capital fund reference

WI Public Housing

Capital Fund ReferenceApril 2013

Larry WoodDeanna Alfonso

U.S. Department of Housing & Urban DevelopmentMilwaukee Field Office

WI Public Housing 2

Capital Fund Management

1. Capital Funds follow 24 CFR 24.9052. Capital Funds include Regular CFP Grants, ARRA Grants (Formula and

Competitive), RHF Grants, and Emergency CFP Grants. 3. It is the responsibility of the PHA to follow HUD regulations and use

funds appropriately.4. HUD reserves the right to establish voucher thresholds depending on

PHA performance or other issues and concerns.5. Timely update of the Obligation/Expenditure log in LOCCS is the PHA

responsibility.6. Contracts and processes all need to follow 24 CFR 85.367. Fiscal responsibility is everybody’s job.

WI Public Housing 3

Obligations

Obligations mean the cumulative amount of modernization commitments entered into by the HA; i.e., contract execution for contract labor, materials or services; start and continuation of physical work by force account labor; and start and continuation of administrative work. Contract execution means execution of the contract by both the HA and the contractor. For force account work, all funds for a group of sequentially-related physical work items are considered obligated when the first work item is started, such as kitchen cabinet replacement followed by kitchen floor replacement, but only where funds continue to be expended at a reasonable rate. Where one force account physical work item is started and is not sequentially related to other physical work items, such as site improvements and kitchen remodeling, then only the funds for the one physical work item started are considered obligated. - Notice PIH 96-90

A minimum of 90% of the funds must be obligated by the “Obligation End Date”. Obligation End date is 2 years after the funds are made available. The term “obligation” means that a PHA has an obligating document, such as a contract, signed by two parties, or a purchase order.

WI Public Housing 4

Expenditures

Where funds have been obligated, the HA is expected to show reasonable progress through increasing fund expenditures each quarter at a ratethat would allow completion within the time frame set forth in the implementation schedule. Expenditures mean the cumulative amount of modernization funds distributed by the HA through written checks. The HA shall requisition funds only when payment is due and after inspection and acceptance of the work and shall distribute the funds within three working days of receipt of the funds. - Notice PIH 96-90

WI Public Housing 5

Capital Fund “DO’s”

Use CFP grant funds to modernization and improve projects of units that are under the Annual Contributions Contract (ACC), as defined in 24 CFR 5.403 All of the activities must be approved by HUD (via the Annual and 5

year Action Plan) Fungibility of proposed work items is allowed. This means that the PHA

may use CFP funds for any activity addressed in the 5 year action plan, if it so chooses, provided that the following items are satisfied:

(1) Such activity has been included in the environmental review; otherwise, the ER has to be amended); and

(2) The PHA prepares and submits a budget revision (HUD FORM 50075.1, parts I, II), to HUD for approval, prior to the implementation is the activity.

WI Public Housing 6

Capital Fund “DO’s”

• Only expend funds after the Environmental Review (ER) has been completed.

• PHAs must update the “Obligation-Expenditures” screen in LOCCS (Monthly- No exception). This activity must be completed no later than 5 calendar days after the month ends.

• Note: All PHAs are required to have available their obligation/expenditure documents, should any of these documents be requested by HUD.

• Follow all “Eligible Activities” regulations. Note:

Eligible activities are outlined in 24 CFR 968. This Code of Federal Regulations pre-dates the Quality Housing and Work Responsibility Act (QHWRA) of 1995. However, it is the latest document listing eligible activities, at this time. If you are unsure of eligibility of a certain activity, please contact the Field Office for further guidance.

WI Public Housing 7

1406

• A Maximum of 20% may be budgeted and expended for Operations (BLI 1406). This applies to large PHAs (250 units or more).

• Small PHAs , PHAs with less than 250 dwelling units, that are not designated as a troubled PHA pursuant to section 6(j)(2) of the Act, and that in the determination of the Secretary is operating and maintaining its public housing in safe, clean and healthy condition, may transfer 100% of its funds to operations.

• Large PHAs can transfer up to 20% to BLI 1406 Operations. The PHA can use these funds to fund security guards and/or direct social services.

• BLI 1406 funds, once withdrawn, immediately follow the operating fund rule - (24 CFR 990).

Note: Funds budgeted under the BLI 1406 are considered obligated and expended when the PHA draws down the funds.

WI Public Housing 8

1408• A Maximum of 20% may be budgeted and expended for Management

Improvements (BLI 1408). BLI 1408 may be used for the following activities (24 CFR 968.112- Eligible Activities):

– Management, financial, and accounting control systems of the PHA– PHA staff training– Provision of social services to residents, from local government or other public and

private entities– Resident and development security (i.e., installation of security apparatus such as

cameras, key cards for individual residents, etc.). This does not include police and/or security guards protection.

