n e hsa facilities foundations

8/13/2019 N E HSA Facilities Foundations

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Importance of Facilities

Involve significant amounts of Federal funds Are the most valuable program property

Usually held for long periods of timeComplex compliance requirements applyOngoing oversight is challenging

Difficult to fully address during onsite reviewsGrantee reporting is currently minimalPotential for large disallowances exists


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Planning the Facilities Activity

Completing the Application

Managing the Project

Utilization of the Facility

Disposition of the Facility

Facilities Activity Process


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Planning the Facilities Activity

Begin and continue discussions with Regional facilities staff Written permission to use grant funds is required: 1309.53 Seek input from multiple sources: parents, staff, community

members Make effective use of professionals: engineers, architects,

planners Insure complete understanding of regulatory and legal

requirements Initiate needed discussions with lenders and landlords


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Completing the Application

Elements of the facilities application are very specific: 1309.10

A detailed cost comparison is required: 1309.11 Regional office can request additional information Procurement procedures must be followed Davis-Bacon Act requirements apply Lending arrangements and documents must be submitted

If property is leased, permission of landlord is required


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Managing the Project

Continue conversations with Regional staff Notices of Federal Interest is required upon funding: 1309.21 Submission of drawings and specifications: 1309.51 Inspections must be provided and maintained: 1309.53

Insurance, bonding and maintenance are required: 1309.23 Carefully monitor costs and address unanticipated overruns Follow procurement procedures Monitor Davis-Bacon Act compliance


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Utilization of the Facility

Review compliance to date with property regulations Insure that Notices of Federal Interest have been filed Consent must be obtained for non-HS/EHS program use:

1309.21

Cannot pledge or encumber facility without permission: 1309.21 1309 applies to use of grant funds for mortgage payments Insurance and maintenance requirements are ongoing:

1309.23 Maintain records for ownership or occupancy +3 years:


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Disposition of the Facility

Disposition request required if property is no longer needed Applicable regulations are 45 CFR 74.32 and 45 CFR 92.31 Can use in another Federally sponsored program with

permission Grantee retains title: compensate for Federal share Property sold: proceeds apportioned Federal and non-Federal

share

Directed transfer: compensate for non-Federal share Dis osition o tion is at the direction of ACF


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Facilities Funds come with Lots of Strings Attached


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Facilities Regulations

45 CFR Part 1309 Head Start Facilities Purchase, Major Renovation and Construction

Subpart A General45 CFR 1309.1 - 1309.5

Subpart B Application Procedures45 CFR 1309.10 - 1309.12

Subpart C Protection of Federal Interest45 CFR 1309.20 - 1309.23

Subpart D Modular Units45 CFR 1309.30 - 1309.34

Subpart E Other Administrative Provisions45 CFR 1309.40 - 1309.44

Subpart F Construction and Major Renovation45 CFR 1309.51 - 1309.54

45 CFR 74.32 and 45 CFR 92.31 Disposition of Real Property
http://eclkc.ohs.acf.hhs.gov/hslc/standards/Head%20Start%20Requirements/1309http://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2074/CFR82107.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2092/45CFRPart92.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2092/45CFRPart92.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2092/45CFRPart92.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2092/45CFRPart92.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2092/45CFRPart92.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2074/CFR82107.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2074/CFR82107.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2074/CFR82107.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/Fiscal/Legislation%20and%20Regulations/Title%2045%20CFR%20Part%2074/CFR82107.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/Head%20Start%20Requirements/1309http://eclkc.ohs.acf.hhs.gov/hslc/standards/Head%20Start%20Requirements/1309http://eclkc.ohs.acf.hhs.gov/hslc/standards/Head%20Start%20Requirements/1309http://eclkc.ohs.acf.hhs.gov/hslc/standards/Head%20Start%20Requirements/1309


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Definitions

Acquire Acquire means to purchase or construct in whole or in partwith Head Start grant funds through payments made insatisfaction of a mortgage agreement (both principal and

interest), as a down payment, and for professional fees,closing costs and any other costs associated with thepurchase or construction of the property that are usual andcustomary for the locality.

Purchase

Purchase means to buy an existing facility, either outright orthrough a mortgage. Purchase also refers to an approved useof Head Start funds to continue paying the cost of purchasingfacilities.

ConstructionConstruction means new buildings, and excludes renovations,alterations, additions, or work of any kind to existing buildings.

