Arkansas Administrative Code › Agency 109 - Arkansas Development Finance Authority › Rule 109.00.18-001 - Home Program Operations Manual

Current through Register Vol. 49, No. 6, June, 2024
CHAPTER
		  1:
INTRODUCTION AND PURPOSE
CONGRATULATIONS!!
* Congratulations on your HOME Investment Partnerships Program
			 (HOME) award!
* The Arkansas Development Finance Authority ("ADFA" or the
			 "Authority") will work closely with the State Recipients, Subrecipients, owners
			 and developers to ensure that eligible Arkansans have access to affordable,
			 decent, safe, and sanitary housing. Together our commitment to affordable
			 housing goes beyond the enforcement of administrative procedures and extends to
			 the people and the communities being served.
PROGRAM FUNCTIONS AND BACKGROUND
* The Arkansas Development Finance Authority, a public body
			 politic and corporate, with corporate succession, was created May 1, 1985, in
			 part to assist low-income and under-served Arkansans in the financing,
			 development, and preservation of affordable housing.
* ADFA receives HOME Investment Partnerships Act funding from HUD
			 (the HOME Act, Title II of the Cranston-Gonzalez National Affordable Housing
			 Act) as a state Participating Jurisdiction (PJ), and then makes awards to
			 eligible organizations who, in turn, disburse the HOME funds to qualified
			 households in Arkansas communities.
* The HOME Investment Partnerships Program ("the HOME Program")
			 was created to provide funds to expand the supply of affordable housing for
			 very low-income and low-income persons.
* ADFA embraces its responsibility to administer the HOME Program
			 that has been entrusted to it.
> ADFA will administer the HOME Program creatively,
			 effectively, and efficiently under the housing conditions that exist in the
			 State of Arkansas (the "State") and with all practical safeguards against waste
			 or fraud.
> ADFA will practice and advocate innovation, flexibility, and
			 expansion in program design to address unmet housing needs throughout the
			 state.
* The HOME Program Final Rule found in 24 CFR Part 92 is the
			 implementing regulation for the program. The HOME Final Rule has been updated
			 over the years. The most recent update was published in the
Federal
			 Register
on July 24, 2013.
USING THE ADFA HOME PROGRAM OPERATIONS MANUAL
* State Recipients, Subrecipients, and funded entities should
			 read this manual to learn the rules and requirements associated with ADFA's
			 HOME Program. Different rules apply to different activities (homeowner, rental
			 and TBRA), therefore readers should refer to relevant chapters as listed in
			 Exhibit 1.1.
* Funding Recipients must follow procedures described in the ADFA
			 HOME Program Operations Manual and use all referenced ADFA forms. Referenced
			 appendices and accompanying resources provide additional information and
			 instruction. ADFA's manual, forms, and appendices are available online at:
http://adfa.arkansas.gov/
.
EXHIBIT 1.1 Chapters to Reference for each
			 Activity
Chapter Number
Chapter Name
Homeowner -
Owner
Occupied
Rehab
Homebuyer
Rental
Tenant-Based
Rental Assistance
(TBRA)
2
Administrative Overview and Management
X
X
X
X
3
General Requirements of the HOME Program
X
X
X
X
4
Homeowner Occupied Rehabilitation
X
5
Homeownership Development
X
6
Rental Housing Program
X
7
Tenant-Based Rental Assistance
X
8
Community Housing Development Organizations
X (if
applicable)
X (if
applicable)
9
Recordkeeping/Reporting
X
X
X
X
10
Procurement
X
X
X
11
Construction Management
X
X
X
12
Environmental Review
X
X
X
X
13
Other State/Federal Requirements
X
X
X
X
14
Match
X
X
X
DISCLAIMER
This manual is for ADFA HOME Recipients and/or any related
			 parties as a support and practical guidance related to the HOME Program.
It is not intended to change, enlarge or restrict any requirement
			 found in the contracts, Department of Housing and Urban Development (HUD) Final
			 Rule, Arkansas Development Finance Authority rules and policies and/or any
			 related federal or state rule governing this program.
This manual is not meant to be a substitute for HOME Program
			 regulations, but as a supplement to them. It is not exhaustive regarding all
			 considerations affecting the use of HOME Program funds. While careful
			 consideration and due care has been used in developing the manual, HOME Program
			 participants are encouraged to consult with ADFA HOME Program staff to ensure
			 correct interpretation of policies and regulations. ADFA reserves the right to
			 implement additional policies as needed.
CHAPTER 2:
ADMINISTRATIVE AND
		  MANAGEMENT OVERVIEW
Recipients of HOME funds are subject to a number of general
			 administrative requirements and must manage their program to comply. Here we
			 discuss these requirements and how to put in place proper systems and
			 procedures to start up a solid program.
This chapter covers administrative requirements and management
			 considerations that HOME fund Recipients should have in mind when they are
			 successful in their application to ADFA and receive HOME funds. The first part
			 of the chapter discusses how to get started - the agreements and systems that
			 should be put in place, good practices for administering and managing HOME
			 funds, and also how to complete draws for HOME funds. The second part of the
			 chapter covers specific administrative requirements including HOME rules for
			 administrative and planning costs, Federal uniform administrative requirements,
			 HOME written agreements, conflict-of-interest provisions, prohibition against
			 the use of HOME funds for inherently religious activities, HOME rules for
			 program income, assisting with the Integrated Disbursement and Information
			 System (IDIS) requirements, and other ADFA administrative requirements.
GETTING STARTED
* Certifications.
Applicants applying for HOME
			 Program funds must successfully complete the following certification
			 courses:
>
HOME Program Certification:
Effective
January 1, 2011,
applicants applying for ADFA HOME Program funds
			 (exclusive of ADDI funds) must have, at a minimum, a current ADFA HOME Program
			 Certification as a Program Administrator in the activity for which the
			 application is being made. Such certification may be acquired through the new
			 class format (which includes online videos and tests) available 24/7 on the
			 ADFA website.
> Applicants may meet this certification requirement as
			 follows:
V Applicant, if an individual, or an employee of applicant
			 obtains an ADFA HOME Program Certification as a Program Administrator as noted
			 below in the activity for which the application is being made by attending an
			 ADFA-sponsored 21/4 day certification training and
			 successfully passing the certification exam given at the conclusion of the
			 training with a minimum of 70%; or
V One member of the applicant's development team has a current
			 ADFA Program Administrator certification in the activity for which the
			 application is being made. Development team members may include the owner,
			 developer, sponsor, management company or a CHDO. If a consultant is employed
			 to satisfy this requirement, that consultant must have a current ADFA HOME
			 Program Consultant Certification in the activity for which the application is
			 being made.
> Program Administrators, if an individual, may participate in
			 ADFA HOME activities as an individual applicant, or if an employee, on behalf
			 of their organization only. Consultants may contract and provide technical
			 assistance to ADFA HOME Program applicants. Each must attend an ADFA-sponsored
			 21/4 day certification training and successfully
			 pass the certification exam given at the conclusion of the training.
			 Program
Administrators must score a minimum of 70%. Consultants must
			 score a minimum of 80%.
> At the present, there are six (6) ADFA HOME Program
			 Certifications that may be obtained for ADFA HOME Program activities:
V Program Administrator - Homeowner
			 Rehabilitation/Homebuyer;
V Program Administrator - Rental/TBRA;
V Program Administrator - Comprehensive (includes all HOME
			 activities);
V Consultant - Homeowner Rehabilitation/Homebuyer;
*S
Consultant - Rental/TBRA; and
V Consultant - Comprehensive (includes all HOME
			 activities).
> Certifications are valid for
five (5) years
from the date of the exam. No continuing education is required.
>
Fair Housing Certification:
Effective
January 1, 2012
applicants applying for HOME Program funds must
			 successfully complete Fair Housing Training Course prior to receiving
			 funding.
V The training course will provide a thorough knowledge and
			 understanding of the Fair Housing Act.
V Applicants will be required to have the following members of
			 the development team who have successfully completed the course:
* Owners, Developers, Sponsors of the project
* Consultants
* Management Company
* Architects
* Community Housing Development Organizations (CHDO)
* Subrecipients - Project Administer
* Capacity.
Applicants will be required to have at
			 least one member of the development team who has one or more years of housing
			 development experience and has successfully completed at least one affordable
			 housing project.
* Program Recipients will take several steps, upon receipt of the
			 award and before any project work begins. These are described below.
* Award notification.
Upon ADFA Board approval of
			 the HOME Program application, ADFA will issue an Award Letter to a Recipient
			 that specifies the award amount and any applicable conditions.
* Agreement.
ADFA HOME agreements have to be
			 executed to codify the details the ADFA HOME award upon satisfactory
			 environmental review. The Recipient agreement will specify ADFA's expectations
			 and requirements.
> Written Agreements will include general requirements that
			 are applicable across all ADFA HOME programs.
V General requirements are specified in detail in the Chapter 3:
			 General Requirements.
> Program specific details that are specified in written
			 agreements will reflect the details of the approved application and ADFA HOME
			 parameters.
V ADFA HOME parameters for specific programs are detailed in
			 Chapter 4: Homeowner Rehabilitation Housing Program, Chapter 5: Homebuyer
			 Housing Program, Chapter 6: Rental Housing Program, and Chapter 7: Tenant-Based
			 Rental Assistance. Please review the appropriate chapter for your
			 program.
* Notice to proceed.
To ensure that all HOME Program
			 requirements have been met, no work shall begin until all documentation has
			 been executed, a preconstruction conference has been conducted, and ADFA issues
			 a Notice to Proceed.
* Project setup.
ADFA expects that Recipients will
			 complete IDIS Setup and Completion Forms for each project and/or individual
			 activity that is carried out within the scope of the administered
			 program.
* Preconstruction conference.
For all projects that
			 involve construction (multi- and single-family development activities and
			 homeowner rehabilitation), preconstruction conferences must be conducted prior
			 to commencing construction.
> For rental activities the preconstruction conference must be
			 conducted with the development team and an ADFA representative.
> For homeowner activities the preconstruction conference must
			 be conducted with the applicant/consultant, the homeowner, the contractor, and
			 an ADFA Inspector.
CRITICAL SUCCESS FACTORS
To be successful in the use of administration and management of
			 HOME funds, Recipients should consider several factors that are critical to
			 success. They include readiness to initiate the program and the ability to
			 account for funds. There are also a number of sound management practices that
			 support success.
* Readiness.
ADFA expects that Recipients will
			 initiate programs immediately upon receipt of Notice to Proceed.
> Applicants applying for HOME Program funds must begin their
			 program activities and/or developments within ninety (90) days of the Notice to
			 Proceed.
> Recipients that do not commence program activities and/or
			 developments within ninety (90) days risk the loss of their award, unless
			 otherwise approved by ADFA.
V ADFA realizes that there may be extenuating circumstances that
			 may delay the beginning of a program/project. Such circumstances will be
			 reviewed on a case-by-case basis.
> Funds that are lost by Recipients will be reallocated to
			 other eligible activities.
* Accountability.
ADFA expects that Recipients will
			 be accountable for all ADFA HOME funds distributed through their programs. To
			 that end, Recipients are expected to:
> Monitor beneficiaries and contracted/partner entities for
			 appropriate expenditures.
V Please refer to ADFA's Compliance and Monitoring Manual for
			 more guidance on monitoring requirements.
> Provide accurate beneficiary and expenditure activity to
			 ADFA.
V IDIS Setup forms must be used for each project and/or activity
			 within a program.
V IDIS Setup forms must accurately reflect beneficiary
			 information.
V Changes must be documented and reported to ADFA.
V IDIS Close Out reports must be completed and submitted to close
			 out each project/activity.
V Please review the IDIS section of this chapter for further
			 details.
* Other good practices.
