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Friday, October 13th, 2017

October 13, 2017: The Social Security Administration has announced the Cost-of-Living Adjustment (COLA) for 2018.  According to www.ssa.gov:

“Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018.

The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017.”

You can add the 2.0% COLA by multiplying the current award amount by 1.020.

For management staff, be sure to apply this COLA to benefits for the appropriate number of months. 


Mrs. Smith would like to move in on December 1, 2017.  Her 2017 gross Social Security monthly amount is $928.  You will calculate her Social Security income as follows:

$928 x 1.020 = $946.56 (2018 monthly amount)

$928 x 1 = $928 (December 2017)

$946.56 x 11 = $10,412.16 (January – November 2018)

$928 + $10,412.16 = $11,340.16 (12 months)

If you have already processed files for move-in for January 2018, it is recommended that you review the household income and apply the COLA to benefits issued by the Social Security Administration since it is a known anticipated change in income.


A Few Tidbits from Wil at Spectrum

Thursday, October 15th, 2015

Written by Wil Whalen, Spectrum Enterprises

  1. There will be no cost-of-living (COLA) increase for Social Security this year. “With consumer prices down over the past year, monthly Social Security (SS) and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.” – ssa.gov  This means that managers will not be required to add an increased amount of SS or SSI to TICs this year.


  1. It’s always a good idea to compare a tenant’s first annual recertification file to the move-in file to see what has changed. This is particularly helpful when a tenant goes over the income limit at the first annual certification.  And if there are any changes in the file that would be cited by an auditor, place a clarification or note-to-file explaining the change.  It goes along with the old auditor adage, “If one page in a file raises a question, the next page should contain the answer.” 


  1. Calculation Sheets are your friends. One thing that makes my job easier as an auditor is when a file contains a calculation sheet.  This page is basically a summary sheet of all the calculation tapes in your file.  However, a common thing we find is instead of an actual calculation, we see is “Total x1 = Total.” ( ie: Employment – $31,200 x 1 = $31,200). As opposed to “Employment – $15 x 40 (hours) x 52 (weeks) = $31,200”.  This doesn’t show us your work or explain where you got your numbers.  Even if there is a calculation tape further on in the file, it’s helpful to show your work here as well.


  1. Winter is coming! According to the National Weather Service, El Nino is in full effect and it will be the strongest El Nino of the last 50 years.  This means good news for the Northeast – where I reside – and bad news for everywhere else!  California is expected to be much more active weather-wise this winter.  They will get significant precipitation in the form of both rain and snow.  This could result in mudslides and flooding, which is bad news for areas with recent burn scars from wildfires.  There will be less lake effect snow for the Great Lakes Region and a milder winter for the Northeast.  The Southeast can expect a much stormier winter than usual. They are expecting this to have a serious impact on weather throughout the all of North America, so pay close attention to your weather forecasts and plan accordingly.


  1. Flexibility is important on inspection/audit day. Keep in mind that most inspectors book multiple inspections/audits in one day.  In Massachusetts we do up to four or five smaller properties in a day.  We have a lot of ground to cover each quarter.  So this means we’re often running a few minutes late and even more often a few minutes early.  So be sure you provide your inspectors with good contact phone numbers so they can keep you updated on our status.  Also, it’s a good idea to give your inspectors information as to where they should park when they arrive.  This information can often be the difference between arriving on time and being late.  If they need to park in a public lot or garage blocks from the property, knowing this in advance will allow them to factor the time to park into their travel schedule.  We always do our best to be on time, but traffic and Mother Nature often work against us.  So being flexible on inspection day will make everyone’s lives a little easier.


  1. Happy Halloween.

Calculating For Additional Set Asides

Thursday, June 18th, 2015

Written by Jennifer Borland, Spectrum Enterprises

Many properties have included in the extended low income housing commitment set asides in addition to 40/60 or 20/50.  Most often Spectrum sees properties that include units set aside at 40%, 30%, 20%.  How are the income limits for these set asides calculated?

