7485.3 G

CHAPTER 10. HA RESPONSIBILITY: CONDUCT OF APPROVED ACTIVITIES

10-1.OBJECTIVE. The objective of this Chapter is to set forth

requirements for the conduct of approved activities, including fund

requisitions, cash management, procurement, and fiscal closeout.

The Chapter also explains the revised requirements for previously

funded CIAP programs in progress.

10-2.FORCE ACCOUNT.\[\'968.120 or \'950.612\]

A. Public Housing. The PHA may undertake the modernization

activities using force account labor, only where

specifically approved by HUD in the CIAP Budget or CGP

Annual Statement, except no prior HUD approval is required

where the PHA is designated as both an Overall High

Performer and Mod High Performer under the Public Housing

Management Assessment Program (PHMAP). The FO shall approve

the use of force account labor only where it is cost-effective

and appropriate to the scope and type of physical

improvements and the PHA has the capacity to serve as its

own main contractor and to maintain an adequate level of

routine maintenance during force account activity.

B. Indian Housing. The IHA may undertake the modernization

activities using force account labor or contract labor,

including contracting with a Resident Management Corporation

(RMC), without prior HUD approval.

C. Both Public and Indian Housing. If the entirety of a

modernization activity (including the planning and

architectural design of the rehabilitation) is administered

by the RMC, the HA shall not retain for any administrative

or other reason, any portion of the modernization funds

provided, unless the HA and the RMC provide otherwise by

contract.

10-3.INITIATION OF ACTIVITIES. After the FO has approved the Annual

Statement and has entered into the ACC Amendment with the HA, the

HA shall begin to undertake the modernization activities set

forth in its approved Annual Statement. \[\'968.125 or \'950.614\]

10-4.REVISED REQUIREMENTS FOR CIAP PROGRAMS IN PROGRESS. Where the HA

is still implementing previously approved CIAP programs, the

Department will permit the CGP agency, after approval of its

Comprehensive Plan, to administer both CIAP and CGP funds on a

similar basis in certain

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7485.3 G

key functional areas. These same rules shall apply to Major

Reconstruction of Obsolete Projects (MROP) approved with

Modernization Project numbers in FFYs 1986-88 and subsequent FFY

amendments to those MROPs; these same rules do not apply to MROPs

approved in FFY 1989 and thereafter because they were approved as

development not modernization. The Department\'s goal is to

provide maximum flexibility to the HA, while protecting the

Federal interest, and to avoid HUD and HA operation of dual

programs with different sets of requirements. Where there are

significant program deficiencies, the FO may issue either a

notice of deficiency or a corrective action order in accordance

with paragraph 12-9. Generally through the first operational

year of the HA\'s participation in the CGP and until there is

evidence of the HA!s performance under the CGP, the FO shall

include consideration of the HA\'s performance under the CIAP in

determining whether a notice of deficiency or a corrective action

order is appropriate. Such notice or order may establish

additional requirements for the CGP, as well as the CIAP.

A. Thresholds for Contracting Actions. Under the CIAP, HUD

establishes dollar thresholds for prior HUD approval of the

following three contracting activities: (1)

architectural/engineering and other professional services

contracts before execution or issuance; (2) construction

solicitations before issuance; and (3) contract

modifications before issuance. There are no similar

thresholds under the CGP. However, where HUD issues a

notice of deficiency or a corrective action order in this

functional area, HUD will establish the same thresholds for

both the CIAP and the CGP. The thresholds will be

established as high as possible to provide maximum

flexibility to the HA, while protecting the Federal

interest. Where no notice of deficiency or corrective

action order is issued in this functional area, the HA will

have no thresholds for either CIAP or CGP, and may undertake

the above activities, regardless of dollar amount, without

prior HUD approval.

B. Construction Requirements. The construction requirements

are the same for both the CIAP and the CGP. However, where

HUD issues a notice of deficiency or a corrective action

order in this functional area, HUD will establish the same

submission requirements (e.g., periodic construction

progress reports or construction completion documents) for

both the CIAP and the CGP.

C. Fund Requisitions. Refer to paragraph 10-5. Where HUD issues

a notice of deficiency or a corrective action order in this

functional area, HUD will establish the same review

requirements for both the CIAP and the CGP.

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7485.3 G

D. Budget Revisions.

1\. General Requirements. The budget revision requirements

are the same for both the CIAP and the CGP. Refer to

paragraph 6-10, Amendments to Annual Statement.

However, where HUD issues a notice of deficiency or a

corrective action order in this functional area, HUD

will establish the same submission requirements for

both the CIAP and the CGP.

