U. S. Department of Housing and Urban Development

Office of Public and Indian Housing

Notice PIH 96-90 (HA)

Secretary\'s Representatives; Issued: December 5, 1996

Field Office Public Housing Expires: December 31, 1997

Directors; ONAP Administrators;

Public Housing Agencies; Indian

Housing Authorities

Line of Credit Control System/Voice Response System (LOCCS/VRS) for

Modernization Program Areas

Section 1. Introduction

1-1. Purpose. LOCCS/VRS is the Department\'s disbursement system for

Public Housing Agencies and Indian Housing Authorities (herein

referred to as HAs) to draw down approved Modernization funds

and for HUD Field Offices (FOs) to monitor HA obligation and

expenditure progress against funds disbursed by HUD. This Notice

sets forth the requirements for the three Modernization program

areas in LOCCS/VRS: Comprehensive Grant Program (COMP);

Comprehensive Improvement Assistance Program (CIAP); and Lead-

Based Paint Risk Assessment (LBP). These abbreviations designate

the program areas in LOCCS. This Notice is organized into the

following Sections:

Section 1: Introduction.

Section 2: HA and FO access to LOCCS/VRS.

Section 3: Budget Line Item (BLI) edits and one-month review

edit.

Section 4: HA entry of obligation/expenditure information,

linkage of Modernization program areas, FO action, and LOCCS

obligation/expenditure report.

Section 5: HUD entry of Obligation End Date, Pre-Audit End Date

and Post-Audit End Date for each Modernization program area

grant.

Section 6: LOCCS-generated reminder and late letters and

correction of drawdowns against the wrong grant or BLI.

Section 7: Suspension and automatic review of payment requests

by the FO.

1-2. User Guides. For additional information on LOCCS/VRS, HAs and

FOs may obtain free copies of the following documents, as well

as this Notice, from the HUD Direct Distribution Center by

calling 1-800-767-7468:

A. For HAs, the LOCCS User Guide Part I.

B. For FOs, the LOCCS PIH Program User Guide for HUD Staff.

1-3. Notices Superseded. This Notice supersedes Notice PIH 94-63

(HA), dated 9/14/94, and its extension by Notice PIH 95-61 (HA),

dated 9/28/96.

1-4. Technical Assistance. If the HA has any questions pertaining to

LOCCS/VRS, the HA should contact the FO for assistance.

Section 2. HA/FO Access

2-1. HA Access. To obtain LOCCS/VRS authorization for any of the

Modernization program areas, the HA shall send Form HUD-27054,

LOCCS/VRS Access Authorization, for each proposed HA user to the

FO for review. Refer to Appendix 1 for a sample Form HUD-27054.

After review, the designated FO person shall initial anywhere on

the form and then send the form to HUD Headquarters, Attention:

LOCCS Security Staff, P.O. Box 23774, Washington, DC 20026-3774.

Note: If the HA sends this form directly to HUD Headquarters,

processing of the form will be delayed while the LOCCS Security

Officer contacts the FO. Note: MROP grants, including those

approved as Modernization Projects, are under the Development,

not the CIAP, program area. Therefore, to draw down MROP funds

in LOCCS/VRS, the HA user must have authorization for the

Development program area (PDEV).

A. Multiple Users. If the HA wishes to have more than one user

draw down funds, an access authorization form must be

completed for each user not currently authorized in

LOCCS/VRS. The Department recommends that the HA have at

least one back-up user. If the HA user needs access for more

than one Modernization program area (i.e., COMP, CIAP and

LBP), the user shall request one access authorization for

each program area; the request for access to more than one

program area may be combined on the same form.

B. Direct Deposit Form. The HA is not required to submit a new

SF-1199A, Direct Deposit Sign-Up Form. If the HA wishes to

change its bank account, the HA shall submit a new SF-1199A

to the FO. The FO shall review the form to verify the

accuracy of the information, including the Tax Identification

Number, and then initial and send the form to HUD

Headquarters, Attention: ACH Team, P.O. Box 44816,

Washington, DC 20026-4816.

C. No Minimum Drawdown. There is no minimum drawdown

requirement. The HA shall draw down that amount of funds

necessary to meet its immediate cash needs \-- no more, no

less.

D. Requisitioning Cents. To draw down cents, the HA shall enter

star (\*), the amount with no decimal, and pound (#). For

example, to draw down \$0.45, the HA enters \* 45 #.

