CAPITAL FUND PROGRAM From an Operational Standpoint

Office of Capital Improvements The PIH Office of Capital Improvements administers the Capital Fund. Created by the Quality Housing and Work Responsibility Act (QHWRA) in 1998, the Capital Fund provides funds, annually, to Public Housing Agencies (PHAs) for the development, financing, and modernization of public housing developments and for management improvements.

References Capital Fund Final Rule (Combined the former legacy programs covering public housing modernization programs) 24 CFR 905 – The Public Housing Capital Fund Program New: The Capital Fund Guidebook

Types of Capital Funds Formula Replacement Housing Factor (RHF) pre July 1, 2013 Demolition and Disposition Transitional Funding (DDTF) Emergency and Non-Presidentially Declared Natural Disaster Emergency Safety and Security Capital Fund Education and Training Community Facilities (CFCF)

Demolition and Disposition Transitional Funding (DDTF) PHAs that remove ACC units on or after July 1, 2013 are eligible for 5 years of DDTF. (CFP Final Rule) DDTF funds are added to the Capital Fund Program Formula grant and are considered one grant. Any eligible formula grant activities.

PLANNING Form HUD (Annual Statement / Performance and Evaluation Report) Form HUD (Five Year Action Plan)

Tools These tools are used to form the basis for the PHA Strategic Planning and the establishment of goals and objectives contained in the PHA Agency Plan. Physical Needs Assessment Energy Audit GPNA (Proposed Rule, Pending Final 24 CFR )

Stakeholders Residents, Associations and RAB Local Officials – Mayor – Department of Building and Housing – Department of Economic Development – Planning and Zoning – Codes Administration Neighborhood Groups and Associations Community Action Commission Key Staff

Charrettes

Charrette char·rette SH ə ˈ ret/ nounNorth American noun: charrette; plural noun: charrettes; noun: charette; plural noun: charettes a meeting in which all stakeholders in a project attempt to resolve conflicts and map solutions.

Considerations Eligible Activities 24 CFR Ineligible Activities and Costs 24 CFR

Eligible General: Activities that are eligible to be funded with Capital Funds include only items specified in an approved CFP 5-Year Action Plan as identified in (3 pages of eligible activities).

Ineligible Costs not associated with a public housing project or development, as defined in § (b)(1) (mixed finance); Activities and costs not included in the PHA’s CFP 5-Year Action Plan Ineligible activities are listed at (only a half page of items)

Exception (There’s always one…) Emergency activities. Capital Fund related activities identified as emergency work, as defined in Sec of this part, whether or not the need is indicated in the CFP 5-Year Action Plan.

Emergency Work Capital Fund related physical work items that if not done pose an immediate threat to the health or safety of residents, and which must be completed within one year of funding. Management Improvements are not eligible as emergency work and therefore must be covered by the CFP 5- Year Action Plan before the PHA may carry them out.

Quiz (Eligible or Not?) Swimming pool or hot tub Operations expenses Truck for the Director of Capital Improvements Improvements not modest in design On-going security services Audit Building housing Public Housing staff and HCVP staff Management improvements not identified in the five year action plan, done on an emergency basis

General Program Requirements General. Unless otherwise stated, the requirements in this section apply to both qualified PHAs as described in § 903.3(c) and nonqualified PHAs. Each PHA must complete a comprehensive physical needs assessment (PNA). Not enforceable in FY 2015 (see Section 233 of the FY 2015 HUD Appropriations Act) Currently voluntary.

General Program Requirements Continued A PHA must annually conduct a public hearing and consult with the Resident Advisory Board (RAB) of the PHA to discuss the Capital Fund submission. The PHA may elect to conduct a separate annual public hearing in order to solicit public comments or to hold the annual public hearing at the same time as the hearing for the Annual PHA Plan.

General Program Requirements Continued Public Hearing: On display for at least 45 days. Publish a notice informing the public that the information is available for review and inspection; that a public hearing will take place on the plan; and of the date, time, and location of the hearing. Consistency with Consolidated Plan. The Capital Fund submission must be consistent with any applicable Consolidated Plan.

