71204 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 943

[Docket No. FR–4474–F–02]

RIN 2577–AC00

Consortia of Public Housing Agencies

and Joint Ventures

AGENCY: Office of Public and Indian

Housing, HUD.

ACTION: Final rule.

SUMMARY: This final rule implements a

1998 law that authorizes public housing

agencies (PHAs) to administer any or all

of their housing programs through a

consortium of PHAs. The law also

authorizes PHAs to use subsidiaries,

joint ventures, partnerships or other

business arrangements to administer

their housing programs or to provide

supportive or social services. This final

rule specifies minimum requirements

relating to formation and operation of

consortia and minimum contents of

consortium agreements, as required by

the statute and reflects consideration of

public comments received on the

proposed rule.

EFFECTIVE DATE: December 29, 2000.

FOR FURTHER INFORMATION CONTACT: Rod

Solomon, Deputy Assistant Secretary for

Policy, Program and Legislative

Initiatives, Department of Housing and

Urban Development, Office of Public

and Indian Housing, 451 Seventh Street,

SW, Room 4116, Washington, DC 20410;

telephone (202) 708–0713 (this is not a

toll-free telephone number). Persons

with hearing or speech disabilities may

access this number via TTY by calling

the toll-free Federal Information Relay

Service at 1–800–877–8339.

SUPPLEMENTARY INFORMATION:

I. The September 14, 1999 Proposed

Rule

On September 14, 1999 (64 FR 49940),

HUD published for public comment a

proposed rule implementing section 13

of the United States Housing Act of

1937 (42 U.S.C. 1437 et seq.) (referred to

as the ‘‘1937 Act’’), as amended by

section 515 of the Quality Housing and

Work Responsibility Act of 1998 (title V

of the fiscal year 1999 HUD

Appropriations Act; Pub. L. 105–276,

approved October 21, 1998; 112 Stat.

2461) (referred to as the ‘‘Public

Housing Reform Act’’).

In addition to authorizing public

housing agencies (PHAs) to administer

any or all of their housing programs

through a consortium of PHAs, section

13 of the 1937 Act also authorizes PHAs

to use subsidiaries, joint ventures,

partnerships or other business

arrangements to administer their

housing programs or to provide

supportive or social services. The

proposed rule specified minimum

requirements relating to formation and

operation of consortia and minimum

contents of consortium agreements, as

required by the statute.

Before enactment of the Public

Housing Reform Act, some PHAs had

established cooperative arrangements

for carrying out some of their

responsibilities. A principal difference

is that under a section 13 consortium, a

joint PHA Plan is submitted on behalf

of participating PHAs. Enactment of the

revised section 13, however, does not

restrict the ability of PHAs to continue

to establish cooperative arrangements

under which they receive funding

separately and submit separate PHA

Plans. Another major difference

between such arrangements and

consortia as authorized under section

13, is that under section 13 funding

must be paid to the consortium. HUD is

implementing this requirement by

providing that funds shall be directed to

the lead agency, as a representative of

the consortium, on behalf of the

participating PHAs, instead of being

paid to the PHAs separately (although

funding allocations are still calculated

separately for each PHA).

The preamble to the September 14,

1999 proposed rule provides additional

information regarding the proposed

implementation of section 13 of the

1937 Act, as revised.

II. Changes Made at the Final Rule

Stages

The following describes the more

significant changes made to this rule at

the final rule stage. In addition to the

changes discussed below, certain

technical and clarifying changes were

made at the final rule stage. Some of the

nonsubstantive changes, but not

necessarily all, may be noted below. The

more significant changes are as follows:

• In § 943.118 (What is a

consortium?), HUD adds language at the

end of this section to require that PHAs

participating in a consortium adopt the

same fiscal year in order that the

applicable periods for submission and

review of the joint PHA Plan are the

same and to indicate that

notwithstanding any other regulation,

PHAs may request and HUD may

approve changes in PHA fiscal years to

make this possible.

• In § 943.120 (What programs of a

PHA are included in a consortium’s

functions), HUD revises paragraph (a)(1)

to clarify that a PHA’s public housing

program may include either the

operating fund or the capital fund, or

both). In paragraph (a)(4) of this same

section, HUD removes reference to the

exception made for ‘‘Moderate

Rehabilitation and Certificates and

Vouchers.

• In § 943.122 (How is a consortium

organized?), HUD revises paragraph to

clarify that any necessary payment

agreements entered into between HUD

and the lead agency and other

participating agencies must provide that

HUD funding to the participating PHAs

for program categories covered by the

consortium will be paid to the lead

agency. This payment arrangement is

consistent with the requirements of the

Public Housing Reform Act. HUD

revises paragraph (b) to provide that to

be the lead agency in a consortium, not

only must a PHA not be designated as

troubled, or determined by HUD to fail

the civil rights compliance threshold for

new funding, the PHA must not have

had its PHAS designation withheld for

civil rights or other reasons.

