Policy and Procedures for Revenue Cycle – Cash Management ...



Policy and Procedures for Revenue Cycle – Cash Management and Program FundingBACKGROUND INFORMATIONThe revenue cycle for cash management and program funding is the process by which the PHA receives funding and monitors reserve levels. A financial goal of the PHA is to maximize its cash position by maximizing revenue and collecting all revenue as quickly as possible. The PHA should manage and monitor its cash level and cash disbursements considering budgeted expenses during the year and maximizing interest earned on cash balances that are not needed in the short-term.This policy applies to revenues earned for all programs of the PHA that are not on an expenditure reimbursement basis (e.g., the Capital Fund Program). Note: The revenue cycle for the Capital Fund Program should follow the separate Capital Fund policy that is provided since much of the Capital Fund grant is not available as cash until the PHA has incurred an eligible expense.This policy should be used in conjunction with the investment, rent collection, tenant accounts receivable processing and Capital Fund Program policies.This document provides two (2) samples of a PHA policy and procedures for the revenue cycle for cash management and program funding.Sample 1 – Small PHAs with No Finance Department. This sample provides a revenue cycle for cash management and program funding policy for a small PHA with no finance department and utilizes a fee accountant.Sample 2 – Large PHAs with a Finance Department. This sample provides a revenue cycle for cash management and program funding policy for a large PHA with a finance department.PHAs can simply cut and paste the sample(s) into their policy and procedures documents and modify as needed.ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for PHA programs and projects and the major assumptions that were used to develop the sample policy and procedures.Assumption – Small PHAs utilize the services of a fee accountant. (Small PHAs)Assumption – PHAs will have in place other policies as described above, in conjunction with this policy. (All PHAs)SAMPLE 1 – SMALL PHAs WITH NO FINANCE DEPARTMENTREVENUE CYCLE POLICY – CASH MANAGEMENT AND PROGRAM FUNDINGThe PHA shall manage the inflow of resources in a prudent and efficient manner that is compliant with program requirements and cash resources that are not needed in the short-term should be invested.Revenues earned shall be converted into cash as promptly as possible and shall become resources of the program generating the revenue. The source of the revenue is a key factor in determining when the revenue can be converted into cash (i.e., draw-down from HUD or collected from a tenant) and when revenues shall be recognized on the PHA’s books of account.For cash management purposes, revenues and disbursements for different programs will be retained and processed in separate bank accounts. Due to restrictions on the use of Housing Choice Voucher (HCV) HAP funding and administrative fee funding, the PHA will maintain separate bank accounts for HAP and administrative fee activity. Family Self Sufficiency (FSS) escrow accounts will also be maintained in a separate bank account.For internal financial statement and PHA monitoring, all bank accounts will be shown separately on the financial statements and when aggregated, totals to the amount held at the financial institution. All bank accounts will be reconciled monthly.Resource levels shall be monitored monthly on an individual project/program basis to ensure that adequate resources are available and that revenues are promptly converted into cash. The monitoring shall also incorporate decisions on whether to invest or redeem investments to maintain appropriate cash balances.REVENUE CYCLE PROCEDURES – CASH MANAGEMENT AND PROGRAM FUNDINGThe following procedures related to the revenue cycle for cash management and program funding are provided below.Program funding,Cash balances and investments, andYear-end accounting.Program Funding ProceduresThe following funding procedures will be used for: 1) Operating Subsidy; 2) Rent Collection; 3) Service Fees and Other PHA Charges; 4) Housing Choice Voucher; and 5) Transfers.Operating Subsidy. Requests for the payment of public housing operating subsidy (i.e., drawdown of operating subsidy) shall be made monthly by the Executive Director in the amount that HUD has made available to the PHA for that month. A copy of the payment request (i.e., printout from eLOCCS) shall be printed, initialed and dated by the Executive Director, and sent to the fee accountant as documentation of the transaction.For public housing operating subsidy, the revenues will be recognized in the period in which the funding was made available to the PHA.The PHA will follow the same procedures for similar operating subsidy programs that the PHA may administer.Rent Collection. The PHA will follow the rent collection policy for collections related to tenant rents and other tenant charges. The PHA will follow the tenant accounts receivable processing policy for revenues related to tenant accounts receivable that is overdue. Tenant rents shall be recognized as revenue on the first of the month.Service Fees and Other PHA Charges. For service fees and other PHA charges, including other tenant charges, such as maintenance charges or excess utility charges, the revenue will be recognized when the service(s) have been provided.Housing Choice Voucher (HCV) Funds. HCV HAP and administrative fee funding is automatically deposited by HUD into the PHA’s bank account each month (i.e., no drawdown action of funds is needed to be initiated by the PHA).HAP Funds. The PHA will determine each month whether the HAP funds disbursed by HUD and PHA held HAP equity are enough to cover the upcoming month’s HAP expenses. An estimate of HAP expenses for the next month should be