U.S. Department of Housing and Urban Development

Office of Public and Indian Housing

Special Attention of: Notice 97-1 (HA)

Secretary\'s Representatives;

State and Area Coordinators; Issued: January 15, 1997

State and Area Office Directors of Expires: September 30, 1997

Public Housing; Administrators,

Offices of Native American Programs;

PHAs and IHAs Administering Section 8

Programs Cross References:

Subject: Processing Section 8 Renewal Funding Increments in Fiscal Year

1997

1\. PURPOSE. In September 1996, many of the Section 8 funding increments

expiring in fiscal year (FY) 1997 were either extended or renewed

using FY 1996 renewal funds. This Notice provides instructions to HUD

Field Offices for replacing rental certificate and rental voucher

funding increments expiring between January 1997 and September 1997

that were not previously extended or renewed. Therefore, only those

FY 1997 funding increments that have not been renewed/extended are

affected by this Notice.

These instructions also do not apply to renewal of expiring Moderate

Rehabilitation funding increments or Housing Assistance Payments

Contracts. Instructions for Mod Rehab 1997 renewals are being issued

separately.

This Notice supersedes Notice PIH 96-4 , issued February 8, 1996.

Please review the instructions in this Notice carefully, as the

instructions for processing FY 1997 renewals have changed from

instructions in Notice 96-4.

2\. BASIC PRINCIPLES FOR FY 1997. The Department\'s objective is to
ensure

continued assistance to housing authorities (HAs) with expiring

contracts, and to the owners and families they serve. To achieve this

objective, ACC reserves will be used, when available, to extend

expiring contracts, or, if ACC reserves are not available,

appropriated renewal funds will be assigned to renew expiring

increments. Renewal funding and extensions will be for a one year

term (12 months) in FY 1997.

3\. DETERMINATION TO EXTEND OR RENEW. Field offices must determine

whether to extend or renew each expiring funding increment. The

following steps are required to make this determination:

A. Identify Expiring Increments: The field office should use

HUDCAPS report A75QPA03 (Expiring Contracts - Program Based) to

identify every expiring increment during the time period January

1, 1997 through September 30, 1997.

B. Calculate Renewal Cost: The calculation of contract and budget

authority requirements is substantially the same for the rental

certificate and rental voucher programs. The Lotus 1-2-3

worksheets have been revised for FY 1997. Separate worksheets

will be used for rental certificate and rental voucher renewals.

The revised worksheets are identified by the heading \"RENEWAL

FUNDING WORKSHEET - REVISED December 1, 1996\". The revised

worksheets will be sent to all Public Housing Directors and ONAP

Administrators via cc:mail when this Notice is signed.

Attachment I provides user instructions for the revised

worksheet. The revised worksheets are to be used for all renewal

calculations for expirations in January 1997 and subsequent

months that have not already been renewed/extended.

Renewal funding calculations are based on the FY 1997 FMRs (by

unit size), and the average tenant contributions (from the most

recently approved form HUD 52672). FY 1997 FMRs were published

in the Federal Register September 20, 1996. FMRs must be entered

for all unit sizes included in the unit distribution on the HA\'s

Form HUD 52672 from the current fiscal year.

C. Determine Current ACC Reserves: The current ACC reserves are

defined as the ACC reserves from the approved Voucher for Payment

of Annual Contributions and Operating Statement (form HUD-52681),

line 31, for the most recently closed HA fiscal year, PLUS the

approved budgeted provision for reserves from the current HA

fiscal year and any other open HA fiscal years, based on the

Estimate of Total Required Annual Contributions (form HUD-52673),

line 28. Please note that the budgeted provision for reserves

may be either positive or negative depending on whether the HA

projected to add to or reduce its ACC reserves.

D. Determine Available Reserves: Available reserves shall be

defined as current ACC reserves (as defined above) minus one half

of the annual contributions available for the current HA fiscal

year, based on the Estimate of Required Annual Contributions

(form HUD-52673), line 13. If the current ACC reserves are less

than or equal to one half of the annual contributions available

for the current HA fiscal year, then there are no available

reserves, and the project must be renewed.

