Arkansas Administrative Code › Agency 109 - Arkansas Development Finance Authority › Division 04 - Multi-Family Housing › Rule 109.04.12-003 - 2012 HOME Investment Partnership Program Policy and 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 ("ADFA" or the
				"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.
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://www.arkansas.gov/adfa/htm
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/Reconstruction
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
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 (ADFA or 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 HOME Program funds must
				complete and successfully pass the HOME Program Certification Exam prior to
				receiving funding, exclusive of ADDI funds.
[TICK] The Certification course is a 2 ½ day training
				which will provide a thorough knowledge and understanding of the HOME Program
				rules and regulations.
[TICK] Applicants will be required to have at least one member
				of the development team who has successfully completed and passed the
				Certification Exam.
[TICK] Development team may include:
.
Owners, Developers, Sponsors of the
				project
.
Consultants
.
Management Company
.
Community Housing Development Organizations
				(CHDO)
.
Subrecipients - Project Administer
ADFA HOME Program Operations Manual Page 2-1
October 2012
>
Certified HOME Program Administrators and
				Consultants will be required to obtain annual HOME Program continuing
				education.
[TICK] Continuing education may be obtained by attending at
				least one of the following classes:
.
ADFA sponsored continuing education
				classes.
.
Attendance at the annual ADFA Housing
				Forums
.
HOME Program Certification Classes (No exam
				required)
[TICK] If a Certified HOME Program Administrators or Consultant
				fails to obtain the HOME Program continuing education, the Certified HOME
				Program Administrator or Consultant will be required to take the HOME Program
				Certification Training and successful pass HOME Certification Exam prior to
				receiving funding, exclusive of ADDI funds.
>
Fair Housing Certification - Effective
January 1, 2012
applicants applying for HOME Program funds must
				successfully complete Fair Housing Training Course prior to receiving
				funding.
[TICK] The training course will provide a thorough knowledge
				and understanding of the Fair Housing Act.
[TICK] 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.
[TICK] 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.
[TICK] 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, and ADFA issues a Notice to
				Proceed.
*
Project set up.
ADFA expects that Recipients
				will complete IDIS Set Up Forms for each project and/or individual activity
				that is carried out within the scope of the administered program.
*
Pre-construction conference.
For all projects
				that involve construction (multi- and single-family development activities and
				homeowner rehabilitation), pre-construction conferences must be conducted prior
				to commencing construction.
>
For rental activities the pre-construction
				conference must be conducted with the development team and an ADFA
				representative.
>
For homeowner activities the pre-construction
				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.
[TICK] 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.
[TICK] Please refer to ADFA's Compliance and Monitoring Manual
				for more guidance on monitoring requirements.
>
Provide accurate beneficiary and expenditure
				activity to ADFA.
[TICK] IDIS Set Up forms must be used for each project and/or
				activity within a program.
[TICK] IDIS Set Up forms must accurately reflect beneficiary
				information.
[TICK] Changes must be documented and reported to ADFA.
[TICK] IDIS Close Out reports must be completed and submitted
				to close out each project/activity.
[TICK] 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;
[TICK] Staff must be knowledgeable (or trained) to work well
				with clients, partners, and each other; and
[TICK] There must be systems in place to track and manage
				performance.
> Choose qualified partners:
Recipients should
				have systems for selecting partners that are:
[TICK] Easily understood and fair; and
[TICK] Capable of delivering projects that meet or exceed
				expectations and comply with requirements in the written agreement with
				ADFA.
[TICK] 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.
[TICK] Policies and procedures must be clear and easily
				understood.
[TICK] Policies and procedures must be current and
				reflect:
* What must be done;
* Who should do the work; and
* When it should be done.
[TICK] 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.
[TICK] In particular, this means that projects that are
				ill-conceived, 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.
[TICK] They must be complete, and clearly describe the project,
				roles of the Recipient and the partner involved.
[TICK] 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.
