Housing Authority of City of CovingtonLocal Government

Condition: The Section 8 program ended the year with a negative unrestricted equity of $6,810. A negative unrestricted equity balance is an indication that Housing Assistance Payments (HAP) funds are being spent on administration costs. Criteria: The ACC establishes the amounts HUD will provide a PHA for HAP and administrative fees. With the exception of Moving to Work Housing Authorities, HAP may not be used to cover administrative expenses nor may HAP (including RNP) be loaned, advanced, or transferred to other component units or other programs such as Public and Indian Housing (Assistance Listing 14.850) (24 CFFR sections 982.151 and 982.152). Cause of Condition: The Section 8 program had long-term compensated absences in the amount of $33,772 which can reflect a “false” negative equity balance in the program. Potential effect of Condition: Possible compliance violation. Recommendation: The negative unrestricted equity balance should be brought to a positive equity balance as soon as possible. Client Response: If the long-term compensated absences balance of $33,772 were removed, there would not be a negative unrestricted equity balance of $6,810. There is VMS guidance on the impact of a “false” negative balance as a result of employer accruals specifically to accrued pension and OPEB liabilities. The long-term compensated absences balance of $33,772 is causing the same “false” negative equity balance as does accrued pension and OPEB liabilities. It is suggested the PHA insert a comment in the ‘comments’ section to reflect the portion of the UNP balance that is attributable to the unfunded pension and OPEB liability and provide the actual ‘cash equivalent’ UNP balance (the UNP “should be” balance if the pension and OPEB liability were removed). The Executive Director will have the negative unrestricted equity balance corrected in the near future.

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