Broadband Infrastructure |
What types of activities are eligible but may not be feasible?
Public services as identified at 24 CFR 570.201(e). Public services may include the installation of satellite dishes and similar equipment on private homes or the provision of wireless routers and/or computers to income-eligible persons or households. Most grantees may only spend 15 percent of their CDBG grants plus 15 percent of the program income earned in the prior program year on public service activities. This severely limits the amount of C...
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Public services as identified at 24 CFR 570.201(e). Public services may include the installation of satellite dishes and similar equipment on private homes or the provision of wireless routers and/or computers to income-eligible persons or households. Most grantees may only spend 15 percent of their CDBG grants plus 15 percent of the program income earned in the prior program year on public service activities. This severely limits the amount of CDBG funds that grantees may spend on public services. This public service cap is statutory and cannot be waived.
There is a monthly cost for accessing Internet service, and some households may be unable to afford the cost. Subsidizing the cost on behalf of an individual or family would be eligible as a public service.
A business or nonprofit/municipal internet provider receiving CDBG assistance may simply be asked to reduce the cost of providing Internet service in some neighborhoods/areas.
Note: Providing “backbone” (major transmission lines, usually high speed fiber, that carry signals/data for the Internet) or “first mile” (telecommunication networks delivering communications connectivity to customers) infrastructure that serves a very large geographic area (e.g., upgrades the infrastructure for an entire metropolitan area, or extends service across the entire western part of a state) is unlikely to meet a national objective because the service area would be too large to qualify (e.g., an entire metropolitan area cannot be less than 80 percent of the median income for that metro area).
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Broadband Infrastructure |
Must national objective compliance be demonstrated?
Yes. All CDBG assisted activities must be eligible and meet one of three national objectives—benefit to low- and moderate-income persons, elimination of slums/blight, and urgent need. If an activity is eligible but does not meet a national objective, that activity becomes ineligible. The installation, rehabilitation, or reconstruction of public facilities and improvements [24 CFR 570.201(c)]; privately-owned utilities [24 CFR 570.201(l)]; and n...
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Yes. All CDBG assisted activities must be eligible and meet one of three national objectives—benefit to low- and moderate-income persons, elimination of slums/blight, and urgent need. If an activity is eligible but does not meet a national objective, that activity becomes ineligible.
The installation, rehabilitation, or reconstruction of public facilities and improvements [24 CFR 570.201(c)]; privately-owned utilities [24 CFR 570.201(l)]; and non-profit owned, non-residential buildings as identified at 24 CFR 570.202(a)(4) may meet the national objective of benefit to low- and moderate-income persons on an area basis [24 CFR 570.208(a)].
The rehabilitation of privately-owned buildings for residential purposes and new housing construction would meet the low- and moderate-income housing national objective [24 CFR 570.208(a)(3)].
Public service activities such as digital literacy classes may meet either the low- and moderate-income area benefit or low- and moderate-income limited clientele national objectives.
The assistance to for-profit businesses under 24 CFR 570.203(b) would meet the low- and moderate-income job creation/retention national objective [24 CFR 570.208(a)(4)]. Businesses that conduct a lot of online retail or have call centers are most likely to create jobs directly related to the provision of broadband services.
In addition, activities assisted under 24 CFR 570.203(b) must also meet the public benefit standards at 24 CFR 570.209. The business assisted must either provide goods or services to low- and moderate-income residents or create or retain one full-time equivalent, permanent job per $35,000 of CDBG funds used. Providing broadband service would fall under the category of goods or services.
For activities that meet the benefit to low- and moderate-income persons on an area basis, how is the service area defined?
Before an Entitlement Jurisdiction grantee provides any CDBG funds for an activity, it must determine the entire area that will be served by the activity. The service area must be in a primarily residential area where not less than 51 percent of the persons residing in the area are low and moderate income. Grantees must also consider the nature of the activity (its size and structure), the location of the activity, and the availability of comparable broadband infrastructure before proceeding.
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Broadband Infrastructure |
Can Community Development Block Grant (CDBG) funds be used to fund broadband/telecommunications projects? If so, how?
Yes. CDBG funds may be used to install wiring, fiber optic cables, and permanently affixed equipment such as receivers for areas to receive broadband/internet access. Eligible activities include: The acquisition, construction, reconstruction, rehabilitation, or installation of public facilities and improvements (which include infrastructure improvements) under 24 CFR 570.201(c); Rehabilitation of privately owned buildings for residential purpose...
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Yes. CDBG funds may be used to install wiring, fiber optic cables, and permanently affixed equipment such as receivers for areas to receive broadband/internet access. Eligible activities include:
- The acquisition, construction, reconstruction, rehabilitation, or installation of public facilities and improvements (which include infrastructure improvements) under 24 CFR 570.201(c);
- Rehabilitation of privately owned buildings for residential purposes and non-profit owned, non-residential buildings and improvements not eligible under 570.201(c) under 24 CFR 570.202(a);
- New housing construction carried out by a qualified Community Based Development Organization under 24 CFR 570.204(a);
- The acquisition, construction, reconstruction, rehabilitation, or installation of distribution lines and facilities of privately-owned utilities, which includes the placing underground of new or existing distribution facilities and lines under 24 CFR 570.201(l);
- Digital literacy classes as a public service under 24 CFR 570.201(e); and
- Economic development – grants/loans to for-profit businesses, particularly businesses that focus on broadband/Internet access and technology under 24 CFR 570.203(b).
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Economic Development |
Are for profit businesses required to have a DUNS number to be eligible for economic development loans with CDBG funds?
Yes, for profit businesses are required to have a DUNS number to be eligible for economic development loans funded with CDBG. 24 CFR § 570.609 establishes that the requirements set forth in 24 CFR part 5 apply to the CDBG program. 24 CFR § 5.1003 describes the DUNS number requirement in detail. For profit businesses can register for a DUNS number through the Online DUNS Request Portal. This is a free service. Federal procurement data syste...
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Yes, for profit businesses are required to have a DUNS number to be eligible for economic development loans funded with CDBG. 24 CFR § 570.609 establishes that the requirements set forth in 24 CFR part 5 apply to the CDBG program. 24 CFR § 5.1003 describes the DUNS number requirement in detail. For profit businesses can register for a DUNS number through the Online DUNS Request Portal. This is a free service. Federal procurement data systems and requirements are also changing, so the businesses in question should also create an account in the System for Award Management (SAM), which includes links to trainings, guidance, and other materials for the various types of entities that will use SAM. This is also a free service.
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Economic Development |
The City is thinking about creating a CDBG funded Microenterprise Loan Program. Could the loan program's eligibility/fundability be microenterprise assistance/low mod "limited clientele" or does the national objective have to be "job creation"?
The national objective for microenterprise assistance under the authority of 24 CFR 570.201(o) may meet the low/moderate income limited clientele national objective. There is no requirement that microenterprise assistance must meet the low/moderate income jobs (job creation or retention) national objective. In addition, activities assisted under 24 CFR 570.201(o) do not have to meet the public benefit standards. 24 CFR 570.208(a)(2)(iii) states t...
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The national objective for microenterprise assistance under the authority of 24 CFR 570.201(o) may meet the low/moderate income limited clientele national objective. There is no requirement that microenterprise assistance must meet the low/moderate income jobs (job creation or retention) national objective. In addition, activities assisted under 24 CFR 570.201(o) do not have to meet the public benefit standards. 24 CFR 570.208(a)(2)(iii) states that a microenterprise assistance activity carried out in accordance with the provisions of 570.201(o) with respect to those owners of microenterprises and persons developing enterprises assisted under the activity during each program year who are low and moderate income persons. For purposes of this paragraph, persons determined to be low and moderate income may be presumed to continue to qualify as such for up to a three year period. Therefore, the low/moderate income limited clientele national objective may be used for microenterprise assistance activities under 24 CFR 570.201(o).
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Economic Development |
Can Section 108 Loans be used for substantial rehabilitation of a school if the school is active (that is, not a closed school being adapted for re-use)?
Please review The Section 108 Loan Guarantee Program regulations at Subpart M, Loan Guarantees, 24 CFR 570.700 - 570.711. Specifically, see "Eligible Activities" at 570.703 and note the first sentence states that, "Guaranteed loan funds may be used for the following activities, provided such activities meet the requirements of 570.200....," which are regulatory references to the General Policies of the Community Development Block Grant (CDBG) pro...
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Please review The Section 108 Loan Guarantee Program regulations at Subpart M, Loan Guarantees, 24 CFR 570.700 - 570.711. Specifically, see "Eligible Activities" at 570.703 and note the first sentence states that, "Guaranteed loan funds may be used for the following activities, provided such activities meet the requirements of 570.200....," which are regulatory references to the General Policies of the Community Development Block Grant (CDBG) program. If your school is an active public school it may be an eligible activity for a public facility under 570.703 (l) to the extent eligible under 570.201(c). Please review these regulation citations.
Generally, you may consider using Section 108 loans to rehabilitate public facilities, except for buildings for the general conduct of government. However, please keep in mind that for purposes of determining eligibility of activities funded under Section 108 loans, CDBG General Policies and requirements apply. Therefore this activity is only eligible if it also meets a National Objective, as required at 570.200(a)(2). Criteria for determining whether an activity addresses one or more of these national objectives are found in §570.208.If you have additional questions regarding program compliance with Section 108 Loan Guarantee Program requirements, please contact your HUD Field Office.
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Economic Development |
What happens when a business assisted with CDBG funds fails to create the number of jobs expected or the business closes?
If the business is unable to create the number of jobs they were expected to (or if the business closed) a finding must be made that the grantee failed to meet a national objective and, as a result, HUD may advise them to repay their CDBG line of credit. The funds repaid to the line of credit will be credited to the original activity and zero out the draws. Otherwise, the grantee may subsequently cancel the activity. However, if the local HUD fie...
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If the business is unable to create the number of jobs they were expected to (or if the business closed) a finding must be made that the grantee failed to meet a national objective and, as a result, HUD may advise them to repay their CDBG line of credit. The funds repaid to the line of credit will be credited to the original activity and zero out the draws. Otherwise, the grantee may subsequently cancel the activity. However, if the local HUD field office agrees that the grantee has exercised due diligence in managing this activity, then the field office may allow the grantee to cancel this activity with draws.
If the economic development activity is eligible, the public benefit standards apply. A job filled is a job that counts toward the public benefit standards. 24 CFR 570.209(d) addresses the actions HUD may take if the public benefit standards are not met as projected. Conversely, if the activity is deemed ineligible, the public benefit standards do not really matter except as for the ability of the grantee to do due diligence in its underwriting capacity. The grantee is also responsible for repayment of CDBG funds with non-federal funds. However, the grantee is always allowed to pursue repayment from the assisted business.
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Economic Development |
How does a business assisted with CDBG funds handle lay-offs and no job creation in year 2 if it was to create jobs? Do we report negative jobs for year 2?
Year 2 accomplishments should be reported as zero jobs created for year 2. Concerning the layoffs: A job filled by a low- and moderate-person meets a national objective at the time the individual is hired. The CDBG regulations do not speak of layoffs; however, it has treated layoffs that occur within two years of the CDBG assistance as though they were vacancies created through job turnover [24 CFR 570.506(b)(5) and (6)]. If the business fills th...
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Year 2 accomplishments should be reported as zero jobs created for year 2. Concerning the layoffs: A job filled by a low- and moderate-person meets a national objective at the time the individual is hired. The CDBG regulations do not speak of layoffs; however, it has treated layoffs that occur within two years of the CDBG assistance as though they were vacancies created through job turnover [24 CFR 570.506(b)(5) and (6)]. If the business fills the vacant position within two years of the CDBG assistance, first consideration must be given to a low- and moderate-income person to fill the vacancy. For the future, the grantee may want to specifically mention the layoff policy in the written agreement with the business. Position vacancies filled count toward the public benefit standards as a new job.
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Economic Development |
What is HUD’s guidance on debt collection/forgiveness on economic development loans originated with CDBG funds? Are there any reporting requirements with the IRS?
For CDBG economic development activities, the terms of the loan are negotiated between the grantee and the business being funded. The CDBG Program allows CDBG funds to be provided as a grant or a loan and for grantees to determine the terms of those loans. Each grantee makes decisions about how its program is run. The requirements, including terms of the agreement, including the possibility of waiving repayment for the activity, would need to be ...
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For CDBG economic development activities, the terms of the loan are negotiated between the grantee and the business being funded. The CDBG Program allows CDBG funds to be provided as a grant or a loan and for grantees to determine the terms of those loans. Each grantee makes decisions about how its program is run. The requirements, including terms of the agreement, including the possibility of waiving repayment for the activity, would need to be part of the grantee's policies and procedures and contained in the CDBG written agreement between the grantee and the business. If a business fails to meet the CDBG requirements within the economic development loan agreement, the grantee would typically require repayment of the loan.
Waiving repayment or a loan write-off should be done infrequently and only implemented if the following were true: a) A national objective was met in 24 CFR 570.208; and b) The public benefit standards at 24 CFR 570.209(b) are met. If either of the above is not met on an individual loan to a business, the activity would not be an eligible CDBG activity and the grantee would need to repay the CDBG program for the costs. Grantees must follow the underwriting guidelines in Appendix A of 24 CFR Part 570 or adopt their own that are as stringent or even more so when making economic development loans. This is so that the possibility of default by the business may be minimized. Grantees may look at collateral and other means of recovering their CDBG dollars if a business defaults on its loan payments if it does not want to forgive the loan. CDBG funds may be used for debt collection measures as an activity delivery cost of the economic development activity. HUD will monitor for compliance with these elements of due diligence. If the activity met a national objective, if the grantee complies and if defaulted loans are rare, HUD is less likely to require repayment of loans that had to be written off.
Questions on IRS reporting requirements should be directed to the IRS.
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Economic Development |
We are planning to provide technical assistance and training to owners of microenterprises and persons developing microenterprises for a small fee. Is the national objective to be met forlow-mod jobs and do we have to track jobs created from this type of assistance?
It is important to remember that microenterprise activities are eligible when the business (at the time of assistance) is no larger than 5 individuals, including the owner. Technical assistance to microenterprises is eligible under 24 CFR570.201(o)(1)(iii), provided a national objective is met. The national objective most appropriate for this kind of activity is Low-Mod Limited Clientele. If the owners/individuals planning to start microenterpris...
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It is important to remember that microenterprise activities are eligible when the business (at the time of assistance) is no larger than 5 individuals, including the owner. Technical assistance to microenterprises is eligible under 24 CFR570.201(o)(1)(iii), provided a national objective is met. The national objective most appropriate for this kind of activity is Low-Mod Limited Clientele. If the owners/individuals planning to start microenterprises are low and moderate income, this activity qualifies under 24 CFR.570.208(a)(2)(iii) and all participants are presumed to be low-and moderate income. Creating jobs is not required when using the limited clientele national objective, although the grantee may, at its discretion, track any jobs that are developed and report them into IDIS. The CDBG Program allows charging fees for a service when the fees are minor and do not prohibit a typical low-and moderate-income individual from participating in the activity. When fees are received, they are considered applicable credits and must be credited back to the activity. Therefore, if tuition is collected in this program, it should be used to offset the costs of the program. This should reduce the amount of CDBG funds required to fund the project.
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Economic Development |
What are the security requirements for a Section 108 loan guarantee if the assets to be assisted with the loan are infrastructure such as neighborhood curbs, gutters, and sidewalk construction/reconstruction?
The security requirements for Section 108 loans are determined on a case by case basis, as described in CFR 24 §570.705 (b). Generally, you can use liens on real property and equipment not directly associated with the loan, as this is one of the acceptable security requirement examples listed in §570.705 (b)(3). However, the exact details of your pledged assets and security requirements will need to be reviewed and approved by HUD after you sub...
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The security requirements for Section 108 loans are determined on a case by case basis, as described in CFR 24 §570.705 (b). Generally, you can use liens on real property and equipment not directly associated with the loan, as this is one of the acceptable security requirement examples listed in §570.705 (b)(3). However, the exact details of your pledged assets and security requirements will need to be reviewed and approved by HUD after you submit your loan application.
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Economic Development |
A landlocked company wants to move from the south part of town to the north to expand their operations. The new location is away from the homes of the current employees, but it would allow the company to create 50 new jobs. Will this still qualify for the national objective of job creation?
Your question is concerning the national objective as it relates to a company that wishes to relocate from the south of city to the north of the city in order to expand operations. Our answer is based on a previous correspondence in which you clarified that the site for the company's new location is in a non-entitlement, State Program area. In order to respond to your question, we have made several assumptions, as follows: The eligible activity ...
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Your question is concerning the national objective as it relates to a company that wishes to relocate from the south of city to the north of the city in order to expand operations. Our answer is based on a previous correspondence in which you clarified that the site for the company's new location is in a non-entitlement, State Program area. In order to respond to your question, we have made several assumptions, as follows:
- The eligible activity for the transaction is special economic development. Consequently, the project must conform not only to the Eligibility and National Objective requirements, but also to the appropriateness criteria (Public Benefit and Appendix A).
- The documentation for evidencing compliance with the Public Benefit criterion is cost per job created.
- Eligibility will need to be based on job creation; In your question you note that existing jobs are held by residents of the entitlement community. Therefore job retention would not benefit the State Program and thus cannot be used.
- The forecast of 50 new jobs must be based on "reasonable" assumptions.
You also need to determine that you are in compliance with the anti-piracy provisions of the CDBG Program. The U.S. Bureau of Labor Statistics determines market areas. We reviewed the Market Areas based on BLS statistics and confirmed with you that the old and new locations are both within the same county and therefore the move to the new location will not result in a significant job loss as defined by the Anti-Pirating Rule found at Section 588 of the Quality Housing and Work Responsibility Act of 1998. The documentation for national objective is LMI benefit via the creation of jobs (24 CFR 570.483(a)(4). For this activity to be eligible the jobs created must be held by residents of the non-entitlement area.
Please refer to the following regulatory citation for further guidance: CFR 570.486 b) Activities serving beneficiaries outside the jurisdiction of the unit of general local government. Any activity carried out by a recipient of State CDBG program funds must significantly benefit residents of the jurisdiction of the grant recipient, and the unit of general local government must determine that the activity is meeting its needs in accordance with section 106(d)(2)(D) of the Act. For an activity to significantly benefit residents of the recipient jurisdiction, the CDBG funds expended by the unit of general local government must not be unreasonably disproportionate to the benefits to its residents. To meet this requirement the funds provided through the unit of local government would need to be conditional to the hiring of local residents. Assuming these assumptions are true, and you have gone through the appropriate due diligence, then the assistance may be provided, so long as the origination file documents three primary eligibility criteria: 1) eligible activity; 2) national objective and 3) appropriateness (Appendix A and Public Benefit).
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Homebuyer Assistance |
A CDBG Entitlement grantee wants to carry out homeownership assistance and housing rehabilitation in its NRSA. May the grantee apply the language at 24 CFR 570.208(d)(5)(ii) in meeting a national objective since it is carrying out both homeownership assistance and housing rehabilitation? If so, how?
Yes, the language applies, and here is an example of how aggregation of housing units may result in compliance with the low/moderate income housing national objective: City X is carrying out homeownership assistance and has obligated CDBG funds for 60 households in the NRSA to receive this assistance. The city is also rehabilitating 50 houses in the NRSA. To meet the low- and moderate-income national objective, add the total number of housing act...
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Yes, the language applies, and here is an example of how aggregation of housing units may result in compliance with the low/moderate income housing national objective:
City X is carrying out homeownership assistance and has obligated CDBG funds for 60 households in the NRSA to receive this assistance. The city is also rehabilitating 50 houses in the NRSA. To meet the low- and moderate-income national objective, add the total number of housing activities together (110). Multiply 110 X .51 to determine the number of units that must be occupied by low/moderate income households (56). Since all the homeownership assistance units (60) must be occupied by low/moderate income households, this means that none of the 50 units receiving rehabilitation have to be occupied by low/moderate income households to meet the low- and moderate-income housing national objective in the NRSA.
In another example, City Y provides homeownership assistance for 30 units and rehabilitates 40 houses in its NRSA for a total of 70 units. Thirty-six (36) of these units must be occupied by low/moderate income households and the thirty homeownership assistance units must be owned by low- and moderate-income households. Therefore, only six (6) of the units being rehabilitated must be occupied by low/moderate income households. The other 34 units may meet the slum/blight national objective (or in certain circumstances, the urgent need national objective).
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Homebuyer Assistance |
A CDBG Entitlement grantee wants to carry out homeownership assistance under 24 CFR 570.201(n) in a Neighborhood Revitalization Strategy Area (NRSA). If this is the only housing activity the grantee plans to carry out in the NRSA, may all the units be considered a single structure for national objective compliance purposes?
No. Although 24 CFR 570.208(d)(5)(ii) allows housing activities for which CDBG funds have been obligated during a program year in the strategy area to be considered a single structure for national objective compliance purposes, the requirement that homeownership assistance activities carried out under 570.201(n) be restricted to low- and moderate-income persons is statutory. Each homeowner receiving assistance must be low- or moderate-income. Sta...
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No. Although 24 CFR 570.208(d)(5)(ii) allows housing activities for which CDBG funds have been obligated during a program year in the strategy area to be considered a single structure for national objective compliance purposes, the requirement that homeownership assistance activities carried out under 570.201(n) be restricted to low- and moderate-income persons is statutory. Each homeowner receiving assistance must be low- or moderate-income. Statutory requirements supersede regulatory requirements.
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Homebuyer Assistance |
Can CDBG be used to provide down payment assistance to income-eligible homebuyers? If so, what regulations govern the provision of CDBG down payment assistance?
CDBG funds can be used for down payment assistance up to 50% of the lender required down payment amount. This can be done as a stand-alone homeownership assistance activity under 24 CFR 570.201(n) as well as other eligible costs such as principal write-downs, closing costs, etc. Down payment assistance provided under 24 CFR 570.201(n) is restricted to low/moderate income households. If down payment assistance is funded as a public service, this a...
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CDBG funds can be used for down payment assistance up to 50% of the lender required down payment amount. This can be done as a stand-alone homeownership assistance activity under 24 CFR 570.201(n) as well as other eligible costs such as principal write-downs, closing costs, etc. Down payment assistance provided under 24 CFR 570.201(n) is restricted to low/moderate income households. If down payment assistance is funded as a public service, this activity would count towards the 15 percent public services cap under 24 CFR 570.201(e). Here, the grantee is not limited to providing 50 percent of the required down payment. The low/moderate income housing national objectives may be used for this activity. The Guide to National Objectives and Eligible Activities for Entitlement Communities may also be helpful to you.
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Homebuyer Assistance |
Has HUD modified the first time homebuyer definition(s) to include anyone participating in FHAs Back to Work mortgage program?
The CDBG program regulations found at 24 CFR Part 570 do not define the term first-time homebuyer. The CDBG regulations also do not restrict CDBG assistance to only those households purchasing a home for the first-time. It is, however, possible for the grantee to place additional requirements on its local program policies and procedures, such as limiting the activity to first time homebuyers or homebuyers only located in a designated area.
Homebuyer Assistance
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Homebuyer Assistance |
How can CDBG homeownership assistance provided under 24 CFR 570.201(n) meet the low- and moderate-income national objective?
CDBG-assisted activities such as homeownership assistance under 24 CFR 570.201(n) and housing rehabilitation under 24 CFR 570.202(a)(1) can only meet the low- and moderate-income housing national objective (LMH). Homeownership assistance cannot meet the low- and moderate-income area benefit national objective because it is a direct benefit activity. Homeownership assistance also cannot meet the low- and moderate-income limited clientele national ...
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CDBG-assisted activities such as homeownership assistance under 24 CFR 570.201(n) and housing rehabilitation under 24 CFR 570.202(a)(1) can only meet the low- and moderate-income housing national objective (LMH). Homeownership assistance cannot meet the low- and moderate-income area benefit national objective because it is a direct benefit activity. Homeownership assistance also cannot meet the low- and moderate-income limited clientele national objective, even if homeownership assistance is being provided to a member of a presumed group, such as the elderly, identified at 24 CFR 570.208(a)(2)(i)(A).
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Homebuyer Assistance |
How should CDBG grantees enter homeownership assistance activities in the Integrated Disbursement and Information System (IDIS)?
The grantee may choose to enter all homeownership activities under one IDIS activity number or each one under a separate IDIS activity number. The grantee has the discretion to choose the method it prefers. However, there must be an address entered for each assisted unit in an IDIS activity.
Homebuyer Assistance
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Homebuyer Assistance |
How should the CDBG grantee decide what amount of subsidy is appropriate? The Uniform Administrative Requirements require that such subsidies are necessary and reasonable.
CDBG grantees must verify the income of the household in order to determine its eligibility. Using this information, the grantee can establish a standard for how much of the household's gross income can be allocated to housing costs; a commonly-used standard is about 30% of adjusted gross income for principal, interest, taxes, and insurance (PITI). In many cases, PITI charges exceed 30% of the household's income. The example below shows how under...
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CDBG grantees must verify the income of the household in order to determine its eligibility. Using this information, the grantee can establish a standard for how much of the household's gross income can be allocated to housing costs; a commonly-used standard is about 30% of adjusted gross income for principal, interest, taxes, and insurance (PITI). In many cases, PITI charges exceed 30% of the household's income.
The example below shows how underwriting can calculate the appropriate level of subsidy.
The family can afford $10,800 in annual PITI expenses. In this example, they have $1,450 less per year than they need ($12,250-$10,800). The taxes and insurance do not change, but the grantee can make a grant or soft second mortgage to eliminate the gap. Deducting the taxes and insurance from the 30%-of-income figure shows that the family can afford $6,800 for a mortgage payment. Then, one would use a mortgage calculator to determine how large a mortgage can be supported with the $6800 the family can afford to spend on principal and interest. This annual payment amount will support a mortgage of $118,695, at the same 4%, 30-year terms.
Revised affordability calculation:
The grantee would therefore reduce the principal amount of the mortgage by $25,305 and take a soft second mortgage to secure it. Adding the $4,000 in taxes and insurance keeps the total annual housing cost at the $10,800 level that the household can afford on 30% of its gross income.
At the grantee's option, it could also pay 50% of the downpayment on behalf of the family. The $25,305 soft second mortgage amount dwarfs the $3,000 that is half of the downpayment, but both forms of subsidy are eligible. However, even though it has substantially more invested in lowering the mortgage amount, the grantee cannot pay more than 50% of the downpayment. The downpayment involves equity and the homeownership assistance adjusts debt.
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Homebuyer Assistance |
If the city is providing CDBG down payment assistance, is the grantee required to ensure that no more than 30% of the beneficiary’s income be spent on housing to ensure affordability?
No, when providing homebuyer assistance, grantees are not required to ensure that applicant households pay no more than 30 percent of household income for housing expense. However, it is important to review a homebuyer's income and expenses, even when providing limited financial assistance such as down payment assistance, to help prevent applicants from entering into financial commitments that they will not be able to sustain over time. Grantees ...
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No, when providing homebuyer assistance, grantees are not required to ensure that applicant households pay no more than 30 percent of household income for housing expense. However, it is important to review a homebuyer's income and expenses, even when providing limited financial assistance such as down payment assistance, to help prevent applicants from entering into financial commitments that they will not be able to sustain over time. Grantees often review the terms of the first mortgage to ensure that it appears to be reasonable and affordable (e.g., no large balloon payments or negative amortization) and may also request the first lender provide the results of its underwriting analysis.
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Homebuyer Assistance |
If the grantee awards CDBG homeownership assistance as a loan, can it be forgivable?
Yes. A grantee may require the homeowner to remain in the unit for a selected period after it is purchased. If the homeowner does so, the balance of the loan is forgiven. This type of loan is used more frequently for housing rehabilitation but can be used for home purchases. A grantee may also impose "due on sale" provisions requiring repayment if the homebuyer sells the property, dies, or stops occupying it as their principal residence.
Homebuyer Assistance
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Homebuyer Assistance |
Is there a maximum contract price for a homebuyer assistance program? Is there a general rule or requirement of the price range a low income applicant should be looking for when they are home searching?
Absent limiting local program guidelines, and unlike the HOME program which limits the value of any homebuyer/homeowner property to 95% of the median purchase price for that area, CDBG regulations do not cap the maximum purchase price of a property. HUD does encourage the grantee to establish and follow written program and underwriting guidelines for its programs. These guidelines should include property eligibility and could include a limit on value.
Homebuyer Assistance
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Homebuyer Assistance |
Is there a method for other people, who are not low- or moderate-income, to receive CDBG homeownership assistance? If so, is it an activity frequently carried out by grantees?
Yes, as a public service under 24 CFR 570.201(e) of the Entitlement CDBG regulations and Section 105(a)(8) of the Housing and Community Development Act (HCDA). However, the only homeownership activity that is allowed as a public service is downpayment assistance. (Note that there is no requirement that only 50 percent of the downpayment required be provided when such assistance is carried out as a public service.) This activity is not frequently ...
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Yes, as a public service under 24 CFR 570.201(e) of the Entitlement CDBG regulations and Section 105(a)(8) of the Housing and Community Development Act (HCDA). However, the only homeownership activity that is allowed as a public service is downpayment assistance. (Note that there is no requirement that only 50 percent of the downpayment required be provided when such assistance is carried out as a public service.) This activity is not frequently carried out by grantees because it is a very costly activity. The primary intent of the CDBG program is for low- and moderate-income persons to benefit from CDBG-assisted activities. In addition, for public services, grantees are limited to spending no more than 15 percent of their CDBG grant plus 15 percent of the prior year's program income.
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Homebuyer Assistance |
May anyone requesting homeownership assistance receive such assistance as identified at Section 105(a)(25) of the HCDA? Why?
No. Only low- and moderate-income households may benefit from these activities because the statute specifically states, "(25) provision of direct assistance to facilitate and expand homeownership among persons of low and income ..." In addition, each of the five eligible activities identified above contain the language "low and moderate income homebuyers." Therefore, Section 105(a)(25) of the Housing and Community Development Act (HCDA) restricts...
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No. Only low- and moderate-income households may benefit from these activities because the statute specifically states, "(25) provision of direct assistance to facilitate and expand homeownership among persons of low and income ..." In addition, each of the five eligible activities identified above contain the language "low and moderate income homebuyers." Therefore, Section 105(a)(25) of the Housing and Community Development Act (HCDA) restricts homeownership assistance provided under 24 CFR 570.201(n) of the Entitlement CDBG regulations to low- and moderate-income homebuyers. Statutory requirements cannot be waived.
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Homebuyer Assistance |
May CDBG homeownership assistance be provided as a grant?
Yes. It is at the grantee's discretion regarding the provision of assistance as a grant or loan. Most grantees award CDBG funds for homeownership assistance as a loan, often forgiven over a period to avoid windfalls by the purchaser while allowing equity to accrue.
Homebuyer Assistance
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Homebuyer Assistance |
Must the low- and moderate-income housing national objective criterion be met if the CDBG downpayment assistance is provided as a public service?
No. The activity may also meet the low- and moderate-income limited clientele national objective provisions at 24 CFR 570.208(a)(2)(i)(B) or (C).
Homebuyer Assistance
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Homebuyer Assistance |
The city offers homeowners forgivable mortgage loans funded through the CDBG program for qualifying activities involving home ownership, down payment or rehabilitation of property. Recently, the City's finance department received information during an IRS webinar that said the City is required to issue 1099C forms when a mortgage loan is forgiven, thus reporting the forgiven loan as taxable income for the homeowner. Are we required to report the forgiven loan as taxable if it was funded with CDBG dollars?
The CDBG regulations permit grantees to decide how to provide CDBG assistance. The CDBG dollars can be provided as a grant or a loan, as an interest reduction or a loan guarantee. When provided as a forgivable loan, the CDBG regulations do not specify if IRS Form 1099C must be issued when the mortgage is forgiven. According to IRS Publication 4861, if a debt for which a person is personally liable is forgiven or satisfied for less than the full a...
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The CDBG regulations permit grantees to decide how to provide CDBG assistance. The CDBG dollars can be provided as a grant or a loan, as an interest reduction or a loan guarantee. When provided as a forgivable loan, the CDBG regulations do not specify if IRS Form 1099C must be issued when the mortgage is forgiven. According to IRS Publication 4861, if a debt for which a person is personally liable is forgiven or satisfied for less than the full amount owed, the debt is considered canceled in whatever amount if remained unpaid. Generally, they must include the canceled amount in their income. If the city’s CDBG mortgages are structured so that they are fully forgiven over a specified period of time, the canceled amount would not be considered taxable income. Homeowners also may be able to exclude the canceled debt. The most applicable exclusion for homeowners with a CDBG funded mortgage would be the Qualified Principal Residence Indebtedness. Homeowners can exclude canceled debt from income if it is qualified principal residence indebtedness. Qualified principal residence indebtedness is any mortgage they took out to buy, build, or substantially improve their main home. It also must be secured by their main home. It is recommended that the city’s Finance Department seek advice from a qualified IRS representative for your specific program.
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Homebuyer Assistance |
The terms homeownership assistance and down payment assistance seem to be used interchangeably. Is there a difference and where is it in the list of eligible CDBG activities?
The following sections will address both activities, which are different. As an overview, down payment assistance is exactly what it sounds like: paying part of the required down payment. Except when done as a public service, the assistance is limited to 50% of the required down payment. There are numerous other ways of supporting homeownership for low and moderate income households, including reducing mortgage principal and interest, and paying ...
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The following sections will address both activities, which are different. As an overview, down payment assistance is exactly what it sounds like: paying part of the required down payment. Except when done as a public service, the assistance is limited to 50% of the required down payment. There are numerous other ways of supporting homeownership for low and moderate income households, including reducing mortgage principal and interest, and paying closing costs. These activities do not have absolute cost limits, but underwriting should be done to determine the right level of assistance (not too little or too much.) The more general term for these activities is homeownership assistance. The following section of the Housing and Community Development Act of 1974 describes these in greater detail. Currently this list of specific activities appears only in the HCD Act, but is noted by title at 570.201(n) in the regulations.
§5305. Activities eligible for assistance
(a) Enumeration of eligible activities
(24) Provision of direct assistance to facilitate and expand homeownership among persons of low and moderate income (except that such assistance shall not be considered a public service for purposes of paragraph (8)) by using such assistance to–
(A) subsidize interest rates and mortgage principal amounts for low- and moderate-income homebuyers;
(B) finance the acquisition by low- and moderate-income homebuyers of housing that is occupied by the homebuyers;
(C) acquire guarantees for mortgage financing obtained by low- and moderate-income homebuyers from private lenders (except that amounts received under this chapter may not be used under this subparagraph to directly guarantee such mortgage financing and grantees under this chapter may not directly provide such guarantees);
(D) provide up to 50 percent of any down payment required from low- or moderate-income homebuyer; or
(E) pay reasonable closing costs (normally associated with the purchase of a home) incurred by a low- or moderate-income homebuyer.
[Note that there are two paragraph 24’s in the legislation.]
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Homebuyer Assistance |
We have targeted low/mod families to purchase our completely renovated homes; however, we have not been successful in locating eligible families to qualify for a mortgage. What would you recommend we do in order to complete the national objective and close these activities? Should we consider lease purchase, rent, or market all social economic classes for purchase if able to qualify for a mortgage?
The CDBG regulation at 24 CFR 570.208(a)(3) requires that each of the homes must be occupied by households that earn less than 80 percent of area median income adjusted for household size, unless the housing is located within a designated Neighborhood Revitalization Strategy Area, where pursuant to 24 CFR 570.208(d)(5)(ii), the homes may be considered to be a single structure for purposes of determining whether or not at least 51 percent of the h...
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The CDBG regulation at 24 CFR 570.208(a)(3) requires that each of the homes must be occupied by households that earn less than 80 percent of area median income adjusted for household size, unless the housing is located within a designated Neighborhood Revitalization Strategy Area, where pursuant to 24 CFR 570.208(d)(5)(ii), the homes may be considered to be a single structure for purposes of determining whether or not at least 51 percent of the homes are occupied by low- and moderate-income households.
If you are not able to meet a National Objective, you would be required to repay the CDBG investment in the property as it would not have qualified as a CDBG-funded project. Some suggestions to increase the number of households who may qualify for primary financing include:
- Using homeownership counseling programs to expand the pool of qualified buyers and to filter out households who are not yet ready to buy;
- Reducing the sales price to decrease the primary lender's risk and to increase the range of buyers who are able to afford a lower monthly payment;
- Investing additional CDBG funds to provide down payment assistance and/or closing cost assistance; or
- Contributing additional CDBG funds to buy down the sales price of the homes (if feasible). This assistance can be provided as an amortizing or forgivable loan.
To increase the number of interested buyers, also consider some of the disposition strategies that have been successful in the Neighborhood Stabilization Program such as partnering with community members and institutions to assist in marketing the homes more broadly and potentially reaching buyers who would not ordinarily learn of these opportunities to buy. Some of these strategies include:
- Procuring the services of real estate development support professionals to provide sales support, and to brainstorm market opportunities in the area;
- Identifying opportunities to attend public events and to engage partners to participate in housing fairs in target areas;
- Meeting with local employers to determine if there is interest in employer-assisted housing programs; or
- Working with local homeownership counseling programs.
Since your objective is to complete these open activities as soon as possible, conversion to rental is also an option provided that the homes are similarly occupied by low- and moderate-income households and the rents are affordable. Note that a grantee must first adopt and make public its standards for determining "affordable rents" for this purpose. If the city does not wish to be in an ownership and property management role, it may consider transferring ownership and/or management to a qualified non-profit housing organization.