There are several key steps
			 in the effective administration of a HOME program that will aid Recipients in
			 running good ADFA HOME programs. ADFA strongly urges Recipients to consider
			 these steps and implement them in the administration of all ADFA HOME program
			 activities:
>
Hire, organize, and staff key functions:
The
			 core of an effective HOME program is its staff
V Staff must be knowledgeable (or trained) to work well with
			 clients, partners, and each other; and
V There must be systems in place to track and manage
			 performance.
>
Choose qualified partners:
Recipients should
			 have systems for selecting partners that are:
V Easily understood and fair; and
V Capable of delivering projects that meet or exceed expectations
			 and comply with requirements in the written agreement with ADFA.
V As noted above, Recipients must monitor the performance of
			 their partners and take appropriate, timely action to correct problems.
>
Develop effective policies and procedures:
Policies and procedures are the backbone to the operations of a program.
			 ADFA expects that Recipients will have policies and procedures in place to
			 guide staff and partners.
V Policies and procedures must be clear and easily
			 understood.
V Policies and procedures must be current and reflect:
* What must be done;
* Who should do the work; and
* When it should be done.
V They must be followed and performance should be monitored to
			 ensure compliance.
>
Advertise the program appropriately:
Recipients
			 are expected to identify and serve appropriate beneficiaries, especially
			 under-served populations.
>
Make strategic project investments:
Recipients
			 are expected to have the capacity to underwrite and fund projects that meet
			 local goals and the intent of the HOME program.
V In particular, this means that projects that are impractical,
			 under-funded, or are not consistent with program goals do not get awarded HOME
			 funds.
>
Use ADFA prepared closing documents and template
			 agreements:
Written Agreements set the parameters for measuring and
			 monitoring performance.
V They must be complete, and clearly describe the project, roles
			 of the Recipient and the partner involved.
V They must set realistic, achievable milestones for achievement
			 and describe consequences for failure to meet them.
>
Oversee construction effectively:
Good
			 construction management is essential to the HOME program's success. Please see
			 Chapter 11: Construction Management for details.
V It begins with a preconstruction conference and follows with
			 regular progress and a final inspection.
* The HOME program has a number of property standards that must
			 be understood and followed.
* Inspection reports will cover compliance with applicable
			 property codes and standards.
V Costs to develop or preserve housing must be reasonable, and
			 budgets and invoices must be reviewed by knowledgeable staff persons prior to
			 approval.
V It also includes reporting that is taken seriously by both the
			 PJ and its partner, and tracks information that is useful and accurate.
>
Manage affordability period compliance:
The
			 Recipient is responsible for ensuring that beneficiaries are income eligible
			 and contractors and/or partners involved in the process are adequately
			 verifying incomes.
V In addition, rental projects must be effectively managed during
			 the affordability period. This includes managing rents, unit quality, and
			 recertifying incomes.
>
Ensure effective financial management:
Recipients are subject to the Federal Uniform Administrative
			 Requirements which are detailed in a later section in this chapter. In
			 addition, Recipients must be able to evaluate budgets and proposals from
			 contractors and/or partners to determine if they appear to be financially
			 sound.
V Recipients must be able to anticipate the need for HOME funds
			 and budget accordingly for all activities.
V They also must have the capacity to train (if needed) and
			 monitor their partners to ensure that their financial management systems can
			 provide sufficient information to prevent fraud or waste, make informed
			 budgeting decisions, and track source documentation of expenditures.
>
Keep records and monitor:
Again, Recipients are
			 required to monitor their own program and the performance of their
			 partners.
V They must keep records sufficient to demonstrate to ADFA that
			 HOME funds have been spent appropriately and within the intent of the program
			 and compliant with its regulations.
V Recipients must provide information regarding their annual
			 performance in annually administering HOME funds to ADFA so that ADFA can
			 report the information and make it available to HUD and the public for
			 review.
V ADFA may require additional information upon request for
			 presentations or information from members of its governing body and the public
			 to demonstrate performance and outcomes of the ADFA HOME program.
>
Evaluate program effectiveness:
ADFA must, as
			 part of its annual monitoring requirement, look at internal operations.
HOME PROGRAM DRAWS
* Disbursement of HOME Program funds will occur only when all of
			 the following conditions have been met:
> Required environmental review process has been
			 satisfactorily completed.
> Project closing documents are finalized. The written HOME
			 Program Agreement will reflect the following:
V A project completion date acceptable to ADFA and the Recipient
			 of the HOME Program funds;
V Payment of the HOME Program funds (e.g., how the funds will be
			 disbursed: at the beginning of the project or on a prorata basis, or as final
			 funds are disbursed); and
V Provisions for the timing of HOME Program fund
			 disbursements.
> Complete IDIS setup information has been submitted to ADFA
			 staff and ADFA staff has completed IDIS activity setup. See section on (IDIS)
			 below for additional details.
> A preconstruction conference is held.
V For rental activities the preconstruction conference must be
			 conducted with the development team and an ADFA representative.
V For homeowner activities the preconstruction conference must be
			 conducted with the applicant/consultant, the homeowner, the contractor, and an
			 ADFA Inspector.
> ADFA issues a Notice to Proceed. To ensure that all HOME
			 Program requirements have been met, no work shall begin until all documentation
			 has been executed, a preconstruction conference has been held, and a Notice to
			 Proceed is issued by ADFA.
* Payment details including timeline for reimbursement will be
			 outlined in the project closing documents, specifically the HOME Written
			 Agreement.
* General ADFA requirements regarding reimbursement of costs
			 include:
> Cost incurred prior to HOME Program fund allocation shall
			 not be reimbursed (except in the case of an eligible soft cost or an interim
			 construction loan approved by ADFA).
> Retainage will be released thirty (30) days after the final
			 inspection is approved and upon ADFA's receipt of pay request and all
			 completion documentation.
V Completion documentation required for release of retainage on
			 rental activities include:
* Final completed Project Breakdown Pay Estimate Itemization
			 (ADFA Form 2011)
* HOME Disbursement Certification Form (ADFA Form 2012)
* Owners Completion Certificate and Authorization of Payment to
			 Contractors -(ADFA 10000)
* Project Completion Form (HUD Form 40097)
* Final Inspection Report by ADFA Inspector
* Plumbing Certification
* HVAC Certification
* Electrical Certification
* Certificate of occupancy(s) (for all buildings comprising the
			 property)
* Certificate and Release of Liens (ADFA Form)
* Certification of Final Inspection (ADFA Form)
* Placed in Service Form (ADFA Form)
* Section 3 Compliance Report and Documentation
* Advertisement/Flyers/and any additional efforts to hire low and
			 very low income county residents)
* Names, address, telephone number, and type of work for all
			 subcontractors
* Release of Liens by Contractor & Subcontractor(s)
* Cost Certification
* Warranty Information for all Products
* Copy of Tenant Selection Criteria
* Affirmative Fair Housing Marketing Plan Documentation
* Proof of advertisement, flyers, proof of community contact
			 letters being mailed photo of project sign, waitlist and any other lease up
			 marketing efforts)
* Proof of current Hazard/Liability Insurance naming ADFA as
			 additional insured
* Management agreement between owner and agent
* Match Form & supporting documentation to reconcile with
			 original application
* Evidence of Operating Reserve requirements have been satisfied
			 per application (Bank Statements)
* Completion of project information in the ADFA Housing Registry
			 Database
* Any additional information and/or documentation which ADFA
			 staff may deem necessary and appropriate to ensure compliance
V Completion documentation required for release of retainage on
			 homeowner activities include:
* Pay Estimate Itemization Form
* ADFA Inspection Report
* HOME Disbursement Certification Form (ADFA 2012)
* Owners Completion Certificate and Authorization of Payment to
			 Contractors -(ADFA 10000)
* Certification of Final Inspection - (ADFA Form)
* Electrical Certification
* HVAC Certification
* Plumbing Certification
* Certificate and Release of Liens - Notarized with valid notary
			 stamp
* Homeowner Rehab Setup Completion Form (HUD 40096)
* Lead Base Paint Clearance Letter - Required for all housing
			 built prior to 1978
* Proof of Homeowner Insurance - ADFA listed as additional
			 insured
* Completion of project information in the ADFA Housing Registry
			 Database
* Any additional information and/or documentation which ADFA
			 staff may deem necessary and appropriate to ensure compliance
V Completion documentation required for release of delivery costs
			 on homeowner activities include:
* Certification of Delivery Costs
* Acknowledgement Page - Notarized with valid notary stamp
* Audit
(Section "Y" of ADFA Policy & Procedures
			 Manual)
* Any additional information and/or documentation which ADFA
			 staff may deem necessary and appropriate to ensure compliance
* Supporting documentation for delivery cost expenditures or
			 expenses
V If any HOME Program funded project has an available balance
			 after development completion and release of retainage, ADFA will de-obligate
			 those funds and reallocate such balance of HOME Program funds to other eligible
			 activities according to ADFA's adopted HOME Program allocation process.
ELIGIBLE ADMINISTRATIVE AND PLANNING COSTS
ADFA allows Recipients a maximum of 10% of their allocation for
			 reasonable administrative and planning costs. These include staff costs as well
			 as other administrative costs. Details on how to determine what is eligible and
			 reasonable are in the subsections below.
* The 10% cap includes certain soft costs incurred by Recipients
			 that are project-related. Again, see the details on how to determine what is
			 eligible as a project-related soft cost below.
* To understand how the 10% is calculated, it is important to
			 note the following.
> For most activities, the 10% is in addition to the requested
			 HOME Program allocation amount.
> For TBRA, administration funds are based on an estimate of
			 the number of new and continuing tenants served by the Recipient's TBRA
			 program. Please refer to the section on Program Administration Funds versus
			 Annual Subsidy Requirements in Chapter 7: Tenant-Based Rental Assistance for
			 details regarding TBRA administration funds.
> Applicants who choose to use a consultant must include the
			 consultant fee, if any, in an amount not to exceed ten percent (10%) of the
			 requested HOME Program allocation in the proposed development budget.
V Applicants who choose not to use a consultant may apply for an
			 amount not to exceed ten percent (10%) of the requested HOME Program allocation
			 as reimbursement of project delivery costs.
V The HOME Program allocation may not include both a consultant
			 fee and a project delivery cost reimbursement.
Staff Costs for Administering ADFA HOME
			 Programs
* Eligible administrative and planning costs include expenditures
			 for salaries, wages and related costs of Recipient staff responsible for HOME
			 Program administration.
* Recipients have two alternatives for determining the amount of
			 staff costs to charge to HOME Program administration.
>
Option 1
: Include the
entire
salary, wages and related costs of each person whose
primary
responsibility involves program
			 administration assignments.
OR
>
Option 2:
Determine the
pro rata
			 share
of salary, wages and related costs of each person whose
			 job includes
any
program administration
			 assignments for each person.
* A Recipient may choose
only one
of these two methods each program year.
Example
: Smithville's HOME
			 Program director spends approximately 90 percent of her time on HOME Program
			 management, oversight and coordination, while the budget analyst spends only 30
			 percent of his time on HOME Program management and coordination. Under Option
			 1, all of the HOME Program director's salary could be charged to HOME
			 administrative/planning costs, but none of the budget analyst's salary could be
			 charged. Under Option 2, 90 percent of the HOME Program administrator's salary
			 and related costs and 30 percent of the budget analyst's salary and other costs
			 could be charged to HOME Program administrative/planning costs.
* Assignments as a factor:
For the purpose of
			 determining whether all or a portion of a staff person's salary and related
			 costs may be charged to HOME, Recipients must analyze the types of assignments
			 carried out by each individual.
* HOME Program administrative assignments that should be
			 considered in making this determination include:
> Developing systems and schedules for ensuring compliance
			 with HOME Program requirements;
> Finalizing HOME agreements;
> Monitoring HOME-assisted housing and housing with designated
			 matching funds;
> Preparing reports and other documents;
> Coordinating the resolution of monitoring and audit
			 findings; and
> Managing or supervising persons whose primary
			 responsibilities include those previously listed.
