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Surplus Cash - Mid-Year Calculation

Mar 23, 2017 07:18AM MDT

Can the mid-year surplus cash calculation be another date than June 30, 2016?

My client's regulatory agreement is under Section 221(d)(4). The regulatory agreement notes that "all allowable distributions shall be made or taken only after the end of a semiannual or annual fiscal period" and makes not mention of June 30 anywhere in the regulatory agreement.

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Les Sparks AHACPA Mar 23, 2017

Drew, this used to be asked all of the time. Clients try to interpret “mid-year” as something other than mid-year. To avoid further discussion on this, HUD clarified in the new Regulatory Agreements the exact date. Here is what is says:

13.Surplus Cash.
a. Borrower must calculate Surplus Cash as of the last day of its fiscal year.
Borrower may also, at its election, and if permitted pursuant to Program
Obligations, calculate Surplus Cash as of the last day of the sixth month of
its fiscal year. Borrower shall submit a report of its Surplus Cash
calculations to HUD with its required annual financial reports, pursuant to
Program Obligations.

This, of course, does not apply to older agreements, but it makes clear HUD’s position on the matter. If you let the client do this, the risk is that HUD will notice the date and come back against the client. I have no idea how likely that is.


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