Lease-purchase is also a viable option, but it may take several years before the households are able to accumulate funds for a down-payment and qualify for primary financing. If you decide to convert these homeownership activities to rental or lease-purchase, we encourage you to review your Citizen Participation Plan and to consult with your assigned CPD Representative in the local Field Office before doing so. This will ensure that you comply with the Citizen Participation requirements of 24 CFR Part 91 in the event that you change the nature or beneficiaries of these CDBG activities.
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Homebuyer Assistance |
What are some of the activity delivery costs of homeownership assistance that may be charged to the CDBG activity?
The salary of the grantee's staff person(s) taking and processing applications from interested homebuyers and conducting the classes listed above may be charged to homeownership assistance proportionate to the amount of time grantee staff spends on these activities. Some grantees require credit counseling and homebuyer education classes to be completed before CDBG assistance is provided for homeownership assistance. Those classes may be considere...
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The salary of the grantee's staff person(s) taking and processing applications from interested homebuyers and conducting the classes listed above may be charged to homeownership assistance proportionate to the amount of time grantee staff spends on these activities.
Some grantees require credit counseling and homebuyer education classes to be completed before CDBG assistance is provided for homeownership assistance. Those classes may be considered activity delivery costs of homeownership assistance under 24 CFR 570.201(n) and HCDA Section 105(a)(25). Note that after August 1, 2020, the final compliance date, all housing counseling required under or provided in connection with HUD programs, as defined in CFR § 5.111 (b), must be provided by HUD certified housing counselors that must work for agencies approved to participate in HUD's Housing Counseling Program. In reporting on housing counseling in IDIS, grantees must use the new matrix code, 05Y.
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Homebuyer Assistance |
What does "acquire guarantees of mortgage financing but not guaranteeing the mortgage itself" mean in the CDBG program?
This means if the private lender selected by the homebuyer offers a guarantee of the mortgage financing (as may occur with a Federal Housing Administration (FHA) mortgage), the grantee may purchase the guarantee to ensure repayment in case of default by the homebuyer. This section allows the purchase of mortgage insurance by the household but not the direct issuance of mortgage insurance by the grantee.
Homebuyer Assistance
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Homebuyer Assistance |
What does "financing the acquisition of housing occupied by the homebuyers" mean in the CDBG program?
Some households rent a condominium, townhouse, or single unit structure with the option of purchasing it. They may not be ready to purchase when moving in but may be ready in a year or so to begin the homebuying process. The grantee may use CDBG funds to make a loan to the individual or household to purchase the unit they occupy.
Homebuyer Assistance
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Homebuyer Assistance |
What does "subsidizing interest rates and mortgage principal amounts" mean in the CDBG program?
Grantees may provide an interest rate subsidy to make the payments more affordable. For example, a bank may provide a couple with a home loan with a five percent interest rate. The grantee may subsidize it so that the interest rate changes from five percent to three percent, thereby lowering the mortgage payment. Grantees may also subsidize the mortgage principal amount. For example, another couple acquired a mortgage for $75,000. The grantee awa...
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Grantees may provide an interest rate subsidy to make the payments more affordable. For example, a bank may provide a couple with a home loan with a five percent interest rate. The grantee may subsidize it so that the interest rate changes from five percent to three percent, thereby lowering the mortgage payment.
Grantees may also subsidize the mortgage principal amount. For example, another couple acquired a mortgage for $75,000. The grantee awarded them $10,000 as a subsidy, which means that now their mortgage principal amount is now $65,000, resulting in a lower mortgage payment.
If CDBG assistance for either of these activities is awarded as a loan, it may be referred to as a soft second mortgage. Both are designed to make the monthly housing payment more affordable to the low- or moderate-income family.
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Homebuyer Assistance |
What if the prospective CDBG-assisted homebuyer doesn't complete the process?
For example, Ms. C. completed the homebuyer education and credit counseling courses. She changed her mind about purchasing a home once she found out how much work she needed to do to clear items from her credit report. She advised the grantee that she was dropping out of its homeownership assistance program. What about the costs incurred by Ms. C's participation to date?
The costs of the homebuyer education and credit counseling courses may still be charged as activity delivery costs of homeownership assistance under 24 CFR 570.201(n), but only if the grantee enters all its homeownership assistance activities for the program year in IDIS under one activity. Although the participant did not complete the homebuying process, the courses she completed were not standalone courses and were required to be completed to p...
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The costs of the homebuyer education and credit counseling courses may still be charged as activity delivery costs of homeownership assistance under 24 CFR 570.201(n), but only if the grantee enters all its homeownership assistance activities for the program year in IDIS under one activity. Although the participant did not complete the homebuying process, the courses she completed were not standalone courses and were required to be completed to participate in the homeownership assistance program. Therefore, as part of the homeownership assistance program, the cost of the courses is allowed as activity delivery costs under 570.201(n), although the homebuying process was not completed.
However, if the grantee enters each household assisted under separate IDIS activities, the grantee may recategorize the activity delivery costs incurred as a program administration cost [24 CFR 570.206], provided it does not cause the grantee to exceed the 20 percent planning and administration cap. The grantee may be able to recategorize costs such as homebuyer education and credit counseling as a public service (provided the public service cap is not exceeded). If neither of these is possible, the grantee must cancel the activity and reimburse its CDBG program for the costs.
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Homebuyer Assistance |
Where is homeownership assistance cited in the CDBG regulations, and where may you find the list of activities defined as homeownership assistance? What are those activities?
Homeownership assistance is cited at 24 CFR 570.201(n) of the Entitlement CDBG regulations, and the list of activities is found at Section 105(a)(25) of the Housing and Community Development Act (HCDA) of 1974, as amended. The activities as defined in the statute are: subsidizing interest rates and mortgage principal amounts; financing the acquisition of housing occupied by the homebuyers; acquiring guarantees of mortgage financing obtained by ho...
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Homeownership assistance is cited at 24 CFR 570.201(n) of the Entitlement CDBG regulations, and the list of activities is found at Section 105(a)(25) of the Housing and Community Development Act (HCDA) of 1974, as amended.
The activities as defined in the statute are: subsidizing interest rates and mortgage principal amounts; financing the acquisition of housing occupied by the homebuyers; acquiring guarantees of mortgage financing obtained by homeowners from private lenders (but not directly guaranteeing the mortgage); providing up to 50 percent of the required downpayment; and paying reasonable closing costs.
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Homebuyer Assistance |
Why is downpayment assistance limited to 50 percent of the required down payment? Can the amount of CDBG funds provided as downpayment assistance be used for any of the other homeownership activities identified at Section 105(a)(25) of the HCDA, which include subsidizing of the mortgage principal amount?
Section 105(a)(25) of the Housing and Community Development Act (HCDA) limits downpayment assistance to a maximum of 50 percent of any downpayment required from low- or moderate-income homebuyers. This is a statutory requirement, so it cannot be waived. The amount of the required downpayment may vary among jurisdictions. However, the amount of downpayment assistance paid with CDBG funds must be necessary and reasonable in accordance with 2 CFR 20...
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Section 105(a)(25) of the Housing and Community Development Act (HCDA) limits downpayment assistance to a maximum of 50 percent of any downpayment required from low- or moderate-income homebuyers. This is a statutory requirement, so it cannot be waived. The amount of the required downpayment may vary among jurisdictions. However, the amount of downpayment assistance paid with CDBG funds must be necessary and reasonable in accordance with 2 CFR 200.403 and 200.404.
However, since subsidizing interest rates and mortgage principal amounts are also eligible forms of homeownership assistance, CDBG funds may be provided to do so and there is no statutory limit on such assistance. The grantee must perform basic underwriting to determine the appropriate level: enough to make the cost affordable, but not so much that it creates undue enrichment. There must be a clear distinction between the amount of CDBG funds being provided for downpayment assistance and the amount provided for subsidizing the mortgage principal or interest rates. For example, Homeowner A is provided a total of $15,000 in CDBG funds as a loan for downpayment assistance and subsidizing the mortgage principal amount. The downpayment is $6,000. The check stub (and the grantee's records) must clearly identify the amount being provided for up to half of the required downpayment ($3,000) and the amount subsidizing the mortgage principal ($12,000). The grantee's files must document the required downpayment, so the correct amount of assistance is provided.
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Homeless |
When carrying out activities that benefit homeless persons, is the CDBG grantee (or subrecipient) required to ensure that the beneficiaries met the categories of definitions of homeless at 24 CFR 91.5 in connection with the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act?
No. The CDBG program allows grantees to define "homeless" for presumed low- and moderate-income benefit activities. The CDBG regulations and the CDBG Guide to National Objectives and Eligible Activities for Entitlement Communities do not define "homeless persons". However, the Consolidated Plan regulations do, and the CDBG program is one of the programs covered by the Consolidated Plan; but the Consolidated Plan regulations govern the development...
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No. The CDBG program allows grantees to define "homeless" for presumed low- and moderate-income benefit activities. The CDBG regulations and the CDBG Guide to National Objectives and Eligible Activities for Entitlement Communities do not define "homeless persons". However, the Consolidated Plan regulations do, and the CDBG program is one of the programs covered by the Consolidated Plan; but the Consolidated Plan regulations govern the development of the Plan and the submission requirements, not necessarily the implementation of specific activities under specific programs.
When identifying the needs of its homeless population and the goals to address those needs in the Consolidated Plan, the grantee may use the definitions of "at risk of homelessness," "chronically homeless," "homeless," "homeless under other Federal statutes," and "women fleeing domestic violence" at 24 CFR 91.5. In addition, persons falling into any of these categories except "at risk of homelessness" will meet the low- and moderate-income limited clientele presumed benefit criterion at 24 CFR 570.208(a)(2)(i)(A) for Entitlements and 24 CFR 570.483(b)(2)(ii)(A) for States. Persons at risk of homelessness cannot meet this presumption because there is no data demonstrating that persons falling into this category are low- and moderate-income.
Related FAQ(s)
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Homeless |
Which definitions of homeless can be used in the CDBG program to show that persons may be presumed to be low- and moderate-income?
The regulations at 24 CFR 91.5 identify several definitions/types of homelessness. Listed below are those definitions/types and if persons meeting them may be presumed low- and moderate-income as stated at 24 CFR 570.208(a)(2)(i)(A) for Entitlements and 24 CFR 570.483(b)(2)(ii)(A) for States. At risk of homelessness: No. Every individual or family at risk of homelessness may not be low- and moderate-income because being considered at risk of home...
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The regulations at 24 CFR 91.5 identify several definitions/types of homelessness. Listed below are those definitions/types and if persons meeting them may be presumed low- and moderate-income as stated at 24 CFR 570.208(a)(2)(i)(A) for Entitlements and 24 CFR 570.483(b)(2)(ii)(A) for States.
At risk of homelessness: No. Every individual or family at risk of homelessness may not be low- and moderate-income because being considered at risk of homelessness is not necessarily linked to income levels. There is no data demonstrating that people at risk of homelessness are low- and moderate- income. Grantees that want to use the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act definition of homeless must be made aware that they cannot presume that persons at risk of homelessness are low- and moderate-income. Therefore, the presumption of homeless persons as low/moderate income as stated at 24 CFR 570.208(a)(2)(i)(A) for Entitlements and 24 CFR 570.483(b)(2)(ii)(A) for States cannot be met if serving only this population. If a grantee wanted to carry out an activity that would only serve persons at risk of homelessness, the provisions of the low- and moderate-income limited clientele national objective at 24 CFR 570.208(a)(2)(i)(B) or (C) for Entitlements and 24 CFR 570.483(b)(2)(ii)(B) or (C) for States would have to be met. This means that participants would have to be income-qualified to ensure that a national objective is met.
Chronically homeless: Yes. Persons with a disability and have been homeless at least 12 months will meet the presumption of being low- and moderate-income.
Homeless: Yes. Persons living in shelters or on the street will meet the presumption of being low- and moderate-income.
Homeless under other Federal statutes: Yes. Persons may be defined as homeless by other statutes, such as section 387 of the Runaway and Homeless Youth Act, section 637 of the Head Start Act, section 41403 of the Violence Against Women Act, section 330(h) of the Public Health Service Act, section 3 of the Food and Nutrition Act of 2008, section 17(b) of the Child Nutrition Act of 1966, and section 725 of the McKinney-Vento Homeless Assistance Act.
Women fleeing domestic violence: Yes. Note that victims of domestic violence are also a group presumed to be low- and moderate-income under 24 CFR 570.208(a)(2)(i)(A) for Entitlements and 24 CFR 570.483(b)(2)(ii)(A) for States.
FAQ3611
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Homeless |
Can persons presenting evidence of homelessness be considered homeless for CDBG program purposes?
The Entitlement CDBG program regulations at 24 CFR 570.506(b) state that grantees may substitute evidence that the assisted person is homeless. This evidence may come from the person's participation in another program serving homeless persons such as those identified above.
Homeless
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Homeless |
May an entitlement grantee provide CDBG funds to support the local Continuum of Care (CoC), or one of the non-profits participating in the local CoC, by paying for costs associated with administration of the Homeless Management Information System (HMIS)?
CDBG funds cannot be used to pay for the administration costs for HMIS since such costs are not a CDBG-eligible activity. CDBG funds may not be used to pay the general administrative costs of the Emergency Shelter Grant (ESG) program or other homeless programs under the authority of Section 105(a)(13) of the Housing and Community Development Act of 1974, as amended (HCDA), or 24 CFR 570.206 of the Entitlement CDBG regulations. HMIS is used to col...
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CDBG funds cannot be used to pay for the administration costs for HMIS since such costs are not a CDBG-eligible activity. CDBG funds may not be used to pay the general administrative costs of the Emergency Shelter Grant (ESG) program or other homeless programs under the authority of Section 105(a)(13) of the Housing and Community Development Act of 1974, as amended (HCDA), or 24 CFR 570.206 of the Entitlement CDBG regulations. HMIS is used to collect data for CoC assisted homeless programs and is not a data source for CDBG-assisted activities benefiting homeless persons. Therefore, administration costs for HMIS cannot be charged to the CDBG program.
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Homeless |
May CDBG funds be used for any costs other than administrative costs for the HMIS?
CDBG funds may support only those Homeless Management Information System (HMIS) costs that are activity delivery costs of a public service activity in accordance with 24 CFR 570.201(e) for Entitlements and Section 105(a)(8) of the HCDA for States. The grantee must be carrying out a CDBG-eligible public service that meets a national objective. An example of eligible CDBG costs would include staff time using HMIS for client case management for serv...
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CDBG funds may support only those Homeless Management Information System (HMIS) costs that are activity delivery costs of a public service activity in accordance with 24 CFR 570.201(e) for Entitlements and Section 105(a)(8) of the HCDA for States. The grantee must be carrying out a CDBG-eligible public service that meets a national objective. An example of eligible CDBG costs would include staff time using HMIS for client case management for services being provided to homeless persons, or relating to the operation of a homeless shelter, both which are CDBG-eligible under the authority of 24 CFR 570.201(e) and (c) for Entitlements and Section 105(a)(8) and (a)(2) of the HCDA for States, respectively.
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Homeowner Rehabilitation |
Does the CDBG program have a definition of homeownership like the HOME program does? Specifically, can a housing unit that is an installment purchase be assisted with CDBG funds?
The CDBG regulations are silent on a definition of homeownership. Each Grantee must describe the activities it will undertake and how it will define homeownership in its Consolidated Plan and Policies and Procedures. If in this situation the seller retains ownership rights then the current resident is not considered a homeowner but rather a renter. Under that scenario, not only is your CDBG investment unsecured but (assuming your intent is rehabi...
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The CDBG regulations are silent on a definition of homeownership. Each Grantee must describe the activities it will undertake and how it will define homeownership in its Consolidated Plan and Policies and Procedures. If in this situation the seller retains ownership rights then the current resident is not considered a homeowner but rather a renter. Under that scenario, not only is your CDBG investment unsecured but (assuming your intent is rehabilitation assistance rather than homebuyer assistance), you are in essence doing rental rehabilitation and would need the actual "owner's" approval to do the rehabilitation. You would also be required to comply with all of the requirements of rental rehabilitation, including ensuring that the "rent" paid is "reasonable" based on local policy.
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Homeowner Rehabilitation |
We have difficulty obtaining sufficient responses for a truly competitive bidding process for our CDBG rehab program. Our policy is to have a minimum of two bids plus our internal cost estimate which meets state code. However, occasionally we have only one bid, necessitating a costly and time consuming rebidding process. Is it acceptable to have one bid, or must we decline the project until two bids are submitted?
Grantees and subrecipients that are governmental entities are required to use their own procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in 2 CFR 200.320. When procuring for a housing rehabilitation contractor, the applicable procurement methods would include small purchase (currently up to the simplified acquisition ...
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Grantees and subrecipients that are governmental entities are required to use their own procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in 2 CFR 200.320. When procuring for a housing rehabilitation contractor, the applicable procurement methods would include small purchase (currently up to the simplified acquisition threshold limit of$100,000) or formal sealed bids. If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. Generally, obtaining three (3) bids is regarded as a minimum standard for small purchase procurements. In order for the formal sealed bid procedure to be feasible, two (2) or more responsible bidders must be willing and able to compete effectively for the business (i.e. two bids must be received).
If a private individual (e.g. the housing rehabilitation beneficiary household) receives a grant or loan from a grantee or subrecipient, the federal procurement requirements do not apply to that private individual. However, grantees are highly encouraged to implement procedures to ensure cost reasonableness, such as preparing an internal cost estimate along with the work write-up and requiring that the beneficiary household obtain a minimum number of bids. The contract award should be made to a contractor whose bid is determined to be a reasonable bid in comparison to the internal cost estimate and other bids.
In the event that procurement efforts do not result in an acceptable number of bids, we recommend that you review your contractor outreach efforts and consult with your local CPD Field Office representative to determine the adequacy of your particular procurement.
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Homeowner Rehabilitation |
A CDBG project involves making repairs to the exterior of an owner-occupied duplex in which one of the households is above the 80% AMI income limit and the other one is below. If $30,000 of CDBG funds will go into the rehabilitation of both units, does the Lead Safe Housing Rule require us to perform interim controls on the unit that does not meet the income limit? Our understanding is that we would have to apply interim controls to both units.
Yes, the CDBG rules allow for the rehabilitation of both parts of a duplex, as long as one household is below 80% of area median income (570.208(a)(3)). Therefore, the grantee can treat both units. Assuming that the property was constructed prior to January 1, 1978, your interpretation about lead is correct. 24 CFR 35.930(c) states that for residential property receiving an average of more than $5,000 and up to and including $25,000 per unit in f...
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Yes, the CDBG rules allow for the rehabilitation of both parts of a duplex, as long as one household is below 80% of area median income (570.208(a)(3)). Therefore, the grantee can treat both units.
Assuming that the property was constructed prior to January 1, 1978, your interpretation about lead is correct. 24 CFR 35.930(c) states that for residential property receiving an average of more than $5,000 and up to and including $25,000 per unit in federal rehabilitation assistance, each grantee or participating jurisdiction shall: (1)Conduct paint testing or presume the presence of lead-based paint, in accordance with paragraph (a) of this section. (2) Perform a risk assessment in the dwelling units receiving federal assistance, in common areas servicing those units, and exterior painted surfaces, in accordance with §35.1320(b), before rehabilitation begins. (3) Perform interim controls in accordance with §35.1330 of all lead-based paint hazards identified pursuant to paragraphs (c)(1) and (c)(2) of this section. (4) Implement safe work practices during rehabilitation work in accordance with §35.1350 and repair any paint that is disturbed and is known or presumed to be lead-based paint. The indicated $15,000 per unit of federal assistance requires that a risk assessment be conducted.
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Homeowner Rehabilitation |
Does CDBG require a lead safe clearance test for homeowner rehab programs under $5,000? Our understanding is that clearance is not required if the disturbance of the paint surface is de minimis.
For housing rehabilitation work costing under $5,000 per unit, the "do no harm" approach is used. You are correct that clearance is not required when painted surface areas are below HUD's de minimis threshold (only).Note that when clearance is required, HUD's Lead Safe Housing Rule (LSHR) requires a clearance examination be done by an independent party instead of the certified renovator's cleaning verification procedure. HUD's LSHR regulations ar...
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For housing rehabilitation work costing under $5,000 per unit, the "do no harm" approach is used. You are correct that clearance is not required when painted surface areas are below HUD's de minimis threshold (only).Note that when clearance is required, HUD's Lead Safe Housing Rule (LSHR) requires a clearance examination be done by an independent party instead of the certified renovator's cleaning verification procedure. HUD's LSHR regulations are found at 24 CFR Part 35. Subpart J addresses housing rehabilitation.
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Homeowner Rehabilitation |
In the CDBG Program, can a "for profit" entity administer/manage the jurisdiction’s Housing Rehabilitation Program as a subrecipient?
A for-profit entity cannot be a subrecipient unless it is a qualified microenterprise as stated in 24 CFR 570.201(o). A subrecipient is defined at 24 CFR 570.500(c) as a public or private nonprofit agency, authority, or organization, or a for-profit entity authorized under 570.201(o). If the for-profit is not a qualified microenterprise, it cannot be considered as a subrecipient. A grantee may procure a contractor (which may be a for-profit) to a...
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A for-profit entity cannot be a subrecipient unless it is a qualified microenterprise as stated in 24 CFR 570.201(o). A subrecipient is defined at 24 CFR 570.500(c) as a public or private nonprofit agency, authority, or organization, or a for-profit entity authorized under 570.201(o). If the for-profit is not a qualified microenterprise, it cannot be considered as a subrecipient. A grantee may procure a contractor (which may be a for-profit) to administer its housing rehabilitation program as long as all of the requirements in 2 CFR 200.320 are met. In this capacity, the contractor is not considered a subrecipient.
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Homeowner Rehabilitation |
Are there federal guidelines for appliance allowance?
There are no specific guidelines or maximum amounts for the cost of appliances included in housing rehabilitation. The cost of appliances, as with all federal grant program costs, must meet the test of reasonableness. Most communities include specifications for allowable appliances in their housing rehabilitation standards. In addition to energy efficiency standards, such as requiring Energy Star compliance, the specifications often refer to an a...
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There are no specific guidelines or maximum amounts for the cost of appliances included in housing rehabilitation. The cost of appliances, as with all federal grant program costs, must meet the test of reasonableness. Most communities include specifications for allowable appliances in their housing rehabilitation standards. In addition to energy efficiency standards, such as requiring Energy Star compliance, the specifications often refer to an appliance model, or equivalent, that is appropriate and typical for similar housing in the area. For appliances in modest housing typically occupied by a low- and moderate-income household, this would mean that higher end appliances with additional features would exceed the reasonable cost for CDBG assistance. It may be useful for you to consult with other communities in your area for information on the appliance specifications and standards they have adopted for their housing rehabilitation programs.
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Homeowner Rehabilitation |
If our CDBG funded rehab program takes into consideration family size, can we count expectant children as part of the household?
The CDBG regulations do not specify if children expected to be born to pregnant women are included as members of the household. It would be up to your local program to develop and follow policies for the rehabilitation program to address this issue, but it would be reasonable to anticipate imminent changes in family composition.
Homeowner Rehabilitation
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Homeowner Rehabilitation |
Can CDBG be used to pay for appliances in a minor home repairs program and do these repairs have to comply with code?
CDBG funds can be used in minor home repair and/or specialty repair programs including using CDBG funds for the acquisition of appliances that are required as part of the rehabilitation. CDBG has no minimum investment requirement and no requirement that units meet code upon completion, although this is sometimes required by grantees.
Homeowner Rehabilitation
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Homeowner Rehabilitation |
I have a property that has requested CDBG funds for rehabilitation, but the property is owned by a trust. I know that CDBG funds can be expended if the property is owned in fee-simple title, as a life estate, or a 99 year leasehold, but is living trust a valid form of ownership for CDBG?
CDBG regulations are silent on acceptable forms of ownership or the how CDBG funds are secured. The project must be eligible and meet a national objective. The Grantee should have policies and procedures in place that both ensure federal compliance but also delineate how the program will be operated, including types of properties and acceptable ownership.
Homeowner Rehabilitation
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Homeowner Rehabilitation |
If someone received a CDBG assisted homeowner rehabilitation loan in 2008, can they come back and receive additional CDBG assisted rehabilitation funding?
CDBG funds may be used more than once to rehabilitate the same housing structure. This may be necessary because the work was not performed satisfactorily the first time or there is a different problem that needs resolution. There is no time limit. If years have passed, the household should be income qualified again to ensure that the low/moderate income housing national objective is met.
Homeowner Rehabilitation
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Homeowner Rehabilitation |
Are mobile homes eligible to be rehabilitated with CDBG funds? This is a single family residence and they own the lot that the mobile home is on.
The CDBG regulations allow the rehabilitation of owner-occupied mobile homes if they are considered part of the community's permanent housing stock. Your policies and procedures should govern what/and how they are included in your program.
Homeowner Rehabilitation
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Homeowner Rehabilitation |
The city currently uses CDBG funds to operate a homeowner rehab program. A homeowner recently applied for the program to obtain assistance in making improvements to her home. The applicant has an addition to the garage that was not built to code and would require extensive work to make it safe. Is it possible to demolish only the portion of the garage that was not built to code using CDBG funds? If so, should the demolition be done separate from the other rehabilitation work completed at the home?
CDBG regulations permit funds to be used to rehabilitate a garage or additions to a housing structure incidental to the rehabilitation of the home. Assuming that your local guidelines include detached garages as an eligible housing rehabilitation activity, then demolition and reconstruction of the unsafe addition may be eligible as housing rehabilitation and meet the low/moderate income housing national objective. There is no CDBG requirement for...
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CDBG regulations permit funds to be used to rehabilitate a garage or additions to a housing structure incidental to the rehabilitation of the home. Assuming that your local guidelines include detached garages as an eligible housing rehabilitation activity, then demolition and reconstruction of the unsafe addition may be eligible as housing rehabilitation and meet the low/moderate income housing national objective. There is no CDBG requirement for a separate bid process or contract for work on the same structure. Therefore, all of the work may be performed by one contractor.
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Job Training |
Can CDBG funds be used to pay salaries for persons participating in CDBG-assisted job training programs?
No. Salaries for job training participants are not considered an activity delivery cost of job training. However, the salary of the person providing the job training is considered an eligible activity delivery cost of job training.
Job Training
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Job Training |
Can CDBG funds be provided to job training participants for transportation and lunch expenses?
Yes. CDBG funds may be used to pay stipends to persons participating in CDBG-assisted job training programs. A stipend is a payment to defray out-of-pocket costs participants incur while attending job training. Stipends usually cover round-trip transportation costs (bus, subway, etc.) and may also include lunch.
Job Training
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Job Training |
Can CDBG funds for stipends be provided directly to the job training participants?
Yes, although this is not recommended. The grantee may provide bus and/or subway passes to job training participants that cover transportation costs for the length of the job training. The grantee may also provide job training participants with a voucher daily that covers the cost of lunch from nearby restaurants. If a person brings his/her lunch, he/she would not receive a lunch voucher.
Job Training
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Davis-Bacon |
Does the use of CDBG funds to pay for construction loan interest trigger Davis-Bacon? By this I do not mean using CDBG assistance to write down the interest rate charged on a construction loan.
Federal labor standards provisions apply to construction work financed in whole or in part with CDBG funds of more than $2,000. “Financing" is not limited to the act of paying for construction work directly. "Financing" can mean, for example, using CDBG assistance to pay the interest charged to reduce the interest rate on a construction loan (including certain collateral accounts). Generally, "financing" also means using CDBG funds to provide p...
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Federal labor standards provisions apply to construction work financed in whole or in part with CDBG funds of more than $2,000. “Financing" is not limited to the act of paying for construction work directly. "Financing" can mean, for example, using CDBG assistance to pay the interest charged to reduce the interest rate on a construction loan (including certain collateral accounts). Generally, "financing" also means using CDBG funds to provide permanent financing following construction. This question suggests that CDBG funds will make payments on the construction financing; Davis-Bacon applies in this case. Where CDBG funds are used to finance only a portion of the construction work, labor standards are applicable to the entire construction work.
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Davis-Bacon |
Our agency owns a mixed use residential building. There are six residential units and two commercial units. We are planning renovations in excess of $2,000 which will be funded with CDBG. Does Davis-Bacon apply because although there are less than eight residential units it is a mixed use building?
The Davis-Bacon applicability threshold for residential property is 8 or more units. For mixed use property, there is no unit threshold except that, if the entire rehabilitation is clearly limited to the residential portion, the residential threshold applies. However, if the commercial space is also rehabilitated, Davis-Bacon would apply. It should be noted that some states have labor laws that may also apply to CDBG-funded construction projects....
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The Davis-Bacon applicability threshold for residential property is 8 or more units. For mixed use property, there is no unit threshold except that, if the entire rehabilitation is clearly limited to the residential portion, the residential threshold applies. However, if the commercial space is also rehabilitated, Davis-Bacon would apply. It should be noted that some states have labor laws that may also apply to CDBG-funded construction projects. If federal and state laws differ, you must comply with the more stringent of the two. For additional information, view the HUD Handbook 1344.1 Second Revision. Please review Chapter 3 of the Handbook for information on wage rate decisions and compliance for mixed use projects.
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Davis-Bacon |
When it comes to prevailing wage in compliance with the labor laws, we have been told to always compare Federal Prevailing Wage Rates with our State Prevailing Wage Rates for the same trade and use the higher of the two. Is there language in the federal Law that states that and if there is, where can I find it?
The federal law that applies federal prevailing wage rates (Davis-Bacon rates) to CDBG funding is Section 110 of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5310). Section 110 requires the payment of wages at rates "not less than" the local prevailing wages determined by the U.S. Secretary of Labor under the Davis-Bacon Act. This means that the federal wage rates are only a minimum, and if state laws, applicable to th...
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The federal law that applies federal prevailing wage rates (Davis-Bacon rates) to CDBG funding is Section 110 of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5310). Section 110 requires the payment of wages at rates "not less than" the local prevailing wages determined by the U.S. Secretary of Labor under the Davis-Bacon Act. This means that the federal wage rates are only a minimum, and if state laws, applicable to the project, require the payment of higher wages, the federal law does not interfere with the higher state requirement. However, even if state law requires the payment of higher rates, and is applicable to the project, the Davis-Bacon wage determination and contract clauses must still be included in solicitation bids and signed contracts for CDBG-financed construction work (except for residential property with less than 8 units). It is the responsibility of the CDBG recipient to contact the state Department of Labor to ascertain whether a project is subject to state prevailing wage rates.
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Davis-Bacon |
A group home is constructing an addition to expand capacity. Is there an exemption to Davis-Bacon?
The applicability of Davis-Bacon under CDBG turns on whether the property is in fact a residential property containing less than 8 units. If the group home is in fact residential, as opposed to a transient homeless shelter, and is designed similar to a single-family home, it would not be covered by Davis-Bacon under the language of Sec. 110 of the HCD Act. The fact that the property is considered a public facility for program eligibility purposes...
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The applicability of Davis-Bacon under CDBG turns on whether the property is in fact a residential property containing less than 8 units. If the group home is in fact residential, as opposed to a transient homeless shelter, and is designed similar to a single-family home, it would not be covered by Davis-Bacon under the language of Sec. 110 of the HCD Act. The fact that the property is considered a public facility for program eligibility purposes wouldn’t alter its residential character.
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Davis-Bacon |
In cases where the work is being contributed in-kind, or paid for from another source and CDBG funds are only paying for materials, does Davis-Bacon still apply?
Bona-fide volunteers are excluded from Davis-Bacon requirements under CDBG (and other HUD programs). HUD Regulations at 24 CFR Part 70 provide definitions and additional guidance concerning the use of volunteers. Generally, volunteers are defined as individuals who: Perform services for a public or private entity for a civic, charitable, or humanitarian reason, without promise, expectation, or receipt of compensation for services rendered; May b...
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Bona-fide volunteers are excluded from Davis-Bacon requirements under CDBG (and other HUD programs). HUD Regulations at 24 CFR Part 70 provide definitions and additional guidance concerning the use of volunteers. Generally, volunteers are defined as individuals who:
- Perform services for a public or private entity for a civic, charitable, or humanitarian reason, without promise, expectation, or receipt of compensation for services rendered;
- May be paid expenses, reasonable benefits, or a nominal fee for such services for which the individual volunteered; and
- Are not otherwise employed at any time in the construction work.
- Davis-Bacon also does not apply to material suppliers or their employees or to employees, such as truck drivers, who may be delivering materials to a job site.
For any youth performing construction work, you should ensure the work is supervised by a general contractor and that appropriate insurance coverage is provided.
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Davis-Bacon |
Are certified payrolls for apprentices in a Step-Up program required for Davis-Bacon projects? If so, would that mean that the apprentices must be assigned work classifications that match with classifications on the applicable wage decision?
Your question is about federal labor standards requirements for apprentices in a Step-Up program. The applicable requirement is found in Chapter 4 of the HUD Handbook on Federal Labor Standards Requirements in Housing and Urban Development Programs. In addition to reviewing this chapter, you should specifically note paragraph 4-2 that provides guidance on apprentices and states that: "E. Proper classification of work. Each laborer and mechanic sh...
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Your question is about federal labor standards requirements for apprentices in a Step-Up program. The applicable requirement is found in Chapter 4 of the HUD Handbook on Federal Labor Standards Requirements in Housing and Urban Development Programs. In addition to reviewing this chapter, you should specifically note paragraph 4-2 that provides guidance on apprentices and states that: "E. Proper classification of work. Each laborer and mechanic shall be classified in accordance with the work classifications listed on the wage decision and the actual type of work he/she performs, and shall be paid the appropriate wage rate and fringe benefits for the classification regardless of their level of skill."
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Davis-Bacon |
What are acceptable ways to confirm that payroll hourly rates have been reviewed and found to correspond with the ones on the applicable wage determination?
Adequate documentation of payroll review can be based on establishing a reasonable, objective set of records that can be verified by a third party. A suggested format would include a brief statement, signed and dated by the reviewer, indicating that a specifically identified payroll document had been compared to specific wage determination, along with notation whether or not any discrepancies have been identified. The applicable payroll and wage ...
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Adequate documentation of payroll review can be based on establishing a reasonable, objective set of records that can be verified by a third party. A suggested format would include a brief statement, signed and dated by the reviewer, indicating that a specifically identified payroll document had been compared to specific wage determination, along with notation whether or not any discrepancies have been identified. The applicable payroll and wage determination could either be attached or referenced to a location that is readily accessible. Depending upon the size of the project and the number of contractors, subcontractors, and workers, the grantee should conduct periodic employee interviews using the Form HUD-11 and compare the information from those interviews to payrolls received. Finding discrepancies, depending upon their severity and the grantee’s knowledge of the general contractor, may trigger the need for more frequent site visits and interviews. All of this review documentation could be subject to some level of supervisory quality control, which could be done on a sample basis, allowing for increased supervisory review if discrepancies arise.
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Davis-Bacon |
We are currently reviewing an application for an owner-occupied rehabilitation program that plans to offer loans of approximately $20,000 or less to home owners for necessary repairs. The organization plans to do 10 owner occupied rehabs of single family, one-unit properties. What I have read so far is that the minimum threshold for Davis-Bacon to apply is if it is a building of 8 units or more, and therefore would not apply to a program that intends to rehab multiple (possibly over 8) 1-unit properties. Is this a correct interpretation?
Davis-Bacon in CDBG is driven by the number of units on a property or on contiguous lots, owned and operated as a single project. Separately owned single-family homes of separate parcels are exempt, regardless of how many units are in the same contract.
Davis-Bacon
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Davis-Bacon |
We have granted funding to a domestic violence shelter that has a 5-bedroom (single "unit") house which offers emergency shelter to women facing domestic violence for an average of about 21 days. They will be using the funds to make repairs to the home. Would Davis-Bacon Wages apply? I know it does not apply to residential dwellings, but I do not know if this space is considering residential.
Under the CDBG program, facilities that are designed for use in providing shelter for persons with special needs are considered public facilities and not permanent housing. Such shelters would include shelters for victims of domestic violence. Use of CDBG funds in a construction contract in excess of $2,000 to repair the shelter would trigger prevailing wages as defined by the Davis-Bacon Act.
Davis-Bacon
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Davis-Bacon |
If I use CDBG dollars for demolition and cleaning of a site for a larger project which triggers Davis-Bacon, is it required the private dollars invested for construction also follow the rules of Davis- Bacon? My State has done away with prevailing wage requirements.
Davis-Bacon wage rates apply when CDBG funds pay in whole or in part for any direct cost of construction and the construction meets one of the following thresholds: Residential: property has more than 8 units Non Residential: Any construction work valued at more than $2,000 Certain CDBG activities or soft costs such as real property acquisition or architectural and engineering fees do not trigger Davis-Bacon requirements. There are instances wh...
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Davis-Bacon wage rates apply when CDBG funds pay in whole or in part for any direct cost of construction and the construction meets one of the following thresholds:
- Residential: property has more than 8 units
- Non Residential: Any construction work valued at more than $2,000
Certain CDBG activities or soft costs such as real property acquisition or architectural and engineering fees do not trigger Davis-Bacon requirements. There are instances when CDBG funds are used for demolition to make way for related non-federal assisted construction. Davis-Bacon would not apply to the construction if the demolition is done under separate contract by the grantee or its contractor before transfer of land to the developer. Davis-Bacon would apply to the construction if the demolition was contracted by the same entity (developer, contractor, etc.) doing the private construction and will be carried out while the contracting entity controls the site.
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Davis-Bacon |
If CDBG funds only pay for pre-development costs on a project that will ultimately lead to jobs for low- and moderate-income people, does the use of the CDBG funds in the project trigger Davis-Bacon requirements? CDBG funds will not be used to pay for any other part of the project which may include acquisition, construction, or rehabilitation.
