fund Program for management related to capital activities • COCC may charge up to 10% of total Capital Fund Program grant as management fee

  12. Housing Choice Voucher Program Fee • Fees charged for all administrative work performed by COCC staff related to the operation of HCV program • Two different fees can be charged: • HCV Management Fee – Higher of either 20% of annual administrative fee or $12 PUM based on number of vouchers leased • HCV Bookkeeping Fee – $7.50 PUM based on number of vouchers leased

  13. Program Management Fees and Other Income • Public Housing Development • Other HUD Programs (ROSS, HOPE VI, etc.) • Other business activity

  14. Fee for Service: Centralized Front-Line Functions • PHAs may choose to centralize various front-line expense activities and charge AMPs a fee for these services • Examples • Maintenance • Legal Services

  15. Fee for Service Guidelines PHAs must adhere to the following: • Fees must be based on the market rate for the work received and not the actual cost • PHAs must use the fee for service approach for centrally provided maintenance • Centrally provided front-line services must be in the best interest of the AMPs and cannot cost more than if performed on-site • PHAs must maintain documentation for the fees charged to the AMPs

  16. Sample COCC Revenue from Fees

  17. Front-Line Expenses vs. Fee Expenses • Unlike in the past, front-line expenses and administrative expenses, called fee expenses, will need to be separated • Front-Line Expenses: • An expense of the AMP • Paid for by AMP income (e.g. subsidy and rent) • Fee Expenses: • An expense of the COCC • Paid for by fee income generated by COCC

  18. What is Classified as a Fee Expense? • Certain personnel costs, including: • Executive Director • Regional Managers • Human Resource • Finance and accounting • Equipment, furniture, and services necessary to sustain COCC • Central servers and software supporting COCC • Refer to Table 7.2 of the Supplement to PIH Notice 2007-09

  19. What is Classified as a Front-Line Expense? • Onsite personnel • Housing Manager • Maintenance Technician • Resident Services • Equipment, furniture, and services required to maintain site-based office • AMP utility costs • Refer to Table 7.2 of the Supplement to PIH Notice 2007-09

  20. Summary and Online Resources

  21. Benefits of Asset Management • Improved services provided to each AMP • Organizational structure allows for greater efficiency • Onsite staff provide greater service to tenants • System enhancements will allow PHAs to operate more efficiently

  22. Online Resourceshttp://www.hud.gov/offices/pih/programs/ph/am • Revisions to the Public Housing Operating Fund Program; Final Rule - 24 CFR Part 990 • Preparing for Asset Management Under the New Public Housing Operating Fund Rule (24 CFR 990): A Planning Document • Demonstration of a Successful Conversion to Asset Management (Stop-Loss) Submission Kit Year 2 • Demonstrating Successful Conversion to Asset Management: A Site Visit to the Charlotte Housing Authority

  23. Online Resources(continued)http://www.hud.gov/offices/pih/programs/ph/am • PIH Notice 2007-09, Changes in Financial Management and Reporting for Public Housing Agencies Under the New Operating Fund Rule (24 CFR Part 990), issued April 10, 2007 • Asset Management Help Desk • Email: AssetManagementHelpDesk@hud.gov • Toll-Free Telephone: 1-800-511-8478

  24. End of Section 3

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