2-2. HA Change of Address.

A. To report a change of address for the HA, the HA shall send

Form HUD-27056, Change of Address Request, to the FO for

review. After review, the designated FO person shall initial

anywhere on the form and then send the form to HUD

Headquarters, ACH Team, P.O. Box 44816, Washington, DC 20026-

4816\. Refer to Appendix 2 for a sample Form HUD-27056. Note:

If the HA sends this form directly to HUD Headquarters,

processing of the form will be delayed while Headquarters

contacts the FO.

B. To report a change of address for an individual HA user, the

HA shall send Form HUD-27054, LOCCS/VRS Access Authorization,

with the corrected address for the HA user, to the FO for

review. After review, the designated FO person shall initial

anywhere on the form and then send the form to HUD

Headquarters, Attention: LOCCS Security Staff, P.O. Box

23774, Washington, DC 20026-3774. Note: If the HA sends this

form directly to HUD Headquarters, processing of the form

will be delayed while Headquarters contacts the FO.

2-3. FO Access. Each proposed new FO user shall submit Form HUD-

27054-A, Access Authorization Security Form for HUD Staff, to

Headquarters, Attention: LOCCS Security Staff, Room 3184,

requesting authorization for each listed program area. Refer to

Appendix 3 for a sample Form HUD-27054-A. The FO should refer to

the LOCCS PIH Program User Guide for HUD Staff for additional

instructions. Note: Access to MROP grants, including those

approved as Modernization Projects, must be obtained under the

Development program area (PDEV).

2-4. HA Payment Voucher. The HA should refer to the LOCCS User Guide

Part I for generic instructions on preparation of payment

vouchers. Refer to Appendices 4, 5 and 6, respectively, for the

following sample payment voucher forms: Form HUD-50080-CIAP,

Payment Voucher; Form HUD-50080-COMP, Payment Voucher; and Form

HUD-50080-LBP, Payment Voucher.

Section 3. LOCCS Edits

3-1. General.

A. As quickly as possible after the funds for a grant have been

reserved and obligated (ACC amendment) and entered in the

Program Accounting System (PAS) by the Field Accounting

Division (FAD) and environmental review requirements have

been met, each FO shall access LOCCS and prepare the grant

for disbursement by entering the BLIs. Using the F01 screen

from the Program Area Menu, the FO shall enter the original

BLI amounts, corresponding to the approved amounts in Part I

of the COMP Annual Statement or the CIAP Budget (used for

both CIAP and LBP), into LOCCS. The sum of the BLIs must

equal the total grant amount or LOCCS will prevent the FO

user from finalizing the BLI entry.

Note: Environmental review requirements are met when: (1) the

FO has approved the HA\'s Request for Release of Funds where

the review was performed by a responsible entity under 24 CFR

Part 58; or (2) the FO itself has completed the review under

24 CFR Part 50; or (3) the approved activities are exempt

from review requirements under 24 CFR 58.34 or 58.35(b).

B. Although the HA is responsible for accounting for the funds

by the development accounts identified in the PIH Low-Rent

Technical Accounting Guidebook 7510.1, LOCCS tracks the

disbursement of funds only by BLIs, which represent summary

development accounts.

C. LOCCS/VRS contains general, soft and hard edits to monitor

program requirements and guard against excessive cash

drawdowns, as follows:

1\. General Edits.

a\. The HA is limited to one transaction per day, per

grant. LOCCS/VRS will not allow the HA to enter a

payment request until all previous payment requests

have been processed by LOCCS. Therefore, if the HA has

a pending payment which is being reviewed by the FO

prior to payment, the HA cannot enter any subsequent

payment requests for the same grant until the previous

request is either approved or rejected.

b\. LOCCS/VRS will not allow the HA to enter a payment

request, that when added to previously paid requests,

would exceed the total amount of the grant.

2\. Soft Edits. Soft edits are limits placed on certain BLIs

that prevent the HA from being paid when certain

thresholds are exceeded, but do not prevent the HA from

completing its payment request. The request is flagged for

FO review before payment. Where this occurs, the HA should

contact the FO for further instructions. The HA may be

required to submit a budget revision before the payment

request can be approved.

