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CHAPTER 9

GRANT ADMINISTRATION

9-1 INTRODUCTION. This chapter describes grantee

responsibilities for ensuring that rental rehabilitation

grants are administered in accordance with the RRP

statutory and regulatory requirements and other applicable

laws. In the case of States and urban counties using

units of general local government to perform program

functions, and all grantees using designated public

agencies or private contract agents, this includes

responsibility for ensuring that the subrecipients and/or

agents carry out their rental rehabilitation program

functions in compliance with all requirements applicable

under 24 CFR Part 511 and this Handbook.

9-2 RESPONSIBILITY FOR GRANT ADMINISTRATION. Grantees are

responsible for ensuring that rental rehabilitation grants

are administered in accordance with the requirements of

24 CFR Part 511 and other applicable laws. The parameters

of State grantee discretion in using state recipients or

other units of general local government to perform program

functions are described in Paragraphs 5-6 and 9-5 of this

Handbook. To the extent that urban counties run programs

similar to decentralized State programs, the parameters

are similar to those described for States in Paragraphs

5-6 and 9-5 of this Handbook; except that urban counties

are not required by the RRP statute or regulations to

share their administrative funds with units of general

local government either performing specific, but limited

program functions, or those acting as \'urban county

recipients.\' All grantees may enter into written

agreements with \"designated public agencies\" or \"contract

agents\" (which terms are defined in Paragraph 1-6 of this

Handbook) to perform program administrative functions as

generally described in this Chapter. The use of

designated public agencies or contract agents does not

relieve the grantee of its responsibility for ensuring

compliance with 24 CFR 511 and other applicable laws.

9-3 ADMINISTRATIVE COSTS

A. Maximum Amount. A grantee may use up to 10 percent

of the grant amount initially obligated to the

grantee for Federal Fiscal Year 1988 and later

fiscal years for administrative costs eligible under

24 CFR 511.71(b) or (c). Eligible grantees may draw

down funds to pay for eligible administrative costs

through the Cash and Management Information (C/MI)

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System in accordance with 24 CFR 511.75 (see

Chapter 11 of this Handbook for information on the

C/MIS).

B. Eligibility. Eligible administrative expenses must

be reasonable and necessary costs, as described in

OMB Circular A-87, incurred by the grantee, or by a

unit of general local government pursuant to a

written cost-sharing agreement with a State grantee

(See 24 CFR 511.51(b)) in carrying out the Rental

Rehabilitation Program. Administrative costs do not

include costs of rehabilitation which are incurred by

and charged to project owners as eligible project

costs under 24 CFR 511.10(f)(2).

C. Written Cost-sharing Agreement Required for Some

States. See Subparagraph 5-6.D of this Handbook.

D. Cost-sharing Considerations for Urban Counties.

While an urban county grantee is not specifically

required by the RRP statute or regulations to share

its administrative funds with units of general local

government within the county which perform RRP

program functions, it may do so at its option. If

so, a written-cost sharing agreement, as contained in

Subparagraph 5-6.D of this Handbook, or similar

provisions, should be included in the written

agreement between the county and the units of general

local government specifying the RRP program functions

being delegated and the cost-sharing arrangement.

(See Subparagraph 5-6.C for written agreements that

would be pertinent to an \"urban county recipient\" and

Paragraph 9-5 for the terms of written agreements

with designated public agencies and contract

agents.)

E. Allocation of Benefit\--Administrative Funds.

Administrative funds expended during a grant year

will be deemed to meet program requirements in the

same proportion as grant amounts for project costs.

For example, if 70 percent of the Fiscal Year 1989

grant used for project costs benefit lower income

families, then 70 percent of the Fiscal Year 1989

grant used for administrative costs will be deemed to

benefit lower income persons. (See 24 CFR

511.71(d).)

9-4 APPLICABILITY OF UNIFORM ADMINISTRATIVE REQUIREMENTS.

