Audit Report

OIG-16-053

DOMESTIC ASSISTANCE

Recovery Act: Audit of Virginia Housing Development 

Authority’s Payment Under 1602 Program

August 19, 2016

Office of

Inspector General

Department of the Treasury
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Contents

Audit of Virginia Housing Development Authority’s Payment

Under 1602 Program (OIG-16-053) 

Page i 

Audit Report................................................................................................. 1 

Results in Brief............................................................................................ 1 

Background ................................................................................................ 2 

 Eligibility under the 1602 Program ............................................................ 3 

 Virginia Housing Development Authority ................................................... 4 

Audit Results .............................................................................................. 5 

 Awarding............................................................................................... 5 

 Subawarding .......................................................................................... 6 

 Compliance and Asset Management.......................................................... 6 

 Quarterly and Annual Reporting ................................................................ 7 

 

Appendices

Appendix 1: Objective, Scope, and Methodology........................................ 9 

Appendix 2: Grantee Terms and Conditions ............................................... 11 

Appendix 3: Virginia Housing Development Authority Response ................... 16 

Appendix 4: Treasury Management Response ............................................ 17 

Appendix 5: Major Contributors to This Report........................................... 18 

Appendix 6: Report Distribution................................................................ 19 

Acronyms

IRC Internal Revenue Code

OFAS Office of the Fiscal Assistant Secretary

OIG Office of Inspector General

QAP Qualified Allocation Plan

VHDA Virginia Housing Development Authority

 
OIG Audit

Report

The Department of the Treasury

Office of Inspector General

Audit of Virginia Housing Development Authority’s Payment Page 1

Under 1602 Program (OIG-16-053)

 August 19, 2016 

 David A. Lebryk

 Fiscal Assistant Secretary

As part of our ongoing oversight of the Department of the 

Treasury’s (Treasury) Payments to States for Low-Income Housing 

Projects in Lieu of Low-Income Housing Credits for 2009 (1602 

Program),

1 authorized by Section 1602 of the American Recovery 

and Reinvestment Act of 2009 (Recovery Act),2 we conducted

audits of awards made to selected State housing credit agencies. 

The objective of these audits was to assess whether the agencies 

awarded funds under Treasury’s 1602 Program complied with the 

program’s overall requirements and the “Grantee Terms and 

Conditions” (together referred to as 1602 Program requirements). 

In this report, we provided our assessment of Virginia Housing 

Development Authority’s (VHDA) compliance with the 1602 

Program requirements. Appendix 1 provides a more detailed 

description of our audit objective, scope, and methodology.

Results in Brief

We found that VHDA generally complied with Treasury’s 1602 

Program requirements, which capture the eligibility and compliance 

requirements set forth in both Section 42 of the Internal Revenue 

Code (IRC)3 and Section 1602 of the Recovery Act. Specifically, 

VHDA met the applicable requirements for receiving its 

$112,488,313 1602 Program award as well as requirements for 

subawarding those funds to 30 eligible low-income housing 

projects. 

 

1 Treasury’s Office of the Fiscal Assistant Secretary (OFAS) administers this program. 

2

 Public Law 111-5, 123 Stat. 362-364 (Feb. 17, 2009). Under section 1602 of the Recovery Act, 

Treasury shall make a grant to the housing credit agency of each State in an amount equal to such 

State’s low-income housing grant election amount. 3 26 U.S.C.§42 “Low-Income Housing Credit”
Audit of Virginia Housing Development Authority’s Payment Page 2

Under 1602 Program (OIG-16-053)

We also found that VHDA did establish a process for monitoring 

the long-term viability of projects and their compliance with 1602 

Program requirements. As such, we make no recommendation in 

this report. Nonetheless, we do want to emphasize the need for 

continued diligence on the part of Treasury and VHDA to ensure 

compliance with the 1602 Program requirements over the 

remaining 15-year compliance period. 

As part of our reporting process over the 1602 Program awardees, 

we provided VHDA an opportunity to comment on a draft of this 

report. In a written response, VHDA management acknowledged

our conclusions on VHDA’s administration of its 1602 Program 

funds. VHDA’s response is provided in appendix 3.