There are a number of project costs that may be paid with CDBG funds without triggering the Davis-Bacon requirements. These include: Acquisition costs, Financing costs, and Soft costs such as the cost of legal, architectural and engineering, and construction management services. The use of CDBG for predevelopment costs such as those described in your question will not alone trigger Davis-Bacon prevailing wage requirements. However, if any const...
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There are a number of project costs that may be paid with CDBG funds without triggering the Davis-Bacon requirements. These include:
- Acquisition costs,
- Financing costs, and
- Soft costs such as the cost of legal, architectural and engineering, and construction management services.
The use of CDBG for predevelopment costs such as those described in your question will not alone trigger Davis-Bacon prevailing wage requirements. However, if any construction work of $2,000 or more is paid for with CDBG funds, then all of the construction costs are covered. It is the use of funds, not the timing, that matters.
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Davis-Bacon |
The City is initiating an energy efficiency program for residents using CDBG funds. We will have 2 contractors: an energy audit contractor and a construction contractor. We plan to have one agreement with each contractor to cover the entire project. The homes are scattered sites throughout the city and have individual homeowners. Even though we are expending over $2,000 and assisting approximately 10 homes, does Davis-Bacon apply since the homes are not located on contiguous lots and are individually owned?
There are two thresholds that trigger Davis-Bacon in the CDBG Program. The first is when CDBG is used to fund construction contracts of more than $2,000 in non-residential properties. The second threshold is when CDBG is used to fund residential construction contracts for properties that include 8 or more units. A Davis-Bacon covered residential property is defined as 8 or more units in one or more buildings on an undivided lot or on contiguous l...
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There are two thresholds that trigger Davis-Bacon in the CDBG Program. The first is when CDBG is used to fund construction contracts of more than $2,000 in non-residential properties. The second threshold is when CDBG is used to fund residential construction contracts for properties that include 8 or more units. A Davis-Bacon covered residential property is defined as 8 or more units in one or more buildings on an undivided lot or on contiguous lots or parcels which are commonly-owned and operated as one rental, cooperative, or condominium project. In the project described, single family units on separately owned, non-contiguous lots, Davis-Bacon does not apply.
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Davis-Bacon |
Is Davis-Bacon triggered when there is interior and/or exterior rehabilitation of a condo unit within a multi-unit condominium where the occupant of the condo unit owns the air space through a recorded warranty deed? There are 4 units per building and 20 buildings on the property.
For CDBG projects, residential properties containing 7 or fewer units are exempt from Davis-Bacon. However, the eight-unit threshold applies to the number of units on a property; not the number of units being rehabilitated or constructed and not the number of units funded with CDBG dollars. A property is defined as one or more buildings on an undivided lot or on contiguous lots or parcels which are commonly-owned and operated as one rental, coope...
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For CDBG projects, residential properties containing 7 or fewer units are exempt from Davis-Bacon. However, the eight-unit threshold applies to the number of units on a property; not the number of units being rehabilitated or constructed and not the number of units funded with CDBG dollars. A property is defined as one or more buildings on an undivided lot or on contiguous lots or parcels which are commonly-owned and operated as one rental, cooperative, or condominium project. Because the property that you describe includes eight (8) or more units on an undivided lot under common ownership in one condominium project, the Davis-Bacon requirements apply. For further information, please refer to HUD Handbook 1344.1 Rev. 2.
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Davis-Bacon |
A business wants to apply for an infrastructure loan/grant to create a road to a building that is not built yet. The building will be paid for by the business and the business will create 15 jobs. The business wants to use the building as match/leverage for the infrastructure. The jobs will be in the building once it is built. Are the match funds from the private business that will be used to build the building considered part of the CDBG project and therefore Davis-Bacon is required on the construction of the building? Or because the private business is paying for the construction of the building not CDBG funds for that activity – is Davis-Bacon exempt?
The construction of a road using a CDBG infrastructure loan is subject to Davis-Bacon labor standards if the cost of construction is $2,000 or more, regardless of whether it is financed partially or completely with CDBG funds. If the CDBG activity is one large construction contract covering both the building and the road, then Davis-Bacon labor standards will apply to the construction of the building. Even though CDBG is not being used for the bu...
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The construction of a road using a CDBG infrastructure loan is subject to Davis-Bacon labor standards if the cost of construction is $2,000 or more, regardless of whether it is financed partially or completely with CDBG funds. If the CDBG activity is one large construction contract covering both the building and the road, then Davis-Bacon labor standards will apply to the construction of the building. Even though CDBG is not being used for the building construction part of the project, CDBG funds are used as a funding source for the entire project (the building and road combined), thus cross-cutting requirements like Davis-Bacon apply to the entire project.
Additional information regarding Davis-Bacon labor standards can be found in the Basically CDBG Guide, Chapter 16: Labor Standards.
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Davis-Bacon |
Does the use of CDBG funds to pay fees to a general contractor/builder managing a project trigger Davis-Bacon requirements?
There are a number of project costs that may be paid with CDBG funds without triggering the Davis-Bacon requirements. These include: Acquisition costs, Financing costs, and Soft costs such as the cost of legal, architectural and engineering, and construction management services. You can find HUD’s description of the applicability of Davis-Bacon to CDBG projects provided on the Factors of Labor Standards Applicability page. If the fees to a ge...
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There are a number of project costs that may be paid with CDBG funds without triggering the Davis-Bacon requirements. These include:
- Acquisition costs,
- Financing costs, and
- Soft costs such as the cost of legal, architectural and engineering, and construction management services.
You can find HUD’s description of the applicability of Davis-Bacon to CDBG projects provided on the Factors of Labor Standards Applicability page. If the fees to a general contractor/builder managing a project you cite are fees for services (e.g., communicating with building officials, consulting with the project architect, reviewing the construction schedule, conducting site inspections, etc.) payment of CDBG funds for these activities, alone, will not trigger the Davis-Bacon requirements.
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Davis-Bacon |
We have a public sewer project where we are paying only for site work. Construction and equipment for the project are not part of our contract. Is it necessary to require Payment and Performance Bonds and Prevailing Wage of the contractor that is building the sewer plant? We are requiring this of the contractor that is doing the site work.
Davis-Bacon wage rates apply when CDBG funds pay in whole or in part for any direct cost of construction and the construction meets one of the following thresholds: Residential: Property has 8 or more units Non Residential: Any construction work valued at more than $2,000 Since CDBG funds are being used to finance part of the construction of the project, in this case site work, Davis-Bacon wage rates apply to the entire construction project. Yo...
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Davis-Bacon wage rates apply when CDBG funds pay in whole or in part for any direct cost of construction and the construction meets one of the following thresholds:
- Residential: Property has 8 or more units
- Non Residential: Any construction work valued at more than $2,000
Since CDBG funds are being used to finance part of the construction of the project, in this case site work, Davis-Bacon wage rates apply to the entire construction project. You should follow your bonding policies and requirements for both contracts. Grantees that do not have bonding polices and requirements should follow the requirements at 24 CFR 85.36(h)(1).
Note that site acquisition, since it is not a construction activity, is not covered by Davis-Bacon.
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Davis-Bacon |
When do Davis-Bacon requirements apply to construction on residential property?
Davis-Bacon applies to the rehabilitation of residential property only if the property contains 8 or more units. Residential property that contains 7 or fewer units is exempt. Although the statute refers to the rehabilitation of residential property, this exemption has been interpreted to include the new construction of residential property containing 7 or fewer units. Typically, single-family homeowner properties are excluded under this exemptio...
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Davis-Bacon applies to the rehabilitation of residential property only if the property contains 8 or more units. Residential property that contains 7 or fewer units is exempt. Although the statute refers to the rehabilitation of residential property, this exemption has been interpreted to include the new construction of residential property containing 7 or fewer units. Typically, single-family homeowner properties are excluded under this exemption.
However, "property" is not limited to a specific building. Property is defined as one or more buildings on an undivided lot or on contiguous lots or parcels, which are commonly-owned and operated as one rental, cooperative or condominium project. Examples of 8+ unit properties may include:
- 5 townhouse buildings side-by-side which consist of 2 units each.
- 3 apartment buildings each consisting of 5 units and located on one tract of land.
- 8 single-family (not homeowner) houses located on contiguous lots.
The requirement is more clearly explained in HUD Handbook 1344.1 Rev. 2 entitled Federal Labor Standards Requirements in Housing and Urban Development Programs. Appendix II-6 Factors of Labor Standards Applicability provides detailed guidance on Davis-Bacon applicability to various HUD programs.
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Fair Housing and Section 504 |
Is there an ADA compliance requirement when we are using CDBG to rehabilitate a multi-unit housing development?
Accessibility requirements for CDBG assisted rental rehabilitation are based on the Fair Housing Act and Section 504 of the Rehabilitation Act of 1973, rather than the ADA. The ADA generally applies to public facilities and housing provided directly by state and local governments. For a multi-family project, the new construction accessibility standard must be met if the project has 15 or more total units and the cost of the rehabilitation is at l...
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Accessibility requirements for CDBG assisted rental rehabilitation are based on the Fair Housing Act and Section 504 of the Rehabilitation Act of 1973, rather than the ADA. The ADA generally applies to public facilities and housing provided directly by state and local governments.
For a multi-family project, the new construction accessibility standard must be met if the project has 15 or more total units and the cost of the rehabilitation is at least 75 percent of the replacement cost of the completed facility (see 24 CFR 8.23 in the link below). The new construction standard requires 5 percent of the units to be accessible to persons with mobility impairments, and an additional 2 percent accessible for persons with hearing or vision impairments. If your project does not meet the threshold for compliance with the new construction standard, accessibility must be provided to the maximum extent feasible. View 24 CFR Part 8 – Nondiscrimination Based on Handicap in Federally Assisted Programs and Activities.
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Fair Housing and Section 504 |
Are we required to have an affirmatively furthering fair housing policy in place for projects or programs that do not involve housing construction or rehab? For example, a subrecipient is using CDBG for an intersection improvement and another for a wheelchair accessible play structure must they have an Affirmative Fair Housing Policy?
The unit of local government receiving CDBG funds must affirmatively further fair housing. This statutory requirement is recognized in the certifications it signs as part of its Consolidated Plan submission for CDBG funds. The AFFH policy covers the entire program, including all activities and all subrecipients. There is no need to develop separate policies. The required certification regarding fair housing reads as follows: “Affirmatively Furt...
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The unit of local government receiving CDBG funds must affirmatively further fair housing. This statutory requirement is recognized in the certifications it signs as part of its Consolidated Plan submission for CDBG funds. The AFFH policy covers the entire program, including all activities and all subrecipients. There is no need to develop separate policies. The required certification regarding fair housing reads as follows: “Affirmatively Further Fair Housing - The jurisdiction will affirmatively further fair housing, which means it will conduct an analysis of impediments to fair housing choice within the jurisdiction, take appropriate actions to overcome the effects of any impediments identified through that analysis, and maintain records reflecting that analysis and actions in this regard.
There is no requirement that a subrecipient have its own separate policy or plan for affirmatively furthering fair housing, although the subrecipient must comply with general fair housing requirements in carrying out a CDBG activity. Rather, it would be appropriate for your local government to involve its CDBG subrecipients in the process of determining locally appropriate actions to further fair housing and carrying out those actions, and to hold the subrecipients accountable for them in all their projects. Subrecipients engaged in housing activities may have more direct involvement in furthering fair housing; nevertheless, all subrecipients, other participants in the CDBG program, as well as the general public can provide information, insight, and resources that contribute to fulfilling the county’s obligation to affirmatively further fair housing. The county may establish a local requirement for subrecipient involvement in its efforts to affirmatively further fair housing through provisions in its subrecipient agreements, although such a contractual provision is not a specific CDBG regulatory requirement.
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Fair Housing and Section 504 |
Is a grantee required to have an ADA Officer/Coordinator due to Section 504 and the ADA? And if so, is there a resource that describes the responsibilities of this position?
There are two resources that should help clarify what is required: Basically CDBG for Entitlements, Chapter 19 Fair Housing HUD CPD Notice 05-10: CDBG and Section 504 Americans with Disabilities Act, Architectural Barriers Act In terms of designating a specific person, Basically CDBG provides the requirements under Section 504 where grantees with more than 15 employees must have a 504 coordinator. This person may already exist within you...
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There are two resources that should help clarify what is required:
In terms of designating a specific person, Basically CDBG provides the requirements under Section 504 where grantees with more than 15 employees must have a 504 coordinator. This person may already exist within your local government - you might check to determine who that person is within your jurisdiction. For ADA, there is no requirement that a specific person be designated; however, CDBG entitlement staff should be knowledgeable about what is required in terms of funding and monitoring CDBG activities that are in compliance with the ADA requirements.
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Section 3 |
CDBG funds will eventually be used to pay for the actual construction work to rehab a community center. However, the professional services for the design and engineering of the center will be paid with local, non-federal funds. Are these professional services subject to the same Section 3 reporting requirements as the construction work?
The professional service work for design/engineering that was completed prior to your involvement would not be included in any Section 3 reporting since no covered HUD grant funds were used. Construction, and construction-related, and any contracts are subject to Section 3 requirements if $1 of covered HUD funds is used. 24 CFR Part 135 - Section 3 Regulations states: Section 3 covered contract means a contract or subcontract (including a profess...
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The professional service work for design/engineering that was completed prior to your involvement would not be included in any Section 3 reporting since no covered HUD grant funds were used. Construction, and construction-related, and any contracts are subject to Section 3 requirements if $1 of covered HUD funds is used. 24 CFR Part 135 - Section 3 Regulations states: Section 3 covered contract means a contract or subcontract (including a professional service contract) awarded by a recipient or contractor for work generated by the expenditure of Section 3 covered assistance, or for work arising in connection with a section 3 covered projects.
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Section 3 |
A project funded by FHWA and CDBG is in conflict with Section 3 requirements for preferential treatment. How do we resolve this conflict?
You are correct. There is a conflict with Section 3 which requires that preferential hiring be afforded to those living in the project area and FHWA regulations that prohibit preferential hiring. In 2010, FHWA developed a livability initiative to better coordinate federal aid highway programs with grant programs administered by HUD and EPA. Under this initiative, FHWA may waive on a case by case basis the prohibition on local hiring preferences t...
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You are correct. There is a conflict with Section 3 which requires that preferential hiring be afforded to those living in the project area and FHWA regulations that prohibit preferential hiring. In 2010, FHWA developed a livability initiative to better coordinate federal aid highway programs with grant programs administered by HUD and EPA. Under this initiative, FHWA may waive on a case by case basis the prohibition on local hiring preferences to accommodate Section 3 requirements. Please view the Construction Program Guide for information on the initiative and examples of projects.
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Section 3 |
When is Section 3 triggered for a CDBG project?
Section 3 applies to projects of a certain scope and monetary amount and is triggered when the following thresholds are met and new hiring and/or contracting opportunities are generated by the use of grant funds. Scope: Section 3 requirements apply to projects that involve work arising in connection with the construction or rehabilitation of a HUD-assisted project, regardless of how the grant funds are actually spent. Section 3 requirements do n...
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Section 3 applies to projects of a certain scope and monetary amount and is triggered when the following thresholds are met and new hiring and/or contracting opportunities are generated by the use of grant funds.
- Scope: Section 3 requirements apply to projects that involve work arising in connection with the construction or rehabilitation of a HUD-assisted project, regardless of how the grant funds are actually spent. Section 3 requirements do not apply to projects that do not involve rehabilitation and new construction, such as direct homebuyer assistance for the purchase of standard housing, or tenant-based rental assistance programs.
- Dollar Thresholds: Section 3 applies when these thresholds are met:
- The grant administering entity receives more than $200,000 in grant funds, and invests any amount of these funds to carry out new construction or rehabilitation activity (including demolition and lead-based paint abatement). The administering entity includes the PJ/grantee, as well as any subrecipient (unit of local government) or subrecipient (nonprofit organization) that receives over $200,000.
- A contractor/subcontractor of a project receives a contract for $100,000 or more in grant assistance.
Once it is determined that Section 3 applies to a project, the Section 3 requirements apply to all contracts, provided that at least $1 of grant funds is being used. If the grant administering agency receives more than $200,000 in grant funds, but no single contractor is awarded more than $100,000, then the Section 3 requirements apply to the training, employment, and contracting activities of the PJ/grantee, or subrecipient but not to those of the contractor(s) of the project. This means new hiring and contracting opportunities generated by the PJ/grantee, subrecipient that is related to work arising in connection with the HUD-assisted new construction or rehabilitation project would be subject to the Section 3 hiring and contracting goals.
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Section 3 |
Would Section 3 requirements apply only to the construction/rehabilitation phase of a community center or do they continue to the employees/staffing of the community center?
Section 3 requirements do not apply to projects that do not involve housing construction, rehabilitation, or other public construction, such as a community center. The requirements would not apply to the staffing of the community center even if the construction / rehabilitation of the community center was a Section 3 covered project.
Section 3
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Section 3 |
How do you establish the basis for the 10% goal for contracts? Is it based on the total value of the construction contract or is it based on the value of the covered contracts for building trades work, such as carpentry, masonry, plumbing, electrical, and demolition?
The regulations at 24 CFR 135.30(c)(1) establish a goal that at least 10% of the dollar amount of Section 3 covered contracts for building trades work be awarded to Section 3 businesses. The Section 3 requirements would apply to aggregate amount of all projects involving housing construction, rehabilitation, or other public construction. Therefore the numerical goal would be 10% of the total dollar amount of all covered contracts.
Section 3
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Acquisition-Disposition-Demolition |
What are the basic principles to meet CDBG eligibility and national objective requirements for acquisition, demolition, and disposition activities?
Each CDBG project must be an eligible activity and meet a national objective. Acquisition of real property, demolition and disposition are all eligible activities. Meeting a national objective can be more complex. CDBG grantees must identify the planned end use for all properties that they acquire. However, when the planned use does not come to fruition, grantees often struggle to find alternative end uses for these properties. Nonetheless, ...
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Each CDBG project must be an eligible activity and meet a national objective. Acquisition of real property, demolition and disposition are all eligible activities. Meeting a national objective can be more complex. CDBG grantees must identify the planned end use for all properties that they acquire. However, when the planned use does not come to fruition, grantees often struggle to find alternative end uses for these properties. Nonetheless, grantees should ensure that their acquisitions support the overall community development program. The table below attempts to provide additional clarification and examples.
Common Scenarios Involving Acquisition, Demolition, and Disposition in CDBG
- LMA: Low- to Moderate-Income Area
- LMC: Low- to Moderate-Income Clientele
- LMH: Low- to Moderate-Income Housing
- LMJ: Low- to Moderate-Income Jurisdiction
- SB: Slum and Blight
- SBA: Slum and Blight Area
- URG: Urgent Need
Eligible Activity |
End Use of Property |
National Objective |
Consequences |
Acquisition Only |
Property remains in public control.
Example: Land acquired for public facility.
Never put to permanent use.
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National objective based on end use; LMA or LMC in this example.
Never achieved a national objective.
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Document national objective. Ineligible activity. Reimburse the program for all CDBG funds expended.*
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Demolition Only |
CDBG is not used for acquisition.
Remains in private ownership or public property acquired through other sources. Demolition is the only eligible activity.
Example: Dangerous building taken down, site planted with grass.
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Spot Slum and Blight (SB)
Possibly Slum and Blight Area (SBA)
Possibly Urgent Need (URG) in limited situations.**
LMA not available in CDBG. NSP allowed this because there was no slum and blight national objective.
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Eligible if property meets criteria in 24 CFR 570.208(b) or 24 CFR 570.483(c) and 70% overall benefit maintained.
Meet SB criteria or reimburse the CDBG program.
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Disposition Only |
CDBG funded upkeep and subsequent sale of CDBG-assisted property for eligible use.
Example: affordable housing.
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LMH, SB, or other, depending on end use.
If no end use, ineligible.
If not acquired with CDBG funds, ineligible.
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See Note A below.
This scenario will generally involve CDBG acquisition.
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Acquisition & Demolition |
Clearance is the end use; no further activity planned. |
Meets national objective for clearance, which also applies to the acquisition. |
Any subsequent activity will trigger Change of Use. See Note C below. |
Acquisition & Demolition |
If public property supports and eligible activity and meets a national objective, then remains eligible program activity.
Example: Community garden in LMA; flood zone buyouts.
Property does not have an eligible end use.
Demolition did not meet national objective.
Example: Demolition of property that was not blighted with no resale.
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National objective for Demolition: SB
National objective for Acquisition: Depends on the end use. SB or SBA is allowable if the end use is clearing blighted property in a flood zone.
Urgent Need (URG) in limited situations**
If property never met national objective: It is ineligible.
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Document national objective for both acquisition and demolition.
Reimbursement of all costs is required (Not just current value).
See Note D below.
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Acquisition & Disposition (no Demolition) |
If property sold to private entity, and supports an eligible activity, then remains eligible activity.
Example: Affordable housing.
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National objective for acquisition/disposition. Depends on the end use of the property.
LMA, LMH, LMC, LMJ, or SBA |
The disposition (end use) drives the national objective.
See Note A below.
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Acquisition & Disposition (no Demolition) |
If publicly or privately owned and does not meet a national objective.
Example: Vacant land acquired and sold for church.
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If no national objective is ever met for either Acquisition or Disposition, then it is ineligible. |
Reimbursement of all costs required (not just current value). |
Acquisition & Demolition & Disposition |
Dangerous structure acquired and demolished, then sold or donated to non-profit developer of affordable housing. |
SB for demolition. National objective for acquisition and disposition based on end use. In this example: LMH |
Document national objective. |
Acquisition & Demolition & Disposition |
Demolition meets national objective, but Acquisition/Disposition does not.
Example: Structure razed but land remains unused.
Property not blighted. Grantee sells cleared land for parking lot in upper income Census Block Group.
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Acquisition for clearance can meet SB test.
No disposition for an eligible use does not result in a Change of Use.
No SB for demo. Parking lot does not meet a national objective.
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Repay current market value if a Change of Use does not meet a national objective.
See Note C below.
Ineligible Activity
Repay all costs
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Notes
*Sales proceeds are program income. Repayments of ineligible costs are not considered program income. Repayments must be made to the line of credit from which they were drawn unless the funds were drawn from a grant that has since expired (over eight years old). Those repayments must be made to the grantee's local CDBG program account.
**In very limited situations, the urgent need national objective could be possible: e.g., demolition or acquisition-plus-demolition on buildings damaged by a tornado, massive fire, mudslide, etc. The grantee would have to demonstrate that its current conditions present a serious and immediate threat to public health and safety. If the property is sold or reused for another purpose, the reuse must meet a national objective or change of use applies (reimbursement of current fair market value required).
A. If no accomplishments have been demonstrated after 3-5 years, HUD may have reason to question the national objective compliance.
B. Acquisition by Eminent Domain: There is a statutory prohibition against using CDBG funds in conjunction with eminent domain for economic development projects benefitting private for profit businesses.
C. Change of Use: 24 CFR 570.503 for entitlement subrecipients; 24 CFR 570.505 for entitlement grantees; 24 CFR 570.489(j) for the State CDBG program.
D. Acquiring and/or holding property "for future use" is not an eligible activity.
Regulatory References
ELIGIBILITY: Acquisition - 24 CFR 570.201(a) for Entitlements, Section 105(a)(1) for States; Disposition - 24 CFR 570.201(b) for Entitlements, Section 105(a)(7) for States; Clearance-Demolition - 24 CFR 570.201(d) for Entitlements, Section 105(a)(4) for States.
NATIONAL OBJECTIVES: Activities benefiting low- and moderate-income persons. 24 CFR 570.208(a) for Entitlements; 24 CFR 570.483(b) for States; Slums and Blight 24 CFR 570.208(b) for Entitlements, 24 CFR 483(c) for States; Urgent Need 24 CFR 570.208(c) for Entitlements, 24 CFR 570.483(d) for States.
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Acquisition-Disposition-Demolition |
Our community wants to demolish some blighted properties. How can we meet a CDBG national objective with this activity?
The main option is to treat the demolition as an activity that aids in the prevention or elimination of slums and blight, either on a spot basis (SB) or an area basis (SBA) (24 CFR 570.208(b)). For the removal of isolated instances of blight, the SB criteria are the most appropriate. Use of SBA covers more properties; establishing an area as blighted requires more documentation. In cases where removal of blight is the goal of the demolition, the ...
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The main option is to treat the demolition as an activity that aids in the prevention or elimination of slums and blight, either on a spot basis (SB) or an area basis (SBA) (24 CFR 570.208(b)). For the removal of isolated instances of blight, the SB criteria are the most appropriate. Use of SBA covers more properties; establishing an area as blighted requires more documentation. In cases where removal of blight is the goal of the demolition, the demolition serves as the end use and no further treatment is required, provided the use of the property does not change after the demolition.
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Acquisition-Disposition-Demolition |
If our community wishes to qualify a demolition activity as meeting the CDBG national objective of benefiting low- and moderate-income persons, is there a way to accomplish this?
If the demolition is integral to another activity meeting the national objective of benefitting low- and moderate-income persons, the demolition could meet a national objective other than slums and blight. For example, a grantee could demolish a vacant structure and remove the debris to make a neighborhood park and playground that will serve a predominantly residential low- and moderate-income neighborhood. It is very difficult to qualify a stand...
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If the demolition is integral to another activity meeting the national objective of benefitting low- and moderate-income persons, the demolition could meet a national objective other than slums and blight. For example, a grantee could demolish a vacant structure and remove the debris to make a neighborhood park and playground that will serve a predominantly residential low- and moderate-income neighborhood. It is very difficult to qualify a stand-alone demolition as anything but removal of slums or blight.
Because grantees must demonstrate that at least 70% of expenditures benefit low- and moderate-income persons, communities have an effective limit of 30% of the grant (adjusted for administration and program income) for slum and blight (and urgent need) activities.
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Acquisition-Disposition-Demolition |
If our community must acquire the property with CDBG funds in order to carry out the demolition, how can we meet a national objective?
When using CDBG funds to acquire such properties (24 CFR 570.201(a)), the situation can be more complicated. This is due to the fact that both the acquisition and demolition activities must meet a national objective. In this case, the demolition would have to meet the slum and blight national objective, either on an area basis (SBA) or a spot basis (SB), unless the demolition is integral to another activity that benefits lower-income persons, suc...
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When using CDBG funds to acquire such properties (24 CFR 570.201(a)), the situation can be more complicated. This is due to the fact that both the acquisition and demolition activities must meet a national objective. In this case, the demolition would have to meet the slum and blight national objective, either on an area basis (SBA) or a spot basis (SB), unless the demolition is integral to another activity that benefits lower-income persons, such as affordable housing.
The acquisition must also meet a national objective, usually based on the follow-on activity that the property will be used for after the demolition. There are several ways to approach national objective compliance. If acquisition for the purpose of clearing the property occurs, the clearance that meets the slum and blight (area or spot basis, SBA or SB) national objective is considered the use of the property. Second, through public ownership for an eligible use such as a park in a low- and moderate-income area (LMA), the acquisition can rely on the national objective of that eligible end use. Third, the acquisition can qualify through the property’s disposition for an eligible activity (24 CFR 570.201(b)).
In all cases, the acquisition activity must meet a national objective, but not necessarily the slum and blight national objective required for the demolition. For example, if the property is ultimately used for affordable housing, the acquisition would meet the low- and moderate-income national objective for housing activities (LMH).
It is very rare for acquisition alone to meet a national objective; generally acquisition is paired with another activity such as rehabilitation or disposition, and the rehabilitation or disposition meets the national objective (unless, as above, demolition is the end use). If the acquisition never meets a national objective, the purchase is ineligible. Note that an eligible end use that meets a national objective could be funded with sources other than CDBG.
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Acquisition-Disposition-Demolition |
If our community must acquire and dispose of a property, how can we meet a national objective under the CDBG program?
Once property is acquired, the grantee must either retain the property or dispose of it. CDBG recipients that hold the property must put it to an eligible use that meets a national objective within a reasonable period of time, because land banking is ineligible in CDBG. If the property is acquired for a public purpose and then sold, national objective compliance is determined based on the end use of the property. Some public uses that are eligibl...
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Once property is acquired, the grantee must either retain the property or dispose of it. CDBG recipients that hold the property must put it to an eligible use that meets a national objective within a reasonable period of time, because land banking is ineligible in CDBG. If the property is acquired for a public purpose and then sold, national objective compliance is determined based on the end use of the property.
Some public uses that are eligible and meet a national objective are:
- Community gardens or public facilities in low- and moderate-income areas (LMA)
- Neighborhood play lots in low- and moderate-income areas (LMA)
- Open space for drainage and storm water retention in low- and moderate-income areas (LMA)
- Lease or sale of land for housing meeting the low- and moderate-income housing criteria (LMH)
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Acquisition-Disposition-Demolition |
If property is acquired with CDBG funds, what kind of expenses are eligible at the time of disposition?
Real property acquired with CDBG funds may be managed and maintained as an eligible disposition expense, but such work must be limited in duration. Properties that have not achieved an end use within three to four years run the risk of monitoring or audit findings. Grantees or subrecipients may pay for ongoing maintenance of acquired properties, which could include repairs, utilities, yard work and similar expenses. CDBG funds may only be used to...
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Real property acquired with CDBG funds may be managed and maintained as an eligible disposition expense, but such work must be limited in duration. Properties that have not achieved an end use within three to four years run the risk of monitoring or audit findings. Grantees or subrecipients may pay for ongoing maintenance of acquired properties, which could include repairs, utilities, yard work and similar expenses. CDBG funds may only be used to maintain property that was acquired with CDBG funds and is being actively marketed. The property must support an eligible use and meet a national objective. If the property never achieves an eligible end use that meets a national objective, the maintenance expenses may be found ineligible as well.
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Acquisition-Disposition-Demolition |
What are some common ways in which properties are disposed in the CDBG program?
Grantees that think strategically may also dispose of property to other organizations, such as private developers. Here again, the disposition must lead to an eligible end use, such as affordable housing or low- to moderate-income (LMI) area benefit activities such as a park. Some private end uses that will likely qualify are: Sale or donation of lots to adjacent income-eligible property owners to ensure continued maintenance as side yards (LMH)...
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Grantees that think strategically may also dispose of property to other organizations, such as private developers. Here again, the disposition must lead to an eligible end use, such as affordable housing or low- to moderate-income (LMI) area benefit activities such as a park.
Some private end uses that will likely qualify are:
- Sale or donation of lots to adjacent income-eligible property owners to ensure continued maintenance as side yards (LMH)
- Sale or long term lease for low- to moderate-income housing (LMH) (single-family or multi-family, owner or renter)
- Disposition for economic development (parking lot for corner store in low- to moderate-income area (LMA)
- Disposition for economic development (play lot for in-home daycare facility) (LMJ)
- Disposition for economic development (site assembly for a machine shop that will employ neighborhood residents)
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Acquisition-Disposition-Demolition |
What if the housing or other use (LMI)-benefiting use that was planned for our CDBG activity does not materialize?
In such cases, the change of use rules apply, as described at 24 CFR 570.505 for entitlement grantees and 24 CFR 570.503(a)(7) for subrecipients. Change of use rules apply to real property acquired or improved using CDBG funds in excess of $25,000. Note that demolition costs are not counted toward the $25,000. For entitlement grantees, these standards apply from the date CDBG funds are first spent for the property until five years after closeout ...
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In such cases, the change of use rules apply, as described at 24 CFR 570.505 for entitlement grantees and 24 CFR 570.503(a)(7) for subrecipients. Change of use rules apply to real property acquired or improved using CDBG funds in excess of $25,000. Note that demolition costs are not counted toward the $25,000. For entitlement grantees, these standards apply from the date CDBG funds are first spent for the property until five years after closeout of an entitlement recipient's participation in the entitlement CDBG program or, with respect to other recipients, until five years after the closeout of the grant from which the assistance to the property was provided. For subrecipients, the properties must be used to meet one of the national objectives until five years after expiration of the agreement, or for such longer period of time as determined to be appropriate by the grantee. If the property is still covered by these requirements, the grantee or subrecipient must follow the change of use procedures.
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Acquisition-Disposition-Demolition |
How do we ensure compliance with the change of use rules with our CDBG activities?
First, determine that the property originally met a national objective; if it never met a national objective, the costs are ineligible and all funds expended on the property must be reimbursed to the program. Second, if the property did meet a national objective, calculate whether the CDBG costs of acquisition and improvements exceeded $25,000. If lower than $25,000, the grantee may dispose of property with no further requirements. If over $25,00...
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First, determine that the property originally met a national objective; if it never met a national objective, the costs are ineligible and all funds expended on the property must be reimbursed to the program. Second, if the property did meet a national objective, calculate whether the CDBG costs of acquisition and improvements exceeded $25,000. If lower than $25,000, the grantee may dispose of property with no further requirements. If over $25,000, the grantee must give affected citizens reasonable opportunity to comment on the proposed change. If the new use meets a national objective, the grantee may proceed with the change. If the new use does not meet a national objective, then the grantee may retain or dispose of the property by reimbursing the CDBG program for the current fair market value of the property, less any portion of the value not attributable to CDBG. Sale proceeds are program income.
For example, an entitlement city renovated an older structure for a youth center in a low- to moderate-income area (LMA). Now, the demographics in the neighborhood have changed; the young people have grown and the community has many more adult and senior members. The entitlement community believes that it should demolish the building and change the use by selling the land to a business which does not directly benefit the low and moderate income area or create jobs. If the grantee follows the procedures for change of use and obtains approval from affected citizens, it may sell the land to the business, reimburse the CDBG program, and the property will no longer be subject to CDBG requirements.
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Acquisition-Disposition-Demolition |
What other requirements in addition to the CDBG regulations apply when real property is acquired under the CDBG program?
Pursuant to 24 CFR 570.606, CDBG grantees must follow the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended. The URA, passed by Congress in 1970, establishes minimum standards for federally funded programs and projects that require the acquisition of real property (real estate) or displace persons from their homes, businesses, or farms. The URA's protections and assistance apply to the acquisition,...
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Pursuant to 24 CFR 570.606, CDBG grantees must follow the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended. The URA, passed by Congress in 1970, establishes minimum standards for federally funded programs and projects that require the acquisition of real property (real estate) or displace persons from their homes, businesses, or farms. The URA's protections and assistance apply to the acquisition, rehabilitation, or demolition of real property for federal or federally funded projects. The government-wide regulation that implements the URA can be found at 49 CFR Part 24.
Relocation advisory services are the single most important part of a successful relocation program. Relocation advisory services are required to be provided to all eligible displaced persons including nonresidential displaced persons. These include determining the needs of displaced persons, explaining benefits that the displaced person might be entitled to, and providing listings of comparable dwellings for residential displacements and replacement sites for businesses, among others.
The CDBG program must also comply with the anti-displacement requirements of Section 104(d) of the URA. The URA is quite complex. Grantees are strongly encouraged to contact their HUD Regional Relocation Specialist for assistance.
Please note that acquiring real property with CDBG funds through eminent domain (condemnation) for economic development projects benefiting private, for-profit businesses is prohibited. This is a statutory prohibition contained annually in the HUD appropriations bill since 2006. New housing construction (by itself, not mixed-use) is not economic development in 24 CFR 570.203.
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Acquisition-Disposition-Demolition |
Is there a requirement to do a financial analysis to determine the amount of CDBG funds to provide to a subrecipient for the acquisition of real property?
The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) requirement addresses value and the CDBG portion acknowledges the OMB requirement of cost reasonableness. CDBG regulations do not mandate a financial analysis, except that grantees must ensure that costs are reasonable. In addition, real property acquired with CDBG funds and real property acquired with other funds for a CDBG-funded project are subject to th...
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The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) requirement addresses value and the CDBG portion acknowledges the OMB requirement of cost reasonableness.
CDBG regulations do not mandate a financial analysis, except that grantees must ensure that costs are reasonable. In addition, real property acquired with CDBG funds and real property acquired with other funds for a CDBG-funded project are subject to the URA which is implemented for the CDBG program at 24 CFR 570.606 and 49 CFR Part 24. The URA real property acquisition regulations that apply to CDBG at 24 CFR 570.606(e) and 49 CFR Part 24, Subpart B, generally require both an appraisal and appraisal review to establish the fair market value of real property to be acquired, with the exception of real property acquisitions that meet the criteria at 49 CFR 24.101(b)(1)-(5), often referred to as "voluntary acquisitions." Even though the URA does not require an appraisal and appraisal review for these "voluntary acquisitions," grantees must still be able to demonstrate that the acquisition cost, if funded under CDBG, is reasonable and necessary.
Complex issues can be brought to the local HUD field office for assistance. For additional information and guidance on the URA, including real property acquisition and valuation matters, visit HUD's Acquisition and Relocation website. For direct assistance on URA real property acquisition matters, contact your HUD Regional Relocation Specialist.
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Acquisition-Disposition-Demolition |
In a CDBG acquisition activity, do the environmental review requirements at 24 CFR Part 58 apply?
Under 24 CFR Part 58, the Responsible Entity (unit of local government) must determine the appropriate level of environmental review, ensure that the project complies with all applicable environmental laws and authorities, document any mitigation measures and conditions, and complete all required approvals. To determine the appropriate level of environmental review, all proposed or anticipated activities must be grouped together (24 CFR §58.32),...
