Title 9 Part 1647

Beginning with the date of substantial completion, all project revenue shall be deposited into the administration fund and all expense chargeable to project revenues shall be paid therefrom. The opening of the administration fund at the beginning of the initial operating period, the operation of the fund during that period, the setting up of the income and expense analysis ledgers and the tenants' accounting system, the closing of the books at the end of the initial operating period, the transfer of funds between the development and administration funds to adjust for net income or deficit of the initial operating period, advances by the development fund, prepaid expenses and payable, change and petty cash funds, etc., have been described in Subpart 1646-6, to which references should be made.

Vacancy and collection loss reserves shall be set aside out of project revenue for each project as of the last day of each calendar quarter beginning with the quarter in which the date of substantial completion falls.

The amount set aside for vacancy and collection loss reserves at the end of each calendar quarter shall be equal to three per cent, or such other rate as the division shall approve or prescribe, of the total dwelling rent schedule (account 3110) for such quarter less actual dwelling vacancy losses incurred (account 3111) and collection losses (account 4770) written off during such quarter. For the purpose of this provision, total dwelling rent schedule shall be the sum of the following:

The amount set aside for any project shall not increase the accumulated total reserve for vacancy and collection losses to an amount greater than the highest total dwelling rent schedule, as defined above, for any full calendar quarter between the end of the initial operating period and March 31, 1947, for projects whose date of substantial completion is prior to March 31, 1947, or greater than the highest total dwelling rent schedule for any full calendar quarter up to and including the eighth quarter after the end of the initial operating period, for projects whose date of substantial completion is subsequent to March 31, 1947. A full calendar quarter consists of a consecutive three month period ending March 31, June 30, September 30 or December 31.

The reserve accumulated shall be available to meet vacancy and collection losses in any calendar quarter in which the actual losses exceed an amount equal to three per cent of the total dwelling rent schedule for such quarter. In any such quarter the reserve shall be drawn upon to meet such excesses to the extent of the balance available in the reserve.

At the end of each calendar quarter, the provision for vacancy and collection losses, if any, as computed in accordance with subdivision (a) of section 1647-2.4, shall be transferred from the administration fund to the reserve fund. If the reserve is to be drawn upon, a transfer of the amount to be drawn, as computed in accordance with subdivision (b) of section 1647-2.4, shall, similarly, be made from the reserve fund to the administration fund. The segregation and investment of the reserve are discussed in Subpart 1647-5, to which reference should be made.

Painting and decorating reserves shall be set aside out of project revenue for each project as of the last day of each calendar quarter beginning with the quarter in which the date of substantial completion falls.

The amount set aside for painting and decorating reserves at the end of each calendar quarter shall be equal to one quarter of the average annual estimate of painting and decorating expenses less the actual painting and decorating expense incurred during each quarter. However, with respect to a given fiscal year, the amount set aside for any portion of such fiscal year shall not exceed the prorated average annual estimate less the actual expense for such portion of the year. The average annual estimate of painting and decorating expense shall be in accordance with the operating budget, as approved by the division.

The reserve accumulated shall be available to meet painting and decorating expense in any calendar quarter in which the actual expense incurred exceeds one quarter of the average annual estimate of painting and decorating expense. In any such quarter the reserve shall be drawn upon to meet such excesses to the extent of the balance available in the reserve.

At the end of each calendar quarter, the provision for painting and decorating, if any, as computed in accordance with section 1647-3.4 shall be transferred from the administration fund to the reserve fund. If the reserve is to be drawn upon, a transfer of the amount to be drawn, as computed in accordance with section 1647-3.4, shall, similarly, be made from the reserve fund to the administration fund. The segregation and investment of the reserve, are discussed in Subpart 1647-5, to which reference should be made.

The purpose of the replacement reserve is to accumulate funds for the replacement of selected categories of fixed assets at the end of their useful lives, such replacement being necessary to maintain or restore the utility, function or revenue-producing capacity of the project over its statutory life.

The first step in the system of classification is the preparation by the local agency of a schedule of replacement reserve requirements (see § 1647-4.3). This schedule is submitted for division review and approval upon substantial completion of the project and lists the assets which, it is intended, will be replaced over the life of the project and for which reserves are to be accumulated by periodical provisions. It is evident that, of the aggregate of assets comprising a project, a selection will necessarily have to be made of the assets to be included in the schedule of replacement reserve requirements, inasmuch as it is the stated purpose of the reserve to provide funds only for such replacements as are required to maintain or restore the utility, function or revenue-producing capacity of the project over its statutory life.