After incorporating VHDA’s response into a draft of this report, we 

provided the draft to Treasury management for comment. Treasury 

management concurred with our audit results; its response is 

provided in appendix 4.

Background

The low-income housing tax credit program codified in Section 42 

of the IRC was authorized by the Tax Reform Act of 1986.4 The 

tax credit is an incentive for individuals and corporations to invest 

in the construction or rehabilitation of low-income housing. For 

projects meeting the program requirements, the tax credit provides 

the investor a dollar-for-dollar reduction in personal or corporate 

federal income tax liability for a 10-year period. 

The Recovery Act intended to provide relief to the conditions 

caused by the economic crisis, at the time. Part of that relief, 

provided in Section 1602 of the Recovery Act, consisted of grants 

awarded to States5 for low-income housing projects in lieu of lowincome housing credit allocations. The purpose of Section 1602 

 4 Public Law 99-514, Stat. 2189 (Oct. 22, 1986)

5 According to Treasury’s Grantee Terms and Conditions, “...2. Grantee Eligibility a. The grantee is the 

housing credit agency for one of the 50 States, the District of Columbia, the Commonwealth of Puerto 

Rico, the Virgin Islands, American Samoa, Guam, or the Northern Mariana Islands which files Form 

8610, Annual Low-Income Housing Credit Agencies Report with the Internal Revenue Service.”
Audit of Virginia Housing Development Authority’s Payment Page 3

Under 1602 Program (OIG-16-053)

was to fill the gap left by the reduced demand for low-income 

housing tax credits that would enable low-income housing projects 

to continue or begin in cases where developers could not obtain 

private investment, as well as, increase the availability of 

affordable housing. The Secretary of the Treasury is responsible for 

carrying out the requirements of Section 1602. 

Eligibility Under the 1602 Program 

Under the Recovery Act, State housing credit agencies were 

allowed to exchange a portion of their low-income housing credits 

for Section 1602 funds. The maximum funds available to a State 

could not exceed its “Low-income Housing Grant Election 

Amount”6 as determined under Section 1602. In turn, State 

housing credit agencies would disburse funds to eligible 

subawardees to help finance either the construction or the 

acquisition and rehabilitation of qualified low-income housing 

projects. Section 1602 also provided that subawarded projects be

subject to the same eligibility and compliance requirements as the 

low-income housing credits found in Section 42 of the IRC. In 

addition to following the IRC Section 42 eligibility and compliance 

requirements, Section 1602 required that State housing credit 

agencies:

(1) establish a process to ensure that applicants who were 

allocated low-income housing credits demonstrate “good 

faith efforts” to obtain investment commitments for credits 

elsewhere; 

(2) perform asset management functions to ensure subawardee

compliance with Section 42 of the IRC and the long-term 

viability of projects;7 and

(3) recapture funds in the event of subawardees’ noncompliance 

payable to Treasury.

 6 “Low-income Housing Grant Election Amount” may not exceed 85 percent of the sum of (1) 10 times 

(a) the unused State housing credit ceiling (if any) for calendar year 2008 and (b) the amount of State 

housing credit ceiling returned in 2009, plus (2) 10 times 40 percent of (c) the greater of $2.30 

multiplied by the State population or $2,655,000 and (d) unused housing credit carryover allocated to 

the State in the 2009 National Pool.

7 Low-income housing projects must be financially feasible and remain viable throughout the 15-year 

compliance period required by Section 42 of the IRC. 
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Under 1602 Program (OIG-16-053)

As part of its overall administration of Treasury’s 1602 Program, 

OFAS developed the “Grantee Terms and Conditions” to identify 

the eligibility and compliance requirements set forth in both Section 

42 of the IRC and Section 1602 of the Recovery Act. State 

housing credit agencies and subawards funded by them are subject 

to these terms and conditions for a 15-year compliance period. 

Among the requirements, State housing credit agencies are 

required to provide financial status and project performance reports 

quarterly and other applicable reports to ensure their compliance 

with the terms and conditions of their 1602 Program awards. In its 

post subaward reporting guidance, OFAS required that State 

housing credit agencies certify annually that (1) the amount of 

Section 1602 funds subawarded to a project was equal to or less 

than 85 percent of the project’s eligible basis; and (2) funded 

projects remain “qualified” throughout the 15-year compliance 

period. Appendix 2 provides the detail contained in OFAS’ “Grantee 

Terms and Conditions.”

