Title 9 Part 1646

Development cost budgets, requisitions for loan funds, contract commitments, payments to contractors, reporting and other special procedures applicable to the development period are described in this Part.

The Development Cost Budget (form DH-512), provides the means for controlling the nature and extent of the expenditures in the development of a project. No budget shall, however, be deemed effective or controlling until it has received the written approval of the division. The development cost budget consists of two sheets and is prepared and submitted by the local agency in the following manner on a form (see Exhibits 1 and 2 of Appendix S-11), supplied by the division:

The preliminary development cost budget, showing the proposed estimated project development cost, is prepared by the local agency and is included in and made a part of its application for financial assistance from the State. The preliminary budget controls the development cost expenditures from the date of the loan and subsidy contract to the date of the award of the major superstructure contracts, i.e. general construction, plumbing, heating and electrical. The preliminary budget may, under certain circumstances, be revised from time to time, in which case the latest approved budget will be controlling.

Upon the award of the major superstructure contracts (general construction, plumbing, heating, electrical) the local agency shall prepare a final development cost budget reflecting these contract awards and any others, and the latest revised estimate of development costs, and submit it to the division for approval not later than 15 days after the award and execution of these contracts. This final budget also may, under certain circumstances, be revised, in which case the latest approved budget will be controlling. The final development cost budget controls the development cost expenditures from the date of its approval to the date of approval of the bond sale budget.

Prior to the sale of bonds by the Comptroller, the division will request the local agency to prepare and submit to the division for approval its best estimate as to what will be the final development cost of the project to justify the amount of bonds to be included in the bond issue. This estimate should be prepared on form DH-512. Should further permanent financing be required for a project, the local agency will be requested to prepare and submit for the division's approval a supplementary bond sale budget, also on form DH-512. The bond sale budgets will control expenditures from the date of approval until final development cost is determined.

The specimen form of Development Cost Budget (form DH-512) is shown as Exhibits 1 and 2 of Appendix S-11. Each development cost budget shall be supported by a development cost budget justification which may, in the case of a preliminary budget, be submitted separately from the application for financial assistance. The division will be glad to render assistance in the preparation of development cost budgets. The instructions in this Subchapter are confined, primarily, to the relations of the budgets to the reports, schedules and forms described herein. The following comments are intended for purposes of clarification:

Upon receipt of written advice from the division of approval of a development cost budget or bond sale budget for a project, the amounts reflected in column (4) of such budget shall become controlling with respect to development cost expenditures and shall be recorded for control purposes in the development cost analysis ledger, in column (2) of the Analysis of Expenditures and Budget Control Statement, form DH 213, and in column (2) of the Certificate of Purposes, form DH-216, thereafter submitted. Such amounts shall not be altered without the written approval of the division.

The following procedure is established in reference to development cost expenditures in excess of development cost budget amounts, as approved by the commissioner.

Expenditures for restricted items are limited to the amounts approved by the division. Restricted items include land acquisition, architectural, engineering, and construction contracts, legal services and expenses, appraisals, negotiation costs, etc., where the local agency is required to obtain the prior written approval of the division before entering into a commitment or making an expenditure.

Approval is hereby given to exceed by not more than 20 per cent the amount budgeted for any item other than a restricted item, provided that the total expenditures for a group of development cost accounts (viz: 1410, 1420, etc. groups) shall not thereby exceed the amount provided therefor in the approved budget without the prior written approval of the division.

The housing loan voucher is submitted, in an original and one conformed copy, together with a certificate of purposes, on a printed form supplied by the division. A specimen form of housing loan voucher, as it should appear upon submission to the division, is shown as Exhibit 8 of Appendix S-11. Requisitions are numbered consecutively, in order of filing, and the installment number on the housing loan voucher must agree in order with the requisition number in the heading of sheet 1 of the certificate of purposes. The amount of the installment being requisitioned must agree with the grand total of column 3, “Requirements for Period of this Requisition”, of the certificate of purposes if the advance of loan funds is to be made directly by the State. If the loan funds are to be borrowed from sources other than the State, however, the amount of the installment being requisitioned must then agree with column 5, total requirements, of the certificate of purposes and with the amount of the advance loan note to the State.

The local agency shall maintain a current card record of each parcel of land acquired or to be acquired by private purchase or condemnation on form DH-Land Record, a specimen form of which is shown as Exhibit 10 of Appendix S-11.

The term contracts as used in this Subpart shall include contracts for surveys, test borings, architectural and engineering services, material-testing and demolition, as well as the group of construction contracts included in the 1460, Structures, Equipment, and Improvements, group of development of cost accounts. Contracts for the purchase of land, appraiser's or negotiator's services, etc., are described separately and are to be distinguished from the contracts included in the scope of this paragraph. The instructions and procedures with respect to the contracts included in the scope of this Subpart are limited to the accounting features only.