3\. Hard Edits. Hard edits are limits placed on certain BLIs

that will not allow the HA to request more funds than is

entered by the FO for those BLIs in LOCCS or than a

specific percentage of the grant amount. When a hard edit

occurs, the payment request is denied and the HA should

contact the FO for further instructions. The HA may be

required to submit a budget revision before the payment

request can be approved. If the FO wishes to approve the

payment request, the FO must first increase the BLI amount

which triggered the hard edit (and also reduce another BLI

by the same amount) and then direct the HA to make another

request in accordance with the revised amounts. The FO

should promptly notify the HA by telephone of when the

revised BLIs have been entered.

3-2. BLI Edits for COMP. The BLI edits for COMP are as follows:

A. BLI 1406, Operations. There is a hard edit of 10 percent of

the grant amount.

B. BLI 1408, Management Improvements. There is a soft edit of 20

percent of the grant amount or the FO-entered BLI amount,

whichever is greater. The FO has the authority to approve an

amount exceeding 20 percent for this BLI. Note: For Public

Housing, PHAs that are high overall performers, as well as

high Mod performers, have no programmatic limit on the amount

they may draw/expend on BLI 1408. Therefore, if such PHA

wishes to increase this BLI above 20 percent after the BLI is

initially entered by the FO, the PHA must inform the FO so

that the FO may reenter a higher amount for BLI 1408 and a

lower amount for another BLI. The PHA may so inform the FO by

telephone and the FO shall make the BLI adjustments as

quickly as possible.

C. BLI 1410, Administration. There is a soft edit of 10 percent

of the grant amount or the FO-entered BLI amount, whichever

is greater. The FO has the authority to approve an amount

exceeding 10 percent for this BLI.

D. BLI 1411, Audit Costs. There is a soft edit of 110 percent of

the FO-entered BLI amount.

E. BLI 1430 through 1495. For BLI 1430, Fees and Costs; BLI

1440, Site Acquisition; BLI 1450, Site Improvement; BLI 1460,

Dwelling Structures; BLI 1465, Dwelling Equipment - Non-

expendable; BLI 1470, Nondwelling Structures; BLI 1475,

Nondwelling Equipment; BLI 1485, Demolition; and 1495,

Relocation Costs, there are no edits to allow for the

fungibility (interchangeability) of work between the Annual

Statement and years two through five of the latest HUD-

approved Five-Year Action Plan. The FO is not required to

revise these BLIs to reflect HA exercise of fungibility.

F. BLI 1490, Replacement Reserve. There is a hard edit of the

FO-entered BLI amount.

G. BLI 1498, Mod Used for Development. There is a hard edit of

the FO-entered BLI amount.

H. BLI 1502.

1\. Development account 1502 is provided on the Annual

Statement to allow the HA to budget initially up to 8

percent of its annual grant for contingencies. If the HA

initially budgets funds for account 1502, the FO will

enter the budgeted amount, not to exceed 8 percent, into

BLI 1502 when initially spreading the BLIs.

2\. When the HA needs to use the funds in this contingency

account for cost overruns or other work within its Five-

Year Action Plan, the HA is required to rebudget the

funds, within the Annual Statement, from the contingency

account 1502 to other eligible development accounts and

then draw down the funds from the other BLIs. Since

fungibility permits the HA to move funds among development

accounts without prior FO approval, there are no edits on

BLIs 1430 through 1495 (see subparagraph E). Accordingly,

the HA may draw down funds from these BLIs without the FO

entering revised BLI amounts into LOCCS/VRS, as long as

the total grant amount is not exceeded.

3\. After the HA has rebudgeted the funds, within the Annual

Statement, from account 1502 into other eligible

development accounts for purposes of obligation and

expenditure, the HA may not replenish account 1502. At

program completion, the revised budget amount for account

1502 must be zero. Since the HA may not draw down funds

against BLI 1502, it is not listed on Form HUD 50080-COMP,

Payment Voucher. LOCCS/VRS will always show zero funds

disbursed for BLI 1502.

3-3. BLI Edits for CIAP. The BLI edits for CIAP are as follows:

A. BLI 1406, Operations. There is a hard edit of 10 percent of

the grant amount.

B. BLI 1408, Management Improvements. There is a hard edit of

the FO-entered BLI amount. In CIAP, there is no percentage

limit on the grant amount that may be approved for management

improvements.

C. BLI 1410, Administration. There is a hard edit of the FO-

entered BLI amount. In CIAP, there is no percentage limit on

the grant amount that may be approved for administration.