Other Planning and Administrative
			 Costs
* In addition to staff salaries and related costs, these
			 include:
> Goods and services necessary for administration (e.g.,
			 utilities, office supplies, etc.);
> Administrative services under third party agreements (e.g.,
			 legal services);
> Administering a tenant-based rental assistance (TBRA)
			 program;
> Providing public information;
> Fair housing activities;
> Indirect costs under a cost allocation plan prepared in
			 accordance with applicable Office of Management and Budget (OMB) Circular
			 requirements and approved by ADFA; and
> Complying with other Federal requirements.
Administrative Costs Versus Project-Related
			 Soft Costs
* Certain costs may be charged as either administrative and
			 planning costs,
or
as project-related soft costs when they are
			 incurred by Recipients. Project-related soft costs are not available to
			 owners/developers/sponsors. Costs that are eligible as project-related soft
			 costs are listed below.
>
Staff and overhead costs:
These are staff and
			 overhead costs incurred by the Recipient or third party contractor that are
			 directly related to carrying out specific HOME projects. They include:
V Appraisals;
V Preparation of work specifications;
V Loan processing and underwriting;
V Construction inspections and oversight;
V Inspections for the presence of lead hazards or defective
			 paint;
V Advisory and other relocation services;
V Project-specific environmental reviews; and
V Homebuyer and tenant counseling (if the buyer or tenant is
			 HOME-assisted).
>
Compliance costs:
These include the costs of
			 complying with other Federal requirements directly related to a specific
			 HOME-assisted project.
* Implications of charging to a project.
Charging
			 costs to a specific project has several implications.
> Project costs count in the maximum per-unit subsidy limit
			 calculation.
> Administrative costs charged to the project should not be
			 included in the loan to the project owner.
> Project costs trigger 25 percent match.
> If the project does not go forward, project costs must be
			 charged as administrative costs.
* Implications of charging as administrative and planning
			 costs:
> Costs are subject to the 10 percent cap, and
> Accounting and reporting requirements are simplified.
* Exceptions:
> State recipients, subrecipients, community housing
			 development organizations (CHDO), housing non-profits, and for-profit
			 developers may not charge servicing, originations or other fees for the purpose
			 of covering costs of administering the HOME program.
> Some costs of providing HOME-funded TBRA are administrative
			 costs and some may be charged as project-related soft costs. See Chapter 7:
			 TBRA for more information.
> Project-related soft costs incurred by a property owner are
			 considered project-specific and cannot be charged as administrative costs. (For
			 example, if the property owner hires and pays for an appraisal.)
* For more information:
For further guidance,
			 Recipients should refer to HUD Notice CPD 06-01 "Administrative Costs,
			 Project-related Soft Costs, and Community Housing Development Organization
			 (CHDO) Operating Expenses Under the HOME Program," which is available online on
			 the HUD Exchange at
www.hudexchange.info
.
UNIFORM ADMINISTRATIVE REQUIREMENTS
Recipients must comply with certain administrative requirements,
			 generally pertaining to the financial management and audit standards. All
			 projects funded after December 26, 2014 must follow 2 CFR Part 200.
* Recipients must comply with administrative requirements,
			 generally pertaining to the financial management and audit standards. All
			 recipients administering ADFA HOME programs or using ADFA HOME funds should be
			 familiar with these requirements at 2 CFR 200m but especially:
>
2 CRF 200.425 Audits
> 2 CFR 200 Subpart B Conflict of Interest
> 2 CFR 200 Subpart E: Cost Principles.
This
			 section establishes principles and standards to provide a uniform approach for
			 determining allowable costs under Federal grants
>
2 CFR 200 Financial Management Systems
WRITTEN AGREEMENTS BETWEEN RECIPIENTS AND OTHER ENTITIES
			 FOR ADFA HOME FUNDS
Written agreements are important legal documents that help ADFA
			 and its Recipients protect their investment and enforce HOME Program
			 rules.
* A written agreement must be entered into
before
			 any HOME funds are committed or disbursed
by the Recipient to
			 any entity.
> ADFA will enter into an agreement with all Recipients of its
			 HOME program before committing or disbursing funds.
> Additionally, ADFA provides template consulting agreements
			 that must be used by Recipients.
> Upon request, ADFA can provide an addendum that cover both
			 ADFA and HUD specific terms.
* When properly written and executed, a written agreement can
			 be:
> A valuable management tool for verifying compliance and
			 monitoring performance;
> A training tool for all parties using HOME funds to learn
			 about the rules and regulations of the HOME Program and other Federal
			 regulations; and
> A Recipient's method of enforcing program requirements and
			 protecting its investment.
Contents of Written
			 Agreements
* A written agreement should serve as a concise statement of the
			 relationship between the Recipient and a funded entity/beneficiary of HOME
			 funds. It should also clearly state the conditions under which the HOME funds
			 are provided.
* The discussion below is intended to educate Recipients
			 regarding the required provisions in ADFA HOME written agreements.
* Note that for all development activities, ADFA will select
			 and/or approve a closing entity to provide closing services for all HOME
			 Program transactions using ADFA-approved documents.
> The services will be available and required in the county
			 where the development is located.
> ADFA HOME Program staff will provide closing instructions
			 for all HOME Program funded transactions to the closing entity.
> ADFA will be responsible for payment of costs associated
			 with closing the HOME Program portion of the transaction on both homeowner and
			 rental activities.
* Required provisions. The specific contents of agreements will
			 vary. The 2013 HOME Final Rule (24 CFR Part 92) details the specific HOME
			 provisions that must be included in written agreements between program
			 administrating Recipients and the various entities that may receive HOME funds.
			 These provisions are listed below.
> Use of funds: Description of the amount and use of HOME
			 funds, including the type and number of housing units, tasks to be performed,
			 schedule for completing tasks (including a schedule of committing funds to
			 projects that meet the deadlines established by this part), a budget, any
			 requirement of matching contributions, and the period of the agreement in
			 sufficient detail to effectively monitor performance. (For nonprofit and
			 for-profit housing owner, sponsor or developers, the duration of the agreement
			 will be in a separate clause.) These items must be in sufficient detail to
			 provide a sound basis for ADFA to effectively monitor performance under the
			 agreement.
> Affordability: Requires housing assisted with HOME funds to
			 meet the affordability requirements, as applicable, and require repayment of
			 the funds to ADFA, if the housing does not meet the affordability requirements
			 for the specified time period. The affordability requirements must be imposed
			 by deed restrictions, covenants running with the land, use restrictions or
			 other mechanisms approved by HUD.
> Reversion of assets/program income requirements: States
			 whether program income, unexpended funds or other assets will be returned to
			 the Recipient.
> Uniform administrative requirements:
Compliance with applicable Federal administrative requirements
			 (applicable provisions of 24 CFR Part 85 for governmental entities or
			 applicable provisions of 24 CFR Part 84 for non-profit entities)
Exhibit 2-1 summarizes which of the minimum required provisions
			 must be included in the various types of written agreements.
> Other Federal requirements:
Requirements
			 regarding: non-discrimination and equal opportunity; affirmative marketing and
			 minority outreach; environmental review; displacement, relocation and
			 acquisition; labor standards; lead-based paint; and
			 conflict-of-interest.
>
Affirmative marketing:
Requirements for
			 affirmative marketing in projects of five or more HOME-assisted units.
>
Requests for disbursements of funds:
Requirement that HOME funds may not be requested until funds are needed
			 for payment of eligible costs. The amount of each request must be limited to
			 the amount needed. Program income must be returned to ADFA before any new
			 funding requests will be provided.
>
Records and reports:
Enumeration of records
			 that must be maintained, and information and reports that must be
			 submitted.
>
Enforcement of the agreement:
This provision is
			 in the agreement with all parties, including owners, and is the means of
			 enforcing the provisions of the written agreement.
>
Prohibited Fees:
Prohibits the recipient from
			 charging servicing, origination, or other fees for the costs of administering
			 the HOME program.
* Template agreements.
Recipients must use ADFA
			 template contracts, agreements and other legal documents as provided by ADFA's
			 HOME Program staff.
* Duration of agreements.
The agreement must specify
			 the duration of the agreement. If the housing assisted under the agreement is
			 rental housing, the agreement must be in effect through the affordability
			 period required by the ADFA. If the housing assisted under this agreement is
			 homeownership housing, the agreement must be in effect at least until the
			 completion of the project and transfer of ownership to a low-income
			 family.
*
Amending the documents.
Written agreements may be
			 amended by mutual agreement of the parties when regulations and requirements
			 change, or when adjustments to funding levels or other conditions related to a
			 specific project are needed.
EXHIBIT 2-1 Required Provisions in Written Agreements
PJ Agreement With...
Required Provisions (§92.504)
State Recipients
Recipients (e.g., Sub-recipients)
Owners, Sponsors, Developers (e.g.,
						CHDOs)
Contractors
Homebuyers
Homeowners
Tenants (Receiving TBRA)
Use of HOME Funds
[TICK]
[TICK]
[TICK]
[TICK]
[TICK]
[TICK]
Affordability (§92.252 or §92.254)
[TICK]
[TICK]
[TICK]
Program Income
[TICK]
[TICK]
Uniform Administration Requirements (§92.505)
[TICK]
[TICK]
Project Requirements (as applicable in Subpart F)
[TICK]
[TICK]
[TICK]
§92.254(a) only
[TICK]
§92.254(b) only
[TICK]
§92.209 and §92.253
						only
Property Standards (§92.251 and §92.355)
[TICK]
Other Program Requirements (Subpart H except §92.352
						and §92.357)
[TICK]
[TICK]
[TICK]
[TICK]
except §92.505, §92.506,
						§92.352
Affirmative Marketing (§92.351)
[TICK]
[TICK]
[TICK]
Requests for Disbursement of Funds
[TICK]
[TICK]
[TICK]
Reversion of Assets
[TICK]
Records and Reports
[TICK]
[TICK]
[TICK]
Enforcement of the Agreement (§92.252 and 24 CFR
						Part 85 as applicable)
[TICK]
[TICK]
[TICK]
[TICK]
Duration of the Agreement
[TICK]
[TICK]
[TICK]
Prohibited Fees (§92.214)
[TICK]
[TICK]
[TICK]
CHDO Provisions (§92.300 and §92.301)
[TICK]
Suggested Provisions (not HOME
						requirements)
Roles and Responsibilities
[TICK]
[TICK]
[TICK]
[TICK]
Description of the Project
[TICK]
[TICK]
[TICK]
Performance Standards
[TICK]
[TICK]
[TICK]
[TICK]
Conflict of Interest
[TICK]
[TICK]
[TICK]
Monitoring
[TICK]
[TICK]
[TICK]
[TICK]
Close-out Requirements
[TICK]
[TICK]
[TICK]
Non-compliance
[TICK]
[TICK]
[TICK]
[TICK]
[TICK]
CONFLICT-OF-INTEREST
The HOME Program regulations require Recipients to comply with
			 two different sets of conflict-of-interest provisions. The first set of
			 provisions comes from 2 CFR 200. The second, which applies only in cases not
			 covered by 24 CFR 200 Subpart B, is set forth in the HOME regulations.
			 Additionally, the HOME regulations include conflict-of-interest provisions for
			 nonprofit, for-profit owners/developers/sponsors and CHDOs.
Additionally, Arkansas Governor's Executive Order 98-04,
			 Governor's Policy Directive #8, and ACA §
								21-8-304 have established
			 mandatory guidelines and procedures that are intended to prevent waste, abuse
			 or the appearance of impropriety and to create a clearinghouse for grants and
			 contracts.