Given the 50% limits, determining additional set aside limits isn’t very hard:

40% = 50% x 0.8

30% = 50% x 0.6

20% = 50% x 0.4

Using limits for a property placed in service prior to 2009 in Portland, Maine:

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.8            x     0.8            x     0.8

40%     $21,840           $24,960           $28,080


            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.6            x     0.6            x     0.6

30%     $16,380           $18,720           $21,060


            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.4            x     0.4            x     0.4

20%     $10,920           $12,480           $14,040

Spectrum recommends having your housing credit agency approve limits before implementing.

REMINDER – Check for Updated Compliance Forms

Friday, April 24th, 2015

Written by Erik Whitton, Spectrum Enterprises

A recent trend we are noting as we review tenant files is that many sites are using outdated forms.  Most state agencies provide forms such as Tenant Income Certifications (TIC), Income Verifications, and Affidavit forms.  While many of these forms are suggested; others are mandatory.  From time to time these forms are modified to reflect new rules or policies.  For example, the imputed asset rate changed in February 2015 which means most state agencies have updated their TIC forms to reflect the new rate. Other forms may have changed as well.  

Please make sure that properties in your portfolio are using the current version of all forms provided by your state agency.  Most state agencies maintain a website with all compliance materials such as forms, income/rent limits, and compliance manuals.  It is therefore very easy to compare the forms you are using with the current versions provided by the state agency.  Usually the forms have a date on the bottom of the form to indicate when they were  last updated.  

I would additionally suggest:

  • Reviewing any recent changes to your state compliance manual
  • Compare the income and rent limits in use at your sites with the figures provided by your state agency
  • See if the state is providing any compliance training seminars that you should participate in
  • See if you can subscribe to an email notification service to receive these types of updates

Please see our forms package here.

Tip Affidavits

Wednesday, April 1st, 2015

Written by Lois Churchill, Spectrum Enterprises

When a job pays tips, or can be reasonably expected to pay tips, the use of a Tip Affidavit is highly recommended.

Servers in restaurants have to report credit card tips but not cash tips, the same with taxi drivers.  Valet attendants don’t necessarily have to report any tip income but don’t be fooled into believing they don’t earn any. At the typical $1 per time I typically pay times the overall number of cars parked/retrieved in a shift, this can add up to some serious income!

Regardless of whether some tip income is reported on pay stubs, if the job is one in which tips are or could be earned obtain an affidavit to determine if there’s additional countable income.

Spectrum 2015 Reporting Format

Thursday, March 26th, 2015

Written by Wesley Chisholm, Spectrum Enterprises


Spectrum has recently completed an update to the reporting format we use for investor clients.  We have refined our reports to include more information, to improve the text quality for reading and printing, and to make it easier for property management staff to understand what corrections are needed.  It may take some time before you feel familiar with these reports as they are a departure from what our previous reports looked like.  However, I have spent a lot of time on this and I firmly believe these are an improvement for you and your partners.  Spectrum 2015 Sample Investor Report is available for review.

Going forward, all reports will consist of a cover letter along with the following items:

 Exhibit A: “File Results Based on Risk”

The primary concerns of our work relate to income eligibility, student eligibility, and rent restriction.  This exhibit lists all units sorted to show files with a highest risk of noncompliance first.  These files should be prioritized by management staff responsible for submitting corrections for re-review. The files with the least risk of noncompliance will be sorted to appear later in the report. The exhibit includes detailed notes from the Spectrum Compliance Analyst to list all issues of potential noncompliance along with suggested corrective action.

 Exhibit B: “File Results Sorted by Unit Number”

This exhibit is a streamlined listing of all files submitted for review.  Each file is sorted by Unit Number and the report can be compared to rent roll or year-end status reports prepared by the site.  Although the full text of our findings is not included here, the exhibit does include our file ratings.  Also listed is the tenant name; move in date; bedroom size; set aside election; income; rent; and utility allowance.  This exhibit includes a summary of unit mix (bedroom size and set aside elections) which can be compared to the property’s tax credit application filed with the HFA.