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Under 24 CFR Part 58, the Responsible Entity (unit of local government) must determine the appropriate level of environmental review, ensure that the project complies with all applicable environmental laws and authorities, document any mitigation measures and conditions, and complete all required approvals. To determine the appropriate level of environmental review, all proposed or anticipated activities must be grouped together (24 CFR §58.32), and note that, for acquisition or demo activities, the environmental review must consider any subsequent use and/or changes to the site. For example, if a property to be acquired will require demolition and reconstruction, the environmental review must consider the full range of those activities and uses in addition to the acquisition.
More information about environmental review requirements can be found on the Environmental Review page on the HUD Exchange.
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Acquisition-Disposition-Demolition |
When disposing of a property purchased with CDBG funds, does the grantee need to ensure that the property will continue to meet a national objective?
Yes, the new use must meet a national objective or the program must be repaid. If a subrecipient is involved, the subrecipient agreement must specify the terms under which a national objective must be met. The CDBG regulations state that the project must meet a national objective until five years after expiration of the subrecipient agreement, or longer as required by the grantee. If the property ceases to meet a national objective during that te...
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Yes, the new use must meet a national objective or the program must be repaid. If a subrecipient is involved, the subrecipient agreement must specify the terms under which a national objective must be met. The CDBG regulations state that the project must meet a national objective until five years after expiration of the subrecipient agreement, or longer as required by the grantee. If the property ceases to meet a national objective during that term, it must be treated as a change of use. (If there is no subrecipient agreement between the grantee and subrecipient concerning the activity, or if the subrecipient agreement contains no expiration date, the activity must continue to meet a national objective in perpetuity.) If the grantee holds title to the property, it must continue to meet a national objective in perpetuity or be sold for current market value, with the proceeds being CDBG program income.
If the new use can meet a national objective, no repayment would be required. For example, converting a community center to a daycare facility for low- to moderate-income (LMI) families would meet a national objective, so reimbursement is unnecessary. If the use changes and the subsequent use does not meet a national objective, then the property may be taken out of the program. The CDBG program must be reimbursed at current market value, regardless of the original purchase price. If the property never met a national objective, all costs must be reimbursed; the activity is ineligible. If CDBG paid only a portion of the costs, a proportional share of the proceeds should be reimbursed to the program.
If the fair market value is less than the original CDBG investment, a determination must be made as to why the value change occurred and the grantee must document the files. See also FAQ 3458 and FAQ 3459.
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Audits and Budgeting |
When is a 2 CFR Part 200 audit or Single Audit required, and how much oversight is a grantee required to have over these audits?
A 2 CFR Part 200 audit is required if your organization expends more than $750,000 in federal funds during your fiscal year. CDBG grantees and subrecipients that expend $750,000 or more in a year in federal awards must have an audit conducted in accordance with 2 CFR Part 200, Subpart F—Audit Requirements except when they elect to have a program-specific audit conducted. A program audit is an audit of one federal program (such as CDBG). A progr...
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A 2 CFR Part 200 audit is required if your organization expends more than $750,000 in federal funds during your fiscal year. CDBG grantees and subrecipients that expend $750,000 or more in a year in federal awards must have an audit conducted in accordance with 2 CFR Part 200, Subpart F—Audit Requirements except when they elect to have a program-specific audit conducted. A program audit is an audit of one federal program (such as CDBG). A program-specific audit is allowed when the grantee or subrecipient expends federal awards under only one federal program. A single audit is an audit that includes both an entity's financial statements and its federal awards (from all applicable federal programs). If a grantee or subrecipient expends less than $750,000 a year in federal awards, it is exempt from the audit requirements for that year; however, records must be available for review or audit by appropriate officials of the federal agency, pass-through entity and the Government Accountability Office.
Your agency's oversight should be in the form of monitoring to ensure compliance with CDBG regulations and any requirements imposed by your agency. Advise subrecipients of requirements imposed on them by federal laws, regulations, and the provisions of contracts or grant agreements as well as any supplemental requirements imposed by the grantee. Monitor the activities of subrecipients as necessary to ensure that CDBG funds are used for authorized purposes in compliance with laws, regulations, and the provisions of the subrecipient agreement and those performance goals are achieved. Ensure that a subrecipient or non-federal agency expending $750,000 or more in federal awards during their fiscal year has met the audit requirements of 2 CFR 200 for that fiscal year in accordance with the provisions of Subpart F—Audit Requirements.
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Audits and Budgeting |
Can a city utilize CDBG contingency funds from previously awarded projects to incur or pay for Pre-Award costs as a method to get a jump-start on expending its entitlement funds, or does the source of the Pre-Award funding have to be city general revenue funds or some other non-federal funding source?
The Reimbursement for Pre-Award Costs provision is found in the Community Development Block Grant regulations at 24 CFR 570.200(h). Under this provision, before the date of the grant agreement, a grantee or their subrecipients may carry out a project using non-CDBG funds with the understanding that they may reimburse those non-CDBG funds from one or more future CDBG program grants. Grantees may use general funds or obtain a private loan to assist...
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The Reimbursement for Pre-Award Costs provision is found in the Community Development Block Grant regulations at 24 CFR 570.200(h). Under this provision, before the date of the grant agreement, a grantee or their subrecipients may carry out a project using non-CDBG funds with the understanding that they may reimburse those non-CDBG funds from one or more future CDBG program grants. Grantees may use general funds or obtain a private loan to assist the activity. The pre-award project must meet all the requirements that would otherwise apply to a CDBG funded project (be in a Consolidated Plan/Action plan or amended plan, environmental review, Davis-Bacon, and national objective compliance). Citizens also must be notified of the extent the pre-award will affect future CDBG grants. If there are funds that were unutilized from a previously assisted CDBG-assisted activity, those funds may be reprogrammed for another eligible activity that meets a national objective. Please note that whenever a grantee changes the use of CDBG funds from one activity to another that triggers a substantial amendment which requires that citizens be provided an opportunity to comment on the substantial amendment.
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Audits and Budgeting |
We are currently working on a street reconstruction project where a contractor has signed an agreement to construct the project for the city. No construction work has started. Are we able to pay for materials in advance and store them at our public works yard or do we need to wait until actual materials are needed at the job site?
In order for the grantee to comply with 24 CFR 85.20(b)(7), grantees must have procedures in place to minimize the time elapsed between the transfer of funds from Treasury and disbursement by the grantee. You should have procedures in place to avoid time gaps between drawdowns and disbursement of funds and should make every attempt to make drawdowns as close as possible to the time of making the disbursement. It appears as if the project may be u...
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In order for the grantee to comply with 24 CFR 85.20(b)(7), grantees must have procedures in place to minimize the time elapsed between the transfer of funds from Treasury and disbursement by the grantee. You should have procedures in place to avoid time gaps between drawdowns and disbursement of funds and should make every attempt to make drawdowns as close as possible to the time of making the disbursement. It appears as if the project may be underway soon, but the grantee should wait until the materials are needed at the job site to purchase them. One of the main values of the requirements under 24 CFR 85.20(b)(7) is there are less likely to be errors made in ordering of materials for the project when the materials are ordered closer to the project schedule. If materials are purchased in advance, some of them may not be used or deemed as unnecessary. If that occurs, the grantee may end up having to pay back the CDBG funds used to purchase those materials. Ensure all materials are properly procured via 24 CFR 85.36.
(24 CFR 85.20(b)(7); 24 CFR 85.36; 2 CFR Part 225 (formerly OMB Circular A-87))
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Audits and Budgeting |
What rules govern unspent prior year income when reallocating in the next program year? Do the funds have to all go in housing community development or can they be split, within the caps between public service, administration and housing/community development?
Compliance with the public service and planning and administrative limits is calculated separately for each program year. For this purpose, a grantee includes program income in these calculations based on the program year in which the program income is received. Specific guidance for determining compliance with the public service and planning and administrative limits is included in the Community Development Block Grant Program - Guide to Nationa...
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Compliance with the public service and planning and administrative limits is calculated separately for each program year. For this purpose, a grantee includes program income in these calculations based on the program year in which the program income is received. Specific guidance for determining compliance with the public service and planning and administrative limits is included in the Community Development Block Grant Program - Guide to National Objectives and Eligible Activities for Entitlement Communities, Chapter 2, Categories of Eligible Activities. For Public Services, the computation worksheet is found on page 2-27. For the cap on planning and administration, the worksheet is on page 2-77.
In addition, a grantee must consider program income received as one of the resources available when considering proposed activities for an Annual Action Plan or amendment. If the program income received has not been previously designated to be used for a specific eligible activity, the amount program income available as a program resource must be part of the information provided to the public in the process of preparing an Annual Action Plan or amendment.
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Audits and Budgeting |
Which source(s) did HUD use to calculate the individual categories (population size, poverty, & overcrowding) in determining the funding amounts for entitlement communities? For example, in FY12 they used the 2010 Census for population size and used the American Community Survey 2005-2009 Estimates for poverty and overcrowding.
For the poverty, overcrowding, and pre-1940 housing variables, HUD used the ACS 2007-2011 data. For the population and growth lag variables, HUD used the 2012 population estimates. HUD used the revised population estimate for communities that successfully challenged their population estimates with the Bureau of Census.
Audits and Budgeting
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Audits and Budgeting |
We want to charge activity delivery costs that were previously billed to CDBG administrative costs. Dowe need to update our annual Action Plan to show this budget change?
Please review your Citizen Participation Plan to determine if any budget changes (program administration vs. activity delivery) require an amendment to your Consolidated Plan / Annual Action Plan and act accordingly. Budgets for activity delivery and program administration cannot be combined in your Annual Action Plan or in IDIS. These activities have different regulatory citations for eligibility and national objectives and must be described sep...
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Please review your Citizen Participation Plan to determine if any budget changes (program administration vs. activity delivery) require an amendment to your Consolidated Plan / Annual Action Plan and act accordingly. Budgets for activity delivery and program administration cannot be combined in your Annual Action Plan or in IDIS. These activities have different regulatory citations for eligibility and national objectives and must be described separately. These activities also have different IDIS matrix codes. The required time and activity timesheets should be used to provide budget estimates for activity delivery and program administration. If you are just starting to charge staff time to activity delivery, you may have to make a general estimate until you have actual data from the time and activity timesheets. Depending on your actual experience, it may be necessary to amend your budget during the year.
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Audits and Budgeting |
Should a city department that we fund with CDBG dollars have their own DUNS Number? Our Community Development Department has their own DUNS Number, but other city departments tend to use our DUNS Number.
In most cases, a Memorandum of Understanding (MOU) is the agreement between departments in the same City. So, if the department you are funding is part of the same legal entity, a separate DUNS number would not be required. However, if a legal agreement is executed between the Community Development Department and another department receiving a subaward of $25,000 or more of CDBG funds, the subaward must be reported in the FFATA Subaward...
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In most cases, a Memorandum of Understanding (MOU) is the agreement between departments in the same City. So, if the department you are funding is part of the same legal entity, a separate DUNS number would not be required.
However, if a legal agreement is executed between the Community Development Department and another department receiving a subaward of $25,000 or more of CDBG funds, the subaward must be reported in the FFATA Subaward Reporting System (FSRS). A unique entity identifier (i.e., the DUNS number) is one of the mandatory fields in the FSRS, so one would be required for the department receiving the subaward. However, these kinds of agreements generally occur between the Grantee and subrecipients or contractors, not between City Departments.
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Code Enforcement |
What is code enforcement for CDBG program purposes?
Code enforcement is a process whereby local governments gain compliance with ordinances and regulations regarding health and housing codes, land use and zoning ordinances, permitting, sign standards, and uniform building and fire codes in deteriorated or deteriorating areas in which such enforcement, together with public or private improvements or services to be provided, may be expected to arrest the decline of the area. Since, for CDBG program ...
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Code enforcement is a process whereby local governments gain compliance with ordinances and regulations regarding health and housing codes, land use and zoning ordinances, permitting, sign standards, and uniform building and fire codes in deteriorated or deteriorating areas in which such enforcement, together with public or private improvements or services to be provided, may be expected to arrest the decline of the area. Since, for CDBG program purposes, code enforcement is defined as the maintenance and preservation of the appearance of residential, commercial, and industrial properties, grantees are strongly encouraged to emphasize health and safety issues in buildings, including disaster-resistant provisions, in accordance with local building codes and applicable federal design standards and requirements.
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Code Enforcement |
What costs may CDBG funds be used for in accordance with 24 CFR 570.202(c)?
CDBG funds may be used to pay salaries for code enforcement inspectors for the time spent conducting such inspections in CDBG-eligible areas (areas that meet the state/local definition of deteriorated/deteriorating). In addition, items needed to conduct such inspections such as coveralls to protect their clothing and hand-held electronic devices such as tablets are also eligible. Finally, legal proceedings such as hearings to address appeals of v...
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CDBG funds may be used to pay salaries for code enforcement inspectors for the time spent conducting such inspections in CDBG-eligible areas (areas that meet the state/local definition of deteriorated/deteriorating). In addition, items needed to conduct such inspections such as coveralls to protect their clothing and hand-held electronic devices such as tablets are also eligible. Finally, legal proceedings such as hearings to address appeals of violations are also eligible. See the Related FAQs section for additional requirements.
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Code Enforcement |
What CDBG national objective(s) does code enforcement activities meet under 24 CFR 570.202(c)?
There are three national objectives for the CDBG program: benefiting low-moderate income persons, removing slum and blight, and meeting urgent needs. The primary national objective used by grantees carrying out CDBG-assisted code enforcement is benefit to low- and moderate-income persons on an area basis [24 CFR 570.208(a)(1)]. Grantees may use the slum/blight area (SBA) national objective as well. However, because grantees are required to expend...
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There are three national objectives for the CDBG program: benefiting low-moderate income persons, removing slum and blight, and meeting urgent needs. The primary national objective used by grantees carrying out CDBG-assisted code enforcement is benefit to low- and moderate-income persons on an area basis [24 CFR 570.208(a)(1)]. Grantees may use the slum/blight area (SBA) national objective as well. However, because grantees are required to expend 70 percent of their CDBG funds in the aggregate over a one-, two-, or three-year certification period (the length of time is at the grantee's discretion) on activities that benefit low- and moderate-income persons (overall benefit). Grantees are more likely to choose the benefit to low and moderate-income persons on an area basis national objective to ensure this requirement is met.
Grantees may also use the slum/blight urban renewal completion national objective if they have outstanding urban renewal plans or areas. A grantee must be able to document this national objective by having a copy of the Urban Renewal Plan in effect at the time of closeout of HUD financial assistance under title I of the Housing Act of 1949 or financial settlement under Section 112 of the Housing and Community Development Act (HCDA), and a description of how the inspections for code violations and enforcement of codes are needed to complete the urban renewal plan for the area.
Grantees may also use the national objective of meeting community development needs having a particular urgency if they have experienced a disaster such as a tornado or flood. After a disaster, an area that was not previously deteriorated may become so if the effects of the disasters are not fully addressed because of a shortage of funds, and areas that were deteriorating before the disaster may further deteriorate. CDBG funds may be used for code enforcement in these areas to ensure the health and safety of grantees' residents.
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Code Enforcement |
Can CDBG funds be used to conduct code enforcement in any area where at least 51 percent of the residents are low- and moderate-income persons?
To be an eligible area for carrying out CDBG-assisted code enforcement, the area must be deteriorated/deteriorating in accordance with state/local law. Even if an area contains 51 percent low- and moderate-income persons, if it does not contain areas that meet a definition of deteriorated/deteriorating, then CDBG funds may not be used to conduct code enforcement in those areas. On the other hand, an area that is less than 51 percent low-and moder...
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To be an eligible area for carrying out CDBG-assisted code enforcement, the area must be deteriorated/deteriorating in accordance with state/local law. Even if an area contains 51 percent low- and moderate-income persons, if it does not contain areas that meet a definition of deteriorated/deteriorating, then CDBG funds may not be used to conduct code enforcement in those areas. On the other hand, an area that is less than 51 percent low-and moderate-income might meet the grantee's definition of a deteriorated area, and thus be an eligible area in which to conduct CDBG-assisted code enforcement. A deteriorating/deteriorated area that is not primarily residential (such as an industrial area) could also be an area where code enforcement activities could be paid for with CDBG funds. However, in both of these latter examples, the grantee could not meet the low-and moderate-income area benefit national objective criteria –because eligible areas must be both primarily residential and 51 percent or more low- and moderate-income. Grantees may be able to comply with one of the other national objectives.
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Code Enforcement |
What is considered a deteriorated/deteriorating area for CDBG program purposes?
The term is not defined in the statute or regulations governing the CDBG program. The CDBG program gives grantees the flexibility and latitude to use their own definitions and criteria when defining deteriorated/deteriorating. The grantee may use its state/local law definition of deteriorated/deteriorating or use the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating. The definition should have criteria ...
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The term is not defined in the statute or regulations governing the CDBG program. The CDBG program gives grantees the flexibility and latitude to use their own definitions and criteria when defining deteriorated/deteriorating. The grantee may use its state/local law definition of deteriorated/deteriorating or use the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating. The definition should have criteria that addresses the physical conditions of buildings/structures or will be considered insufficient. Grantees are required to have written documentation that defines deteriorated/deteriorating and how they determined that areas were designated as deteriorated/deteriorating.
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Code Enforcement |
Does HUD specify what (or how many) other activities the grantee must also carry out in eligible deteriorated/deteriorating areas in conjunction with CDBG-assisted code enforcement? Must those other activities be funded with CDBG?
While HUD does not specify what activities or how many other activities the grantees must carry out when conducting CDBG-assisted code enforcement, the regulations require code enforcement to be performed in conjunction with improvements, rehabilitation, or services. The Entitlement CDBG regulations at 24 CFR 570.202(c) state that code enforcement may be carried out with CDBG funds "...when such enforcement together with public or private improve...
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While HUD does not specify what activities or how many other activities the grantees must carry out when conducting CDBG-assisted code enforcement, the regulations require code enforcement to be performed in conjunction with improvements, rehabilitation, or services. The Entitlement CDBG regulations at 24 CFR 570.202(c) state that code enforcement may be carried out with CDBG funds "...when such enforcement together with public or private improvements, rehabilitation, or services to be provided may be expected to arrest the decline of the area." Grantees have the discretion to decide which CDBG-assisted activities they will fund, and HUD does not have the authority to direct the grantees to carry out certain activities.
Grantees do not have to use CDBG funds for activities that will correct code violations such as rehabilitation of housing, public facilities, or commercial facilities. Correcting the code violations is the responsibility of the property owner. However, if grantees decide to use CDBG funds to assist property owners to have necessary rehabilitation performed, they must ensure that a national objective is met.
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Code Enforcement |
Must grantees have written strategies and plans in place to address code violations before using CDBG funds for code enforcement?
No. There is no regulatory or statutory requirement for grantees to have written strategies and plans in place to address code violations before carrying out CDBG-assisted code enforcement. However, having a written strategy in place may help a grantee ensure that it complies with all program requirements, by spelling out the definition of deteriorated to be used, how the grantee will identify eligible areas and their boundaries, what other progr...
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No. There is no regulatory or statutory requirement for grantees to have written strategies and plans in place to address code violations before carrying out CDBG-assisted code enforcement. However, having a written strategy in place may help a grantee ensure that it complies with all program requirements, by spelling out the definition of deteriorated to be used, how the grantee will identify eligible areas and their boundaries, what other programs/resources will be provided to arrest the decline, how the grantee will measure effectiveness of the program, and how often the grantee will evaluate the program to determine whether continued CDBG assistance is appropriate in a given area, etc.
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Code Enforcement |
Are grantees required to assist property owners in addressing the code violations discovered during a CDBG-assisted code enforcement inspection?
No. There is no regulatory or statutory requirement for grantees to assist property owners with addressing code violations discovered during CDBG-assisted code enforcement inspections. The property owners are responsible for addressing the code violations and may request assistance from grantees to do so via the CDBG program or local government programs. Grantees have the discretion to determine what CDBG-assisted activities they will fund, and H...
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No. There is no regulatory or statutory requirement for grantees to assist property owners with addressing code violations discovered during CDBG-assisted code enforcement inspections. The property owners are responsible for addressing the code violations and may request assistance from grantees to do so via the CDBG program or local government programs. Grantees have the discretion to determine what CDBG-assisted activities they will fund, and HUD cannot force grantees to carry out a particular activity or provide assistance to a particular person or organization.
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Code Enforcement |
If CDBG funds will be used to carry out the improvements needed to address code violations, can those improvements be carried out under the code enforcement eligible activity at 24 CFR 570.202(c)?
No. The necessary improvements may be eligible under a different eligibility category, depending on the type of structure and the activity to be carried out. Improvements to a housing structure would be eligible at 24 CFR 570.202(a) or Section 105(a)(4) of the Housing and Community Development Act of 1974 (HCDA), as amended, if the low- and moderate-income housing national objective can be met. Improvements to a facility such as a recreation cent...
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No. The necessary improvements may be eligible under a different eligibility category, depending on the type of structure and the activity to be carried out. Improvements to a housing structure would be eligible at 24 CFR 570.202(a) or Section 105(a)(4) of the Housing and Community Development Act of 1974 (HCDA), as amended, if the low- and moderate-income housing national objective can be met. Improvements to a facility such as a recreation center or homeless shelter would be eligible at 24 CFR 570.201(c) or Section 105(a)(2) of the HCDA, provided a national objective is met. Rehabilitation of commercial buildings may be eligible under 24 CFR 570.202(a), 570.203(a) or (b) and Section 105(a)(14) of the HCDA. Demolition of buildings may be eligible under 24 CFR 570.201(d) and Section 105(a)(4) of the HCDA. Improvements may also be paid for with private funds or other funding sources such as general funds.
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Code Enforcement |
Can CDBG funds be used to enforce codes relating to junk cars parked on streets, un-mowed lawns, graffiti on fences, flyers posted on telephone poles, etc.?
HUD would look askance at using CDBG funds to enforce local codes that deal only with such nuisances, without also addressing the physical conditions of buildings. HUD recognizes that issues like unkempt yards, accumulation of debris or junk cars, etc., can further contribute to the deteriorated appearance of a neighborhood. HUD also recognizes that local codes may be written to address a broader spectrum of local health, safety and appearance is...
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HUD would look askance at using CDBG funds to enforce local codes that deal only with such nuisances, without also addressing the physical conditions of buildings. HUD recognizes that issues like unkempt yards, accumulation of debris or junk cars, etc., can further contribute to the deteriorated appearance of a neighborhood. HUD also recognizes that local codes may be written to address a broader spectrum of local health, safety and appearance issues than just building conditions. However, statutory and regulatory language require that code enforcement must be carried out in "deteriorated or deteriorating areas" in conjunction with "public or private improvements, rehabilitation or services". These phrases imply a focus on physical conditions of buildings of buildings or other improvements, and actions to make physical improvements in the area. Grantees that use CDBG funds to enforce codes relating to visual or nuisance issues, without also conducting building code enforcement, may find it difficult to demonstrate how the activity is eligible.
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Code Enforcement |
Can CDBG funds be used to pay the salaries of code enforcement inspectors that conduct inspections city- or county-wide?
It depends. CDBG funds may only be used to pay the salaries for code enforcement inspectors for the time spent conducting inspections in areas that meet the state/local law definition of deteriorated/deteriorating or use the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating. It is very unlikely that an entire city or county would be designated as deteriorated/deteriorating. In order to conduct CDBG-assi...
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It depends. CDBG funds may only be used to pay the salaries for code enforcement inspectors for the time spent conducting inspections in areas that meet the state/local law definition of deteriorated/deteriorating or use the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating. It is very unlikely that an entire city or county would be designated as deteriorated/deteriorating. In order to conduct CDBG-assisted code enforcement inspections city- or county-wide, a city or county must have documentation in its files that demonstrates that its entire jurisdiction meets the state/local definition of deteriorated/deteriorating. Absent that determination, CDBG-assisted code enforcement activities cannot be carried out city- or county-wide.
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Code Enforcement |
Here is an example to help illustrate the question in FAQ 3638: If Grantee X's total code enforcement division budget is $5 million, and the grantee can show that 40 percent of all code enforcement inspections were performed in CDBG-eligible neighborhoods, can the grantee charge $2 million to the CDBG program?
No, unless the entire city or county meets a state/local definition of deteriorated/deteriorating or the city or county uses the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating, and the entire city/county can qualify as meeting one of three national objectives. Code enforcement activities are CDBG-eligible if carried out in areas that meet a state/local definition of deteriorated/deteriorating, but if...
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No, unless the entire city or county meets a state/local definition of deteriorated/deteriorating or the city or county uses the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating, and the entire city/county can qualify as meeting one of three national objectives. Code enforcement activities are CDBG-eligible if carried out in areas that meet a state/local definition of deteriorated/deteriorating, but if the grantee does not meet a national objective, the costs are not CDBG allowable. For salaries of code enforcement staff to be eligible CDBG costs, a grantee must either have records showing that the staff paid with CDBG funds worked exclusively on CDBG-eligible code enforcement inspections or must have time records showing that CDBG funds paid only for time spent on CDBG-eligible code enforcement. See the last question below and 24 CFR 570.506 for further information about recordkeeping requirements regarding code enforcement activities.
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Code Enforcement |
What are the additional requirements if grantees want to use CDBG funds to pay for coveralls and hand-held electronic devices to be used in its code enforcement activities?
Grantees may only use CDBG funds to purchase uniforms and/or coveralls if they are a job requirement for code enforcement inspectors and a regular jurisdiction-incurred expense. Coveralls and hand-held electronic devices may only be used by code enforcement inspectors when they are conducting CDBG-eligible code enforcement inspections. The items cannot be purchased with CDBG funds and used by code enforcement inspectors for code enforcement inspe...
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Grantees may only use CDBG funds to purchase uniforms and/or coveralls if they are a job requirement for code enforcement inspectors and a regular jurisdiction-incurred expense. Coveralls and hand-held electronic devices may only be used by code enforcement inspectors when they are conducting CDBG-eligible code enforcement inspections. The items cannot be purchased with CDBG funds and used by code enforcement inspectors for code enforcement inspections jurisdiction-wide or for such inspections in non-deteriorated/deteriorating areas. If grantees use CDBG funds to purchase these items, their use is limited to use in CDBG-eligible areas. A log should be maintained regarding the use of equipment such as tablets that shows when they were used and in what areas they were used (e.g., 9000 block of Main Street, located in an area designated as deteriorated/deteriorating).
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Code Enforcement |
What requirements, if any, pertain to the use of CDBG funds for legal proceedings for CDBG-assisted code enforcement violations?
Legal proceedings costs such as the salaries of hearing officers and attorneys may only be paid with CDBG funds to address issues raised by the code enforcement inspections that were CDBG-assisted. Hearings are scheduled to ensure that property owners receive due process if they challenge the citation or fine assessed. CDBG funds may be used to pay the costs of the hearing. For example, the salaries of the hearing officers may be paid with CDBG f...
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Legal proceedings costs such as the salaries of hearing officers and attorneys may only be paid with CDBG funds to address issues raised by the code enforcement inspections that were CDBG-assisted. Hearings are scheduled to ensure that property owners receive due process if they challenge the citation or fine assessed. CDBG funds may be used to pay the costs of the hearing. For example, the salaries of the hearing officers may be paid with CDBG funds proportionate to the time they spend hearing and deciding the appeals from code enforcement citations or fines resulting from CDBG-assisted code inspections and enforcement expenses. If grantees pay legal fees to an attorney as part of the proceedings, they may use CDBG funds to pay the legal fees allocable to CDBG-assisted code enforcement. Note that a defendant's legal costs are not eligible costs.
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Code Enforcement |
Are there other staff and incidental costs of code enforcement that may be paid with CDBG funds?
Yes. The staff costs associated with processing and issuing the citations, collecting and processing the fines, and postage are all eligible activity delivery costs of CDBG-assisted code enforcement. Staff may include a clerk or another staff member that performs these activities. However, CDBG funds may only be used to pay staff costs for the time spent on these activities pertaining to CDBG-assisted code enforcement. Records must be kept to sho...
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Yes. The staff costs associated with processing and issuing the citations, collecting and processing the fines, and postage are all eligible activity delivery costs of CDBG-assisted code enforcement. Staff may include a clerk or another staff member that performs these activities. However, CDBG funds may only be used to pay staff costs for the time spent on these activities pertaining to CDBG-assisted code enforcement. Records must be kept to show the percentage of time spent on CDBG-assisted code enforcement and non-CDBG-assisted code enforcement.
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Code Enforcement |
Vehicles are often used by code enforcement inspectors for transportation from one site to another. May CDBG funds be used to pay for that vehicle?
The regulation at 24 CFR 570.207(b)(1) states that purchase of equipment with CDBG funds is generally ineligible. CDBG funds may be used to lease vehicles. In addition, 24 CFR 570.207(b)(1)((iii) states that CDBG funds may be used to purchase or pay depreciation in accordance with 2 CFR part 200, subpart E. Depreciation costs may be paid in accordance with 2 CFR 200.436 proportionate to the amount of time the vehicle is used for CDBG-assisted cod...
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The regulation at 24 CFR 570.207(b)(1) states that purchase of equipment with CDBG funds is generally ineligible. CDBG funds may be used to lease vehicles. In addition, 24 CFR 570.207(b)(1)((iii) states that CDBG funds may be used to purchase or pay depreciation in accordance with 2 CFR part 200, subpart E. Depreciation costs may be paid in accordance with 2 CFR 200.436 proportionate to the amount of time the vehicle is used for CDBG-assisted code enforcement.
The entire cost can be paid for with CDBG only if the vehicle is used exclusively for CDBG-eligible code enforcement inspections. However, it may be difficult to show that a given vehicle is used exclusively in one or more deteriorated areas, consistent with CDBG requirements, or exclusively by staff whose entire salaries are paid for with CDBG funds because they perform only CDBG-eligible code enforcement inspections. On the other hand, if a grantee has records showing how much time/miles a vehicle is used for CDBG-eligible code enforcement inspections, it can charge a proportion of the total lease or use to CDBG. Or, if code enforcement staff make use of cars in a municipal fleet or motor pool, without having vehicles devoted exclusively to code enforcement, use allowances may be recovered via a cost allocation plan. The use allowance is an eligible activity delivery cost [see 24 CFR 570.207(b)(1)(iii)].
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Code Enforcement |
Are code violation fines collected considered CDBG program income?
No because these funds do not meet the definition of program income as defined at 24 CFR 570.500(a). Rather, the fines should be treated as applicable credits or general revenue. Applicable credits are receipts or reductions of expenditure type transactions that offset or reduce expense items allocable to Federal awards. Applicable credits shall be credited to the Federal award (in this case, CDBG funds) either as a cost reduction or cash refund,...
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No because these funds do not meet the definition of program income as defined at 24 CFR 570.500(a). Rather, the fines should be treated as applicable credits or general revenue. Applicable credits are receipts or reductions of expenditure type transactions that offset or reduce expense items allocable to Federal awards. Applicable credits shall be credited to the Federal award (in this case, CDBG funds) either as a cost reduction or cash refund, as appropriate. There are two instances that must be met for code enforcement fines to be considered applicable credits:
- The cost of the inspections for code violations and enforcement of codes, which may include the inspectors' salaries, must have been wholly or partially paid for with CDBG funds, and
- The intended purpose of the code enforcement fine, as reflected in local law, handbook, manual, etc., is to recover the costs incurred for the code enforcement activities without regard to the source of funds for payment of the code enforcement activity.
To be considered general revenue,
- The purpose of the fine cannot be to recover the cost of the code inspections and enforcement;
- The costs of carrying out the code inspections and enforcement were not paid with CDBG funds; or
- The amount of the fine exceeds the costs paid with CDBG funds.
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Code Enforcement |
What records must grantees keep in their files to show that the CDBG-assisted code enforcement meets all CDBG program requirements?
At a minimum, grantees' files must contain: The definition of deteriorated/deteriorating used by grantees. If the state/local law definition of deteriorated/deteriorating is used, a copy of the definition with the citation should be included. A description of the conditions of the areas in which CDBG funds are used for code enforcement, demonstrating that these areas meet the state local law definition of deteriorated/deteriorating or mee...
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At a minimum, grantees' files must contain:
- The definition of deteriorated/deteriorating used by grantees. If the state/local law definition of deteriorated/deteriorating is used, a copy of the definition with the citation should be included.
- A description of the conditions of the areas in which CDBG funds are used for code enforcement, demonstrating that these areas meet the state local law definition of deteriorated/deteriorating or meet the criteria at 24 CFR 570.208(b)(1) or 24 CFR 570.483(c)(1) to define deteriorated/deteriorating.
- Salary records (salaries, benefits, timesheets) of code enforcement inspectors being paid with CDBG funds and a description of all areas they are responsible for inspecting. The timesheets should be supported by documentation showing that the inspections were performed on buildings located in designated deteriorated areas.
- Documentation such as inspection logs that show the amount of time inspectors performed inspections within the designated deteriorated areas.
- Salary records (salaries, benefits, timesheets) for employees that process and issue citations and collect and process fines.
- Invoices for the purchase of necessary equipment (e.g., tablets, coveralls, vehicle lease payments, etc.) and use logs.
- Costs for legal proceedings such as salaries of hearing officers and attorneys (salaries and timesheets).
- If the low/moderate income area benefit national objective criterion is used, the boundaries of the areas in which CDBG funds are used for code enforcement and the low/moderate income summary data or local survey data that demonstrate compliance with this national objective.
- If the slum/blight area national objective criterion is used, the grantee's delineation of the areas inspected as slum/blighted under state or local law; when the determination was made; a determination that a minimum of 25 percent of the buildings in the delineated area have either physical deterioration, property abandonment, chronic high occupancy turnover rates, and/or significant declines in property values or abnormally low property values relative to other areas in the community; and documentation of known or suspected environmental contamination.
- If the slum/blight urban renewal national objective criterion is used, the Urban Renewal Plan in effect at the time of closeout of Federal financial assistance under the Housing Act of 1949 or financial settlement under Section 112 of the HCDA, documentation that the urban renewal plan is incomplete, and a description of how the code enforcement inspections and enforcement were needed to complete the plan for the area.
- If the urgent need national objective is used, for entitlement grantees, a certification that the buildings inspected posed a serious and immediate threat to the health and welfare of the community, the disastrous occurrence was of recent origin (18 months before the grantee's certification, and that no other funding resources were available to assist the activity [24 CFR 570.208(c)]. For the State CDBG program, the unit of general local government makes the certification, and the State determines, that the criterion above was met. See 24 CFR 570.483(d).
- Identification of other activities to be carried out (whether CDBG-assisted or not) that will arrest the decline of the areas and their funding sources.
- Compliance with the procurement standards at 2 CFR 200.318-200.326 when equipment and services are procured.
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Code Enforcement |
Can CDBG funds be used to pay training costs for code enforcement inspectors?
Yes. CDBG funds may be used to pay for training costs so that code enforcement inspectors are kept up-to-date on changes in the code enforcement industry and maintain their professional credentials. Such costs are eligible under 24 CFR 570.202(c) and are considered activity delivery costs. However, note that the cost of obtaining a license is the responsibility of the employer and not an eligible CDBG expense.
Code Enforcement
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Code Enforcement |
How long is an area considered SBA eligible?
Under 570.208(b)(1)(iii), the designation of an area as slum or blighted under the Slum Blight Area (SBA) national objective is required to be reevaluated every ten (10) years for it to remain qualified. The requirements for meeting this national objective are under 570.208(b)(1).
Code Enforcement
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Code Enforcement |
I’m doing code enforcement on housing so why can’t it be eligible under LMH?
Under 570.208(a)(3) an activity is eligible only if it is carried out for the purpose of providing or improving permanent residential structures which, upon completion, will be occupied by low and moderate income households. Code enforcement as an activity does not provide such a direct benefit to the household. It is the correction of the code violation, such as rehabilitation, that directly benefits the household and would be eligible under the...
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Under 570.208(a)(3) an activity is eligible only if it is carried out for the purpose of providing or improving permanent residential structures which, upon completion, will be occupied by low and moderate income households. Code enforcement as an activity does not provide such a direct benefit to the household. It is the correction of the code violation, such as rehabilitation, that directly benefits the household and would be eligible under the Low and Moderate Income Housing (LMH) national objective.
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Code Enforcement |
When do I need to make sure the overall income benefit is documented?
Each grantee certifies over a specified period of time (one (1), two (2), or three (3) years), a minimum of 70% of CDBG funds shall be expended for activities benefitting low to moderate income persons. Code enforcement may count toward the overall benefit requirement if the national objective of low and moderate area (LMA) is used. When code enforcement activities are undertaken under the slum and blight area (SBA) or urgent need national object...
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Each grantee certifies over a specified period of time (one (1), two (2), or three (3) years), a minimum of 70% of CDBG funds shall be expended for activities benefitting low to moderate income persons. Code enforcement may count toward the overall benefit requirement if the national objective of low and moderate area (LMA) is used. When code enforcement activities are undertaken under the slum and blight area (SBA) or urgent need national objectives, these activities will not count toward the minimum 70% requirement.
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Code Enforcement |
There is one particularly large building in the center of a neighborhood that has become an eyesore. Can we use CDBG to conduct code enforcement on it?
Yes. As long as the building is within the designated deteriorated or deteriorating area and the code enforcement is performed in conjunction with planned improvements, rehabilitation, or services to the area.
Code Enforcement
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Code Enforcement |
Can we do code enforcement on commercial and industrial buildings? What about vacant lots?
Code enforcement and inspections may take place in primarily residential areas and will allow enforcement activities for commercial and industrial buildings, as well as vacant land within the designated deteriorated or deteriorating area as long as the activity is able to meet the low to moderate income area (LMA) national objective and code enforcement is performed in conjunction with planned improvements, rehabilitation, or services to the area...