D. BLI 1411, Audit Costs. This BLI may not be used in CIAP.

E. BLI 1430 through 1495. For BLI 1430, Fees and Costs; BLI

1440, Site Acquisition; BLI 1450, Site Improvement; BLI 1460,

Dwelling Structures; BLI 1465, Dwelling Equipment - Non-

expendable; BLI 1470, Nondwelling Structures; BLI 1475,

Nondwelling Equipment; BLI 1485, Demolition; and 1495,

Relocation Costs, there are soft edits of 110 percent of the

FO-entered BLI amount.

F. BLI 1490, Replacement Reserve. This BLI may not be used in

CIAP.

G. BLI 1498, Mod Funds Used for Development. There is a hard

edit of the FO-entered BLI amount.

H. BLI 1502. This BLI may not be used in CIAP.

I. BLI 1500. CIAP grants/loans approved in FY 1992 and prior

years were entered automatically, during the conversion to

LOCCS, on BLI 1500. The FO was not required to spread the

loan. The HA requests payment for these CIAP grants/loans

against BLI 1500 on Form HUD-50080-CIAP.

3-4. BLI Edits for LBP. This program areas has only two BLIs \-- 1410

and 1430. There is hard edit for each BLI of the FO-entered BLI

amount.

3-5. One-Month Review Edit. For all three Modernization program

areas, there is a soft edit, which flags for FO review, HA

payment requests which cumulatively exceed a specified

percentage of the annual grant amount in a current month. This

edit does not mean that the HA cannot draw down more than its

percentage limit in a current month; it does mean that the

payment request causing the limit to be exceeded is flagged for

FO review.

A. COMP and CIAP Program Areas. The one-month review edit

percentages are as follows:

Grant Amount Percentage

\$100,000,000 - or more 3.0%

\$ 10,000,000 - \$ 99,999,999 5.0%

\$ 1,000,000 - \$ 9,999,999 12.0%

\$ 1 - \$ 999,999 20.0%

B. LBP Program Area. The one-month review edit is 10 percent of

the grant amount.

3-6. FO Review.

A. The FO should query LOCCS daily, but no less frequently than

twice weekly, depending on the activity level, to determine

if there are any Vouchers Out for Review (Q10 screen). The FO

should query for any workload (Q40 screen) at the same time

to see if any BLI data entry is needed. Where LOCCS shows

payment requests flagged for review, the FO is responsible

for evaluating whether the request should be released for

payment. FO review of and action on any payment request

flagged for review should be completed within no more than

three working days.

B. When the one-month review edit flags a payment request for

review, the HA shall immediately call the FO to explain the

reasons. Based on the HA\'s telephone explanation, the FO may

release the payment without further delay or require that the

HA send in additional documentation. For example, where the

HA has awarded a large construction contract, and the

schedule for periodic payment, when added to other routine

payments during a month, will cause the HA to exceed the

percentage limit for a number of months, the FO may request

that the HA send or fax in the schedule when the one-month

review is first triggered. Thereafter, a telephone call from

the HA should be sufficient for the FO to release the payment

request. Where necessary, the FO may direct the HA to submit

back-up documentation in support of the payment request.

However, the FO shall make every effort not to request

excessive documentation. In all cases, the FO shall enter the

reason for its action (release or denial of the request) in

the approve/reject reason line of the V32 review voucher

screen.

Section 4. Obligation/Expenditure Information

4-1. General. The HA is required to enter cumulative obligation and

expenditure data on a quarterly basis when requisitioning

modernization funds from any of the three Modernization program

areas. Obligation and expenditure data are entered at the grant

level.

4-2. Defining Obligations and Expenditures.

A. 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.

Contract execution means execution of the contract by both

the HA and the contractor. For force account work, all funds

for a group of sequentially-related physical work items are

considered obligated when the first work item is started,

such as kitchen cabinet replacement followed by kitchen floor

replacement, but only where funds continue to be expended at

a reasonable rate. Where one force account physical work item

is started and is not sequentially related to other physical

work items, such as site improvements and kitchen remodeling,

then only the funds for the one physical work item started

are considered obligated.

B. Expenditures. Where funds have been obligated, the HA is

expected to show reasonable progress through increasing fund

expenditures each quarter at a rate that would allow

completion within the time frame set forth in the

implementation schedule. 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.