General Program Requirements Continued Board resolution of the five year action plan PIC certification DUNS registration and annual renewal EPIC (Annual reporting)

General Program Requirements Continued Capital Fund program submission requirements. At the time that the PHA submits the ACC Amendment(s) for its Capital Fund Grants(s) to HUD, the PHA must submit the following items: Annual Statement (Estimate) 3 originals 5 Year Action Plan (Fixed or rolling) Certificate of Compliance with Environmental Review Part 50 or 58

General Program Requirements Continued Criteria for Significant Amendment or Modification. The PHA must include in the basic criteria that the PHA will use for determining a significant amendment or modification to the CFP 5-Year Action Plan. In addition to the criteria established by the PHA, for the purpose of the CFP, a proposed demolition, disposition, homeownership, Capital Fund financing, development, or mixed finance proposal are considered significant amendments to the CFP 5-Year Action Plan. Must be included in the PHA definition of Significant Amendment and Substantial Deviation in the Agency Plan.

ACC Amendment Submission continued The PHA is also required to submit various certifications to HUD, in a form prescribed by HUD, including, but not limited to: Form SF-LLL: Disclosure of Lobbying Activities Certification of PIC Data Form HUD CR: Civil Rights Certification Form HUD 50077: Certification of Compliance with Public Hearing (PHA Plans and Related Regulations) Form HUD 50071: Certification of Payments to Influence Federal Transactions

Environmental Review Part 50 (Performed by the Field Office) Part 58 (Performed by the Responsible Entity) Recommend a five year review with annual updates. Start early in the process. (Hiccups can take a while to resolve) Send annual statements and five year plans to responsible entity. Intent is to have this process complete in time for submission of ACC Amendment. Executed Form HUD (Authority to Use Grant Funds) Keep records on file for audit!

Timely Submission of the ACC Amendment If HUD does not receive the signed and dated Amendment by the submission deadline, the PHA will receive the Capital Fund grant for that year; however, it will have less than 24 months to obligate 90 percent of the Capital Fund grant and less than 48 months to expend these funds because the PHA's obligation start date and disbursement end date for these grants will remain as previously established by HUD.

What’s Next? Fully Executed ACC Amendment for the Capital Fund Program Funding. Build you file. Begin monthly reporting in LOCCs. Begin Obligation and Expenditure Period. Codified at

Obligations Obligation. A binding agreement for work or financing that will result in outlays, immediately or in the future. All obligations must be incorporated within the CFP 5- Year Action Plan that has been approved by the PHA Board of Commissioners and HUD. This includes funds obligated by the PHA for work to be performed by contract labor (i.e., contract award), or by force account labor (i.e., work actually started by PHA employees). Capital Funds identified in the PHA’s CFP 5-Year Action Plan to be transferred to operations (BLI 1406) are obligated by the PHA once the funds have been budgeted and drawn down by the PHA. Once these funds are drawn down they are subject to the requirements of 24 CFR part 990. (Operating Fund)

Obligations continued…. Obligation End Date (OED) Formula Grants: 90% by 24 months RHF: 90% by 24 months of accumulation date ESSG: 90% by 12 months Disaster Grants: 90% by 24 months DDTF: Same as formula grant RAD conversions: Can apply for extension up to 60 months

Obligations continued…. Management Improvements 1408 meeting eligibility requirements in (b)(7) must have contract or other approved documents executed. Administration 1410 is considered obligated when budgeted. CFFP 1501or 9000 Debt Service: Obligation occurs when loan or bond documents are executed.

OBLIGATIONS CONTINUED…… Contingency 1502: The PHA must revise the budget to move funds (8% max) to another line item prior to obligating. Forced Account: Single task is obligated when it starts. Multiple related tasks are obligated when they start but must continue at a reasonable rate. Multiple unrelated tasks are obligated when each separate task is started.