[TICK] It begins with a pre-construction 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.
[TICK] Costs to develop or preserve housing must be reasonable,
				and budgets and invoices must be reviewed by knowledgeable staff persons prior
				to approval.
[TICK] 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.
[TICK] In addition, rental projects must be effectively managed
				during the affordability period. This includes managing rents, unit quality,
				and re-certifying 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.
[TICK] Recipients must be able to anticipate the need for HOME
				funds and budget accordingly. This is particularly important when running a
				Tenant Based Rental Assistance (TBRA) program.
[TICK] 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.
[TICK] 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.
[TICK] 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.
[TICK] 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:
[TICK] A project completion date acceptable to ADFA and the
				Recipient of the HOME Program funds;
[TICK] 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
[TICK] Provisions for the timing of HOME Program fund
				disbursements.
>
Complete IDIS set up information has been
				submitted to ADFA staff and ADFA staff has completed IDIS activity set up. See
				section on (IDIS) below for additional details.
>
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 and a Notice to Proceed is issued by
				ADFA.
>
A pre-construction conference is held.
[TICK] For rental activities the pre-construction conference
				must be conducted with the development team and an ADFA representative.
[TICK] For homeowner activities the pre-construction conference
				must be conducted with the applicant/consultant, the homeowner, the contractor,
				and an ADFA Inspector.
* 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.
[TICK] 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
*
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 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
[TICK] 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 Set Up 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
[TICK] 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
[TICK] 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 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.
[TICK] 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.
[TICK] 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 AFDA; 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:
[TICK] Appraisals;
[TICK] Preparation of work specifications;
[TICK] Loan processing and underwriting;
[TICK] Construction inspections and oversight;
[TICK] Inspections for the presence of lead hazards or
				defective paint;
[TICK] Advisory and other relocation services;
[TICK] Project-specific environmental reviews; and
[TICK] 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 (12.5%
				for the State of Arkansas).
>
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
:
>
The cost of providing HOME-funded TBRA is an
				administrative cost and may not be charged as a project-related soft
				cost.
>
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.)
Note
: A Recipient may not charge a fee to a
				project for ongoing project monitoring and compliance reviews. Recipients also
				may not charge fees for origination or loan servicing.
*
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 at
				http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/notices/.
UNIFORM ADMINISTRATIVE REQUIREMENTS
Recipients must comply with certain administrative
				requirements, generally pertaining to the financial management and audit
				standards. These differ depending whether the Recipient is a government entity,
				a nonprofit, or a CHDO.
*
Government entities.
Governmental entities that
				are Recipients must comply with administrative requirements, generally
				pertaining to the financial management and audit standards. All government
				entities administering ADFA HOME programs or using ADFA HOME funds should be
				familiar with these requirements.
> OMB Circular A-87 "Cost Principles for State, Local
				and Indian Tribal Governments":
This circular establishes principles and
				standards to provide a uniform approach for determining allowable costs under
				Federal grants and other agreements with states and local governments and
				Indian tribal governments.
> Certain provisions in 24 CFR Part 85
: These
				regulations set forth uniform requirements for financial management systems,
				procurement, reports and records, and grant close-outs for Recipients of
				Federal grant funding. Attachment 3-1 lists the applicable provisions.
> OMB Circular A-133 (Audit Requirements)
: All
				Recipients are required to have audits. Audit thresholds and requirements are
				outlined in OMB Circular A-133.
*
Nonprofit organizations.
HOME-funded Recipients
				that are nonprofit organizations must also comply with certain uniform
				administrative requirements. These requirements are similar, but are not quite
				the same as those placed on Recipients that are governmental entities. All
				nonprofit HOME Recipients should be familiar with these requirements, as
				detailed below.
> OMB Circular A-122, "Cost Principles for Non-Profit
				Organizations,"
or, for institutions of higher education, OMB Circular
				A-21 "Cost Principles for Educational Institutions": This circular establishes
				principles for determining allowable costs under grants, contracts and other
				agreements with nonprofit organizations. OMB Circular A-122 is in the
				Appendix.
