Index Number: 1.250 CIM-0126

Subject: Funding of Legal Expenses Under Grant Agreement

August 11, 2003

MEMORANDUM FOR: Renee' D. Greenman, ITAG/OTAG Audit Resolution Task
Force, H

FROM: John J. Daly, Associate General Counsel for Insured Housing, CI

SUBJECT: Request for Legal Opinion

HUD Inspector General (IG) Audit, Case Number 2002-SF-1006, issued

September 30, 2002, of Legal Aid Society of Hawaii (LASH)

(Grant FFOT98006HI, 1998 NOFA -- Fed. Reg. -- Vol. 63, No. 83 --

Thursday, April 30, 1998)

This memorandum responds to your June 26, 2003 request for legal advice
related to the captioned Inspector General Audit of Legal Aid Society of
Hawaii (LASH). The audit stated that, in order to clear Recommendation
1A, a legal determination should be obtained about whether the use of
OTAG funding for tenant legal representation is appropriate under the
OTAG program.

We have reviewed Section 514 of MAHRA, the 1998 Notice of Funding
Availability (NOFA), the Outreach and Training Grant (OTAG) Agreement
with LASH, 24 C.F.R Parts 84

and 85, and the application from LASH. The NOFA defined the purpose of
the OTAG program as one to provide funds to conduct outreach and
training development for HUD tenants in properties eligible to
participate in the Mark-to-Market (M2M) program so the tenants can
participate in the M2M program and affect decisions about the future of
their housing. The NOFA provided the following list of what was included
in the definition of "eligible activities."

1.  Identifying residents and resident groups living in eligible
    properties;

2.  Providing outreach and training to tenants to explain the M2M
    program, the possible financial changes, the possible project
    repairs, access and community resources and effective methods for
    communicating the organization's position;

3.  Organizing residents of eligible low-income housing so the tenants
    can effectively participate in the M2M process;

4.  Performing outreach, training, and counseling, which may include
    teaching sound housing management, maintenance, and financial
    management to residents and resident groups living in eligible M2M
    properties;

5.  Delivering training programs on M2M and/or resident homeownership
    options;

6.  Establishing M2M clearinghouses as a resource to resident
    organizations, community groups, and potential purchasers;

7.  Creating informational materials about the M2M process for
    distribution;

8.  Providing support for HUD approved activities proposed by the
    grantee that would further the M2M program and others considered
    eligible at HUD's discretion; and

9.  Educating parties outside HUD about the M2M process.

> 63 Fed. Reg. 23943 (1998).

None of activities listed above includes the provision of legal
representation for tenant groups or individual tenants. In addition, no
evidence has been provided to us to indicate that the grantee proposed,
or HUD approved, the provision of legal representation under the Grant
(which might have rendered such activities eligible under item 8.
above).

HUD regulations provide that a budget plan is the financial expression
of the project or program as approved during the award process and shall
be related to performance for program evaluation purposes. See 24 CFR
84.25(a). Grant recipients are required to report deviations from budget
and program plans and request prior HUD approvals for revisions. See 24
CFR 84.25(b). Since the original budget plan did not provide for legal
representation and there is no record of a request for revisions or HUD
approval of deviations, we do not think there is a basis under these
regulations for the billing of such costs and their payment by HUD.

The Grant Agreement does not list eligible activities separately, but by
its terms, the agreement incorporates the grant application (submitted
by the grantee prior to award). We have reviewed the application, which
describes LASH's proposed activities as "identifying residents,
providing outreach and training, organizing residents, performing
counseling, and delivering area-wide training programs" but does not
discuss providing legal representation to tenants. Therefore, we do not
believe there is a legal basis for such activities to be eligible for
payment under the Grant.

Please contact Deborah Brain at ext. 5240 if you have any questions
about this memorandum.

cc:

CA Weidenfeller 10110

CI Daly 9226

CIM Collotta/Potts 9228

CIM File/Chron 9228

Decimal file 222.0

# ACORN NO. 379093 

# (J:GIM/GreenmanOTLegRep.doc)

REVISED:DDBrain:ddb 08/06/2003 202-708-4107

REVISED:JJDaly:jjd 07/15/2003 202-708-1274

J:GIM/GreenmanOTLegRep-Revised.doc

REVISED:JJDaly:jjd 08/11/2003 202-708-1274

J:GIM/GreenmanOTLegRep-Revised.doc

**Concurrence:**

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Brain Collotta Potts