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Front-Line Expenses

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Section 3: The Central Office
Cost Center
The Central Office Cost Center: Learning
Objectives
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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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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
Central Office Cost Center
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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
Review: The Flow of Funds
OLD
HUD
NEW
HUD
$ Subsidy
$
PHA
PHA/COCC
$ Fees
AMP
• Property Management Fee
• Asset Management Fee
• Bookkeeping Fee
• Program Management Fees
• Fee-for-Service
Types of Fee Income
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Property management fee
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Bookkeeping fee
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Asset management fee
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Program management fees and other
business activity
Fee-for-service (e.g., centralized painting or
extermination)
Property Management Fee
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Fee charged to AMPs for oversight
provided by COCC
Replaces traditional PHA overhead
allocations
Based on occupied units and HUDapproved vacancies (not including limited
vacancies)
Average management fee in HUD’s
multifamily housing programs was $35
PUM (2004)
Methods of Determining
Property Management Fees
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80th percentile of fees paid by market
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Local HUD multifamily fee schedules
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Other compelling local market data
Bookkeeping Fee
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COCC is permitted to charge a
bookkeeping fee for the project accounting
function of $7.50 PUM
Based on occupied units and HUDapproved vacancies (not including limited
vacancies)
Average bookkeeping fee in HUD’s
multifamily housing programs was
approximately $3.50 PUM (2004)
Asset Management Fee
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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
Capital Fund Program
Management Fee
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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
Housing Choice Voucher Program Fee
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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
Program Management Fees and Other
Income
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Public Housing Development
Other HUD Programs (ROSS, HOPE VI,
etc.)
Other business activity
Fee for Service: Centralized Front-Line
Functions
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PHAs may choose to centralize various
front-line expense activities and charge
AMPs a fee for these services
Examples
 Maintenance
 Legal Services
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
Sample COCC Revenue from Fees
Fee
Management Fee
Fee Calculation
$40 x 1,000 units x 12
months x 97% occupancy
Amount
$465,600
Bookkeeping Fee
$7.50 x 1,000 units x 12
months x 97% occupancy
$10 x 1,000 units x 12
months
$50 x 1000 treatments
$87,300
Asset Management
Fee
Extermination
Fee-for-Service
Total
$120,000
$50,000
$722,900
Front-Line Expenses
vs. Fee Expenses
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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
What is Classified as a Fee Expense?
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Certain personnel costs, including:
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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
What is Classified as a Front-Line
Expense?
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Onsite personnel
• Housing Manager
• Maintenance Technician
• Resident Services
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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
Summary and Online Resources
Benefits of Asset Management
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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
Online Resources
http://www.hud.gov/offices/pih/programs/ph/am
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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
Online Resources
(continued)
http://www.hud.gov/offices/pih/programs/ph/am
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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
End of Section 3
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