> Certain provisions of 24 CFR Part 84
: The
				regulations at 24 CFR Part 84 implement OMB Circular A-110 and set forth
				uniform requirements for nonprofit organizations, including financial
				management systems, property standards, procurement standards, reporting and
				record-keeping. Attachment 3-1 lists the applicable provisions.
*
CHDOs.
The requirements at
				24 CFR
				84.21, "Standards for Financial Management
				Systems" apply to CHDOs who are acting as an owner, developer or sponsor of
				HOME-assisted housing.
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 templates for
				agreements between a Recipient and a contractor.
* 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 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 tasks to be
				performed, schedule for completing tasks, a budget in sufficient detail to
				effectively monitor performance and the period of the agreement. (For nonprofit
				and for-profit housing owner, sponsor or developers, the duration of the
				agreement will be in a separate clause.)
> 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 (OMB Circular
				A-87 and applicable provisions of 24 CFR Part 85 for governmental entities, or
				OMB Circular A-122 and applicable provisions of 24 CFR Part 84 for non-profit
				entities).
> 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.
---------------------------------------------------
More on Agreement Provisions
Exhibit 2-1 summarizes which of the minimum required provisions
				must be included in the various types of written agreements.
> 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.
*
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.
Click here
				to view image
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 24 CFR Parts 84 and 85. The second, which applies only in
				cases not covered by 24 CFR Parts 84 and 85, 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 clearing house for grants and
				contracts.
Recipient Activities Covered by CFR
				Provisions
* In the procurement of property and services by Recipients,
				the conflict-of-interest provisions at
				24 CFR
				85.36 and 24 CFR 84.42 apply. 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
				24 CFR
				85.36 and 24 CFR 84.42, the HOME regulations
				at 24 CFR
				92.356 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 AFDA, 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
. Any position of control or
. 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.
>
As of the September 30, 2003 Final Rule for
				24 CFR Part 92, HUD (Attachment 1-4), HUD identified regulations for eight
				programs, including the HOME Program, to eliminate barriers and ensure that
				these programs are open to all qualified organizations regardless of their
				religious character.
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).
* 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.
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
				Set-up and Completion information for all ADFA funded activities.
>
The Set-up 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 criminal background checks, suspensions, and audits.
*
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 Principals
				(GAAP) and the Single Audit Act Amendments of 1996 ( 31 U.S.C. 7501-7507 ) and
				revised OMB Circular A-133, "Audits of States, Local Governments, and
>
Non-Profit Organizations" as required in 24
				CFR Part 84 and 85 respectively.
LIST OF ADFA FORMS
ADFA has all required program administration and management
				forms on their website,
www.arkansas.gov/adfa.
These forms
				include:
* Contract and Grant Disclosure and Certification Form
* IDIS Activity Set Up Forms
* IDIS Activity Completion Forms
Click here
				to view image
ATTACHMENT 2-2 PROGRAM INCOME CASE STUDY
Middle City received an allocation of $500,000 in HOME Program
				funds from HUD. Middle City allocated $200,000 of the funds to its homeowner
				rehabilitation program. This program provides direct loans with interest rates
				ranging from two to five percent, depending upon income to eligible owner
				occupants for the repair or rehabilitation of their homes. Through the
				repayment of principal and interest on the loans, this program generates
				approximately $25,000 in program income. In accordance with the HOME Program
				requirements, this program income is placed in the PJ's HOME Investment Trust
				account, and is used, prior to the drawdown of HOME funds from the U.S.
				Treasury, for other HOME-eligible housing activities.