4-3. Time Frame for Entering Cumulative Obligation and Expenditure

Data.

A. During the grace month following a quarter end (i.e.,

January, April, July, or October), LOCCS/VRS gives the HA the

option to either enter/update cumulative obligation and

expenditure data without drawing down or continue the

drawdown without entering the data. The requested data

include the total cumulative obligation and expenditure

amounts for each grant for which funds are being

requisitioned. If no obligation or expenditure activity has

occurred since the last quarterly update, the HA must reenter

the existing cumulative obligation and expenditure data in

order for LOCCS/VRS to acknowledge data entry for the most

recent previous quarter. During the grace month, there is no

limit on the number of times that the HA may enter/update

obligation/expenditure information.

B. Beginning on the first day of the month following end of the

grace month (i.e., February 1, May 1, August 1, or November

1), the HA is not allowed to continue a drawdown until the

cumulative obligation and expenditure data for that grant for

the previous quarter have been entered. For example, for the

quarter ending December 31, the HA is required to enter

obligation and expenditure data during the month of January.

If the HA has not done so by January 31, and the HA attempts

to requisition funds on February 1, LOCCS/VRS will not

process the requisition until the required data are

entered/updated. Refer to paragraph 4-4 regarding linkage of

the three Modernization program areas.

C. Where the HA has not requisitioned funds during a previous

quarter or quarters, the HA is not allowed to requisition

funds until the cumulative obligation and expenditure data

for that grant for the most recent previous quarter have been

entered. For example, if the HA has not requisitioned funds

during the quarters ending March 31 and June 30, but needs to

requisition funds in August, LOCCS/VRS will not process the

requisition until the required data for the quarter ending

June 30 are entered/updated.

D. For the initial drawdown for a particular grant, the

procedure set forth in subparagraph C applies. Where the

cumulative obligation and expenditure data for the most

recent previous quarter are zero, the HA shall enter zeroes

for both amounts. For example, where the ACC was amended in

December and the HA is requisitioning funds in February, the

HA must enter zeroes for the quarter ending December 31.

4-4. Linkage of Grants Within a Modernization Program Area (Public

Housing Only). This paragraph does not apply to Indian Housing.

A. Definition and Consequences. Effective 4/1/97, to ensure

complete entry/update of all modernization obligation and

expenditure information by the HA on a quarterly basis, LOCCS

will link all grants within a Modernization program area

(COMP, CIAP or LBP) that are not fully obligated/expended or

that do not have a Pre-Audit End Date (see Section 5). For

example, HA failure to update information on a particular

COMP grant will, after the grace month, result in the

suspension of drawdowns on all other COMP grants.

B. HA Responsibility. Because of the linkage of the grants

within a Modernization program area, it is extremely

important that the HA continue to update quarterly

obligation/expenditure data on each grant until it is 100

percent obligated/expended or a Pre-Audit End Date is entered

into LOCCS.

4-5. Data Entry Edits.

A. If the entered cumulative obligation or expenditure amount is

less than the prior quarter\'s obligation or expenditure

amount, LOCCS/VRS will ask the HA whether the entered amount

is correct. If the amount is incorrect, the HA may correct

the amount. For example, the obligation amount may decrease

due to a contract modification, reducing the fixed price of

the contract.

B. If the entered cumulative obligation amount is greater than

the grant amount, LOCCS/VRS will ask the HA to enter a

corrected amount. The obligation amount cannot exceed the

grant amount.

C. If the entered cumulative expenditure amount is greater than

the obligation amount, LOCCS/VRS will ask the HA to enter a

corrected amount. The expenditure amount cannot exceed the

obligation amount.

4-6. FO Entry of Obligation/Expenditure Information. The FO may enter

or change obligation/expenditure information for the last

quarter on behalf of the HA at any time up until entry of the

Pre-Audit End Date (see Section 5). FO entry or correction of

information may be necessary where the HA determines that it has

made a mistake in updating its information and is unable to

correct the mistake because the grace month is over.

4-7. FO Action on HA Failure to Enter Information.

A. Q29A Query. On the 31st day after the quarter end, the FO

should use the Q29A function, which is an on-line query, to

determine those HAs, by program area, which have not updated

obligation/expenditure information. The FO should immediately

contact those HAs and request entry/update of

obligation/expenditure information no later than the 45th day

after the quarter end.