Recipient Activities Covered by CFR
			 Provisions
* In the procurement of property and services by Recipients, the
			 conflict-of-interest provisions are located at 24 CFR 200 Subpart B. These
			 regulations require Recipients to maintain written standards governing the
			 performance of their employees engaged in awarding and administering contracts.
			 At a minimum, these standards must:
> Require that no employee, officer, agent of the Recipient
			 shall participate in the selection, award or administration of a contract
			 supported by HOME if a conflict-of-interest, either real or apparent, would be
			 involved;
> Require that Recipient employees, officers and agents not
			 accept gratuities, favors or anything of monetary value from contractors,
			 potential contractors or parties to subagreements; and
> Stipulate provisions for penalties, sanctions or other
			 disciplinary actions for violations of standards.
* A conflict would arise when any of the following has a
financial or other interest
in a firm selected
			 for award:
> An employee, agent or officer of the Recipient;
> Any member of an employee's, agent's or officer's immediate
			 family;
> An employee's, agent's or officer's partner; or
> An organization that employs or is about to employ an
			 employee, agent or officer of the Recipient.
Recipient Activities Covered by HOME
			 Regulations
* In cases not covered by 2 CFR 200 Subpart B, the HOME
			 regulations at 24 CFR
			 92.356(f) governing
			 conflict-of-interest apply. These provisions cover employees, agents,
			 consultants, officers and elected or appointed officials of the Recipient. The
			 HOME regulations state that no person covered who exercises or has exercised
			 any functions or responsibilities with respect to HOME activities or who is in
			 a position to participate in decisions or gain inside information:
> May obtain a financial interest or benefit from a HOME
			 activity; or
> Have an interest in any contract, subcontract or agreement
			 for themselves or for persons with business or family ties.
* This requirement applies to covered persons during their tenure
			 and for one year after leaving the Recipient entity.
* Exceptions.
Upon written request by the Recipient
			 to ADFA, exceptions to both sets of provisions may be granted by HUD on a
			 case-by-case basis. After ADFA has completed the following an exception may be
			 granted:
> Disclosed the full nature of the conflict and submitted
			 proof that the disclosure has been made public, and
> Provided a legal opinion from ADFA stating that there would
			 be no violation of state or local law if the exception were granted.
* To request that ADFA submit a written request for an exception,
			 please contact your ADFA manager.
* Executing and maintaining conflict-of-interest
			 provisions.
While not specifically required in the HOME regulations,
			 Recipients must include the conflict-of-interest provision in written
			 agreements and other documents with owners, developers and sponsors. In
			 addition, monitoring of projects should include necessary actions to ensure
			 that this provision is adhered to.
HOME Provisions for Nonprofit and For-Profit
			 Owners, Developers, CHDOs and Sponsors
* The HOME Final Rule includes conflict-of-interest provision
			 applicable to for-profit and nonprofit owners, developers and sponsors of
			 HOME-assisted housing. This provision states that no owner, developer or
			 sponsor of HOME-assisted housing, including their officers, employees, agents,
			 consultants or elected or appointed officials, may occupy a HOME-assisted unit
			 in a development. This provision
does not
apply
			 to:
> An individual receiving HOME funds to acquire or
			 rehabilitate his/her principal residence, or
> An individual living in a HOME-assisted rental housing
			 development where he/she is a project manager or a maintenance worker in that
			 development.
* Exceptions.
Exceptions to this
			 conflict-of-interest provision (governing owners, developer and sponsors of
			 HOME-assisted housing) may be granted by ADFA after obtaining a waiver from HUD
			 on a case-by-case basis based on the following factors as set forth in the
			 regulations:
> Whether the person receiving the benefit is a member of a
			 group or class of low-income persons intended to be the beneficiaries of
			 assisted housing, and the exception will permit him or her to receive generally
			 the same interests or benefits as are being made available or provided to the
			 group as a whole;
> Whether the person has withdrawn from his or her functions
			 or responsibilities, or the decision-making process with respect to the
			 specific assisted housing in question;
> Whether the tenant protection requirements of CFR 92.253
			 (prohibited lease terms, termination of tenancy and tenant selection) are being
			 observed;
> Whether the affirmative marketing requirements are being
			 observed and followed; and
> Any other factor relevant to the PJ's determination,
			 including the timing of the requested exception.
Mandatory Arkansas State Contract Disclosure
			 and Certification Procedures
* In accordance with Arkansas Governor's Executive Order 98-04,
			 Governor's Policy Directive #8, and ACA §
								21-8-304, Recipients are required
			 to disclose whether any current or former member of the general assembly,
			 constitutional officer, board or commission member, state employee, or the
			 spouse or immediate family member of any of the persons described in this
			 sentence, or with any entity in which any such person holds
> Any position of control or
> Any ownership interest of 10% or greater.
* Additionally, Recipients must
> Obtain disclosures from any subcontractor, sub-lessor, or
			 other assignee and
> Determine whether the third party is a current or former:
			 member of the general assembly, constitutional officer, board or commission
			 member, state employee, or the spouse or immediate family member of any of the
			 persons described in this sentence, or if any of the persons described in this
			 sentence hold
V Any position of control or
V Any ownership interest of 10% or greater in the Third
			 Party.
> Report any such disclosure by the Third Party to the
			 agency.
* ADFA's Contract and Grant Disclosure and Certification Form
			 should be used to obtain disclosures. The form also specifies that the
			 following language that must be used in all written agreements with third
			 parties:
* Failure to make any disclosure required by Governor's Executive
			 Order 98-04, or any violation of any rule, regulation, or policy adopted
			 pursuant to that Order, shall be a material breach of the terms of this
			 subcontract. The party who fails to make the required disclosure or who
			 violates any rule, regulation, or policy shall be subject to all legal remedies
			 available to the contractor.
RELIGIOUS ORGANIZATIONS
* HOME funds
may
be provided to
			 primarily religious organizations for any activity, excluding inherently
			 religious activities.
> These organizations are reviewed like any other potential
			 partner depending on the role undertaken;
> Projects must be eligible and provided for secular persons;
			 and
> Religious activities may be offered but cannot be required
			 for participation.
HOME PROGRAM INCOME
* Program income is any revenue received by the Recipient
			 directly generated from the use of HOME funds or matching contributions.
			 Program income includes, but is not limited to:
> Proceeds from the sale or long-term lease of real property
			 acquired, rehabilitated or constructed with HOME funds or matching
			 contributions;
> Income from the use or rental of real property owned by a
			 Recipient that was acquired, rehabilitated or constructed with HOME funds or
			 matching contributions, minus the costs incidental to generating that
			 income;
> Payments of principal and interest on loans made with HOME
			 or matching funds, and proceeds from the sale of loans or obligations secured
			 by loans made with HOME or matching contributions;
> Interest on program income; and
> Any other interest or return on the investment of HOME and
			 matching funds.
* ADFA requires that all program income is returned to the PJ
			 (i.e., ADFA) unless their agreement allows for it to stay with the
			 Subrecipient.
* A case study on program income is provided as Attachment 2-2 to
			 this chapter.
RECAPTURED FUNDS
* Any amount repaid as a result of a homebuyer property being
			 sold within the affordability period. The recaptured provisions must be stated
			 in written agreements between Recipients and the income of any eligible
			 homebuyers.
* Recaptured funds are a return of the original HOME investment
			 and are technically not program income. Therefore, unlike program income, 10
			 percent of recaptured funds
cannot
be used for planning and
			 administrative costs and must be returned to ADFA.
* When HOME funds are expended for projects that are terminated
			 before completion, voluntary or involuntary, the HOME funds that have been
			 expended are ineligible and must be repaid.
* The termination of affordability restrictions does not relieve
			 ADFA of its repayment obligations for housing that does not remain affordable
			 for the required period.
INTEGRATED DISBURSEMENT AND INFORMATION SYSTEM
			 (IDIS)
* ADFA is required by HUD to use the IDIS system to accomplish
			 two key objectives:
> To manage and account for disbursements of HOME funds;
			 and
> To collect, consolidate and report information regarding
			 HOME Program performance.
* The IDIS is like a bank. ADFA has an account in the bank, and
			 the account contains a deposit of HOME monies (and other HUD funds). ADFA can
			 withdraw funds from the account by using a PC, much like computerized
			 banking.
* Unlike a bank checking account, ADFA must maintain significant
			 information regarding the purpose for each expenditure (that is, activity
			 information). ADFA has to submit Activity Setup information and Activity
			 Completion information.
> All HOME Program Recipients must provide Setup and
			 Completion information for all ADFA funded activities.
> The Setup and Completion forms are available on ADFA's
			 website. For details regarding the submission of completed forms, please see
			 the relevant activity chapters (Chapters 4-7).
OTHER ADFA ADMINISTRATIVE REQUIREMENTS
In addition to the HOME administrative requirements listed in
			 this chapter, ADFA has certain administrative requirements on Recipients
			 related to approval authority, criminal background checks, suspensions, and
			 audits.
* Approval Authority.
The President of ADFA, or his
			 authorized designee, has the authority to approve an increase or decrease in
			 HOME funds for any activities previously approved by the Board Housing Review
			 Committee as long as the total increase or decrease does not exceed five (5%)
			 percent of the original allocation. Actions taken will be provided to the Board
			 Housing Review Committee as an update.
* Criminal background check.
In addition to the
			 Contract Disclosure and Certification described in the Conflict of Interest
			 section above, ADFA requires Recipients to disclose if any of the following
			 apply:
> Conviction by State or Federal jurisdiction;
> Suspension or debarment by any state or Federal
			 agency;
> Bankruptcy or Reorganization;
> Outstanding, uncorrected noncompliance with a state or
			 Federal housing agency;
> Existing contracts or indebtedness with ADFA; and
> Delinquent, defaulted or foreclosed contract, loan or
			 indebtedness with ADFA.
* Suspension policy.
Note that the Criminal
			 Background Check works in conjunction with ADFA's Suspension Policy.
> Per the Suspension Policy, ADFA requires participants in the
			 HOME Program to certify that neither it nor its principals are presently
			 debarred, suspended, proposed for debarment, declared ineligible or voluntarily
			 excluded from any entity from a federally funded transaction.
> Any participant that remains on a debarred or suspended
			 condition shall be prohibited from participation in the ADFA HOME Program as
			 long as they are classified in this manner.
* Audit.
ADFA requires that Recipients have an audit
			 conducted of Federal funds received in accordance with the following:
> Generally Accepted Accounting Principles (GAAP) and the
			 Single Audit Act Amendments of 1996 ( 31 U.S.C. 7501-7507 ) and revised 2 CFR
			 200.
LIST OF ADFA FORMS
ADFA has all required program administration and management forms
			 on their website,
http://adfa.arkansas.gov/
. These forms
			 include:
* Contract and Grant Disclosure and Certification Form
* IDIS Activity Setup Forms
* IDIS Activity Completion Forms
CHAPTER 3:
GENERAL REQUIREMENTS OF
THE HOME PROGRAM
__________________
The HOME program has a number of basic rules that apply to all
			 program activities. All ADFA HOME Program Recipients must comply with these
			 rules when implementing their projects.
This chapter provides an overview the HOME Program as well as
			 general rules that apply to all program activities. Part I of this chapter
			 provides a history of the HOME Program and explains how funds are allocated to
			 ADFA's partners. Part II of this chapter outlines the overarching program
			 requirements of the HOME Program that apply to all funded Recipients and their
			 projects. These requirements include rules about project subsidies, eligible
			 costs, the property (including property standards), low-income targeting, and
			 long-term affordability. Part III provides detail on cost allocation and
			 subsidy layering.
For specific rules related to each program activity, see Chapters
			 4, 5, 6 and 7.
PART I:OVERVIEW OF THE HOME PROGRAM
The HOME Program
			 was created by the National Affordable Housing Act of 1990 (NAHA), and has been
			 amended several times by subsequent legislation. It is the largest Federal
			 block grant available to communities to create affordable housing.
