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PART III

FUNDS MANAGEMENT AND CASH AND MANAGEMENT INFORMATION SYSTEM

CHAPTER 10. FUNDS MANAGEMENT

10-1 ALLOCATION FORMULA. (See 24 CFR 511.30)

A. General. HUD will allocate amounts available for

rental rehabilitation grants for any fiscal year to

cities having populations of 50,000 or more, urban

counties, consortia (See Chapter 7 of this Handbook

for more information about consortia), and States on

the basis of the formula contained in 24 CFR 511.30

of the program regulations and described in this

section of this handbook. Allocations are subject to

the minimum allocation described in 24 CFR 511.31.

Allocations are published annually in the Federal

Register pursuant to 24 CFR 511.34, and grantees

thereafter receive their grants by submitting Program

Descriptions for HUD approval under 24 CFR 511,

Subpart C.

B. Source of data to be used. The data to be used for

calculating the specific allocation for each entity

referred to in paragraph A above and in 24 CFR 511.30

are taken from data supplied by the Bureau of Census,

based upon the latest decennial census available to

HUD prior to the start of the fiscal year, adjusted

for boundary changes and annexations.

C. Formula factors. The formula for determining

allocations for the Rental Rehabilitation Program is

contained at 24 CFR 511.30(c) and uses three specific

factors:

1\. Rental units where the household head is at or

below the poverty level, as defined by the

Office of Management and Budget;

2\. Rental units built before 1940 where the

household head is at or below the poverty level;

and

3\. Rental units with at least one of four problems

(overcrowding, incomplete kitchen facilities,

incomplete plumbing, or high rent costs).

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a\. \"Overcrowding\" for purposes of the formula

is a condition that exists if there is more

than one person per room occupying the

unit.

b\. \"Incomplete kitchen facilities\" are those

lacking a sink with running water, a range,

or a refrigerator.

C. \"Incomplete plumbing\" exists in a unit that

lacks hot and cold piped water, a flush

toilet, or a bathtub or shower inside the

unit for the exclusive use of the occupants

of the unit.

d\. \"High rent costs\" occur when more than

30 percent of household income is used for

rent.

D. Calculating the formula.

1\. In accordance with the regulations at 24 CFR

511.30(d), the formula is an equation with the

data for each entity referred to in paragraph

A above expressed as numerator for each factor

and the total national data for each factor

expressed as denominator. This ratio is then

multiplied by the amount available for

allocation. Data for areas eligible for

assistance under Title V of the United States

Housing Act of 1949 (Title V-eligible area data)

are excluded from the data for a State or a

consortium. Title V-eligible area data for

States and consortia are also excluded from the

total national data.

2\. The allocation for each entity is calculated as

follows:

a\. The ratio of the number of rental units

where the household head is at or below the

poverty level within the jurisdiction of

the entity to the number of such rental

units using the total national data,

multiplied by .25; plus

b\. The ratio of the number of rental units

built before 1940 where the household head

is at or below the poverty level within the

jurisdiction of the entity to the number of

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such rental units using the total national

data, multiplied by .25; plus

C. The ratio of the number of rental units

with at least one of the four problems

identified in paragraph C.3 above within

the jurisdiction of the entity to the

number of such rental units using the total

national data, multiplied by .50; and

d\. The sum of the ratios in paragraphs D.2 a,

b and c above multiplied by the amount

available for allocation to determine the

specific allocation for each entity.

10-2 MINIMUM ALLOCATION AMOUNT. (See 24 CFR 511.31) Except as

provided in paragraph B below, the minimum allocation for

any city, urban county, or consortium determined under the

formula contained in 24 CFR 511.30 for any fiscal year is

\$50,000. Cities, urban counties, and consortia with

formula allocations of \$50,000 or more will be deemed to

meet this threshold. A formula allocation that is below

\$50,000 and is not accepted by a city, urban county, or

consortium under paragraph B below will be added to the

allocation for the State Program in which the city, urban

county, or consortium is located. A city, urban county,

or a jurisdiction in a consortium with a formula

allocation below \$50,000 that elects not to receive its

allocation may participate in the State Program, as

provided in Subpart F of 24 CFR 511 even if-it did not

elect to accept its formula allocation. (see also Chapter

5 of this Handbook).