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Code enforcement and inspections may take place in primarily residential areas and will allow enforcement activities for commercial and industrial buildings, as well as vacant land within the designated deteriorated or deteriorating area as long as the activity is able to meet the low to moderate income area (LMA) national objective and code enforcement is performed in conjunction with planned improvements, rehabilitation, or services to the area.
The focus of CDBG-assisted code enforcement and inspections is on buildings. Additional efforts to address violations concerning vacant lots, signs, and motor vehicles are allowed in conjunction with efforts regarding buildings and should form a minor part of a CDBG-assisted code enforcement program.
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Code Enforcement |
Can the code enforcement activity be used to pay for a neighborhood cleanup?
Under 570.202(c) a neighborhood cleanup would not be eligible as a code enforcement activity. This activity may be CDBG eligible as an improvement or service to the community if undertaken by a non-profit as a public service under 570.201(e).
Code Enforcement
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Code Enforcement |
Can I use the code enforcement activity to help low income homeowners correct their code violations?
Under 570.202(c) the costs of correcting the code violations are not eligible. The eligible activity of rehabilitation (570.202(a) and (b) and Section 105(a) (4)), however, can be used to correct code violations.
Code Enforcement
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Code Enforcement |
A hurricane caused a great deal of damage in our community but not enough to receive a Presidential declaration.Can I still consider this an urgent need?
Code enforcement may meet the urgent need national objective if the grantee is able to certify the following: The buildings inspected pose a serious and immediate threat to the health and welfare of the community. The disastrous occurrence is of a recent origin (within 18 months before the grantee’s certification), or the disastrous occurrence recently became urgent. The grantee is unable to finance the activity on its own and no other f...
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Code enforcement may meet the urgent need national objective if the grantee is able to certify the following:
- The buildings inspected pose a serious and immediate threat to the health and welfare of the community.
- The disastrous occurrence is of a recent origin (within 18 months before the grantee’s certification), or the disastrous occurrence recently became urgent.
- The grantee is unable to finance the activity on its own and no other funding resources are available.
For states, the unit of general local government must certify the requirements above and the state must make the final determination of eligibility under the urgent need national objective.
If CDBG-Disaster Recovery funds are used, contact your Field Office for further direction. The requirements to document urgent need may differ and may depend on the requirements that apply to the specific appropriation of disaster recovery funds involved.
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Code Enforcement |
My county inspection staff went to a training and came back saying CDBG was eligible to pay their salaries and operating costs. Is this true?
The salaries and expenses of the county inspection staff may be eligible costs if they are carrying out code enforcement and inspections in CDBG-eligible areas. As the grantee you must be able to document CDBG funds are not being used for general government expenses and instead can be directly associated with code enforcement in primarily residential deteriorated or deteriorating areas where the enforcement, together with public or private improv...
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The salaries and expenses of the county inspection staff may be eligible costs if they are carrying out code enforcement and inspections in CDBG-eligible areas. As the grantee you must be able to document CDBG funds are not being used for general government expenses and instead can be directly associated with code enforcement in primarily residential deteriorated or deteriorating areas where the enforcement, together with public or private improvements or services may be expected to arrest the decline of an area. Eligible costs under 570.202(c) and 105(a)(3) include the following:
- The cost of conducting code enforcement inspections including salaries.
- Related expenses of code enforcement inspectors, such as equipment, uniforms, and vehicles.
- The cost of the legal proceedings that result from the code enforcement inspections, including staff costs associated with processing and issuing the citations, collecting and processing the fines, postage, and the cost of the hearing, including the salary costs of the hearing officers and associated legal fees.
The costs of these items should be appropriately documented and allocated by the percentage of time they are used for inspections and legal proceedings carried out for CDBG purposes in CDBG-eligible areas and for non-CDBG purposes. Additionally, the use of CDBG funds should also not be excessive in relation to the community’s overall enforcement program.
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Code Enforcement |
When can I use CDBG funds for code enforcement?
Under 570.202(c) code enforcement must be undertaken in conjunction with improvements, rehabilitation, or services with the purpose of ensuring the deteriorated or deteriorating areas are not detrimental to public health and safety. Code enforcement activity may take place in residential, commercial, or industrial areas.
Code Enforcement
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Code Enforcement |
What is HUD’s definition of code enforcement?
For Entitlements, HUD’s definition of code enforcement can be found under 24 CFR 570.202(c). The definition is stated as: Costs incurred for inspection for code violations and enforcement of codes (e.g. salaries and related expenses of code enforcement inspectors and legal proceedings, but not including the cost of correcting the violations) in deteriorating or deteriorated areas when such enforcement together with planned public or private imp...
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For Entitlements, HUD’s definition of code enforcement can be found under 24 CFR 570.202(c). The definition is stated as: Costs incurred for inspection for code violations and enforcement of codes (e.g. salaries and related expenses of code enforcement inspectors and legal proceedings, but not including the cost of correcting the violations) in deteriorating or deteriorated areas when such enforcement together with planned public or private improvements, rehabilitation, or services to be provided may be expected to arrest the decline of the area.
For States the definition is found under Section 105(a)(3) of the HCDA and is stated as: the use of CDBG funds for code enforcement in deteriorated or deteriorating areas in which such enforcement, together with the public or private improvements or services to be provided, may be expected to arrest the decline of the area.
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Consolidated Plan |
What if an entitlement does not want to administer its CDBG program, what are the options?
The entitlement city of Apple (the city) does not want to administer its Community Development Block Grant (CDBG) program. It is not sure how to proceed. What are the options available to Apple? The entitlement city may contract with a nearby unit of government (city, town, county, state agency, council of governments, etc.) to run its CDBG program on its behalf. The city may also contract with another unit of government to run specific component...
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The entitlement city of Apple (the city) does not want to administer its Community Development Block Grant (CDBG) program. It is not sure how to proceed. What are the options available to Apple?
The entitlement city may contract with a nearby unit of government (city, town, county, state agency, council of governments, etc.) to run its CDBG program on its behalf. The city may also contract with another unit of government to run specific components of its CDBG program such as its housing rehabilitation programs. If the city chooses one of these options, it does not have to procure the unit of local government; it may just select one (subject to state and local law). There still must be a written contract or agreement, and Apple still must oversee the other entity's performance under the contract. Apple is still the grantee. As such, it must submit the Consolidated Plan and Action Plan, its chief official must sign and submit the certifications, and city staff must approve all IDIS drawdowns.
However, if Apple is located within a county that is a CDBG urban county, it has additional options:
- The city may contract with the urban county to administer its CDBG program;
- The city may remain an entitlement and enter into a joint agreement with the urban county during its year of requalification; or
- The city may relinquish its entitlement status and join the urban county during any year of its qualification period.
Finally, the city may also relinquish its status and participate in the State CDBG program, whether or not it is located within an urban county.
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Consolidated Plan |
What are the types of agreements that the entitlement city in FAQ 3540 would have to enter with other entitlement cities/towns and urban counties?
If the city is entering into an agreement with another entitlement to administer its CDBG program, it may enter into a Memorandum of Understanding, subrecipient agreement, or interlocal agreement that details the scope of work, budget, timeframe, etc. While not required by 2 CFR Part 200 regulations, the city could formally procure the services of the other jurisdiction(s). Apple must still have a written agreement and must still oversee the othe...
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If the city is entering into an agreement with another entitlement to administer its CDBG program, it may enter into a Memorandum of Understanding, subrecipient agreement, or interlocal agreement that details the scope of work, budget, timeframe, etc. While not required by 2 CFR Part 200 regulations, the city could formally procure the services of the other jurisdiction(s). Apple must still have a written agreement and must still oversee the other entity's performance under the contract.
If retaining its entitlement status, the city would enter a joint agreement with the urban county during the county's year of requalification. The county would receive its CDBG grant and the city's CDBG grant and is entitled to 20 percent of the city's grant for administering its program. The county would consult with the city on activities it wants the county to carry out on its behalf.
If relinquishing its entitlement status, the city would enter a cooperation agreement with the urban county. The city must remain with the urban county for the entire three-year qualification period (or the remainder thereof). When the urban county is requalifying, the city may then choose to opt out of the county and reclaim its entitlement status or remain with the county for the next three-year qualification period. Urban counties may have cooperation agreements that are automatically renewed.
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Consolidated Plan |
If the city decides to have Entitlement B administer its CDBG program, is there a limit on how long such an agreement can be in effect?
No. There is no limit on how long an MOU or contract between Entitlement B and the city can be.
Consolidated Plan
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Consolidated Plan |
If the city decides to enter a joint agreement with the urban county or join the county as a participating unit of general local government via a cooperation agreement, is there a limit on how long those agreements can be in effect?
Yes and no. For joint agreements and cooperation agreements, there can be an renewable clause therein stating the agreements automatically renew. This is unless the city notifies the urban county during its year of requalification it no longer wants to have a joint agreement with the county or opts out of the county as a participant in its CDBG program. Note that the city may opt out of the urban county or terminate its joint agreement only durin...
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Yes and no. For joint agreements and cooperation agreements, there can be an renewable clause therein stating the agreements automatically renew. This is unless the city notifies the urban county during its year of requalification it no longer wants to have a joint agreement with the county or opts out of the county as a participant in its CDBG program. Note that the city may opt out of the urban county or terminate its joint agreement only during the county's year of requalification. Once the city joins the urban county or enters into a joint agreement, that agreement remains in effect for the duration of the county's three-year qualification period.
For additional information, also see the FAQs on Urban Counties and on Joint Agreements vs. Cooperation Agreements.
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Consolidated Plan |
What certifications are required upon submission of the Consolidated Plan (Con Plan) or annual action plan?
The consolidated plan certifications required by a jurisdiction can be found at §91.225 (local governments), §91.325 (States) and §91.425 (HOME Consortia). The specific certifications required are determined by whether a jurisdiction is a member of a HOME consortia, a state entity or a local government. The following chart highlights the general certifications required by each type of jurisdiction. General Certification Local Jurisdiction ...
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The consolidated plan certifications required by a jurisdiction can be found at §91.225 (local governments), §91.325 (States) and §91.425 (HOME Consortia). The specific certifications required are determined by whether a jurisdiction is a member of a HOME consortia, a state entity or a local government. The following chart highlights the general certifications required by each type of jurisdiction.
General Certification |
Local Jurisdiction |
State |
HOME Consortium |
Affirmatively Furthering Fair Housing |
X |
X |
X |
Anti-Displacement and Relocation Plan |
X |
X |
X |
Anti-Lobbying |
X |
X |
X |
Authority of consortium |
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X |
Authority of jurisdiction |
X |
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Authority of state |
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X |
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Consistency with Plan |
X |
X |
X |
Acquisition and Relocation |
X |
X |
X |
Section 3 |
X |
X |
X |
Program-specific certifications are also required. The following chart highlights the required program-specific information that should be contained in each certification by funding source.
CDBG Certification |
ESG Certification |
HOME Certification |
HOPWA Certification |
- Citizen participation
- Consultation with local governments
- Community development plan
- Use of funds
- Compliance with anti-discrimination
- Excessive force
- Compliance with laws
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- Rehab/conversion - 10-yr/3-yr min period of use
- Not less than 3 years
- Limits for shelter for street outreach
- Renovation will result in safe and sanitary buildings
- Recipients will assist in obtaining permanent housing and supportive services
- Match requirements
- Confidentiality
- Involvement of homeless individuals and families
- Consistency with con plan
- Discharge policy
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- TBRA is consistent with plan
- Use for eligible activities
- PJ will evaluate HOME assisted projects for appropriate financial assistance
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- Certification of consistency from the authorized public officials for each other locality in the EMSA where housing assistance is provided
- Activities funded under the program will meet urgent needs not being met by public and private sources
- Any building or structure assisted under that program shall be operated for the purpose specified in the plan
- For 10-year period involving new construction, substantial rehabilitation, or acquisition
- Three-years in the case of assistance involving non-substantial rehab or repair of the building or structure
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Consolidated Plan |
Is it OK if the Consolidated Plan General Certification combines the acquisition/relocation and the anti-displacement and relocation certifications into one document?
Yes. However, grantees should note even though each certification requirement is combined in a single certification document, they are still separate regulations and HUD will review them as separate items.
Consolidated Plan
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Consolidated Plan |
Are original signatures required on the Consolidated Plan certifications and SF-424s?
Yes. HUD still requires original ink signatures on all certifications and SF-424s. Grantees must submit all original executed certification to HUD directly.
Consolidated Plan
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Consolidated Plan |
Will HUD accept electronic signatures on the SF-424 and certifications?
No. HUD will not accept electronic signatures on certifications and SF-424s. HUD still requires original ink signatures on all certifications and SF-424s.
Consolidated Plan
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Consolidated Plan |
Can Consolidated Plan Certifications be attached to the plan and sent in through the e-Con Planning Suite?
No. A grantee must submit all original executed certifications to HUD directly. This is because HUD requires original signatures on all certifications and SF-424 documents. Scanned copies of signed certifications can be attached in the AD-25 screen of the e-Con Planning Suite for informational purposes only and are not considered to be official submissions.
Consolidated Plan
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Consolidated Plan |
Can HUD reject my Consolidated Plan because it is missing certifications?
Yes. The regulations at 24 CFR 91.500(b) state that HUD may disapprove a plan as substantially incomplete due to missing certifications.
Consolidated Plan
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Consolidated Plan |
When is the Consolidated Plan considered to be officially submitted?
A Consolidated Plan is considered officially submitted when the HUD field office receives 1) all executed original SF-424s; 2) all required executed original certifications; and 3) the email notification that the Con Plan or annual action plan has been submitted in IDIS. HUD's 45-day review period begins when the last item is received by the field office. This could include the executed original SF-424s, the required executed original certificat...
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A Consolidated Plan is considered officially submitted when the HUD field office receives 1) all executed original SF-424s; 2) all required executed original certifications; and 3) the email notification that the Con Plan or annual action plan has been submitted in IDIS.
HUD's 45-day review period begins when the last item is received by the field office. This could include the executed original SF-424s, the required executed original certifications or when the con plan or annual action plan has been submitted in IDIS, whichever occurs last.
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Consolidated Plan |
Which version of the Application for Federal Assistance, also known as the SF-424 form, should I use?
The most updated version of the Application for Federal Assistance, or SF-424 form, may be found at www.grants.gov. Select the Forms tab then select the SF-424 Family version. The most recent SF-424 form will be found near the top of the list of forms, OMB #4040-0004.
Consolidated Plan
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Consolidated Plan |
Should an SF-424 form be submitted for each grant?
Yes. Grantees should submit one original executed SF-424 Form for each CPD grant the jurisdiction receives (CDBG, ESG, HOME, HOPWA, HTF).
Consolidated Plan
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Consolidated Plan |
Where can I find instructions on how to complete the SF-424 Form?
Instructions on how to complete the SF-424 form can be found at www.grants.gov. Select the Forms tab; then select Form Instructions. Click on SF-424 Instructions. Instructions to complete the SF-424 form are provided.
Consolidated Plan
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Consolidated Plan |
What is the Applicant Identifier on the SF-424 Form?
The Applicant Identifier (Item 4) is the number assigned by HUD to the grantee for the grant program. For example, B-12-DN-03-0014 is considered as an applicant identifier.
Consolidated Plan
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Consolidated Plan |
Where do I find the most recent version of the certifications?
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Cost Reasonableness |
What is the eligible use of CDBG funds for costs associated with staff who are on leave due to the closure of the grantee or subrecipient's office, and the costs of the grantee or subrecipient's unused or partially utilized space in response to COVID-19?
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Cost Reasonableness |
When completing the SF-425 line 10a Cash Receipts should I include the total amount of funds received through IDIS drawdowns for the reporting period, including both EN and AD fund types? Or should I only include EN funds?
Notice CPD-12-012: Submission of Federal Financial Report Standard Form 425 provides guidance for the Entitlement Communities, Insular Areas, and Non-Entitlement Counties in Hawaii under the Community Development Block Grant (CDBG) program on the submission of the Federal Financial Report. The amount of funds received through IDIS drawdowns from the beginning of the reporting period through the end date of the reporting period plus the cash on ha...
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Notice CPD-12-012: Submission of Federal Financial Report Standard Form 425 provides guidance for the Entitlement Communities, Insular Areas, and Non-Entitlement Counties in Hawaii under the Community Development Block Grant (CDBG) program on the submission of the Federal Financial Report. The amount of funds received through IDIS drawdowns from the beginning of the reporting period through the end date of the reporting period plus the cash on hand at the beginning of the reporting period should be entered in line number 10a. This amount includes funds received (both fund types, EN and AD) for all CDBG activities including planning and administration. We recommend you use the IDIS PR07 report to calculate total cash receipts for the quarter plus prior quarters since the inception of the CDBG award. When running the PR07, be sure to select the report that reads Vouchers Submitted to LOCCS. You can enter a date range for the period. Review the IDIS Online Reports User Guide for additional information on IDIS reports.
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Cost Reasonableness |
What is the time frame in which we must disburse advanced funds to our subrecipients for eligible program expenses? Is it once CDBG funds are drawn down and wired to our county treasurer? How do we handle the funds if that time frame has elapsed?
Disbursement of funds must occur in a timely manner. The general rule is that CDBG funds must be used within three business days they are drawn down. If disbursement takes longer than three business days, written justification should be maintained in the files. Funds drawn down erroneously must also be returned to HUD in a timely manner. Per 24 CFR Part 85.21(b) / [2 CFR 200.305(b)] [also referenced at 24 CFR 570.502(b)(3)(i)], recipients and sub...
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Disbursement of funds must occur in a timely manner. The general rule is that CDBG funds must be used within three business days they are drawn down. If disbursement takes longer than three business days, written justification should be maintained in the files. Funds drawn down erroneously must also be returned to HUD in a timely manner.
Per 24 CFR Part 85.21(b) / [2 CFR 200.305(b)] [also referenced at 24 CFR 570.502(b)(3)(i)], recipients and subrecipients are required to have procedures in place to minimize the amount of time that elapses between the transfer of CDBG funds and the disbursement of those funds by the grantee or subrecipient in accordance with Treasury regulations at 31 CFR Part 205. Recipients (and subrecipients) must include accurate information in drawdown requests.
It should be noted that funds held in an escrow account for rehabilitation activities generally must be disbursed within 10 days. Reference 24 CFR 570.511(a)(4).
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Cost Reasonableness |
24 CFR Part 85.21(f)(1) says to disburse interest earned on RLFs. Does this refer to the interest earned on the RLF account from the banking institution or the interest received from the loan repayment (program income)?
Each revolving loan fund's (RLF) cash balance must be held in an interest-bearing account, and any interest paid on CDBG funds held in this account is considered interest earned on grant advances and must be remitted to HUD for transmittal to the U.S. Treasury no less frequently than annually. Reference 24 CFR 570.500(b). This is not considered program income. [Reference: 2 CFR 200.80, Program Income] The payment of principal and interest on loan...
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Each revolving loan fund's (RLF) cash balance must be held in an interest-bearing account, and any interest paid on CDBG funds held in this account is considered interest earned on grant advances and must be remitted to HUD for transmittal to the U.S. Treasury no less frequently than annually. Reference 24 CFR 570.500(b). This is not considered program income. [Reference: 2 CFR 200.80, Program Income]
The payment of principal and interest on loans made from revolving funds is considered program income and subject to the CDBG program income requirements. The language at 24 CFR 85.21(f)(1) / [2 CFR 200.305(b)(5)] refers to repayments made by borrowers and the interest earned from the loan repayments. These funds must be substantially disbursed prior to the recipient's making grant withdrawals from the U.S. Treasury for the same activity (i.e., the activity that the revolving loan fund was established to undertake). It should be noted that grantees are not required to disburse program income in a revolving loan fund before making grant withdrawals for other CDBG activities. CDBG funds in an RLF may only be used for the activity for which it was established.
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Cost Reasonableness |
At what hourly rate is donated, unskilled labor valued in the context of resources leveraged with CDBG funds?
The CDBG Program does not have a specific requirement for match or for leverage and has not defined the rate at which donated labor should be valued. The HOME Program has long used a rate of $10.00 per hour as its established rate for unskilled donated or voluntary labor. Labor from community groups, nonprofits (i.e., Habitat for Humanity's sweat equity program), friends, neighbors, corrections work crews, or federal job training programs such as...
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The CDBG Program does not have a specific requirement for match or for leverage and has not defined the rate at which donated labor should be valued. The HOME Program has long used a rate of $10.00 per hour as its established rate for unskilled donated or voluntary labor. Labor from community groups, nonprofits (i.e., Habitat for Humanity's sweat equity program), friends, neighbors, corrections work crews, or federal job training programs such as the Workforce Investment Act (WIA) programs are some examples of donated labor. This rate could be used for reporting leverage in IDIS.
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Cost Reasonableness |
What is considered to be adequate documentation when funds are paid through an automated clearing house instead of a paper check or draft? Is a "screen shot" of our internal system indicating the vendor name and vendor number, purchase order number, and the amount sufficient support documentation in the event of a HUD Financial Audit?
HUD, like all other federal agencies is looking at digital documentation. You should work with your Field Office financial staff to determine whether the documentation you have is sufficient to show "proof of payment". However, even if that is determined to be sufficient, you are still required to maintain support documentation such as time sheets (# number of hours, rate of pay and benefits ties to the CDBG activity), invoices / proof of payment...
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HUD, like all other federal agencies is looking at digital documentation. You should work with your Field Office financial staff to determine whether the documentation you have is sufficient to show "proof of payment". However, even if that is determined to be sufficient, you are still required to maintain support documentation such as time sheets (# number of hours, rate of pay and benefits ties to the CDBG activity), invoices / proof of payment (contacts, purchase orders, copies of checks, receipts for work completed or equipment purchased), or completed product (i.e., plan, study, survey). References: 2 CFR Part 225, Appendix B, #8(h)(3) and 24 CFR 570.502(a)(4).
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Cost Reasonableness |
Is there a deadline date for returning interest earned?
If your account earned interest on advances of CDBG funds, all but $500 for eligible administrative costs must be remitted to the U.S. Treasury promptly, but not less than quarterly, per 24 CFR 85.21(i) / [2 CFR 200.305(b)(9)]. In addition, interest earned on revolving fund balances must be remitted to U.S. Treasury no less than annually as stated as 24 CFR 570.500(b).
Cost Reasonableness
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Cost Reasonableness |
Where are the regulations that pertain to the disposition of assets purchased with CDBG funds?
The applicable CDBG regulation is at 24 CFR 85.32, Equipment / [2 CFR 200.313, Equipment]. 24 CFR 85.32(e) / [2 CFR 200.313(e)] pertains to the disposition of equipment by the grantee or subrecipient.
Cost Reasonableness
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Cost Reasonableness |
When are funds for a project in our annual action plan considered to be obligated? Is it when the sub-grantee agreement with that municipality is executed or when the actual construction contract is signed by the municipality and the street contractor?
The Administrative Requirements for Grants and Cooperative Agreements to State, Local and Federally Recognized Indian Tribal Governments (24 CFR Part 85) / [2 CFR Part 200] which is applicable to the CDBG Program, includes the following definition: Obligations mean the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee duri...
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The Administrative Requirements for Grants and Cooperative Agreements to State, Local and Federally Recognized Indian Tribal Governments (24 CFR Part 85) / [2 CFR Part 200] which is applicable to the CDBG Program, includes the following definition: Obligations mean the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee during the same or a future period. The funds would not meet this definition of obligation until the contract is executed between the unit of government and the entity that will perform the work.
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Housing Counseling |
If a housing counseling activity is administered in compliance with the requirements of this housing counseling certification rule, does that mean the activity will no longer be subject to the Community Development Block Grant (CDBG) program’s 15% cap on public services activities?
No. The Final Rule will not affect what activities are eligible as a public service and thus subject to the public services cap. The same housing counseling activities currently included under the public services cap will continue to be included under the cap when the housing counseling certification rule is implemented. The only difference will be that housing counseling (as defined at 24 CFR 5.100) will need to be conducted by HUD certified hou...
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No. The Final Rule will not affect what activities are eligible as a public service and thus subject to the public services cap. The same housing counseling activities currently included under the public services cap will continue to be included under the cap when the housing counseling certification rule is implemented. The only difference will be that housing counseling (as defined at 24 CFR 5.100) will need to be conducted by HUD certified housing counselors, working for an agency approved to participate in HUD’s Housing Counseling program, as of August 1, 2021, the final compliance date for certification.
Stand-alone housing counseling activities, and other types of housing information and education services (some of which heretofore may have been called “housing counseling” by grantees) have always come under the public services cap and will continue to come under the cap. Similarly, housing counseling (or other types of housing information and education services) which are provided as part of the activity delivery for Homeownership Assistance (not direct), are eligible as a public service activity and so are subject to the 15% cap. In contrast, housing counseling, or other types of housing information and education services, may be provided as part of the activity delivery costs for specific types activities that do not come under the public services cap. For example, housing counseling for potential homebuyers may be included as part of the activity delivery costs for Direct Homeownership Assistance activities or for Housing Services activities in support of the HOME program; grantees might provide basic home maintenance information or financial literacy training as part of a housing rehabilitation program. Housing counseling or other housing information and education services undertaken as part of one of those activities does not come under the public services cap.
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Housing Counseling |
My agency administers a Community Development Block Grant (CDBG)-funded activity that we have called housing counseling, but it is not as comprehensive/individualized as is defined in 24 CFR 5.100. Must we change our program to comply with the new housing counseling certification rule, as of August 1, 2021, the final compliance date for certification? Must we discontinue our program if it doesn’t comply? Or can we continue the program as currently designed?
A CDBG or CDBG Disaster Recovery (CDBG-DR) grantee still has the flexibility to design activities to meet its locally identified needs. The Final Rule does not mandate that anything previously characterized as “housing counseling” must now either meet the new requirements or stop receiving CDBG funds. (However, there is one exception: if a recipient is funding housing counseling under 24 CFR 570.201(k), Housing Services, in support of a HOME-...
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A CDBG or CDBG Disaster Recovery (CDBG-DR) grantee still has the flexibility to design activities to meet its locally identified needs. The Final Rule does not mandate that anything previously characterized as “housing counseling” must now either meet the new requirements or stop receiving CDBG funds. (However, there is one exception: if a recipient is funding housing counseling under 24 CFR 570.201(k), Housing Services, in support of a HOME- funded homeownership program to which the Final Rule applies, then the CDBG- or CDBG-DR- funded activity will also be subject to the new Part 5 requirements.)
Apart from this exception for a recipient funding housing counseling under 24 CFR 570.201(k), Housing Services, in support of a HOME-funded homeownership program, a grantee may decide that it wishes to continue funding its activity as currently designed. Henceforth, however, an activity that does not meet the definition of 24 CFR 5.100 should not be called “housing counseling.” Grantees will need to come up with another term to characterize this type of activity, such as “housing information and referral services” or “homeownership education program” or “general budget/financial counseling”. HUD plans to make changes to the Integrated Disbursement and Information System (IDIS) system (used by grantees to report on formula CDBG funding) and the DRGR system (used by grantees to report on CDBG-DR funding) to reflect the changes triggered by the final housing counseling certification rule. These system changes will allow grantees (and HUD) to distinguish between those housing counseling activities that are subject to the Part 5 requirements and other types of housing information and education services that do not meet the 24 CFR 5.100 definition of housing counseling.
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Housing Counseling |
How do I determine if what my agency does under Community Development Block Grant (CDBG) or Community Development Block Grant – Disaster Recovery (CDBG-DR) is housing counseling as defined at 24 CFR 5.100?
If the agency is providing independent, expert advice customized to the need of the consumer to address the consumers’ housing barriers and achieve their housing goals (that includes an intake, financial and housing affordability analysis, an action plan, and a reasonable effort to have follow-up communication with the client when possible), then this is housing counseling as defined at 24 CFR 5.100, and the housing counseling must be provided ...
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If the agency is providing independent, expert advice customized to the need of the consumer to address the consumers’ housing barriers and achieve their housing goals (that includes an intake, financial and housing affordability analysis, an action plan, and a reasonable effort to have follow-up communication with the client when possible), then this is housing counseling as defined at 24 CFR 5.100, and the housing counseling must be provided by a HUD certified housing counselor and the agency must become approved to participate in HUD’s Housing Counseling program.
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Housing Counseling |
The Community Development Block Grant (CDBG) and Community Development Block Grant – Disaster Recovery (CDBG-DR) are listed in the certification rule as “HUD Programs where housing counseling is funded under the HUD program.” How are the CDBG and CDBG-DR programs affected by the Final Rule on housing counselor certification?
Housing counseling is an eligible activity under several different categories of activities in the CDBG and CDBG-DR programs. Depending on the program design and the intended beneficiaries, housing counseling may be eligible as a public service (under 24 CFR 570.201(e)), as part of a homeownership assistance activity (24 CFR 570.201(n)), or as a housing service in support of the HOME program (24 CFR 570.201(k)). If a recipient uses CDBG or CDBG-D...
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Housing counseling is an eligible activity under several different categories of activities in the CDBG and CDBG-DR programs. Depending on the program design and the intended beneficiaries, housing counseling may be eligible as a public service (under 24 CFR 570.201(e)), as part of a homeownership assistance activity (24 CFR 570.201(n)), or as a housing service in support of the HOME program (24 CFR 570.201(k)). If a recipient uses CDBG or CDBG-DR to fund a housing counseling program that meets the definition at 24 CFR 5.100, either directly or through a subrecipient, the housing counseling must be provided by a HUD certified housing counselor working for an agency approved to participate in HUD’s Housing Counseling program, by the Final Compliance Date.
If a recipient (grantee or subrecipient) uses CDBG or CDBG-DR funds to carry out an activity that does not meet the definition at 24 CFR 5.100, then the agency providing the services does not have to become approved to participate in HUD’s Housing Counseling program, and its staff do not have to become HUD certified housing counselors.
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IDIS |
How should CDBG grantees enter homeownership assistance activities in the Integrated Disbursement and Information System (IDIS)?
The grantee may choose to enter all homeownership activities under one IDIS activity number or each one under a separate IDIS activity number. The grantee has the discretion to choose the method it prefers. However, there must be an address entered for each assisted unit in an IDIS activity.
IDIS
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IDIS |
Does HUD have any rule for setting up CDBG activity and reporting activity delivery costs (ADC) in IDIS?
Yes. HUD has policies and procedures for setting up activities and reporting activity delivery costs (ADC). The following provides guidance on how to set up activity and report ADC in IDIS for different types of major CDBG activities. 1. Acquisition and Disposition: When setting up acquisition and disposition activities in IDIS, grantees should set up one activity for each property assisted. Each activity must have the address of the property ass...
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Yes. HUD has policies and procedures for setting up activities and reporting activity delivery costs (ADC). The following provides guidance on how to set up activity and report ADC in IDIS for different types of major CDBG activities.
1. Acquisition and Disposition:
When setting up acquisition and disposition activities in IDIS, grantees should set up one activity for each property assisted. Each activity must have the address of the property assisted. This is how HUD tracks properties that grantees have acquired or disposed of with CDBG funds and determines national objective compliance. ADC for acquisition and disposition activities should be included in the budgets of each activity. Grantees may not set up separate activities for ADC and may only have one property in an activity inclusive of ADC.
2. Public Facility and Improvements:
Grantees may only have one public facility in an activity. Grantees must set up a separate activity for each public facility. This is the only way that HUD can determine national objective compliance for a facility. For instance, the grantee may NOT combine the rehabilitation of five different day care centers in one activity, even if they serve the same neighborhood and/or are managed by the same organization. Each day care center must be reported in a separate activity in order to determine national objective compliance.
Activity Delivery Costs: ADC for the public facility and improvements should be included in the budgets of each activity. Grantees may not set up separate activities for ADC. Grantees may only have one public facility in an activity inclusive of ADC. For more information on different types public facility and improvements activities and appropriate matrix codes, check "Matrix Code Definitions."
3. Public Service:
Grantees may only have one public service in an activity. Grantees must set up a separate activity for each public service. This is the only way that HUD can determine national objective compliance for a particular service. For example, the grantee may NOT combine operating costs for CDBG-funded senior meals-on-wheels, child care, and youth programs that are taking place at a community center in one activity. Each program must be in a separate activity to demonstrate that each program has met a national objective.
Activity Delivery Costs: ADC for the public services should be included in the budgets of each activity. Grantees may not set up separate activities for ADC. Grantees may only have one public service program in an activity inclusive of ADC. For more information on different types public services activities and available matrix codes, check "Matrix Code Definitions."
4. Housing Rehabilitation:
Single-unit rehabilitation: For single – unit housing rehabilitation activities, grantees have two options to set up activities.
Option 1 (aggregate all units for the same type of rehabilitation): For the same type of single-unit housing rehabilitation funded in a program year, all the units can be aggregated and allocated as one activity in IDIS under appropriate matrix code 14A, 14D, 14F, 14G, or 14I. However, grantees are required to enter an address for each assisted unit. (Note: The grantee cannot combine units for different types of rehabilitation. For example, 14A and 14G are two different types of rehabilitation, the grantee must set up two separate activities in IDIS, one for all 14A units, one for all 14G units.)
Activity Delivery Costs: Single-unit administrative rehabilitation costs, deemed as "activity delivery costs." If the grantee used the Option 1 method, then housing administrative costs can be reported in an aggregate amount for expenditures as one activity for a single program year in one of two ways:
- 14* series Single-unit rehabilitation: CDBG funds expended for the same type of single-unit rehabilitation administration costs in a program year can be included in the aggregate amount and combined with hard costs in IDIS under appropriate matrix code 14A, 14D, 14F, 14G, or 14I. This means that IDIS does not differentiate between hard costs and activity delivery costs for single-unit rehabilitation.
or
- 14H Rehabilitation Administration: CDBG funds spent for the same type of single-unit rehabilitation administration costs in a program year can be allocated as one activity under IDIS matrix code 14H. (For example, the grantee funded two types of rehabilitation activities, emergency repairs under matrix code 14A and energy Efficiency Improvements under 14F. The grantee will need to set up two 14H activities, one for the 14A units and one for the 14F units.) The 14H activity should be correlated to those activities entered in IDIS under 14* as hard costs. Under this option, the grantee will only need to report accomplishments under the activities for hard costs. For the 14H activity, the grantee will answer "Yes" to the question "Will accomplishments be reported at another activity?" on the "CDBG Setup Detail" page and enter the correlated 14* IDIS Activity ID. If more than one 14* activities are associated with the 14H activity, the grantee will need to report all the correlated 14* activity IDs in the activity description field. View detailed guidance on how to report accomplishments.
Option 2 (separate each unit): The grantee may set up a separate activity for each housing unit that has been rehabilitated under appropriate matrix code 14A, 14D, 14F, 14G, or 14I.
Activity Delivery Costs: Under Option 2, grantees may report rehabilitation administrative costs in one of two ways:
- 14* series Single-unit rehabilitation: The grantee may allocate the rehabilitation administrative costs and combine them with the individual 14* activities.
or
- 14H Rehabilitation Administration: CDBG funds spent for the same type of single-unit rehabilitation administration costs in a program year can be allocated as one activity under IDIS matrix code 14H. (For example, the grantee funded two types of rehabilitation activities, emergency repairs under matrix code 14A and energy Efficiency Improvements under 14F. The grantee will need to set up two 14H activities, one for the 14A units and one for the 14F units.) The 14H activity ties to the 14* activities for the hard costs. Under this option, the grantee will only need to report accomplishments under the activities for hard costs. For the 14H activity, the grantee will answer "Yes" to the question "Will accomplishments be reported at another activity?" on the "CDBG Setup Detail" page and enter the correlated 14* IDIS Activity ID. If more than one 14* activities are associated with the 14H activity, the grantee will need to report all the correlated 14* activity IDs in the activity description field. View detailed guidance on how to report CDBG accomplishments.
Multi-unit Rehabilitation – For multi-unit housing rehabilitation activities, a separate activity needs to be set up for each building under appropriate matrix code 14B-D, 14F, 14G or 14I, unless the buildings are or will be located on the same or contiguous properties under common ownership and management.
Activity Delivery Costs: Administrative rehabilitation costs for multi-unit rehabilitation activities can be reported one of two ways:
- 14* series multi-unit rehabilitation: The grantees may combine the rehabilitation administrative costs with hard costs and report them under each individual 14B-D, 14F, 14G, or 14I activity.
or
- 14H rehabilitation administration: Administrative rehabilitation costs for multi-unit housing must be set up as a separate IDIS activity that corresponds with each 14B-D, 14F, 14G, or 14I multi-unit rehabilitation activity. When the grantee sets up a separate activity for activity delivery costs, the grantee will only need to report accomplishments under the activities for hard costs. For the 14H activity, the grantee will answer "Yes" to the question "Will accomplishments be reported at another activity?" on the "CDBG Setup Detail" page and enter the correlated 14B-D, 14F, 14G, or 14I IDIS Activity ID. View detailed guidance on how to report accomplishments.
5. Economic Development Activities:
Each assisted business shall be a separate activity for the purpose of determining national objective compliance. Grantees should set up a separate activity for each business receiving direct economic development assistance under 24 CFR 570.203(b) or 42 USC 5305(a)(17) [use matrix code 18A] or 24 CFR 570.201(o), 42 USC 5305(a)(22) or 24 CFR 570.482(c) [use matrix code18C].
If the assisted activity is one identified at 570.208(a)(4)(vi) or 570.483(b)(4)(vi), then job aggregation is allowed. Grantees may aggregate jobs created or retained by all businesses for which CDBG assistance is received during each program year under one IDIS activity.