B. Automatic Review. If the HA persistently fails to enter

obligation/expenditure information during the grace month or

repeatedly enters incorrect information, the FO should

require automatic review of every payment request in the

affected program area. Refer to paragraph 7-3 for additional

information on automatic review.

4-8. Obligation/Expenditure Report. The LOCCS-generated report

A670E1C shows, for each grant, obligation/expenditure

information, as well as Obligation End Date and Pre-Audit End

Date, sorted by Modernization program area, FY and HA. All FY

1987 and subsequent year grants with a Post-Audit End Date are

rolled into a summary line, \"Total FY Closed.\" All FY 1986 and

prior year loans are removed from LOCCS reports after a Post-

Audit End Date is entered. For the column entitled \"Non-Current

Obligation/Expenditure Data,\" an asterisk means that no data has

ever been provided; a date means the last report received; and a

blank means that the HA is current in its report.

A. On the 31st day after the quarter end, a preliminary report

is generated. Using a risk management approach, the FO shall

review the preliminary report for apparent inaccuracies and

request the HA to make corrections, where necessary, between

the 31st and 45th day after the quarter end.

B. On the 46th day after the quarter end, a final report is

generated. The FO shall retain all final reports for

reference.

4-9. Availability of LOCCS Reports. Standard LOCCS reports are

available for printing for three calendar days upon being

displayed on the FO print list. If the FO does not print the

report during this period, the FO may recover and print the

report using the Q61 screen. The report recovery feature is

available for 30 calendar days. To avoid use of the Q61 feature,

the FO program staff should review the print list with the FO

staff responsible for routinely printing LOCCS reports to

identify the reports and their frequency for printing.

Section 5. End Dates

5-1. General. For each COMP, CIAP, and LBP grant in LOCCS/VRS, the

following three end dates shall be entered into LOCCS over the

life of the grant.

A. Obligation End Date is the date by which all funds for a

specific grant will be obligated. If the implementation

schedule for a grant has multiple obligation deadline dates

(e.g., dates for each development and HA-wide management

improvement included in the grant), the last obligation

deadline date is the Obligation End Date for the entire

grant. The Obligation End Date must be a quarter end date;

i.e., 12/31, 3/31, 6/30 or 9/30. This date is entered by the

FO, as set forth in paragraph 5-2, at the time the BLIs are

initially spread.

B. Pre-Audit End Date is the date on which the FO, after review,

receives the HA\'s final progress report and Form HUD-53001,

Actual Modernization Cost Certificate (AMCC). This date is

entered by the FO, as set forth in paragraph 5-3.

C. Post-Audit End Date is the date on which the FO approves the

AMCC after audit. The FO forwards the original of the

approved AMCC to the FAD and this date is entered by the FAD

into LOCCS. LOCCS will interface with PAS to record program

closeout, as set forth in paragraph 5-4. The FO should

routinely check LOCCS to ensure that the FAD has entered the

Post-Audit End Date.

5-2. Obligation End Date.

A. Initial Entry. The FO is required to use the F01 screen to

enter the Obligation End Date at the time it initially

spreads the BLIs.

B. Revision of Initial Entry. Using the A01 function, the FO may

change the Obligation End Date at any time.

1\. If the FO approves a time extension of an obligation

deadline date in the implementation schedule and the

extension affects the Obligation End Date of the entire

grant, the FO shall change the Obligation End Date in

LOCCS.

2\. If the HA self-extends an obligation deadline date in the

implementation schedule and the extension affects the

Obligation End Date of the entire grant, the HA shall

notify, by telephone or in writing, the FO to change the

Obligation End Date in LOCCS. Note: The HA, regardless of

whether it is a COMP or CIAP agency, may not self-extend

any obligation deadline date for an LBP grant.

C. HA Update of Obligated Information. During the grace period

immediately following the Obligation End Date, LOCCS/VRS will

allow the HA to update obligated information. After the end

of the grace period immediately following the Obligation End

Date, the HA will be prevented from changing obligated

information, but will still be required to update expended

information on a quarterly basis.

D. Other Consequences. After the end of the grace period

immediately following the Obligation End Date, LOCCS/VRS

will:

1\. prevent cumulative disbursements from exceeding cumulative

obligations; and

2\. continue reminder letters regarding updates of expended

(not obligated) information, which is required quarterly,

and progress reporting, which is required annually for

COMP and semi-annually for CIAP and LBP.