A. Localities in Urban Counties. Localities located in

urban counties follow the urban county in terms of

eligibility. For any city or urban county that would

receive less than the minimum allocation amount

(established at \$50,000 by program regulations at 24

CFR 511.31), the amount would be added to the State

allocation and the city or urban county could

participate in the State Program. However, any city

or urban county that is eligible for \$50,000 or more

by formula may not participate in a State or

HUD-administered State Program. Any locality that

is part of an urban county cooperation agreement is

deemed to be an area that is eligible for a formula

allocation if the urban county would receive at least

\$50,000 and, thus, such a locality is not eligible to

participate in a State Program (or HUD-administered

Program) whether or not the urban county actually

participates in the Rental Rehabilitation Program.

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B. Optional Grantees. A city, urban county, or

consortium that: (1) accepted a formula allocation

in the preceding fiscal year, and (2) has a formula

allocation in the current fiscal year that is less

than \$50,000, may elect to accept its formula

allocation by submitting written notification to HUD

of its decision to do so within 30 days of the date

of publication in the Federal Register of its

proposed allocation for the fiscal year. If such a

city, urban county, or consortium does not notify HUD

within this period, HUD will regard the city, urban

county, or consortium as having elected not to accept

its formula allocation and will notify the

appropriate State of its additional allocation. This

election procedure does not affect the deadline for

submitting Program Descriptions under 24 CFR

511.20(a). If a grantee does not elect to accept its

formula amount in a fiscal year where it falls below

the \$50,000 minimum threshold, it would not be given

the option of so electing in an immediately

succeeding fiscal year(s). In such an instance, the

formula amount if less than \$50,000 would

automatically be added to the State\'s portion and the

affected city, urban county or consortium would have

to apply to the State for funding.

10-3 HOW RRP FUNDS ARE MADE AVAILABLE TO GRANTEES.

A. Appropriation. Funds are appropriated by Congress

and apportioned by the Office of Management and

Budget (OMB).

B. Allocation. Funds are allocated by the formula

described at 24 CFR 511.30 and in Paragraph 10-1 of

this chapter. Also funds may be reallocated, as an

additional grant, under 24 CFR 511.33(b) and

Paragraph 10-5 of this Handbook.

C. Notice. Pursuant to 24 CFR 511.34, a notice is

published in the Federal Register announcing RRP

allocations for the fiscal year and deadlines for

submission of Program Descriptions for

formula-eligible grantees.

D. Fund assignment. After the Secretary of HUD approves

a Fund Assignment Plan for the RRP for the

fiscal year, the funds are assigned to the Regional

Offices using the Regional Fund and Contract

Authority Assignment form HUD-185. A list of all

localities and States by Region and Field Office that

are eligible for formula allocations is attached to

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the memorandum assigning the funds. Grant numbers

are indicated for each locality that has previously

participated as a formula grantee and for each State

that has previously administered the program.

E. Subassignment. After Regional Offices receive the

forms HUD-185, they then sub-assign the RRP funds to

Field Offices using the Regional Fund and Contract

Authority Sub-Assignment form HUD 185.1. Regional

Offices also attach the appropriate portion of the

list of localities and States that are eligible for

formula allocations (the list that was attached to

the form HUD-185).

If there are localities which participated as formula

grantees in the preceding fiscal year and, due to a

decrease in program funding, their formula amounts

are less than \$50,000 in the current fiscal year,

such localities (optional grantees) have the option

of participating as formula grantees or in the

appropriate State Rental Rehabilitation Program.

If an optional grantee declines its less-than-\$50,000

formula amount, the amount is to be added to the

State\'s allocation. In States where there are

optional grantees, HUD Regional or Field Office staff

should inform the States as early as possible of

their full allocation.

