14d. Key Financial/Accounting Requirements for PRA Grantees
Administrative Costs for Grantees
Total Administrative Costs, including both direct and indirect costs, may not exceed eight (8) percent of the rental assistance grant amount awarded, unless approved by HUD. (HUD-92305-PRA) These funds may be used for planning and other costs associated with developing and operating the Section 811 PRA Demonstration program, including infrastructure and technology needed to operate the program. [CA-Exhibit 5: §206]
Amendments to Cooperative Agreements (CA) and Rental Assistance Contracts (RAC)
Changes to a grantee’s PRA program can be made. Changes in the key program characteristics described in Exhibit 4 of the Cooperative Agreement must be reported in writing to HUD. Grantees may notify HUD of changes except those that involve any change to their leveraging (of rents or of other units); these require HUD approval prior to making any change. If you are unsure whether or not a change requires HUD approval, it is best to check with the PRA staff. Additionally, the Agreements shall be construed, and the rights and obligations of the parties determined, in accordance with all statutory requirements, and with all HUD requirements, including regulatory and administrative requirements, as may be amended from time to time. [CA-25]
To amend a RAC, submit the following to the HUD PRA mailbox [FAQ-2706]:
- RAC page 1
- RAC page 4, with revisions and signatures
- A new Rent Schedule using HUD Form 92458
- A cover letter or e-mail justification for the amendment
Audit Requirements for grantees
All non-federal entities that expend $750,000 or more of federal awards in a year are required to obtain an annual audit in accordance with 2 CFR Part 200-Uniform Administrative Requirements, Cost Principles and Audit Requirements for federal Awards (or A-133 for FY 2012 grantees). HUD expects grantees to include PRA activities in their annual financial audit but does not require a separate audit. HUD understands that in states with multiple federal programs, the PRA program may not be selected for review each year. [FAQ-2594]
Pursuant to their Cooperative Agreement, grantees must submit audited annual financial statements that comply with the requirements of the appropriate OMB circular by the earlier of: thirty (30) days after receipt of the auditor’s report or nine (9) months after the grantee’s fiscal year end. Grantees are not required to submit an audited financial statement specific to this grant award. [CA-13.G.1]
- The audit must be performed by an independent auditor and procured using the standards set forth in the OMB Omnibus Circular and other documents referenced in the Omnibus Circular (or A-133 for FY 2012 grantees). [CA-13.G.2]
- If there are audit findings that require corrective actions that relate to the PRA Program, the grantee must complete corrective actions described in the audit submission package. [CA-13.G.3]
Audit Requirements for Owners
Owners are not required to conduct an A-133/Part 200 audit due to their PRA contract obligations alone. If an Owner is a nonprofit organization with federal funds expenditures of $750,000 or more per year, the entity would be subject to an A-133/Part 200 audit. This would be as a result of Office of Management and Budget Requirements, not HUD PRA Program requirements. [FAQ-2363]
The PRA Program does, however, include certain requirements regarding financial oversight of Owners:
- Fraud Monitoring: The Cooperative Agreement, Section XVI b, states that grantees are solely responsible for the administration, management and oversight of the Grant and all program activities, including monitoring Owners of Eligible Multifamily Properties. Grantees must monitor Owners to ensure that all program and audit requirements are met.
- Financial Statement Submittal: Grantees are required to submit to HUD audited annual financial statements that comply with the requirements of OMB’s Ominibus Circular (or 24 CFR part 85, as applicable). Towards that end, grantees are expected to establish control measures with Owners to meet the grantee’s financial reporting requirements. In signing a RAC, Owners agree to comply with the grantee’s control measures.
Budget Reports for HUD
Grantees are expected to provide HUD with quarterly budgets until the very last RAC is executed, which results in the grantee’s fully encumbering funds provided under their Cooperative Agreement.
