HUD recently issued a notice to help public housing agencies (PHAs) administer, track, and report public housing operating funds. HUD Notice PIH-2025-14 refines the rules governing how funds can be used, clarifies financial reporting obligations under the Financial Data Schedule (FDS), and lays out expectations for internal controls and recordkeeping. These updates aim to strengthen financial accountability and reduce the risk of noncompliance in an area HUD has deemed high risk.

The notice reinforces the longstanding principle that operating funds are restricted federal resources. PHAs may use these funds only for specific, eligible purposes spelled out in Section 9(e) of the Housing Act of 1937. This includes activities related to operating and managing public housing units, such as maintenance, utility costs, insurance, and resident services. But the guidance goes further, making clear that even temporary or well-intentioned diversions of operating funds to cover other programs--even within the same PHA--violate federal law.

The notice explicitly prohibits using operating funds to support the Central Office Cost Center (COCC), to advance capital expenditures in place of Capital Fund drawdowns, or to subsidize shortfalls in programs like Resident Opportunities and Self-Sufficiency (ROSS) or Jobs Plus. The COCC is an accounting concept used by PHAs under HUD’s asset management model to capture the administrative overhead costs of running the agency that are not directly tied to a specific public housing project. The COCC houses the central services that support all PHA operations, such as executive management, finance, human resources, procurement, and information technology.

For agencies that manage multiple funding streams through pooled accounts or central payor arrangements, the notice emphasizes the need for precision. PHAs must ensure that advances from pooled accounts never exceed the public housing program’s immediate expenditure needs. In other words, funds must be available only to the extent that real costs are due and payable and not in anticipation of future needs.

Financial Data Schedule Reporting Revisions

An important change implemented by the notice is its overhaul of certain Financial Data Schedule (FDS) reporting practices. PHAs should align current practices with the updated FDS line definitions found in Appendix B of the notice.

While the financial data schedule has long been a tool for standardizing how PHAs report revenues, expenses, and fund balances to HUD, the notice updates several line-item definitions to reduce confusion and increase consistency. For example, HUD has replaced the definitions for FDS lines 144 (Inter-program Due From), 172 (Notes Receivable – Past Due), 347 (Inter-program Due To), and 352 (Long-term Operating Borrowings). These changes make clear that inter-program balances must be settled through actual cash transfers and not simply booked in accounting software as cash equivalents.

The notice also includes new guidance on how and when to reclassify short-term receivables and payables as long term. These reclassifications are now permitted only when a documented repayment plan exists, and they must be supported with detailed explanations in FDS comments.

HUD warns against masking program losses through inappropriate reclassifications or exclusions. Inter-program balances must be reported in full and not buried through offsets or write-downs. Misreporting such balances can jeopardize future funding and trigger findings in single audits.

Stronger Internal Controls

Recognizing that many PHAs manage many funding streams, HUD devotes an entire section of the notice to best practices in financial management and internal controls. Agencies are encouraged to develop and enforce standard operating procedures that clearly define fund flows, approval hierarchies, and reconciliation timelines.

The notice offers concrete examples, such as creating account-level profiles that track each program’s funding source, restrictions, and expected cash needs. These tools can help ensure that temporary cash shortages don’t lead to the inappropriate use of restricted funds.

The guidance also recommends controls to limit spending, monitor aging balances, and prevent unauthorized activity in expired program accounts. And when operating funds earn interest, PHAs must remember their obligation to remit amounts over $500 per year to the Department of Health and Human Services.

HUD closes the notice with a reminder that misuse of operating funds is not just a technical error but can trigger enforcement actions, including repayments, offsets, or administrative sanctions under the Housing Act. PHAs that fail to submit timely and accurate expenditure data may also see future disbursements stopped until compliance is restored.