F. Reservation of Funds for the RRP Grantees. Once

Program Descriptions are received for the

localities/States, CPD staff in each Field Office

should send a copy of the form HUD-185, with the list

of localities and States attached, to the Regional

Accounting Division (RAD). If any of the formula

eligible grantees decline to participate in the

program, or if they apply for less than their

allocation, their names should be removed from the

list or the lesser amount should be indicated,

respectively, before providing the list to RAD. In

addition, if optional grantees (those whose formula

amounts are less than \$50,000) choose not to

participate as formula grantees, their names should

not only be removed from the list before sending the

list to RAD for fund reservation, but also the amount

of any funds declined by optional grantees should be

added to the allocations for the State and the new

amount should be indicated for the State. Based on

this list RAD will establish fund reservations in the

Program Accounting System (PAS) for each grantee

whose allocation is based on the formula.

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Reservations for grants to be approved by

Field Offices under the HUD-Administered State

Program will be recorded in PAS by RADs based on form

HUD-718s, Fund Reservation and Contract Authority,

submitted by program staff on a grantee-by-grantee

basis.

G. Obligation of Funds to RRP Grantees. A Funding

Approval form HUD-40015 (Exhibit 10-1) and Grant

Agreement form HUD-40015.1 (Exhibit 10-2) signed by

the Field Office Manager for each initial fiscal year

grant and any subsequent reallocation are to be sent

to the Regional Accounting Division (RAD) so that

Rental Rehabilitation grant funds can be recorded as

obligations by RAD in the PAS. Obligation of funds

for the Rental Rehabilitation Program occurs when the

Field Office Manager signs a Funding Approval and

Grant Agreement for a grantee and the grantee is

notified (after Congressional notifications have been

made). Thus, the date of obligation is the date of

notification to the grantee and should be the same

day the Field Office Manager signs the Funding

Approval and Grant Agreement. Field Offices should

immediately provide RAD with a copy of the Funding

Approval and Grant Agreement signed by HUD. All

documents pertaining to obligations of rehabilitation

grant funds should be forwarded to RAD as soon as

possible to be recorded as obligations. Obligations

will be recorded by RAD based on the Funding Approval

and Grant Agreement signed by the Field Office

Manager. After the Grant Agreement is signed by the

grantee, Field Offices are to provide RAD with a copy

of the fully executed Grant Agreement. Upon receipt

of the fully executed Grant Agreement, RAD records

the contract stage in PAS which transfers the grant

amount to the Letter of Credit Control System

(LOCCS). When the RAD records an initial Grant

Agreement for the fiscal year in PAS, 10 percent of

the grant will automatically be set aside in LOCCS

for administrative expenses (See Paragraph 11-3 of

this Handbook for additional information on

administrative costs). The following day the funds

should be available for the grantee to set up

projects provided the grantee has submitted a Direct

Deposit Sign-Up form (SF 1199-A) (Exhibit 10.), and

has received Security IDs. (Please refer to Chapter

11 of this Handbook for additional information on

these forms.)

H. Assignment of Grant Numbers and Submission of

Security Forms and Direct Deposit Sign-Up Forms. If

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a grantee participated in the Rental Rehabilitation

Program in a previous Fiscal Year and is still

participating as the same type of grantee (formula

grantee\--MC or UC, State grantee\--SG, or

HUD-Administered\--HG or HD) this year, its grant number

must stay the same except for the Fiscal Year part of

the number. Also if a grant number has been used

previously, but that grantee is not participating in

the program this Fiscal Year, the grant number is not

to be used for another grantee.

For a State-Administered (State) Program, the State

must complete a form HUD-40022 State Designation of

Local Recipients (Exhibit 10-4), if the State

allocates funds to local recipients and must send a

copy of this form to the Rental Rehabilitation

Program, P.O. Box 23997, L\'Enfant Plaza Station,

Washington, D.C. 20026. States should be reminded to

keep grant numbers the same (except for the

Fiscal Year part of the grant number) for local

recipients that participated previously as local

recipients in a State Program. In addition, if a

grant number has been used previously, but that local

recipient is not participating in the program in any

subsequent funding year, the grant number is not to

be used for another local recipient.

