Housing Minute: Checking Accounts

Our Compliance Trainer, Amanda Lee Gross, presents a “Housing Minute” video on the role checking account information plays in compliance.

Housing Minute:  Checking Accounts

When determining annual household income for all the major affordable housing programs, we must include accessible assets held by any household member. This edition of E&A Team’s Housing Minute focuses on the asset, checking account.

The asset value of a checking account, for the purpose of determining annual income, is the average balance for the last six months. In circumstances where the applicant/tenant has had the account open for less than 6 months, use the average balance, based on the number of months that the account has been open.

Checking Account Statements

We often find ourselves with a stack of checking account statements for an applicant or a resident. When checking account statements are obtained to determine the 6-month average balance, there are some key items to look for when reviewing these statements.

  • Is the statement a complete document? A common trend we see occurring across the country is to only collect the 1st page of a checking account statement. Please be aware many agency auditors, may not consider only collecting the 1st page of the statement to be a complete document. The best practice is to collect all pages of the checking account statement. (Please check with the appropriate staff at your organization before implementing any changes in document collection practices!)
  • Total monthly deposits: Compare the amount of monthly deposits made into the account to the amount of income reported by the household member, clarify any discrepancies and verify any additional income sources if needed.

Example

Cletus is applying for a unit and declares his only source of income to be from employment and his only asset to be a checking account.  The Manager verifies Cletus’s gross monthly income to be $1,000 and collects six months’ worth of bank statements to determine the asset value for Cletus’s checking account.
Upon reviewing Cletus’s checking account statements, the Manager notices that a total of $2,000 is deposited monthly into Cletus’s checking account.

This is an indicator of undisclosed income.  Additional information may be obtained by reviewing the individual line items within the statements (see next example).  The Manager should clarify with Cletus the source of this additional income.  The additional income source should be verified and included in the determination of annual income, if necessary.

  • Automatic Deposits: Compare any ACH Deposits to the income reported by the household member, clarify any discrepancies and verify any additional income sources if needed.

Example (continued based on first example)

When reviewing the line items of Cletus’s checking account statements, the Manager notices that there are multiple ACH (Automatic Deposits) from “Pay Pal” ranging from $50 to $100, averaging about $800 each month.  The Manager clarifies this source of income with Cletus, who reports that he had forgotten that he is also self-employed and sells ladybugs on Amazon.com.  The Manager obtains the documentation to determine Cletus’s net income from self-employment and includes this income in calculation of Cletus’s annual income.

  • Account Transfers: Look for transfers of funds made into (or out of) the checking account from (or to) other accounts (i.e. a savings account) compare these accounts with the accounts disclosed by the household member, clarify any discrepancies and verify any additional asset sources if needed.

Example (continued based on first example)

Also, when reviewing the line items of Cletus’s checking account statements, the Manager notices that there are multiple transfers indicated from a Savings Account.  The Manager clarifies this discrepancy with Cletus, who reports that he had forgotten that he also has a savings account in addition to a his checking account. The Manager obtains verification of the current balance of the savings account and includes the asset when determining annual income for Cletus.

  • Automatic Withdrawals: Compare any automatic withdrawals for mortgage payments to the assets disclosed by the household member, clarify any discrepancies and verify any additional asset sources if needed.


    Example (continued based on first example)

    Lastly, when reviewing the line items of Cletus’s checking account statement, the Manager notices that each month there is an automatic withdrawal from Cletus’s checking account by a mortgage company.
    The Manager clarifies this discrepancy with Cletus, who reports that he didn’t think the house need to be reported as an asset since Cletus owes more than what the house is worth.  The Manager obtains documentation to determine the cash value of the real estate, and includes the amount (if any) when determining annual income for Cletus.

As you can see, reviewing checking account statements can often alert management to potential income or asset sources that an applicant or tenant may have not disclosed. These additional income & asset sources could affect household eligibility for occupancy as well as rental subsidies.