U.S. Department of Housing and Urban Development

Office of Public and Indian Housing

Special Attention: Notice PIH 98-11 (HA)

Directors, Offices of Public Housing; Issued: February 3, 1998

Director, Section 8 Financial Management Expires: December 31, 1998

Center; Section 8 Public Housing Agencies;

Secretary\'s Representatives; State and Cross References:

Area Coordinators

Subject: Fiscal Year 1998 Financial Management Requirements for Section
8 Moderate Rehabilitation Program (Mod Rehab) Housing Assistance
Payments (HAP) Contract

Expirations.

1\. PURPOSE - This Notice provides instructions to PIH

State/Area Offices on financial procedures for

implementing Notice PIH 97-58, Fiscal Year (FY) 1998

Renewal of Expiring Section 8 Moderate Rehabilitation

(Mod Rehab) Housing Assistance Payments Contracts (HAP),

dated November 21, 1997. This Notice updates Notice 97-15,

Financial Management Program Requirements for the

Moderate Rehabilitation Program, dated April 10, 1997.

2\. BACKGROUND - As stated in Notice 97-58, the FY 1998

Appropriations Act extends Section 211(b) of the FY 1997

Appropriations Act to cover HAP contracts expiring during

FY 1998. Financial processing of Mod Rehab renewal

increments as well as replacement certificate increments

will be substantially similar to the procedures followed

for FY 1997, with additional instructions contained in

this Notice.

Prior to passage of the FY 1998 Appropriations Act, State

and Area Offices were instructed to reserve and contract

funds for tenant-based certificates to replace all HAP

contracts expiring in the first quarter of FY 1998, from

October 1, 1997 to December 31, 1997. Because Section

211(b) of the Appropriations Act was extended for FY

1998, eligible property owners may in certain

circumstances retroactively request renewal of their

units for which HAP contracts expired from October 1,

1997 to December 31, 1997.

3\. APPLICABILITY - The provisions in this Notice for replacement

certificates applies to all Mod Rehab HAP contracts

expiring from January 1, 1998, to December 31, 1998.

The provisions in this Notice for renewal and extension

of eligible Mod Rehab HAP contracts applies to the

first quarter FY 1998 expirations where owners have

requested retroactive renewals, as well as eligible HAP

contracts expiring from January 1, 1998, to September 30,

1998\.

This Notice does not apply to Offices of Native American

Programs, and expiring Section 8 contracts administered

by Indian Housing Authorities (IHAs). IHA administered

HAP contracts which expire after September 30, 1997 will

not be renewed, pursuant to the Native American Housing

Assistance and Self Determination Act of 1996. This

Notice is also not applicable to the Section 8 Moderate

Rehabilitation Single Room Occupancy Program.

4\. GENERAL PROCEDURES - All Mod Rehab HAP contracts expiring

during the period covered by this Notice will

either be renewed or replaced with tenant-based

certificates or vouchers, if approved by HUD

Headquarters. Funds will be assigned under Fund Code

0319; program code PPXMR for renewals and PPXMC for

replacement certificates (PPXMV for replacement

vouchers).

Replacement funds for all HAP contracts expiring between

January 1, 1998, and March 31, 1998, will be provided

based on HUDCAPS information on the number of units

expiring and the actual average cost from the program\'s

last closed year end settlement adjusted for inflation of

2.5% per year, to the present. For renewal of HAP

contracts which expired between October 1, 1997 and

December 31, 1997, and from January 1, 1998 to March 31,

1998, funds will be provided as identified on completed

and approved reports submitted by HUD field offices.

Thereafter, all funds will be assigned to field offices

on the quarterly basis of their completed and approved

reports on renewal and replacement funding needs, as

specified in this Notice. Funds are to be reserved in

accordance with the approved reports, unless a change is

concurred upon by Headquarters.

Expirations from within the same funding increment may be

combined for renewal. The HAP Contract Number of the

renewal of the Mod Rehab HAP contract expiration will be

the same as the HAP Contract Number of the original

funding allocation.