 Exhibit C: “Spectrum Review of Management Procedures”

In this exhibit we assess critical procedures related to the organizational structure of tenant files; how applicants are screened for eligibility; how income/assets are verified; whether the manager tests income using a variety of approaches; whether the correct income and rent limits are used; and whether the correct utility allowance is used.  Our Compliance Analyst will provide suggestions on any area that could be improved.

 Exhibit D: “Income and Rent Limits”

Spectrum performs an independent calculation of Section 42 income and rent limits.  Our data is included for your reference.


On the Exhibit A and Exhibit B reports our Compliance Analyst has summarized a risk rating for each file submitted.  The risk rating includes 2 elements.  The overall household/unit LIHTC eligibility is ranked as follows:

 Yes: Spectrum Analyst has confirmed the household/unit is eligible based on income; gross rent; and student status.

A: Spectrum Analyst believes the household/unit appears to be eligible based on income; gross rent; and student status.  Additional work is required to make a final determination.

?: Spectrum Analyst is questioning whether the household/unit is eligible based on income; gross rent; or student status.  Additional work is required to make a final determination.

No: Spectrum Analyst has confirmed the household/unit is not eligible based on violations related to income; gross rent; or student status.

 In addition to a determination of household/unit eligibility; our reports reflect a numerical rating to assess overall tenant file compliance and whether the manager should be required to submit additional corrective materials.  Here is an outline of the ratings criteria used:

Rating 3:  Household/unit is not LIHTC qualified.  File contains severe noncompliance which could result in loss of credit.  Please submit file corrections for re-review.

Rating 2:  File appears to contain at least one issue which may be reported to the IRS as noncompliance.  Please submit file corrections for re-review.

Rating 1:  Unit is qualified; file corrections are suggested however they do not need to be submitted for re-review.           

Rating 0:  Unit is qualified; file does not require corrective action.

Retailers Pay Increases and Anticipated Income

Thursday, February 26th, 2015

Written by Lainey Nadeau, Spectrum Enterprises

In the last week two retail giants, Walmart and TJX Companies, have announced plans to increase pay for workers in 2015 and 2016. How does this affect the LIHTC program? Anticipated income.


On February 19 Walmart’s CEO Doug McMillon announced via blog a plan to increase pay for employees effective April 2015 with an additional increase to be effective in February 2016. Here are the details of the Walmart increase:

  • CURRENT ASSOCIATES: Pay will increase to at least $9/hour by April 2015 and to at least $10/hour by February 2016
  • NEW ASSOCIATES: Will start at $9/hour and increase to $10/hour after successful completion of a 6-month training program
  • DEPARTMENT MANAGERS: Some department managers will see pay increase to at least $13/hour this summer and  to at least $15/hour in early 2016  
  • SCHEDULING: Employees may have a more fixed schedule, more advanced notice of their schedule and more opportunity to pick up additional shifts. 

With 5,163 Walmart and Sam’s Club locations in the US there is likely one in or near your community. According to CNN this pay increase will impact roughly 500,000 full-time and part-time Walmart associates.


On February 25 TJX, the parent company of TJMaxx, Marshalls, Homegoods and Sierra Trading Post, announced plans to increase pay to at least $9/hour beginning in June 2015. In 2016 all workers will see their pay increase to at least $10/hour, (Bloomberg, Wall Street Journal). TJX Companies have over 3,200 stores worldwide with 191,000 employees.


Regarding anticipated income, the HUD 4350 states, “If information is available on changes expected to occur during the year, use that information to determine the total anticipated income from all known sources during the year,” (p. 5-4). Not including an anticipated raise could result in a finding of non-compliance. The 8823 Guide gives the following example:

Example 1: Specific Source of Income Omitted

Annual Income was not properly calculated. The manager/owner did not include a source of income, such as a raise, overtime, or bonus. When reviewed, a correct calculation indicates that the household was not income eligible at move-in. (page 4-33).

 Where the amount and date of the Walmart and TJX increases are known the increases should be applied to anticipated earnings.