Since awards under the 1602 Program are not conventional grants 

but an exchange of low-income housing credits falling under the 

requirements of Section 42 of the IRC, they are not within the 

scope of the Single Audit Act8 nor a part of the audit universe 

explicitly set by the Office of Management and Budget. Therefore, 

unless the State auditor specifically audits these awards, the 

awards to the respective States and their subawardees will not 

receive any audit coverage.

Virginia Housing Development Authority

 

The VHDA was created in 

1972 and is responsible for 

administering the State’s

low-income housing tax 

credit programs. VHDA

works with lenders,

developers, and others to

help Virginians attain 

quality, affordable housing.

VHDA is also responsible 

 8 Public Law 98-502, amended by Public Law 104-145, Single Audit Act Amendment of 1996

(OIG Photograph, August 2013)
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Under 1602 Program (OIG-16-053)

for administering Virginia’s low-income housing tax credit program 

and allocates credits based on the selection criteria set forth in its 

Qualified Allocation Plan (QAP).

In 2009, VHDA exchanged a portion of its low-income housing 

credits for $112,488,313 under the 1602 Program which funded

30 projects that were stalled due to the downturn in the lowincome housing tax credit equity market. The funded projects 

yielded 2,989 low-income housing units which were set aside for 

qualifying residents throughout Virginia. Projects and units were 

certified for occupancy and placed in-service between August

2010 and December 2011.

Audit Results

We found that VHDA generally complied with Treasury’s 1602 

Program requirements. Specifically, VHDA met the requirements for 

receiving its 1602 Program award as well as the requirements for 

subawarding those funds to low-income housing projects. VHDA

also established a process for monitoring the long-term viability of 

projects and their compliance with 1602 Program requirements and 

met Treasury’s reporting requirements. 

Based on our review of VHDA’s administration and oversight 

activities, we concluded that funded projects met the 1602 

Program’s subaward requirements.

Awarding

VHDA requested and was awarded $112,488,313 of 1602 

Program funds, the amount equal to VHDA’s low-income housing 

election amount requested in its application packages. In turn, 

VHDA subawarded and disbursed all 1602 Program funds to 30

eligible low-income housing projects in exchange for tax credits.

Also required by the 1602 Program requirements, VHDA

subawarded funds to low-income housing projects which (1) 

qualified under Section 42 of the IRC, (2) demonstrated “good faith 

efforts” to obtain investments elsewhere, and (3) did not exceed 
Audit of Virginia Housing Development Authority’s Payment Page 6

Under 1602 Program (OIG-16-053)

the amounts necessary to make the projects financially feasible and 

viable throughout the 15-year compliance period. 

Subawarding

VHDA identified 30 qualified low-income housing projects for 

subawards that were already allocated low-income housing tax 

credits in 2008 and 2009. These projects were stalled due to the 

downturn in the low-income housing tax credit equity market, and 

were subawarded 1602 Program funds in exchange for their 2008

and 2009 low-income housing tax credit allocations. In identifying 

the 30 projects, VHDA applied the selection criteria set forth in its 

QAP as required by Section 42 of the IRC. The QAP establishes the 

criteria used by the housing credit agency to determine the State’s 

housing priorities that are appropriate to the local conditions, and 

along with other requirements, gives preference to allocating credit 

dollar amounts among selected projects.

Compliance and Asset Management 

As required by Section 1602 of the Recovery Act, VHDA

established compliance and asset management oversight functions

to ensure that low-income housing projects comply with Section

42 of the IRC and remain viable during the 15-year compliance

period.

Section 1602 of the Recovery Act also required that State housing 

credit agencies impose conditions and/or restrictions, including 

recapture provisions, on subawardees to ensure low-income 

housing projects remain qualified during the 15-year compliance 

period. OFAS further stipulated in its 1602 Program requirements

that recapture provisions be included in State credit housing 

agencies’ written subaward agreements. Furthermore, State 

housing credit agencies were required by OFAS to have procedures 

in place for monitoring 1602 Program subawardees to identify and 

correct issues of noncompliance during the compliance period. In 

the event of noncompliance, State housing credit agencies must 

take reasonable action to recapture of 1602 Program funds, 

payable to Treasury.