The renewal funds will be reserved as a subsequent line

to the original Mod Rehab funding increment, with the

expiration date of line 001 no earlier than the

expiration date for the new renewal line. UDIS, HAPU and

HAPC tables must be created to support the units of each

expiring HAP Contract being renewed.

Expirations within the same calendar quarter may be

combined for replacement. The effective date of the

replacement increment will be determined by the earliest

expiration date of HAPs replaced in the replacement

increment.

As HAP contracts expire, field offices are reminded to DO

NOTHING to the number of units on the expiring HAPC

record. The funding exhibit for the Mod Rehab program

excludes inactive HAPs which have units on the HAPU

table. If the HAP has expired, as determined by the HAP

effective and expiration dates on HAPC, then it is

automatically excluded from the funding exhibit or on an

expiration report.

5\. SPECIFIC HUDCAPS PROCEDURES - RENEWALS:

a\. Identify all HAP contracts to be renewed from within

a specific Mod Rehab funding increment (see

Attachment IV, HA Report to Field Office, a

suggested, not mandatory, HAP information format for

the HA). The HUDCAPS report Expiring Contracts -

Funding Increment Based #A75QPA04 identifies all HAP

contracts expiring within the specified period.

Determine the total dollar amount (BA) of renewal

funding to be provided (see Section 7 below,

Calculation of Renewal and Replacement Needs, and

Attachment I, Renewal Funding Worksheet).

Requested renewals must be made within the time

limits established in Notice 97-58: 1) For HAP

contracts which expire between October 1, 1997 and

January 31, 1998, owners must request a renewal

within 15 days of the date of the housing

authority\'s (HA) notification. 2) For HAP contracts

which expire between February 1 and September 30,

1998, HAs must require owners to request a renewal

at least 75 days prior to the termination of the HAP

contract.

b\. Create a line 00X (first unused line number) on the

original funding increment, following the HUDCAPS

procedures titled \"Providing a Cost Amendment for

Funding-Increment Based Programs\" from page MP-79

from the HUDCAPS Procedures and Users Guides of

August 1996. On the Header tab, the funding action

is entered as a Renewal; the document action is

modification; the program type is MR. A related FI

number is not required. The BA is the total of the

amounts determined on the worksheet for all units to

be renewed in that increment. On the Line tab,

enter the correct new line number; the source year

is 98; the fund is 0319 and the program is PPXMR.

The bedroom distribution must match that of the HAPs

being renewed, per HAPU. The Description should

identify that the funds renew units from HAP.

Approve the reservation document.

c\. Enter the dates and terms on the FISL table and

change the status to pending. The funding term will

be 12 months, beginning the first of the month in

which the first renewal occurs, unless that is the

last date of the month, in which case the term

begins the first date of the next month. The

contract term must cover all HAPs renewed on the

line. It begins the same date as the funding term

and ends on the last date of the month in which the

last renewal term ends.

In order for the new funding exhibit to include the

full term of the renewal line, ensure that the

expiration date for line 001 is no earlier than the

expiration date for the new line. If the expiration

date for line 001 is earlier, do a change date and

term action for line 001 to extend the expiration

date to agree with the expiration date of the new

renewal.

d\. Add the renewal line to HAPC. Use the same HAP

number and stage as are on the original HAP

Contract. The effective date is the date after the

original term expired; the expiration date is 12

months later. Use a blank HAPC table to enter the

data; then invoke Actions Add. The total units will

be entered by HUDCAPS when HAPU is completed by the

user. Unless the renewal line is added to HAPC and

HAPU these units will not be accounted for at the

end of the renewed HAP term.

e\. Add the HAPU line for the renewal units. Use the

same FI number, HAP Number and Stage as on the

original Contract. The line is the renewal line

number (00X). The bedroom size must match the

expired HAPs; the program type is MR. Use a blank

HAPU table to enter the data; then invoke Actions

Add.

f\. Print the ACC Funding Exhibit, attach to the ACC,

and secure signatures of the HA and HUD.

g\. Contract the renewal line in HUDCAPS.