Grantees, State recipients and their designated public

agencies and contract agents shall comply with the

requirements and standards of OMB Circular A-87,

\"Principles for Determining Costs Applicable to Grants and

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Contracts with State, Local and Federally recognized

Indian Tribal Governments,\" OMB Circular A-128, \"Audits of

State and Local Governments\" (implemented at 24 CFR Part

44\) and with 24 CFR Part 85 \"Uniform Administrative

Requirements for Grants and Cooperative Agreements to

State and Local Governments\", except for Sections 85.10,

85.11, 85.25, 85.31, and 85.40(b), 85.41, and 85.50. In

lieu of Section 85.25 and 85.50, HUD has adopted 24 CFR

511.76 which deals with program income generated under the

RRP and 24 CFR 511.77 which deals with the close out of

RRP grants.

9-5 DESIGNATED PUBLIC AGENCY AND CONTRACT AGENT ADMINISTRATION

OF RRP ELIGIBLE ACTIVITIES. Grantees or State recipients

may contract with private parties (referred to herein as

\"contract agents\"), or may enter into agreements with

another public agency (referred to herein as the

\"designated public agency\"), to perform various functions

in connection with carrying out their local rental

rehabilitation grant programs to the extent not prohibited

by HUD regulations or policy. Since designated public

agencies and contract agents perform program

administrative services on behalf of the grantee, they

must execute any significant legal documents (if so

permitted by the grantee), in the grantee\'s name. This

specifically includes commitments and project agreements

with owners and lien documents under 24 CFR 511.11(d),

which shall also be recorded under the grantee\'s name.

This section of the Handbook describes the procedures and

requirements for entering into contracts or agreements for

such services. Procedures for designated public

agency/contract agent access to the C/MI System are

discussed in Chapter 11 of this Handbook.

A. Agreements with Designated Public Agencies. Prior to

authorizing a designated public agency to administer

specific functions under its Rental Rehabilitation

Program, the grantee or State recipient shall enter

into a written agreement with the designated public

agency which shall remain in effect during any period

that the designated public agency has control over

RRP funds including program income), or performs

program administrative services for the grantee. At

a minimum, the written agreement shall include

provisions concerning the following items:

1\. Statement of Work. The agreement shall include

a description of the work to be performed,

including the terms and conditions under which

the work is to be performed. If the grantee

wishes to have the designated public agency

perform all aspects of the program (except as

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prohibited in the introduction to this paragraph

above and in Chapter 11), the agreement may

simply so specify and shall require the agency

to carry out the program in accordance with the

requirements of 24 CFR 511 and this Handbook.

These items shall be in sufficient detail to

provide a sound basis for the grantee or State

recipient and HUD to effectively monitor

performance under the agreement. If the

agreement is between a State grantee and a unit

of general local government, it shall also

contain any provision required by Subparagraph

5-6.D of this Handbook pertaining to

administrative cost-sharing.

2\. Records and Reports. The grantee/State

recipient shall specify in the agreement the

particular records to be maintained and the

particular reports which must be submitted in

order to assist the grantee/State recipient in

meetings its recordkeeping and reporting

requirements. (See Paragraph 9-6 below.) Such

records will be made available to Federal

officials as described in Paragraph 9-9 below.

3\. Program Income. If applicable, the agreement

shall include the program income requirements

set forth at in Paragraph 9-10 below and 24 CFR

511.76.

4\. Other Program Requirements. The agreement shall

require compliance with all Federal laws and

regulations described in Chapter 3 of this

Handbook and at 24 CFR 511.16, as applicable, as

well as with applicable uniform administrative

requirements as described in Paragraph 9-4 above

and 24 CFR 511.72.

6\. Suspension and Termination. The agreement shall

specify that the grantee may suspend or

terminate the agreement immediately if the

designated agent materially fails to comply with

any term of the agreement and that the agreement

may be terminated by the grantee or State

recipient for convenience upon due notice.