9

 9 Treasury, “Section 1602—Payments to States for Low-Income Housing Projects in Lieu of Low-Income 

Housing Credits for 2009 Recapture Guidance”
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Under 1602 Program (OIG-16-053)

In the case of VHDA, the requisite recapture provisions were 

included in its subaward agreements in the event of subawardee 

noncompliance. VHDA structured its 1602 Program subawards as 

tax credit exchange funds, subject to recapture in the event a lowincome project does not remain qualified during the 15-year 

compliance period. All 11 projects we reviewed had completed the 

first year of the 15-year compliance period. VHDA’s compliance 

monitoring procedures included performing on-site inspections of 

project buildings and units, reviews of management practices, and 

reviews of project tenant files for compliance with Section 42 of 

the IRC. 

VHDA’s policy requires that an annual asset management review

be performed on each 1602 Program project throughout the 15-

year compliance period to ensure its long-term viability. 

Specifically, VHDA requires all projects to submit monthly 

operating reports, annual budget information, and audited financial 

statements to the projects’ VHDA asset manager.

VHDA’s continuous compliance monitoring and review of asset 

management reports for the remaining years within the 15-year 

compliance period should ensure that 1602 Program projects 

continue to be qualified low-income buildings.

Quarterly and Annual Reporting

OFAS requires that State housing credit agencies submit financial 

status and project performance reports for each low-income

housing project on a quarterly basis during the development stage 

as well as other reports deemed necessary to ensure compliance 

with provisions of Section 1602. In its post sub-award reporting

guidance, OFAS also requires that State housing credit agencies

provide two additional certification reports. The first report is to

certify each project’s placed in-service date and whether 1602

Program funds used were equal to or less than 85 percent of the

project’s eligible basis. The second report is required each year

thereafter for the project’s annual compliance throughout the

15-year compliance period once the project is placed in service.

 
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Under 1602 Program (OIG-16-053)

We found that VHDA complied with OFAS’ reporting requirements. 

That is, VHDA submitted quarterly project performance reports 

during each project’s developmental stage and annual certification 

reports after each project was placed in service.

******

We appreciate the courtesies and cooperation extended by your 

staff during this audit. Major contributors to this report are listed in 

appendix 5. A distribution list for this report is provided as 

appendix 6. If you have any questions, you may contact me at 

(202) 927-1011 or Shiela Michel, Audit Manager, at 

(202) 927-5407.

/s/

Theresa Cameron

Audit Director
Appendix 1

Objective, Scope, and Methodology

Audit of Virginia Housing Development Authority’s Payment Page 9 

Under 1602 Program (OIG-16-053)

In July 2013, we initiated our audit of the Virginia Housing 

Development Authority (VHDA) as part of our audits of State 

housing credit agencies funded under Department of the Treasury’s 

(Treasury) Payments to States for Low-Income Housing Projects in 

Lieu of Low-Income Housing Credits for 2009 (1602 Program)

authorized by Section 1602 of the American Recovery and 

Reinvestment Act of 2009 (Recovery Act). The objective of these 

audits was to assess whether State housing credit agencies 

awarded funds under Treasury’s 1602 Program complied with the 

program’s overall requirements and the “Grantee Terms and 

Conditions” (together referred as 1602 Program requirements). To 

meet our objective, we assessed whether VHDA properly received 

and subawarded 1602 Program funds, implemented compliance 

and asset management processes, and met Treasury’s reporting 

requirements. 

We statistically selected VHDA from the universe of 55 states and 

territories eligible to receive 1602 Program funds. We caution, 

however, that our sample was randomly selected to avoid bias and 

not for the purpose of projecting results to the universe or 

concluding on the effectiveness of the 1602 Program. In the case 

of VHDA, we statistically selected and reviewed 11 of the 30

funded projects, representing $34,705,914 of the $112,488,313

awarded to Virginia. 