Middle City also provided a total of $300,000 to two different
				CHDOs for eligible CHDO set-aside activities. The first project, which received
				$150,000 in HOME funds, was undertaken by Middle City Housing (MCH). This
				project involved the construction of a new multi-family rental property
				containing 25 apartments. Middle City -- the PJ -- provided the HOME funds to
				MCH in the form of a low-interest, deferred payment loan. The principal and
				interest on the loan would have to be repaid beginning in the third year of the
				project's operation. The loan repayments to the PJ would be considered program
				income, placed in the PJ's HOME Investment Trust account and expended for other
				HOME-eligible activities prior to the drawdown of additional HOME funds from
				the U.S. Treasury.
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 Final Rule was published on September 16, 1996.
				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.
*
Timeframes. HOME Rules require ADFA to commit and spend
				its funds within certain timeframes.
>
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
five years
to expend HOME funds. PJs
				that do not meet these timeframes risk losing their HOME funds.
>
Given these requirements, ADFA has created
				its own timeline for HOME program Recipients. Recipients must disburse:
[TICK] 25 percent of the total HOME Program funds within 90
				days; and
[TICK] 75 percent within one year from the date of the notice
				to proceed.
*
Limits per applicant.
ADFA has set the following
				parameters regarding the amount of HOME Program funds that can be allocated
per applicant:
Note:
ADFA Board of Directors
				reserve the right to increase or decrease the maximum program allocation during
				the program year to meet HOME program requirements. All allocations are subject
				to availability of funds.
>
Applicants must request a
minimum
of $100,000 in HOME Program funds to be considered for a HOME Program
				allocation (with the exception of TBRA projects).
>
The
maximum
amount that can be
				requested and allocated by ADFA is $450,000 in HOME Program funds, subject to
				availability of funds (
Note:
The maximum allocation for a CHDO
				projects is $900,000, subject to the availability of funds).
>
The
maximum
amount that can be
				requested and allocated for TBRA projects by ADFA is $225,000, subject to
				availability of funds.
>
TBRA applicants may apply for funding once a
				year and when 75% of the current allocation has been expended.
>
Recipients may have a maximum of three
				approved HOME projects, per housing activity (Rental, Homeowner, TBRA), per
				HOME Fiscal year (July 1 to June 30) based upon capacity as determined by
				ADFA.
*
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.)
Eligible
				Activities
Homeowner Rehabilitation Activities
- see chapter 4
Homebuyer Activities
- see chapter 5
Rental Housing Activities
- see chapter 6
TBRA
- see chapter 7
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, rehabilitation or
				reconstruction 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.)
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. ADFA HOME Program funds
				allocated within a designated local PJ will be limited to down payment and
				closing costs assistance loans, CHDO Set-Aside projects, and joint Low-Income
				Housing Tax Credit/HOME developments.
*
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 now 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. As of the September 30, 2003 Final Rule for 24 CFR Part 92, HUD
				identified regulations for eight programs, including the HOME Program, to
				eliminate barriers and ensure that these programs are open to all qualified
				organizations regardless of their religious character.
*
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 24 CFR
				Part 85 (for PJs) and Part 84 (for nonprofits).
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
[92.218-92.222]
* 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 12.5 percent matching
				obligation for HOME funds expended. ADFA imposes a 12.5 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.
Monitoring, Record-keeping and
Reporting [92.508 and 92.509]
* As a HOME PJ, ADFA is required to keep records that enable
				HUD to determine whether they have met program and project requirements. 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.
* AFDA 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.
[TICK] 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.
[TICK] The property or some other assets are used as
				collateral.
[TICK] 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.
[TICK] 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.
[TICK] 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.
[TICK] Deferred payment loans can be forgivable or
				repayable.
.
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).
.
If repayable, repayment might be required at the
				sale or transfer of the property or at the end of a fixed period of
				time.
[TICK] Like the amortizing loans discussed above, these loans
				can accrue interest or be non-interest bearing.
[TICK] Deferred payment loans require the property or some
				other form of collateral to be used as security for repayments.
[TICK] 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.
[TICK] Grants require no liens on the property or other
				assets.