7\. Conditions for Religious Organizations. Where

applicable, the agreement shall specify the

conditions prescribed by HUD for the use of RRP

funds by religious organizations pursuant to 24

CFR 511.11(c)(5). (See Subparagraph 2-10.D.6 of

this Handbook)

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B. Agreements with Contract Agents. Prior to

authorizing a contract agent to administer specific

functions under its rental rehabilitation program or

granting access to project accounts in the C/MI

System, the grantee or State recipient shall enter

into a contract with the agent in accordance with the

procedures in, and containing the provisions required

by, 24 CFR 85.36. The agreement shall remain in

effect during any period the contract agent has

control over rental rehabilitation grant amounts#

including program income, or performs program

administrative services for the grantee.

Additionally, if the contract agent is authorized to

request disbursements of rental rehabilitation grant

amounts through the C/MI System, the contract will

also specify the monthly financial reports which must

be submitted to the grantee/State recipient to

document payments through the C/MI System. Finally,

where applicable, the contract must specify that all

program funds under the agent\'s control are held in

trust for use exclusively for RRP purposes, and are

not available for the agent\'s own use or for the

satisfaction of claims against the agent. All

records required to be maintained for program

purposes will be made available to Federal officials

as described in Paragraph 9-9 below.

9-6 RECORDS TO BE MAINTAINED. As required by 24 CFR 511.73(a)

each grantee shall maintain records as specified by HUD

that clearly document its performance under each

requirement of 24 CFR 511. States distributing rental

rehabilitation grant amounts to State recipients shall

also ensure that their recipients maintain such records in

order to document each recipient\'s performance. The

records required, shall, at a minimum, include the

following:

1\. Program Records. Records will be maintained

documenting that the grantee\'s or State recipient\'s

program is in compliance with the program-wide

requirements of 24 CFR 511.10, including but not

limited to records supporting the following:

1\. That the lower-income benefit requirements at 24

CFR 511.10(a) are met on a grant year basis;

2\. That the requirements for use of rental

rehabilitation grants for housing for families

at 24 CFR 511.10(b) are met on a grant year

basis;

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3\. That the neighborhoods selected are in

accordance with the criteria at 24 CFR

511.11(c);

4\. That a rehabilitation standard has been adopted

in accordance with 24 CFR 511.10 (e); and

5\. That projects were selected in accordance with

the project selection priorities (24 CFR

511.10(g)).

B. Project Records. Records will be maintained which

provide a full description of each project assisted

(or being assisted) with RRP funds, including the

location of the project, a pre-rehabilitation

inspection report describing the deficiencies, the

total cost of the rehabilitation including both RRP

and non-RRP funds, and evidence that the project

meets the project specific requirements of 24 CFR

511.10 and 11 including but not limited to records

supporting the following:

1\. That RRP funds expended for the project were

necessary to correct substandard conditions,

make essential improvements, or repair systems

in danger of failure (24 CFR 511.11(a));

2\. That the property is real property used for

permanent, primarily residential rental purposes

(24 CFR 511.11(b));

3\. That the property is privately owned after

completion (24 CFR 511.11(c));

4\. That there exists a legally enforceable written

agreement with the project owner receiving RRP

assistance documenting that the owner agrees to

the long-term owner obligations under 24 CFR

511.11(d);

5\. That total project costs meet the minimum

project costs required (24 CFR 522.10(d));

6\. That RRP funds expended do not exceed the

maximum amount allowable under 24 CFR 511.11(e);

and

7\. That all project costs were eligible under 24

CFR 511.10(f); and

8\. That the rehabilitation of the property did not

cause the involuntary displacement of very

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7360.01

low-income families by families who were not very

low-income families. (24 CFR 511.14(A))l))

9\. Copies of inspection reports, deficiency lists,

work write-ups, cost estimates, bids, cost

proposals, and or other information pertaining

to specifying the work to be done and supporting

the cost of the work.