In performing our work, we reviewed applicable laws and 

regulations governing the 1602 Program to include the Recovery 

Act and Section 42 of the Internal Revenue Code, as well as 

Treasury’s policies and procedures. We also visited VHDA in 

Richmond, Virginia, where we interviewed key personnel; reviewed 

documents used to support Virginia’s low-income housing credit 

allocation, low-income housing projects’ existence, and cash 

disbursements in our sample; and assessed VHDA’s overall 

compliance with Treasury’s 1602 Program requirements. We also 

conducted site visits to three projects located in Portsmouth and 

Richmond, Virginia. We performed our fieldwork between June 

2013 and June 2016. 
Appendix 1

Objective, Scope, and Methodology

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Under 1602 Program (OIG-16-053)

We conducted this performance audit in accordance with generally 

accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix 2

Grantee Terms and Conditions

Audit of Virginia Housing Development Authority’s Payment Page 11 

Under 1602 Program (OIG-16-053)

Grants to States for Low-Income Housing Projects in Lieu of Low-Income Housing 

Credits for 2009 

GRANTEE TERMS AND CONDITIONS 

1. Authority 

a. Section 1602 of the American Recovery and Reinvestment Tax Act of 2009 (Act) authorizes 

the United States Department of the Treasury (Treasury) to issue grants to State housing credit 

agencies in lieu of low-income housing credits. 

b. The grantee has authority to receive Section 1602 grants. 

2. Grantee Eligibility 

a. The grantee is the housing credit agency for one of the 50 States, the District of Columbia, the 

Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, Guam, or the Northern 

Mariana Islands which files Form 8610, Annual Low-Income Housing Credit Agencies Report 

with the Internal Revenue Service. 

b. The grantee shall be the sole recipient of the Section 1602 funds in the State and must 

coordinate with other housing credit agencies within the State (including any constitutional home 

rule cities) to determine how much of their 2009 credit ceiling the other agencies would elect to 

take in the form of a grant election amount and will provide to those agencies their proportionate 

share. 

c. The grantee shall enter into written agreement with any other participating housing credit 

agencies within the State, binding the participating agency to comply with the terms and 

conditions applicable to the grantee or designated state agency in the sections 3 through 10 of 

these terms and conditions. 

d. The grantee is the party responsible to Treasury for all grant matters. 

3. Eligible Projects 

a. The grantee shall only select projects for subawards which are qualified low-income buildings 

under Section 42 of the Internal Revenue Code (the Code). 

b. The grantee must ensure that the subaward is consistent with the requirement of section 

42(m)(2) of the Code that the subaward made for a project [building(s)] does not exceed the 

amount necessary to ensure the financial feasibility of the project and its viability as a project 

throughout the credit period. 

4. Use of Grant Funds 

a. The grantee is receiving an initial grant election amount. The grantee may apply for additional 

grant funds through 2010. If the Treasury Department approves the request, the Treasury 

Department will amend the award to increase the grant amount. 
Appendix 2

Grantee Terms and Conditions

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b. The grantee shall use all grant amounts to make subawards, or for transfer to other agencies to 

make subawards. The subawards shall be in the form of cash assistance and are not required to 

be repaid unless there is a recapture event with respect to the qualified low-income building. The 

grantee shall not use grant election amounts for any other purpose, including administrative 

costs. The grantee may collect reasonable fees from a subawardee to cover expenses associated 

with performance of its duties under Section 1602(c)(3) of the Act, Compliance and Asset 

Management. Reasonable fees are amounts customarily charged for the same or similar services 

and in no event may exceed costs. 

c. The grantee may disburse grant funds to subawardees in 2009 and 2010. The grantee may 

disburse grant funds to subawardees in 2011 provided the subaward has been made to the 

subawardee on or before December 31, 2010 and the subawardee has, by the close of 2010, paid 

or incurred at least 30 percent of the subawardee’s total adjusted basis in land and depreciable 

property that is reasonably expected to be part of the low-income housing project for which the 

disbursements are made. 

d. The subawards shall finance the construction or acquisition and rehabilitation of qualified lowincome buildings in accordance with Section 1602(c) of the Act. 

e. The grantee shall make subawards in the same manner and shall be subject to the same 

limitations as an allocation of housing credit dollar amount allocated under Section 42(m) of the 

Code, except for the additional determinations required in subsection g of this section. 

f. Prior to making any subaward, the grantee shall establish a written process for making a 

determination that applicants for subawards have demonstrated a good faith effort to obtain 

investment commitments for tax credits in lieu of a subaward. 

g. Prior to making any subaward, the grantee shall make a determination that the applicant for 

the subaward has demonstrated a good faith effort to obtain investment commitments for tax 

credits in lieu of the subaward. 