The next step in the system of classification is the preparation of the annual operating budget. Each operating budget submitted to the division for review and approval will include a supplementary schedule of replacements which shall give a detailed description and cost estimate of all replacements planned for the budget year. It is evident that, in the preparation of the operating budget, the local agency will be guided by the schedule of replacement reserve requirements in that the classes of assets budgeted to be replaced during a given budget year will be selected from the list of assets scheduled to be replaced over the life of the project as per the schedule of replacement reserve requirements, as revised to date. In the event that the need for an unanticipated replacement occurs during the year, the local agency shall request division approval of a corresponding amendment of the operating budget.

The final step in the system of classification is to classify as replacements, to be charged to account 2510, Replacement Reserve, all expenditures for items listed on the schedule of replacements with the approved operating budget, as amended, and to classify as RM&R expenses, to be charged to the 4400 group of expense accounts, all other expenditures for maintaining or restoring the utility, function and revenue-producing capacity of the project.

The replacement reserve shall be set aside out of project revenue as of the last day of each calendar quarter beginning with the quarter in which the date of substantial completion falls.

In this method the annual contributions, previously determined, are based on the savings in interest charges on the indebtedness of the local agency to the State of New York arising out of the periodical reductions, by way of amortization, of that indebtedness in accordance with the terms of the loan contract. This saving is the difference between the amount charged, on the accrual basis, to account 4716, Interest on Indebtedness, for a given fiscal year and the amount of the annual interest charge on the original indebtedness. The annual provision, under this method, will ordinarily, be equal to the interest saving for the year, but is subject to adjustment at the direction of the division, or with its prior authorization and approval, as a result of the periodical review of the adequacy of the reserve. The interest savings method results in a level maximum rent charge, particularly during the early years of operation, but has the disadvantage of being only incidentally related to the replacement requirements. It cannot be used if the interest rate is too low.

In this method, the annual contributions, previously determined, are based on an analysis of the life expectancies of the various classes of assets to be replaced over the statutory life of the project, as described in subdivision (b) of section 1647-4.3. The annual provision, under this method, is also subject to adjustment at the direction of the division, or with its prior authorization and approval, as a result of the periodical review of the adequacy of the reserve. The sinking fund method results in higher initial rent charges which may later be offset by interest savings, but has the advantage of being directly related to the replacement requirements.

The reserve accumulated shall be available to make replacements required to maintain or restore the utility, function or revenue-producing capacity of the project. The classification of expenditures as “replacements” has been described in section 1647-4.2 as being predetermined by (a) the schedule of replacement reserve requirements and (b) the annual operating budget. The division, however, reserves the right to direct the classification or reclassification of expenditures as “replacements”. All charges for replacements shall be made directly to account 2510, Replacement Reserve. No charges for replacements shall be made to account 2511, Interest Earned on Reserve Fund Investments, or to account 2512, Gain or Loss on Disposition of Reserve Fund Investments, but balances available in the latter accounts may be transferred to account 2510 at the direction of the division or with its prior authorization and approval. No charge shall be made to account 2510 in excess of the credit balance therein or after said balance has been exhausted. Anticipated expenditures or commitments for replacements in excess of the balance available in account 2510 shall be submitted to the division for review and approval before being made. Careful planning, budgeting and classification, together with periodical review of replacement requirements should, however, result in a reserve adequate to meet all requirements as and when they occur. No charges shall be made to account 2510, Replacement Reserve, unless it appears in an approved operating budget or has been approved by the Division of Housing.

At the end of each calendar quarter, the provision for replacements as per Table II of the schedule of replacement reserve requirements shall be transferred from the administration fund to the reserve fund, as directed in section 1647-4.5. It is preferable that expenditures for replacements be made directly from the reserve fund, but they may also be made from the administration fund, in which case the administration fund shall be reimbursed not later than the end of the quarter in which the expenditure was made. The segregation and investment of the reserve are discussed in Subpart 1647-5, to which reference should be made.