• In § 943.124 (What elements must a

consortium agreement contain?), HUD

revises paragraph (a)(5) to provide that

the consortium agreement must not only

specify the period of existence of the

consortium and the terms under which

a PHA may withdraw from the

consortium before the end of the period

of existence, but must specify when a

PHA may join the consortium. This

paragraph also was revised to provide

that, for orderly transition, the addition

or withdrawal of a PHA and termination

of the consortium must take effect on

the anniversary of the consortium’s

fiscal year.

• In § 943.126 (What is the

relationship between HUD and a

consortium?), HUD removes paragraph

(b) which provided that HUD’s payment

to the consortium of funding for the

covered program categories covered will

be paid to the lead agency. This

paragraph was duplicative of § 943.122,

which addresses consortium

organization. HUD revises paragraph (a)

by removing the ‘‘(a)’’ as the designation

for this paragraph and by clarifying that

HUD’s relationship with the consortium

is through the PHA Plan process, in

addition to the payment agreements

entered into. HUD also revises this

paragraph to clarify that HUD funds

provided to the consortium must be

used in accordance with the consortium

agreement and the joint PHA Plan, in

addition to HUD’s regulations and

requirements.

• In § 943.128 (How does a

consortium carry out planning and

reporting functions?), HUD revises

paragraph (b) to clarify that the

consortium must maintain records, in

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addition to submitting certain reports to

HUD. HUD revises paragraph (c) to

require that the consortium agreement

must be made available to the public as

a supporting document to the joint PHA

Plan.

• In § 943.130 (What are the

responsibilities of participating PHAs?),

HUD adds a new paragraph (b) to

address the applicability of independent

audit and performance assessment

system requirements to consortia and to

note that the manner of applicability

depends upon the composition and

funding of the PHA. The new paragraph

provides that where the lead agency will

manage substantially all program and

activities of the consortium, HUD

interprets financial accountability to

rest with the consortium and therefore

apply independent and performance

assessment requirements on a

consortium-wide basis. Where the lead

agency will not manage substantially all

programs and activities of a consortium,

the consortium must identify in its PHA

Plan submission which PHAs have

financial accountability for the

programs. The determination of

financial accountability shall be made

in accordance with generally accepted

accounting principles, as determined in

consultation with an independent

public accountant. This paragraph also

provides, however, that with respect to

any consortium, HUD may determine

(based on a request from the consortium

or other circumstances) to apply

independent audit and performance

requirements on a different basis (than

that provided in the rule) where a

different basis would promote sound

management.

• In § 943.140 (What programs and

activities are covered by this subpart?),

HUD revises paragraph (a) to clarify that

subpart C applies to a PHA’s

management functions as well as the

PHA’s administrative functions.

• In § 943.146 (What impact does the

use of a subsidiary affiliate, or joint

venture have on financial accountability

to HUD and the Federal government?),

HUD replaces the term ‘‘General

Accounting Office’’ with ‘‘Comptroller

General,’’ which is consistent with

statutory terminology.

• In § 943.148 (What procurement

standards apply to PHAs selecting

partners for a joint venture?), HUD

revises paragraph (a) to clarify that the

requirements of 24 CFR part 85

(Administrative Requirements for

Grants and Cooperative Agreements to

State, Local and Federally Recognized

Indian Tribal Governments) are

applicable to the regulations in part 943,

subject to the provisions in paragraph

(b) of this section. HUD revises

paragraph (b)(2) of this same section, to

reference the applicability of the

requirements of 24 CFR part 84 (Grants

and Agreements with Institutions of

Higher Education, Hospitals, and Other

Non-Profit Agencies).

In § 943.150 (What procurement

standards apply to a PHA’s joint venture

partner?), HUD revises paragraph (a) to

include reference to the applicability of

part 84.

III. Discussion of Public Comments

Received on the Proposed Rule

This final rule takes into

consideration the public comments

received on the September 14, 1999

proposed rule. The public comment

period on the proposed rule closed on

November 15, 1999. By close of business

on that date, HUD had received 6 public

comments. Comments were submitted

by two PHAs; two of the three main

organizations representing PHAs; a State

PHA association; and a private

individual. This section of the preamble

presents a summary of the significant

issues raised by the public commenters

on the September 14, 1999 proposed

rule and HUD’s responses to these

comments, and provides the basis why

certain changes, as highlighted in

Section II of this preamble, were made

at the final rule stage. The changes

benefit both from the comments

received during the public comment

period and from comments and

questions that have arisen since the

comment period closed from PHAs and

others interested in forming consortia or

joint ventures, as provided by this rule.