If there are available reserves, the field office must review its

records to determine if another expiring increment has previously

been extended for the same HA and program in FYs 1995, 1996, or

the first quarter of 1997. If so, then the unexpired portion of

the restricted ACC reserves must be subtracted from the

calculation of available ACC reserves.

The determination of unexpired restricted ACC reserves for an

extended increment is similar to determining the amount of ABA

for an increment expiring during an HA\'s FY. The steps are:

a\. Identify the term of the extension: FY 95 extensions

had a term of 36 months; FY 96 had a term or 24 months; and

FY 97 extensions have a term of 12 months.

b\. The amount of restricted reserves should be prorated by

month. The number of months from the FY 1997 expiring

increment\'s expiration date to the expiration date of the

previously extended increment(s) is the unexpired amount of

ACC reserves that must be subtracted from the available

reserves for extensions.

The amount of unexpired reserves is prorated by dividing the

restricted ACC reserves for each increment by the term of

the extension (in months), and multiplying that monthly

amount by the number of months between the FY 1997 expiring

increment\'s expiration date and the extension\'s expiration

date.

For example, in FY 1995, HA X had one expiring certificate

increment extended for 36 months, restricting \$256,100 from

the HA\'s ACC reserves. The increment originally expired on

August 31, 1995; therefore, it was extended from September

1, 1995 through August 31, 1998.

HA X has another increment which expires on January 31,

1997\. The FO calculates the remaining restricted reserves

in the following manner:

Original restricted reserves - \$256,100

\$256,100 / 36 (extension term) = \$7,114 per month

\$7,114 \* 19 (number of months between February 1, 1997 and

August 31, 1998) = \$135,166

\$135,166 is the amount of restricted reserves that must be

subtracted from HA X\'s available ACC reserves.

E. Determine Whether to Renew or Extend: If available reserves are

greater than or equal to the calculated renewal cost, the

expiring funding increment should be extended for an additional

one year term. If available reserves are less than the

calculated renewal cost, renewal funding should be provided to

replace the expiring funding increment.

To assist with this determination, the Lotus 1-2-3 worksheet

\"Renewal/Extension Funding for Fiscal Year 1997 Certificate and

Voucher Expirations\", will be provided to Public Housing

Directors and ONAP Administrators when this Notice is signed.

The worksheet, based on the data entered, will determine which

increments should be renewed and which should be extended.

Instructions for the worksheet are attached to this Notice.

Field offices that have not renewed/extended all increments

expiring in FY 1997 must submit the \"Renewal/Extensions Funding

for Fiscal Year 1997 Certificates and Voucher Expirations\"

worksheets, by January 31, 1997, via cc:mail, to Mary C. Conway

at PIHPOST.

FY 1997 renewal funding will be assigned to the field offices

based on the renewal amounts shown on this worksheet. Therefore,

FY 1997 renewal funds will NOT be provided to field offices which

have not submitted the worksheet. Further, Public Housing

Directors are responsible for ensuring the accuracy of the

worksheet. If the Finance Division determines that the Field

Office has not correctly reported all FY 1997 renewals/extensions

and data is missing on the worksheet, the report will be returned

to the field office for reconciliation. NO FY 1997 RENEWAL FUNDS

will be assigned until the worksheet is reconciled.

F. Multiple Expirations. Some HAs may have multiple funding

increments expiring at the same time, or within the same Federal

fiscal year. In these cases, the decision to extend or renew

should be made on an increment by increment basis. Available

reserves may be sufficient to permit the extension of one or more

of the expiring funding increments, but not all.

G. Multiple FMR Areas: Some expiring funding increments may cover

multiple FMR areas. In such cases, separate worksheets should be

prepared for each FMR area, and the resulting budget authority

requirements added together.

H. Cannot Mix Programs: The rental certificate program and the

rental voucher program must be analyzed independently. Available

reserves in the rental certificate program cannot be used to

extend rental voucher funding increments, and vise versa.

I. No Partial Funding: An expiring funding increment will either be

fully extended for a one year, or it will be fully renewed for a

one year term.