5-3. Pre-Audit End Date.

A. Initial Entry. The FO will enter the Pre-Audit End Date after

receipt, review and acceptance of the final progress report

and the AMCC. This date cannot be a future date and does not

have to be a quarter end date.

B. Consequences. When the Pre-Audit End Date is entered, LOCCS

will:

1\. ensure that the obligated and expended amounts equal the

disbursed amount\*;

2\. ensure that there are no outstanding receivables

associated with the grant/loan\*;

3\. ensure that all required progress reports have been

recorded as having been received by the FO through the M10

screen\*;

4\. not allow any further HA updates of obligated/expended

information;

5\. not allow any further FO updates of obligated/expended

information;

6\. not allow any further drawdowns by the HA;

7\. automatically adjust obligated, expended and disbursed for

any collections posted after the Pre-Audit End Date; and

8\. stop all reminder letters.

\* If this is not the case, LOCCS will display an error

message and will not accept entry of the Pre-Audit End

Date.

5-4. Post-Audit End Date. After audit, the FO, in all instances,

shall send the original of the audited and approved AMCC to the

FAD, even where there is no downward adjustment (recapture).

Note: The FO no longer sends the original of the AMCC directly

to Headquarters where there is no downward adjustment. In

accordance with subparagraphs A, B or C, the FAD will enter the

Post-Audit End Date, which is the date on which the FO approved

the AMCC after audit.

A. Where HUD records (LOCCS) and HA records (audit) agree as to

funds obligated, expended and disbursed, the FAD shall

immediately enter the Post-Audit End Date into LOCCS, which

interfaces with PAS to record that the grant has been closed

out.

B. Where the HA owes funds to HUD (i.e., the amount disbursed by

LOCCS is greater than the amount obligated and expended by

the HA per the audit), the FAD shall establish an accounts

receivable in PAS through LOCCS, which will automatically

adjust the obligation/expenditure information downward by the

amount of the receivable. In addition, the FAD shall

establish an accounts receivable in the Departmental Accounts

Receivables Tracking System (DARTS). Upon receipt of the

remittance, the FAD shall record the remittance so that the

amount disbursed by LOCCS/VRS is equal to the amount

obligated/expended by the HA per the audit. The FAD then

shall enter the Post-Audit End Date. The HA shall remit in

accordance with the following:

1\. Where the remittance is \$2,000 or less, the HA shall send

a check, payable to the Department of HUD, to NationsBank,

Excess Financing, P.O. Box 100144, Atlanta, GA 30384. The

HA shall notate the Modernization program area (e.g.,

COMP, CIAP or LBP) and the Modernization Project Number on

the check.

2\. Where the remittance is over \$2,000, the HA shall request

its financial institution to wire the funds to HUD in

accordance with instructions set forth in the Financial

Management Handbook 7475.1, as revised.

C. Where HUD owes funds to the HA (i.e., the amount disbursed by

LOCCS/VRS is less than the amount obligated and expended by

the HA per the audit), the FAD shall enter the Post-Audit End

Date and the amount owed by HUD. LOCCS will automatically

adjust the obligation/expenditure information upward by the

amount which HUD owes and generate a voucher for that amount.

However, the voucher will not be paid until the FO indicates

approval of the voucher in LOCCS.

D. After the FAD enters the Post-Audit End Date, all undisbursed

balances will be automatically recaptured through LOCCS.

Note: The FO no longer prepares a Program Accounting Data

(PAD) form to recapture excess authority.

Section 6. Reminder and Late Letters/Drawdowns Against Wrong Grant or

BLI

6-1. Letters. LOCCS generates one reminder and one late letter to the

HA for grants within a Modernization program area (COMP, CIAP

and LBP), as follows:

A. Obligation/Expenditure Information. For each Modernization

program area, a reminder letter is sent quarterly, on the

last day of the quarter end (i.e., 3/31, 6/30, 9/30, and

12/31). If the HA does not update the obligation/expenditure

information for any grant during the grace month, a late

letter is sent on the last day of the grace month following

the quarter end and no further drawdowns will be allowed

until the required information is entered. Refer to paragraph

4-4 regarding linkage of the Modernization program areas.