Entry (1):

Debit: Account 1500, Incomplete Contracts $XXX

Credit: Account 2400, Contract Awards $XXX

Change orders authorize a variation in the contract terms. The change order must state whether there is to be an adjustment of the contract price, and the exact amount of such adjustment, if any.

Proceed orders authorize a variation in the contract terms without stating a definite price, said price being subject to future determination. A proceed order must be superseded by a change order as soon as the definite price is determined.

Final Certificate of Completion (form DH-64389A)

4 copies Certificate and Release (forms DH-64398B)

2 copies Final Statement of Account (form DH-64398C) 1 copy

Debit: Account 1460.2, Plumbing $15,000.00

Debit: Account 2112, Contract Retentions 8,500.00

Credit: Account 1111, Development Fund $23,500.00

Debit: Account 2400, Contract Awards $15,000.00

Credit: Account 1500, Incompleted Contracts $15,000.00

Prudent policy, again, would demand that a local agency, in addition to beginning the screening of applications in advance of the date the first buildings of the project proper become available for occupancy, make preparations, in advance of such date, for receiving the tenants. Such preparations might include the printing of booklets for the instruction of tenants, the recruiting of the management and maintenance staffs, the employment of such staffs for a short training and orientation period, etc. It may sometimes be found necessary, also, to furnish operating services and utilities, etc., for a short period between the date of acceptance of the first buildings by the local agency and the beginning of the initial operating period. Such costs and expenses (other than tenant selection costs) as are directly attributable to the preparations for the operation of a project or to the initial operation of the project proper, and which have been incurred or are applicable to the period prior to the beginning of the initial operating period, constitute preliminary expenses which are charged to account 1470.2 and are payable out of the development fund directly. They do not constitute expenses of the initial operating period chargeable to account 1470.3.

Prior to the date the first rentals from the project proper are expected to be received, the local agency shall open an administration fund bank account. Procedures for opening bank accounts are described in Part 1642. All income derived from the operation of the project proper during the initial operating period shall be deposited into the administration fund, and all expenses chargeable to the operating period accounts (4000 group) shall be paid out of the administration fund. In the event funds are not available for the payment of such expenses out of the administration fund, transfers may be made from the development fund to the administration fund, as described in subdivision (d) of section 1646-6.3. The administration fund bank account so established is continued beyond the date of substantial completion into the operating period.

Simultaneously with opening the administration fund bank account, the local agency should open a security deposits fund bank account, so that the required segregation of security deposits from other funds may be accomplished.

Prior to the beginning of the initial operating period, the local agency shall set up, and have ready for use, subsidiary income and expense analysis ledgers prescribed for the recording of the income and expense of the project proper during the initial operating period, in accordance with the instructions contained in the definition of account 1470.3 (see Part 1641) and in Part 1642. The use of account 1470.3, Net Deficit or (Income), for the control of the subsidiary ledgers is described in sections 1642-3.8 and 1642-3.9.

Prior to the initial operating period the tenant accounting system including the subsidiary security deposits ledger should be set up and ready for use. Such preparation should be timely, inasmuch as the preparation and printing of the forms required for the system, the setting up of the control records, instruction of the staff in the operation of the system, etc., may extend over a period of some months. In addition, where machine-bookkeeping is to be used, the order for the machine may have to be placed well in advance. A specimen tenant accounting system for hand posting is described in Part 1642.

Inasmuch as account 1470.3, Net Deficit or (Income), will operate as a control account, in accordance with the procedures described in sections 1642-3.8 and 1642-3.9, the balance of account 1470.3, as of the date of substantial completion, will automatically reflect, after all adjustments are made for income and expense applicable to the initial operating period, the net deficit or income resulting from the operation of the project proper during the initial operating period. When the date of substantial completion, as concurred in by the commissioner, has been determined and the adjustments for income and expense as of the date of substantial completion made, a journal voucher shall be prepared closing the subsidiary income accounts (3000 group) and expense accounts (4000 group) individually. The difference between the sums of the debits to the income accounts and the credits to the expense accounts will appear as a balancing figure on the voucher and shall agree with the balance of the control, account 1470.3.

After the net income or deficit for the initial operating period has been determined, it may be found that prepaid expenses, as of the date of substantial completion, may have been paid out of the development fund but are applicable to the operating period and that a transfer of funds from the administration fund to the development fund will be in order, or vice versa, that prepaid expenses may have been paid out of the administration fund but are applicable to the development period, etc. Similar situations may arise with respect to inventories (such as for fuel and paint supplies) reflected in the balance sheet, accounts payable and accrued payables. The local agency shall prepare a schedule analyzing and allocating such items as between the development and administration funds so that it will be in a position to make the proper transfer of funds. The schedule should also take into account the possible reimbursement of the development fund for such items as petty cash and change funds established therefrom.