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

Records. Records are required to be maintained to

comply with the C/MIS provisions of 24 CFR 511.75

(see Chapter 11 of this Handbook) including but not

limited to the following:

1\. Tenant Information. Records indicating the

characteristics of tenants, including

race/ethnicity, household size, income, and

gender of household head of:

a\. Tenants occupying units before

rehabilitation;

b\. Tenants moving (initially after

rehabilitation) into projects assisted with

rental rehabilitation grant funds; and

2\. Owner Information. Records indicating the name

and address of the project owner as well as the

type of ownership (individual(s), corporation,

partnership). When the type of ownership is

individual(s), the names of all owners will be

listed.

3\. Project Information. Records indicating the

following:

a\. The number of units, bedroom size and rent

of each unit in assisted projects, both

before and after rehabilitation;

b\. Copies of Pre-Rehabilitation, Payment

Voucher, and Project Completion Reports for

each individual project assisted with RRP

funds including any amendments thereto.

4\. C/MI System Documents. Copies of all C/MI forms

including but not limited to Security Forms,

Direct Deposit Sign-Up Forms, and, for States

designating local recipients, State Designation

of Local Recipients Forms (See Chapter 11 of

this Handbook.)

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D. Affordability. Grantees and State recipients must

keep data as necessary to show the affordability of

units occupied (or to be occupied by low and moderate

income households. This data would include

information as to the current Fair Market Rents

(FMRs) for the various bedroom sizes.

E. Nondiscrimination, Equal Opportunity, Affirmative

Marketing and Minority and Women\'s business

enterprise. Grantees and State recipients must

maintain records demonstrating compliance with the

requirements of 24 511.13(a), nondiscrimination,

equal opportunity and affirmative marketing, and 24

CFR 511.13(c) minority and women\'s business

enterprise. Such records will include but are not

limited to:

1\. Data on the racial, ethnic, gender and income

level characteristics of:

a\. Tenants occupying units before

rehabilitation;

b\. Tenants moving from and (initially after

rehabilitation) into projects assisted

under the RRP;

C. Applicants for tenancy within 90 days

following completion of rehabilitation

assisted under the RRP; and

2\. Data indicating the race, ethnicity and gender

of head of households displaced as a result of

RRP funded activities, and, if available, the

address and census tract of the housing units to

which each displaced household relocated. Such

information shall be used only as a basis for

further investigation as to compliance with

nondiscrimination requirements. No grantee is

required to attain or maintain any particular

statistical measure by race, ethnicity, or

gender.

3\. Documentation as to the race, ethnicity and

gender of owners of RRP projects and of

contractors performing rehabilitation work.

4\. Documentation describing the grantee\'s

affirmative marketing steps and evidence of an

annual assessment of the effectiveness of the

grantee\'s or State recipient\'s affirmative

marketing efforts.

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5\. Documentation describing the grantee\'s

assessment of the results of the efforts to

promote the use of minority and women-owned

businesses prescribed by 24 511.13(c).

F. Public consultation. The grantee or State recipient

must maintain records which demonstrate that the

grantee\'s program was developed in consultation with

the public as required in 24 CFR 511.20(c)(2).

G. Tenant Assistance. The grantee or State recipient

must maintain records which demonstrate compliance

with the requirements regarding tenant assistance,

displacement relocation and acquisition as required

under 24 CFR 511.14. (See Chapter 14 for additional

information about specific recordkeeping requirements

in this area.)

H. Lead Based Paint. The grantee or State recipient

must maintain records which demonstrate compliance

with the lead based paint requirements of 24 CFR

511.15(c)(7). These include but are not limited to:

1\. Documentation that all tenants in housing

constructed prior to 1978 were notified of the

hazards of lead-based paint.

2\. Copies of all inspection and/or test reports

pertaining to lead-based paint.

3\. Documentation as to whether or not any children

under 7 resided in the units and whether or not

such children had an EBL.

9-7 RETENTION OF RECORDS. Under 24 CFR 511.73(b), records

required to be maintained in conjunction with the RRP

shall be retained for a period of three years from the

date of final closeout of the rental rehabilitation

grant.

