The following provides an explanation regarding an adjustment to the Project Expense Levels (PELs) for audit costs as it related to mixed-finance projects for FFY 2010.

Generally, PELs are calculated using operating costs in the FHA property portfolio as a "benchmark." These amounts are calculated for 2000 and then inflated forward. Because the Operating Fund Formula includes an add-on for a PHA's independent audit cost, one of the last steps in calculating the PEL is to subtract the PHA's actual audit costs from the 2000 model-determined PEL. Mixed-finance projects, however, often have separate (single asset) audit costs and may also only share a small proportion of the agency's overall Single Audit Act expense. As a result, HUD will allow mixed-financed projects to include in FFY 2010 an add-on equal to the audit expense, inflated, that was originally subtracted in calculating the baseline 2000 PEL. [For more information, refer to the 'Public Housing Operating Fund Variable Coefficients for Public Housing Operating Fund Project Expense Levels' Notice (Docket No. FR-5016-N-02)].

Attached is a schedule for all PHAs showing the 2000 audit cost that was subtracted from the 2000 model-determined PEL, inflated to FFY 2010 using the PHA's specific inflation factors. Note that the amounts reported are per unit month (PUM). Therefore, the total amount of the add-on can be calculated by multiplying the PUM amount by the number of eligible unit months (EUMs) in the project. Mixed-finance projects may enter this amount as an add-on on Section 3, Part A, Line 10 of their form HUD-52723. If the mixed-finance project is allocated a share of the agency's overall independent audit, the allocated amount can be added to the amount calculated based on the data provided in the attached spreadsheet. If the Regulatory and Operating Agreement otherwise compensates the mixed-finance project for its separate (single asset) audit costs the add-on should not be provided.