5. Written Agreements and Disbursements to Subawardees 

a. The grantee shall execute a legally binding written agreement with the entity receiving a 

subaward. The grantee and the subawardee must execute the written agreement before any 

Section 1602 funds are disbursed to the subawardee. 

b. The written agreement must set forth (explicitly, or incorporated by reference) all Section 

1602 program requirements, including the requirements of Section 42 of the Code, applicable to 

the subaward. 

c. The written agreement shall impose conditions or restrictions, including a requirement 

providing for recapture, so as to assure that the qualified low-income building remains a 

qualified low-income building during the 15-year compliance period. The written agreement may 

include the extended low-income housing commitment under Section 42(h)(6)(B) of the Code. 
Appendix 2

Grantee Terms and Conditions

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Under 1602 Program (OIG-16-053)

d. The written agreement shall require the subawardee to provide sufficient information to the 

grantee to report on the use of grant funds as required by section 8 of these terms and conditions. 

6. Asset Management 

a. The grantee shall perform asset management functions so as to ensure compliance with 

Section 42 of the Code and the regulations thereunder (including Title 26 Code of Federal 

Regulations section 1.42.9), and the long-term viability of the buildings funded by a subaward 

under the Act in accordance with Section 1602(c)(3) of the Act. 

7. Compliance with the 2009 State Housing Credit Ceiling 

a. The grantee shall track (1) the credit equivalent of all grant election amounts to ensure that the 

2009 State Housing Credit Ceiling is appropriately reduced as required by section 42(i)(9)(A) of 

the Code and (2) total grant election amounts to ensure that these amounts do not exceed the 

amount authorized by section 1602(b). 

b. The grantee shall track the total of credits allocated under Section 42(h)(1) of the Code. 

c. The grantee shall ensure that the credit equivalent of all elected grant amounts through 2010, 

plus the credits allocated under Section 42(h)(1) of the Code during 2009, do not exceed the 

State housing credit ceiling for 2009. 

8. Reporting 

a. The grantee shall provide periodic reports as required by Treasury. A financial status report 

and a project performance report is required on a quarterly basis, due 10 working days after the 

end of the quarter. Quarters end on March 31, June 30, September 30, and December 31. 

b. The performance report has the following elements on each project receiving a subaward 

during the quarter: 

• Name of recipient entity 

• Name of project 

• Brief description of project 

• Location of project: city/county, State, zip code 

• Number of construction jobs created 

• Number of construction jobs retained 

• Number of non-construction jobs created 

• Number of non-construction jobs retained 

• Number of total housing units newly constructed 

• Number of total housing units rehabilitated 

• Number of low-income housing units newly constructed 

• Number of low-income housing units rehabilitated 

c. The grantee shall submit any other reports that Treasury deems necessary to comply with 

Section 1602 of the Act and American Recovery and Reinvestment Act guidance. 
Appendix 2

Grantee Terms and Conditions

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9. Recapture 

a. The grantee shall include in any subaward a requirement providing for recapture to assure that 

the building remains a qualified low-income building during the 15-year compliance period. 

b. The grantee shall notify subawardees that any amount subject to recapture becomes a debt 

owed to the United States payable to the General Fund of the Treasury and enforceable by all 

available means against any assets of the recipient entity. 

10. Financial Management 

a. The grantee must expend and account for grant funds in accordance with State laws and 

procedures for expending and accounting for its own funds. Fiscal control and accounting 

procedures of the designated State housing credit agency must be sufficient to permit preparation 

of required reports and permit the tracing of funds to a level of expenditures adequate to establish 

that such funds have not been used in violation of the restrictions and prohibitions of applicable 

statutes. Effective control and accountability must be maintained for all grant funds. 

b. The grantee shall open a new account (Grant Account) with a financial institution for the 

purpose of receiving grant election amounts, for making distributions of grant election amounts 

to other agencies within the State, and for making subawards. 

c. The grantee must maintain program, financial, and accounting records sufficient to 

demonstrate that grant funds were used in accordance with the Section 1602 program and these 

terms and conditions. The Treasury as the awarding office, the cognizant Treasury inspector 

general, and the Comptroller General of the United States, or any of their authorized 

representatives, shall have the right of access to facilities and to any pertinent books, documents, 

papers, or other records (electronic and otherwise) of grantees, which are pertinent to the grant, 

in order to make audits, examinations, excerpts, and transcripts. 

d. The grantee shall minimize the time between the receipt of grant funds and the disbursement 

of those funds to subawardees. Federal funds cannot be drawn by the grantee from the U.S. 