2\. Closing Out CIAP Budgets. To close out older CIAP

Budgets, completed work items in CGP Annual Statements

may be substituted for uncontracted work items in CIAP

Budgets. Where undertaking this type of budget

revision, the HA shall notify the FO and request a

disbursement adjustment in LOCCS. The HA shall

identify each grant involved in the adjustment and, by

grant, the disbursed amounts by Budget Line Item (BLI)

to be adjusted. The FO shall request that the Field

Accounting Division (FAD) make the disbursement

adjustment. Note: CIAP funds are not transferred from

the original CIAP grant, but remain in and are

accounted for in the original CIAP grant.

E. Semi-Annual Progress Reports. Under the CIAP, HUD requires

the HA to submit semi-annual progress reports until all

funds for a particular CIAP grant are expended. The CIAP

progress report is due 30 calendar days after the six-month

periods ending 9/30 and 3/31. This CIAP requirement remains

unchanged because of the Department\'s need to ensure that

all approved CIAP funds are obligated and expended as

quickly as possible by CGP agencies.

F. Time Extensions. The time extension requirements are the

same for both the CIAP and the CGP. However, where HUD

issues a notice of deficiency or a corrective action order

in this functional area, the HA will not be allowed to

revise target dates under either the CIAP or the CGP without

prior HUD approval.

G. Actual Modernization Cost Certificate (AMCC). Under the

CIAP, HUD requires the HA to submit an AMCC when a

particular CIAP grant has been terminated or has been

completed with all funds expended. This requirement remains

unchanged because of the Department\'s need to complete

fiscal closeout of approved programs. Refer to paragraph

10-10.

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7485.3 G

10-5.FUND REQUISITIONS. To request CGP funds against the approved Annual

Statement, the HA shall follow the requirements set forth in the

latest HUD Notice on LOCCS/VRS for Modernization Program Areas.

\[\'968.130 or \'950.616\]

10-6.CASH MANAGEMENT.

A. Accounting Procedures. Refer to Appendix 2-2.

B. Treatment of Interest Income Earned.

1\. For Cash Drawdowns Other than for Replacement Reserve.

U.S. Treasury requirements provide that the HA shall

disburse cash within three working days of receipt. As

with all CIAP funds, the CGP funds that are drawn down

for purposes other than funding the CGP replacement

reserve shall be reported in the calculation of

Estimated Investment Income/Target Investment Income

(EII/TII) for the calculation of operating subsidy in

the Performance Funding System (PFS).

2\. For Funds in the Replacement Reserve.

a\. The HA is permitted to retain the interest earned

on the replacement reserve. Such interest income

is excluded from the EII/TII calculation of

operating subsidy in PFS. Even though the

replacement reserve funds are excluded from the

EII/TII calculation, the HA shall ensure that the

funds in the replacement reserve earn interest at

or above the operating budget TII rate (average

91-day Treasury bill rate) which coincides with

the HA\'s CGP reporting period (July 1 through June

30). The interest rate earned on the replacement

reserve will be reviewed and reported by the

Independent Auditor in the annual audit report.

b\. For the day-to day cash management of the

replacement reserve, the HA shall follow the

requirements set forth in Notice PIH 96-33,

Required HA Cash Management and Investment

Policies and Procedures, dated June 4, 1996.

These requirements include competitive selection

of a bank, collateralization of deposits, and HUD-

approved investment securities.

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7485.3 G

C. Replacement reserve funds, including accrued interest, shall

be used only for eligible modernization costs.

10-7.TIME EXTENSIONS. The HA shall not obligate or expend funds after

the obligation or expenditure deadline date approved by HUD in the

original implementation schedule (Part III of Annual Statement)

without a time extension as set forth in subparagraphs A or B.

\[\'968325(i)(2) or \'950.656(i)(2)\]

A. No Prior HUD Approval. The HA may extend the target dates

for fund obligation and expenditure in the HUD-approved

original implementation schedule whenever any delay outside

of the HA\'s control occurs and the extension occurs no later

than 30 calendar days after the existing deadline dates.

Such extension is subject to HUD review under paragraph 12-5

as to the HA\'s continuing capacity. Examples of delay

outside of the HA\'s control are:

1\. Need to use leftover funds from a completed

modernization program for additional work. Note: LBP

Risk Assessment funds that are leftover shall not be

used for other purposes and shall be recaptured after

audit;

2\. Unforeseen delays in contracting or contract

administration;

3\. Litigation; or

4\. Delay by HUD or other institutions. Note: Delay by

the HA\'s staff, Board of Commissioners or, where the HA

is part of the local government, the local government

itself, or a change in the Executive Director is

considered to be within the HA\'s control and,

therefore, requires prior HUD approval.