J. HUDCAPS Reservation Pricing: Reservation pricing functionality

has been developed in HUDCAPS. Do not use the reservation

pricing function in HUDCAPS until instructed to do so by

Headquarters.

4\. PROCESSING CONTRACT EXTENSIONS. Expiring increments are extended

using the Contract Dates and Terms Change Table (CDTC) in HUDCAPS.

Prior to entering the new expiration date on the CDTC table, the user

should make a print screen of the ABAT table for the expiring

increment. This allows the user to identify the ABA for each year

before making the changes in HUDCAPS. It is possible that when

extending the expiration date, HUDCAPS will require the user to check

the \"Cover Disbursements and Place All Undistributed BA in the Last

Year\" box. If this box is checked HUDCAPS will redistribute ABA for

the increment once the change is approved. The user must then go back

to the ABAT table and reenter the ABA from the print screen, as it

appeared in HUDCAPS before the expiration date was extended.

After printing the ABA table, the new expiration date can be entered

in the modified values column. HUDCAPS will recalculate the contract

term. Do not change the funding term. Changes made on CDTC must be

approved on the Contract Dates and Terms Approval Table (CDTA). After

the changes are approved, a consolidated Annual Contributions Contract

(ACC) with updated funding exhibits must be sent to the HA for

execution.

The correct contract authority (CA) for an extended funding increment

during the period of the extension is zero. No additional funding is

provided during the course of the extension; the funding increment is

supported by restricted ACC reserves. When a funding increment

reaches the end of its funding term, HUDCAPS will print a CA of zero

on any funding exhibit that is printed. However, if funding exhibits

are printed before the end of the funding term, CA will print with its

original value.

Field offices should normally process both renewals and extensions

before the expiration date. To avoid possible confusion regarding the

CA, the field office should manually change the CA on the funding

exhibit to zero, when printing funding exhibits for extensions before

the end of the funding term.

HUD Notice 96-68 establishes the Department\'s policy for the number of

units a HA can lease. That Notice states that HAs can only lease the

number of units that can be supported by the HA\'s contract authority.

When determining the number of units supportable by the HA\'s contract

authority, the field office should also include the annual amount of

restricted reserves. An extended project should not adversely impact

the number of units a HA can lease.

5\. PROCESSING RENEWAL FUNDING. Funding is reserved for a renewal by

creating and approving a reservation document (RV) in HUDCAPS after an

assignment of funds has been received (form HUD 185). This process

will also assign a unique funding increment number for the renewal.

The expiring funding increment number must be entered in the Related

Funding Increment boxes on the Header tab of the RV document. Ten

Related Funding Increment boxes are provided to accommodate multiple

expirations being combined into one renewal funding increment. Unit

distribution data for the renewal funding increment must be entered on

the Line tab of the RV document.

Once the reservation has been approved, additional data must be

entered on the Funding Increment Status Line Table (FISL). The

Funding Term and Contract Term shall be 12 months; the effective date

of term shall be the first day of the month in which the expiring

increment expires, if the expiration date falls on a date other than

the last day of the month. If the expiration date falls on the last

day of the month, the effective date of the renewal shall be the first

day of the subsequent month.

The status indicator on FISL must be changed from Reserved to Pending

in order for the renewal funding increment to appear on a Funding

Exhibit printed from HUDCAPS.

After increments are reserved in HUDCAPS, the field office should

compare the amount of budget authority on each funding worksheet with

the amount of money reserved in HUDCAPS. Any discrepancies must be

resolved before the increment is contracted.

HAs are not required to submit applications (Form HUD-52515) or

Section 213 comments for renewal funding. HAs are no longer required

to routinely submit budget revisions with each contracted renewal

increment. Instead, budget revisions are only necessary if the HA

requires more funds than were previously approved in the current

budget. Congressional notification is not required for renewals. The

ACC must be prepared and executed in accordance with Notice PIH 94-29,

issued May 26, 1994.

6\. MULTIPLE EXPIRATIONS. If an HA has more than one rental voucher or

rental certificate funding increment being renewed in FY 1997, one

renewal funding increment may be created for the HA combining renewal

rental certificates or renewal rental vouchers. The effective date

for the renewal increment will be the first day of the month following

the expiration of the earliest expiring increment.