6\. SPECIFIC HUDCAPS PROCEDURES - REPLACEMENTS:

a\. Using the HUDCAPS expiration report Funding

Increment Based #A75QPA04, and suggested Attachment

IV, identify all expiring HAPs to be replaced with

certificates within a calendar quarter, and for

which funding has been assigned.

b\. Create a certificate funding increment number for a

renewal increment, following HUDCAPS procedures.

c\. Create the Reservation Document, following HUDCAPS

procedures for renewals. If the Mod Rehab

increment(s) which include the expiring HAPs has

previously been cited as a Related Funding Increment

on a Reservation Document, go to the FISH table for

the expiring Mod Rehab increment(s) and delete the

\"Replacement FI Number\" entry by highlighting the

\"Replacement Increment\" field, hitting the delete

key and doing an Actions/Change function. That will

enable you to re-use the Mod Rehab increment as a

Related Funding Increment. Approve the reservation

document.

d\. Enter dates and terms on the FISL table and change

status to pending. The term will be 12 months,

beginning the first of the month in which the first

covered expiration occurs, unless that is the last

day of a month, in which case the term begins the

next day.

e\. Print the funding exhibit, attach to an ACC and

secure signatures of the HA and HUD.

f\. Contract the replacement increment in HUDCAPS.

7\. CALCULATION OF RENEWAL AND REPLACEMENT NEEDS -

Calculating the Fiscal Year 1998 funds needed to support

the one year renewals to the Mod Rehab owner, and funds

needed to replace expiring Mod Rehab contracts with

certificates where a renewal to the owner is not being

made will be substantially similar to the process used in

Fiscal Year 1997, with the exceptions noted below.

Funding worksheets in Excel, with accompanying

instructions, are attached to this Notice.

a\. RENEWALS: The only change in the funding worksheet

is that current 1998 FMRs will be used. Worksheet

will increase the FMRs by 20%. The average tenant

payment from the latest approved mod rehab budget

for the funding increment that includes the unit(s)

covered by the expiring HAP will be entered as well

as the number of units, by bedroom distribution.

b\. REPLACEMENTS: The nature of staggered Mod Rehab

expirations makes the use of Reservation Pricing in

HUDCAPS problematic, and therefore requires the use

of the attached worksheet. Funding needs for

replacement certificates will be calculated,

however, on the same basis as any other certificate.

The worksheet will use 92% of the 1998 FMRs, with

the ability to go up to 100% as justified by actual

costs.

8\. REPORTING REQUIREMENTS - Field Offices will be required

to provide quarterly reports to Headquarters indicating

the category and amount of funds required. A sample

spreadsheet report and instructions (Attachment III) are

included for reporting renewal and replacement

requirements to Headquarters. A separate report is

required for each category.

A suggested reporting format and instructions are again

also included for use by HAs (Attachment IV). The use of

this format by HAs for submission to the Field Office

will help ensure that program requirements have been met

and that the correct amount of assistance is requested

prior to issuing renewal Mod Rehab funding or replacement

tenant based assistance.

The first report covering expirations during the period

of January 1, 1998 through March 31, 1998, which will be

funded in advance, is due to Headquarters no later than

February 6, 1998. Thereafter, the reporting requirements

are as follows:

Contract Expiration Period Report Due to HQ

April 1 - June 30, 1998 April 30, 1998

July 1 - September 30 1998 July 31, 1998

October 1 - December 31, 1998 August 31, 1998

9\. NOTIFICATION TO HOUSING AUTHORITIES - When replacement

tenant based assistance or renewal funds for the Mod

Rehab program are received, the Field Office should

reserve the funds in HUDCAPS and prepare a Notification

Letter(s) to the HA. Separate letters should be prepared

for replacement tenant based assistance and for renewal

funds.

The letter(s) will inform the HA that expiring HAP

contracts have either been replaced with tenant based

assistance or renewed for the Mod Rehab Program. Also

included in the letter(s) should be the expiring project

number, new increment number (tenant based assistance

only), the number of tenant based assistance units funded

and/or renewed Mod Rehab units, funding term, and budget

authority.