* Objectives.
The intent of the HOME Program is
			 to:
> Increase the supply of decent affordable housing to
			 lower-income households,
> Expand the capacity of nonprofit housing providers,
> Strengthen the ability of state and local governments to
			 provide housing, and
> Leverage private-sector participation.
* Regulations.
The HOME Program regulations are
			 found at 24 CFR Part 92 and the 2013 HOME Final Rule was published on July 24,
			 2013. Relevant regulatory citations are provided throughout this manual.
ALLOCATION OF FUNDS
HOME funds are allocated annually by formula to State and local
			 governments by HUD. The State of Arkansas receives funds through this formula
			 and ADFA is the agency that administers funds allocated to the State. Under the
			 HOME Program, ADFA is designated a "Participating Jurisdiction" or "PJ". The
			 local PJs in Arkansas include the Cities of Fort Smith, Little Rock, North
			 Little Rock, and Pine Bluff.
In turn, ADFA allocates funds to various partners through their
			 formal application process. ADFA is subject to several HOME Program
			 requirements when allocating funds to other entities and these requirements
			 affect the way HOME program Recipients run their programs as well.
* Time frames.
HOME Rules require ADFA to commit and
			 spend its funds within certain time frames.
> Typically PJs have
24 months
to enter into written agreements with developers, owners,
			 contractors, Subrecipients, State Recipients and Community Housing Development
			 Organizations (CHDOs, a type of nonprofit housing organization) to commit HOME
			 funds and
four years
to expend HOME funds. PJs
			 that do not meet these time frames risk losing their HOME funds. At this time
			 HUD has suspended the 24 month commitment timeline for PJs.
* Given these requirements, ADFA has created its own timeline for
			 HOME program Recipients. Eligible Recipients must expend:
> 25% of the HOME allocation within 90 days of Notice to
			 Proceed;
> 75% of the HOME allocation within one year of Notice to
			 Proceed; and
> 100% of the HOME allocation within 18 months of the Notice
			 to Proceed.
* Uses of funds.
The HOME Program and ADFA place the
			 following limits on uses of fund:
>
Planning and Administration:
Applicants may use
			 up to 10 percent of their HOME Program allocation for a consultant fee and/or
			 project delivery costs. (See Chapter 2: Administrative Overview and Management
			 for more information).
>
CHDOS:
ADFA must reserve
a
			 minimum of
15
percent
of its
			 annual allocation for activities undertaken by qualified Community Housing
			 Development Organizations (CHDOs). (See Chapter 8 for more information on
			 CHDOs.)
HOME-FUNDED ACTIVITIES
HOME funds can be used to
			 support four general affordable housing activities.
* Homeowner rehabilitation.
HOME funds may be used
			 to assist existing owner-occupants with the repair or rehabilitation of their
			 homes. (See Chapter 4: Homeowner Housing - Owner Occupied Housing for more
			 information.)
* Homebuyer activities.
HOME funds can be used to
			 finance the acquisition and/or rehabilitation or new construction of homes for
			 homebuyers. (See Chapter 5: Homeowner Housing - Homebuyer for more
			 information.)
* Rental housing.
Affordable rental housing may be
			 acquired and/or rehabilitated, or constructed. (See Chapter 6: Rental Housing
			 Program for more information.)
* Tenant-based rental assistance (TBRA).
Financial
			 assistance for rent, security deposits and, under certain conditions, utility
			 deposits may be provided to tenants. Assistance for utility deposits may only
			 be provided in conjunction with a TBRA security deposit or monthly rental
			 assistance program. (See Chapter 7: TBRA for more information.)
ELIGIBLE ACTIVITIES
Homeowner Rehabilitation Activities
- see chapter
			 4
Homebuyer Activities
- see chapter 5
Rental
			 Housing Activities
- see chapter 6
TBRA-
see chapter
			 7
ADFA HOME PROGRAM ROLES AND RELATIONSHIPS
ADFA relies on numerous partners to create affordable housing
			 under its HOME program. Partners play different roles at different times,
			 depending upon the project or activity being undertaken.
* ADFA.
As a State PJ, ADFA has broad discretion in
			 administering HOME funds. ADFA may administer activities directly, allocate
			 funds to units of local government directly, evaluate and fund projects, or
			 combine the two approaches.
* State Recipients.
ADFA may allocate funds to units
			 of general local government, including cities, towns, townships and counties.
			 The funds are then administered by local governments for eligible HOME
			 uses.
* Local PJs.
Local PJs are units of local government
			 who received a HOME allocation directly from HUD. ADFA may undertake
			 jointly-funded projects with local PJs and may use HOME funds anywhere within
			 the State including within the boundaries of local PJs.
* CHDOs.
A CHDO is a private, nonprofit organization
			 that meets a series of qualifications prescribed in the HOME regulations. Each
			 PJ, including ADFA, must use a minimum of 15 percent of its annual allocation
			 for housing owned, developed or sponsored by CHDOs. PJs evaluate organizations'
			 qualifications and designate them as CHDOs. CHDOs also may be involved in the
			 program as Subrecipients, but the use of HOME funds in this capacity is not
			 counted toward the 15 percent set-aside. See Chapter 8 of this manual for more
			 information.
* Subrecipients.
A Subrecipient is a public agency
			 or nonprofit organization selected by a PJ to administer all or a portion of
			 the PJ's HOME Program. It may or may not also qualify as a CHDO. A public
			 agency or nonprofit organization that receives HOME funds solely as a developer
			 or owner of housing is not considered a Subrecipient.
* Developers, owners and sponsors.
Individuals,
			 for-profit entities and nonprofits can participate in the HOME Program as
			 owners, developers or sponsors of housing. When CHDOs use HOME funds as owners,
			 developers or sponsors, this use of HOME funds counts toward the 15 percent
			 CHDO set-aside.
* Private lenders.
One of the goals of the HOME
			 Program is to establish strong public/private partnerships. PJs are required to
			 make all reasonable efforts to maximize participation by private lenders and
			 other members of the private sector. The Community Reinvestment Act (CRA)
			 requirements provide an incentive to private lending institutions to become
			 involved in HOME Program activities.
* Faith-based organizations.
Faith-based or
			 religious organizations are able to compete on an equal footing with other
			 organizations for HUD funding. Funding may be provided directly to any
			 Recipient, as long as those funds are not used to support inherently religious
			 activities.
* Third-party contractors.
A PJ may contract with a
			 private for-profit contractor to administer all or part of its HOME Program.
			 Unlike public agencies or nonprofits, contractors must be procured through a
			 competitive process in accordance with applicable Office of Management and
			 Budget (OMB) procurement requirements. These requirements are found in 2 CFR
			 200.
OTHER HOME REQUIREMENTS
When a PJ accepts HOME funds, it agrees to meet certain
			 obligations. ADFA passes along many of these requirements to its
			 Recipients.
Matching Requirement
[92.218-92.2221
* Each PJ incurs a 25 percent matching obligation for HOME funds
			 it expends. Currently, the State of Arkansas has a 50 percent match reduction
			 from HUD, which requires ADFA to meet a 25 percent matching obligation for HOME
			 funds expended. ADFA imposes a 25 percent matching obligation on its HOME
			 Program Recipients for all activities
except
TBRA and
			 homebuyer down payment assistance. Chapter 14 provides further details on ADFA
			 match requirements.
* Matching contributions must be:
> A permanent contribution to affordable housing;
> From non-Federal sources; and
> Provided by any of a broad array of public and private
			 donors, such as local government agencies, state agencies, charitable
			 organizations/foundations, and private sector organizations such as lending
			 institutions and corporate donors.
Maximum Per-Unit Subsidy Amount
[92.2501
* Maximum HOME subsidy limit.
The maximum per-unit
			 HOME subsidy limit varies by PJ. HUD determines and issues the maximum per-unit
			 subsidy limits annually. PJs must use the HUD-published limits.
* Due to the discontinuation of the Section 221(d)(3) mortgage
			 insurance program, these maximum per-unit subsidy limits are no longer used for
			 the HOME Program. HUD Notice CPD-15-003 establishes an interim policy that
			 directs PJs to use the Section 234-Condominium Housing basic mortgage limits,
			 for elevator-type projects, as an alternative to the Section 221(d)(3) limits
			 in order to determine the maximum amount of HOME funds a PJ may invest on a
			 per-unit basis in HOME-assisted housing projects.
> For more information, see
https://www.hudexchange.info/resource/2315/home-per-unit-
subsidy/
Monitoring, Record-keeping and Reporting
[92.508 and 92.5091
* As a HOME PJ, ADFA is required to keep records that enable HUD
			 to determine whether they have met program and project requirements. Files must
			 be kept for 5 years after the completion of the affordability period. ADFA is
			 also responsible for enforcing these requirements with all its HOME Program
			 Recipients. Monitoring and record-keeping requirements are outlined in Chapter
			 9: Recordkeeping, Reporting, and Monitoring of this manual.
* ADFA must also submit an annual performance report to HUD known
			 as the Consolidated Annual Performance and Evaluation Report (CAPER.) ADFA
			 requires that all Recipients meet certain reporting obligations to assist with
			 this annual responsibility. (See Chapter 9: Recordkeeping, Reporting, and
			 Monitoring for further information on reporting requirements.)
PART II: GENERAL REQUIREMENTS OF THE HOME
			 PROGRAM
As described in Part I of this chapter, ADFA allocates funds to
			 Recipients who in turn develop eligible HOME projects. Part II of this chapter
			 outlines a variety of general requirements all HOME Program Recipients need to
			 follow and comply with when administering a HOME project. The following two
			 definitions are critical to understanding the requirements that are outlined in
			 the following sections.
* Project
means a site or sites together with any
			 building (including manufactured housing unit) or buildings located on the
			 site(s) under common ownership, management and financing, to be assisted with
			 HOME funds as a single undertaking. The "project" includes all of the
			 activities associated with the site and building. For
tenant-based rental assistance (TBRA),
"project"
			 means assistance to one or more families.
* HOME-Assisted Units.
The HOME Program
			 distinguishes between the units in a project that have been assisted with HOME
			 funds and those that have not - hence the term
HOME-assisted
unit. This distinction between HOME-assisted and unassisted
			 units allows HOME funds to be spent on mixed-income projects while still
			 targeting HOME dollars only to income-eligible households.
THE SUBSIDY
The HOME Program outlines eligible forms of subsidy as well as
			 subsidy limits.
Eligible Forms of
			 Subsidy
* The HOME Program regulations allows virtually any form of
			 financial assistance, or subsidy, to be provided for eligible projects and to
			 eligible beneficiaries, though the participating jurisdiction (in this case
			 ADFA) decides what forms of assistance it will provide.
* ADFA HOME Program allocations to Recipients for the Rental
			 Housing Program and the Homeowner Program and allocations to nonprofit
			 entities, for-profit entities and CHDO activities will be in the form of
repayable or forgivable loans.
Allocations for TBRA programs will
			 be in the form of
grants.
These forms of subsidy, as well as the
			 other forms that are eligible under the HOME regulation are outlined
			 below:
>
Interest bearing loans or advances:
These loans
			 are amortizing loans. Repayment is expected on a regular basis, usually
			 monthly, so that over a fixed period of time, all of the principal and interest
			 is repaid.
V Such loans may have interest rates at or below the prevailing
			 market rate. Often, very low interest rates (i.e., one to three percent) can
			 make monthly payments affordable to the borrower.
V The property or some other assets are used as
			 collateral.
V The term of the loan may vary. For home purchase, a term of up
			 to 30 years is common while rehabilitation and construction loans tend to have
			 terms of 10 to 15 years.
>
Non-interest-bearing loans or advances:
The
			 principal amount of such loans is paid back on a regular basis over time, but
			 no interest is charged.
