BOARD OF COMMISSIONERS TRAINING U. S. Dept of Housing and Urban Development Financial Management

1. BOARD OF COMMISSIONERS TRAINING U. S. Dept of Housing and Urban Development Financial Management March 2009

2. Board Of Commissioners Training Series • The Commissioner’s Role • The Executive Director’s Role • Agency Management • Financial Operations and Oversight • Physical Facilities and Maintenance • Procurement and Contracting Overview • Preventing and Resolving Audit Findings • Performance Measures PHAS, MASS, FASS, PASS, SEMAP IX. Conducting an Effective Board Meeting X. Emergency and Disaster Preparedness

3. Questions ? ? ? ? • Am I fully informed about the financial status and operating condition of our Housing Authority (HA), the amount of reserves, or the amount of Federal subsidy received for different programs? • Do the Board members receive full reports at Board meetings concerning the financial and operating condition of the Authority? • Do I carefully review and fully understand the items proposed in budgets before voting for approval?

4. Four Major Functions • Financial Management is one of the FOUR interrelated • functional areas of HA operations. • Sound functional financial management is essential to the • effective operations of all areas of the HA. BOARD OVERSIGHT GENERAL MANAGEMENT PROGRAM MANAGEMENT FINANCIAL MANAGEMENT

5. Roles of Commissioners • The Commissioners role is management and • executive in nature: • Review and monitor budgets and other financial documents to ensure expenditures are in compliance with federal, state and local laws and other requirements. • Review and approve policies and procedures to establish sound internal controls. • Review and approve policies and procedures which will detect and prevent program fraud, waste, mismanagement and abuse.

6. Role of Executive Director • The focus of the ED’s role is management and operations • Coordinate and prepare all HA operating budgets • Collect rents and enforce lease terms • Supervise cash management and bank reconciliations • Enforce internal control procedures and policies

7. Role of Executive Director – Cont’d • Monitor operations for fraud and abuse • Maintain overall compliance with federal, state and local laws, as well as PHA policy and procedures • Keep the Board of Commissioners informed of any problems, such as audit concerns, major resident issues, financial status, and changes to laws

8. Financial & Fiduciary Responsibilities • Make sound business decisions • Be knowledgeable about the financial status of your agency • Review and understand financial reports • Establish internal controls • Safeguard agency assets • Institute Standard Operating Procedures • Review and understand IPA audits • Closely monitor the resolution of audit findings • Understand and adhere to investment policies • Avoid conflicts of interest and apparent conflicts of interest

9. Budgets • The Board’s Responsibility is exercised by: • Reviewing Budget Proposals • Ask Questions • Approve or Modified Approval • Monitoring the budget • Most budgets are not reviewed/approved by HUD

10. Prevent Fraud, Waste and Abuse • Establish and Enforce Internal Controls • Clear Job Responsibilities and Separation of Duties • Personnel Selection • Independent Audits and HUD Reviews • Accountability of Staff

11. Internal Controls The system within a PHA consisting of its plan for organization, assignment of duties and responsibilities, design of accounts and reports, and all measures and methods employed to (1) protect its assets, (2) to encourage the accuracy and reliability of accounting and other operating data and reports, (3) to promote and judge the operational efficiency of all aspects of the PHA's activities, and (4) to communicate managerial policies and to encourage and measure compliance.

12. Cash Receipts • Internal controlover cash receipts must be provided to expedite the flow of work, to improve accuracy, and to ensure accountability of cash received. • While adequate internal control does serve as a deterrent to possible misappropriation or diversion of cash by employees, it also serves as a protection of the employees by placing responsibility and accountability. • Internal Controls should be practiced to the greatest extent possible given the size of the housing authority • Duties should be segregated so that no one person is incomplete control of recording receipts and depositing receipts.

13. Cash Disbursements • Internal control over disbursements must be provided to ensure disbursements are made only for legitimate purposes. • The Board should designate by resolution the personnel authorized to sign and countersign checks • All checks should require at least two signatures • All checks should be numbered, issued, and recorded in the cash disbursements register in numerical sequence and review procedures to ensure compliance

14. Cash Disbursements CONTINUED • The signing or countersigning of checks in advance must be prohibited. (Don't sign blank checks) • Checks should only be signed after reviewing the supporting documentation (invoice). • All duties should be segregated so that no one person is incomplete control of a disbursement transaction. • Documents, such as purchase orders, vendors invoices, receiving and inspection reports, and contractor's estimates should be carefully examined

15. Board Meeting Information • Copy of the latest (previous months) balanced bank reconciliation. Large, recurring amounts for deposit in transit must be discussed and resolved. • Summary of income/expenses by account classification, along with comparisons to all program budgets. • Substantial deviations from program budgets should be discussed and corrective action taken, as necessary. • Listing of check vouchers issued/voided since previous meeting with basic information, such as date, check number, payee, purpose and amount. The listing should be reviewed for any patterns, unusual payments or payees.

16. Board Meeting Information CONTINUED • Listing of monthly rental collections/deposits. • Subsidy payments and other transfer payments. Large variations from month to month should be explained. • Listing of investments and monthly activity in this area, if any. • Summary of travel costs with details regarding who traveled, the purpose of the trip and costs. • Summary of tenants accounts receivable and vacancy rate. If problems exist, Executive Director should furnish information on actions take to resolve.