7\. ADMINISTRATIVE FEES. For FY 1997, the administrative fee rate for

calculating renewal funding requirements is 7.5 percent. The renewal

funding worksheet uses the FY 1997 two-bedroom FMR for estimating the

funding requirement for the administrative fee.

A Notice detailing the procedures for calculating earned

administrative fee will be issued soon.

8\. ANTI-LOBBYING CERTIFICATION. If the HA receives funds exceeding

\$100,000 in budget authority, the HA is required to submit Form
HUD-50071,

Certification for Contracts, Grants, Loans and Cooperative

Agreements, certifying that it has not and will not make any

prohibited payment from federally appropriated funds. In addition,

the HA is required to submit Standard Form (SF)-LLL, Disclosure of

Lobbying Activities, disclosing any payment made, or agreement to make

a payment, with other than federally appropriated funds for

influencing or attempting to influence executive or legislative branch

personnel in connection with renewal funding. These documents must be

submitted to HUD with the consolidated ACC.

Form HUD 50071 is not required to be submitted with executed ACCs for

contract extensions.

9\. UNDISBURSED FUNDING. Undisbursed funds remaining at the expiration
of

a rental certificate or rental voucher funding increment should only

be recaptured if the HA\'s participation in the program is terminating.

Otherwise, if undisbursed budget authority remains on an expired

funding increment, it will become ACC reserves when the year end

statement is approved in HUDCAPS, and will be available for use by the

HA in future years.

Please note that all recapture actions must be approved by Mary Conway

in the Finance Division before being processed in HUDCAPS.

Continuity is extremely important to the success of the Section 8

programs. Field offices should work closely with HAs to ensure their

continuing participation in the programs. If a HA wishes to terminate

its Section 8 programs, the field office should strive to resolve any

perceived problems. If these efforts fail, another HA must be

identified to assume responsibility for the affected programs. Please

notify Madeline Hastings in the Office of Rental Assistance if any

such situations develop.

10\. CONTACTS: Should your staff need further assistance, they may
contact

the Finance Division of the Office of Rental Assistance at 202-708-2934.

/s/ Michael B. Janis for

Kevin Emanuel Marchman,

Acting Assistant Secretary for

Public and Indian Housing

ATTACHMENT I

INSTRUCTIONS FOR USING THE RENEWAL FUNDING WORKSHEETFOR FY 1997

Following are line by line instructions for using the revised Lotus
1-2-3

worksheet for calculating renewal funding requirements for Section 8

rental certificate and rental voucher funding increments expiring during
FY

1997\. Only lines 1 - 7 require data entry by the user. All other lines

are calculated by the worksheet.

Heading: The worksheet heading includes unnumbered lines for the HA
name,

and the project number for the renewal funding increment. Users are

encouraged to use these lines for identification purposes. These lines
do

not affect the calculations of the worksheet.

Line 1. NUMBER OF UNITS: Enter the total number of units to be funded by

the renewal funding increment. This should be the same number of units

that were reserved for the expiring funding increment.

Line 2. ADMINISTRATIVE FEE RATE: An administrative fee rate of 7.5

percent (.075) should be used. This rate has already been entered as a

default value.

Line 3. Fair Market Rents: Enter the current Fair Market Rents. Fiscal

Year 1997 Fair Market Rents were published in the Federal Register

September 20, 1996. Enter Fair Market Rents for all unit sizes for which

unit distribution data is entered on line 7.

Line 4. Average Tenant Contributions: Enter the average tenant

contributions, by unit size, from the most recent form HUD 52672
submitted

by the HA for the Rental Certificate or Rental Voucher program, as

appropriate. If the State or area office has concerns regarding the

accuracy or age of this data, it may contact the HA to obtain current

information.

Line 5. Unit Distribution for the Entire Program: Enter the unit

distribution for the HA\'s entire rental certificate or rental voucher

program, as reflected on the most recent

HUD-52672.

The worksheet will calculate funding requirements (contract authority
and

budget authority) for a one-year term.