Section 3: The Central Office Section 3: The Central Office Cost CenterCost Center

The Central Office Cost Center: Learning The Central Office Cost Center: Learning ObjectivesObjectives

Explain the concept and requirements of Explain the concept and requirements of the Central Office Cost Center (COCC) the Central Office Cost Center (COCC) under the Final Rule under the Final Rule

Describe the allowable fees charged by the Describe the allowable fees charged by the COCCCOCC

Central Office Cost Center (COCC)Central Office Cost Center (COCC)

Owners of Multifamily properties employ Owners of Multifamily properties employ property management companies for the property management companies for the day-to-day operation of propertiesday-to-day operation of properties

The Central Office Cost Center will operate The Central Office Cost Center will operate like a property management companylike a property management company

Final Rule requires all large PHAs (250 or Final Rule requires all large PHAs (250 or more units) to establish a COCCmore units) to establish a COCC

Central Office Cost CenterCentral Office Cost Center

Business unit within the PHA that earns Business unit within the PHA that earns income from fees and/or by overseeing income from fees and/or by overseeing other business activityother business activity

Simplifies administrative requirementsSimplifies administrative requirements Provides greater flexibility to support Provides greater flexibility to support

mission of PHAmission of PHA

Review: The Flow of FundsReview: The Flow of Funds

• Property Management Fee

• Asset Management Fee

• Bookkeeping Fee

• Program Management Fees

• Fee-for-Service

HUD PHAOLD$

HUD

AMP

NEW PHA/COCC

$ Subsidy $ Fees

Types of Fee Income Types of Fee Income

Property management feeProperty management fee

Bookkeeping fee Bookkeeping fee

Asset management feeAsset management fee

Program management fees and other Program management fees and other business activitybusiness activity

Fee-for-service (e.g., centralized painting or Fee-for-service (e.g., centralized painting or extermination)extermination)

Property Management FeeProperty Management Fee

Fee charged to AMPs for oversight Fee charged to AMPs for oversight provided by COCCprovided by COCC

Replaces traditional PHA overhead Replaces traditional PHA overhead allocationsallocations

Based on occupied units and HUD-Based on occupied units and HUD-approved vacancies (not including limited approved vacancies (not including limited vacancies)vacancies)

Average management fee in HUD’s Average management fee in HUD’s multifamily housing programs was $35 multifamily housing programs was $35 PUM (2004)PUM (2004)

Methods of DeterminingMethods of DeterminingProperty Management FeesProperty Management Fees

8080thth percentile of fees paid by market percentile of fees paid by market

Local HUD multifamily fee schedulesLocal HUD multifamily fee schedules

Other compelling local market dataOther compelling local market data

Bookkeeping FeeBookkeeping Fee

COCC is permitted to charge a COCC is permitted to charge a bookkeeping fee for the project accounting bookkeeping fee for the project accounting function of $7.50 PUMfunction of $7.50 PUM

Based on occupied units and HUD-Based on occupied units and HUD-approved vacancies (not including limited approved vacancies (not including limited vacancies)vacancies)

Average bookkeeping fee in HUD’s Average bookkeeping fee in HUD’s multifamily housing programs was multifamily housing programs was approximately $3.50 PUM (2004)approximately $3.50 PUM (2004)

Asset Management FeeAsset Management Fee

Fees charged to AMPs for those tasks that Fees charged to AMPs for those tasks that would be residual if all property would be residual if all property management functions were contracted to management functions were contracted to a third-party ($10 PUM)a third-party ($10 PUM)

Subject to the availability of excess cashSubject to the availability of excess cash Based on total number of ACC unitsBased on total number of ACC units

Capital Fund Program Capital Fund Program Management FeeManagement Fee

Fee charged to the Capital Fund Program Fee charged to the Capital Fund Program for management related to capital for management related to capital activitiesactivities

COCC may charge up to 10% of total COCC may charge up to 10% of total Capital Fund Program grant as Capital Fund Program grant as management feemanagement fee

Housing Choice Voucher Program FeeHousing Choice Voucher Program Fee

Fees charged for all administrative work Fees charged for all administrative work performed by COCC staff related to the performed by COCC staff related to the operation of HCV programoperation of HCV program

Two different fees can be charged:Two different fees can be charged:• HCV Management Fee – Higher of either HCV Management Fee – Higher of either

20% of annual administrative fee or $12 20% of annual administrative fee or $12 PUM based on number of vouchers leased PUM based on number of vouchers leased

• HCV Bookkeeping Fee – $7.50 PUM based HCV Bookkeeping Fee – $7.50 PUM based on number of vouchers leasedon number of vouchers leased

Public Housing DevelopmentPublic Housing Development

Other HUD Programs (ROSS, HOPE VI, etc.)Other HUD Programs (ROSS, HOPE VI, etc.)