[TICK] They are most commonly used for downpayment and closing
				cost assistance in homebuyer programs or to provide assistance to very
				low-income owner-occupants for rehabilitation; however, ADFA currently provides
				down payment assistance in the form of forgivable loans.
> 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.
[TICK] 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.
[TICK] A loan guarantee account is a loan loss reserve held by
				the lender in an amount equal to some percentage of the outstanding
				principal.
.
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.
.
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 investment:
The maximum per-unit
				HOME subsidy limit varies by PJ. HUD determines the maximum amounts, which are
				based on the FHA Section 221(d)(3) program limits for the metropolitan area
				each year.
* The maximum per-unit subsidy limit is:
>
100 percent of the dollar limits for a
				Section 221(d)(3) nonprofit sponsor, elevator-type development, indexed for
				base city high cost areas, and adjusted for the number of bedrooms.
Computing a Project's Per-Unit Subsidy
When computing the HOME subsidy per unit, it is not necessary
				to include HOME-funded TBRA associated with the project.
> Note:
ADFA has imposed per unit subsidy
				limits which are
less
than the FHA 221(d)3 limits. See the
				activity chapters for more information.
*
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 dwelling 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.
*
Reconstruction
: This refers to rebuilding a
				structure on the same lot where housing is standing at the time of project
				commitment. HOME funds may be used to build a new foundation or repair an
				existing foundation. Reconstruction also includes replacing a substandard
				manufactured housing unit with a new manufactured housing unit. During
				reconstruction, the number of rooms per unit may change, but the number of
				units may not. NOTE: Replacing a manufactured housing unit with a stick-built
				unit is considered a homebuyer development activity even if the
				applicant/beneficiary owns the lot and existing manufactured unit.
*
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.
Reconstruction & Environmental Review
Reconstruction may take place anywhere on the lot; however,
				reconstruction of a single family unit in a new location on the lot is
				classified as new construction for purposes of environmental review.
				Reconstruction of multi-family is viewed as new construction for the purposes
				of environmental review if the number of units is increased or decreased by
				more than 20% and/or the cost of reconstruction is more than 75% of the total
				estimated cost of the replacement after the work is completed. Refer to 24 CFR
				Part 58 for more information.
*
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.
> Note:
ADFA HOME funds requested for
				acquisition and eligible soft costs may be disbursed ONLY after the start of
				construction (policy excludes CHDO Set-aside projects.)
*
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. 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.
*
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.
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 in the
				Appendix.
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.
Property Standards
* HOME-funded properties must meet certain minimum property
				standards.
> State and local standards
: State and local
				codes and ordinances apply to any HOME-funded project regardless of whether the
				project involves acquisition, rehabilitation, or new construction.
> Model codes
: For
rehabilitation
				or new construction
projects where there are not state or local
				building codes, the Recipient must enforce national model codes as listed in
				Exhibit 3-1.
> Housing quality standards
: For
acquisition-only
projects, if there are no state
				or local codes or standards, the Recipient must enforce Section 8 Housing
				Quality Standards (HQS).
> Rehabilitation standards
: Each PJ must
				develop written rehabilitation standards to apply to all HOME-funded
rehabilitation
work. These standards are similar
				to work specifications, and generally describe the methods and materials to be
				used when performing rehabilitation activities.
> International Energy Conservation Code
:
New construction
requires compliance with the
				International Energy Conservation Code.
> Handicapped accessibility - Section (504)
: In
				some cases, handicapped accessibility requirements apply. See the
				indiv
idual activity chapters (Chapters 4-7) fo
r more
				information.
> Site and neighborhood standards
: The site and
				nei
ghborhood standards of
				24 CFR
				983.6(b) ap
ply 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).
* The applicable standards vary by the type of activity.
				Exhibit 3-1 explains the minimum property standards that apply to each type of
				HOME activity.
* All
new
manufactured housing
				units must meet the construction and safety standards of 24 CFR 3280. New
				manufactured housing units must be installed according to state or local codes
				or the manufacturer's written instructions.