Notice PIH 98- \* on renewal of certificates and

vouchers during Fiscal Year 98 provides that beginning on

October 1, 1997, HAs are no longer required to routinely

submit budget revisions with each contracted renewal

funding increment. Budget revisions are only necessary

if the HA requires more funds than were previously

approved in the current budget. However, since each

renewal increment replacing an expiring Mod Rehab

contract(s) does increase the size of the Certificate, or

Voucher, program, a budget revision to include the

prorated replacement project funding must be submitted by

the HA. \* Notice will be issued.

Sample letters are included in Attachment V.

The appropriate entries should be made in HUDCAPS to

generate a funding exhibit for the tenant based

assistance program and/or the Mod Rehab program, as

applicable. Please refer to the HUDCAPS Users guide for

specific data entry requirements. The ACC and new

funding exhibit should be submitted to the HA for

signature.

If the expired Mod Rehab HAP contract has been replaced

with tenant based assistance, it is not necessary to

submit a revised ACC for the Mod Rehab program to the HA.

HUDCAPS will automatically delete the number of units

under ACC on subsequent funding exhibits. The HA should

be reminded that subsequent Mod Rehab budgets should

reflect the actual number of units remaining under HAP

contract which have not yet expired.

To maintain Mod Rehab program history, the HAPC table

should not be altered to reduce the number of expiring

units replaced with tenant based assistance. When

applicable, the HAPC table should be updated to include

the related funding increment.

10\. FURTHER INFORMATION

Any questions regarding this notice should be addressed

to the Section 8 Finance Division of the Office of Public

and Assisted Housing Delivery, at (202) 708-2934.

\_\_\_\_/s/\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Kevin Emanuel Marchman,

Assistant Secretary for

Public and Indian Housing

Attachment

ATTACHMENTS - Attaches to 98-11att.pdf

I. Renewal Funding Worksheet

II\. Replacement Funding Worksheet

III\. Field Office Reports To Headquarters

a\. Instructions

b\. Renewals

c\. Replacements

IV\. Housing Authority Report to HUD Field Office

a\. Instructions

b\. Report

V. Suggested Notification Letter Format

a\. Renewal

b\. Replacement

INSTRUCTIONS FOR FY 1998 MOD REHAB HOUSING AUTHORITY

DETERMINATION RENEWAL/REPLACEMENT NEEDS

NOTE: This is a suggested HAP information gathering format for

the Housing Authority. It is not mandatory to submit, but will

assist in determining Mod Rehab renewal and replacement needs.

Field Office Name: Full name of the HUD Field Office

Housing Authority (HA) Name and Number: Name of the HA and 11

digit project number

Rental Property with 5 or more units: Enter Yes or No

Date of Last Physical Inspection: Enter the date that the HA

conducted its latest HQS review of the MR property. If no

physical inspection of the MR property was ever conducted,

enter NA.

HQS Violations Yes or No: Enter Yes or No

Date Property Owner Contacted: Enter the date that HA sent

written notice, explaining PL 104-204 and its extension in FFY

1998, to the owner of a multifamily housing property covered

by an expiring HAP contract.

Date Property Owner Responded: Date the HA received a written

response from the owner of a multifamily housing property

covered by an expiring HAP contract. If the owner fails to

respond in accordance with the HA\'s written instructions, the

HA must issue rental certificates to the affected Section 8

eligible family and the Mod Rehab contract terminates.

Units to be Renewed: Enter the number of units to be renewed

by extending the MR HAP contract in the column entitled,

\'Number of MR units to be renewed in Place\'.

Units to be Replaced: Enter the number of units to be replaced

with rental certificates in the column entitled, \'Number of

Replacement Certs to be issued to Previous MR Tenants\'.

Total Expiring Units: Enter the sum of the columns \'Number to

be Renewed\' and \'Number to be Replaced\' into the column

entitled \'Total Expiring Units\'.

Total: Sum up all the units in the column entitled \'Total

Expiring Units\' and enter that sum on the line provided at the

bottom of that column. The total number of units expiring, as

reported by the HA, should agree with the total on HUDCAPS

report Expiring Contracts - Funding Increment Based, \#

A75QPA04.

Date: Enter the date that the HA Certifying Officer signed the

form.

Signature of HA Certifying Officer: Signature of

representative having authorization to commit the HA

contractually.