Other business activityOther business activity

Program Management Fees and Other Program Management Fees and Other IncomeIncome

Fee for Service: Centralized Front-Line Fee for Service: Centralized Front-Line FunctionsFunctions

PHAs may choose to centralize various PHAs may choose to centralize various front-line expense activities and charge front-line expense activities and charge AMPs a fee for these servicesAMPs a fee for these services

ExamplesExamples MaintenanceMaintenance Legal ServicesLegal Services

Fee for Service GuidelinesFee for Service Guidelines

PHAs must adhere to the following:PHAs must adhere to the following: Fees must be based on the market rate for Fees must be based on the market rate for

the work received and not the actual costthe work received and not the actual cost PHAs must use the fee for service approach PHAs must use the fee for service approach

for centrally provided maintenance for centrally provided maintenance Centrally provided front-line services must Centrally provided front-line services must

be in the best interest of the AMPs and be in the best interest of the AMPs and cannot cost more than if performed on-sitecannot cost more than if performed on-site

PHAs must maintain documentation for the PHAs must maintain documentation for the fees charged to the AMPsfees charged to the AMPs

Sample COCC Revenue from FeesSample COCC Revenue from Fees

Fee Fee Fee Calculation Fee Calculation Amount Amount

Management Fee Management Fee $40 x 1,000 units x 12 $40 x 1,000 units x 12 months x 97% occupancy months x 97% occupancy

$465,600 $465,600

Bookkeeping Fee Bookkeeping Fee $7.50 x 1,000 units x 12 $7.50 x 1,000 units x 12 months x 97% occupancy months x 97% occupancy

$87,300 $87,300

Asset Management Asset Management Fee Fee

$10 x 1,000 units x 12 $10 x 1,000 units x 12 months months

$120,000 $120,000

Extermination Extermination Fee-for-ServiceFee-for-Service

$50 x 1000 treatments$50 x 1000 treatments $50,000 $50,000

TotalTotal $722,900 $722,900

Front-Line Expenses Front-Line Expenses vs. Fee Expenses vs. Fee Expenses

Unlike in the past, front-line expenses and Unlike in the past, front-line expenses and administrative expenses, called fee administrative expenses, called fee expenses, will need to be separatedexpenses, will need to be separated

Fee Expenses:Fee Expenses: An expense of the COCCAn expense of the COCC Paid for by fee income Paid for by fee income

generated by COCCgenerated by COCC

Front-Line Expenses:Front-Line Expenses: An expense of the An expense of the

AMPAMP Paid for by AMP Paid for by AMP

income (e.g. subsidy income (e.g. subsidy and rent)and rent)

What is Classified as a Fee Expense?What is Classified as a Fee Expense?

Certain personnel costs, including:Certain personnel costs, including:• Executive DirectorExecutive Director• Regional ManagersRegional Managers• Human ResourceHuman Resource• Finance and accountingFinance and accounting

Equipment, furniture, and services Equipment, furniture, and services necessary to sustain COCCnecessary to sustain COCC

Central servers and software supporting Central servers and software supporting COCCCOCC

Refer to Table 7.2 of the Supplement to Refer to Table 7.2 of the Supplement to PIH Notice 2007-09PIH Notice 2007-09

What is Classified as a Front-Line What is Classified as a Front-Line Expense?Expense?

Onsite personnelOnsite personnel• Housing ManagerHousing Manager• Maintenance TechnicianMaintenance Technician• Resident ServicesResident Services

Equipment, furniture, and services Equipment, furniture, and services required to maintain site-based officerequired to maintain site-based office

AMP utility costsAMP utility costs Refer to Table 7.2 of the Supplement to Refer to Table 7.2 of the Supplement to

PIH Notice 2007-09PIH Notice 2007-09

Summary and Online ResourcesSummary and Online Resources

Benefits of Asset ManagementBenefits of Asset Management

Improved services provided to each AMPImproved services provided to each AMP Organizational structure allows for greater Organizational structure allows for greater

efficiencyefficiency Onsite staff provide greater service to Onsite staff provide greater service to

tenantstenants System enhancements will allow PHAs to System enhancements will allow PHAs to

operate more efficientlyoperate more efficiently

Online ResourcesOnline Resources http://www.hud.gov/offices/pih/programs/ph/amhttp://www.hud.gov/offices/pih/programs/ph/am

Revisions to the Public Housing Operating Fund Revisions to the Public Housing Operating Fund Program; Final Rule - 24 CFR Part 990Program; Final Rule - 24 CFR Part 990

Preparing for Asset Management Under the New Preparing for Asset Management Under the New Public Housing Operating Fund Rule (24 CFR 990): Public Housing Operating Fund Rule (24 CFR 990): A Planning DocumentA Planning Document

Demonstration of a Successful Conversion to Demonstration of a Successful Conversion to Asset Management (Stop-Loss) Submission Kit Asset Management (Stop-Loss) Submission Kit Year 2Year 2

Demonstrating Successful Conversion to Asset Demonstrating Successful Conversion to Asset Management: A Site Visit to the Charlotte Housing Management: A Site Visit to the Charlotte Housing AuthorityAuthority

Online ResourcesOnline Resources (continued)(continued)

http://http://www.hud.gov/offices/pih/programs/ph/amwww.hud.gov/offices/pih/programs/ph/am

PIH Notice 2007-09, Changes in Financial PIH Notice 2007-09, Changes in Financial Management and Reporting for Public Housing Management and Reporting for Public Housing Agencies Under the New Operating Fund Rule (24 Agencies Under the New Operating Fund Rule (24 CFR Part 990), issued April 10, 2007 CFR Part 990), issued April 10, 2007

Asset Management Help Desk Asset Management Help Desk • Email: Email: AssetManagementHelpDesk@hud.govAssetManagementHelpDesk@hud.gov• Toll-Free Telephone: 1-800-511-8478Toll-Free Telephone: 1-800-511-8478

End of Section 3End of Section 3