45 CFR 1309.3


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Definitions

Major RenovationMajor renovation means a structural change to the foundation, roof, floor, orexterior or load-bearing walls of a facility, or extension of an existing facilityto increase its floor area. Major renovation also means extensive alterationof an existing facility, such as to significantly change its function andpurpose, even if such renovation does not include any structural change tothe facility. Major renovation also includes a renovation of any kind whichhas a cost exceeding the lesser of $200,000, adjusted annually to reflectthe percentage change in the Consumer Price Index for All UrbanConsumers (issued by the Bureau of Labor Statistics) beginning one yearafter June 2, 2003, or 25 percent of the total annual direct costs approvedfor the grantee by ACF for the budget period in which the application ismade.Online Calculator: http://data.bls.gov/cgi-bin/cpicalc.pl

Minor Renovation

Incidental alterations and [minor] renovations mean improvements to facilitywhich do not meet the definition of major renovation.

45 CFR 1309.3
http://data.bls.gov/cgi-bin/cpicalc.plhttp://data.bls.gov/cgi-bin/cpicalc.plhttp://data.bls.gov/cgi-bin/cpicalc.plhttp://data.bls.gov/cgi-bin/cpicalc.pl


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Definitions

Related Party (less-than-arms-length)Rental costs under less -than-arms- length leases are allowableonly up to the amount that would be allowed under the applicablecost principles had title to the property been vested in the recipient.

A less-than-arms-length lease is one in which one party to the leaseagreement is able to control or substantially influence the actions ofthe other.Such leases include, but are not limited to, those between divisionsof an organization; between organizations under common controlthrough common officers, directors, or members; and between anorganization and its directors, trustees, officers, or key employees(or the families of these individuals), directly or throughcorporations, trusts, or similar arrangements in which they hold a

controlling interest.


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Definitions

Capital Leases (material equity)Rental costs under leases that create a material equity in the leasedproperty, as defined in the applicable cost principles, are allowableonly up to the amount that would be allowed had the recipientpurchased the property on the date the lease agreement wasexecuted. This would include depreciation or use allowances,maintenance, taxes, and insurance, but would exclude unallowablecosts.

Sale and Lease BackWhen a recipient transfers property to a third party through sale,lease, or otherwise and then leases the property back from that thirdparty, the lease costs that may be charged to an HHS grantgenerally may not exceed the amount that would be allowed if therecipient continued to own the property.

FASB No. 13 Lease Lan ua e
http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820908834&blobheader=application/pdfhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820908834&blobheader=application/pdf


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Definitions

Fair Market Value and Fair Rental RateMarket value and rental rate must be established by an

independent appraiser, with the value certified by the Grantee(excluding Federal share).

Depreciation or Use Allowance Annual depreciation is the acquisition cost of a facility (notincluding land) divided by its estimated useful life. Once a facilityis fully depreciated, a use allowance not exceeding 2% of theacquisition cost may be taken.


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Davis-Bacon Act

Construction and renovation projects and subcontractsfinanced with funds awarded under the Head Startprogram are subject to the Davis-Bacon Act and theRegulations of the Department of Labor.

All contracts entered into by any Head Start programwhich are in excess of $2,000 and are for theconstruction, renovation or repair of buildings used byHead Start programs, are subject to the requirements ofthe Davis-Bacon Act. See IM-95-04 .

All laborers and mechanics employed by contractors orsubcontractors in the construction or renovation ofaffected Head Start facilities shall be paid wages at notless than those prevailing on similar construction in thelocality, as determined by the Secretary of Labor.

45 CFR 1309.54
http://www.dol.gov/whd/contracts/dbra.htmhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://eclkc.ohs.acf.hhs.gov/hslc/standards/IMs/1995/resour_ime_01003a_022206.htmlhttp://www.dol.gov/whd/contracts/dbra.htmhttp://www.dol.gov/whd/contracts/dbra.htmhttp://www.dol.gov/whd/contracts/dbra.htm


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Facilities Project Pitfalls

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Adequacy and timeliness of Notice of Federal InterestCompliance with procurement proceduresDavis-Bacon Act application and recordkeeping

Engaging in facilities activities without 1309complianceUsing Federally funded facilities as collateral (lines ofcredit)

Mortgage payments using Federal funds (ongoingpurchase)Confusion between consent and subordinationFair market value versus depreciation or use allowance

Related party and capital lease arrangements


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Questions and Comments

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