V As with interest-bearing loans, these loans will use the
			 property or other assets as collateral and the term of the loan will vary
			 depending on the nature of the activity funded.
V Such loans are made when the borrower is able to make regular
			 payments but even a small amount of interest is not affordable.
>
Deferred loans (forgivable or repayable):
These
			 loans are not fully amortized. Instead, some, or even all, principal and
			 interest payments are deferred to some point in the future. Deferred loans can
			 be structured in many different ways.
V Deferred payment loans can be forgivable or repayable.
V If forgivable, the forgiveness might be structured to occur at
			 one point in time (such as at the end of the affordability period), or forgiven
			 incrementally (such as forgiving one-fifth of the loan each year over five
			 years).
V If repayable, repayment might be required at the sale or
			 transfer of the property or at the end of a fixed period of time.
V Like the amortizing loans discussed above, these loans can
			 accrue interest or be non-interest bearing.
V Deferred payment loans require the property or some other form
			 of collateral to be used as security for repayments.
V Deferred payment loans are also referred to as "soft seconds."
			 They are increasingly being used to leverage private first mortgage financing
			 in homeownership. They may also be used to help rental projects by allowing
			 deferral of loan payments for the first few years until the project becomes
			 stable.
>
Grants:
Grants are provided with no requirement
			 or expectation of repayment.
V Grants require no liens on the property or other assets.
V Grants are most commonly used for downpayment assistance
			 (though other assistance options exist) and closing cost assistance in
			 homebuyer programs or to provide assistance to very low-income owner-occupants
			 for rehabilitation.
>
Interest subsidies:
This is usually an up-front
			 discounted payment to a private lender in exchange for a lower interest rate on
			 a loan. An interest subsidy may also be a deposit in an interest-bearing
			 account from which monthly subsidies are drawn and paid to a lender along with
			 the homeowner's monthly payment.
>
Equity investments:
An equity investment is an
			 investment made in return for a share of ownership. Under this form of subsidy,
			 the PJ acquires a financial stake in the assisted property and is paid a
			 monetary return on the investment if money is left after expenses and loans are
			 paid.
>
Loan guarantees and loan guarantee accounts:
HOME funds may be pledged to guarantee loans or to capitalize a loan
			 guarantee account. A loan guarantee or loan guarantee account ensures payment
			 of a loan in case of default.
V A loan guarantee is a written promise to pay the lender some
			 percentage of the outstanding principal balance of a loan in the event the
			 borrower defaults. It may be held for a specified period of time or reduced by
			 a specific amount over time as the loan principal is repaid.
V A loan guarantee account is a loan loss reserve held by the
			 lender in an amount equal to some percentage of the outstanding
			 principal.
V The lender holding the loan guarantee account may require a
			 minimum balance, as well as a percentage of the principal amount of the loan.
			 The percentage of the loan amount held as guarantee may vary from loan to loan,
			 or from program to program.
PROGRAM INCOME AND GUARANTEED LOANS
Repaid loans guaranteed with HOME monies are not considered
			 program income and are not subject to HOME requirements.
V HOME rules require that the amount of money in a loan guarantee
			 account must be based on a reasonable estimate of the default rate on the
			 guaranteed loans, and may not exceed 20 percent of the total outstanding
			 principal guaranteed, except that the account may include a reasonable minimum
			 balance.
>
Other forms approved by HUD:
Other forms of
			 assistance require HUD approval. If the PJ intends to use a form of assistance
			 not listed above, the PJ's Consolidated Plan or Action Plan should describe the
			 proposed form of assistance. Once approved by HUD as part of the Plan, no other
			 HUD approval is required.
Project Subsidy
			 Limits
* Minimum HOME investment.
The minimum amount of
			 HOME funds is an average of $1,000, multiplied by the number of HOME-assisted
			 units in the project.
> The minimum
only
relates to
			 the HOME funds, and
not
to any other funds that
			 might be used for project costs.
> The minimum HOME investment does not apply to TBRA.
* Maximum HOME subsidy limit.
The maximum per-unit
			 HOME subsidy limit varies by PJ. HUD determines and issues the maximum per-unit
			 subsidy limits annually. PJs must use the HUD-published limits.
* Actual HOME Investment.
The actual subsidy
			 provided will depend on the following factors.
> The proportion of the total project cost that is
			 HOME-eligible - some planned project costs may not be eligible expenses under
			 the HOME Program.
> The number of units in the project is HOME-assisted -
			 projects may have a mix of HOME- and non-HOME-assisted units.
> The financial needs of the project - HOME projects may not
			 receive more subsidy than is required to make them financially feasible.
* To determine what is required and reasonable, ADFA will
			 complete a cost allocation and subsidy layering analysis. HOME project awards
			 are based on the completed cost allocation and subsidy layering
			 analysis.
> Part III of this chapter provides an overview of the cost
			 allocation and subsidy layering reviews.
> Cost allocation and subsidy layering are impacted by any
			 changes in the number of HOME-assisted units, total number of units in the
			 project, development cost and/or financing sources.
>
Because of these requirements,
all HOME
			 Recipients are obligated to contact ADFA as soon as there are any changes in
			 project size/scope, cost or financing sources.
ELIGIBLE COSTS
Eligible costs depend on the nature of the program activity. The
			 individual program chapters (Chapters 4 through 7) provide specific lists of
			 eligible costs. A general list follows.
* New construction.
HOME funds may be used for new
			 construction of both rental and ownership housing. Any project that includes
			 the addition of housing units outside the existing walls of a structure is
			 considered new construction.
* Rehabilitation.
This includes the alteration,
			 improvement or modification of an existing structure. It also includes moving
			 an existing structure to a foundation constructed with HOME funds.
			 Rehabilitation may include adding rooms outside the existing walls of a
			 structure, but adding a housing unit is considered new construction.
* Conversion.
Conversion of an existing structure
			 from another use to affordable residential housing is usually classified as
			 rehabilitation. If conversion involves additional units beyond the walls
			 (envelope) of an existing structure, the entire project will be deemed new
			 construction. Conversion of a structure to commercial use is prohibited.
* Site improvements.
Site improvements must be in
			 keeping with improvements to surrounding standard projects. They include new,
			 on-site improvements (sidewalks, utility connections, sewer and water lines,
			 etc.) where none are present. They are essential to development or repair of
			 existing improvements. Building new, off-site utility connections to an
			 adjacent street is also eligible. Off-site infrastructure is not eligible as a
			 HOME expense, but may be eligible for match credit.
Example
: Infrastructure, such as
			 sewer and water lines in a public street in front of a HOME-assisted property,
			 cannot be paid for with HOME funds. However, the connections that run from the
			 HOME-assisted property to the street are eligible HOME costs since they are
			 essential to the property.
* Acquisition of property.
Acquisition of existing
			 standard property, or substandard property in need of rehabilitation, is
			 eligible as part of either a homebuyer program or a rental housing project.
			 After acquisition, rental units must meet HOME rental occupancy, affordability
			 and lease requirements.
* Acquisition of vacant land.
HOME funds may be used
			 for acquisition of vacant land
only
if
			 construction will begin on a HOME project within 12 months of purchase. Land
			 banking is prohibited.
* Demolition.
Demolition of an existing structure
			 may be funded through HOME only if construction will begin on the HOME project
			 within 12 months.
* Relocation costs.
The Uniform Relocation Act and
			 Section 104(d) (also known as the Barney Frank Amendments; see the appendix for
			 detailed information on these requirements) apply to all HOME-assisted
			 properties. Both permanent and temporary relocation assistance are eligible
			 costs. Staff and overhead costs associated with relocation assistance are also
			 eligible.
* Refinancing.
HOME funds may be used to refinance
			 existing debt on single-family, owner-occupied properties in connection with
			 HOME-funded rehabilitation. The refinancing must be necessary to reduce the
			 owner's overall housing costs and make the housing more affordable and if the
			 rehabilitation cost is greater than the amount of debt that is refinanced.
			 Refinancing for the purpose of taking out equity is not permitted. HOME may
			 also be used to refinance existing debt on multi-family projects being
			 rehabilitated with HOME funds, if refinancing is necessary to permit or
			 continue long-term affordability, and is consistent with PJ-established
			 refinancing guidelines.
* Capitalization of project reserves.
HOME funds may
			 be used to fund an initial operating deficit reserve for new construction and
			 rehabilitation projects for the initial rent-up period. The reserve may be used
			 to pay for project operating expenses, scheduled payments to a replacement
			 reserve and debt service for a period of up to 18 months.
* Project-related soft costs.
These must be
			 reasonable and necessary. Examples of eligible project soft costs
			 include:
> Finance-related costs;
> Architectural, engineering and related professional
			 services;
> Tenant and homebuyer counseling, provided the household
			 receiving the counseling ultimately becomes the tenant or owner of a
			 HOME-assisted unit;
> Affirmative marketing and fair housing services to
			 prospective tenants or owners of an assisted project; and
> Staff costs directly related to projects (not including
			 TBRA.)
See Chapter 2: Administrative and Management Overview for more
			 information on project related soft costs.
PROHIBITED ACTIVITIES
The HOME Program regulations explicitly prohibit certain
			 activities which are outlined below.
* Project reserve accounts.
HOME funds may not be
			 used to provide project reserve accounts (except for initial operating deficit
			 reserves) or to pay for operating subsidies.
* Tenant-based rental assistance for certain purposes.
HOME funds may not be used as rental assistance in conjunction with the
			 federal Rental Rehabilitation Program (Section 17) to prevent displacements.
			 They also may not be used for certain mandated existing Section 8 Program uses,
			 such as Section 8 rent subsidies for troubled HUD-insured projects.
* Match for other programs.
HOME Program funds may
			 not be used as the "nonfederal" match for other federal programs
except
to match McKinney Act funds (see Chapter
			 14: Match).
* Development, operations or modernization of public
			 housing.
HOME Program monies may not be used to provide assistance
			 authorized under section 9 of the 1937 Act (Public Housing Capital and
			 Operating Funds).
* Properties receiving assistance under 24 CFR Part 248
			 (Prepayment of Low-Income Housing Mortgages).
Properties receiving
			 assistance through the Low Income Housing Preservation and Resident
			 Homeownership Act (LIHPRHA) or the Emergency Low Income Preservation Act
			 (ELIHPA) are not eligible for HOME assistance except if the HOME assistance is
			 provided to
priority purchasers.
These programs
			 are no longer funded.
* Additional investment of HOME funds (double-dipping).
During the first year after project completion, the PJ may commit
			 additional funds to a project. After the first year, no additional HOME funds
			 may be provided to a HOME-assisted project during the relevant period of
			 affordability,
except
that:
> Rental assistance to families may be renewed.
> Rental assistance may be provided to families that will
			 occupy housing previously assisted with HOME funds.
> A homebuyer may be assisted with HOME funds to acquire a
			 unit that was previously assisted with HOME funds.
> Troubled rental projects with ADFA and HUD
			 permission.
* Acquisition of PJ-owned property.
A PJ
may not
use HOME Program funds to reimburse
			 itself for property in its inventory or property purchased for another purpose.
			 However, in anticipation of a HOME project, a PJ may use HOME funds to:
> Acquire property.
> Reimburse itself for property acquired specifically for a
			 HOME project with other funds.
* Project-based rental assistance.
HOME funds may
			 not be used for rental assistance if receipt of the funds is tied to occupancy
			 in a particular project. Funds from another source, such as Section 8, may be
			 used for this type of project-based assistance in a HOME-assisted unit.
			 Further, HOME funds may be used for other eligible costs, such as
			 rehabilitation, in units receiving project-based assistance from another source
			 - for example, Section 8 or state-funded project-based assistance.
* Pay for delinquent taxes, fees or charges.
HOME
			 funds may not be used to pay delinquent taxes, fees or charges on properties to
			 be assisted with HOME funds.
