[Code of Federal Regulations] [Title 24, Volume 4] [Revised as of April 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR902.35] [Page 271-272] TITLE 24--HOUSING AND URBAN DEVELOPMENT CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 902_PUBLIC HOUSING ASSESSMENT SYSTEM--Table of Contents Subpart C_PHAS Indicator #2: Financial Condition Sec. 902.35 Financial condition scoring and thresholds. (a) Scoring. Under PHAS Indicator 2, REAC will calculate a score based on the values of financial condition components, as well as audit and internal control flags. Each financial condition component has several levels of performance, with different point values for each level. A PHA's score for a financial condition component depends upon both the level of the PHA's performance under a component, and the PHA's size, based on the number of public housing and section 8 units and other units the PHA operates. (1) Under PHAS Indicator 2, REAC will calculate a score following the procedures described in the PHAS Notice on the Financial Condition Scoring Process (PHAS FASS Notice 3), which will be published in the Federal Register. HUD may revise this notice in the future, but HUD will publish for comment any significant proposed amendments to this notice. After comments have been considered, HUD will publish a notice adopting a final notice or amendment. The PHAS Notice on the Financial Condition Scoring Process that is currently in effect can be found at the REAC Internet site at http://www.hud.gov/reac or obtained from REAC's Technical Assistance Center at 888-245-4860 (this is a toll free number). (2) PHAs with fiscal years ending on or before June 30, 2000, will receive an advisory score based on the PHA's entity-wide operations. PHAs with fiscal years ending March 31, 2000, and June 30, 2000, will also receive a score under this subpart C. These PHAs will receive a PHAS financial condition score on the basis of their public housing operating subsidies program. PHAs with fiscal years ending after June 30, 2000, will receive PHAS financial condition scores on the basis of their entity-wide operations. (3) High liquidity or reserves. (i) Under the scoring process for the Financial Condition Indicator, no points will be deducted under the Current Ratio or Monthly Expenditure Fund Balance components for a PHA that has too high liquidity or reserves if the PHA has achieved at least 90 percent of the points available under the Physical [[Page 272]] Condition Indicator, and is not required to prepare a follow-up survey plan under the Resident Service and Satisfaction Indicator. (ii) A PHA that has too high liquidity or reserves but does not meet the qualifications described in paragraph (a)(3)(i) of this section may appeal point deductions under the Current Ratio or Monthly Expenditure Fund Balance components based on mitigating circumstances if the PHA's physical condition score is at least 60 percent of the total available points under the Physical Condition Indicator. (A) The appeal may be made without regard to change in designation. (B) To adjust a financial condition score based on mitigating circumstances, the PHA must submit a request to the applicable HUD HUB/ Program Center within 15 days of the issuance of the financial condition score to the PHA and must be accompanied by a description of the mitigating circumstances. Based on the recommendation of the applicable HUD HUB/Program Center following its review of the PHA's evidence or documentation, HUD may determine that a point adjustment for the financial condition score is acceptable. (b) Components of PHAS Indicator 2. The components of PHAS Indicator 2 are: (1) Current Ratio is current assets divided by current liabilities. (2) Number of Months Expendable Fund Balance is expendable fund balance (Expendable Fund Balance) divided by monthly operating expenses. The Expendable Fund Balance is the portion of the fund balance representing expendable available financial resources, that is, the unreserved and undesignated fund balance. (3) Tenant Receivable Outstanding is the average number of days tenant receivables are outstanding and it is calculated by dividing tenant accounts receivable by Daily Tenant Revenue (rental revenue/365). (4) Occupancy Loss is one minus unit months leased divided by unit months available. (5) Expense Management/Utility Consumption is the expense per unit for key expenses, including utility consumption, and other expenses such as maintenance and security. (6) Net Income or Loss divided by the Expendable Fund Balance measures how the year's operations have affected the PHA's viability. (c) Thresholds. In order to receive a passing score under the Financial Condition Indicator, the PHA must achieve a score of at least 18 points, or 60 percent of the available points under this indicator. If the PHA fails to receive a passing score on the Financial Condition Indicator, the PHA shall be categorized as a substandard financial agency. [65 FR 1738, Jan. 11, 2000, as amended at 65 FR 36044, June 6, 2000]