A. General Comments Not Regarding a

Particular Regulatory Section

Comment: Rule is unclear regarding

the relationship between PHA consortia

and formula funding under PHDEP. One

commenter posed several questions

regarding the relationship between PHA

consortia and formula funding under

the Public Housing Drug Elimination

Program (PHDEP). The commenter

referred to HUD’s September 14, 1999

final rule (64 FR 49900) providing for

PHDEP formula allocations. The

commenter wrote that the September 14,

1999 final rule provides that certain

grantees who received past funding will

automatically receive PHDEP funding

for Fiscal Year (FY) 1999, provided that

the grantee’s grant application

demonstrates positive program

outcomes. The commenter was

concerned about those PHAs that are

not eligible for automatic FY 1999

PHDEP funding.

The commenter asked the following

questions:

1. Will such a PHA be able to join a

consortium of other PHAs that

continuously receive PHDEP assistance?

2. Will the PHA be required to

become a PHDEP grantee before joining

such a consortium?

3. May a PHA that was not awarded

PHDEP assistance conduct drugelimination activities subsidized by

other PHAs who have received PHDEP

funding?

HUD Response. Yes, a PHA not

eligible for automatic PHDEP funding

may join a consortium with other PHAs

that do receive PHDEP assistance,

without becoming a PHDEP grantee

itself first. A PHA that was not awarded

PHDEP assistance and is part of a

consortium with PHAs that were

awarded PHDEP assistance may conduct

drug elimination activities using that

assistance.

Comment: Rule is unclear regarding

real estate transactions and

development/acquisition and

redevelopment. One commenter wrote

that it had hoped ‘‘that these types of

development activities would be

highlighted in the proposed rule and

encouraged by HUD.’’

HUD Response. HUD encourages

PHAs to use the consortium and joint

venture options as broadly as possible to

advance their mission, including using

them for capital planning and

development. However, HUD also

believes that any public housing

development activities involving joint

ventures are more appropriately

addressed in HUD’s Mixed-Finance

Development rule or Capital Fund rule,

to be issued later this year.

Comment: Further HUD guidance is

required. One commenter wrote that the

‘‘statute and the proposed rule assume

a level of experience or sophistication

which may not be universal among the

PHAs.’’ The commenter wrote that ‘‘it

would be most useful [for HUD] to

prepare some form of policy guide or

‘how to’ that would direct the energies

of potential members in a productive

way.’’ The commenter recommended

that HUD provide guidance in the

question and answer format, with

‘‘examples with different sizes of PHAs

and different sets of consortia objectives

that have successfully used the

strategy.’’

Comment: Rule provides sufficient

guidance. In contrast to the preceding

comment, one commenter wrote that

‘‘sufficient regulatory guidance has been

provided and that remaining planning

and operational issues should be left for

[P]HAs to develop through their agency

planning process and partnership

agreements.’’ The commenter believes

that the provisions of the proposed rule

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‘‘effectively outline the basic framework

and submission process for [P]HAs that

opt to form a consortium or joint

venture.’’

HUD Response. The rule provides the

basic regulatory framework. HUD will

explore issuing additional guidance to

supplement the rule.

B. Comment regarding proposed

§ 943.115—What programs are covered

under this subpart?

Comment: Final rule should cover all

categories of Section 8 projects. Section

943.115 of the proposed rule provided

that two types of Section 8 projects are

not covered by the regulatory provisions

governing consortia:

1. PHA-administered project-based

Section 8 under the Request for

Proposals published on May 19, 1999

(64 FR 27358); and

2. Section 8 projects that are the

subject of financial restructuring under

the ‘‘Mark to Market’’ program, where

Participating Administrative Entities are

designated to administer the program

(see 42 U.S.C. 1437f note).

One commenter objected to these

exclusions, writing that ‘‘[a]ny

consortium made up of public agencies

should be treated corporately as a public

agency itself.’’

HUD Response. Neither of these

categories is covered by the PHA Plan,

which is why they were excluded in the

September 14, 1999 proposed rule. The

PHA Plan is the vehicle for PHAs to

combine their planning and reporting,

and this rule addresses only those

entities and activities covered by a PHA

Plan. HUD, therefore, makes no change

in response to this comment.

C. Comment regarding proposed

§ 943.120—What programs of a PHA are

included in a consortium’s functions?

Comment: Final rule should authorize

a PHA to enter more than one

consortium for a program category.

Section 943.120(b) of the proposed rule

provided that ‘‘[i]f a PHA elects to enter

a consortium with respect to a program

category * * * the consortium must

cover the PHA’s whole program under

the [Annual Contributions Contract

(ACC)] with HUD for that program

category.’’ One commenter—the PHA

for the State of Hawaii—objected to this

provision. The commenter wrote that in

addition to the administration of its

state-wide program, it administers a

relatively large Section 8 tenant-based

program for the City and County of

Honolulu. The PHA also administers

separate, and smaller, Section 8

programs for neighboring counties.