* Prohibited Fees.
State recipients, subrecipients,
			 community housing development organizations (CHDO), housing non-profits, and
			 for-profit developers may not charge servicing, origination, or other fees for
			 the purpose of covering costs of administering the HOME program.
THE PROPERTY
The HOME Program has rules about the type and value of properties
			 eligible for assistance.
Property Types
* Depending on the nature of the program activity, HOME rules
			 specify the types of property that are eligible for funding. See the individual
			 program activity chapters for guidance.
* Public facilities are not eligible under HOME even if
			 constructed to serve a HOME-assisted project. See CPD Notice 01-5 on the HUD
			 Exchange at
www.hudexchange.info
.
Property Value
* For owner-occupied and homebuyer properties, HOME limits the
			 value or purchase price of the property. In short, the price or, in the case of
			 rehabilitated properties, the value may not exceed 95 percent of the area
			 median purchase price as established by HUD for new and existing housing
Property Standards
* HOME-funded properties must meet certain minimum property
			 standards.
New Construction
* State and local codes, ordinances, and zoning
			 requirements.
Housing must meet all applicable State and local codes,
			 ordinances, and zoning requirements or in absence of State or local building
			 code, the International Residential Code or International Building Code (as
			 applicable to the type of housing) of the International Code Council.
> All new construction work must also conform to the
			 International Energy Conservation Code (IECC) and applicable state or local
			 energy conservation codes.
> Additionally, ADFA requires that all new building
			 construction complies with the Arkansas Energy Code. ADFA HOME program
			 Recipients must document compliance using the Certificate of Compliance for the
			 current Arkansas Energy Code.
* Site and neighborhood standards.
The site and
			 neighborhood standards of 24
			 CFR 983.57(e)(2) and (3)
			 applies only to the
new construction of rental
			 housing.
* Universal Design standards.
ADFA requires units to
			 adhere to the
Arkansas Usability Standards in Housing: Guidance Manual
			 for Constructing Inclusive Functional Dwelling (AUSH).
>
Housing must meet the accessibility
			 requirements of 24 CFR part 8, which implements Section 504 of the
			 Rehabilitation Act of 1973, Americans with Disabilities Act implemented at 28
			 CFR parts 35 and 36, as applicable, and covered multifamily dwellings must meet
			 the design and construction requirements at
			 24 CFR
			 100.205, which implements the Fair Housing
			 Act.
* Disaster Mitigation.
Housing must be constructed
			 to mitigate the impact of potential disasters in accordance with State and
			 local codes, ordinances or other requirements as HUD may establish (where
			 applicable).
* Written cost estimates, construction contracts and
			 construction documents.
ADFA will ensure the construction contract(s)
			 and construction documents describe the work to be undertaken in adequate
			 detail so that inspections can be conducted. ADFA will review and approve
			 written cost estimates for construction and determine that costs are
			 reasonable.
* Construction progress inspections.
ADFA will
			 conduct progress and final inspections of construction to ensure that work is
			 done in accordance with the applicable codes, the construction contract, and
			 construction documents.
Rehabilitation
* State and local codes, ordinances, and zoning
			 requirements.
Housing must meet all applicable State and local codes,
			 ordinances, and zoning requirements or in absence of State or local building
			 code, the International Existing Building Code of the International Code
			 Council.
> All rehabilitation work must also conform to the
			 International Energy Conservation Code (IECC) and applicable state or local
			 energy conservation codes.
> Additionally, ADFA requires that all rehabilitation work
			 complies with the Arkansas Energy Code. ADFA HOME program Recipients must
			 document compliance using the Certificate of Compliance for the current
			 Arkansas Energy Code.
* Health and Safety.
Housing must address
			 life-threatening deficiencies immediately, if housing is occupied.
* Uniform Physical Condition Standards.
The
			 properties must be free of deficiencies established in
			 24 CFR
			 5.703 (Uniform Physical Condition
			 Standards).
* Major Systems.
Major systems are: structural
			 support; roofing; cladding and weatherproofing (e.g., windows, doors, siding,
			 gutters); plumbing; electrical; heating; ventilation; and air condition.
>
Major systems for rental housing:
Upon project
			 completion of each major system, ADFA must estimate (based on age and
			 condition) the remaining useful life of the major systems. For multifamily
			 projects of 26 units or more, ADFA will determine the useful life of the major
			 systems through a capital needs assessment.
>
Major systems for homeownership housing:
Upon
			 project completion, each major system must have a remaining useful life of at
			 least five years or the major system must be rehabilitated or replaced as part
			 of the rehabilitation work.
* Capital Needs Assessment.
Housing must address all
			 work identified in the capital needs assessment.
> A capital needs assessment will be completed for multifamily
			 rental housing projects of 26 units or more to determine all work to be
			 performed and identify and address the long-term physical needs of the
			 project.
* Lead-based paint.
Housing must meet the lead-based
			 paint requirements at 24 CFR part 35.
* Disaster Mitigation.
Housing must be improved to
			 mitigate the impact of potential disasters in accordance with State and local
			 codes, ordinances or other requirements as HUD may establish (where
			 applicable).
> Housing must meet the accessibility requirements of 24 CFR
			 part 8, which implements Section 504 of the Rehabilitation Act of 1973,
			 Americans with Disabilities Act implemented at 28 CFR parts 35 and 36, as
			 applicable, and covered multifamily dwellings must meet the design and
			 construction requirements at 24 CFR 100.205, which implements
			 the Fair Housing Act.
* Construction documents and cost estimates.
The
			 work to be completed must meet ADFA's rehabilitation standards. The
			 construction documents (i.e., written scope of work to be performed) must be in
			 sufficient detail to establish the basis for a uniform inspection of the
			 housing to determine compliance with ADFA's standards. ADFA will review and
			 approve a written cost estimate for rehabilitation after determining that costs
			 are reasonable.
* Frequency of inspections.
ADFA will conduct an
			 initial property inspection to identify the deficiencies that must be
			 addressed. ADFA will also conduct progress and final inspections to determine
			 that work was done in accordance with work write-ups.
Acquisition of Standard
			 Housing
* Existing housing that is acquired for rental housing, and that
			 was newly constructed or rehabilitated less than 12 months before the date of
			 commitment of HOME funds, must meet the above property standards for new
			 construction or rehabilitation projects, as applicable. ADFA will document this
			 compliance based upon a review of approved building plans and Certificates of
			 Occupancy, and an inspection that is conducted no earlier than 90 days before
			 the commitment of HOME assistance.
> All other existing housing that is acquired with HOME
			 assistance for rental housing must meet the rehabilitation property standards
			 requirements. ADFA will document this compliance based upon an inspection that
			 is conducted no earlier than 90 days before the commitment of HOME
			 assistance.
> Existing housing that is acquired for homeownership (e.g.,
			 downpayment assistance) must be decent, safe, sanitary, and in good repair. At
			 a minimum the housing must meet the following:
V Applicable State and local housing quality standards and code
			 requirements.
V Housing must be free of deficiencies established in
			 24 CFR
			 5.703 (Uniform Physical Condition
			 Standards).
Manufactured Housing
* Construction of all manufactured housing must meet the
			 Manufactured Home Construction and Safety Standards at 24 CFR 3280. The
			 following requirements must also be met:
> Installed according to State and local laws or codes. In the
			 absence of state or local laws or codes, the unit must be installed according
			 to the manufacturer's written instructions.
> At time of project completion, must be on a permanent
			 foundation that meets the requirements for foundation systems as set forth in
			 24 CFR
			 203.43f(c)(i).
> At time of project completion, be connected to permanent
			 utility hook-ups.
> At time of project completion, be located on land owned by
			 the manufactured housing unit owner or has a lease equal to the applicable
			 period of affordability.
* Existing manufactured housing, including its the foundation and
			 anchoring must meet all applicable State and local codes, ordinances, and
			 requirements or in the absence of local or state codes, the Model Manufactured
			 Home Installation Standards at 24 CFR 3285. Manufactured housing that is
			 rehabilitated using HOME funds must meet the above property standards
			 requirements, as applicable. ADFA will document this compliance in accordance
			 with inspection procedures that ADFA has established pursuant to §92.251,
			 as applicable.
Tenant-Based Rental
			 Assistance
* All housing occupied by tenants receiving HOME tenant-based
			 rental assistance must meet the Housing Quality Standards at
			 24 CFR
			 982.401, or the successor requirements as
			 established by HUD.
Exhibit 3-1 explains the minimum property standards that apply to
			 each type of HOME activity.
EXHIBIT 3-1 Minimum Property Standards by Activity
			 Type
Activity
Minimum Property Standard to be Met
Tenant-based rental assistance
Section 8 HQS or successor requirements as established by
						HUD.
Acquisition of standard (existing) housing (no
						rehabilitation or construction):
Homeownership
* Applicable state or local housing quality standards and
						code requirements.
* Uniform Physical Condition Standards (UPCS) pursuant to
						24 CFR
						5.703
Rental Housing Constructed or Rehabilitated < 12
						months
* Meet new construction or rehabilitation property
						standards (as applicable)
Rental Housing Rehabilitated > 12 months
* Rehabilitation property standards
Rehabilitation of housing
Local written rehabilitation standards.
AND State and local code requirements.
If no local codes apply, one of the following national
						model codes:
* International Code Council's (ICC's) International
						Existing Building Code
AND
* International Energy Conservation Code.
* Arkansas Energy Code
AND
* Health & Safety
AND
* Major Systems
AND
* Handicapped accessibility requirements, where
						applicable
(i.e., Section 504 and the Arkansas Usability Standards in
						Housing).
AND
* Lead Base Paint
AND
* Uniform Physical Condition Standards (UPCS) pursuant to
						24 CFR
						5.703
AND
* Disaster Mitigation Standards (when applicable)
* Capital Needs Assessment for rental housinq of 26 or
						more units
New construction of housing
New Construction of Rental Housing
State and local code requirements.
If no state and local codes apply, one of the following
						national model codes:
* International Code Council's (ICC's) International
						Residential Code
* International Code Council's (ICC's) International
						Building Code
AND
* International Energy Conservation Code.
* Arkansas Energy Code
AND
* Universal Design
AND
* Handicapped accessibility requirements, where
						applicable
(i.e., Section 504 and the Arkansas Usability Standards in
						Housing)
AND
* Disaster Mitigation Standards (when applicable)
AND
* Written cost estimates
AND
* Construction progress Inspections
* Site and neighborhood standards at 24 CFR
						893.6(b).
Manufactured Housing - New Construction
Existing Manufactured Housing
* Manufactured Home Construction and Safety Standards at
						24 CFR 3280
AND
* State and local code requirements.
* If no state and local codes apply, the manufactures
						written instructions AND
* Permanent foundation that meets foundation systems at
						24 CFR
						203.43f(c)(i)
AND
* Connected to permanent utility hook-ups
AND
* Own the land or hold a lease equal to period of
						affordability
Foundation and Anchoring:
* State and local code requirements
* If no state and local codes apply the Model
						Manufactured HOME Installation Standards at 24 CFR 3285
AND
Rehabilitation:
Rehabilitation property standards (stated above)
*Note: PJs using MPS may rely on inspections performed by a
			 qualified person.
THE APPLICANT/BENEFICIARY
The HOME Program is designed to provide affordable housing to
			 low-income and very-low-income families and individuals. Therefore, the program
			 has rules about targeting program resources and establishing applicant
			 eligibility.
Program Targeting
* ADFA must use 100 percent of its HOME funds to assist families
			 with incomes below 80 percent of the area median income.
* For rental housing or TBRA.