Extensions Formal request to the Assistant Secretary. HQ reviews and recommends approval or rejection to Assistant Secretary. Can’t exceed 12 months. Based on the size of the PHA. Complexity of capital program of PHA. Limitations resulting from State or local law. Other factors as the Secretary determines to be relevant.

Consequences of non-compliance with obligation end date (OED) As of November 25, 2013 a PHA failing to obligate 90% by the OED of an RHF grant will have the funds recaptured. Formula grants not obligating 90% by the OED will have the next Capital Fund grant penalized by 1/12 th for each month they are out of compliance.

DEOBLIGATING FUNDS A PHA is not penalized if the OED has passed and they de-obligate due to a voided contract or other legitimate reason. PHA should contact FO to report. If accepted FO will add a project note in LOCCS.

Expenditures Expenditure. Capital Funds disbursed by the PHA to pay for obligations incurred in connection with work included in a CFP 5-Year Action Plan that has been approved by the PHA Board of Commissioners and HUD. Total funds expended means cash actually disbursed and does not include retainage.

Expenditures continued… Expenditure end dates (EED) Formula Grants: 48 months RHF: 48 Months from oldest of accumulated grants Disaster Grant: 48 months ESSG: 24 months RAD: If HUD approves OED to 60 months, EED is extended the same

Expenditures continued… Once funds are disbursed (transferred from LOCCS to the PHA), the PHA shall pay the applicable bill(s) within 3 business days. PHAs can’t expend nonfederal funds first to pay bills then use Capital Funds to reimburse themselves. HUD discourages FOs from executing disbursement adjustments in LOCCS.

Failure to Expend Penalty Failure to expend all funds in a Capital Fund Grant by the EED will result in the un-expended funds being recaptured. HQ will notify the PHA copying the FO of the noncompliance. HQ issues a unilaterally executed ACC Amendment recapturing the unexpended funds. PHA proceeds to closeout the applicable grant.

Obligation / Expenditure Quiz Can the Expenditure deadline be extended? What is the OED for an accumulated RHF grant? Failure to meet the OED penalizes the affected grant by 1/12 th for each month (or portion of month) the PHA is out of compliance.

Fungibility 905 Definition Fungibility. As it relates to the Capital Fund Program, fungibility allows the PHA to substitute work items between any of the years within the latest approved CFP 5-Year Action Plan, without prior HUD approval. Wikipedia Definition Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are "capable of being substituted in place of one another."

Budget revisions Significant amendments must go through the approval process. If not the PHA may proceed to amend without HUD approval. Give the revision a number and send to FO. FO will adjust BLIs to agree in LOCCS.

Budget Line Items (CFP) 1406 Operations 1408 Management Improvements 1410 Administration 1411 Audit 1430 Fees and Costs 1450 Site Improvements 1460 Dwelling Improvements 1465 Dwelling Equipment 1470 Non-Dwelling Improvements 1475 Non-Dwelling Equipment 1485 Demolition Costs 1495 Relocation Costs 1499 Development 1501 or 9000 CFFP debt service 1502 Contingency 1503 or 1504 RAD

Cost Limits 1406 Operations 20% (100% small PHAs) 1408 Management Improvements (14% 2016) 1410 Administration or Program Fee under asset management 10%; Development 3% or up to 6% with approval.

Management Improvements BLI 1408 Management improvements. Noncapital activities that are project- specific or PHA-wide improvements needed to upgrade or improve the operation or maintenance of the PHA's projects, to promote energy conservation, to sustain physical improvements at those projects, or correct management deficiencies.

1408 continued Management improvement costs shall be fundable only for the implementation period of the physical improvements, unless a longer period, up to a maximum of 4 years, is clearly necessary to achieve performance targets.

1408 continued Management improvement cost limits. In Fiscal Year (FY) 2014, a PHA shall not use more than18 percent. In FY 2015, a PHA shall not use more than16 percent. In FY 2016, a PHA shall not use more than14 percent. In FY 2017, a PHA shall not use more than12 percent. In FY 2018 and thereafter, a PHA shall not use more than 10 percent of its annual Capital Fund grant for eligible management improvement costs identified in its CFP 5-Year Action Plan. Management improvements are an eligible expense for PHAs participating in asset management.