According to the commenter, each

county also administers separate

Section 8 certificate and voucher

programs. The PHA wrote that it would

like to continue to administer the

Section 8 program for Honolulu, while

forming a separate consortium to

administer the smaller programs on

each of the neighbor island counties.

However, under proposed § 943.120(b),

the PHA stated it would be prevented

from taking this course of action.

HUD Response. A joint PHA Plan

covering an entire program category is

an essential element of a consortium. If

HUD were to allow a PHA to participate

in more than one consortium for the

same program category, there would be

overlapping PHA Plans for the same

program, and as many or more PHA

Plans rather than fewer. Program

administration would not be simplified.

Consequently, the final rule continues

to provide that a PHA may not be a

member of two different consortia for

the same program. However, the

proposed rule and this final rule still

leave room for a PHA or a consortium

to contract with another PHA to

administer some or all aspects of a

Section 8 program. The PHA performing

these functions under contract need not

be a member of a consortium with the

PHA whose program it is administering.

In addition, HUD will work with

agencies that encounter problems in

determining how to combine functions

where a consortium under this rule does

not seem to be the proper mechanism.

D. Comment regarding proposed

§ 943.124—What elements must a

consortium agreement contain?

Comment: Consortium agreement

should provide for PHAs joining

consortium after establishment. One

commenter wrote that the final rule

should require the inclusion of a

provision in the consortium agreement

providing for (or prohibiting) a new

PHA joining the consortium after its

establishment.

HUD Response. Section 943.124 was

revised in the final rule to include the

requested provision.

E. Comment regarding proposed

§ 943.128—How does a consortium

carry out planning and reporting

functions?

Comment: Final rule should provide

flexibility regarding the reporting

requirements. Section 943.128 of the

proposed rule provided for reporting to

HUD, in accordance with HUD

regulations and requirements, for all of

the participating PHAs. The preamble to

the proposed rule solicited public

comment on whether all reports should

be combined reports (see 64 FR 49940,

third column). One commenter wrote

that, absent an explanation of what is

meant by ‘‘all reports’’, the question is

difficult to answer. However, the

commenter recommended that

‘‘reporting requirements should be met

in whatever way seems best for the

consortium and its individual members,

so long as [HUD] gets the data it needs.’’

HUD Response. The scope of planning

and reporting by the consortium must

reflect the scope of consortium

activities. PHAs should be aware that

funding allocations for the Operating

Fund and Capital Fund will continue to

be calculated separately for each PHA in

a consortium. In addition, as noted in

Section II of this preamble, how

independent audit and performance

assessment requirements apply to PHAs

in a consortium depends upon the

composition and funding of

participating PHAs. HUD’s intention,

with respect to applicability of

independent audit and performance

assessment of PHAs in a consortium, is

that a consortium composed entirely of

PHAs that are not designated as

troubled and for which the lead agency

has assumed all public housing

administration and management

functions would be treated as one entity

for purposes of independent and audit

performance assessment requirements of

the participating PHAs. However, the

rule also provides HUD with the

flexibility to select or approve

alternative approaches to applying

independent audit and performance

assessment requirements where such

alternative approaches would promote

sound management.

F. Comment regarding proposed

§ 943.148—What procurement

standards apply to PHAs selecting

partners for a joint venture?

Comment: Final rule should not apply

procurement requirements to selection

of an affiliate as a joint venture partner.

Section 943.148(a) of the proposed rule

provided that the procurement

requirements of 24 CFR part 85 are

generally applicable to a PHA’s

procurement of goods and services.

Section 943.148(b) of the proposed rule

permitted qualifications based on sole

source procurement for PHA selection

of a joint venture partner without

making a distinction between selection

of an affiliated or non-affiliated entity.

Section 943.148(b) permitted such a

selection of a joint venture partner if

one of two conditions is met:

1. The joint venture partner will make

available to the PHA substantial, unique

and tangible resources or other benefits

that would not otherwise be available to

the PHA on the open market (e.g.,

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planning expertise, program experience,

or financial or other resources); or

2. A resident group or a PHA

subsidiary is willing and able to act as

the PHA’s partner in performing

administrative functions or to provide

supportive or social services.

One commenter wrote that, by

treating a PHA’s decision to operate

through an affiliate as a procurement

action, the proposed rule ‘‘detracts from

the benefit to the PHA of utilizing the

associated entity.’’ The commenter

wrote that new section 13 of the 1937

Act ‘‘appears to evidence Congress’

opinion that PHAs need the ability to

operate through whatever organizational

structure is most suitable in light of the

specific objectives sought to be

accomplished, without fear that such

operation will be clouded by

intimations that such relationships are

somehow improper or inappropriate

vehicles.’’

The commenter stated that it does not

believe that the ‘‘sole source exception’’

provided in proposed § 943.148(b)

adequately addresses this problem.

