Funding System Thinking September 2016 Larry Wood U.S. Department of Housing & Urban Development Milwaukee Field Office

First – Some NEW Info from August in Ft Worth EA changes Coming – Decoupling EA from Funding, to make it site based 5 Year EAs. Intended to match 5 Year Plan. Increasing Focus on EAs & Responsible Entities New EA Software “HEROS” – RE Input New Maintenance definitions coming EAs have always been allowable CFP Expenses

Government Funding Oath of office: “I, [name], do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.”

System Thinking Process is intended to take a broad view Look for hidden problems Find Root Causes Make short term and long term plans Change and then monitor results Continuous improvement

A Quick and Easy Guide to the Procurement Process

Funding Overview Process involves ACC – HUD form 53012 5 Year Plan - 24 CFR Part 903 PNA/GPNA PHA Budget Capital Funds - 24 CFR Part 905 Operating Funds – 24 CFR Part 990 LOCCS Accounts Procurement – 2 CFR Part 200

ACC HUD Fm 53012 a & b – Your Basic Contract Capital Fund ACC Amendments Fm 52840 Follow 24 CFR Part 905 Follow approved 5 Year plan Obligate within 24 months/Expend in 48 mos. Authorizes HUD to impose penalties for non-compliance.

CFP Process – CFP Guidebook P. 28

Obligations Obligations mean the cumulative amount of modernization commitments entered into by the HA; i.e., contract execution for contract labor, materials or services; start and continuation of physical work by force account labor; and start and continuation of administrative work. – 24 CFR 905.306 or PIH 96-90 A minimum of 90% of the funds must be obligated by the “Obligation End Date”. Obligation End date is 2 years after the funds are made available. The term “obligation” means that a PHA has an obligating document, such as a contract, signed by two parties, or a purchase order. See also pages 78-79 in the CFP Guidebook:

Expenditures Expenditures mean the cumulative amount of modernization funds distributed by the HA through written checks. The HA shall requisition funds only when payment is due and after inspection and acceptance of the work and shall distribute the funds within three working days of receipt of the funds. - 24 CFR 905.306 or PIH 96-90

Capital Fund Rules Use CFP grant funds to modernize and improve projects or units that are under the Annual Contributions Contract (ACC), as defined in 24 CFR Part 5.403 All of the activities must be approved by HUD (via the Annual and 5 year Action Plan) Fungibility of proposed work items is allowed. This means that the PHA may use CFP funds for any activity addressed in the 5 year action plan, if it so chooses, provided that the following items are satisfied: (1) Such activity has been included in the environmental review; otherwise, the ER has to be amended); and (2) The PHA prepares and submits a budget revision (HUD FORM 50075.1, parts I, II), to HUD for approval, prior to the implementation is the activity.

Capital Fund Rules – Cont’d Only expend funds after the Environmental Review (ER) has been completed. PHAs must update the “Obligation-Expenditures” screen in LOCCS (Monthly- No exception). This activity must be completed no later than 5 calendar days after the month ends. Note: All PHAs are required to have available their obligation/expenditure documents, should any of these documents be requested by HUD. Follow all “Eligible Activities” regulations. Note: Eligible activities were formerly outlined in 24 CFR 968. This Code of Federal Regulations pre-dates the Quality Housing and Work Responsibility Act (QHWRA) of 1995. However, it is the latest document listing eligible activities, at this time. If you are unsure of eligibility of a certain activity, please check the CFP Guidebook or contact the Field Office. Treasury rules state: The PHA should not draw down funds unless the PHA has a bill that is due and payable and those funds should be expended within 3 business days. 24 CFR 905.310 – “requisition funds only when due and payable”

BLI Chart – CFP Guidebook Page 8

RAD Conversion Chapter 10 of the CFP Guidebook Uses of CFP money for RAD conversion PHAs may apply for up to a 5 year extension of Obligation and Expenditure dates. Faircloth limits change BLI 1503 and BLI 1504 are used in RAD conversions; funds in those BLIs may be drawn down to fund post-conversion activities as well.

1406 - Operations A Maximum of 20% may be budgeted and expended for Operations (BLI 1406). This applies to large PHAs (250 units or more). Small PHAs , PHAs with less than 250 dwelling units, that are not designated as a troubled PHA pursuant to section 6(j)(2) of the Act, and that in the determination of the Secretary is operating and maintaining its public housing in safe, clean and healthy condition, may transfer 100% of its funds to operations. Large PHAs can transfer up to 20% to BLI 1406 Operations. The PHA can use these funds to fund security guards and/or direct social services. BLI 1406 funds, once withdrawn, immediately follow the operating fund rule - (24 CFR 990). Note: Funds budgeted under the BLI 1406 are considered obligated and expended when the PHA draws down the funds.

1408 Management Improvement Cost Limits

1408 – Mgt Improvements A Maximum of 14% in FY 2016 may be budgeted and expended for Management Improvements (BLI 1408). BLI 1408 may be used for the following activities (old ref 24 CFR 968.112- Eligible Activities): Management, financial, and accounting control systems of the PHA PHA staff training Provision of social services to residents, from local government or other public and private entities Resident and development security (i.e., installation of security apparatus such as cameras, key cards for individual residents, etc.). This does not include police and/or security guards protection. Resident selection and eviction Occupancy, rent collection, maintenance (non-routine), and equal opportunity. Preventive Maintenance System costs to include the establishment of a maintenance preventive system or improvement of an existing system: Regular inspection of building structures, systems, and units Drug elimination costs.