A word on Administration Costs BLI 1410 Administrative costs. Any administrative costs, including salaries and employee benefit contributions, other than the Capital Fund Program Fee, must be related to a specific public housing development or modernization project and detailed in the CFP 5-Year Action Plan. (actual costs only)

Capital Fund Program Fee Capital Fund Program Fee. This fee covers costs associated with oversight and management of the CFP attributable to the HUD-accepted COCC as described in 24 CFR part 990 subpart H. These costs include duties related to capital planning, preparing the CFP Annual Statement/ Performance and Evaluation Report, preparing the CFP 5-Year Action Plan, the monitoring of LOCCS, preparing reports, drawing funds, budgeting, accounting, and procuring construction and other miscellaneous contracts. This fee is not intended to cover costs associated with construction supervisory and inspection functions that are considered a front-line cost of the project.

Performance and Evaluation Reports All PHAs must prepare a CFP Annual Statement/Performance and Evaluation Report at a time and in a format prescribed by HUD. These reports shall be retained on file for all grants for which a final Actual Modernization Cost Certificate (AMCC) or an Actual Development Cost Certificate (ADCC) has not been submitted. A final Performance and Evaluation Report must be submitted in accordance with 24 CFR , at the time the PHA submits its AMCC or ADCC.

P&Es for Troubled Agencies PHAs that are designated as troubled performers under PHAS (24 CFR part 902) or as troubled under the Section 8 Management Assessment Program (SEMAP) (24 CFR part 985), and/or were identified as noncompliant with section 9(j) obligation and expenditure requirements during the fiscal year, shall submit their CFP Annual Statement/ Performance and Evaluation Reports to HUD for review and approval.

P&Es for the other Agencies All other PHAs, that are not designated as troubled performers under PHAS and are not designated as troubled under SEMAP, and that were in compliance with section 9(j) obligation and expenditure requirements during the fiscal year, shall prepare a CFP Annual Statement/Performance and Evaluation report for all open grants and shall retain the report(s) on file at the PHA, to be available to HUD upon request.

P&Es for MTW Agencies Moving to Work (MTW) PHAs. MTW PHAs are to submit the Capital Fund submissions as part of the MTW Plan annually, as required by the MTW Agreement.

Quiz (True or false) Operations (1406) can be obligated and draw any time the PHA needs the funds. Management Improvements are limited to 20% of the grant. Non-asset management PHAs can draw up to 10 % of the grant for administration with no supporting documentation. PHAs that are troubled under SEMAP must submit P&Es to HUD for approval.

CF ACC term and covenant to operate The PHA shall operate all public housing projects in accordance with the CF ACC, as amended, and applicable HUD regulations, for the statutorily prescribed period. These periods shall be evidenced by a recorded DOT on all public housing property. If the PHA uses Capital Funds to develop public housing or to modernize existing public housing, the CF ACC term and the covenant to operate those projects are as follows:

CF ACC term and covenant to operate Development activities. Each public housing project developed using Capital Funds shall establish a restricted use covenant, either in the DOT or as a Declaration of Restrictive Covenants, to operate under the terms and conditions applicable to public housing for a 40-year period that begins on the date on which the project becomes available for occupancy, as determined by HUD.

CF ACC term and covenant to operate Modernization activities. For PHAs that receive Capital Fund assistance, the execution of each new CF ACC Amendment establishes an additional 20- year period that begins on the latest date on which modernization is completed, except that the additional 20-year period does not apply to a project that receives Capital Fund assistance only for management improvements.

term and covenant to operate Operating Fund. Any public housing project developed that receives Operating Fund assistance shall have a covenant to operate under requirements applicable to public housing for a 10-year period beginning upon the conclusion of the fiscal year for which such amounts were provided, except for such shorter period as permitted by HUD by an exception.

Questions?