Within 15 days after the end of each calendar month, the local agency shall submit to the division at 270 Broadway, New York 7, New York, a monthly financial report, unless a quarterly financial report, as per section 1646-7.2, below, is scheduled to be submitted. The monthly financial report shall consist of a uniform balance sheet (see § 1646-7.4) and a schedule of investments (see § 1646-7.9, infra) in an original only. The first report shall be made as of the end of the month in which the first advance of loan funds, whether by the State or sources other than the State, has been made. The requirement to submit monthly financial reports shall cease when the project has been declared substantially completed, unless the division shall request the local agency to continue to sumbit monthly reports beyond the date of substantial completion.

Each quarterly financial statement shall be submitted with a letter of transmittal and certificate listing the documents, data and supporting schedules (by numbers) included therein. The form to be used is shown as Exhibit 21 of Appendix S-11.

A uniform balance sheet, to be prepared by the local agency, is prescribed and is shown as Exhibit 22 of Appendix S-11. The uniform balance sheet as prepared and submitted by the local agency, shall include only those accounts which are active in the general ledger and/or show balances as of the closing date of the period for which the report is being filed.

Each quarterly financial report submitted shall include a schedule wherein the local agency's bank balances, per the books shall be reconciled to the respective balances, per the bank, all as of the closing date of the period for which the report is being filed. The reconciliation shall be made, individually, for each bank account maintained. The designation of each bank account and the name of the bank shall be stated in each reconciliation. Instructions with respect to making bank reconciliations are given in section 1642-1.6.

Each bank balance maintained by the local agency shall be confirmed by the depositary as of the closing date of each quarterly period. Such confirmation shall be prepared substantially in accordance with the specimen form shown as Exhibit 23 of Appendix S-11.

Each quarterly financial report submitted by a local agency shall include a schedule of contract awards, substantially in the same form as shown in Exhibit 26 of Appendix S-11. This schedule shall continue to be submitted until all obligations represented by contract commitments have been liquidated. The information for the preparation of the schedule of contract awards will be derived from the contractors ledger (see § 1642-3.12) and it follows that the totals of the schedule will always be in agreement with the general ledger control accounts for Contract Awards (account 2400) and Contract Retentions (account 2112). The information as to the contract payments for advances for materials stored is obtained from line 16 of the periodical estimate for partial payment (see Exhibit 14 of Appendix S-11). Each periodical estimate will have the current figure shown on this line, until by the end of construction, the amount should be zero.

Where a local agency has made investments, monthly and quarterly financial report submitted shall include a detailed schedule of investments, prepared in accordance with the instructions given in section 1645-5.1. The schedule of investments shall not include investments made by the State Comptroller of loan funds held by him in the State Housing Fund.

Contingent liabilities not reflected on a local agency's balance sheet will consist mainly of pending or threatened claims, lawsuits or judgments for which no provision has been made inasmuch as some uncertainty exists at the balance sheet date as to whether there will ever be any legal obligation. Contingent liabilities involving amounts which are or may become material shall be listed in a schedule of contingent liabilities, to be submitted with each quarterly financial report, together with the estimated amounts involved and such information as will explain their nature and status.

Where the local agency operates the project site, prior to demolition and construction, an itemized statement of income and expense of operating the site, as reflected in account 1420.4, Site Income, and account 1420.5, Site Expense, shall be submitted, if requested by the division, on form DH-621 with the quarterly financial statement. Form DH-621, Income and Expense—Budget Control Statement, is a printed form supplied by the division and is shown as Exhibit 27 of Appendix S-11. For use in reporting the results of operating the site, the phrase “Site Income and Expense” shall be added to the heading of form DH-621 and the budget columns of the form shall be disregarded. Column 3 “Cumulative Figures—Actual” shall reflect the results of operating the site from the beginning of the development period to the closing date of the period for which the report is being submitted. The current and cumulative amounts reported on form DH-621 for total income and total expense shall agree with the respective amounts reported for accounts 1420.4 and 1420.5 on form DH-213. The required figures for the detailed statement will be derived from the subsidiary income and expense analysis ledgers maintained for site operations.

The requirements for reporting initial operating period income and expense on form DH-621 and the adaptation and use of the form in connection therewith have been described in subdivision (e) of section 1646-6.3. This statement shall be furnished only where specifically requested by the division.

Debit: Account 1300--Working Capital $XXX

Credit: Account 2560--Reserve for Working Capital $XXX

Note:

To record working capital as established by letter from Commissioner of Housing, dated _____, certifying physical completion of the project.