The segregation of moneys set aside for vacancy and collection loss, painting and decorating, and replacement reserves, or other authorized reserves, from other funds, and the deposit thereof in a separate reserve fund bank account is prescribed. While the moneys set aside for the individual reserves are pooled in a common reserve fund, separate accountability of the moneys set aside for each reserve shall be maintained by means of a general ledger analysis of accounts 1113, Reserve Fund, as described in section 1642-3.2. Similar provisions apply with respect to investments of reserve funds.

Immediately following the close of each calendar quarter, there shall be withdrawn from the administration fund and deposited in the reserve fund, the amounts set aside for vacancy and collection loss, painting and decorating, and replacements reserves computed in accordance with Subpart 1647-4. If, at the end of the calendar quarter, the amounts computed for the specified reserves should be negative figures, a corresponding amount shall be withdrawn from the reserve fund and deposited in the administration fund. Individual transfers of funds with respect to each reserve are not, however, prescribed and it is recommended that lump sum transfers, reflecting the net amount to be transferred either way, be made. Interest on reserve fund investments shall be deposited in the reserve fund when received.

Since only occasional disbursements will be made from the reserve fund, it will be unnecessary to have separate reserve fund vouchers and checks printed. In lieu thereof, administration fund vouchers and checks may be adapted for use in making reserve fund disbursement by striking out the words “Administration Fund” and substituting therefor the words “Reserve Fund”.

Policies and procedures with respect to the investment of monies set aside for reserves are described in Part 1645, Investments, to which reference should be made.

At the close of each fiscal year, the reserve accounts and reserve funds shall be reconciled as follows: if none of the reserve fund has been invested, the total of the reserve accounts 2510, 2520 and 2530 shall equal the Reserve Fund, account 1113, plus the amount of reserves computed for the year but not as yet transferred to the reserve fund. If any investments have been made of the reserve fund, the total of the reserve accounts 2510, 2511, 2512, 2520 and 2530 shall equal the total of amounts 1113, Reserve Fund, and 1176, Reserve Fund Investments, plus any accrued interest receivable on the investments but not yet received plus the amount of reserves computed for the year but not as yet transferred to the reserve fund. A similar reconciliation shall then be made with respect to each reserve account, accounts 2510, 2511 and 2512, being treated for this purpose as the replacement reserve, as per section 1647-4.9. The combined reconciliations shall be reflected in a schedule to be included, in an original and duplicate, with each financial report to be submitted during the operating period for the last quarter of the fiscal year, ending on March 31 (see Subpart 1647-8).

In order that the books of account during the operating period may present an accurate fiscal picture, it is essential that all obligations of a local agency applicable to a reporting period and due or accrued shall be recorded on the books of account at the end of the period. It is also essential that disbursements covering expenses which will become a charge to operations at a later date be recorded as a deferred charge. With respect to these items the procedures outlined herein shall be followed during the operating period. Similar procedures are applicable during the development period mainly with respect to deferred charges, unpaid bills and invoices being recorded during the development period as obligations only as they are vouchered for payment.

At the end of each reporting period, a journal voucher shall be prepared charging the various operating expense accounts and crediting account 2119, Sundry Accounts Payable, with the total amount of the unpaid bills and invoices on hand. The journal voucher shall have sufficient detail to permit identification of the bills being recorded (i.e., name of vendor, description, and amount). At the beginning of the subsequent month this entry shall be reversed. When payment is effected, the charge to the respective expense accounts will be made.

At the end of each reporting period, a journal voucher shall be prepared charging the respective operating expense accounts and crediting the appropriate accrued accounts with the total of all accrued expenses. Items included in this category shall be expenses that have been incurred but for which payment is not due, such as electricity, gas, water, salaries, wages, etc. If the precise amount of the expense incurred with respect to these items cannot be determined, an estimate shall be made. This estimate may be made on the basis of meter readings, previous bills or payrolls. On the first day of the subsequent month this journal entry shall be reversed.

Disbursements covering items that will become a charge to future operations shall be recorded as a deferred charge when the expenditure is made. At the close of each quarter, a journal voucher shall be prepared charging operating expense and crediting the appropriate deferred charge account with the applicable share for the quarter of the amount originally set up as a deferred charge. The procedures to be followed with respect to the quarterly charge to operation for insurance, fuel, and paint supplies are set forth in Subparts 1642-6 and 1642-7 of this Subchapter.