B. Prior HUD Approval. The HA shall not extend the target

dates for fund obligation and expenditures whenever any delay

within the HA\'s control occurs or the extension occurs 30

calendar days after the existing deadline dates. In such case,

the HA may request FO approval of a time extension to avoid

recapture of funds. The request shall include an explanation of

the delay, steps taken to prevent future delay, and the requested

extension. FO approval of a time extension will allow the PHA

more time to obligate and expend funds, but will adversely affect

the PHA\'s PHMAP score on the Modernization Indicator, Components

#1 and #2.

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7485.3 G

10-8.CONTRACTING REQUIREMENTS. The HA shall comply with the contracting

requirements set forth in 24 CFR 85.36, except as noted in

subparagraphs B and D, and set forth in the Procurement Handbook

for PHAs and IHAs 7460.8, as revised. \[\'968.135 or \'950.618\]

A. Wage Requirements. The HA shall comply with the prevailing

wage rate requirements set forth in Appendix 1-8.

B. Assurance of Completion. For each construction contract

over \$100,000 or any lesser amount required by State or

local/tribal law or the HA\'s own procurement policy, the

contractor shall furnish a bid guarantee from each bidder

equivalent to 5% of the bid price and one of the following:

1\. A performance and payment bond for 100% of the contract

price; or

2\. Separate performance and payments bonds, each for 50%

or more of the contract price; or

3\. A 20% cash escrow; or

4\. A 25% irrevocable letter of credit.

C. Prior HUD Approval Under \'85.36(g). The HA is exempt from

the prior HUD approval requirements of this subparagraph if

the HA requests a HUD determination, and HUD determines,

that the HA\'s procurement systems comply with the standards

of \'85.36. If the HA fails to request such a determination

or if HUD determines that the HA\'s procurement procedures or

operation fails to comply with the standards of \'85.36, the

HA shall obtain prior HUD approval when:

1\. The procurement is expected to exceed \$100,000 and is

to be awarded without competition or only one bid or

offer is received in response to a solicitation; or

2\. The procurement is expected to exceed \$100,000 and

specifies a \"brand name\" product; or

3\. The proposed award over \$100,000 is to be awarded to

other than the apparent low bidder under a sealed bid

procurement; or

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7485.3 G

4\. A proposed contract modification changes the scope of a

contract or increases the contract amount by more than

\$100,000 on a noncumulative basis.

D. Prior HUD Approval Notwithstanding \'85.36(g).

Notwithstanding \'85.36(g), where HUD issues a notice of

deficiency or a corrective action order in this functional

area, the HA may be required to submit the following

documents to HUD for prior approval:

1\. Proposed agreement with the architect/engineer (A/E) or

other professional services contractors before

execution or issuance;

2\. Complete construction and management improvement

solicitations before inviting bids or proposals; and

3\. Proposed modifications to construction and management

contracts before issuance, except in an emergency

endangering life or property.

E. Construction Requirements. Where poor performance is

indicated, the HA may be required to submit to the FO

periodic construction progress reports and, for prior HUD

approval, construction completion documents above a HUD-specified
amount. The FO shall notify the HA of additional

construction requirements by a notice of deficiency or a

corrective action order.

F. Lists of Parties Excluded. The HA shall retain

documentation on file that the contractor is not included on

the Lists of Parties Excluded from Federal Procurement or

Nonprocurement Programs.

G. Contracting with Resident-Owned Businesses. The PHA may use

an alternative procurement when contracting with businesses

owned in substantial part by public housing residents, as

set forth in 24 CFR Part 963, and with Section 3 business

concerns, as set forth in 24 CFR Part 135. The IHA should

refer to 24 CFR 950.175 for Indian preference requirements.

10-9.ON-SITE INSPECTIONS. It is the responsibility of the HA, not HUD,

to provide, by contract or otherwise, adequate and competent

supervisory and inspection personnel during modernization,

whether work is performed by contract or force account labor and

with or without the services of an A/E to ensure work quality and

progress. \[\'968.140 or \'950.6201

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7485.3 G

10-10.HA SUBMISSION OF ACTUAL MODERNIZATION COST CERTIFICATE (AMCC)

AND FINAL REPORT. Upon completion or termination of the

modernization activities funded by each annual grant and payment

of all authorized costs, the HA shall submit Form HUD-53001,

AMCC, to the FO for review before inclusion in the HA\'s annual

audit. Complete instructions for preparing Form HUD-53001 are

set forth in Appendix 10-1. In addition, the HA shall submit

Form HUD-52837, Annual Statement/Performance and Evaluation

Report, marked \"final.\" \[\'968.145(a) or \'950.622(a)\]

10-11.HUD REVIEW OF AMCC. Upon receipt of the required documents, the

FO shall review the documents as follows:

A. The amounts on the \"final\" Report and the AMCC must agree as

to funds approved, obligated, and expended. The FO is not

required to respread the BLIs in LOCCS to reflect actual

expenditures by BLI.

