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Chapter 5. Calculation Problem Areas

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  1. Chapter 5.Calculation Problem Areas

  2. Chapter 5. Section 1. Introduction Learning Objective Understand and address those difficult aspects of rent calculation where errors are most likely to occur

  3. Introduction • In this session, we will focus on the error-prone components of income and rent determination • Identified in HUD’s Policy Development and Research report, “Quality Control for Rental Assistance Subsidies Determinations” • Emphasized in RIM reviews

  4. Introduction • Purpose of the chapter • Identify common errors • Examine reasons for errors • Practice the more difficult calculations • We will not cover every facet of rent calculation

  5. Introduction • Review of problem areas: • Employment income • Training program income • The earned income disallowance (EID) • Assets and asset income • Utility allowances • Payment standards

  6. References • Appendix A • Web Addresses (page A-1) • Training Program Income Notice (page A-5 through A-24) • Appendix B • Regulation Excerpts (page B-1 through B-28) • HCV Guidebook Excerpts (page B-29 through B-125)

  7. Chapter 5. Section 2.Employment Income

  8. Employment Income • PD&R report found a 68% error rate for families with earned income (employment income) • 88% for families with more than 1 source of earned income • Employment income is single strongest predictor of errors in rent calculation

  9. Employment Income • Annual income from employment includes full amount, before payroll deductions, of: • Wages and salaries • Overtime pay, commissions, fees, tips and bonuses • Other compensation for personal services

  10. Employment Income • Reported income will usually be in amounts over a period of time that are less than annual (hourly, weekly, bi-weekly, semi-monthly, monthly, etc.) • Hourly/full time: rate X 2080 • Weekly: amount X 52 • Semi-monthly: amount X 24 • Bi-weekly: amount X 26 • Monthly: amount X 12

  11. Verification Issues • Most errors are caused by lack of adequate verification • Either PHAs do not obtain third-party employment verification, or the verification is received but not used • Rent calculated using pay stubs • File not documented as to why third party was not available

  12. Verification Issues • Learning Activity 5-1: (Page 5-5) • Paystubs vs. Employer Statement? • Purpose: Discrepancy Awareness • Part 1: Calculate annual income using paystubs (page 5-5 through 5-8) • Part 2: Re-calculate (page 5-8) using third-party verification completed by employer (page 5-9) • Part 3: Group discussion

  13. Unreported and Underreported Income • Some families fail to report or underreport employment income • One common form of underreporting: reporting net earnings, not gross • Use UIV to identify unreported employment • Inform applicants and participants of UIV sources to be checked • Encourages more accurate reporting

  14. Sporadic Income • Temporary, nonrecurring, or sporadic income (including gifts) is not included in annual income • Sporadic income is income that is neither reliable nor periodic

  15. Sporadic Income Example • Daniel Morgan – receives Social Security Disability plus works as handyman occasionally • Claims only worked a couple times last year (no documentation) • Answer the three questions.

  16. Answer: Sporadic Income • Does this fit description of sporadic income? • Yes, his earnings fit the category of nonrecurring, sporadic income • How do you handle his working income? • Don’t include in annual income • Tell Mr. Morgan he must report any regular work or steady jobs he takes • What type of documentation should the PHA have in Daniel’s file to support its decision? • Note in file explaining situation and its decision • UIV documentation if PHA has access

  17. Seasonal Employment • People in some occupations regularly work less than 12 months per year • School employees • Agricultural workers • Construction trades • HUD’s HCV Guidebook describes 2 acceptable calculation methods

  18. Seasonal Employment • Method 1: Annualize current income • Conduct interim reexam when income changes • Method 2: Calculate anticipated income from all known sources for the entire year • No interim reexam • History of income from past years is needed • Not useful when future income source is “unknown” or “none”

  19. Seasonal Employment: Example • Marcy Walsh is currently employed as a tile setter with ABC Construction, earning $1000 per month • For the last 4 years, she has worked this job for 6 months per year during the construction season • During the other 6 months of each year, she works part-time at Domino’s Pizza, earning $400 per month

  20. Calculation: Sample Method 1 • Multiply current income ($1000/month) times 12 months • $12,000 per year • When the construction season ends, conduct an interim reexam • Multiply income from Domino’s ($400/month) times 12 months • $4800 per year

  21. Calculation: Method 2 • Calculate anticipated income from all known sources for the entire year • ABC Construction: $1000 x 6 months = $6000 • Domino’s Pizza $ 400 x 6 months = +$2400 • TOTAL: $8400 • NOTE: There is no interim reexam when the participant changes jobs

  22. Incorrect Calculation of Method 1 • If the PHA counted only the current income ($1000/month) times the anticipated length of the job (6 months), annual income would be calculated as $6000 • Family would pay less than TTP required by regulations • Common error

  23. Seasonal Employment • PHA needs a written policy for this situation • Policy should be implemented consistently • Families with seasonal employment should be informed of policy • If PHA adopts Method 1, family needs to know interim reexam will be conducted • If PHA adopts Method 2, family needs to know interim reexam will not be conducted

  24. Chapter 5. Section 3.Training Program Income See Appendix A for Training Program Notice (page A-5) and CFR (page B-15)

  25. Training Program Income • HUD-Funded Training Program • Exclude all amounts received under the training program while they are in the program

  26. HUD-Funded Training The head of a tenant family receives $500 mo. in TANF. She enrolls in a HUD-funded training program operated by the PHA. TANF benefits stop. She receives $600 mo. while in the training program. Upon completion, she receives a job at the PHA earning $700 per month. What monthly income is counted during training? How long is income excluded? What is counted after completion? None During training only $700 (All)

  27. Other Training Program Income • 5.609(c)(8)(v) • Exclude all incremental earnings and benefits resulting from participation in a qualifying State or local employment training program • includes programs not affiliated with a local government • no specific employment training programs cited

  28. Training Program Income • To qualify, an employment training program must have clearly defined goals and objectives. • PHAs may adopt written policies that establish standards for these programs.