Activity Delivery Costs: ADC for the economic development activities should be included in the budgets of each activity. Grantees may not set up separate activities for ADC. Grantees may only have one activity for each business inclusive of ADC, unless the assisted activity is one identified at 570.208(a)(4)(vi)(B) or 570.483(b)(4)(vi)(B). When a grantee uses CDBG funds to pay for the activity delivery but the actual loans to for-profit businesses are exclusively made with non-CDBG funds, then the grantee may aggregate jobs created by all the businesses receiving loans during each program year under one IDIS activity [use matrix code 18A].
6. Homeownership Assistance
For homeownership assistance, grantees have two options to set up activities.
Option1 (aggregate all units): The grantee may choose to enter all homeownership activities funded in a program year under one IDIS activity. However, the grantee will need to enter all the addresses for every CDBG-assisted unit.
Option 2 (separate each unit): The grantee may enter each homeowner under a separate IDIS activity.
Activity Delivery Costs: If referral services, homeownership education programs, or general budget/financial counseling is provided to homebuyers in conjunction with homeownership assistance, the services are considered activity delivery costs. ADC for the homeownership assistance activities should be included in the budgets of each activity. The grantee should not set up a separate activity for ADC. However, if Housing Counseling, under 24 CFR 5.100, is provided in conjunction with direct homeownership assistance, report Housing Counseling under matrix code 13A or 05Y, as a separate activity. For example, Mr. Smith received $5,000 of downpayment assistance. He also received Housing Counseling service (as defined at 24 CFR 5.100) from a HUD-approved Housing Counseling Agency. The grantee paid $200 to the Housing Counseling Agency for its service. In IDIS, the grantee should set up an activity with matrix code 13B or 05R for $5,000 downpayment assistance and a separate activity for the Housing Counseling service with matrix code 13A or 05Y for $200.
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IDIS |
Does our organization need to submit a separate Cash on Hand report in IDIS for each of our open CDBG grants?
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IDIS |
For CDBG multi-unit housing rehabilitation activities, if the rehabilitation involves multiple structures under common management, can a grantee set up all the addresses under one activity?
According to 24 CFR 570.208(a)(3), "If two or more rental buildings being assisted are or will be located on the same or contiguous properties, and the buildings will be under common ownership and management, the grouped buildings may be considered for this purpose as a single structure." When activities fit this description, yes, the grantee may set up all the addresses under one activity. However, if multi-unit projects are under different owne...
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According to 24 CFR 570.208(a)(3), "If two or more rental buildings being assisted are or will be located on the same or contiguous properties, and the buildings will be under common ownership and management, the grouped buildings may be considered for this purpose as a single structure." When activities fit this description, yes, the grantee may set up all the addresses under one activity. However, if multi-unit projects are under different ownership, the grantee cannot set up all the addresses under one activity. A grantee then needs to set up a separate activity for each address(es) or building(s).
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IDIS |
Our organization is trying to submit the CDBG Cash on Hand report, but IDIS will not allow for a negative dollar amount to be submitted. How do we submit with a negative amount?
The Cash on Hand report should not include any local non-CDBG funds (such as those used to pay for CDBG expenses before reimbursement is received through IDIS drawdowns), and therefore the report should not have negative amounts. The report should be reflective of only the CDBG funds that were received, returned, or disbursed during the quarter period of the report. More information about the PR29 CDBG Cash on Hand report is available in the Inst...
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The Cash on Hand report should not include any local non-CDBG funds (such as those used to pay for CDBG expenses before reimbursement is received through IDIS drawdowns), and therefore the report should not have negative amounts. The report should be reflective of only the CDBG funds that were received, returned, or disbursed during the quarter period of the report.
More information about the PR29 CDBG Cash on Hand report is available in the Instructions for the IDIS Cash on Hand Quarterly Report on the HUD Exchange.
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IDIS |
Our organization received an automatic email from IDIS regarding a flagged CDBG activity. Why were the individuals on the email included?
The CDBG Review Activities process sends emails accordingly: Sends email to the Grantee CDBG First contact [Grantee/PJ page] Sends email to the Grantee CDBG Second contact [Grantee/PJ page] Sends email to any Grantee user with the CDBG 'Set up Activity' user privilege Sends email to any Grantee user with the CDBG 'Update Activity' user privilege A grantee local IDIS administrator can edit user privileges and/or update the CDBG First and Second ...
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The CDBG Review Activities process sends emails accordingly:
- Sends email to the Grantee CDBG First contact [Grantee/PJ page]
- Sends email to the Grantee CDBG Second contact [Grantee/PJ page]
- Sends email to any Grantee user with the CDBG 'Set up Activity' user privilege
- Sends email to any Grantee user with the CDBG 'Update Activity' user privilege
A grantee local IDIS administrator can edit user privileges and/or update the CDBG First and Second contact in IDIS to add/remove individuals from receiving these auto-generated email notifications.
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IDIS |
Our program is making ADA improvements in public spaces throughout the city. How do I set this up in IDIS?
Each public facility or improvement should be set up as a separate activity in IDIS. If a facility serves an individual client group, use the matrix code assigned for that group (e.g. 03A for senior centers). If a facility serves multiple clients of groups without a designated matrix code, assign the matrix code for the type of public facility (e.g. 03E for neighborhood facilities). More information about reporting accomplishments for public faci...
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Each public facility or improvement should be set up as a separate activity in IDIS. If a facility serves an individual client group, use the matrix code assigned for that group (e.g. 03A for senior centers). If a facility serves multiple clients of groups without a designated matrix code, assign the matrix code for the type of public facility (e.g. 03E for neighborhood facilities).
More information about reporting accomplishments for public facilities activities in IDIS is available in the IDIS Online for CDBG Entitlement Communities Manual or the IDIS Online for State CDBG Grantees Manual on the HUD Exchange.
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IDIS |
Our staff works with subrecipients that carry out public facility improvements throughout the city. Can we set up a separate activity to cover those delivery costs?
No, unlike housing rehab programs (e.g. using matrix code 14H), delivery costs should be allocated to the specific activity set up for each individual public facility. More information about reporting accomplishments for public facilities activities in IDIS is available in the IDIS Online for CDBG Entitlement Communities Manual or the IDIS Online for State CDBG Grantees Manual ...
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IDIS |
We already used 15% of program income (PI) for public services activities. We still have some program income on hand. Our current invoices are for other public service activities. Should we draw CDBG grant funds to pay these invoices?
The grantee should draw more program income for the public service activities. The grantee needs to use program income first to comply with 24 CFR 570.504(a)(2)(ii). The amount of CDBG funds obligated/expended* within a program year to support public service activities may not exceed 15% of the total grant awarded to the grantee for that year plus 15% of the total program income it received in the preceding program year. This cap on public servic...
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The grantee should draw more program income for the public service activities. The grantee needs to use program income first to comply with 24 CFR 570.504(a)(2)(ii).
The amount of CDBG funds obligated/expended* within a program year to support public service activities may not exceed 15% of the total grant awarded to the grantee for that year plus 15% of the total program income it received in the preceding program year. This cap on public service activities only determines the maximum amount of CDBG funds the grantee can obligate/expend for public service activities for a program year. As long as the total amount of funds used for public service activities is equal to or less than 15% of the grant plus the prior year program income, the grantee has options to obligate/draw the entire amount for public service activities from grant funds, program income, or a combination of grant funds and program income.
For example, if a grantee's FY 2018 grant is $500,000, and the grantee received $100,000 in program income during program year 2017, the maximum amount of CDBG funds it can use for public service activities for program year 2018 is $90,000 (($500,000 + $100,000) X 15% = $90,000)). The grantee can draw the entire $90,000 from grant funds, or program income, or use a combination of grant and program income funds, as long as the total amount of funds used for public service activities is equal to or less than $90,000. The grantee must follow the "program income first" regulation. Therefore, whether program income or grant funds should be used to pay for the public service activity will depend on whether the grantee has PI on hand when it is ready to pay the invoices.
*Note: The 15% public service cap is determined based on obligations for Entitlement grantees. However, it is based on expenditures for state grantees.
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IDIS |
We ran a PR56 after submitting our last voucher, but the current CDBG draw ratio and the Line Of Credit (LOC) balance did not change. What did we do wrong?
Please note the reporting module in Integrated Disbursement and Information System (IDIS) does not operate on a "real-time" basis; changes are made overnight. Thus, reports only capture changes to the system on the next business day. Even so, vouchers may take longer to process. A good rule of thumb is to run an updated PR56 Report two days after submitting a voucher to see the new draw ratio and LOC balance.
IDIS
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IDIS |
What are some ways for a CDBG grantee to check its timeliness on a regular basis?
A grantee should draw down funds from its LOC on a regular, periodic basis commensurate with cash needs, to ensure consistent bill payment. Each time the grantee submits a voucher in IDIS, for instance, it can run a PR56, CDBG Timeliness Report, which will provide the most updated draw ratio and Line of Credit (LOC) balance in the Line of Credit Control System (LOCCS).
IDIS
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IDIS |
What happens in IDIS when a CDBG grantee misses a Section 108 repayment?
Failure to remit the Section 108 payment seven (7) days prior to the due date constitutes a permissible basis for HUD to declare the Section 108 Guaranteed Loan in default. When a grantee does not make a timely payment on its Section 108 Guaranteed Loan, the CDBG grant funds are deducted from its line(s) of credit to pay amounts due on the Section 108 Guaranteed Loans. The deduction is processed in IDIS as a draw voucher, entitled Manual Payment,...
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Failure to remit the Section 108 payment seven (7) days prior to the due date constitutes a permissible basis for HUD to declare the Section 108 Guaranteed Loan in default. When a grantee does not make a timely payment on its Section 108 Guaranteed Loan, the CDBG grant funds are deducted from its line(s) of credit to pay amounts due on the Section 108 Guaranteed Loans. The deduction is processed in IDIS as a draw voucher, entitled Manual Payment, under Activity #2. Manual Payment vouchers are listed under Activity #2 on the grantee's IDIS PR07 report.
When a Manual Payment voucher is processed in IDIS, the grantee has the option to reimburse its line of credit for the amount deducted. The grantee needs to return the funds to the same origin grant from which funds were deducted. If the grantee decides not to reimburse its line of credit for the Manual Payment, then it must associate these vouchers in IDIS with a Section 108 repayment activity. The grantee will need to set up a new activity with a matrix code of 19F or 19G. For planned repayments of Section 108 loans, please use matrix code 19F. For unplanned repayments, use matrix code 19G. The activity funded amount should be equal to the amount of the Manual Payment. After the section 108 repayment activity has been funded, the grantee will need to revise/transfer draws of the Manual Payment from Activity #2 to the repayment activity. Please note, for 2015 and later grants, the grantee can only revise draws from one activity to another activity from the same grant year and fund type. Therefore, if the Manual Payment was deducted from 2015 or subsequent grant years, the grantee must fund the Section 108 repayment activity from the same origin year grant. For example, if the Manual Payment was deducted from the 2017 grant, the Section 108 repayment activity will need to be funded with the 2017 grant.
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IDIS |
What IDIS reports would be helpful in assembling information for the CDBG Cash on Hand report?
The CDBG Cash on Hand Report should display only the CDBG funds that were received, returned, or disbursed during the quarter, and therefore you can use IDIS reports to assist in completing the information. Some reports that would be helpful are the PR07 for drawdowns, and the PR09 for Program Income and other local CDBG accounts such as Revolving Loan (RL) and Grant-Specific Repayment to Local Account (LA) funds receipted and drawn. More informa...
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The CDBG Cash on Hand Report should display only the CDBG funds that were received, returned, or disbursed during the quarter, and therefore you can use IDIS reports to assist in completing the information. Some reports that would be helpful are the PR07 for drawdowns, and the PR09 for Program Income and other local CDBG accounts such as Revolving Loan (RL) and Grant-Specific Repayment to Local Account (LA) funds receipted and drawn.
More information about the PR29 CDBG Cash on Hand report is available in the Instructions for the IDIS Cash on Hand Quarterly Report on the HUD Exchange.
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IDIS |
What privileges does an IDIS user need to submit the CDBG Cash on Hand report in IDIS?
CDBG grantee users who have rights to request or approve drawdowns may access the "view/submit Cash on Hand" screen by clicking on "Grant" > "Cash on Hand."
For instructions on how the local IDIS administrator can make updates to user privileges in IDIS, please see the How does a local IDIS administrator update a user's privileges? FAQ on the HUD Exchange.
IDIS
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IDIS |
Why do I see negative balances under Activity #2 on my PR02 report?
If there are balances under Activity #2, positive or negative, log into IDIS and search vouchers for Activity #2. Activity #2 is essentially the repository for CDBG funds adjustments. For example, when a grantee returns funds to its line of credit due to ineligible uses of CDBG grant funds for CDBG activities, those returned funds show up in Activity #2 as a negative draw (collection), and the grantee then transfers those funds to the original a...
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If there are balances under Activity #2, positive or negative, log into IDIS and search vouchers for Activity #2.
Activity #2 is essentially the repository for CDBG funds adjustments. For example, when a grantee returns funds to its line of credit due to ineligible uses of CDBG grant funds for CDBG activities, those returned funds show up in Activity #2 as a negative draw (collection), and the grantee then transfers those funds to the original activity to repay that activity for the ineligible expenses. Also, when a grantee misses its Section 108 scheduled loan repayment, HUD deducts the repayment from its line of credit and posts it as a draw voucher (Manual Payment) under Activity #2.
When a grantee sees a negative balance under Activity #2 (that is, when the amount of draws is greater than the amount of negative draws), it often indicates that Section 108 Guaranteed Loan repayments have been deducted by HUD. In this case, the Manual Payment vouchers to the actual Section 108 repayment activities require revision. (See Question #1 for instructions on completing this process.)
When you see a positive balance, it often means the grantee has returned funds to its line of credit and needs to transfer all returned funds to their original activities. Chapter 18 of the IDIS Online Training Manual, Grant Repayments, provides instructions for the grantee when returning funds to its line of credit. These instructions include the use of Activity #2.
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Income Determination |
Can self-certifications of income be used in the CDBG Program to document that an activity has helped low- and moderate-income persons?
Yes. Income self-certifications are permissible pursuant to 24 CFR 570.506(b), but their use is generally limited to documenting beneficiary income for public service activities and even more limited when there is a direct financial benefit (e.g., day care subsidy, rental security deposit, etc.). Self-certifications are not intended to be used with housing and other direct-benefit activities, such as down payment assistance, where significant fin...
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Yes. Income self-certifications are permissible pursuant to 24 CFR 570.506(b), but their use is generally limited to documenting beneficiary income for public service activities and even more limited when there is a direct financial benefit (e.g., day care subsidy, rental security deposit, etc.). Self-certifications are not intended to be used with housing and other direct-benefit activities, such as down payment assistance, where significant financial benefits accrue to the beneficiary of the activity. There is no need to use self-certifications for an activity seeking to meet a low- and moderate-income area (LMA) national objective. In most service areas, the grantee can often rely on Low and Moderate Income Data (LMISD) from the Census Bureau to document the income of persons living within the boundaries of the activity. See further guidance on CDBG Low- and Moderate-Income Data.
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Income Determination |
What type of CDBG public services are better suited to the use of self-certifications?
Self-certifications are generally intended to be used for CDBG eligible activities where there is not a direct financial benefit to the recipient, the service is minimal, or there is only an indirect benefit, such as access to after-school programs for low- or moderate-income children.
Income Determination
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Income Determination |
Do CDBG self-certifications need to be checked for accuracy? Or do we just take the beneficiary on his or her "word?"
The CDBG regulation states that the recipient, meaning the grantee, can "substitute a copy of a verifiable certification from the assisted person that his or her family income does not exceed the applicable income limit established in accordance with §570.3..." "Verifiable," therefore, means that it can be and is subject to being checked for accuracy. The self-certification form should also contain a statement above the signature line that notif...
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The CDBG regulation states that the recipient, meaning the grantee, can "substitute a copy of a verifiable certification from the assisted person that his or her family income does not exceed the applicable income limit established in accordance with §570.3..."
"Verifiable," therefore, means that it can be and is subject to being checked for accuracy. The self-certification form should also contain a statement above the signature line that notifies the signer that falsification of a certification is a violation of federal law and subject to prosecution.
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Income Determination |
How do we go about verifying CDBG self-certifications? Do we need to verify all self-certifications submitted?
HUD recommends source documentation be requested from the CDBG beneficiary for 20% of the certifications. The beneficiary should also be informed that all sources of income and assets must be included when calculating annual income, depending upon the specified definition of the CDBG grantee (e.g., Part 5 (24 CFR 5.609), or the IRS definition. Depending on local policies and procedures, the grantee or subrecipient would review verifiabley income ...
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HUD recommends source documentation be requested from the CDBG beneficiary for 20% of the certifications. The beneficiary should also be informed that all sources of income and assets must be included when calculating annual income, depending upon the specified definition of the CDBG grantee (e.g., Part 5 (24 CFR 5.609), or the IRS definition. Depending on local policies and procedures, the grantee or subrecipient would review verifiabley income documentation through either: a) third party verification (e.g., verification of employment) or b) source documentation (e.g., wage statements , pensions, social security letter, etc.).
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Income Determination |
Is the 20% threshold for verifications of CDBG self-certifications a hard and fast rule?
It is only a recommendation. HUD encourages CDBG grantees to establish their own policies and procedures for implementing a self-certification program. HUD recommends that grantees' local policies and procedures are consistent across similar types of CDBG-funded activities (e.g. for all public services that provide indirect financial assistance to beneficiaries).
Income Determination
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Income Determination |
What are some issues to consider in establishing a CDBG self-certification policy?
Local discretion is important to implementing a CDBG self-certification program because only the grantee can know all the circumstances and risk factors that must be considered in setting up such a program. The flexibility a grantee exercises regarding the 20% sampling recommendation can be a function of several things. For instance, if the grantee is considering a policy for a non-profit subrecipient or a government agency, how comfortable is it...
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Local discretion is important to implementing a CDBG self-certification program because only the grantee can know all the circumstances and risk factors that must be considered in setting up such a program. The flexibility a grantee exercises regarding the 20% sampling recommendation can be a function of several things. For instance, if the grantee is considering a policy for a non-profit subrecipient or a government agency, how comfortable is it with that entity's management and implementation of this public service activity? Is there a direct financial benefit to the beneficiaries? What is the estimated value of the benefit being provided, whether direct or indirect? How many persons is this activity serving?
The answers to all these questions and others should play into the sample size a CDBG grantee requests for verifiable income documentation. The greater the financial value of the benefit being provided – particularly if it is a direct financial benefit (e.g., day care subsidies, rental security deposits), the greater the sample size in most cases. As part of any policy, it is recommended that grantees alert beneficiaries while they are self-certifying as to income, that a select sample of self-certifications will be tested, and those beneficiaries will be expected to produce verifiable income documentation.
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Income Determination |
What about one-time benefits provided at a food bank or a community event where the provider will likely never make contact again with a participant? How are those CDBG self-certifications verifiable?
Many times, it is impractical, if not downright impossible, to secure income verification from the beneficiaries of certain CDBG activities. This is particularly true of public service activities, like food banks, where donated food is made available for individuals and families, often have little or no ongoing client relationship between the beneficiary and the provider. Grantees must use their best judgment in funding agencies providing these s...
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Many times, it is impractical, if not downright impossible, to secure income verification from the beneficiaries of certain CDBG activities. This is particularly true of public service activities, like food banks, where donated food is made available for individuals and families, often have little or no ongoing client relationship between the beneficiary and the provider. Grantees must use their best judgment in funding agencies providing these services and should at least ensure that they have a written policy on self-certifications and that a majority of the types of services being provided do not depend on self-certifications. Grantees may also find it useful to explore other ways of meeting a national objective, such as "Low and Moderate Clientele (LMC) nature and location" or "LMC presumed benefit" would offer a more reliable path toward documentation.
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Income Determination |
If one of our public service activities is monitored by HUD and a sample of verifiable income documentation is not available, will this result in a finding?
The percentage of self-certifications for which a grantee has back-up verifiable income documentation, though recommended to be 20%, is ultimately a function of several factors, as noted above. A discovery of no verifiable income documentation available on any sample taken, however, may be a concern or a finding and warrant further investigation, depending on the nature of the activity and the factors discussed above. Missing or incomplete docume...
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The percentage of self-certifications for which a grantee has back-up verifiable income documentation, though recommended to be 20%, is ultimately a function of several factors, as noted above. A discovery of no verifiable income documentation available on any sample taken, however, may be a concern or a finding and warrant further investigation, depending on the nature of the activity and the factors discussed above. Missing or incomplete documentation from one beneficiary may be a concern, but a pattern of missing data or income-ineligible beneficiaries could result in a finding of noncompliance. Records must demonstrate that at least 51% of the beneficiaries are income eligible. Any CDBG grantee that relies solely or predominantly on a self-certification approach to income documentation can put an activity at risk if the beneficiaries are later audited and determined to be over the applicable income limit.
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Neighborhood Revitalization Strategy Area |
What are Neighborhood Revitalization Strategy Areas (NRSAs)?
A Neighborhood Revitalization Strategy Area (NRSA) is a Community Development Block Grant (CDBG) grantee-designated area targeted for revitalization. An NRSA is different from other local targeted areas in that the designation is reviewed and approved by HUD. In return for the designation, grantees are afforded enhanced flexibility in undertaking economic development, housing and public service activities with their CDBG funds.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
What is the purpose of an NRSA?
NRSAs are intended to revitalize a targeted neighborhood by encouraging a coordinated approach through comprehensive place-based efforts. By targeting an area, CDBG grantees have the opportunity to stimulate investment and empower low-income residents in distressed neighborhoods.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
How can a community benefit from an NRSA?
A community will benefit from a comprehensive place-based approach by using CDBG dollars to leverage additional funding for the neighborhood. An NRSA designation encourages and requires extensive community consultation and participation in revitalization efforts. Grantees also receive enhanced flexibility when undertaking economic development, housing and public service activities when using their CDBG funds. Regulatory relief and greater flexibi...
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A community will benefit from a comprehensive place-based approach by using CDBG dollars to leverage additional funding for the neighborhood. An NRSA designation encourages and requires extensive community consultation and participation in revitalization efforts. Grantees also receive enhanced flexibility when undertaking economic development, housing and public service activities when using their CDBG funds. Regulatory relief and greater flexibility are the primary benefits. In a HUD-approved NRSA, CDBG funds may be involved in the following incentives:
- Aggregation of Housing Units: Housing units assisted in an approved NRSA, during each program year, may be treated as a single structure for purposes of meeting a national objective. The grantee must maintain documentation that demonstrates 51% of the all the single and multi-family housing units completed in the NRSA were initially occupied by low- and moderate-income households. In contrast, outside an NRSA, 100% of the single family homes must be occupied by low- and moderate-income households.
- Job Creation/Retention as Low/Moderate Income Area Benefit: Job creation/retention activities undertaken in an NRSA may be qualified as meeting the area benefit national objective, thus eliminating the need for businesses to track personal income and maintain records for jobs held by or made available to low- and moderate-income persons residing within the NRSA.
- Aggregate Public Benefit Standard Exemption: Economic development activities carried out in an NRSA may be exempted from the aggregate public benefit standards. While the public benefit standard for individual projects still applies, exemption from the aggregate standard means that a grantee may offer more assistance to attract companies that will be able to create jobs within an NRSA.
- Public Service Cap Exemption: Public services carried out in an NRSA are not subject to the statutory 15% public service cap when such activities are carried out by a designated Community Based Development Organization (CBDO) undertaking a neighborhood revitalization, community economic development, or energy conservation project.
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Neighborhood Revitalization Strategy Area |
What is an example of a project where housing units can be aggregated?
A grantee wants to encourage homeowners to remain in the neighborhood and offers a homeowner rehabilitation program. During the program year, 50 homes are rehabilitated within the NRSA. Using the flexible benefit of aggregating housing units, the grantee will only need to document that 26 of these units were owned by low to moderate income homeowners, rather than all 50.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
What is an example of using the LMA national objective for job creation in an NRSA?
A grantee would like to increase jobs in the designated NRSA and offers incentives to a business to expand to an existing building in the neighborhood. Within the NRSA, the activity may be qualified under the low- and moderate-income area benefit (LMA) national objective criteria. As a flexible benefit, the business and grantee will need to report the number of full time jobs created but will not need to collect income information on every person...
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A grantee would like to increase jobs in the designated NRSA and offers incentives to a business to expand to an existing building in the neighborhood. Within the NRSA, the activity may be qualified under the low- and moderate-income area benefit (LMA) national objective criteria. As a flexible benefit, the business and grantee will need to report the number of full time jobs created but will not need to collect income information on every person filling the created jobs, as they would elsewhere.
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Neighborhood Revitalization Strategy Area |
What is an example of an activity that exempts the aggregate public benefit standards?
The grantee operates a small business loan program for the purpose of creating new jobs. The amount of funding a grantee commits to any individual business cannot exceed $50,000 per job. Under the aggregate public benefit standard, all the business loans the grantee makes during any given program year need to, in essence, average out to no more than $35,000 per job. Several of the loans to businesses in the grantee's NRSA will cost well over $35,...
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The grantee operates a small business loan program for the purpose of creating new jobs. The amount of funding a grantee commits to any individual business cannot exceed $50,000 per job. Under the aggregate public benefit standard, all the business loans the grantee makes during any given program year need to, in essence, average out to no more than $35,000 per job. Several of the loans to businesses in the grantee's NRSA will cost well over $35,000 per job and would push the grantee over the $35,000 per job aggregate average. However, the grantee can exclude loans made to NRSA businesses from that average calculation; by excluding those loans, the grantee's aggregate figure stays below $35,000 per job.
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Neighborhood Revitalization Strategy Area |
What is an example of an activity that may be exempt from the public service cap?
A grantee would like to increase the employment rate in the neighborhood and offers a job readiness and interview skills training program. The grantee contracts with a CBDO to carry out the activity to serve 150 residents. The activity aligns with the housing and economic opportunities identified in the NRSA plan. In the grantee's Consolidated Annual Performance and Evaluation Report (CAPER), this activity is excluded from the tabulation of activ...
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A grantee would like to increase the employment rate in the neighborhood and offers a job readiness and interview skills training program. The grantee contracts with a CBDO to carry out the activity to serve 150 residents. The activity aligns with the housing and economic opportunities identified in the NRSA plan. In the grantee's Consolidated Annual Performance and Evaluation Report (CAPER), this activity is excluded from the tabulation of activities upon which compliance with the cap is determined.
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Neighborhood Revitalization Strategy Area |
When can a grantee request an NRSA?
A CDBG grantee may submit an NRSA strategy at any time. However, an NRSA is most effective when tied to a consolidated plan cycle. A grantee submitting an NRSA strategy in the middle of a consolidated plan cycle will also need to amend its plan to incorporate the targeted area. Prior to submission, grantees are encouraged to collaborate with HUD's field office staff prior to submission.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
Can a grantee have more than one NRSA?
Yes. A CDBG grantee may have more than NRSA. Since an NRSA is neighborhood focused, it may be advisable to reduce the size of the NRSA or to divide an area into smaller NRSAs to increase the likelihood of achieving meaningful change. The grantee must submit NRSA strategies for each smaller area.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
What is required for designation of an NRSA?
There are three primary areas for the NRSA designation: A grantee must define a geographical area that comprises a neighborhood that is primarily residential and contains a percentage of low- and moderate-income residents that is 70% or equal to the community's "upper quartile percentage" Documentation of consultations with community members and stakeholders An assessment of the housing market and economic conditions of the area and a comprehens...
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There are three primary areas for the NRSA designation:
- A grantee must define a geographical area that comprises a neighborhood that is primarily residential and contains a percentage of low- and moderate-income residents that is 70% or equal to the community's "upper quartile percentage"
- Documentation of consultations with community members and stakeholders
- An assessment of the housing market and economic conditions of the area and a comprehensive strategy that will produce measurable results
Detailed information on what is required for an NRSA designation is available in CPD Notice 16-16: NRSAs in the CDBG Entitlement Program.
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Neighborhood Revitalization Strategy Area |
How will HUD review and approve NRSA applications?
The HUD field office will review the NRSA strategy for stakeholder involvement, performance measures, housing and economic opportunities planned, level of coordination with partners, ability to leverage funding, and the variety of activities and funding sources incorporated into the strategy. HUD will not look favorably upon strategies that focus exclusively on using only one NRSA incentive, such as the exception to the cap on public services, or...
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The HUD field office will review the NRSA strategy for stakeholder involvement, performance measures, housing and economic opportunities planned, level of coordination with partners, ability to leverage funding, and the variety of activities and funding sources incorporated into the strategy.
HUD will not look favorably upon strategies that focus exclusively on using only one NRSA incentive, such as the exception to the cap on public services, or as a basis to receive low income housing tax credits for a specific housing project. HUD is interested in strategies that will successfully use a range of resources to revitalize neighborhoods and provide viable and sustainable housing and economic opportunities to local residents.
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Neighborhood Revitalization Strategy Area |
How long does the NRSA designation last?
An NRSA designation is in effect for up to five years. Grantees may apply for a renewal after the first five years. However, HUD approval will be based upon demonstrated progress made toward the strategy. At the end of each program year, HUD will review the grantee's progress on measurable outcomes. If the Department determines that progress towards achieving the expected improvements in the area is lagging substantially behind the projections, H...
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An NRSA designation is in effect for up to five years. Grantees may apply for a renewal after the first five years. However, HUD approval will be based upon demonstrated progress made toward the strategy.
At the end of each program year, HUD will review the grantee's progress on measurable outcomes. If the Department determines that progress towards achieving the expected improvements in the area is lagging substantially behind the projections, HUD may suspend its approval of the strategy and the use of NRSA benefits.
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Neighborhood Revitalization Strategy Area |
What performance measurements does HUD expect to see in a proposed NRSA strategy and how will these be assessed?
The grantee should identify achievable outcomes for the NRSA, particularly with respect to housing and economic opportunities, that can be measured and used to determine progress made. Outcomes may include such factors as higher homeownership rates; a reduction in vacancy rates; a rise in housing values; an increase in educational attainment; an increase in employment rates; and an increase in median household income. For each selected outcome, ...
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The grantee should identify achievable outcomes for the NRSA, particularly with respect to housing and economic opportunities, that can be measured and used to determine progress made. Outcomes may include such factors as higher homeownership rates; a reduction in vacancy rates; a rise in housing values; an increase in educational attainment; an increase in employment rates; and an increase in median household income.
For each selected outcome, the grantee should identify expected outputs from the CPD performance measurement framework. The grantee will report on leveraged resources received and used to support the NRSA. Actual NRSA performance information should be updated at least semi-annually in the Integrated Disbursement and Information System (IDIS) and reported in the grantee's Consolidated Annual Performance and Evaluation Report (CAPER).
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Neighborhood Revitalization Strategy Area |
How can an NRSA fit into an existing local target area approach or designation?
An NRSA can complement or even focus more closely on existing target areas in the community. An NRSA can exist within or alongside an established service area, adding emphasis and extra tools to enhance the chances of success.
Neighborhood Revitalization Strategy Area
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Neighborhood Revitalization Strategy Area |
Can a Choice Neighborhood also be an NRSA?
A CDBG grantee with a designated Choice Neighborhood may request automatic NRSA designation. Choice Neighborhoods Implementation Grantees must be actively implementing their Transformation Plan. Choice Neighborhoods Planning Grantees must have completed their Transformation Plan. HUD's Office of Public and Indian Housing will confirm the Choice Neighborhood's status and barring any inconsistencies, HUD-CPD will presume that these areas have met t...
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A CDBG grantee with a designated Choice Neighborhood may request automatic NRSA designation. Choice Neighborhoods Implementation Grantees must be actively implementing their Transformation Plan. Choice Neighborhoods Planning Grantees must have completed their Transformation Plan. HUD's Office of Public and Indian Housing will confirm the Choice Neighborhood's status and barring any inconsistencies, HUD-CPD will presume that these areas have met the NRSA standards and will automatically approve the NSRA designation.
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Neighborhood Revitalization Strategy Area |
Can a Promise Zone also be an NRSA?
Promise Zones are often larger than a single neighborhood; however, a Neighborhood Revitalization Strategy Area may be located within a portion of a designated Promise Zone. To request that a portion of the Promise Zone area also receive NRSA designation, the grantee should submit the NRSA proposed boundaries and demographic information for HUD review. Promise Zones located within a jurisdiction actively implementing comprehensive community revit...
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Promise Zones are often larger than a single neighborhood; however, a Neighborhood Revitalization Strategy Area may be located within a portion of a designated Promise Zone. To request that a portion of the Promise Zone area also receive NRSA designation, the grantee should submit the NRSA proposed boundaries and demographic information for HUD review. Promise Zones located within a jurisdiction actively implementing comprehensive community revitalization and meeting boundary and demographic requirements, as confirmed by HUD's Office of Field Policy and Management, will be presumed to meet the above criteria and HUD-CPD will automatically approve the NRSA designation.
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Neighborhood Revitalization Strategy Area |
Can an Empowerment Zone (EZ), Renewal Community (RC) or Enterprise Community (EC) also be NRSA?
All federal Empowerment Zone (EZ) and Renewal Community (RC) designations expired on December 31, 2009. All Enterprise Community (EC) designations expired in 2004. In the past, HUD presumed the strategic plan for an EZ or EC within an Entitlement community met the above criteria and, therefore, approved an initial NRSA submission at the written request of the grantee without further review. Due to the age of these designations, HUD no longer acce...
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All federal Empowerment Zone (EZ) and Renewal Community (RC) designations expired on December 31, 2009. All Enterprise Community (EC) designations expired in 2004. In the past, HUD presumed the strategic plan for an EZ or EC within an Entitlement community met the above criteria and, therefore, approved an initial NRSA submission at the written request of the grantee without further review. Due to the age of these designations, HUD no longer accepts an EZ or EC strategic plan for the purpose of presumed NRSA designation. Grantees that wish to continue their revitalization work in a former EZ, EC or RC may be able to use information from former EZ, EC or RC applications and reports in developing a new NRSA application.
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Neighborhood Revitalization Strategy Area |
How will HUD assess the performance of an NRSA?
HUD does not mandate that a CDBG grantee set aside a specific amount or percentage of assistance that must be provided but does expect that the community will dedicate sufficient resources to make a noticeable difference. NRSAs should improve the housing and economic conditions in the area, along with physical and social outcomes. The community should plan wisely and not overstate goals, since progress will be measured against stated targets. For...
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HUD does not mandate that a CDBG grantee set aside a specific amount or percentage of assistance that must be provided but does expect that the community will dedicate sufficient resources to make a noticeable difference. NRSAs should improve the housing and economic conditions in the area, along with physical and social outcomes. The community should plan wisely and not overstate goals, since progress will be measured against stated targets. For this reason, it is wiser to designate smaller areas because the effects can be more pronounced when focused on a tight geography.
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Neighborhood Revitalization Strategy Area |
Must the grantee set aside a specific percentage or dollar amount of its CDBG allocation for NRSA?
HUD does not mandate that a CDBG grantee set aside a specific amount or percentage of assistance that must be provided but does expect that the community will dedicate sufficient resources to make a noticeable difference. NRSAs should improve the housing and economic conditions in the area, along with physical and social outcomes. The community should plan wisely and not overstate goals, since progress will be measured against stated targets. For...
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HUD does not mandate that a CDBG grantee set aside a specific amount or percentage of assistance that must be provided but does expect that the community will dedicate sufficient resources to make a noticeable difference. NRSAs should improve the housing and economic conditions in the area, along with physical and social outcomes. The community should plan wisely and not overstate goals, since progress will be measured against stated targets. For this reason, it is wiser to designate smaller areas because the effects can be more pronounced when focused on a tight geography.
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Neighborhood Revitalization Strategy Area |
Can a state or a state grant recipient undertake an NRSA?
States and state subgrantees cannot designate NRSAs but can instead establish Community Revitalization Strategy Areas (CRSA). See the following CPD Policy Notice CPD-97-1, which is being updated, but still valid.
Neighborhood Revitalization Strategy Area
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Overall Benefit |
A grantee expends close to 100% of its CDBG grant on activities that benefit low- and moderate-income persons in a single year. Why would a grantee want to pick a multi-year certification period? Are there advantages to selecting a multi-year certification period?
The grantee may want to select a multi-year certification period to carry out a large CDBG-assisted activity that will meet either the slum/blight or urgent need national objectives. One advantage is that a two- or three-year certification period will give the grantee a larger dollar amount to expend on activities that do not meet the low/moderate income benefit national objective versus having a one-year certification period. In addition, if the...
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The grantee may want to select a multi-year certification period to carry out a large CDBG-assisted activity that will meet either the slum/blight or urgent need national objectives. One advantage is that a two- or three-year certification period will give the grantee a larger dollar amount to expend on activities that do not meet the low/moderate income benefit national objective versus having a one-year certification period. In addition, if the grantee experiences a disaster such as a storm or flood (which does not have to be presidentially declared), it may use CDBG funds to address major threats to public health and safety without having to request a waiver of 24 CFR 91.225(b)(4)(ii). This is because it will already have the flexibility to expend more of its CDBG funds on activities that do not meet the low/moderate income benefit national objective. However, after designating a longer certification period, there is no requirement that the grantee ultimately allocate funds for slums and blight or urgent needs.
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Overall Benefit |
A grantee wants to change its overall benefit certification period from one year to three years because it wants to carry out a large activity under the slum/blight area national objective. However, the one-year certification has not expired, since the grantee is only halfway through its current program year. What should the grantee do?
If a CDBG grantee wants to change its overall benefit certification period, and the current certification period has not expired, it must request a waiver of 24 CFR 91.225(b)(4)(ii). The waiver must be requested before the circumstances requiring the change in overall benefit certification period occur.