calculated two weeks prior to the beginning of the month. If it is likely that cash balances will not be enough to cover HAP expense, the PHA will need to contact HUD to request additional funds to be disbursed if HUD-held reserves are available. The Two-Year Tool will be used to assist in this process. HAP funds will be recognized as revenue based on HUD disbursements and PHA HAP needs, limited to the amount of PHA HAP funding available.Administrative Fees. Administrative fees will be recognized as revenue based on the number of vouchers leased on the first of the month.Transfers. Transfers between programs is not permitted unless specifically authorized by the program. All transfers out from Federal and state programs that are not the repayment of program expenses paid from a central account/working capital account is prohibited unless documented authorization is obtained from the program administrator.The Executive Director shall make transfers each month for the full balance due on all inter-program receivables/liabilities. If a transfer cannot be made for the full balance due, the Executive Director will draft a memo with an explanation for the lack of funds and corrective action to be taken. This memo will be presented to the Board of Commissioners at the next meeting.Cash Balances and Investments ProceduresDuring the preparation of the operating budgets, large cash disbursement items, such as property insurance, should be reviewed to verify that sufficient cash balances will be available at the time of payment.The PHA will monitor cash and investment balances each month and provide a cash and investment balance report to the Board of Commissioners. The Executive Director and Board of Commissioners should review the report to determine whether cash and investment balances are trending upward or downward.Cash balances more than current payables including significant upcoming payables (e.g., insurance premiums) plus four months of average monthly expenditures as calculated on a program level, shall be invested in accordance with the PHA’s investment policy.If the cash balances remaining after subtracting current payables (including significant upcoming payables) is less than two months of average program monthly expenditures, investments should be redeemed to bring cash to within two to four months of average monthly expenditures or to the extent possible in accordance with the investment policy.Year-End Accounting ProceduresAt fiscal year end, the fee accountant shall accrue revenues earned related to subsidy funding sources. These accruals will be supported by funding letters or other funding calculation documentation as necessary.A copy of the payment request shall be printed, initialed and dated by the Executive Director, and sent to the fee accountant as documentation of the transaction. All HUD funding correspondences, funding schedules, and letters shall be provided to the fee accountant monthly.SAMPLE 2 – LARGE PHAs WITH A FINANCE DEPARTMENTREVENUE CYCLE POLICY – CASH MANAGEMENT AND PROGRAM FUNDINGThe PHA shall manage the inflow of resources in a prudent and efficient manner that is compliant with program requirements and cash resources that are not needed in the short-term should be invested.Revenues earned shall be converted into cash as promptly as possible and shall become resources of the program generating the revenue. The source of the revenue is a key factor in determining when the revenue can be converted into cash (i.e., drawdown from HUD or collected from a tenant) and when revenues shall be recognized on the PHA’s books of account.For cash management purposes, revenues and disbursements for different programs will be retained and processed in separate bank accounts. Due to restrictions on the use of Housing Choice Voucher (HCV) HAP funding and administrative fee funding, the PHA will maintain separate bank accounts for HAP and administrative fee activity. The Public Housing and HCV Family Self-Sufficiency (FSS) escrow accounts will also be maintained in separate bank accounts.The PHA’s Central Office Cost Center (COCC) also will be maintained in a separate bank account. The COCC shall be the main account for cost allocations related to payroll and accounts payable.For internal financial statement and PHA monitoring, all bank accounts will be shown separately on the financial statements and when aggregated, totals to the amount held at the financial institution. All bank accounts will be reconciled monthly.Resource levels shall be monitored monthly on an individual project/program basis to ensure that adequate resources are available and that revenues are promptly converted into cash. The monitoring shall also incorporate decisions on whether to invest or redeem investments to maintain appropriate cash balances.REVENUE CYCLE PROCEDURES – CASH MANAGEMENT AND PROGRAM FUNDINGThe following procedures related to the revenue cycle for cash management and program funding are provided below.Program funding,Cash balances and investments, andYear-end accounting.Program Funding ProceduresThe following funding procedures will be used for: 1) Operating Subsidy; 2) Rent Collection; 3) Service Fees and Other PHA Charges; 4) Housing Choice Voucher; and 5) Transfers.Operating Subsidy. Requests for the payment of public housing operating subsidy (i.e., drawdown of operating subsidy) shall be made monthly by the Executive Director in the amount that HUD has made available to the PHA for that month. A copy of the payment request (i.e., printout from eLOCCS) shall be printed, initialed and dated by the Executive Director, and filed with the journal voucher that records the receipt of the payment.For public housing operating subsidy, the revenues will be recognized in the period in which the funding was made available for to the PHA.The PHA will follow the same procedures for similar operating subsidy programs that