Commitments made by a local agency in connection with contracts whose costs are to be charged to operating expense or replacement reserve shall be recorded in account 1500A, Incompleted Contracts—Management, and account 2400A, Contract Awards—Management. The method of recording contract awards, contract changes and partial payments is similar to that described in sections 1646-5.2, 1646-5.3 and 1646-5.4 for the development period. At the end of each reporting period, a journal voucher shall be prepared charging the appropriate operating expense account and crediting account 2119, Sundry Accounts Payable, and also charging account 2400A. Contract Awards—Management, and crediting account 1500A, Incompleted Contracts—Management, with the total amount of any unpaid approved periodic estimates for partial payment on hand.

The books of account shall be closed during the operating period at the end of each fiscal year beginning with the fiscal year in which the date of substantial completion falls. The closing of the income and expense analysis ledgers at the end of the initial operating period has been described in section 1646-6.4(a).

In the instructions that follow all references to the income accounts mean the accounts within the 3000 group of accounts. References to the expense accounts mean the accounts within the 4000 and 6000 groups.

Before closing, all adjustments reflecting accruals, deferred charges and unpaid invoices on hand applicable to the fiscal year being closed shall be recorded in the books in the manner prescribed by Subpart 1647-6. The adjustment reflecting the amount of subsidies to be taken into income for the fiscal year shall not, however, be made until a trial balance of the subsidiary ledgers and a pre-closing trial balance of the general ledger have been made.

After all subsidiary ledgers have been balanced to the respective general ledger accounts, a pre- closing trial balance of the general ledger shall be taken to prove that the sum of the debit balances equals the sum of the credit balances. The subsidy to be taken into income shall then be computed in accordance with Part 1648 and an entry prepared and posted. The income and expense analysis ledgers may now be ruled off. It is recommended that a post-closing trial balance of the general ledger be prepared when the closing entries prescribed in section 1647-7.5, below, have been posted. Copies of all trial balances shall be preserved for use of the division's auditor. See Exhibit 1 of Appendix S-12 for form to be used for trial balance and reconciliation of funds.

Debit: Account 3000, Income Control Account $XXX

Credit: Account 2700, Income and Expense Clearance $XXX

Debit: Account 2700, Income and Expense Clearance $XXX

Credit: Account 4000, Expense Control Account $XXX

Once the books have been closed at the end of the fiscal year and the year-end financial reports to be submitted to the division have been prepared on the basis of such closings, the books of account shall in no event be re-opened for the purpose of making adjustments. Items of income and expense applicable to a given year which have been discovered subsequent to the closing of the books for that year shall be charged or credited to account 2710, Prior Years Adjustments, if they amount to $50 or more each. Items of less than $50 each shall be classified and handled as items of current income or expense, and charged or credited to the applicable income (3000 group) or expense (4000 group) account. Entries may be made by the local agency to account 2710, Prior Years Adjustments, without prior division approval. The local agency shall request, in writing, the division's written approval of its disposition of items in 2710 as a charge or credit to the current year's operations, giving all pertinent information. The division, however, reserves the right to direct other disposition. Prior years adjustments in account 6010 which have been approved by the division as a charge or credit to current year' s operations shall be closed out at the end of the fiscal year along with the other income and expense accounts.

Unless the division shall otherwise request, the requirement to submit monthly financial reports consisting of a uniform balance sheet and a schedule of investments (see § 1646-7.1) shall cease when the project has been declared substantially completed. The requirement to submit quarterly financial reports (see § 1646-7.2) within 15 days after the end of each calendar quarter shall, however, continue beyond the date of substantial completion into the operating period. Each quarterly financial report submitted subsequent to the date of substantial completion shall include, in addition to the data and schedules prescribed in Table I of section 1646-7.2 and such supplementary schedules listed in Table II of section 1646-7.2 as are required by the division to be submitted, a statement of income and expense of the project proper on form DH-621, Income and Expense—Budget Control Statement, in an original and a duplicate, form DH-621 shall be numbered schedule No. 13 of the quarterly financial report. Quarterly financial reports for the quarter ending March 31, beginning with the year in which the date of substantial completion falls, shall further include, in an original and duplicate, a reconciliation of reserve fund and reserve accounts (see § 1647-5.5) and a schedule of replacement reserve transactions (see § 1647-4.9) which shall be numbered schedules no. 14 and no. 15, respectively of the report.