Overall Benefit
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Overall Benefit |
Are CDBG grantees required to certify that they will meet the overall benefit requirement?
Yes. This requirement is found at Section 104(b)(3)(A) of the HCDA and 24 CFR 91.225(b)(4)(ii).
Overall Benefit
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Overall Benefit |
Are there any CDBG funds excluded from the overall benefit computation?
Yes. CDBG planning and administration costs eligible under 24 CFR 570.205 and 570.206 are excluded from the overall benefit computation. Planning and administration costs are not included when determining compliance with national objectives, including the low- and moderate-income benefit national objective, because these costs are considered to benefit the CDBG program as a whole.
Overall Benefit
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Overall Benefit |
At the time of CDBG grant application, what certifications should grantees submit to HUD when they have a multi-year certification period?
Referencing the example in FAQ 3513, for 2014, the CDBG grantee would submit its certification for the three-year period (2014, 2015, 2016). In 2015 and 2016, the grantee would submit the same certification, listing the same years, for each of those years' action plans. In 2017, the grantee will submit a new certification for FY 2017, 2018 and 2019.Related FAQ(s)In 2014, a grantee has a three-year certification period of 2014, 2015, and 2016. In ...
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Referencing the example in FAQ 3513, for 2014, the CDBG grantee would submit its certification for the three-year period (2014, 2015, 2016). In 2015 and 2016, the grantee would submit the same certification, listing the same years, for each of those years' action plans. In 2017, the grantee will submit a new certification for FY 2017, 2018 and 2019.
Related FAQ(s)
- In 2014, a grantee has a three-year certification period of 2014, 2015, and 2016. In 2015, it submitted a three-year certification for 2015, 2016, and 2017. In 2016, it submitted a three-year certification for 2016, 2017, and 2018. Is this overlapping, or rolling, of overall benefit certification periods permitted?
FAQ3512
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Overall Benefit |
Can the grantee ask to extend that one-year certification period to cover additional years, so the grantee has more time to get into compliance?
Example: After a CDBG grantee's program year ends, it is discovered that it failed the chosen one-year certification to meet the 70 percent (70%) minimum overall low- and moderate-income benefit requirement.
No, an overall benefit certification period cannot be changed or extended once it is over. A CDBG grantee is not allowed to retroactively change its certification period to resolve noncompliance that has already occurred.
Overall Benefit
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Overall Benefit |
Does the CDBG overall benefit requirement include Section 108 loan guarantee funds?
Yes. If a CDBG grantee also has a Section 108 loan guarantee, the overall low- and moderate-income benefit requirement is required to be met. The CDBG grantee must include the Section 108 loan guarantee expenditure in its overall benefit test. The language at Section 104(b)(3)(A) and 24 CFR 91.225(b)(4)(ii) references a guarantee or a grant under Section 108, if applicable.
Overall Benefit
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Overall Benefit |
How does a CDBG grantee demonstrate compliance with the selected overall benefit certification period?
Overall benefit compliance is reported annually when the CDBG e grantee submits its PR26, the CDBG Financial Summary Report, as part of its CAPER. Part III of the PR26, Low- and Moderate-Income Benefit This Reporting Period, will show the dollars expended for low- and moderate-income benefit with line items within this part devoted to expenditure adjustments. Just below this section the grantee can show its progress meeting the test at the end of...
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Overall benefit compliance is reported annually when the CDBG e grantee submits its PR26, the CDBG Financial Summary Report, as part of its CAPER. Part III of the PR26, Low- and Moderate-Income Benefit This Reporting Period, will show the dollars expended for low- and moderate-income benefit with line items within this part devoted to expenditure adjustments. Just below this section the grantee can show its progress meeting the test at the end of that program year, regardless of whether it has chosen a one, two, or three-year certification period. If a multiple-year certification period has been chosen, then the grantee enters the cumulative expenditures, obtained from prior and current year PR26 reports, as applicable, to determine the percentage benefit to low- and moderate-income persons (Line 26 of the PR26).
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Overall Benefit |
How does HUD measure compliance with the overall low- and moderate-income benefit requirement?
For example, is it tested based upon: Expenditure of CDBG funds that occurs during the program year(s) listed in the certification? Expenditure of CDBG funds out of the individual grant years listed in the certification?
HUD measures compliance with this requirement by reviewing the expenditure CDBG funds that occurs during the one-, two-, or three-year certification period, as appropriate. It is not based on the expenditure of CDBG funds out of the individual year grant(s) listed in the certification. This is because some CDBG funds for a grant year may not be spent until the following or subsequent years. For example, a grantee planned to spend $500,000 from it...
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HUD measures compliance with this requirement by reviewing the expenditure CDBG funds that occurs during the one-, two-, or three-year certification period, as appropriate. It is not based on the expenditure of CDBG funds out of the individual year grant(s) listed in the certification. This is because some CDBG funds for a grant year may not be spent until the following or subsequent years. For example, a grantee planned to spend $500,000 from its 2014 CDBG grant for a senior center. However, the project was delayed for various reasons, and the senior center was not completed until fall 2016. The 2014 CDBG funds spent in 2016 for this activity will be considered when conducting a compliance review during the grantee's certification period containing program year 2016. The fiscal years referenced in the certification are, therefore, the fiscal years that correspond to the grantee's program years. If a grantee selects a three-year certification period of FY 2015-2017 and it has a July 1 program year start date, compliance will be based on the grantee's expenditures between July 1, 2015 and June 30, 2018.
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Overall Benefit |
In 2014, a grantee has a three-year certification period of 2014, 2015, and 2016. In 2015, it submitted a three-year certification for 2015, 2016, and 2017. In 2016, it submitted a three-year certification for 2016, 2017, and 2018. Is this overlapping, or rolling, of overall benefit certification periods permitted?
No. Grantees may not overlap or roll their three-year certification periods annually. The correct method for submitting a three-year certification period is identified in FAQ 3512. Each CDBG grantee's certification period is separate and distinct. HUD will reject a grantee's Action Plan submission if it contains a certification that overlaps the period specified in a prior year's certification.Related FAQ(s)At the time of CDBG grant application, ...
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No. Grantees may not overlap or roll their three-year certification periods annually. The correct method for submitting a three-year certification period is identified in FAQ 3512. Each CDBG grantee's certification period is separate and distinct. HUD will reject a grantee's Action Plan submission if it contains a certification that overlaps the period specified in a prior year's certification.
Related FAQ(s)
FAQ3513
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Overall Benefit |
May CDBG grantees change their selected overall benefit certification periods whenever they want to do so?
No. CDBG grantees may only change their overall benefit certification periods when they submit their next certification. For example, if a grantee has a two-year certification period of 2016-2017, it may select a three-year certification period for 2018, 2019 and 2020 effective upon expiration of the previous two-year certification.
Overall Benefit
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Overall Benefit |
May compliance with meeting the CDBG overall benefit requirement be waived?
No. The CDBG overall benefit requirement is a statutory requirement which cannot be waived.
Overall Benefit
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Overall Benefit |
What is the CDBG overall low- and moderate-income benefit requirement, and where is it found? Are grantees required to certify that they will meet this requirement?
This CDBG requirement refers to a certification period of over one, two, or three years, a CDBG grantee shall expend not less than 70 percent of its CDBG funds in the aggregate for activities that benefit low- and moderate-income persons. This does not include planning and administrative costs, but does include program income. The grantee elects the period over which it will meet this requirement. This has also been referred to as the 70 percent ...
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This CDBG requirement refers to a certification period of over one, two, or three years, a CDBG grantee shall expend not less than 70 percent of its CDBG funds in the aggregate for activities that benefit low- and moderate-income persons. This does not include planning and administrative costs, but does include program income. The grantee elects the period over which it will meet this requirement. This has also been referred to as the 70 percent (70%) test, LMI benefit test, or overall benefit requirement. It is found at Section 101(c) of the Housing and Community Development Act of 1974 (HCDA) and 24 CFR 570.200(a)(3).
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Overall Benefit |
When do I need to make sure the overall income benefit is documented?
Each grantee certifies over a specified period of time (one (1), two (2), or three (3) years), a minimum of 70% of CDBG funds shall be expended for activities benefitting low to moderate income persons. Code enforcement may count toward the overall benefit requirement if the national objective of low and moderate area (LMA) is used. When code enforcement activities are undertaken under the slum and blight area (SBA) or urgent need national object...
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Each grantee certifies over a specified period of time (one (1), two (2), or three (3) years), a minimum of 70% of CDBG funds shall be expended for activities benefitting low to moderate income persons. Code enforcement may count toward the overall benefit requirement if the national objective of low and moderate area (LMA) is used. When code enforcement activities are undertaken under the slum and blight area (SBA) or urgent need national objectives, these activities will not count toward the minimum 70% requirement.
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Procurement |
Must a contractor be registered at sam.gov and have a DUNS number to check for debarment?
The General Services Administration (GSA), a federal agency, is required by the Federal Acquisition Regulation (FAR) to compile and maintain a list of parties debarred, suspended, or disqualified by federal agencies. Contractors as well as recipients of federal financial assistance must be registered at Sam.gov. To determine if a proposed contractor is debarred, grantees should check the federal SAM database. Active registration in SAM is re...
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The General Services Administration (GSA), a federal agency, is required by the Federal Acquisition Regulation (FAR) to compile and maintain a list of parties debarred, suspended, or disqualified by federal agencies. Contractors as well as recipients of federal financial assistance must be registered at Sam.gov. To determine if a proposed contractor is debarred, grantees should check the federal SAM database. Active registration in SAM is required to apply for an award and for HUD to make a payment. In addition to checking the name of the contracting firm, the name of the president and owner of the firm should also be checked. Staff should also review any state and local debarment lists. Website printouts must be placed in the file.
Per the SAM User Guide, the No Active Exclusions field on the SAM Entity summary indicates whether the entity has a current debarment. SAM.gov will check the exclusions list for the DUNS number of your entity and indicate whether any exclusion records exist. If an active exclusion record exists for your entity, this question will default to “Yes,” meaning that the contractor is debarred. No Record Found means that the entity is not registered or has let its registration lapse. The entity should ensure that the email address is current in SAM.gov so that when automated reminders are sent to renew registration each year that this reminder does not go into spam due to an obsolete email address.
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Procurement |
The County signed an agreement with a sub-recipient (a municipality) to use CDBG funds to construct a recreation center. If the sub-recipient already has or is going to obtain the service of an architect to design and oversee the construction of this center and is using its own non-CDBG funds to pay for the architect's service, does CDBG procurement policy apply in the obtaining of this architect's service?
Grantees and subrecipients are required to follow the procurement standards at 24 CFR 85.36 and 84.40-48, respectively. Specifically, since the subrecipient is a unit of general local government, it is required to follow 24 CFR 85.36, which requires all procurement transactions to be conducted in a manner to provide, to the maximum extent practical, open and free competition. Since this is a federally assisted CDBG activity, the procurement of th...
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Grantees and subrecipients are required to follow the procurement standards at 24 CFR 85.36 and 84.40-48, respectively. Specifically, since the subrecipient is a unit of general local government, it is required to follow 24 CFR 85.36, which requires all procurement transactions to be conducted in a manner to provide, to the maximum extent practical, open and free competition. Since this is a federally assisted CDBG activity, the procurement of the architectural services must meet the requirements at 24 CFR 85.36, even though a portion of the activity is paid from local funds. Additional information on federal procurement standards may be found in CPD Notice 96-05.
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Procurement |
Is there a Buy American requirement for CDBG-funded construction or public works projects similar to other federally-funded work?
There is no "Buy American" requirement for the federal Community Development Block Grant Program (CDBG). CDBG grantees and subrecipients must follow federal procurement rules when purchasing services, supplies, materials, or equipment. The applicable federal regulations are contained in: State and local governments and Indian tribes – 24 CFR Part 85. Nonprofits, institutions of higher education and hospitals – 2 CFR Part 215.44 (forme...
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There is no "Buy American" requirement for the federal Community Development Block Grant Program (CDBG). CDBG grantees and subrecipients must follow federal procurement rules when purchasing services, supplies, materials, or equipment. The applicable federal regulations are contained in:
- State and local governments and Indian tribes – 24 CFR Part 85.
- Nonprofits, institutions of higher education and hospitals – 2 CFR Part 215.44 (formerly OMB Circular A-110), as implemented through 24 CFR Part 84.
Most state and local governments have laws regarding procurement. Each entity receiving CDBG funds should be aware of state and/or local laws that may affect procurement policies. Grantees should adopt procurement policies that describe how the grantee or subrecipient will procure supplies, materials, services and equipment. The policy should assure that all purchases are handled fairly and in a manner that encourages full and open competition. The American Recovery and Reinvestment Act of 2009 awarded Community Development Block Grant Recovery (CDBG-R) funds to grantees that received CDBG funding in fiscal year 2008. For CDBG-R funded programs, the "Buy American" requirement applies to eligible activities for the construction, alteration, repair and maintenance of public buildings or public works. For these activities, with some exceptions, all of the iron, steel, and manufactured goods used in the project must be produced in the United States. All CDBG-R funds had to be expended by September 30, 2012. This "Buy American" requirement did not apply to the regular CDBG program.
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Procurement |
Can a request for proposals (RFP) or a request for qualifications (RFQ) be used on CDBG project?
Grantees may use the request for quotations when carrying out procurement by small purchase procedures. With this method, price or rate quotations are obtained from more than one source for the procurement of services supplies, or other property that does not cost more than $100,000. Requests for quotations may also be used for sealed bid procurements where the contract will be awarded to the firm whose bid, conforming with all of the material te...
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Grantees may use the request for quotations when carrying out procurement by small purchase procedures. With this method, price or rate quotations are obtained from more than one source for the procurement of services supplies, or other property that does not cost more than $100,000. Requests for quotations may also be used for sealed bid procurements where the contract will be awarded to the firm whose bid, conforming with all of the material terms and conditions of the invitation for bids, is the lowest in price. Requests for proposals are used when carrying out procurement by competitive proposals. Regulations on applicable provisions regarding procurement are 24 CFR Sections 85.36 (grantees) or 84.40 to 84.48 (subrecipients). In addition to federal regulations, most local governments have laws and regulations regarding procurement. Each entity receiving CDBG funds should be aware of local laws that may affect procurement policies and procedures.
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Procurement |
Can CDBG funds be used to pay a third party to do all the rehab inspections for a grantee?
CDBG regulations allow grantees to utilize third parties to perform the functions of program implementation. 24 CFR 85.36 (b) through (i) define procurement requirements applicable to third party service providers such as inspectors, specification writers, architects, engineers, etc. Grantees should follow local procurement policies that conform to state and federal requirements, found in 24CFR Part 85, including procurement standards, free and o...
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CDBG regulations allow grantees to utilize third parties to perform the functions of program implementation. 24 CFR 85.36 (b) through (i) define procurement requirements applicable to third party service providers such as inspectors, specification writers, architects, engineers, etc. Grantees should follow local procurement policies that conform to state and federal requirements, found in 24CFR Part 85, including procurement standards, free and open competition, methods of procurement, contracting with small and minority firms and women's business enterprises, conflict of interest, bonding, insurance, debarment, contracting cost and price. Beyond the procurement and contracting requirements, other considerations include technical qualifications of the individual/firm, experience with a similar scope of work, applicable licensing, and references.
It is recommended that you enter into a written contract agreement with the third party service provider. The written agreement should contain clear contract provisions such as a defined scope of work, legal remedies for non-performance or breach of contract, and agreed upon price for the provision of professional services. Having a contract in place serves as a means of ensuring clear communication between the parties involved, as a legal protection for the grantee and the professional service provider, and as a written record of the transaction that took place (scope of work, costs, etc.). It is also highly recommended that your legal counsel review the contract documents to ensure all local and state requirements are met.
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Procurement |
Does a subrecipient have to procure for construction to build a public building if CDBG funding was used solely to acquire land? If yes then can it sole source the contractor, if the contractor was already competitively procured and awarded the sole rights to build public buildings from the state?
CDBG subrecipients are required to follow federal, state and local procurement requirements when choosing a construction contractor, regardless of whether a grantee competitively procured contractors independently. For subrecipients the procurement rules are found at 84.40-84.48; 24 CFR Part 85.36 applies to grantees. They are cross referenced in the CDBG regulations at 24 CFR 570.502. Even though CDBG funds are being used in the acquisitio...
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CDBG subrecipients are required to follow federal, state and local procurement requirements when choosing a construction contractor, regardless of whether a grantee competitively procured contractors independently. For subrecipients the procurement rules are found at 84.40-84.48; 24 CFR Part 85.36 applies to grantees. They are cross referenced in the CDBG regulations at 24 CFR 570.502. Even though CDBG funds are being used in the acquisition, procurement requirements apply to the project itself which is a public facility. The subrecipient cannot simply select the contractor procured by the state. As states and units of general local government are subject to different procurement standards, there is no presumption that a state agency's procurement standards will conform to 24 CFR 85.36(b). The selection of the independent contractor providing common services is usually based on price (i.e., the lowest quote meeting specifications wins the bid). It is not clear whether the State's contractor was selected on that basis. Absent full and open competition consistent with the requirements of 24 CFR 85.36, there is no basis to determine the reasonability of the contract price. Therefore, the subrecipient may not piggyback the state’s procurement.
Please also note that federal acquisition requirements under the Uniform Relocation Assistance and Real Property Acquisition Policies Act are triggered. Documentation of the sale, either voluntary or involuntary, must be in the project file. If you need more information on relocation, the HUD Handbook 1378 might be useful.
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Procurement |
Are there disciplinary actions that must be taken if the code of conduct is violated in a CDBG project?
All procurements made with CDBG funds must comply with the applicable federal requirements found in 24 CFR Part 85.36. CDBG grantees are required to adopt written procurement standards for CDBG projects as required by 24 CFR Part 85.36(b). Grantees must develop and maintain a written code of standards that helps prevent conflicts of interest in procurement. The written code of conduct must apply to all employees, officers, agents of the grantee, ...
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All procurements made with CDBG funds must comply with the applicable federal requirements found in 24 CFR Part 85.36. CDBG grantees are required to adopt written procurement standards for CDBG projects as required by 24 CFR Part 85.36(b). Grantees must develop and maintain a written code of standards that helps prevent conflicts of interest in procurement. The written code of conduct must apply to all employees, officers, agents of the grantee, members of their immediate family and partners. To the extent permitted by State or local law or regulations, such standards of conduct will provide for penalties or sanctions, or other disciplinary actions for violations of such standards by grantees and subgrantee's officers, employees, or agents or by contractors or their agents. Any alleged violations of your code of conduct should be referred to your legal counsel for review and appropriate actions if violations have occurred. Your legal counsel would advise you on disciplinary actions that may be appropriate under state and local law such as removal from position, financial penalties, etc. If violations or infractions are substantial in nature, your legal counsel may refer the matter to appropriate officials for criminal investigation and possible prosecution. Some communities have boards of ethics that review matters, issue opinions and recommend actions.
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Procurement |
Following a formal sealed bid advertisement, an infrastructure project had only one contractor submit a bid for the project. Under a sealed bid procurement process, does more than one bid need to be received before proceeding with the project?
When only one bid is received in response to an invitation for bids, the grantee needs to carefully review and evaluate the relevant circumstances in making a decision about how to proceed. The review should include examination of the specifications to consider if they were sufficiently clear and not unduly restrictive, the process used to solicit adequate competition so that it could have been reasonably assumed that more than one bid would have...
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When only one bid is received in response to an invitation for bids, the grantee needs to carefully review and evaluate the relevant circumstances in making a decision about how to proceed. The review should include examination of the specifications to consider if they were sufficiently clear and not unduly restrictive, the process used to solicit adequate competition so that it could have been reasonably assumed that more than one bid would have been submitted, whether the price of the bid received is fair and reasonable, and if the bid is otherwise in accordance with the invitation for bids. This determination should be placed in the project file. Based on this review, it may be concluded that the work should be re-bid, with modifications as appropriate, using the competitive proposal method of procurement, or that it is appropriate to accept the one bid received. All of the requirements of 24 CFR 85.36(d)(4) must be met for procurement by noncompetitive proposals if the one bid received is accepted. In addition, the municipality must maintain documentation on file that shows its unsuccessful attempts to conduct procurement by sealed bid and competitive proposals.
In order to determine that the price is fair and reasonable, the grantee should compare the bid price to the in-house cost estimate and past prices paid for the same or substantially similar item(s). The grantee should also try to obtain information from the marketplace if that was not already done in developing the estimate of cost. The grantee’s attorney should also review the matter to determine if one bid can be accepted under state and/or local law or if the grantee must re-bid. Additional information on procurement requirements may be found at 24 CFR 85.36 and 24 CFR 84.40-84.48.
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Procurement |
A private nonprofit organization is receiving CDBG funds to construct a homeless shelter. They have private funds which they intend to use to hire a design team, including a construction manager. CDBG funding will finance the construction work, all of which will be procured using the standards at Part 84. What if any are the procurement requirements covering the private funds for the design team and construction manager?
This question addresses whether procurement applies to just CDBG costs or all of the costs in the project. Regardless of the portion of CDBG funds for the construction of a homeless shelter, if the funded entity is a CDBG nonprofit subrecipient, procurement rules in 24 CFR Part 84 apply to all of the costs associated with the project. In addition, any county-specific procurement requirements that are specified within your written agreement also apply.
Procurement
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Procurement |
If you are in the midst of a project and remove a prime construction contractor, what are the options for completing the work so that a nonprofit owner is in compliance with the federal requirements?
Federal procurement standards require all contacts in excess of $100,000 contain suitable provisions for termination, including the manner by which termination shall be effected and the basis for settlement. In addition, contracts must describe conditions under which the contract may be terminated for default as well as conditions where the contract may be terminated because of circumstances beyond the control of the contractor. Please reference ...
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Federal procurement standards require all contacts in excess of $100,000 contain suitable provisions for termination, including the manner by which termination shall be effected and the basis for settlement. In addition, contracts must describe conditions under which the contract may be terminated for default as well as conditions where the contract may be terminated because of circumstances beyond the control of the contractor. Please reference 24 CFR 84.48. Depending on the situation, you may wish to consider legal action against the contractor since they were removed for cause.
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Procurement |
Can local governments procure services from the state’s list of construction contractors? The state uses a sealed bid process to procure contracts.
HUD lays out the responsibilities that grantees must meet when conducting a procurement using federal funds in 24 CFR 85.36. While the procurement standards encourage intergovernmental agreements for the procurement of common goods and services (defined as standard commercial equipment, materials, supplies and services readily obtainable on the open market through conventional commercial marketing channels), procurement activities by CDBG entitle...
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HUD lays out the responsibilities that grantees must meet when conducting a procurement using federal funds in 24 CFR 85.36. While the procurement standards encourage intergovernmental agreements for the procurement of common goods and services (defined as standard commercial equipment, materials, supplies and services readily obtainable on the open market through conventional commercial marketing channels), procurement activities by CDBG entitlement grantees must still be conducted in accordance with the requirements of 24 CFR 85.36(b), specifically requiring grantees to follow their own procurement policies and procedures that meet all specified federal minimum standards.
Therefore, a grantee can select a contractor procured by the state only if the procurement complies with the grantees own procurement policies and procedures and the procurement also meets all requirements of the federal standards specified in 24 CFR 85.36 and meets federal requirements like Davis-Bacon. The bids have to be adjusted for local circumstances and can be made a condition of the award. This is still faster and easier than running a separate process, which is what 85.36(b)(5) is trying to encourage. Notice 96-05 provides additional guidance on procurement issues.
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Procurement |
Are we able to piggyback on an existing contract for the purchase of equipment less than $100,000? City regulations allow piggybacking and the contract being piggybacked on has been procured through a competitive process which included federal procurement language.
Piggybacking in this case refers to using the results of another CDBG grantee's procurement for equipment after-the-fact, rather than the City conducting its own procurement. A grantee may not piggyback another grantee's procurement of a contract for goods and services. HUD lays out the responsibilities that grantees must meet when conducting a procurement using federal funds in 24 CFR 85.36. While 85.36 encourages intergovernmental agreements fo...
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Piggybacking in this case refers to using the results of another CDBG grantee's procurement for equipment after-the-fact, rather than the City conducting its own procurement. A grantee may not piggyback another grantee's procurement of a contract for goods and services. HUD lays out the responsibilities that grantees must meet when conducting a procurement using federal funds in 24 CFR 85.36. While 85.36 encourages intergovernmental agreements for the procurement of common goods and services (defined as standard commercial equipment, materials, supplies and services readily obtainable on the open market through conventional commercial marketing channels), procurement activities by entitlement grantees must still be conducted in accordance with the requirements of 24 CFR 85.36(b). As States and units of general local government are subject to different procurement standards, there is no presumption that a state agency's or unit of government's procurement standards will conform to 85.36(b). The grantee must follow the procurement requirements, in accordance with 24 CFR 85.36(b), even if in the end the result is that the same contractor is selected.
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Procurement |
Please clarify if a PJ is permitted to utilize a competitively bid continuing services contract (for professional services such as engineering, surveying or architectural services) for on-going CDBG activities, during the life of the contract, that has been put in place for a specific period, such as three years? Following, the 3 year contract the on-going professional services contract would again be put out for competitive bids.
Although 24 CFR 85.36 does not mention the renewal of contracts, CPD Notice 96-05, page 3, last paragraph states that grantees are not allowed to renew or extend a contract without further competition. In addition, if professional services are required for a longer period of time than the contract specifies, those services must be secured through a new procurement. Therefore, if a grantee has a contract with a firm for professional services such ...
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Although 24 CFR 85.36 does not mention the renewal of contracts, CPD Notice 96-05, page 3, last paragraph states that grantees are not allowed to renew or extend a contract without further competition. In addition, if professional services are required for a longer period of time than the contract specifies, those services must be secured through a new procurement. Therefore, if a grantee has a contract with a firm for professional services such as engineering, surveying or architectural services, and it wants the firm to continue to do so beyond the time period specified in the original procurement and contract (e.g. three years), the additional year(s) of services must be re-advertised and there must be full and open competition for the work. We also recommend that you review your state and local laws regarding procurement that may apply in this situation.
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Self Certifications |
Can self-certifications of income be used in the CDBG Program to document that an activity has helped low- and moderate-income persons?
Yes. Income self-certifications are permissible pursuant to 24 CFR 570.506(b), but their use is generally limited to documenting beneficiary income for public service activities and even more limited when there is a direct financial benefit (e.g., day care subsidy, rental security deposit, etc.). Self-certifications are not intended to be used with housing and other direct-benefit activities, such as down payment assistance, where significant fin...
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Yes. Income self-certifications are permissible pursuant to 24 CFR 570.506(b), but their use is generally limited to documenting beneficiary income for public service activities and even more limited when there is a direct financial benefit (e.g., day care subsidy, rental security deposit, etc.). Self-certifications are not intended to be used with housing and other direct-benefit activities, such as down payment assistance, where significant financial benefits accrue to the beneficiary of the activity. There is no need to use self-certifications for an activity seeking to meet a low- and moderate-income area (LMA) national objective. In most service areas, the grantee can often rely on Low and Moderate Income Data (LMISD) from the Census Bureau to document the income of persons living within the boundaries of the activity. See further guidance on CDBG Low- and Moderate-Income Data.
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Self Certifications |
What type of CDBG public services are better suited to the use of self-certifications?
Self-certifications are generally intended to be used for CDBG eligible activities where there is not a direct financial benefit to the recipient, the service is minimal, or there is only an indirect benefit, such as access to after-school programs for low- or moderate-income children.
Self Certifications
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Self Certifications |
Do CDBG self-certifications need to be checked for accuracy? Or do we just take the beneficiary on his or her "word?"
The CDBG regulation states that the recipient, meaning the grantee, can "substitute a copy of a verifiable certification from the assisted person that his or her family income does not exceed the applicable income limit established in accordance with §570.3..." "Verifiable," therefore, means that it can be and is subject to being checked for accuracy. The self-certification form should also contain a statement above the signature line that notif...
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The CDBG regulation states that the recipient, meaning the grantee, can "substitute a copy of a verifiable certification from the assisted person that his or her family income does not exceed the applicable income limit established in accordance with §570.3..."
"Verifiable," therefore, means that it can be and is subject to being checked for accuracy. The self-certification form should also contain a statement above the signature line that notifies the signer that falsification of a certification is a violation of federal law and subject to prosecution.
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Self Certifications |
How do we go about verifying CDBG self-certifications? Do we need to verify all self-certifications submitted?
HUD recommends source documentation be requested from the CDBG beneficiary for 20% of the certifications. The beneficiary should also be informed that all sources of income and assets must be included when calculating annual income, depending upon the specified definition of the CDBG grantee (e.g., Part 5 (24 CFR 5.609), or the IRS definition. Depending on local policies and procedures, the grantee or subrecipient would review verifiabley income ...
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HUD recommends source documentation be requested from the CDBG beneficiary for 20% of the certifications. The beneficiary should also be informed that all sources of income and assets must be included when calculating annual income, depending upon the specified definition of the CDBG grantee (e.g., Part 5 (24 CFR 5.609), or the IRS definition. Depending on local policies and procedures, the grantee or subrecipient would review verifiabley income documentation through either: a) third party verification (e.g., verification of employment) or b) source documentation (e.g., wage statements , pensions, social security letter, etc.).
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Self Certifications |
Is the 20% threshold for verifications of CDBG self-certifications a hard and fast rule?
It is only a recommendation. HUD encourages CDBG grantees to establish their own policies and procedures for implementing a self-certification program. HUD recommends that grantees' local policies and procedures are consistent across similar types of CDBG-funded activities (e.g. for all public services that provide indirect financial assistance to beneficiaries).
Self Certifications
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Self Certifications |
What are some issues to consider in establishing a CDBG self-certification policy?
Local discretion is important to implementing a CDBG self-certification program because only the grantee can know all the circumstances and risk factors that must be considered in setting up such a program. The flexibility a grantee exercises regarding the 20% sampling recommendation can be a function of several things. For instance, if the grantee is considering a policy for a non-profit subrecipient or a government agency, how comfortable is it...
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Local discretion is important to implementing a CDBG self-certification program because only the grantee can know all the circumstances and risk factors that must be considered in setting up such a program. The flexibility a grantee exercises regarding the 20% sampling recommendation can be a function of several things. For instance, if the grantee is considering a policy for a non-profit subrecipient or a government agency, how comfortable is it with that entity's management and implementation of this public service activity? Is there a direct financial benefit to the beneficiaries? What is the estimated value of the benefit being provided, whether direct or indirect? How many persons is this activity serving?
The answers to all these questions and others should play into the sample size a CDBG grantee requests for verifiable income documentation. The greater the financial value of the benefit being provided – particularly if it is a direct financial benefit (e.g., day care subsidies, rental security deposits), the greater the sample size in most cases. As part of any policy, it is recommended that grantees alert beneficiaries while they are self-certifying as to income, that a select sample of self-certifications will be tested, and those beneficiaries will be expected to produce verifiable income documentation.
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Self Certifications |
What about one-time benefits provided at a food bank or a community event where the provider will likely never make contact again with a participant? How are those CDBG self-certifications verifiable?
Many times, it is impractical, if not downright impossible, to secure income verification from the beneficiaries of certain CDBG activities. This is particularly true of public service activities, like food banks, where donated food is made available for individuals and families, often have little or no ongoing client relationship between the beneficiary and the provider. Grantees must use their best judgment in funding agencies providing these s...
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Many times, it is impractical, if not downright impossible, to secure income verification from the beneficiaries of certain CDBG activities. This is particularly true of public service activities, like food banks, where donated food is made available for individuals and families, often have little or no ongoing client relationship between the beneficiary and the provider. Grantees must use their best judgment in funding agencies providing these services and should at least ensure that they have a written policy on self-certifications and that a majority of the types of services being provided do not depend on self-certifications. Grantees may also find it useful to explore other ways of meeting a national objective, such as "Low and Moderate Clientele (LMC) nature and location" or "LMC presumed benefit" would offer a more reliable path toward documentation.
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Self Certifications |
If one of our public service activities is monitored by HUD and a sample of verifiable income documentation is not available, will this result in a finding?
The percentage of self-certifications for which a grantee has back-up verifiable income documentation, though recommended to be 20%, is ultimately a function of several factors, as noted above. A discovery of no verifiable income documentation available on any sample taken, however, may be a concern or a finding and warrant further investigation, depending on the nature of the activity and the factors discussed above. Missing or incomplete docume...
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The percentage of self-certifications for which a grantee has back-up verifiable income documentation, though recommended to be 20%, is ultimately a function of several factors, as noted above. A discovery of no verifiable income documentation available on any sample taken, however, may be a concern or a finding and warrant further investigation, depending on the nature of the activity and the factors discussed above. Missing or incomplete documentation from one beneficiary may be a concern, but a pattern of missing data or income-ineligible beneficiaries could result in a finding of noncompliance. Records must demonstrate that at least 51% of the beneficiaries are income eligible. Any CDBG grantee that relies solely or predominantly on a self-certification approach to income documentation can put an activity at risk if the beneficiaries are later audited and determined to be over the applicable income limit.
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Timeliness |
Is CDBG program income included in the timeliness test?
Yes. The timeliness test, which is taken 60 days before the grantee's program year end date, includes available grant balances undisbursed by Line Of Credit Control System (LOCCS) and CDBG program income the grantee has on hand. This includes the program income that a grantee may have on hand in a revolving loan fund (RLF), referenced as "RL" funds in IDIS.
Timeliness
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Timeliness |
We have an activity where there's been a slight delay in completing construction and submission of final invoices. We were counting on these funds to be drawn before our timeliness measurement date. CDBG funds are under contract where the final draws will occur 2-3 weeks after the measurement date, can we go ahead and draw the funds down before our measurement date so that we meet the 1.50 ratio?
No. Doing so violates the 2 CFR Part 200 cash management requirements regarding drawing funds in advance of cash needs [2 CFR 200.305(b)(1)]. Any funds drawn in such a manner will be included by HUD in computing your timeliness ratio anyway. The grantee must return the funds to the LOC unless it can revise the draws to another activity that has immediate cash needs. In addition, the grantee may owe interest to the U.S. Treasury.
Timeliness
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Timeliness |
We ran a PR56 after submitting our last voucher, but the current CDBG draw ratio and the Line Of Credit (LOC) balance did not change. What did we do wrong?
Please note the reporting module in Integrated Disbursement and Information System (IDIS) does not operate on a "real-time" basis; changes are made overnight. Thus, reports only capture changes to the system on the next business day. Even so, vouchers may take longer to process. A good rule of thumb is to run an updated PR56 Report two days after submitting a voucher to see the new draw ratio and LOC balance.
Timeliness
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Timeliness |
What are "factors beyond the CDBG grantee's reasonable control?" Does HUD have a list of reasons that it will automatically accept?
Factors beyond the grantee's reasonable control can be a wide range of issues. Each grantee's circumstances, however, will be considered on its own merits.
HUD recommends that a grantee with any circumstances leading to untimeliness discuss its situation with its field office as soon as possible to explore possible solutions.
Timeliness
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Timeliness |
What are some ways a CDBG grantee can avoid timeliness problems?
Select activities in the Action Plan that are ready to go and include a list of back-up activities that could be funded in case the originally selected activities encounter delays. Reprogram funds for a new activity that is ready to go and include the original activity in a later year's Action Plan once it is ready to proceed. Consider if any changes are needed to the citizen participation plan to facilitate fund reprogramming. Consider making f...
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- Select activities in the Action Plan that are ready to go and include a list of back-up activities that could be funded in case the originally selected activities encounter delays.
- Reprogram funds for a new activity that is ready to go and include the original activity in a later year's Action Plan once it is ready to proceed. Consider if any changes are needed to the citizen participation plan to facilitate fund reprogramming.
- Consider making fewer, larger awards to subrecipients. Consider past experience and/or performance when choosing subrecipients to ensure funds are being expended in a timely manner.
- Consider breaking large infrastructure/construction projects into phases spread across several years' Action Plans. For example, fund the architectural/engineering work in year one, fund the water and sewer line replacements in year two, and fund the street and sidewalk reconstruction in year three.
- Make use of the regulatory authority to incur-pre-award costs (24 CFR 570.200(h)), where appropriate and permitted by state/local law.
- Set performance deadlines in subrecipient agreements and contracts and enforce them. If necessary, reprogram funds from a slow-moving activity to a ready-to-go, faster-moving activity so that there is less of a time lag for expenditures.
- Develop a schedule for each CDBG-funded activity that includes a timeline for estimated draws.
- Don't accumulate bills for months before submitting draw requests in IDIS and draw down funds in IDIS on at least a monthly basis. Grantees should establish a regular schedule for making drawdowns. A grantee that "front-ends" local funds to pay CDBG expenses for long time periods before reimbursing itself from its Line of Credit is costing itself money by earning less interest and risking timeliness concerns.
- Ensure multiple staff members have IDIS access to both initiate and approve drawdown requests to address sudden or unexpected employee absences.
- Perform a cash flow analysis of Revolving Loan Funds (RLFs) to determine whether the fund is over-capitalized (i.e. current balances plus projected repayments exceed expected demand for funds based on past performance). Where supply exceeds demand, reprogram excess RLF balances to other non-RLF activities.
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Timeliness |
What can a CDBG grantee do if it knows in advance it is going to be untimely?
A CDBG grantee may contact its CPD representative in the local HUD field office to request technical assistance. HUD staff may provide guidance to the grantee remotely or onsite on how best to manage its CDBG program.