Unless grantees are new grantees or unless they

change from one category of grantee to another

category (such as from a local recipient in a State

Program to a formula grantee), or unless they change

bank information, they do not have to submit new

Direct Deposit Sign-Up Forms. However, new formula

grantees must submit Security Forms and Direct

Deposit Sign-Up forms even if the information being

submitted is the same as the grantees submitted

before when they were State recipients or

HUD-Administered grantees. Grantees having more than

one grant number (e.g., SG and MC) will,have separate

security IDs for each grant number (See Chapter 11 of

this Handbook for more detail.)

10-4 DEOBLIGATION OF GRANT AMOUNTS.

A. General. Under 24 CFR 511.33(c), HUD may deobligate

rental rehabilitation grant amounts that are not

committed to specific local projects in conformity

with the schedule submitted by the grantee as part of

its Program Description or as part of a reallocation

request. In connection with any such deobligation,

HUD may also deobligate any unutilized grant amounts

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set aside for administrative expenses in the

grantee\'s program account under the C/MI System.

Deobligation may also occur as a result of a remedial

action under 24 CFR 511.82. Before deobligating

grant amounts, HUD will consult with the affected

grantee and take into account factors such as the

timing of the grantee\'s program year; a reasonable

start-up time for implementing a new program, if

applicable; the timing of State distributions to

State recipients, if applicable; the timing of

expected project approvals for projects in the

grantee\'s pipeline; climatic or other considerations

affecting rehabilitation work schedules; and other

relevant considerations. Whatever the reason for

deobligation, the procedures in Paragraphs D and E of

this section apply.

B. Time Frames. In the early years of the RRP, the date

on which the clock started on the time frames

associated with deobligations under 24 CFR 511.33(c)

was the date the grantee signed the grant agreement.

Effective June 14, 1990, this was changed to the date

HUD signs the grant agreement. The following time

frames, therefore, control when HUD will deobligate

funds:

1\. For grants obligated after June 14, 1990, HUD

will deobligate any rental rehabilitation grant

amounts that are not committed to specific local

projects within 2 years of the date of

obligation of the grant under 24 CFR 511.21(d)

(3 years in the case of a State that distributes

rental rehabilitation grant amounts to State

recipients) or expended for eligible costs

within 4 years of such date of obligation

(5 years in the case of a State that distributes

rental rehabilitation grant amounts to State

recipients). The date of obligation is the date

that the Field Office Manager having

jurisdiction signs the Funding Approval form HUD

40015 and Grant Agreement form HUD 40015.1, and

the grantee is notified of the grant award (See

Paragraph 10-3.G. of this Handbook.)

2\. For grants obligated before June 14, 1990, HUD

will deobligate any grant amounts that are not

committed to specific local projects within

2 years of the grantee\'s execution of the Grant

Agreement form HUD 40015.1 for the fiscal year

in question (3 years in the case of a State

that distributes rental rehabilitation grant

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amounts to State recipients) or expended for

eligible costs within 4 years of such date of

execution of the Grant Agreement by the grantee

(5 years in the case of a State that distributes

rental rehabilitation grant amounts to State

recipients).

3\. Extensions. On a case-by-case basis, HUD

Field Offices may extend for up to an additional

year any of the time periods referred to in this

section. None of the time periods referred to

in this section are extended by any suspension

of project set-ups or other remedial action

imposed by HUD under this part. A grantee that

wishes to request an extension must do so in

writing and must include in the request any

relevant information bearing on the request such

as projects which are in the grantee\'s pipeline

for which commitments are imminent or

information on the construction schedule for

specific projects including expected draw dates.

Field Office approvals of extensions will be

granted only upon clear evidence of progress by

the grantee in reaching its commitment and

disbursement goals.

C. Coordination. Field Office staff should coordinate

deobligation actions with the Rental Rehabilitation

Coordinator in the appropriate Region. Field and/or

Regional staff must notify Headquarters

Rehabilitation Management Division of any

deobligation actions that are being taken, and, if

advisable, request that the grant from which funds

will be taken be suspended from further project

set-ups. After consulting with the Central Office on

the proposed deobligation, the responsible HUD

Field Office should call the grantee to explain the

impending action and review the grant information in

the Cash and Management Information (C/MI) System.