B. Progress Reports. Using the M10 screen, the FO shall enter

receipt of required progress reports into LOCCS. If, after

entry of receipt, FO review of the progress report indicates

that the report is incomplete so that progress status cannot

be determined or indicates unacceptable progress, the FO

shall take appropriate action to obtain correction from the

HA.

1\. COMP. For COMP, the Performance and Evaluation (P&E)

Report on each grant is due annually from the HA on 9/30

for the program year ending 6/30. The reminder letter is

sent on 9/1 and the late letter is sent on 10/15, 15 days

after the due date. If FO receipt of the P&E Report for a

particular COMP grant is not entered into LOCCS by 10/15,

all future payments for that grant will be suspended until

such time as FO receipt of the P&E report is entered.

2\. CIAP and LBP. For CIAP and LBP, the Progress Report on

each grant is due semi-annually from the HA; i.e., on

4/30 for the six-month period ending 3/31; and on 10/30

for the six-month period ending 9/30. The reminder

letters are sent on 3/31 and 9/30 and the late letters

are sent on 5/15 and 11/15, 15 days after the due dates.

If FO receipt of the Progress Report for a particular

CIAP or LBP grant is not entered into LOCCS by 5/15 and

11/15, all future payments for that grant will be

suspended until such time as FO receipt of the Progress

Report is entered.

6-2. Drawdowns Against Wrong Grant. Where the HA mistakenly draws

down funds against the wrong grant, the HA shall take one of the

following actions:

A. Where the HA immediately realizes its mistake, the HA shall

contact the FO and request that the FO cancel the voucher

using Option V31. The FO may cancel the voucher only on the

same day on which the HA called it in.

B. Where the HA realizes its mistake the following day or later,

the HA shall contact the FO and ask for a payment adjustment.

The FO shall prepare a memorandum to the FAD requesting an

adjustment and identifying the grant and BLI from which the

funds were mistakenly drawn and the grant and BLI from which

the funds should have been drawn. The FAD will make the

adjustment.

6-3. Drawdowns Against the Wrong BLI. Where the HA has drawn down

funds against the wrong BLI within the same grant, the HA shall

contact the FO and request a disbursement adjustment. The FO

shall correct the disbursement using the M03 screen.

Section 7. Suspension and Automatic Review

7-1. General. On a quarterly basis, using a risk management approach,

the FO should check that HA expenditures are consistent with

drawdowns made. Where drawdowns exceed expenditures and the

variance is not explained by the disbursement information being

more current than the expenditure information, the FO should:

A. Review the grant activities to determine if the HA is in

compliance with all applicable requirements of the

Modernization program area;

B. Where appropriate, stop any further drawdowns until the HA is

in compliance with applicable requirements;

C. In the event that the HA has a significant cash balance on

hand and disbursement is not imminent, the FO shall direct

the HA in writing to remit immediately the excess amount. The

HA shall remit funds in accordance with the instructions in

paragraph 5-4B; and

D. Document all actions taken and the rationale for those

actions.

7-2. Suspension of Payments by FO. Using the M01 screen, the FO has

the ability to stop payments to a specific HA at any time such

action is justified.

A. Reasons for immediate action to suspend payments include, but

are not limited to: clear evidence of fraud; abuse or

mismanagement of funds previously drawn down; persistent

holding of a substantial amount of funds before disbursement

for more than three working days after receipt; and

chronically late or insufficient progress reports.

B. The FO shall document the basis for the suspension of

payments and inform the HA in writing of the reason.

C. Payments may be resumed only after the FO is satisfied that

appropriate actions have been taken by the HA to avoid

recurrences and restitution for any improper use of funds has

been made.

7-3. Automatic Review of Payments by FO. By using the M09 screen, the

FO may place automatic review of every payment request from a

particular HA for a specific program area or individual grants

within a program area. Reasons for automatic review include, but

are not limited to: the PHA is designated as Mod Troubled in

accordance with the Public Housing Management Assessment Program

(PHMAP); or the HA has consistently shown that it is a proven

poor cash manager. If the FO determines that the HA must submit

additional documentation prior to payment, the FO shall formally

notify that HA in writing. Note: The FO shall provide written

notification to the COMP agency through either a Notice of

Deficiency or Corrective Action Order. Automatic review should

remain in place until the HA has demonstrated that it has taken

appropriate corrective action.

\[Signed: Kevin E. Marchman\]

Acting Assistant Secretary for

Public and Indian Housing