Tuesday, August 25, 2009

ANNUAL REPORT Update: Achieving Set-Aside Compliance

Among the most fundamental requirements of the SHIP program, funds must be expended in compliance with the Income, Homeownership and Construction/Rehab Set-Asides. Florida Housing has historically noticed that difficulties achieving set-aside compliance are among the most common of annual report problems.

The SHIP set-aside percentage calculations are not based only on the annual distribution. You must include other revenue sources when calculating set-aside compliance. Compliance with the Homeownership set-aside (65 percent of funds) and the Construction/Rehab set-aside (75 percent of funds) is based on the sum total of the Distribution plus Recaptured Funds. Compliance with the Income Set-aside, on the other hand, is calculated based on the total of all sources of SHIP revenue, including carry forward funds and program income.

Keep in mind the 2009 change to the definition of Recaptured Funds. Starting with the annual reports this year, there will likely be much more program income than recaptured funds reported. Now narrowly defined, recaptured funds are only a repayment that a SHIP jurisdiction receives when it provides SHIP funding for a housing project, but this funding is ultimately not used to assist eligible households.

What happens if you create your 06/07 annual report, only to notice for the first time that you are out of compliance with one or more of the set-asides? What if, for example, you have fully expended your 06/07 funds but have only dedicated 70 percent—rather than the minimum 75 percent required—to the construction/rehab set-aside? The most straight forward solution may be to re-assign assistance expenses between SHIP distributions.

In the case stated above, all 06/07 funds have been expended. It is very likely that a significant amount of the jurisdiction’s 07/08 distribution may also be expended. Identify one or two households assisted with 07/08 funds that comply with the construction/rehab set-aside. Re-assign these expenses to the spreadsheet tracking 06/07 funds. Similarly, re-assign one or two 06/07 cases of set-aside non-compliant assistance to the 07/08 spreadsheet. Determine if this exchange has resulted in enough 06/07 expenses that comply with the set-aside, and re-assign additional 07/08 expenses as needed to achieve set-aside compliance.

The exercise of re-assigning expenses from one SHIP distribution to another is not uncommon. It may also be used to achieve compliance with an expenditure or encumbrance deadline. Whenever an expense is re-assigned to a different distribution, care should be taken to clearly indicate ‘from where’ and ‘to where’ an expense is being re-assigned. In this way, one may still fully reconcile SHIP tracking spreadsheets with the jurisdiction’s general ledger. The example above is a small and simple case of re-assigning funds. If your case is more complicated, call the Florida Housing Coalition for additional guidance as you work to re-assign funds and cure set-aside noncompliance.

There is more to be said about set-aside compliance. Consider reviewing the videos on this topic at the Coalition’s website, http://www.flhousing.org/. On the top pull-down menu for “Local Government and Nonprofit Developer Tools”, select (SHIP) Program Update. These videos are available under the headline “SHIP Annual Report: Training Videos” and are about 7 minutes each.

Every jurisdiction must submit their reports by this September 15th and there is no extension available for submitting them after this date. Start now to ensure their timely completion. Many administrators find that these reports require more of their attention than originally expected.

The Coalition fields questions on a myriad of report-related topics. This year, the Coalition is available on Tuesdays and Thursdays to provide this assistance through its technical assistance line: 800 677-4548. In addition, a full and updated collection of frequently asked questions about annual reports is available at http://faqannualreports.blogspot.com/.

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