Surplus Cash Calculations Under “New” Regulatory Agreements

HUD issued a revised Regulatory Agreement in April, 2011 which includes a “new” definition/calculation of Surplus Cash.  This definition only applies to owners that signed the revised 2011 version of the HUD Regulatory Agreement (Form HUD-92466M, Rev. 4/11; HUD- 92466M).

CPAs and project accountants should be aware that the new Regulatory Agreement allows the owner to include the mortgage principal and reserve for replacements deposit due in the month following the end of the fiscal year in the Surplus Cash computation.  These amounts are to be included in the HUD Chart of Accounts line S1300-110; the description of this account was revised by HUD on December 6^th, 2013.

HUD’s position was clarified on January 27, 2014, where HUD specifically lists the items that should be deducted from surplus cash as a result of the new Regulatory Agreement.  Escrow (tax and insurance) and MIP payments are not listed, and therefore should NOT to be included in the calculation.

It is our understanding however, that there is a new regulatory agreement in draft which will extend the obligations to include one month of tax and insurance escrow deposits.  This new agreement will be posted in the Federal Register for public comment.