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)?
Date Published: May 2015
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.