the PHA may administer.Rent Collection. The PHA will follow the rent collection policy for collections related to tenant rents and other tenant charges. The PHA will follow the tenant accounts receivable processing policy for revenues related to tenant accounts receivable that is overdue. Tenant rents shall be recognized as revenue on the first of the month.Service Fees and Other PHA Charges. For service fees and other PHA charges, including other tenant charges, such as maintenance charges or excess utility charges, the revenue will be recognized when the service(s) have been provided.The individual providing the service shall promptly provide documentation of the service to the Finance Director upon completion. When the documentation has been received, the Finance Director will generate an invoice recording the revenue and receivable for the program that provided the service or that owns the assets that were used. The invoice will be promptly delivered to the service recipient.COCC Fees and other revenues generated for the services provided to other programs, such as COCC management fees, shall be promptly reimbursed by the program receiving the services. These internal fees should be supported by supporting schedules of fee calculations. These inter-program revenues and expenses will be eliminated in the presentation of entity-wide financial statements.Housing Choice Voucher (HCV) Funds. HCV HAP and administrative fee funding is automatically deposited by HUD into the PHA’s bank account each month (i.e., no drawdown action of funds is needed to be initiated by the PHA).HAP Funds. The PHA will determine each month whether the HAP funds disbursed by HUD and PHA held HAP equity are enough to cover the upcoming month’s HAP expenses. An estimate of HAP expenses for the next month should be calculated two weeks prior to the beginning of the month. If it is likely that cash balances will not be enough to cover HAP expense, the PHA will need to contact HUD to request additional funds to be disbursed if HUD-held reserves are available. The Two-Year Tool will be used to assist in this process. HAP funds will be recognized as revenue based on HUD disbursements and PHA HAP needs, limited to the amount of PHA HAP funding available.Administrative Fees. Administrative fees will be recognized as revenue based on the number of vouchers leased on the first of the month.Transfers. Transfers from projects or programs to the COCC shall be allowed for eligible fees. All other transfers between programs is not permitted unless specifically authorized by the program. All transfers out from the projects that are not inter-program transfers or for eligible fees under asset management is prohibited unless documented authorization is obtained from the program administrator. These transfer restrictions do not apply to the repayment of project/program expenses paid from a central account/working capital account.The available resources of the projects/programs should be reviewed in accordance with the financial analysis policy. If the analysis determines that funds are allowed and should be transferred between the projects/programs, the Finance Director shall prepare a proposed transfer between the projects. This proposed transfer shall include the amount to be transferred, the properties receiving and giving resources, the reason for the transfer, the available excess cash from the prior audited financials, and the current cash investment balances of each project involved in the transfer. This transfer must be approved by the Board of Commissioners prior to being recorded.The Finance Director shall make transfers each month for the full balance due on all inter-program receivables/liabilities. If there are large inter-program balances each month, the PHA may choose to make transfers more than once per month, for instance during each payroll cycle. If a transfer cannot be made for the full balance due, the remaining outstanding amount will be noted on an insufficient funds report. The Finance Director and Executive Director will draft a report with an explanation for the lack of funds and corrective action to be taken. This completed report will be presented to the Board of Commissioners at the next meeting.Cash Balances and Investments ProceduresDuring the preparation of the operating budgets, large cash disbursement items, such as property insurance, should be reviewed to verify that sufficient cash balances will be available at the time of payment.The PHA will monitor cash and investment balances each month and provide a cash and investment balance report to the Board of Commissioners. The Executive Director and Board of Commissioners should review the report to determine whether cash and investment balances are trending upward or downward.Cash balances more than current payables including significant upcoming payables (e.g., insurance premiums) plus four months of average monthly expenditures as calculated on a program level, shall be invested in accordance with the PHA’s investment policy.If the cash balances remaining after subtracting current payables (including significant upcoming payables) is less than two months of average program monthly expenditures, investments should be redeemed to bring cash to within two to four months of average monthly expenditures or to the extent possible in accordance with the investment policy.Year-End Accounting ProceduresAt fiscal year end, the finance department shall accrue all revenues earned but not yet booked. These accruals will be supported by funding letters or other funding calculation documentation as necessary.A copy of the payment requests shall be printed, dated, and kept on file by the finance department. All HUD funding correspondences, funding schedules, and letters shall be provided to the finance department monthly. ................
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