According to the commenter, the first

standard ‘‘provides little help in the

PHA/affiliate context’’ because the

‘‘PHA affiliate will usually offer to the

PHA only another form with which to

accomplish its objectives, with perhaps

the same staff and resources the PHA

already has.’’ The commenter also

objected to the second standard because

‘‘there are many functions’’ (such as real

estate acquisition) that cannot be

categorized as administrative functions

or supportive/social services.

HUD Response. The commenter

interprets the rule to require a PHA to

follow part 85 in its transactions with a

subsidiary or affiliate, while that is not

its intent. Rather, the rule creates an

exception to part 85 procurement

procedures in selection of its joint

venture partner. The rule creates an

ability to make this selection under

streamlined procedures—either through

a Request for Qualifications or a sole

source procurement.

With respect to the functions that are

covered by subpart C, the rule has been

revised at this final rule stage to clarify

that the functions covered include

management functions. It does not

apply to activities of a PHA that are

subject to the requirements of subpart F

of Part 941. This section also has been

revised at the final rule stage to clarify

that the requirements of 24 CFR part 84

also may be applicable.

IV. Findings and Certifications

Public Reporting Burden

The information collection

requirements contained in §§ 943.124,

943.126, and 943.128 have been

approved by the Office of Management

and Budget (OMB) under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501–

3520) and assigned OMB Control

Number 2577–0235. In accordance with

the Paperwork Reduction Act, HUD may

not conduct or sponsor, and a person is

not required to respond to, a collection

of information unless the collection

displays a currently valid OMB control

number.

Impact on Small Entities

The Secretary has reviewed this final

rule before publication and by

approving it certifies, in accordance

with the Regulatory Flexibility Act (5

U.S.C. 605(b)), that this final rule will

not have a significant economic impact

on a substantial number of small

entities. Based on HUD’s experience and

contacts with representatives of PHAs

and HUD field offices, HUD expects a

relatively small number of PHAs to form

consortia—certainly fewer than 100.

While there would be savings and

efficiencies in the long run for small

PHAs, forming a consortium also would

require some work for these PHAs—to

enter consortium agreements—and

would require them to overcome

resistance to giving up local control of

their programs. Consequently, HUD

concludes that this final rule will not

have a significant impact on a

substantial number of small entities.

Environmental Impact

A Finding of No Significant Impact

with respect to the environment was

made at the proposed rule stage, in

accordance with HUD regulations at 24

CFR part 50, which implement section

102(2)(C) of the National Environmental

Policy Act of 1969 (42 U.S.C. 4223).

Since the changes to the proposed rule

are minor, that Finding remains

applicable to this final rule and is

available for public inspection between

the hours of 7:30 a.m. and 5:30 p.m.

weekdays in the Regulations Division,

Office of General Counsel, Room 10276,

U.S. Department of Housing and Urban

Development, 451 Seventh Street, SW,

Washington, DC 20410.

Federalism Impact

Executive Order 13132 (entitled

‘‘Federalism’’) prohibits an agency from

publishing any rule that has federalism

implications if the rule either imposes

substantial direct compliance costs on

State and local governments and is not

required by statute, or the rule preempts

State law, unless the agency meets the

consultation and funding requirements

of section 6 of the Executive Order. This

final rule does not have federalism

implications and does not impose

substantial direct compliance costs on

State and local governments or preempt

State law within the meaning of the

Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (2 U.S.C. 1531–

1538) establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. This rule does not impose a

Federal mandate that will result in the

expenditure by State, local, and tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year.

Regulatory Review

The Office of Management and Budget

(OMB) reviewed this rule under

Executive Order 12866, entitled

‘‘Regulatory Planning and Review.’’

OMB determined that this rule is a

‘‘significant regulatory action’’ as

defined in section 3(f) of the Order

(although not an economically

significant regulatory action under the

Order). Any changes made to this rule

as a result of that review are clearly

identified in the docket file, which is

available for public inspection in the

Regulations Division of the Office of

General Counsel, Room 10276, 451

Seventh Street, SW, Washington, DC

20410–0500.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic

Assistance numbers for the program affected

by this rule are 14.850, 14.855, and 14.857.

List of Subjects in 24 CFR Part 943

Low and moderate income housing,

Reporting and recordkeeping

requirements.

Accordingly, HUD adds a new part

943 to title 24 of the Code of Federal

Regulations to read as follows:

PART 943—PUBLIC HOUSING

AGENCY CONSORTIA AND JOINT

VENTURES

Subpart A—General

Sec.

943.100 What is the purpose of this part?

Subpart B—Consortia

943.115 What programs are covered under

this subpart?

943.118 What is a consortium?

71208 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Rules and Regulations

943.120 What programs of a PHA are

included in a consortium’s functions?

943.122 How is a consortium organized?

943.124 What elements must a consortium

agreement contain?

