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

2. 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

3. 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.”

4. 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

6. A Quick and Easy Guide to the Procurement Process

7. 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

8. 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.

9. CFP Process – CFP Guidebook P. 28

10. 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 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 in the CFP Guidebook:

11. 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 CFR or PIH 96-90

12. 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 , parts I, II), to HUD for approval, prior to the implementation is the activity.

13. 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 This Code of Federal Regulations pre-dates the Quality Housing and Work Responsibility Act (QHWRA) of 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 – “requisition funds only when due and payable”

14. BLI Chart – CFP Guidebook Page 8

15. 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.

16. 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.

17. 1408 Management Improvement Cost Limits

18. 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 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.

19. 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 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

20. 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
PNA / GPNA costs

21. 1430 – Fees and Costs Financing – Debt and finance costs
Mixed Finance projects
Capital Fund Financing (CFFP) costs

22. 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

23. 1450 – Site Improvements Parking lot improvements
Landscaping or hardscaping
Sidewalks, curbs, exterior lighting

24. 1460 - Dwelling Structures Costs associated with tenant units Repairs
Unit Modernization
Common Area - repairs, upgrades
Elevator work
Boiler
Roof

25. 1470 – Non Dwelling Structures
Non Dwelling Building repairs and upgrades
PHA Office modernization
Garages, carports
Tool sheds
Gazebo
Sign
Fences
Picnic benches

26. 1475 – Non Dwelling Equipment
Lawn mower
Snow blower
Maintenance Truck
Shop Air compressor
Welder
Printer, copier, office computers
Office furniture

27. 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.

28. 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.

29. 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.

30. 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 ) 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.

31. 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.

32. 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.

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

34. Next Step - Contracting