B. The amount of funds approved and disbursed on the AMCC must

agree with Departmental records in LOCCS.

C. If the \"final\" Report and the AMCC indicate that excess

funds have been provided to the HA, the FO shall direct the

HA to remit immediately the excess funds, without waiting

for the audit, and then subsequently to submit a revised

\"final\" Report or AMCC, showing that total funds disbursed,

obligated and expended are equal amounts. If the audit of

the AMCC shows that the HA over-remitted funds, HUD will

return the amount of the overremittance to the HA.

D. When the amounts disbursed, obligated and expended are equal

in LOCCS, the FO shall enter the Pre-Audit End Date in

LOCCS, which stops all reminder letters.

10-12.AUDIT VERIFICATION OF AMCC. When the submitted documents are

correct, the FO shall notify the HA in writing that the AMCC is

approved for audit and shall be included in the HA\'s next

regularly fiscal audit conducted by the Independent Auditor. The

audit shall follow the guidelines prescribed in 24 CFR Part 44,

Non-Federal Government Audit Requirements (Single Audit Act of

1984 (31 U.S.C. 7501-7507)). HUD reserves the right to conduct

audits. If the audited AMCC discloses unauthorized or ineligible

expenditures, the HA shall take such corrective actions as the FO

may direct. \[\'968.145(b) or \'950.622(b)\]

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7485.3 G

10-13.HUD APPROVAL OF AMCC. Upon receipt of a copy of the audit

report from the HA, the FO shall review the audit report to

determine ff the audited costs agree with the costs shown on

the AMCC. If the audited AMCC indicates that there are

still excess funds, the HA shall remit the excess funds, as

directed by the FO. If the audited AMCC discloses

unauthorized expenditures, the HA shall take such corrective

actions as the FO may direct. After all audited costs have

been reconciled, the OPH Director/ONAP Administrator shall

approve the AMCC. After signature, the FO shall distribute

the original and copies of the approved AMCC as follows:

A. To the HA, one copy for records purposes.

B. To HUD Counsel\'s files, one copy for attachment to the CGP

Amendment. Where necessary, the AMCC shall serve to

automatically amend the CGP Amendment to reduce the amount

of the annual grant to the actual modernization cost.

C. To the FO program files, one copy for records purposes.

D. To the FAD, the original for entry of the Post-Audit End

Date in LOCCS.

1\. 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 in

LOCCS, which interfaces with PAS to record that the

grant has been closed out.

2\. 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 and

expenditure information downward by the amount of the

receivable. In addition, the FAD shall record the

receivable in the Departmental Accounts Receivables

Tracking System (DARTS). Upon receipt of the

remittance by the Department, the FAD shall record the

remittance so that the amount disbursed by LOCCS is

equal to the amount obligated and expended by the HA

per the audit. The FAD then shall enter the Post-Audit

End Date. The HA shall remit as follows:

a\. Where the remittance is \$2,000 or less, the HA

make out a check payable to the Department of HUD

and notate on

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7485.3 G

the check the Modernization program area (\"COMP\",

\"CIAP\" or \"LBP\") and the grant number. The HA

shall send the check to NationsBank, Excess

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

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

request is financial institution to wire the funds

to HUD in accordance with instructions set forth

in the Financial Management Handbook 7485.1, as

revised. The wire transfer shall identify the

Modernization program area and the grant number.

3\. Where HUD owes funds to the HA (i.e., the amount

disbursed by LOCCS 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

and expenditure information upward by the amount which

HUD owes and generate a voucher for that amount. After

FO review and approval, LOCCS will generate a letter to

the HA identifying the grant for which the additional

payment is being made.

4\. After the FAD enters the Post-Audit End Date, all

undisbursed balances will be automatically recaptured

through LOCCS. The FO is no longer required to prepare

PAD forms to recapture excess authority.

10-14.CGP PHASE-OUT AND USE OF REPLACEMENT RESERVE. If the HA\'s unit

count falls below the CGP levels as described in paragraph 3-7C,

the HA shall use its replacement reserve only for eligible

modernization activities, as approved by the FO.

10-10