17. Board Meeting Information CONTINUED • Summary of actions taken to deal with any outstanding HUD or IPA audit findings. • Update on status of capital improvement projects. • Information on contracts awarded where board approval was not required - purpose/cost/award method. • Information on staffing, such as payroll, number of vacant positions, etc. • Status and consideration of open issues tabled at prior meetings for further action.

18. Commissioner “DO's” • Do pass resolutions and policies only after thorough discussion and understanding of the purpose, usage, intent and implications • Do monitor policies and procedures from time to time to ensure that the result is what was intended • Do establish monitoring controls to detect and prevent conflicts of interest, fraud and abuse • Do ensure that an audit is conducted annually and that the report is reviewed by the Commissioners. If you have an area of concern, you may ask the auditors to expand their review

19. Commissioner “DO's” CONTINUED • Do conduct meetings at least quarterly with Resident Council leaders to solicit comments and input. We encourage Commissioners to consider training sessions for Resident Council leaders on the constructive role they can perform. • Do ensure that the PHA operates legally and with integrity. Establish high ethical standards for PHA staff and act as positive role models. • Do learn what the common risks are and be alert for problems such as embezzlement, improper procurement, and other irregularities.

20. Commissioner “DO's” CONTINUED • Do accept reimbursement for expenses incurred for official PHA business.  • Do avoid any Conflict of interest‑No board member may have an interest, direct or indirect, in businesses which provide services or materials to the authority. • Do volunteer your time - Compensation of board members, such as salary or payment for meetings attended, is not permissible from PHA funds.

21. Commissioner “DON’Ts” CONTINUED • Don't sign blank checks, or checks that are not backed up with bills, invoices or vouchers. • Don't have any bank accounts which are controlled by one (1) signature. • Don't, if at all possible, let the persons who are authorized to sign checks reconcile bank statements. • Don't use PHA supplies, equipment, machinery, construction or rehabilitation supplies or staff for personal use.

22. Commissioner “DON’Ts” CONTINUED • Don't use PHA tax exempt status or PHA credit cards for personal use. • Don't use PHA contractors for personal purposes while they are engaged in PHA work. • Don't accept gifts, dinners, or other gratuities from contractors or those bidding for PHA work. • Don't become involved in any business relationships between yourself and the PHA where you or your company are dealing with PHA matters.

23. Audit Findings • Audit Findings are an indication that a significant problem exists within your organization. • Preventing and resolving audit findings is a major component of the performance of your management and fiscal oversight responsibilities.

24. Audit Findings Resolution • The prevention of findings serves to protect the agency. • The resolution of findings serves to remediate the damage caused and to prevent reoccurrence. • Without resolution the problem will continue, become more complex and will negatively impact your agency’s operations. • Depending upon the nature and severity of the finding it may result in the agency being designated as troubled.

25. Public Housing Assessment System MASS Management Operation Assessment 30 pointsPASS Physical Inspection Assessment 30 pointsFASS Financial Assessment 30 pointsRASS Resident Satisfaction 10 pointsA score of less than 60 percent total, or of less than 18 of 30 in any of the MASS, PASS or FASS, will result in a HUD designation of your PHA as a Troubled Performer (requiring recovery in short time frames, and using sanctions and other remedies, for any failures).

26. Financial Assessment (FASS) Based on PHA Financial Data System (FDS) Submissions • Sub-Indicator 1 – Current Ratio • Sub-Indicator 2 – Expendable Fund Balance • Sub-Indicator 3 – Tenant Receivables Outstanding • Sub-Indicator 4 – Occupancy Loss • Sub-Indicator 5 – Expense Management & Utilities • Sub-Indicator 6 – Net Income/Loss divided by the Expendable Fund Balance

27. Section Eight Management Assessment Program (SEMAP) • The local Public Housing Hub Office or Program Center is charged with the responsibility for assessing and scoring the performance of PHAs, administering the Section 8 Housing Choice Voucher program. • A score of less than 60 percent total will result in a HUD designation of your PHA as a Troubled Performer (requiring recovery in short time frames, and using sanctions and other remedies, for any failures).

28. SEMAP consists of these Indicators: Based on PHA SEMAP certification: • Indicator 1 –Selection from Waiting List • Indicator 2 – Rent Reasonableness • Indicator 3 – Determination of Adjusted Income • Indicator 4 – Utility Allowance Schedule • Indicator 5 – HQS Quality Control Inspections • Indicator 6 – HQS Enforcement • Indicator 7 – Expanding Housing Opportunities

29. SEMAP consists of these Indicators: Based on PHA PIC system submissions: • Indicator 8 – Payment Standards • Indicator 9 – Annual Reexaminations • Indicator 10 – Correct Tenant Rent Calculations • Indicator 11 – Pre-Contract HQS Inspections • Indicator 12 – Annual HQS Inspections • Indicator 13 – Lease-Up • Indicator 14 – Family Self-Sufficiency Enrollment • Deconcentration Bonus Indicator