EXHIBIT 3-1 MINIMUM PROPERTY STANDARDS BY ACTIVITY
				TYPE
Activity
Minimum Property Standard to be Met
Tenant-based rental assistance
Section 8 HQS.
Acquisition of existing housing (no rehabilitation or
						  construction)
Applicable state or local housing quality standards and
						  code requirements. If no local standards/codes apply, Section 8 HQS.
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:
. Uniform Building Code (ICBO)
. National Building Code (BOCA)
. Standard Building Code (SBCCI)
OR
. Council of American Building Officials one- or
						  two-family code (CABO)
OR
. Minimum Property Standards* at
						  24 CFR
						  200.925 or
						  200.926(FHA).
AND Handicapped accessibility requirements, where
						  applicable
(i.e., Section 504 and the Arkansas Usability Standards in
						  Housing)
.
New construction of housing
State and local code requirements.
If no state and local codes apply, one of the following
						  national model codes:
. Uniform Building Code (ICBO)
. National Building Code (BOCA)
. Standard Building Code (SBCCI)
OR
. Council of American Building Officials one- or
						  two-family code (CABO)
OR
. Minimum Property Standards* (FHA) at
						  24 CFR
						  200.925 (for multi-family) or 200.926 (for
						  one- and two-unit dwellings).
AND International Energy Conservation Code.
AND Handicapped accessibility requirements, where
						  applicable
(i.e., Section 504 and the Arkansas Usability Standards in
						  Housing)
New construction of
rental
housing must meet site and neighborhood standards at 24 CFR 893.6(b).
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.
Note:
This requirement is more
				stringent than the HOME program regulations that required at least 90 percent
				of HOME-assisted rental and TBRA households be at or below 60 percent of area
				median income.
>
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 Definition
When calculating the annual income of program beneficiaries,
				ADFA HOME Program Recipients must use the Section 8/Part 5 definition.
*
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 annual (gross) income.
*
Calculating annual income
: To calculate annual
				(gross) income, the PJ may choose among three 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.)
> Census long form annual income:
The final
				rule also allows HOME participants to determine annual income as defined for
				the Census long form for the most recent decennial Census.
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
				source documentation such as wage statements, interest statements, and
				unemployment compensation statements.
>
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.
Affordability
				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 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 98-02 provides further guidance on allocating
				costs in projects with HOME and non-HOME units. A copy of the notice can be
				located online at
http://www.hud.gov/utilities/intercept.cfm?/offices/cpd/lawsregs/notices/1998/98-2.pdf.
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.
* Before committing funds to a project that combines the use of
				any other local, State or Federal assistance, ADFA evaluates the project in
				accordance with guidelines that it has adopted, to ensure that ADFA does not
				invest any more HOME funds than are necessary to provide affordable
				housing.
* ADFA conducts the subsidy layering review in accordance with
				the guidelines presented in HUD Notice CPD-98-01 (see the Appendix). These
				guidelines include review of the following project documents:
[TICK]
Sources/uses of funds:
Recipients are
				required to provide ADFA the sources/uses of funds statement for the project
				with supportive documentation. This statement should reflect the project
				development budget and should list:
.
All proposed sources (both private and public)
				of funds and the dollar amounts for each respective source; and
.
All proposed uses of funds (including
				acquisition costs, rehabilitation/or construction costs, financing costs and
				professional fees) associated with the project.
[TICK]
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.
[TICK]
Project development budget:
Recipients
				must provide ADFA the project development budget so that ADFA can determine
				whether the development costs are necessary and reasonable.
.
The budget should include all costs associated
				with the development of the project, regardless of the funding sources.
.
"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.
[TICK]
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).
.
The proforma should include achievable rent
				levels, market vacancies and operating expenses.
.
It should also specify the consequences of tax
				benefits, if any, and any other assumptions used in calculating the project
				cash flow.
.
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.