– Resident selection and eviction– Occupancy, rent collection, maintenance (non-routine), and equal opportunity. – Preventive Maintenance System costs to include the establishment of a maintenance

preventive system or improvement of an existing system:– Regular inspection of building structures, systems, and units– Drug elimination costs.

WI Public Housing 9

1408

• Job training for residents and resident business development activities (for purpose of carrying out activities related to a modernization project and physical improvement). HUD encourages PHAs to hire residents as trainees, apprentices, or employees to carry out the modernization program.

• Lead-based paint costs such as insurance coverage and cleanup and disposal.

• Resident Management Costs related to the following activities:– Technical assistance to a resident council or resident management corporation (RMC)– Training of RMC Board members in community organization, board development, and

leadership– Assistance in the formation of the RMC

WI Public Housing 10

1410• Maximum of 10% may be used for Administration (BLI 1410). PHAs can

draw down the total amount authorized for BLI 1410 Administration at any time or alternatively the PHA can simply withdraw a portion of that amount from that BLI as they have need of the funds.

Treasury rules state: The PHA should not draw down funds unless the PHA has a bill that is due and payable and those funds should be expended within 3 business days.


1410• BLI 1410 may be used for the following activities (24 CFR 968.112- Eligible

Costs): – Planning, design, implementation and monitoring of the physical

management improvements– Salaries/benefits of technical and non-technical personnel assigned to

a modernization project, where the scope and volume of the work are beyond what could be reasonably expected to be accomplished as part of the personnel’s non-modernization duties

– Preparation of the necessary CFP documents (preparation of budget revisions, closeout packages, etc.)

– Resident participation costs associated with ensuring residents’ involvement in the annual PHA Plan process.

– Costs of administering telephone and facsimile machines


Capital Fund “DON’Ts”

• Use CFP funds for everyday operations expenses, unless the funds are under BLI 1406

• Use CFP funds to pay for police protection and security guards. These are operating costs. Section 9(e) (1) (c) of the United States Housing Act of 1937, as amended.

• Pay the A/E for performing work outside of the modernization/rehabilitation project

• Obligate funds (in LOCCS) for operations before funds are drawn down.• Report the funds obligated in LOCCS before they are legally committed

through expenditure, a contract, or a purchase order.



• Demolish or dispose, from inventory, any ACC/DOT units, without prior to written HUD approval. (See PIC Inventory Removal module)

• Use CFP funds (under any circumstances) to pay for costs related to demolition/disposition/acquisition/or development of any non-ACC units.

• Pay for utilities, because utilities are operating costs.• Co-mingle funds - This means that PHAs should not pay its

contractors/vendors from its general account (or any other account) and later charge the CFP account and vice versa.

• Delay payments to your contractors/vendors more than 3 business days after the payment has been released (disbursed) by HUD into the PHA-designated financial institution.



• Ignore the obligation and expenditures end date. Obligation end date cannot be extended, unless approved by the Assistant Secretary of Public Housing (HQ). The expenditures end date may be extended as a result of extending the obligation end date.

Funds not obligated at a minimum of 90% by the obligation end date will be subject to penalties and sanctions. The PHA will lose 1/12 for each month after the obligation end date, from its next CFP grant, for each month that it is not in compliance. Remember - One day into a month will constitute one full month in the calculation of penalty.


CFP Pre Audit

• When funds are fully expended:– Submit AMCC (Form 53001) with the final Budget

form (Form 50075.1) to the FO.– The FO will mark LOCCS as Pre-Audit, removing

any additional PHA responsibility for monthly updates.

– A letter will be sent with a copy of the AMCC– PHA Must Audit the grant on the next FY cycle.


CFP Post Audit

• Provide the FO with an Audit Copy– The FO will notify HUD Accounting to close the

grant.– A FO letter will be provided with the final AMCC

form.


Common Errors

• Obligating funds inappropriately; i.e. 100% without invoices.• Not having a LOCCS backup person.• Drawing funds without matching vouchers or contract

invoices. No voucher may be placed in LOCCS before the appropriate invoice(s) has/have been submitted and approved by the PHA.

• Not expending funds within 3 business days, after HUD disburses the funds. (pay contractors/vendors)


Common Errors

• Placing money in the wrong accounts. For example:– All in 1406 when contract work is anticipated– Not allocating according to the PHA plan

• Delayed close outs.


Conclusion

• Update Obligation/Expenditure log monthly.• Only list obligations as incurred.• Draw money to match vouchers.• Submit the AMCC (Form 53001) & Budget (Form 50075.1)

when money is expended.• Audit the expended grants annually.• Annually plan for the EA requirement on Form 7015.15.• Ensure there are at least two people approved for all HUD

systems.

capital fund reference

Documents

cfp funds

modernization funds

continuation of physical

force account work

related physical work

pha responsibility

contract execution

contract labor