943.126 What is the relationship between

HUD and a consortium?

943.128 How does a consortium carry out

planning and reporting functions?

943.130 What are the responsibilities of

participating PHAs?

Subpart C—Subsidiaries, Affiliates, Joint

Ventures in Public Housing

943.140 What programs and activities are

covered by this subpart?

943.142 In what types of operating

organizations may a PHA participate?

943.144 What financial impact do

operations of a subsidiary, affiliate, or

joint venture have on a PHA?

943.146 What impact does the use of a

subsidiary, affiliate, or joint venture have

on financial accountability to HUD and

the Federal government?

943.148 What procurement standards apply

to PHAs selecting partners for a joint

venture?

943.150 What procurement standards apply

to a PHA’s joint venture partner?

943.151 What procurement standards apply

to a joint venture itself?

Authority: 42 U.S.C. 1437k and 3535(d).

Subpart A—General

§ 943.100 What is the purpose of this part?

This part authorizes public housing

agencies (PHAs) to form consortia, joint

ventures, affiliates, subsidiaries,

partnerships, and other business

arrangements under section 13 of the

United States Housing Act of 1937 (42

U.S.C. 1437k). Under this authority,

PHAs participating in a consortium

enter into a consortium agreement,

submit joint PHA Plans to HUD, and

may combine all or part of their funding

and program administration. This part

does not preclude a PHA from entering

cooperative arrangements to operate its

programs under other authority, as long

as they are consistent with other

program regulations and requirements.

Subpart B—Consortia

§ 943.115 What programs are covered

under this subpart?

(a) Except as provided in paragraph

(b) of this section, this subpart applies

to the following:

(1) PHA administration of public

housing or Section 8 programs under an

Annual Contributions Contract (ACC)

with HUD; and

(2) PHA administration of grants to

the PHA in connection with its public

housing or Section 8 programs.

(b) This subpart does not apply to the

following:

(1) PHA administration of Section 8

projects assigned to a PHA for contract

administration pursuant to an ACC

entered under the Request for Proposals

(RFP) published May 19, 1999 (64 FR

27358);

(2) Section 8 contract administration

of a restructured subsidized multifamily

project by a Participating

Administrative Entity in accordance

with part 401 of this title; or

(3) A PHA in its capacity as owner of

a Section 8 project.

§ 943.118 What is a consortium?

A consortium consists of two or more

PHAs that join together to perform

planning, reporting, and other

administrative or management functions

for participating PHAs, as specified in a

consortium agreement. A consortium

also submits a joint PHA Plan. The lead

agency collects the assistance funds

from HUD that would be paid to the

participating PHAs for the elements of

their operations that are administered

by the consortium and allocates them

according to the consortium agreement.

The participating PHAs must adopt the

same fiscal year so that the applicable

periods for submission and review of

the joint PHA Plan are the same.

Notwithstanding any other regulation,

PHAs proposing to form consortia may

request and HUD may approve changes

in PHA fiscal years to make this

possible.

§ 943.120 What programs of a PHA are

included in a consortium’s functions?

(a) A PHA may enter a consortium

under this subpart for administration of

any of the following program categories:

(1) The PHA’s public housing

program (which may include either the

operating fund or the capital fund, or

both);

(2) The PHA’s Section 8 voucher and

certificate program (including the

project-based certificate and voucher

programs and special housing types);

(3) The PHA’s Section 8 Moderate

Rehabilitation program, including

Single Room Occupancy program;

(4) All other project-based Section 8

programs administered by the PHA

under an ACC with HUD; and

(5) Any grant programs of the PHA in

connection with its Section 8 or public

housing programs, such as the Drug

Elimination program or the Resident

Opportunities and Self-Sufficiency

program, to the extent not inconsistent

with the terms of the governing

documents for the grant program’s

funding source.

(b) If a PHA elects to enter a

consortium with respect to a category

specified in paragraph (a) of this

section, the consortium must cover the

PHA’s whole program under the ACC

with HUD for that category, including

all dwelling units and all funding for

that program under the ACC with HUD.

§ 943.122 How is a consortium organized?

(a) PHAs that elect to form a

consortium enter into a consortium

agreement among the participating

PHAs, specifying a lead agency (see

§ 943.124), and submit a joint PHA Plan

(§ 943.118). HUD enters into any

necessary payment agreements with the

lead agency and the other participating

PHAs (see § 943.126) to provide that

HUD funding to the participating PHAs

for program categories covered by the

consortium will be paid to the lead

agency.

(b) The lead agency must not be a

PHA that is designated as a ‘‘troubled

PHA’’ by HUD, that has been

determined by HUD to fail the civil

rights compliance threshold for new

funding, or that has had a PHAS

designation withheld for civil rights or

other reasons. The lead agency is

designated to receive HUD program

payments on behalf of participating

PHAs, to administer HUD requirements

for administration of the funds, and to

apply the funds in accordance with the

consortium agreement and HUD

regulations and requirements.