 For current Walmart associates we know their pay will increase to at least $9/hour in April and to at least $10/hour in February 2016. For TJX employees we know their pay will increase to at least $9/hour in June 2015.  Spectrum is advising Property Managers to attempt 3rd party verification to determine if the applicant/tenant will be receiving an increase higher than the $9 & $10/hour. While Walmart & TJX use the Work Number for 3rd party verification we have seen some stores complete the EV. Property Managers may also be able verify over the phone or the applicant/tenant may have written documentation regarding their specific increase. The 8823 Guide states, “Owners should use due diligence by asking follow-up questions when the income certification process reveals unusual circumstances suggesting additional sources of income,” (p. 4-33). If the actual raise cannot be clarified the minimum increase to $9 and $10 should be used. To be conservative this should be applied effective April 1, 2015 & February 1, 2016 for Walmart employees and June 1, 2015 for TJX employees. 

 The date of the second increase at TJX increase has only been announced as “2016.” The statement from Walmart regarding department managers is also vague.  It says only that “some department managers” will see an increase in pay to $13 & $15 per hour and gives “this summer” and “early 2016” as the time frame. Spectrum does not feel that these alone are a known increase. Property Managers should exhibit due diligence by following up in these instances to determine if the applicant/tenant falls into the “some managers” category and if more specific increase dates are known.


Microsoft Word - walmart example

Ann is moving in to a LIHTC unit on 3/1/15. The manager has obtained a Work Number printout to verify her income at Walmart. The file documents attempts to 3rd party verify any additional increase via mail and phone. No additional information was available from Walmart or the applicant. The Work Number printout shows Ann is an associate who currently earns $7.50/hour.  When calculating her income you would use the current rate of pay for 4 weeks (3/1/15 to 4/1/15), the increase to $9/hour for 44 weeks (4/1/15 to 2/1/16) and the increase to $10/hour for the remaining 4 weeks.  The Date to Date Calculation at timeanddate.com is a useful tool.

Your company policy is to use the most recent 6 pay periods when calculating income. The average hours worked in the last 6 pay periods is 37.09 regular hours and 0.84 overtime hours.  You would calculate income in the following way:

 $7.50 x 37.09 x 4 = $1,112.70

$11.25 x 0.84 x 4 = $37.35

 $9 x 37.09 x 44 = $14,687.64

$13.50 x 0.84 x 44 = $498.96

$10 x 37.09 x 4 = $1,483.60
$15 x 0.84 x 4 = $50.40

Total: $17,871.10

 For Year To Date calculations or if gross earnings include shift differentials you may want to apply the % of the increase to the average.

 Average of 6 pay stubs = $287.50

$287.50 x 4 = $1,150
$287.50 x 1.2 = $345 (9/7.5=1.2)
$345 x 44 = $15,180
$345 x 1.11 = 414 (10/9 = 1.11)
$414 x 4 = $1,531.80

Total: $17,861.80

 The slight variation between the 2 calculation methods is based on rounding. I rounded to 2 decimals points for this example.

 Neither Walmart or TJX have addressed if increases will be given to current employees who already earn more than $9/hour.  Again, Property Managers should exhibit due diligence by following up in these instances.

 For new Walmart associates we know their starting pay will be $9/hour. Spectrum is advising Property Managers to apply the increase of $10/hour after 6 months with the assumption that the applicant/tenant will successfully complete the training program.

 The new Walmart scheduling system could be helpful when verifying income. Walmart employees will have access to their schedule for the upcoming 2.5 weeks. This may be especially helpful if someone has recently begun working or if their hours have recently changed. Property Managers will want to follow up with applicants/tenants to determine if they anticipate picking up more shifts as the new scheduling system will allow.

 The new Walmart plan also allows employees to begin contributing to their 401K on their 1st day of employment. Make sure you are verifying this as an asset and questioning if the employees have access to the asset.

 The statement from the Walmart CEO says that the company will continue to give quarterly bonuses to full and part time associates. Please make sure you are questioning bonuses and looking at historical data if available.

 In some states the minimum wage is already at or above the $9 amount. For more information about the minimum wage if your state please visit http://www.dol.gov/whd/minwage/america.htm

Assets Under $5,000 “The Missing Instruction Manual”

Thursday, January 8th, 2015

Written by Wesley Chisholm, Spectrum Enterprises


Rev Proc 94-65 allows the use of a tenant signed affidavit to verify assets if the household total net value is lower than $5,000.  In 2000 as part of the LIHTC compliance Best Practices effort the NCSHA distributed the form Under $5,000 Asset Certification which has become widely used.