Timeliness
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Timeliness |
What happens at a CDBG timeliness informal consultation?
At an informal consultation, a grantee is given the opportunity "to demonstrate," as stated in 24 CFR 570.902(a)(1)(ii) and (2)(ii), "to HUD's satisfaction that the lack of timeliness has resulted from factors beyond the grantee's reasonable control." Following this discussion, HUD will decide the appropriate corrective action by considering the grantee's progress with its workout plan. HUD will also determine whether the untimeliness was due, in...
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At an informal consultation, a grantee is given the opportunity "to demonstrate," as stated in 24 CFR 570.902(a)(1)(ii) and (2)(ii), "to HUD's satisfaction that the lack of timeliness has resulted from factors beyond the grantee's reasonable control." Following this discussion, HUD will decide the appropriate corrective action by considering the grantee's progress with its workout plan. HUD will also determine whether the untimeliness was due, in its estimation, from factors beyond the grantee's reasonable control. Finally, HUD will consider the likelihood of the grantee meeting the timeliness measure by its next test date.
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Timeliness |
What is timeliness in the CDBG Program?
"Timely performance" means compliance with the requirement that a CDBG Entitlement grantee, or Hawaii nonentitlement county grantee, must carry out its program in a timely manner, as measured by the rate of expenditure of funds from the grantee's Line of Credit (LOC). A CDBG Entitlement grantee, in accordance with the CDBG regulations at 24 CFR 570.902, must have a balance no greater than one and one-half (1.5) times its annual grant remaining in...
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"Timely performance" means compliance with the requirement that a CDBG Entitlement grantee, or Hawaii nonentitlement county grantee, must carry out its program in a timely manner, as measured by the rate of expenditure of funds from the grantee's Line of Credit (LOC). A CDBG Entitlement grantee, in accordance with the CDBG regulations at 24 CFR 570.902, must have a balance no greater than one and one-half (1.5) times its annual grant remaining in the Line of Credit, 60 days prior to the end of the program year. HUD has a longstanding policy of reducing the next year's grant allocation of a grantee that continues to be untimely.
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Timeliness |
What resources are available to ensure a CDBG grantee stays below its 1.50 timeliness ratio?
HUD provides resources to CDBG grantees on its website on this topic. The first one, "Keeping Your CDBG Funds Moving: Guidelines for Managing Your Overall Community Development Block Grant Program in a Timely Manner" is a helpful pamphlet to help grantees review internal procedures and incorporate timeliness into daily operations. The second resource, "Ensuring CDBG Subrecipient Timeliness" provides guidelines for grantee selection, management,...
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HUD provides resources to CDBG grantees on its website on this topic.
In addition, HUD and other CDBG grantees themselves have other resources to address timeliness accessible by Googling "CDBG Timeliness." These include, but are not limited to, examples of workout plans, timeliness bulletins issued by HUD in years past, and National Community Development Association (NCDA) PowerPoint presentations.
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Timeliness |
What should be included in a CDBG Workout Plan?
The plan should show how the grantee will meet the 1.5 timeliness performance standard by a specific date and identify all the actions the grantee expects to take to meet the specified timetable. Actions may include hiring staff, canceling contracts or matching funds for specific projects. In addition, the plan should include a discussion of projects which are behind schedule and the possibility of replacing them with faster-moving projects, as ...
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- The plan should show how the grantee will meet the 1.5 timeliness performance standard by a specific date and identify all the actions the grantee expects to take to meet the specified timetable. Actions may include hiring staff, canceling contracts or matching funds for specific projects. In addition, the plan should include a discussion of projects which are behind schedule and the possibility of replacing them with faster-moving projects, as well as funds available for reprogramming.
- The plan should include a timetable for all actions that need to take place, including specific dollar disbursements.
- Senior management should be involved in the plan's development so they have a vested interest in meeting performance benchmarks and spending CDBG funds on time.
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Further help in developing an acceptable workout plan may be found in the HUD publication, "Developing and Implementing a CDBG Workout Plan."
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Timeliness |
Why does HUD include RLF balances in computing the CDBG timeliness ratio? Those funds are set aside for a specific type of activity, cannot be drawn for other activities and we cannot control the demand for these funds by potential beneficiaries.
HUD includes Revolving Loan Fund (RLF) balances because they fall under the definition of program income and therefore are subject to the same terms and conditions as CDBG grant funds, including the timely expenditure requirements. Despite RLFs being subject to different rules and circumstances, there are actions that a grantee can take to ensure those funds truly revolve and do not lead to a timely expenditure problem.
Timeliness
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Timeliness |
Why does HUD measure timely expenditure performance 60 days before the end of a CDBG grantee's program year, instead of on the last day of the program year?
HUD measures a CDBG grantee's timely expenditure performance 60 days before the end of a grantee's program year so if corrective actions or sanctions are imposed, a grantee will be informed of those actions prior to the start of the grantee's subsequent program year. Then, a new grant agreement can be issued for the reduced amount.
Timeliness
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Timeliness |
Why is it so important for a CDBG grantee to ensure that its Line of Credit balance does not exceed 1.5 times its most recent allocation, when the measurement is taken?
Section 104(e) of the Housing and Community Development Act of 1974, as amended, requires HUD to determine annually whether each CDBG entitlement grantee is carrying out its activities in a timely manner. In addition to meeting the legal requirements, CDBG funds must be spent on time to achieve the objectives of the program. CDBG funds are used to meet the economic, infrastructure and social needs of under-served, distressed neighborhoods and the...
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Section 104(e) of the Housing and Community Development Act of 1974, as amended, requires HUD to determine annually whether each CDBG entitlement grantee is carrying out its activities in a timely manner. In addition to meeting the legal requirements, CDBG funds must be spent on time to achieve the objectives of the program. CDBG funds are used to meet the economic, infrastructure and social needs of under-served, distressed neighborhoods and therefore Congress wants to make sure that funds are being spent on a regular basis to meet those needs. Congress has expressed concerns in the past about increasing CDBG program funding if CDBG grantees cannot promptly spend the money they already have.
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Timeliness |
Will a CDBG grantee automatically be sanctioned for being untimely?
The first year a CDBG grantee is untimely, the HUD Field Office will send the grantee a finding letter and the grantee will be required to submit a workout plan showing how it intends to get back into compliance before the next timeliness measurement date. The plan might include how the grantee will speed up its overall expenditure rate, how it will spend down the backlog of funds, and how it will fix the problems that caused the untimely expendi...
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The first year a CDBG grantee is untimely, the HUD Field Office will send the grantee a finding letter and the grantee will be required to submit a workout plan showing how it intends to get back into compliance before the next timeliness measurement date. The plan might include how the grantee will speed up its overall expenditure rate, how it will spend down the backlog of funds, and how it will fix the problems that caused the untimely expenditure performance.
The second year an entitlement grantee is untimely, HUD has the authority to reduce the next year's grant by the dollar amount by which the grantee missed the 1.50 ratio. Before making any decision, HUD Headquarters will invite the grantee to participate in an informal consultation, pursuant to 24 CFR 570.911 in the CDBG regulations.
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Timeliness |
What are some ways for a CDBG grantee to check its timeliness on a regular basis?
A grantee should draw down funds from its LOC on a regular, periodic basis commensurate with cash needs, to ensure consistent bill payment. Each time the grantee submits a voucher in IDIS, for instance, it can run a PR56, CDBG Timeliness Report, which will provide the most updated draw ratio and Line of Credit (LOC) balance in the Line of Credit Control System (LOCCS).
Timeliness
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Urban County |
Where is the term "urban county" defined within the CDBG program and how many persons must a county have to qualify as an urban county?
Although mentioned at 24 CFR 570.3, Definitions, urban county is defined at Section 102(a)(6) of the Housing and Community Development Act (HCDA) of 1974, as amended. This provision defines an urban county as a county within a metropolitan area that has a population of 200,000 or more, not including metropolitan cities located therein. A county that has a minimum population of 200,000 may also qualify as an urban county if the unincorporated area...
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Although mentioned at 24 CFR 570.3, Definitions, urban county is defined at Section 102(a)(6) of the Housing and Community Development Act (HCDA) of 1974, as amended. This provision defines an urban county as a county within a metropolitan area that has a population of 200,000 or more, not including metropolitan cities located therein. A county that has a minimum population of 200,000 may also qualify as an urban county if the unincorporated areas and participating units of general local government (UGLGs) in the aggregate have a preponderance of persons of low and moderate income that reside in the county (preponderance test). Paragraphs C and D of Section 102(a)(6) of the HCDA were written in the law so that certain counties that Congress designated could qualify as urban counties.
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Urban County |
What type of communities contribute to the population threshold for a county to be determined eligible for CDBG urban county status?
The types of communities contributing to the population threshold for a county are incorporated units of general local government (UGLGs) that don't qualify as entitlement grantees and choose to participate in the urban county's CDBG program and unincorporated areas. The population of entitlement communities (those having a population over 50,000) located within an urban county is not included. (A metropolitan city may relinquish its entitlement ...
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The types of communities contributing to the population threshold for a county are incorporated units of general local government (UGLGs) that don't qualify as entitlement grantees and choose to participate in the urban county's CDBG program and unincorporated areas. The population of entitlement communities (those having a population over 50,000) located within an urban county is not included. (A metropolitan city may relinquish its entitlement status so that a county can qualify as an urban county.) The population of unincorporated areas of the county are automatically included.
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Urban County |
What happens to a CDBG urban county with a population just over 200,000 if a participating unit of general local government becomes a CDBG entitlement community and drops out of the urban county?
It depends on when the county became an urban county. If it has been an urban county since 1999, it is grandfathered as an urban county and cannot lose that status. Section 102(a)(6)(D)(viii) of the Housing and Community Development Act (HCDA) states that, aside from any other provision of Section 102(a)(6), any county that was classified as an urban county because it met the population threshold or low and moderate-income preponderance test for ...
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It depends on when the county became an urban county. If it has been an urban county since 1999, it is grandfathered as an urban county and cannot lose that status. Section 102(a)(6)(D)(viii) of the Housing and Community Development Act (HCDA) states that, aside from any other provision of Section 102(a)(6), any county that was classified as an urban county because it met the population threshold or low and moderate-income preponderance test for FY 1999 may always remain classified as an urban county.
If the urban county became an urban county in 2000 or later, then it is possible for the urban county to lose its urban county status. Any county that was classified as an urban county for a minimum of two years pursuant to Section 102(a)(6)(A), (C) or (D) will remain classified as an urban county unless one or more of its participating UGLGs chose not to have its population included or not to renew its cooperation agreement with the urban county. In this instance, the county fails to qualify as an urban county. (Section 102(a)(6)(B) of the HCDA). If this occurs, the county may seek a determination to remain as an urban county under the low- and moderate-income preponderance test.
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Urban County |
What is the low/moderate income preponderance test, and how is it calculated within the CDBG urban county context?
A new potentially eligible county may use this method of qualifying if it cannot get every unit of general local government (UGLG) to join the urban county, and, as result, the population of the participating UGLGs and the unincorporated areas does not add up to 200,000. (Note, however, that the county must first meet the 200,000 population threshold to be eligible.) An existing urban county may use this method of requalifying as an urban county ...
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A new potentially eligible county may use this method of qualifying if it cannot get every unit of general local government (UGLG) to join the urban county, and, as result, the population of the participating UGLGs and the unincorporated areas does not add up to 200,000. (Note, however, that the county must first meet the 200,000 population threshold to be eligible.)
An existing urban county may use this method of requalifying as an urban county if it has not been an urban county since 1999, or if its population is just over 200,000, and several of its participating UGLGs decide to leave the urban county, thus dropping the population below 200,000. (For example, the largest city in the county crosses the 50,000 population threshold and elects to leave the urban county to become an Entitlement city on its own when the county's current three-year qualification period ends.)
In either of these cases, the county can still qualify, so long as (1) the population of the participating UGLGs and the unincorporated areas has at least 100,000 population; and (2) the areas that are participating include a majority of the low and moderate persons living in the county (see Section 102(a)(6)(A)(ii) of the Housing and Community Development Act -HCDA).
The low/moderate income preponderance test is calculated by taking the total number of low- and moderate-income persons in the county minus the low- and moderate-income population in entitlement cities, if any. Take the sum and divide it by two, then add one. This is the minimum number of persons that reside in the county that must be low- and moderate-income to meet the preponderance test. For example, county X has a population of 200,475, not counting the populations of Entitlement cities Y and Z. County X has a total low- and moderate-income population of 58,000. Subtract the low- and moderate-income population that is in Entitlements Y and Z (58,000 – (12,000 + 2,000)). That leaves 44,000. Divide it by two which equals 22,000 and then add one which equals 22,001. If the unincorporated areas of the county plus all the participating UGLGs combined have at least 22,001 low- and moderate-income residents, county X can qualify as an urban county.
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Urban County |
How may a metropolitan or a principal city located in a non-urban county assist that county in attaining CDBG urban county status?
A metropolitan city, or a principal city (designated by Office of Management and Budget – OMB) as such and having less than 50,000 population) may relinquish its entitlement status and join the urban county as a participating unit of general local government (UGLG), along with other UGLGs located therein. Including the metropolitan city's population with the county's population will result in the county obtaining the 200,000 or more population ...
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A metropolitan city, or a principal city (designated by Office of Management and Budget – OMB) as such and having less than 50,000 population) may relinquish its entitlement status and join the urban county as a participating unit of general local government (UGLG), along with other UGLGs located therein. Including the metropolitan city's population with the county's population will result in the county obtaining the 200,000 or more population threshold needed to become an urban county. The city must notify HUD of its intention to do so in writing before HUD can include its population in the county's.
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Urban County |
What are "essential powers" within the CDBG program?
"Essential powers" refers to the ability of a county government to undertake essential community development and housing assistance activities in its unincorporated areas, if any, which are not units of general local government. In most counties, the county government's essential powers do not apply to incorporated units of general local government (UGLGs) within the county. If the county government cannot undertake essential community developmen...
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"Essential powers" refers to the ability of a county government to undertake essential community development and housing assistance activities in its unincorporated areas, if any, which are not units of general local government. In most counties, the county government's essential powers do not apply to incorporated units of general local government (UGLGs) within the county. If the county government cannot undertake essential community development and housing assistance activities within incorporated jurisdictions' boundaries, it must enter into a cooperation agreement with each unit of government to carry out those activities.
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Urban County |
What are the first steps in the qualification/requalification process for a CDBG urban county?
After HUD has notified an urban county of its eligibility, a county must contact each unit of general local government (UGLG) in writing and offer them the opportunity to participate or defer participation in the urban county's CDBG program. The UGLG must write back to the urban county with its decision to participate or defer participation in the county's CDBG program. The deadline to complete this step is contained in the annual Urban County No...
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After HUD has notified an urban county of its eligibility, a county must contact each unit of general local government (UGLG) in writing and offer them the opportunity to participate or defer participation in the urban county's CDBG program. The UGLG must write back to the urban county with its decision to participate or defer participation in the county's CDBG program. The deadline to complete this step is contained in the annual Urban County Notice. Where the county has essential housing and community development powers within incorporated local jurisdictions, the county may notify the UGLG that it will be included in the urban county unless it opts out of urban county participation.
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Urban County |
Why does the qualification/requalification period for CDBG urban county status occur every three years?
The qualification/requalification period is a statutory requirement and codified in the regulations at 24 CFR 570.307(d)(1). Section 102(d) of the Housing and Community Development Act (HCDA) states that, "The population of any UGLG which is included in that of an urban county ... shall be included in the population of such urban county for three program years beginning with the program year that its population was first so included." The regulat...
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The qualification/requalification period is a statutory requirement and codified in the regulations at 24 CFR 570.307(d)(1). Section 102(d) of the Housing and Community Development Act (HCDA) states that, "The population of any UGLG which is included in that of an urban county ... shall be included in the population of such urban county for three program years beginning with the program year that its population was first so included." The regulation further states an urban county's qualification by HUD shall remain effective for three successive federal fiscal years regardless of changes in its population during that period.
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Urban County |
Can a unit of general local government (UGLG) join a CDBG urban county during any year of its three-year qualification period?
Yes. The UGLG may join the urban county's CDBG program during the first, second or third year of its qualification period.
Urban County
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Urban County |
Must a unit of general local government (UGLG) remain with the CDBG urban county until it requalifies, even when meeting the population threshold of 50,000 to become an entitlement?
Yes, because this requirement is statutory. Section 102(d) of the Housing and Community Development Act (HCDA) states: "... the population of any unit of general local government which is included in that of an urban county ... shall be included in the population of such urban county for three program years beginning with the program year in which its population was first so included ..." Therefore, even if an UGLG reaches the 50,000 population t...
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Yes, because this requirement is statutory. Section 102(d) of the Housing and Community Development Act (HCDA) states: "... the population of any unit of general local government which is included in that of an urban county ... shall be included in the population of such urban county for three program years beginning with the program year in which its population was first so included ..." Therefore, even if an UGLG reaches the 50,000 population threshold during the three-year qualification period, it must remain with the urban county until it requalifies.
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Urban County |
What happens if an unincorporated area of a CDBG urban county incorporates as a unit of local government during the three-year period?
The newly incorporated unit of general local government (UGLG) will remain part of the urban county's CDBG program as an unincorporated area until the county requalifies. This means that the county will continue to have the ability to undertake essential community development and housing assistance activities in that area without a cooperation agreement. Once the county requalifies, and the newly incorporated UGLG is recognized by the Census Bure...
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The newly incorporated unit of general local government (UGLG) will remain part of the urban county's CDBG program as an unincorporated area until the county requalifies. This means that the county will continue to have the ability to undertake essential community development and housing assistance activities in that area without a cooperation agreement. Once the county requalifies, and the newly incorporated UGLG is recognized by the Census Bureau as such, the county will have to notify the newly incorporated area of its option to remain with the county as an UGLG or opt out of participating in the county's CDBG program.
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Urban County |
Who decides how the CDBG grant is used in an urban county--the county, participating UGLGs, or both? Are there any requirements regarding the distribution of CDBG funds to participating UGLGs?
Urban counties must conduct citizen participation activities and have at least two public hearings annually so the unincorporated areas and the participating units of general local government (UGLGs) and their citizens can discuss their communities' needs and proposed CDBG activities. In addition, in accordance with 24 CFR 91.100, urban counties must consult with business and civic leaders; local and regional government agencies; the Continuum(s)...
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Urban counties must conduct citizen participation activities and have at least two public hearings annually so the unincorporated areas and the participating units of general local government (UGLGs) and their citizens can discuss their communities' needs and proposed CDBG activities. In addition, in accordance with 24 CFR 91.100, urban counties must consult with business and civic leaders; local and regional government agencies; the Continuum(s) of Care that serve the geographic area; public and private agencies that address health, social service, victim services, employment, and education needs; correctional programs and institutions; and adjacent units of general local government (this is not a complete list) in the development of their consolidated plan.
There are no requirements regarding the distribution of CDBG funds to participating UGLGs. The urban county has the discretion to use its method of choice for awarding CDBG funds to participating UGLGs. A participating local government is not entitled to a share of the county's grant just because it has elected to participate in the urban county. As the grantee, the county has all rights and responsibilities for administering its grant under the Housing and Community Development Act (HCDA) and the regulations.
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Urban County |
Are urban counties required to award CDBG funds to all participating UGLGs?
No. Although the demographics of the participating UGLGs are used to calculate the amount of the county's CDBG grant, the UGLG must be planning to carry out a CDBG-assisted activity to receive a CDBG grant award from the urban county. An urban county may distribute CDBG funds in the manner that it chooses. It may require UGLGs to apply for funding under a competitive or noncompetitive selection process, distribute funds among UGLGs using a formul...
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No. Although the demographics of the participating UGLGs are used to calculate the amount of the county's CDBG grant, the UGLG must be planning to carry out a CDBG-assisted activity to receive a CDBG grant award from the urban county.
An urban county may distribute CDBG funds in the manner that it chooses. It may require UGLGs to apply for funding under a competitive or noncompetitive selection process, distribute funds among UGLGs using a formula of its choosing, provide funds to public or private nonprofit organizations, carry out activities directly, or any combination of the above.
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Urban County |
Must the urban county carry out all CDBG-assisted activities itself or may the participating UGLGs also carry out activities?
The urban county may carry out all CDBG-assisted activities itself, even in the participating units of general local government (UGLGs), or choose to carry out activities only in the unincorporated areas and allow the participating UGLGs to carry out activities in their jurisdictions. The final decision on who will carry out activities in the urban county rests with the county.
Urban County
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Urban County |
Are UGLGs and urban counties allowed to negotiate the amount of CDBG funds the county will award to the UGLG?
The urban county needs to establish policies and procedures governing its process for selecting activities for funding, including when and how a county may provide funds to participating units of general local government (UGLGs). However, the CDBG regulations give each grantee the flexibility to design its program based on locally-identified needs and priorities. It is common for county governments to work with their participating UGLGs to help d...
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The urban county needs to establish policies and procedures governing its process for selecting activities for funding, including when and how a county may provide funds to participating units of general local government (UGLGs). However, the CDBG regulations give each grantee the flexibility to design its program based on locally-identified needs and priorities. It is common for county governments to work with their participating UGLGs to help design the county's program. That process may or may not be spelled out in the cooperation agreements with participating UGLGs.
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Urban County |
Can a county take CDBG funds away from a participating UGLG after the county has awarded those funds to the city for an activity?
Yes. An urban county may take back CDBG funds awarded to an unit of general local government (UGLG) for various reasons. These reasons include but are not limited to untimely performance, noncompliance with cooperation and/or subrecipient agreements, ineligible activities, activity does not meet a national objective, noncompliance with Davis-Bacon requirements or fair housing requirements. The urban county ensures CDBG funds are used in accordanc...
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Yes. An urban county may take back CDBG funds awarded to an unit of general local government (UGLG) for various reasons. These reasons include but are not limited to untimely performance, noncompliance with cooperation and/or subrecipient agreements, ineligible activities, activity does not meet a national objective, noncompliance with Davis-Bacon requirements or fair housing requirements. The urban county ensures CDBG funds are used in accordance with all program requirements. Allowing an UGLG to carry out a CDBG-assisted activity does not relieve the urban county of this responsibility. When an UGLG is participating with, or as part of, an urban county, the urban county is responsible for holding the UGLG to the same requirements as subrecipients.
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Urban County |
What kind of written agreements are required between a CDBG urban county and participating UGLGs? If no agreement is required by state/local law, does this mean that no written agreement should exist between the urban county and its UGLGs?
There must be a written cooperation agreement between the urban county and its participating units of general local government (UGLGs) unless the urban county can undertake essential community development and housing assistance activities in incorporated areas. Urban counties must have cooperation agreements with UGLGs unless state/local law gives the urban county essential powers countywide, even in incorporated UGLGs. Since participating UGLGs ...
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There must be a written cooperation agreement between the urban county and its participating units of general local government (UGLGs) unless the urban county can undertake essential community development and housing assistance activities in incorporated areas. Urban counties must have cooperation agreements with UGLGs unless state/local law gives the urban county essential powers countywide, even in incorporated UGLGs. Since participating UGLGs are to be treated as subrecipients in accordance with 24 CFR 570.501(b), minimally, there must be an agreement between the urban county and its UGLGs that meets all the requirements at 24 CFR 570.503 [Agreements with subrecipients].
Cooperation agreements are not the same as subrecipient agreements. Cooperation agreements require UGLGs' cooperation to use their powers to carry out essential community development and housing assistance activities in accordance with the urban county's CDBG program. The agreements are in effect for three years unless they contain an automatic renewal clause. Cooperation agreements do not identify the activities to be carried out by the UGLGs. Subrecipient agreements contain a scope of work that the participating local government or subrecipient (a public or private nonprofit) is required to perform; have a budget; and usually have a beginning and ending date. The subrecipient agreement is not automatically renewing; the grantee and subrecipient may enter into a new subrecipient agreement. Cooperation agreements are only created between urban counties and participating UGLGs. Urban counties are encouraged to have both types of agreements with UGLGs, particularly when they or the UGLGs are carrying out CDBG assisted activities in an UGLG.
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Urban County |
Is a joint agreement the same as a cooperation agreement within the CDBG program?
No. A joint agreement between an entitlement grantee and an urban county permits the urban county to administer an entitlement grantee's CDBG program in addition to its own. A cooperation agreement allows an urban county to carry out eligible activities in participating units of general local government (UGLGs) where it cannot undertake essential community development and housing assistance activities. Therefore, UGLGs cannot have joint agreement...
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No. A joint agreement between an entitlement grantee and an urban county permits the urban county to administer an entitlement grantee's CDBG program in addition to its own. A cooperation agreement allows an urban county to carry out eligible activities in participating units of general local government (UGLGs) where it cannot undertake essential community development and housing assistance activities. Therefore, UGLGs cannot have joint agreements with urban counties. Only an entitlement grantee may have a joint agreement with an urban county.
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Urban County |
Can a CDBG urban county and entitlement grantee enter into a joint agreement whenever they have the desire to do so?
No. 24 CFR 570.308(a) states that a joint request shall only be considered if submitted at the time the county is seeking a three-year qualification or requalification as an urban county.
Urban County
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Urban County |
The CDBG Urban County Notice is published annually. May an extension to the deadlines outlined in the Notice be granted?
Yes. Urban counties must contact their field offices with extension requests. The field offices will contact Headquarters to request the extensions. Note that no extensions will be granted past mid-September.
Urban County
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Urban County |
Can an urban county fail to receive a CDBG grant during any year of its three-year qualification period?
Yes. If the urban county fails to apply for its CDBG grant by not submitting its SF 424, Consolidated Plan/Action Plan, and certifications by August 16 of that year, it will not receive a CDBG grant. This has the effect of the urban county relinquishing its status for that year. The urban county may requalify the following year for the next three-year qualification period if it wants to do so.
Urban County
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Urban County |
What options do UGLGs have if they decide not to participate in the urban county's CDBG program?
Non-entitlement units of general local government (UGLGs) choosing not to participate in the urban county's CDBG program may apply for CDBG funds from the State where it is located or choose not to participate in the CDBG program at all. An UGLG that reaches the population threshold to become an entitlement will be notified of its status. The UGLG must respond in writing to the county and field office that it either accepts or defers its entitlem...
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Non-entitlement units of general local government (UGLGs) choosing not to participate in the urban county's CDBG program may apply for CDBG funds from the State where it is located or choose not to participate in the CDBG program at all. An UGLG that reaches the population threshold to become an entitlement will be notified of its status. The UGLG must respond in writing to the county and field office that it either accepts or defers its entitlement status. If the UGLG accepts its entitlement status, it may either carry out its own CDBG program as an entitlement or enter into a joint agreement with the county during its year of qualification.
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Urban County |
What happens to the UGLGs when an urban county does not apply for its CDBG grant?
In the subsequent year, the units of general local government (UGLGs) may apply for assistance from the State CDBG program. For example, if an urban county does not apply for its CDBG grant by August 16, 2018, it will not receive its 2018 CDBG grant. In 2019, the UGLGs may apply to the State CDBG program for assistance. Theoretically, the state may choose to award any leftover FY 2018 funding to these UGLGs. To do this, the state would have to do...
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In the subsequent year, the units of general local government (UGLGs) may apply for assistance from the State CDBG program. For example, if an urban county does not apply for its CDBG grant by August 16, 2018, it will not receive its 2018 CDBG grant. In 2019, the UGLGs may apply to the State CDBG program for assistance. Theoretically, the state may choose to award any leftover FY 2018 funding to these UGLGs. To do this, the state would have to do a substantial amendment to its method of distribution, and it may be too late if the state was already in the middle of its funding competitions.
If an entitlement grantee relinquished its entitlement status to join the urban county, it may regain its entitlement status by notifying HUD in writing of its intent by mid- September of the preceding fiscal year.
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Urban County |
Can urban counties fund CDBG activities within entitlement communities or non-participating UGLGs that are located inside its boundaries, but outside its jurisdiction? What is the difference between being located within the geopolitical boundaries of the county and being a part of an urban county?
The urban counties must meet all requirements at 24 CFR 570.309. The requirements state that "CDBG funds may assist an activity outside the jurisdiction of the grantee only if the grantee determines that such an activity is necessary to further the purposes of the Act and the recipient's community development objectives, and that reasonable benefits from the activity will accrue to residents within the jurisdiction of the grantee. The grantee sha...
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The urban counties must meet all requirements at 24 CFR 570.309. The requirements state that "CDBG funds may assist an activity outside the jurisdiction of the grantee only if the grantee determines that such an activity is necessary to further the purposes of the Act and the recipient's community development objectives, and that reasonable benefits from the activity will accrue to residents within the jurisdiction of the grantee. The grantee shall document the basis for such determination prior to providing CDBG funds for the activity."
For example, if an urban county provides a social service such as a food pantry on a countywide basis, it will not want to refuse providing the service to low/moderate income persons in areas not participating in the urban county. The persons that live in non-participating areas of the county may be considered part of the 49 percent that are not low/moderate income.
An urban county may also choose to locate a CDBG-assisted public service in an entitlement city within its boundaries that will serve persons countywide. This is because the city is located centrally in the county, providing easy access to people all over the county. This is fine if the county can demonstrate at least 51 percent of the beneficiaries are low/moderate income and live in areas considered part of the urban county for CDBG program purposes.
Although the entitlement community is located within the urban county's physical boundaries, it is considered outside of the jurisdiction of the urban county for CDBG program purposes. Here is an example from a Midwestern county. This county wanted to construct a public facility in its largest city to primarily benefit the city's residents. The county was advised the city was outside its CDBG jurisdiction (although physically located in the county) and the facility would not primarily benefit its residents, so it could not use CDBG funds to construct the facility.
Some urban counties have one or more entitlement cities located within their boundaries, as well as non-entitled cities. These cities are in the geopolitical boundaries of the county and are considered part of the county because of their physical location within the county. The population of all the entitled and non-entitled cities are included as part of the county's total population.
However, to be part of an urban county, a city cannot be an entitlement (unless it has a joint agreement with the county), and an urban county is comprised of all its unincorporated areas and small cities choosing to participate in the urban county's CDBG program. Any small city (or entitlement city) that chooses not to participate in the urban county's CDBG program is not considered part of the urban county for CDBG program purposes. Its population and demographics are not included in the urban county's population. Although an entitlement city may be the location of the county seat (e.g., Chicago, Cook County), the city's population is not included in the urban county's population.
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Urban County |
Can CDBG urban counties and entitlement communities located within their boundaries partner to carry out an eligible activity?
Yes, if there is a written agreement between the entitlement community and urban county that fully details the activity to be carried out and how it will meet a national objective. HUD encourages the entitlement community and urban county to ensure their residents benefit in proportion to the percentage of CDBG funds contributed by each entity for the activity. For example, if the entitlement community and urban county each contributed 50 percent...
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Yes, if there is a written agreement between the entitlement community and urban county that fully details the activity to be carried out and how it will meet a national objective. HUD encourages the entitlement community and urban county to ensure their residents benefit in proportion to the percentage of CDBG funds contributed by each entity for the activity. For example, if the entitlement community and urban county each contributed 50 percent of the total funding for a child care center that served low/moderate income clientele, then it would be expected that approximately 50 percent of the children served live in the entitlement community and 50 percent of the beneficiaries are from the urban county.
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Urban County |
Can an urban county transfer CDBG funding from one participating city to another?
No. Pursuant to the Consolidated and Further Continuing Appropriations Act, 2016, Pub. L. 114-113, a unit of general local government may not sell, trade, or otherwise transfer all or any portion of such funds to a metropolitan city, urban county, unit of general local government, or Indian tribe, or insular area that directly or indirectly receives CDBG funds in exchange for any other funds, credits or non-Federal considerations, but must use su...
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No. Pursuant to the Consolidated and Further Continuing Appropriations Act, 2016, Pub. L. 114-113, a unit of general local government may not sell, trade, or otherwise transfer all or any portion of such funds to a metropolitan city, urban county, unit of general local government, or Indian tribe, or insular area that directly or indirectly receives CDBG funds in exchange for any other funds, credits or non-Federal considerations, but must use such funds for activities eligible under Title I of the Housing and Community Development Act of 1974, as amended. Congress prohibited this practice, beginning with the Consolidated Appropriations Act, 2014. This provision must be incorporated into cooperation agreements by revision or amendment.
In addition, the decision on appropriating CDBG funds in the urban county is not made by any of the participating UGLGs; it is made solely by the urban county.
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Urban County |
Where can I get resources to help the incorporated areas, the county commissioners, and other elected officials, especially, understand the CDBG urban county qualification and requalification process?
HUD has produced a technical assistance product on the urban county qualification and requalification process. Access the product on the HUD Exchange Explore CDBG page by clicking on the link titled, "The Urban County CDBG Qualification Process--Requirements, Procedures and Deadlines." The following table compares requirements for Joint Agreements and Cooperative Agreements. JOINT AGREEMENT COOPERATION AGREEMENT A joint agreement is an ag...
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HUD has produced a technical assistance product on the urban county qualification and requalification process. Access the product on the HUD Exchange Explore CDBG page by clicking on the link titled, "The Urban County CDBG Qualification Process--Requirements, Procedures and Deadlines."
The following table compares requirements for Joint Agreements and Cooperative Agreements.
JOINT AGREEMENT |
COOPERATION AGREEMENT |
A joint agreement is an agreement between an Urban County (UC) and a metropolitan city (entitlement). The UC receives both its own and the entitlement's CDBG grants and administers the entitlement's CDBG program in addition to its own CDBG program. The entitlement is treated as any other Unit of General Local Government (UGLG) that participates in the urban county's CDBG program (subject to the same requirements as subrecipients). A UC may be joined by more than one entitlement, but an entitlement located in more than one UC may be a joint recipient with only one UC at a time.
If an entitlement that was part of a UC becomes an entitlement grantee, it may elect to have a joint agreement with the UC. An existing entitlement may also elect to enter into a joint agreement instead of receiving and administering its own CDBG grant. However, it may only do so during the year that the UC is requalifying. The entitlement is legally obligated to remain in a joint agreement status for the duration of the three-year UC qualification period.
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A cooperation agreement is an agreement made between a UC and a Unit of General Local Government, or UGLG (non-entitlement). The UC must enter into a cooperation agreement with any UGLG where the UC does not have power to carry out essential community renewal and lower-income housing assistance activities. UCs usually have essential powers in their unincorporated areas unless state or local law says otherwise.
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Responsibilities of the Entitlement and UC
Entitlement
- Provides input regarding activities to be funded with CDBG
- Other responsibilities may be spelled out in the joint agreement, as agreed to by the entitlement and the UC
- The UC is required to expend the entitlement's CDBG grant in and for the benefit of that entitlement
UC
- Administers CDBG program
- Develops Consolidated Plan and Action Plan
- Conducts the Assessment of Fair Housing
- Conducts Citizen Participation
- Submits CAPER
- Administers IDIS
- Program Income and Timeliness computed by UC
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Responsibilities of the UGLG and UC
UGLG
- Work with the UC to determine what activities need to be carried out
- UGLGs may carry out eligible activities
UC
- The UC maintains all responsibilities for CDBG grant administration such as submission of the Consolidated Plan/Action Plan and CAPER, A-133 audit, Assessment of Fair Housing, environmental review, design of the UGLGs CDBG program, and management/oversight of subrecipients
- The UC may select UGLGs for CDBG awards but is not required to award CDBG funds to every participating UGLG. CDBG awards should be made only to the UGLGs that plan on carrying out an eligible activity
- Management and oversight of the UGLG in carrying out CDBG-assisted activities
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Applicability
- HUD computes a separate allocation amount each year for the entitlement and the UC, using their respective demographies.
- HUD combines the two amounts and executes one grant agreement for the combined amount with the UC.
- Joint agreements may be automatically renewing.
- All program requirements such as the 20 percent planning and general administration cap, the 15 percent public service cap, and the 70 percent overall benefit requirement are based on the combined grant amount and apply to the UC's grant as a whole. The caps do not apply separately to the entitlement's and the UC's CDBG grants.
- Low/moderate income summary data and the upper quartile exception criteria will be based on the UC's grant as a whole. These do not apply separately to the entitlement's and the UC's CDBG grants.
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Regulatory and Operational Impacts of Cooperation Agreement
- HUD computes one allocation amount for the UC as a whole, including the demographics of all participating UGLGs plus the unincorporated areas of the county.
- HUD executes one grant agreement with the UC.
- HUD has no contractual relationship with the UGLG - the UC does.
- A UC may choose to use automatically-renewing cooperation agreements; in this situation, any participating UGLG is automatically included as a participant for the next three-year UC qualification period unless the UGLG notifies the UC in writing that it wishes to opt out of the UC when it is requalifying.
- All program requirements such as the 20 percent planning and general administration cap, the 15 percent public service cap, the 70 percent overall benefit requirement, low/moderate income summary data, and the upper quartile exception criteria, etc. apply to the UC's grant as a whole, not to each individual sub-award to an UGLG.
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HOME Program Implications
If the entitlement qualifies to receive a separate allocation of HOME funds, it has three options:
- it may form a HOME consortium with the UC, in which case it will be included as part of the UC when the HOME funds for the county are calculated;
- it may elect to continue to receive its separate HOME allocation but have the UC administer it; or
- the entitlement may administer its HOME program on its own.
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HOME Program Implications
When included UGLGs become part of a UC for the CDBG Program, they are part of the UC for the HOME Program and may receive a formula allocation under the HOME Program only as part of the UC. Thus, even if the UC does not receive a HOME formula allocation, the participating UGLG cannot form a HOME consortium with other local governments. However, this does not preclude the UC or a UGLG within an urban county from applying to the State for HOME funds, if the State allows.
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