D. Processing the Paperwork. To deobligate funds from a

grantee, Field Office staff must complete a form

HUD-40015 (Exhibit 10-1). Grantee acceptance of a

Grant Agreement (Exhibit 10-2) is not required for

deobligation actions. A copy of the form HUD-40015

must be sent to the Regional Accounting Division

(RAD), and RAD records the deobligation upon receipt

of this document. The HUD Field Office should be

sure that funds are available for deobligation before

sending the deobligation document to RAD.

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E. Notification to grantee. At the same time the

Field Office sends the HUD-40015 to RAD, the

Field Office will prepare a package, consisting of

the signed Funding Approval Form (HUD-40015) and a

letter to the grantee indicating that funds being

deobligated are no longer available to the grantee

for commitment.

10-5 REALLOCATION OF RENTAL REHABILITATION FUNDS. (See 24 CFR

511.33)

A. General. Rental rehabilitation grant amounts may

become available for reallocation by HUD as a result

of factors such as failure of a city, urban county,

or consortium to receive a formula allocation for

which it is eligible; deobligation of rental

rehabilitation grant amounts based on the progress of

a grantee in carrying out its Rental Rehabilitation

Program, as provided in 24 CFR 511.33(c) and Section

10-4; and actions based upon reviews and audits as

provided in Subparts H and I of the program

regulations at 24 CFR 511, principally Section

511.82.

B. Reallocation of Rental Rehabilitation Grant Amounts.

HUD will reallocate rental rehabilitation funds that

are available in any fiscal year to such grantee or

grantees as HUD determines to be appropriate to

promote the expeditious use of grant amounts,

consistent with the sound development and

administration of grantees\' Rental Rehabilitation

Programs. Grant amounts reallocated may come from

any fiscal year\'s appropriation for which amounts are

available for reallocation. Reallocations will

generally be made among grantees within the various

HUD Regional Office jurisdictions before

reallocations among Regional Offices are considered.

The following procedures must be followed when funds

are being reallocated:

1\. Prior year funds. Any prior year funds that are

deobligated (recaptured) from a grantee must be

returned to Headquarters before they can be

reallocated to other grantees. After the funds

have been deobligated by RAD and returned to

Headquarters, Headquarters then may assign such

funds that are still available for obligation

back to the Region for subassignment to the

appropriate Field Office(s). The same process

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as discussed in Paragraph 10-3 above is used to

assign funds back to the Regional Office.

2\. Current year funds. If current year funds are

deobligated, they may be reallocated to other

grantees without being returned to

Headquarters.

3\. Coordination. Field Office staff should

coordinate reallocation actions with the Rental

Rehabilitation Coordinator in the appropriate

Region. Field and/or Regional staff must notify

Headquarters Rehabilitation Management Division

of any reallocation actions that are being

taken.

C. Other Relevant Considerations for Reallocating Funds.

In deciding whether to reallocate rental

rehabilitation funds, which are available for

reallocation, in addition to the general criteria in

Subparagraph 10-5.B above, Field Office staff should

also consider how well the grantee is meeting the

following six program objectives:

1\. The extent to which more than 80 percent of

units rehabilitated are affordable. (Affordable

rents are rents at or below Fair Market Rents

(FMRs) for the Section 8 Existing Housing

Program or HUD-approved community-wide exception

rents.)

2\. The extent to which rental rehabilitation grants

are used to rehabilitate units containing two or

more bedrooms and three or more bedrooms.

3\. The extent to which units rehabilitated with

rental rehabilitation grants were occupied by

very low income families before rehabilitation

and those families were not displaced from the

project.

4\. The extent to which the gross amount of public

subsidy funds have been minimized per unit.

This objective favors those projects which have

the lowest public subsidy costs regardless of

the total dollar value of the rehabilitation. A

\$2,000 project with \$1,000 in public subsidy

would, for example, be weighed more heavily than

a \$5,000 project with \$2,000 in public subsidy.

This objective tends to favor projects with low

to moderate rehabilitation costs. Projects

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where other Federal funds, such as CDBG, are

used for the match would not rank well under

this objective.