§ 943.124 What elements must a

consortium agreement contain?

(a) The consortium agreement among

the participating PHAs governs the

formation and operation of the

consortium. The consortium agreement

must be consistent with any payment

agreements between the participating

PHAs and HUD and must specify the

following:

(1) The names of the participating

PHAs and the program categories each

PHA is including under the consortium

agreement;

(2) The name of the lead agency;

(3) The functions to be performed by

the lead agency and the other

participating PHAs during the term of

the consortium;

(4) The allocation of funds among

participating PHAs and responsibility

for administration of funds paid to the

consortium; and

(5) The period of existence of the

consortium and the terms under which

a PHA may join or withdraw from the

consortium before the end of that

period. To provide for orderly

transition, addition or withdrawal of a

PHA and termination of the consortium

must take effect on the anniversary of

the consortium’s fiscal year.

(b) The agreement must acknowledge

that the participating PHAs are subject

to the joint PHA Plan submitted by the

lead agency.

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(c) The agreement must be signed by

an authorized representative of each

participating PHA.

§ 943.126 What is the relationship between

HUD and a consortium?

HUD has a direct relationship with

the consortium through the PHA Plan

process and through one or more

payment agreements, executed in a form

prescribed by HUD, under which HUD

and the participating PHAs agree that

program funds will be paid to the lead

agency on behalf of the participating

PHAs. Such funds must be used in

accordance with the consortium

agreement, the joint PHA Plan and HUD

regulations and requirements.

§ 943.128 How does a consortium carry

out planning and reporting functions?

(a) During the term of the consortium

agreement, the consortium must submit

joint five-year Plans and joint Annual

Plans for all participating PHAs, in

accordance with part 903 of this

chapter. HUD may prescribe methods of

submission for consortia generally and

where the consortium does not cover all

program categories.

(b) The consortium must maintain

records and submit reports to HUD, in

accordance with HUD regulations and

requirements, for all of the participating

PHAs. All PHAs will be bound by Plans

and reports submitted to HUD by the

consortium for programs covered by the

consortium.

(c) Each PHA must keep a copy of the

consortium agreement on file for

inspection. The consortium agreement

must also be a supporting document to

the joint PHA Plan.

§ 943.130 What are the responsibilities of

participating PHAs?

(a) Responsibilities, generally. Despite

participation in a consortium, each

participating PHA remains responsible

for its own obligations under its ACC

with HUD. This means that the PHA has

an obligation to assure that all program

funds, including funds paid to the lead

agency for administration by the

consortium, are used in accordance with

HUD regulations and requirements, and

that the PHA program is administered in

accordance with HUD regulations and

requirements. Any breach of program

requirements with respect to a program

covered by the consortium agreement is

a breach of the ACC with each of the

participating PHAs, so each PHA is

responsible for the performance of the

consortium.

(b) Applicability of independent audit

and performance assessment system

requirements to consortia. Where the

lead agency will manage substantially

all program and activities of the

consortium, HUD interprets financial

accountability to rest with the

consortium and thus HUD will apply

independent audit and performance

assessment requirements on a

consortium-wide basis. Where the lead

agency will not manage substantially all

programs and activities of a consortium,

the consortium shall indicate in its PHA

Plan submission which PHAs have

financial accountability for the

programs. The determination of

financial accountability shall be made

in accordance with generally accepted

accounting principles, as determined in

consultation with an independent

public accountant. In such situations,

HUD will apply independent audit and

performance assessment requirements

consistent with that determination.

With respect to any consortium,

however, HUD may determine (based on

a request from the consortium or other

circumstances) to apply independent

audit and performance requirements on

a different basis where this would

promote sound management.

Subpart C—Subsidiaries, Affiliates,

Joint Ventures in Public Housing

§ 943.140 What programs and activities

are covered by this subpart?

(a) This subpart applies to the

provision of a PHA’s public housing

administrative and management

functions, and to the provision (or

arranging for the provision) of

supportive and social services in

connection with public housing. This

subpart does not apply to activities of a

PHA that are subject to the requirements

of part 941, subpart F, of this title.

(b) For purposes of this subpart, the

term ‘‘joint venture partner’’ means a

participant (other than a PHA) in a joint

venture, partnership, or other business

arrangement or contract for services

with a PHA.

(c) This part does not affect a PHA’s

authority to use joint ventures, as may

be permitted under State law, when

using non-1937 Act funds.

§ 943.142 In what types of operating

organizations may a PHA participate?

(a) A PHA may create and operate a

wholly owned or controlled subsidiary

or other affiliate; may enter into joint

ventures, partnerships, or other business

arrangements with individuals,

organizations, entities, or governmental

units. A subsidiary or affiliate may be a

nonprofit corporation. A subsidiary or

affiliate may be an organization

controlled by the same persons who

serve on the governing board of the PHA

or who are employees of the PHA.