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. The preparation of this form is as follows:

In this column there shall be entered, opposite the respective classification, the income and expense of the project proper for the current quarter, as reflected in the books of account. Inasmuch as the accrual method of accounting is prescribed, the term actual refers to income constructively received and to expenditures made, and not to cash receipts and disbursements.

In this column report opposite the appropriate classifications, the figures as reflected in the approved annual operating budget for the quarter.

In this column there shall be entered, opposite the respective classifications, the income and expenses as reflected by the books of account from the beginning of the fiscal year (April 1) to the end of the current quarter.

Enter opposite each of the respective classifications the cumulative budget amounts from the beginning of the fiscal year (April 1) to the end of the current quarter.

The amounts to be entered on this line shall be the basic dwelling rent schedule, account 3110.1, as reflected in the established rental schedule of the project. This line will therefore reflect in the appropriate columns, the actual and budgeted rental income, at the rates set by the established basic rent schedule, which would be received if all units available for dwelling use were occupied, as reflected in account 3110.1.

Enter in the appropriate columns of this line the actual and budgeted dwelling rent surcharges to tenants, as reflected in account 3110.2, see section 1642-4.8.

Enter in the appropriate columns of this line the actual and budgeted retroactive surcharges to tenants, as reflected in account 3110.3. See also section 1642-4.8.

Enter in the appropriate columns of this line the actual and budgeted excess utility charges as reflected in account 3110.4.

Enter on this line the totals of the basic dwelling rent schedule, dwelling rent surcharges, retroactive surcharges, and excess utility charges.

Enter in the appropriate columns of this line the actual and budgeted dwelling vacancy losses, as reflected in account 3111.

Enter on this line the difference between the total dwelling rent schedule (subd. [i] above) and the dwelling vacancy loss.

Enter in the appropriate columns of this line the actual and budgeted rentals charged for space or property other than dwelling space, as reflected in account 3390.

Enter in the appropriate columns of the line, the actual and budgeted charges to tenants, both dwelling and non-dwelling, for goods sold and services rendered other than those provided as part of the rental charges, as reflected in account 3510.

Enter in the appropriate column of this line the operating and nonoperating income, actual and budgeted, which cannot be classified under any other income account, as reflected in account 3590.

Enter in the appropriate columns of this line the interest accrued on administration fund investments, or on development fund investments subsequent to the date of substantial completion as reflected in account 3610.

On the statement for the last quarter of the fiscal year, ending March 31, enter in column 3 and 4 of this line the actual and budgeted amount of State subsidy taken into income for the fiscal year, computed in accordance with Part 1648, Subsidies, and as reflected in account 3810. No entry shall be made in columns 1 and 2, nor shall any entries be made in any column of this line on the statements for the first three quarters of the fiscal year.

On the statement for the last quarter of the fiscal year, ending March 31, enter in column 3 and 4 of this line the actual and budgeted amount of local cash subsidy taken into income for the fiscal year, computed in accordance with Part 1648, Subsidies, and as reflected in account 3820. No entry shall be made in columns 1 and 2, nor shall any entries be made in any column of this line on the statements for the first three quarters of the fiscal year.

The amounts entered on this line are the sums of the amounts reported as income on the lines above.

A line has been provided under this caption for each account in the 4000 and 6000 group of accounts and the captions of the items themselves accurately reflect the account designations. Enter therefore in the appropriate columns the actual and budgeted expenses as reflected in the expense accounts of this group of accounts.

Enter in the appropriate columns of this line the total actual and budgeted expenses, which shall be the sums of the individual amounts reported as expenses on the lines above.

Enter in the appropriate columns of this line the difference between the total income (see subd. [r] above) and total expense (see subd. [t] above).

This schedule shall be submitted, in an original and duplicate, with the financial report submitting [sic] during the operating period for the last quarter of the fiscal year, ending on March 31. The preparation of this schedule is described in section 1647-5.5.

This schedule shall be submitted, in an original and duplicate, with the financial report submitted during the operating period for the last quarter of the fiscal year, ending on March 31. The preparation of this schedule is described on^* section 1647-4.9.