When HOME funds are
			 used for rental housing or for TBRA, additional targeting requirements
			 apply:
> For each annual HOME allocation, ADFA requires that 100
			 percent of the occupants of HOME-assisted rental units and households assisted
			 with HOME-funded TBRA must have incomes that are 60 percent or less of the area
			 median
> 20 percent of the units in
each
rental housing project containing
five or more
units must be occupied by tenant families with incomes at or
			 below 50 percent of median income.
Applicant Income
			 Eligibility
* Income eligibility.
Beneficiaries of HOME funds -
			 homebuyers, homeowners or tenants -must be low-income or very-low-income. Their
			 income eligibility is determined based on their annual income.
* Annual income.
Annual income is the gross amount
			 of income anticipated by all adult household members during the 12 months
			 following the effective date of the determination.
Note:
Annual
			 income is sometimes referred to as gross income or
INCOME DEFINITION
When calculating the annual income of program beneficiaries, ADFA
			 HOME Program Recipients must use the Section 8/Part 5 definition.
annual (gross) income.
* Calculating annual income.
To calculate annual
			 (gross) income, the PJ may choose among two definitions of income listed below;
			 however, ADFA has selected the Section 8/Part 5 definition. ADFA HOME
			 Recipients must use the Section 8/Part 5 definition when calculating the annual
			 income of their program beneficiaries.
>
Section 8 (Part 5) annual (gross) income:
The
			 HOME program has always used the Section 8/Part 5 definition of annual income.
			 It is still an acceptable definition to use for funded activities.
>
IRS adjusted gross income:
The final rule
			 allows HOME participants to determine annual income by using the calculation
			 for "adjusted gross income" outlined in the federal income tax IRS Form 1040.
(Note:
while the IRS calls this calculation "adjusted gross
			 income," it is considered "annual income" for the purposes of the HOME program.
			 "Adjusted income" under the HOME program - used only when calculating rents or
			 TBRA - requires taking annual income and adjusting it in accordance with
			 Section 8 rules.)
Note:
The definitions listed above provide guidance
			 on what items to include in annual income calculation (for example, wages,
			 salaries, tips, etc.). They do not affect the method in which income is
			 verified (discussed under "Income Verifications" below) or how income is
			 adjusted when calculating rents or TBRA.
Income Verifications
* Initial Verification.
To determine if program
			 applicants are income-eligible, Recipients must verify their income using at
			 least 2 months source documentation evidencing annual income such as wage
			 statements, interest statements, and unemployment compensation statements for
			 the family.
Note:
Annual income should include all adult
			 household members, include nonrelated individuals living in the
			 household.
> Income eligibility is based on
anticipated
income. When collecting income
			 verification documentation, also consider any likely changes in income. For
			 example, last year's tax return does not establish anticipated income; nor is
			 it adequate source documentation.
> Once initial income verification is completed, a Recipient
			 is
not
required to re-examine the applicant's income
unless
six months has elapsed before assistance is
			 provided.
* Annual Re-examinations.
For rental and TBRA
			 programs, annual recertifications of income are required. While the HOME
			 Program regulations require that income must be verified with source
			 documentation every six years, ADFA requires income be verified with source
			 documentation
annually.
LONG-TERM AFFORDABILITY
To ensure that HOME
			 investments yield affordable housing over the long term, HOME imposes rent and
			 occupancy requirements over the length of an affordability period.
Affordabilitv
			 Periods
* For homebuyer and rental projects, the length of the
			 affordability period depends on the amount of the HOME investment in the
			 property and the nature of the activity funded. The table below provides the
			 affordability periods.
HOME Investment per Unit
Length of the Affordability Period
Less than $15,000
5 years
$15,000-$40,000
10 years
More than $40,000
15 years
New construction
of rental
housing
20 years
Refinancing
of rental
housing
15 years
* The HOME Final Rule eliminated the requirement that, when HOME
			 funds are used in conjunction with Federal Housing Administration (FHA)
			 insurance, the affordability period be the same as the term of the FHA-insured
			 mortgage.
Occupancy
* Throughout the affordability period, the HOME-assisted housing
			 must be occupied by income-eligible households.
>
Rental housing:
When units become vacant during
			 the affordability period, subsequent tenants must be income-eligible and must
			 be charged the applicable HOME rent. (See Chapter 6: Rental Housing Program for
			 more information.)
>
Homebuyer assistance:
If a home purchased with
			 HOME assistance is sold during the affordability period, resale or recapture
			 provisions apply to ensure the continued provision of affordable homeownership.
			 (See Chapter 5: Homeowner Housing Program - Homebuyers for more
			 information.)
APPLICABILITY OF OTHER FEDERAL REQUIREMENTS
* HOME is subject to a number of cross-cutting Federal
			 regulations, which are detailed in Chapter 13 and highlighted as applicable in
			 the chapters covering homeowner rehabilitation, homebuyer and rental housing
			 activities.
PART III: COST ALLOCATION AND SUBSIDY LAYERING
As
			 described in Part II of this chapter under "Project Subsidy Limits", ADFA
			 performs a cost allocation and subsidy layering review of HOME projects to
			 determine the appropriate subsidy amount to the project.
* As explained in Part II, the actual HOME Investment in a
			 project depends on the following factors.
> The proportion of the total project cost that is
			 HOME-eligible - some planned project costs may not be eligible expenses under
			 the HOME Program.
> How many of the units in the project are HOME-assisted -
			 Projects may have a mix of HOME- and non-HOME-assisted units.
> The financial needs of the project - HOME projects may not
			 receive more subsidy than is required to make them financially feasible.
Example
: Three units in a
			 six-unit structure will be rehabilitated with HOME funds. The maximum-per-unit
			 HOME subsidy for the area determined by HUD is $80,000. Thus, the HOME subsidy
			 for this project
cannot exceed
$240,000 (3 X $80,000). The
			 developer has estimated rehabilitation costs of $75,000 per unit. However, the
			 subsidy needed to make the project
financially feasible based on an analysis of the cash
			 flow and development costs is only $210,000, or $70,000 per
			 unit.
* To determine what is required and reasonable, ADFA will
			 complete a cost allocation and subsidy layering review.
> Cost allocation and subsidy layering are impacted by any
			 changes in the proportion of HOME-assisted unit to total units in the project,
			 development cost or financing sources.
> Because of these requirements, all HOME Recipients are
			 obligated to contact ADFA as soon as there are any changes in project
			 size/scope, cost or financing sources at any point during the development of
			 the project.
COST ALLOCATION
* HOME rules create a floor (minimum) for the number of
			 HOME-assisted units a project must have. This floor is based on the
			 proportional share of total eligible costs to be paid with HOME funds.
Example
: Soccer City is
			 considering a request for HOME funds from Sable Park Housing for a 20-unit
			 building. The HOME-eligible development costs total $400,000. The developer has
			 requested $100,000 in HOME funds. Since the HOME funds represent one-fourth of
			 the total eligible development costs, Soccer City must require the project to
			 have at least five HOME-assisted units, the "floor." Soccer City may choose to
			 require more than five units to be HOME-assisted.
Example
: When Can-do CHDO
			 approached Soccer City for development funds for a 30-unit rehabilitation
			 project, Soccer City decided to subsidize half of their units. All of the units
			 were comparable in size, features, number of bedrooms and development cost.
			 Consequently, Soccer City provided half of the $600,000 in HOME-eligible
			 development costs (i.e., $300,000) to Can-do and 15 of the 30 units were
			 designated HOME-assisted.
* As such, before determining the allowable HOME subsidy amount,
			 ADFA establishes the total HOME-eligible cost for the project.
* Once the total HOME-eligible costs are established for the
			 project, ADFA must allocate costs across units.
> If both the assisted and non-assisted units are comparable
			 in size, features and number of bedrooms, the HOME-eligible costs can be
			 pro-rated across units. (Since floating units, by definition, must be
			 comparable, costs should always be pro-rated.)
Example
: Soccer City wants to
			 subsidize development of a 30 unit project with HOME funds. Twenty of the units
			 have one bedroom and ten have two bedrooms. All of the units have identical
			 amenities. The city plans to underwrite one-third of the units (seven
			 one-bedrooms and three two-bedrooms) and the owner plans to use the floating
			 unit approach. Since all of the one-bedroom units are comparable to one another
			 the costs associated with the one-bedroom units (and common costs on a
			 pro-rated basis) can be spread across all of the one-bedroom units. The same is
			 true of the two-bedroom units, since they also are comparable to one
			 another.
>
If the assisted and non-assisted units are
			 not comparable, the actual costs must be determined and allocated unit-by-unit.
			 The specific units identified to "receive" HOME funds must be fixed - that is,
			 designated as HOME-assisted.
* HUD Notice CPD 16-15 provides further guidance on allocating
			 costs in projects with HOME and non-HOME units. A copy of the notice can be
			 located online at the HUD Exchange
(
www.hudexchange.info
)
.
UNDERWRITING AND SUBSIDY LAYERING
* HUD establishes limits on the amount of HOME funds that may be
			 invested in affordable housing on a per-unit basis for specific areas.
* The 2013 HOME Final Rule requires underwriting all HOME
			 projects (rental and homebuyer) whether or not the projects are assisted with
			 other governmental assistance.
* Before committing funds to a project, ADFA evaluates the
			 project in accordance with guidelines that it has adopted for determining a
			 reasonable level of profit or return on owner's or developer's investment in a
			 project and must not invest any more HOME funds, alone or in combination with
			 other governmental assistance, than are necessary to provide quality affordable
			 housing that is financially viable for a reasonable period of time (at minimum,
			 the period of affordability).
* The financial capacity of the developer as well as their
			 capabilities and experience to undertake the activity proposed are
			 reviewed.
* The proposed project timeline is reviewed to determine
			 reasonability and absorption rates for units.
* For Multi-Family projects with 26 or more units, a capital
			 needs assessment is conducted.
* ADFA conducts the subsidy layering review in accordance with
			 the guidelines presented in HUD Notice CPD-15-11 These guidelines include
			 review of the following project documents:
>
Sources/uses of funds:
Recipients are
			 required to provide ADFA the sources/uses of funds statement for the project
			 with supportive documentation that there is a firm commitment for the funds.
			 This statement should reflect the project development budget and should
			 list:
V All proposed sources (both private and public) of funds and the
			 dollar amounts for each respective source; and
V All proposed uses of funds (including acquisition costs,
			 rehabilitation/or construction costs, financing costs and professional fees)
			 associated with the project.
>
Certification of governmental assistance:
Recipients must provide a formal certification as to whether or not
			 additional governmental assistance will be provided to the project, and if so,
			 what kind of assistance.
>
Project development budget:
Recipients must
			 provide ADFA the project development budget so that ADFA can determine whether
			 the development costs are necessary and reasonable.
V The budget should include all costs associated with the
			 development of the project, regardless of the funding sources.
V "Reasonableness" of costs will be based on all of the following
			 factors:
(1) Costs of comparable
		  projects in the same geographical area;
(2) Qualifications of the cost estimators
		  that developed the various budget line items; and
(3) Comparable costs published by recognized
		  industry cost index services.
>
Proforma:
ADFA will determine the
			 reasonableness of the rate of return on equity investment by looking at the
			 Recipient's proforma (project income and expense statement).
V The proforma should include achievable rent levels, market
			 vacancies and operating expenses.
V It should also specify the consequences of tax benefits, if
			 any, and any other assumptions used in calculating the project cash
			 flow.
V The proforma should represent, at a minimum, the term of the
			 HOME affordability requirements, or longer if other funding sources require
			 longer affordability terms.
* As mentioned above, ADFA conducts its cost allocation and
			 subsidy review upfront to determine the appropriate HOME subsidy to the
			 project; however, cost allocation and subsidy layering are impacted by any
			 changes in the proportion of HOME-assisted unit to total units in the project,
			 development cost or financing sources. This means all HOME Recipients are
			 obligated to contact ADFA as soon as there are any changes in project
			 size/scope, cost or financing sources at any point during the development of
			 the project.