(b) The purpose of any of these

operating organizations would be to

administer programs of the PHA.

§ 943.144 What financial impact do

operations of a subsidiary, affiliate, or joint

venture have on a PHA?

Income generated by subsidiaries,

affiliates, or joint ventures formed under

the authority of this subpart is to be

used for low-income housing or to

benefit the residents assisted by the

PHA. This income will not cause a

decrease in funding provided under the

public housing program, except as

otherwise provided under the Operating

Fund and Capital Fund formulas.

§ 943.146 What impact does the use of a

subsidiary, affiliate, or joint venture have on

financial accountability to HUD and the

Federal government?

None; the subsidiary, affiliate, or joint

venture is subject to the same authority

of HUD, HUD’s Inspector General, and

the Comptroller General to audit its

conduct.

§ 943.148 What procurement standards

apply to PHAs selecting partners for a joint

venture?

(a) The requirements of part 85 of this

title are applicable to this part, subject

to paragraph (b) of this section, in

connection with the PHA’s public

housing program.

(b) A PHA may use competitive

proposal procedures for qualificationsbased procurement (request for

qualifications or ‘‘RFQ’’), or may solicit

a proposal from only one source (‘‘sole

source’’) to select a joint venture partner

to perform an administrative or

management function of its public

housing program or to provide or

arrange to provide supportive or social

services covered under this part, under

the following circumstances:

(1) The proposed joint venture partner

has under its control and will make

available to the partnership substantial,

unique and tangible resources or other

benefits that would not otherwise be

available to the PHA on the open market

(e.g., planning expertise, program

experience, or financial or other

resources). In this case, the PHA must

maintain documentation to substantiate

both the cost reasonableness of its

selection of the proposed partner and

the unique qualifications of the partner:

or

(2) A resident group or a PHA

subsidiary is willing and able to act as

the PHA’s partner in performing

administrative and management

functions or to provide supportive or

social services. This entity must comply

with the requirements of part 84 of this

title (if the entity is a nonprofit) or part

71210 Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / Rules and Regulations

85 of this title (if the entity is a State or

local government) with respect to its

selection of the members of the team

and the members must be paid on a

cost-reimbursement basis only. The

PHA must maintain documentation that

indicates both the cost reasonableness of

its selection of a resident group or PHA

subsidiary and the ability of that group

or subsidiary to act as the PHA’s partner

under this provision.

§ 943.150 What procurement standards

apply to a PHA’s joint venture partner?

(a) General. A joint venture partner is

not a grantee or subgrantee and,

accordingly, is not required to comply

with part 84 or part 85 of this title in

its procurement of goods and services

under this part. The partner must

comply with all applicable State and

local procurement and conflict of

interest requirements with respect to its

selection of entities to assist in PHA

program administration.

(b) Exception. If the joint venture

partner is a subsidiary, affiliate, or

identity of interest party of the PHA, it

is subject to the requirements of part 85

of this title. HUD may, on a case-by-case

basis, exempt such a joint venture

partner from the need to comply with

requirements under part 85 of this title

if HUD determines that the joint venture

has developed an acceptable alternative

procurement plan.

(c) Contracting with identity-ofinterest parties. A joint venture partner

may contract with an identity-of-interest

party for goods or services, or a party

specified in the selected bidder’s

response to a RFP or RFQ (as

applicable), without the need for further

procurement if:

(1) The PHA can demonstrate that its

original competitive selection of the

partner clearly anticipated the later

provision of such goods or services;

(2) Compensation of all identity-ofinterest parties is structured to ensure

there is no duplication of profit or

expenses; and

(3) The PHA can demonstrate that its

selection is reasonable based upon

prevailing market costs and standards,

and that the quality and timeliness of

the goods or services is comparable to

that available in the open market. For

purposes of this paragraph (c), an

‘‘identity-of-interest party’’ means a

party that is wholly owned or controlled

by, or that is otherwise affiliated with,

the partner or the PHA. The PHA may

use an independent organization

experienced in cost valuation to

determine the cost reasonableness of the

proposed contracts.

§ 943.151 What procurement standards

apply to a joint venture itself?

(a) When the joint venture as a whole

is controlled by the PHA or an identity

of interest party of the PHA, the joint

venture is subject to the requirements of

part 85 of this title.

(b) If a joint venture is not controlled

by the PHA or an identity of interest

party of the PHA, then the rules that

apply to the other partners apply. See

§ 943.150.

Dated: November 8, 2000.

Harold Lucas,

Assistant Secretary for Public and Indian

Housing.

[FR Doc. 00–30332 Filed 11–28–00; 8:45 am]

BILLING CODE 4210–33–P