5\. The extent to which the amount of public subsidy

funds as a percentage of total rehabilitation

costs have been minimized. This objective

favors those projects where the grantee or State

recipient has leveraged the greatest amount of

private funds. Using the same example as above,

the \$5,000 project with \$2,000 in public subsidy

(40 percent) would be weighed more heavily than

the \$2,000 project with \$1,000 in public subsidy

(50 percent). This objective, therefore, tends

to favor programs which use gap financing or

programs where rehabilitation costs are

substantial.

6\. The extent to which rental rehabilitation grant

funds have been committed to specific local

projects and projects have been completed over

the preceding 3 years.

Thus, before reallocating funds, Field Office staff

should consider how well the grantee is meeting the

objectives listed above as well as any other

knowledge or information they may have concerning the

grantee\'s performance. Performance in meeting these

objectives should be weighed not only in deciding

whether to reallocate funds but also in deciding how

much to reallocate.

For example, a low level of performance against the

five qualitative objectives (items 1-5 above) would

argue against reallocating funds to a grantee with a

high commitment rate (Item 6 above). Similarly, if

two grantees have equal commitment rates, the one

with the higher performance against the qualitative

factors should receive a higher reallocation bonus.

D. Information Resources. Field and Regional Office

staff can obtain information on commitments and

completions and on the other program objectives for

each grantee by reviewing the following reports

generated by the Cash and Management Information

(C/MI) System reports.

1\. Status of Project Funds Report (A67RSCA). The

A67RSCA is one of the C/MI reports that is

available from the computer facility during the

first 4 days of each month in each Field and

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Regional Office. This report enables staff to

determine how well grantees are meeting the

quantitative objectives for commitments and

completions (Item 6, Paragraph F above).

2\. Property and Tenant Characteristics Report

(A67RQCA). Regional and Field Office staff can

generally check a grantee\'s progress in meeting

the five qualitative program objectives (Items

1-5, Paragraph F above) by referring to the

Property and Tenant Characteristics Report

(A67RQCA), another C/MI report that is available

to the Field and Regional Offices on a monthly

basis. The RQCA report provides information for

all projects that have been completed by the

grantee. The report provides summary

information on a cumulative basis for all grant

years for each grantee. The information on the

right side of the report is from Project

Completion Reports, form HUD-40014-B (Exhibit

10-7) submitted by the grantee and the

information on the left side of the report is

from Pre-Rehabilitation Reports, form HUD-40014

(Exhibit 10-6) for those projects for which

Project Completion Reports have been received.

3\. Property and Tenant Characteristics Quarterly

Report (A67RQBA). In addition to the A67RSCA

and the A67RQCA reports, the C/MI System

generates a quarterly report that provides

specific information by funding year for the

following program objectives:

o Affordability

o Unit Size (by number of Bedrooms)

o Lower Income benefit

Since program requirements and objectives are

for each grant year\'s funds, this report should

be most useful in determining how well grantees

are meeting program requirements by grant year.

E. Procedures for reallocating funds to grantees. With

respect to reallocating funds to grantees which are

determined to warrant additional grant amounts under

the standards of 24 CFR 511.33(b) and Section 10-5 of

this Handbook, the procedures are as follows. The

Field Office will request from each such grantee a

letter indicating that the grantee wants and can use

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7360.01

the additional funding. The grantee\'s letter must

request the specific amount the grantee has been

offered and is eligible to receive. With the letter,

the grantee shall include a new schedule for use of

the additional funds that complies with 24 CFR

511.20(b)(8) and, if applicable, will indicate any

amendments to its previously approved Program

Description for the fiscal year to which the new

funds are attributable. If the grantee\'s amendments

(if any) to its Program Description and its schedule

are approvable, the Field Office will follow the

procedure established for obligating funds in the

Rental Rehabilitation Program as described in Section

10-3.G of this Handbook.

F. Reallocation of Rental Rehabilitation Grant Amounts

at the End of Fiscal Year. Rental rehabilitation

grant amounts that are not obligated at the end of

any fiscal year may be added to the amount available

for formula allocation under 24 CFR 511, Subpart D,

for the succeeding fiscal year, or may be made

available for reallocation in the succeeding

fiscal year under 24 CFR 511.33(b), as HUD determines

appropriate.

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