Please note there is a section in Rev Proc 94-65 that explains this form may not be used to verify assets ‘if a reasonable person in the Owner’s position would conclude that the tenant’s income is higher than the tenant’s represented annual income.’  If a tenant/applicant clearly misrepresents their income, 3rd party verifications of all assets are required.

Am I Required To Use This Form?

Generally you are not required.  This form is an option.  It was meant to reduce the paperwork burden in certifying low income tenants.  You may choose to obtain other verification such as 3rd party forms instead of using the affidavit.  There is no Code requirement to use both 3rd party and the affidavit.

However, many management companies have decided they want their files to be very strong in documenting income and assets.  So you may have a company policy mandating the use of the Under $5,000 Asset Certification affidavit.

Remember that this form should definitely not be used for a household whose assets exceed $5,000.

Remember the form may be used to satisfy the verification requirements for the LIHTC program only.  It may not be used to verify assets for programs such as HUD, HOME, RD, Tax Exempt Bonds, etc.

Common Issues:

Spectrum Compliance Analysts spend a lot of time writing up issues surrounding the use of this form.  We spend a lot of time discussing this on the phone with people who are confused on how to correctly use the form. Here is a list of the more common issues we see.


  • Use One Per Household:


Do not use one form per person (except in California where the state has adjusted the instructions for using this).  Use one form per household; make sure all adults sign the form; make sure the form lists all household assets.


  • Disposed of Assets


The form contains an either/or statement to demonstrate if a household has disposed of any assets in the past 2 years for less than market value.  Please make sure one of these boxes is checked.  Please make sure both boxes are not checked.


  • Households with Zero Assets


The form contains a line for certain households to certify they have zero assets.  This should not be checked for a household with bank accounts, cash on hand, pre-paid debit cards, or any other asset(s).  


  • Cash Value and Asset Income


The form provides a space to list the cash value, the interest rate and the income for each asset.  We see a lot of forms where this calculation is completed incorrectly.

Multiply the balance by the interest rate to derive the asset income.  This should be completed for all assets listed.   

The form also provides a space at the bottom to list the total income from all assets. Add up the income from each asset and list the total.  Do not leave this space blank.


  • Incomplete Forms


Make sure the form is completed in its entirety.  We write up incomplete forms for the following reasons:

  • The total income from all assets is left blank
  • The interest rate column is neglected
  • Asset income is not calculated
  • The assets disposed question is unanswered
  • Assets disclosed on the questionnaire or application are omitted entirely  


  • Inaccurate Forms


The total household income from assets is often incorrect. Households use this space to list the total value of their assets, or their annual (non-asset) income.  Check that the answer is a sum of the income listed from each asset.   

Many households check that they have no assets, but have also listed checking and savings accounts.

Applicants mark the form for both answers to the assets disposed either/or question.


  • New Imputed Rate


Effective 2/1/2015 there is a new imputed rate of interest on cumulative assets to be used for all households with over $5,000 in assets that is 0.06%.  Households whose assets do not exceed $5,000 will continue to count the actual income from their assets.


  • Ask About Debit Cards


Social Security and other benefits are typically disbursed electronically on prepaid debit cards.  This is an asset that requires verification, but many applicants forget to disclose it.  If a household is receiving Social Security, TANF, or any other form of assistance, ask how they receive their payments.  There is a space for “Other” on the list of assets where prepaid debit cards can be listed.


  • Managers Should Not Fill This Out


This form is an affidavit certifying the value of a household’s assets.  The tenant should be filling this form out themselves.  If doing 3rd party verification of assets & the Under $5,000 Asset Certification form, don’t worry if the amounts do not match.  Managers must review the form to see if all disclosed assets have been included and provide guidance if needed.  They should not be completing this affidavit on behalf of the applicant or resident.  