1410 - Administration Maximum of 10% may be used for Administration (BLI 1410). PHAs can draw down the total amount authorized for BLI 1410 Administration at any time or a portion of that amount as they have need of the funds. BLI 1410 may be used for the following activities (24 CFR 968.112- Eligible Costs): Planning, design, implementation and monitoring of the physical management improvements Salaries/benefits of technical and non-technical personnel assigned to a modernization project, where the scope and volume of the work are beyond what could be reasonably expected to be accomplished as part of the personnel’s non-modernization duties Preparation of the necessary CFP documents (preparation of budget revisions, closeout packages, etc.) Resident participation costs associated with ensuring residents’ involvement in the annual PHA Plan process. Costs of administering telephone and facsimile machines

1411 – Audit Costs Costs associated with the PHA annual audit. Although this might better be paid out of Op Sub because you then get reimbursed !!!! Energy Audit Costs - 24 CFR 965.302 PNA / GPNA costs

1430 – Fees and Costs Financing – Debt and finance costs Mixed Finance projects Capital Fund Financing (CFFP) costs

1440 - Site Acquisition Purchase of land, units or real estate property Note: Development or acquisition requires specific HUD approvals and must also meet applicable Environmental regulations in 24 CFR Parts 50 and 58

1450 – Site Improvements Parking lot improvements Landscaping or hardscaping Sidewalks, curbs, exterior lighting

1460 - Dwelling Structures Costs associated with tenant units Repairs Unit Modernization Common Area - repairs, upgrades Elevator work Boiler Roof

1470 – Non Dwelling Structures Non Dwelling Building repairs and upgrades PHA Office modernization Garages, carports Tool sheds Gazebo Sign Fences Picnic benches

1475 – Non Dwelling Equipment Lawn mower Snow blower Maintenance Truck Shop Air compressor Welder Printer, copier, office computers Office furniture

Capital Fund “DON’Ts” Use CFP funds for everyday operations expenses, unless the funds are under BLI 1406 (Soft Costs ONLY) Use CFP funds to pay for police protection and security guards. These are operating costs. Section 9(e) (1) (c) of the United States Housing Act of 1937, as amended. Pay the A/E for performing work outside of the modernization/rehabilitation project Obligate funds (in LOCCS) for operations before funds are drawn down. Report the funds obligated in LOCCS before they are legally committed through expenditure, a contract, or a purchase order.

Capital Fund “DON’Ts” Demolish or dispose, from inventory, any ACC/DOT units, without prior to written HUD/SAC approval. (See PIC Inventory Removal module) Use CFP funds (under any circumstances) to pay for costs related to demolition/disposition/acquisition/or development of any non-ACC units. Pay for utilities, because utilities are operating costs. Co-mingle funds - This means that PHAs should not pay its contractors/vendors from its general account (or any other account) and later charge the CFP account and vice versa. Delay payments to your contractors/vendors more than 3 business days after the payment has been released (disbursed) by HUD into the PHA-designated financial institution.

Capital Fund “DON’Ts” Ignore the obligation and expenditures end date. Obligation end date cannot be extended, unless approved by the Assistant Secretary of Public Housing (HQ). The expenditures end date may be extended as a result of extending the obligation end date. Funds not obligated at a minimum of 90% by the obligation end date will be subject to penalties and sanctions. The PHA will lose 1/12 for each month after the obligation end date, from its next CFP grant, for each month that it is not in compliance. Remember - One day into a month will constitute one full month in the calculation of penalty.

CFP Pre Audit As soon as funds are fully expended 24 CFR 905.322 - Except for 1406, do not submit the AMCC prior to the Obligation end date. Submit AMCC (Form 53001) with the final Budget form (Form 50075.1) to the FO. The FO will mark LOCCS as Pre-Audit, removing any additional PHA responsibility for monthly updates. A letter will be sent with a copy of the AMCC. PHA Must Audit the grant on the next FY cycle.

CFP Post Audit Provide the FO with an Audit Copy The FO will notify HUD Accounting to close the grant. A FO letter will be provided with the final AMCC form.

Common Errors Obligating funds inappropriately; i.e. 100% without invoices. Not having a LOCCS or PIC backup person. Drawing funds without matching vouchers or contract invoices. No voucher may be placed in LOCCS before the appropriate invoice(s) has/have been submitted and approved by the PHA. Placing money in the wrong accounts. For example: All in 1406 when contract work is anticipated Not allocating according to the PHA plan Delayed close outs.

CFP forms – Reference List Forms – Annual Submission ACC (HUD-53012) Annual Budget (HUD-50075.1) Five Year Action Plan (HUD-50075.1) Environmental Assessment (Form 7015.15) Cert of Payments to Influence Fed (HUD-50071) Civil Rights Cert (Large PHA HUD-50077)(Small PHA HUD-50077 CR) Anti Lobbying (form SF-LLL) Statement of Significant Amendment After submission (Closeout) AMCC (HUD-53001) LOCCS Access (HUD-27054)

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