Section 3: The Central Office Cost Center

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