9-8 PUBLIC DISCLOSURE. Documents relevant to a grantee\'s

Program Description shall be made available for public

review upon request at the grantee\'s office during normal

working hours, pursuant to 24 CFR 511.73(c).

9-9 FEDERAL ACCESS TO RECORDS. Under 24 CFR 511.73(d), the

Secretary, the Inspector General and the Comptroller

General of the United States, or any of their duly

authorized representatives, shall have access to all

books, accounts, reports, files, and other papers or

property of grantees, State recipients, or contractors

pertaining to rental rehabilitation grant amounts for the

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purpose of making surveys, audits, examinations, excerpts,

and transcripts. Grantees or, where applicable, State

recipients shall ensure that their agreements with owners

require the owners to provide for similar access to their

records pertaining to the use of rental rehabilitation

grant amounts. In addition, if grantees use designated

agents or contract agents for any purpose, then the

Secretary, the Inspector General and the Comptroller

General or any of their duly authorized representatives,

shall have access to the agent\'s records pertaining to the

use of rental rehabilitation grant amounts or the services

performed by the agent. (The information collection

requirements contained in this section have been approved

by the Office of Management and Budget under control

number 2506-0080 and 2506-0110.)

9-10 PROGRAM INCOME. (24 CFR 511.76) Grantees and State

recipients are neither encouraged to earn nor discouraged

from earning program income in using rental rehabilitation

grant funds. In the event program income is generated

from the use of RRP funds grantees or State recipients are

not authorized to deduct costs incident to the generation

or management of income from gross income for purposes of

determining program income.

A. Definition of Program Income. Program income is

gross income received by a grantee or State recipient

(or by another party at the direction of the grantee

or State recipient) which is directly generated from

the use of rental rehabilitation grant amounts.

1\. Program income includes, but is not limited to,

the following:

a\. Repayments of principal (whether in

installments or a lump-sum) and any

interest or penalty assessments in

connection with the loan or grant, under

the terms of the commitment or other

project assistance agreement between the

owner and the grantee or State recipient,

including repayments, pursuant to

511.11(d)(3), of the rental rehabilitation

grant assistance by the owner after

completion of rehabilitation; and

b\. Interest earned on program income pending

its disposition.

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2\. Program income excludes:

a\. Governmental fees and taxes, including

income taxes, property taxes, special

assessments, transfer taxes, recording fees

and other normal governmental revenues, do

not constitute program income if they are

imposed by generally applicable law,

regulation, or ordinance and are not

imposed in consideration of the project\'s

receipt of assistance under the RRP.

b\. Program income also does not include grant

amounts required to be returned to HUD as a

result of cancellation of a project before

completion, or interest on those grant

amounts, or any interest earned by the

grantee or State recipient on grant funds

after drawdown and before disbursement for

eligible costs. (For disposition of such

interest, see 24 CFR 85.21(i)).

B. Eligible uses. Program income may be used only as

prescribed below:

1\. Project Costs. Program income may be used for

any activity which is eligible under 24 CFR 511

except that program income may not be used to

pay for administrative costs, as described at 24

CFR 511.71. In particular, the total of rental

rehabilitation grant amounts and Rental

Rehabilitation Program income used for any

project (except under 511.76(c)(2)) may not

exceed the amount per unit allowed under

511.11(e)(2) or 50 percent of the total eligible

project costs (except as noted in

511.11(e)(1)).

2\. Rental Assistance. Program income may also be

used to provide rental assistance to lower

income tenants in properties rehabilitated

through the RRP. This includes the use of

program income to pay for administrative costs

associated with the provision of rental

assistance but not to exceed the amount allowed

for administrative fees in the housing voucher

program authorized under Section 8(o) of the

United States Housing Act of 1937, 42 U.S.C.

1437f. In order to use program income for

rental assistance, the grantee or State

recipient must:

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a\. Use the funds to assist lower income

tenants who initially occupy properties

rehabilitated with rental rehabilitation

grant amounts or RRP income;

b\. Have a written policy which is available to

the public stating that program income will

be so used and specify who is eligible to

receive such assistance; and

C. Have an agreement with the PHA stating that

the PHA will utilize the program income to

provide rental assistance in accordance

with the written policy.