Foster Children

Thursday, December 18th, 2014

Written by Lainey Nadeau, Spectrum Enterprises

Establishing family size is an important first step to determining household eligibility. Family size determines the appropriate income limit for the household. Change 4 to the HUD 4350 Handbook made some changes to family size determination. Specifically, it removed foster children and foster adults from who to exclude when determining family size for income limits.

Change 4 was not a complete rewrite and only some pages of the handbook were changed. The bottom of each page shows the date it was last changed. Updated pages will list the 8/13 date in the lower right corner. New language added is between *asterisks.*

The change regarding foster children and adults was a removal of a statement rather than an addition of a statement.

Previously page 3-10 like this:


Now it looks like this:


As you can see “b. Foster Children or foster adults” has been removed and the bottom right shows the 8/13 date.

The HUD 4350 defines foster children and foster adults as follows:

Foster Children: Children that are in the legal guardianship or custody of a State, county, or private adoption or foster care agency, yet are cared for by foster parents in their own homes, under some kind of short-term or long-term foster care arrangement with the custodial agency. These children will generally remain in foster care until they are reunited with their parents, or until their parents voluntarily consent to their adoption by another family, or until the court involuntarily terminates or severs the parental right of their biological parents, so that they can become available to be adopted by another family. Therefore, the parental rights of the parents of these children may or may not have been terminated or severed, and the children may or may not be legally available for adoption.

 Foster Adults: A foster adult is usually an adult with a disability who is unrelated to the tenant family and who is unable to live alone.

 Example: The Miller household contains Mike, Sally and 3 minors, Ashley, Grace and Camden. Ashley and Grace are foster children.

Prior to 8/22/13 this would have been considered a 3-person household when determining income limits. Since Change 4 this is now a 5-person household when determining income limits.

Please note that even though foster children and foster adults are now considered household members when determining family size, income received for the care of foster children and foster adults is still not counted. The 4350 states, “Payments received by the family for the care of foster children or foster adults are not counted. This rule applies only to payments made through the official foster care relationships with local welfare agencies,” (p. 5-9)

In June of 2009 Change 3 of the HUD 4350 changed how earned and unearned income for foster children was counted. Figure 5-2 was added to the handbook. Change 4 did not change this. 



This chart shows:

  • That any employment income earned from a foster child who is under 18 years old is EXCLUDED from annual income.
  • That any employment income earned from a foster adult who is at least 18 years old is INCLUDED in annual income.  
  • That any unearned income received by or on behalf of a foster child or adult is INCLUDED in annual income. This would include benefits such as Social Security and any income earned from an asset owned by the foster child or foster adult.  Remember that “Other Income” does not include payments for the care of foster children or foster adults through official agencies.

It is important to make sure your staff is aware of Change 4 so that households with foster children are not turned away for being over income when a higher income limit should have been used. Since Change 4 only live-in aides and guests are excluded when determining family size for income limits. It is also important to make sure that income and assets for foster children and foster adults are counted appropriately. 

2015 Income Limits

Thursday, December 4th, 2014

Written by Wil Whalen, Spectrum Enterprises

The MTSP income limits must be calculated in a manner consistent with HUD’s Section 8 income limits and are reliant on the effective date of HUD’s Section 8 income limits. Due to statutory changes made to the publication of certain Section 8 income limits, HUD’s programmatic income limits are not anticipated to be published until February 2015 following the release of the 2015 poverty guidelines. In order to ensure that all income limits users share a common effective date, the MTSP income limits will be released at the same time as all other HUD program income limits. http://www.huduser.org/portal/datasets/mtsp.html

The New Imputed Rate of Interest on Cumulative Assets Exceeding $5,000.

Effective 2/1/15, the imputed rate of interest on cumulative assets to be used for all move-in, initial, annual, and interim re-certifications when a family has net assets over $5,000 is .06%. http://www.spectrumlihtc.com/wp-content/uploads/HUDPassbook2015.pdf


Beginning December 31, 2014, the cost-of-living adjustment (COLA) for monthly Social Security and Supplemental Security Income (SSI) benefits will increase to 1.7%. http://www.ssa.gov/news/#!/post/10-2014-2

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