  29. Training Program Income • Training may include • Occupational classroom training • Subsidized on-the-job training • Basic education

  30. Training Program Income Incremental income: Increase in total amount of welfare, benefits, and earnings of family member after enrollment in training program as compared to income before enrollment Only the incremental increase is excluded.

  31. Training Program Income • 5.609(c)(8)(v) • Exclude incremental earnings and benefits only while the family member participates in the employment training program

  32. Example of Other Training Program Income A family head receives $400 per month in TANF. He then enrolls in a qualified State employment training program and receives $550 per month in training income. TANF benefits stop. What income is counted? How long will income be excluded? $400 - the extra $150 is not counted While he remains in the training program

  33. Training Program Income Issues • When new employment is reported, PHA needs to determine whether employment is part of a training program • Notice PIH 2001-15 identified frequent errors in this component • Recommends educating participants on eligible types of training programs • Check data-gathering forms for questions

  34. Chapter 5. Section 4.Earned Income Disallowance See Appendix A for Website Address For FAQs on EID

  35. Earned Income Disallowance • Final Rule • Effective date 4/20/01 • Technical Amendments 2/13/02 • Regulations: 24 CFR 5.617

  36. Earned Income Disallowance • Regulations are similar to earned income disallowance (EID) regulations for Public Housing, except: • For Section 8, will only apply to family members with disabilities • PH EID regulations are not restricted to persons with disabilities

  37. Earned Income Disallowance • Effective 3/15/02, HUD revised the definition of “qualified family” • Family no longer required to meet the regulatory definition of disabled family

  38. Earned Income Disallowance • EID excludes increases in income attributable to new employment or increased earnings over income received by that family member prior to qualifying for the disallowance. • The exclusion applies only to the income of the family member with disabilities, not the entire household

  39. EID Qualifications • Family must be a program participant • Already receiving HCV assistance • Family must experience an increase in annual income as a result of one of the following reasons . . .

  40. Qualifications • Employment by a family member who • Is a person with disabilities, AND • Was “previously unemployed”* for one or more years prior to employment • definition includes a person who has earned not more than could be earned working 10 hrs/week, 50 wks/year, at established minimum wage OR…...

  41. Earned Income Disallowance for Persons with Disabilities 2. Increased earnings by a family member: • Who is a person with disabilities, AND • Whose increased earnings occurred during member’s participation in an: • economic self-sufficiency program • job-training program

  42. HUD Definition of Economic Self-Sufficiency Program • Any program designed to encourage, assist, train or facilitate economic independence of assisted families or to provide work for such families.

  43. HUD Definition of Economic Self-Sufficiency Program • Economic self-sufficiency programs can include: • job training • employment counseling • work placement • basic skills training • education • English proficiency • workfare • financial or household mgmt • apprenticeship • activity necessary for work OR……...

  44. EID Qualifications 3. New employment or increased earnings by a family member who is a person with disabilities AND has received TANF benefits or services within past 6 months • No minimum amount if TANF is received in form of monthly maintenance • If TANF is received in form of one-time payments, wage subsidies, or transportation assistance, total received over 6 month period must be at least $500

  45. EID Initial 12-Month Exclusion • During initial 12 month exclusion period: • Exclude the full amount of increase in income attributable to employment or increased earnings • Initial full exclusion period begins on date qualified family member is: • employed; or • first experiences increase in income due to employment • Initial full exclusion extends for a total of 12 cumulative months (don’t have to be consecutive months)

  46. Determining The Incremental Increase • Determine the annual income of the EID-qualified person prior to the qualifying change (earned and/or unearned) • Calculate the annual income of the EID-qualified person after the qualifying change • The difference is the incremental increase

  47. Example #1 • Mary Jones had $4000 in TANF benefits at the time she became employed. She is earning $12,400 at her new job, and her TANF benefits have stopped. • How much is the incremental increase?

  48. TANF $4000 Empl $___0 Total $4000 TANF $0 Empl $12,400 TOTAL $12,400 Example 1: Think it Through Did we exclude all of her earned income? No How much did we exclude? $8400 Why didn’t we exclude the $12,400? Only the amount which exceeds the baseline is excluded

  49. Example #2 • John Smith had no income at the time he became employed at $12,400 per year. • How much is the incremental increase?

  50. Other Inc $ 0 Empl $___0 Total $ 0 Other Inc $0 Empl $12,400 TOTAL $12,400 Example 2: Think it Through Did we exclude all of his earned income? Yes How much did we exclude? $12,400 Why? The baseline is zero