C. Timing the use of program income. Grantees and State

recipients shall not commit available rental

rehabilitation grant amounts to specific local

projects if sufficient program income is on hand and

available to fund the project, or a substantial

portion of the project. In order to avoid possible

over commitment of funds, grantees and State

recipients shall not anticipate the receipt of

program income and enter into binding commitments

with owners cumulatively exceeding the total amount

of program income on hand plus uncommitted rental

rehabilitation grant amounts. (See Chapter 11 of

this Handbook for information on how to set-up

projects with Program Income in the C/MIS.)

D. Accounting for and Reporting Program Income. Program

income shall be accounted for and reported in the

grantee\'s Annual Performance Report under 24 CFR

511.81(b) and in the Cash and Management Information

(C/MI) System under 24 CFR 511.75, in the manner

prescribed by HUD. (See Chapter 11 for further

information on reporting program income in the C/Mi

System and Chapter 8, Paragraph 8-2 for further

information on the APR.)

E. Authority of State grantees. States administering

rental rehabilitation grants have discretion to

choose whether program income is to be earned at all

or is to be paid to or retained by the State or paid

to or retained by the State recipient. The State\'s

determination should be contained in a written

agreement between the State and its State

recipients. However, once earned, program income

must be used and accounted for in accordance with

this Subparagraph by the State or by the State

recipient, as applicable.

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1\. Exception to State Discretion. The exception to

the State\'s discretion is that when the State

itself is closing out a State recipient and that

State recipient is no longer participating in

the State\'s program, the State must have the

recipient return the program income on hand and

that to be generated in the future to the State.

Alternately, if the recipient is permitted to

retain the program income, the State must assure

that the State recipient expends such program

income only for RRP purposes as described in

Subparagraph B above. If the State chooses to

allow the State recipient to retain the program

income, it must include the conditions under

which this can occur in its written agreement

with the recipient. The written agreement must

also require the recipient to provide an

accounting of any such funds earned and the

purposes for which it was expended no less than

annually in time for the State to include this

information in its Annual Performance Report.

F. Authority of Urban Counties. Because the

configuration of an urban county may change from time

to time, particularly at the time of requalification

of an urban county in the Community Development Block

Grant program, special provisions must be made for

urban county program income. The urban county may

determine whether program income generated by a

project located in a unit of general local government

which, for whatever reason, no longer participates in

the urban county shall be retained by the urban

county for its RRP or by the unit of general local

government. If retained by the unit of general local

government, the urban county must specify in its

written agreement that such program income on hand at

the time of closeout or subsequently earned must be

used for RRP purposes as described in Subparagraph B

above. The agreement must also require the unit of

general local government to provide an accounting of

all program income earned and the purposes for which

it was expended at least annually in time for the

urban county to include this information in its

Annual Performance Report.

G. Program Closeout and Disposition of Program Income.

Program income must be accounted for by the grantee

when a rental rehabilitation program is completely

closed out for all years. Program \"Closeout\" will

occur when the following conditions have been met:

all grant funds from all program years (excluding

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program income) have been expended; funds from the

grant year being closed out are no longer available

for obligation; and the annual performance report

covering the last program year has been submitted to

HUD. Program income shall be treated in the

following manner before and after closeout:

1\. Program income in the amount of \$5,000 or more

shall be used for activities eligible under 24

CFR 511; and

2\. Program income of less than \$5,000 on hand at

program closeout or any program income received

after program closeout is not subject to the

provisions of 24 CFR 511, but must be used for

activities that would be eligible under the CDBG

Program (24 CFR Part 570) or 24 CFR 511.76(c).

9-11 AUDIT. The financial management systems used by grantees,

and where applicable, State recipients shall provide for

audits in accordance with 24 CFR Part 44.

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