Treasury in advance of need. The grantee shall not place in escrow or advance lump sums to 

project owners. Once funds are drawn from the grantee’s U.S. Treasury account, they must be 

expended as a subaward by the grantee within three days, or if grant funds are transferred by the 

grantee to another agency, as a subaward by that agency within three days following the date of 

transfer by the grantee.

e. The grantee shall promptly return to its Grant Account any subawards returned to the 

designated State housing credit agency from subawardees and shall expend returned amounts as 

subawards before additional grant amounts are drawn from the Treasury. 

11. Disallowance, Suspension, and Termination 

a. If the grantee materially fails to comply with any term of the award, whether stated in a 

Federal statute or regulation, the terms and conditions herein, in a State plan or application, a 
Appendix 2

Grantee Terms and Conditions

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notice of award, or elsewhere, Treasury may take one or more of the following actions, as 

appropriate in the circumstances: 

• Temporarily halt cash payments pending correction of the deficiency by the grantee 

• Disallow all or part of the cost of the activity or action not in compliance 

• Wholly or partly suspend or terminate the current award 

• Withhold further awards for the program 

• Take other remedies that may be legally available 

In taking an enforcement action, Treasury will provide the grantee the opportunity for a hearing, 

appeal, or other administrative proceeding to which the grantee is entitled under any statute or 

regulation applicable to the action involved. 

b. The grantee must immediately report any indication of fraud, waste, abuse, or potentially 

criminal activity pertaining to grant funds to Treasury and the cognizant Treasury inspector 

general. 

12. Return of Unused Grant Funds 

a. The grantee shall return to the Treasury by January 1, 2011 any grant election amounts not 

used to make subawards by December 31, 2010. This requirement does not prevent the State 

housing credit agency from continuing to disburse funds to subawardees after December 31, 

2010 provided: 

(1) A subaward has been made to the subawardee on or before December 31, 2010; 

(2) The subawardee has, by the close of 2010, paid or incurred at least 30 percent of the 

subawardee’s total adjusted basis in land and depreciable property that is reasonably 

expected to be part of the low-income housing project; and 

(3) Any funds not disbursed to the subawardee by December 31, 2011 must be returned 

to the Treasury by January 1, 2012. 

Signature 

Under penalties of perjury, I declare that I have examined the terms and conditions in this 

application and that the designated State housing credit agency agrees to and will ensure that 

these terms and conditions will be followed. I declare that I am an authorized official of the 

designated State housing credit agency and am authorized to bind the State housing credit agency 

to these Terms and Conditions.

Name Title

Phone Email

Signature Date signed
Appendix 3

Virginia Housing Development Authority Response 

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Under 1602 Program (OIG-16-053)
Appendix 4

Treasury Management Response

Audit of Virginia Housing Development Authority’s Payment Page 17 

Under 1602 Program (OIG-16-053)
Appendix 5

Major Contributors to This Report

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Shiela Michel, Audit Manager

Gerald Kelly, Auditor-In-Charge

Nick Slonka, Auditor

Paul Harris, Program Analyst

Justin Summers, Referencer
Appendix 6

Report Distribution

Audit of Virginia Housing Development Authority’s Payment Page 19 

Under 1602 Program (OIG-16-053)

Department of the Treasury

Assistant Secretary for Management of the Treasury

Fiscal Assistant Secretary

Deputy Assistant Secretary, Fiscal Operations and Policy

Office of Strategic Planning and Performance Management

Office of the Deputy Chief Financial Officer, Risk and Control

Group

Program Manager, Office of Fiscal Assistant Secretary

Office of Management and Budget

 OIG Budget Examiner

Virginia Housing Development Authority

Executive Director
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