Clarification of HUD Approved Training Expenses

I understand why Owners of HUD subsidized properties and Management companies are sometimes afraid to spend money on training their staff.  Some folks had some questions about whether or not the classes would be considered HUD approved training expenses and  others had concerns they are afraid to spend too much on training for fear their staff will take the skills they just learned and take them to “greener pastures”.  In some cases this a cyclical process.  Sometimes you lose an employee whom you just trained and then you pick one up.  In today’s economic environment I would hazard to guess you are more likely to keep your employees because the job market is very tight.  While your staff are there to perform their duties they have to be trained so you are not throwing money out the window.  Training is very necessary if you want your property to be run correctly and in compliance with the HUD regulations.  We all know that if we don’t know the ground rules it is very difficult to play the game.  TRACS, Enterprise Income Verification (EIV),  Management Occupancy Review s (MOR’s) and REAC; how are any property managers supposed to be able to navigate these subjects without formal training?  Training your staff in your policies and procedures will keep your property portfolio moving in a positive direction towards “Superior” ratings for your MOR and REAC inspections.   To this point I think I have addressed how important training is, but now I want to clarify that the training of your staff is considered by HUD to be an approved training expense.  HUD has stipulated that training is mandatory and it is part of your HUD Section 8 contract budget.

This is what my research revealed about HUD Approved Training Expenses:

A).   Management Costs paid from the Management Fee:

“The Management Agent Handbook, 4381.5 Rev-2, 6.39”, it states:

1. Expenses for services that are not front-line activities must be paid out of management fee funds, except for centralized accounting and computer services. Figure 6-2 below presents examples of costs that may only be paid out of the management fee.

B. Salaries, fringe benefits, office expenses, fees, and contract costs for the following activities must be paid out of management fee funds. These costs include:

(1)   Designing procedures/systems to keep the project running smoothly and in conformity with HUD requirements.

(2)   Preparing budgets required by the owner or HUD, exclusive of rent increase requests and MIO Plans.

(3)   Recruiting, hiring, and supervising project personnel.

(4)   Training for project personnel that exceed the line item budget for training expenses.

(5)  Project funds may be used to obtain project related training for front-line management staff.

(6)  Loan/Asset Management staff may use the following guidelines to assess whether amounts proposed for training are reasonable.

C)  At a minimum, the budget amount should be sufficient to allow one staff person from each functional area to attend a minimum of one project related training session per year.

(a)As a rule of thumb for most projects, a reasonable training budget would not exceed the greater of $5,000 or one half of one percent (0.005) of gross rents.

(b)Loan/Asset Management staff have the authority to approve training budgets that exceed the guidelines in paragraph (a) above if the owner/agent can clearly document the conditions that necessitate more extensive training for project staff.

Figure 6-2

Examples of Costs Paid from Management Fee and Project Account

Costs Paid from Fee                                                                                    Costs Paid from Project Account

There is no doubt that staff retention plays a big part in a successful business and having to worry if a class is “HUD approved training expense” can be a big drag.  I hope this article clarifies for you that the training for your staff is vital and is also part of your Section 8 contract budget.