Thereafter, grantees must provide an updated annual budget, including the amount the grantee anticipates spending in the following year and, based on that amount, evidence that the grantee will not expend funds in excess of the total grant amount. Each budget must include a running total of Administrative Costs the grantee has requested/received thus far and how much is remaining for the Period of Performance. [CA-10]
Closeout of Cooperative Agreements
Grantees must provide HUD with closeout documentation within ninety (90) days after the end of the Performance Period, or within ninety (90) days of termination of their Cooperative Agreement, which should include, without limitation, the following:
- A Final Narrative Report summarizing activities conducted under the grant, including significant outcomes resulting from the grant activities and problems encountered during the Performance Period; and/or
- A final Federal Financial Report. [CA-28.A]
Compliance Reporting Requirements, Including Related to Tenants, Rent Increases & Special Claims
Grantees can contract any or all of these requirements to another entity. As defined under the “Automation Rule” (24 CFR part 208), grantees must monitor the compliance of PRA Program multifamily developments. Grantees are responsible for conducting monthly voucher reviews, adjusting rent and utility allowances when needed, paying monthly rental assistance subsidies directly to Owners, and responding to health and safety issues when required by HUD. These responsibilities include:
- General HUD Compliance Requirements [CA-15.A]
- Monthly Tenant Reporting Requirements [CA-15.B]
- Monthly Voucher Reporting Requirements [CA-15.C]
- Subsidy Payment for Occupied Unit [CA-15.D]
- Tenant Certification [CA-15.E]
- TRACS - Tenant Rental Assistance Certification System [CA-15.F]
- Rent Increase Request Requirements [CA-15.G]
- Special Claims [CA-15.H]
Grantees must have the capability to receive Eligible Tenants’ certification and recertification data (form HUD 50059) and voucher data (form HUD 52670) electronically from Owners of Eligible Multifamily Properties in a form consistent with HUD reporting requirements for the HUD Tenant Rental Assistance Certification System (TRACS). Grantees must also have the capability, in a form acceptable to HUD, for communicating to Owners regarding errors in submissions of forms 50059 and 52670. [CA-14.A]
Grantees must provide HUD with data (via the internet) on RACs, rent adjustments and payments to Owners, contract renewal processing, and other documents and information relevant to grantee responsibilities articulated in their Cooperative Agreement. [CA-14.B]
Grantees must have a depository account with a financial institution whose deposits or accounts are insured either by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Funds and must be capable of receiving and sending electronic fund transfer (EFT) transactions. Grantees must have facilities acceptable to HUD for making timely and accurate rental assistance payments to Owners. [CA-14.C] (See also Depository Accounts.)
Grantees may subcontract any or all of the grantee Communications requirements included in Section XIV. However, if a grantee chooses to subcontract any or all of these requirements, the grantee remains responsible for ensuring all of the requirements in Section XIV are met. [CA-14.D]
Conflicts of Interest
Grantees, where applicable, must comply with the conflict of interest requirements in the Omnibus Circular (or 24 CFR parts 84 and 85, as applicable). [CA-17.A]
Grantees must comply with the disclosure requirements of section 102(b) of the HUD Reform Act of 1989 (42 U.S.C. §3545(b)) and its implementing regulations, 24 CFR part 4. To initially satisfy this requirement, grantees must complete the form HUD-2880, Applicant/Recipient Disclosure Update Report. The completed form is incorporated into grantees’ Cooperative Agreements. Further, grantees are expected to update form HUD-2880, as required by the HUD Reform Act of 1989 and 24 CFR §4.11. [CA-17.B]
Grantees must enter an agreement with a depository institution whose deposits are accounts insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund and all Grant amounts should be promptly deposited with a financial institution. [CA-20.A-B]
Grantees may only withdraw deposited Grant amounts pursuant to the CA. [CA-20.C]
Grantees may not deposit under the depository agreement monies received or held by the grantee in connection with any non-Section 811 PRA Program (or any successor program activity), nor may the grantee comingle these funds with any other non-Section 811 PRA funds. [CA-20. D]
If HUD determines that a grantee has committed any default under the CA, and has given the grantee notice of such determination and a reasonable opportunity to cure, and HUD, at its sole discretion, determines that the grantee fails to cure the default, then HUD may issue a letter of default and collect any amounts due in accordance with 24 CFR §85.52.
To expedite repayment to HUD, the grantee must permit HUD to withdraw Section 811 PRA funds from the grantee's account upon notice from HUD and receipt of the Automated Clearing House (ACH) identification number and amount due.
eLOCCS Requirement for Receiving Payment from HUD
Unless otherwise determined by HUD, grantees must request and receive payment of administrative costs through HUD’s Electronic Line of Credit. [CA-13.A]
Detailed instructions on the use of eLOCCS are included at: [CA-13.A.1-5]
In addition to the required eLOCCS payment voucher, grantees must submit documentation to support payment requests for costs to be incurred in the performance of their CA and in accordance with terms and conditions of any program issued guidance. The supporting documentation may include invoices, receipts, cancelled checks, or salary reports. Vouchers will not be approved for payment, if a grantee has any outstanding reports as it relates to the grant requirements of this agreement. [CA-13.A.6]
Compliance with listed Acts and Executive Orders. [CA-23.A.1-4]
Grantees, where applicable, must submit to HUD a signed certification of compliance with the Fair Housing Act, Title VI of the Civil Rights Act of 1964, Executive Order 11063, Section 504 of the Rehabilitation Act of 1973, and Title II of the Americans with Disabilities Act. [CA-23.B]
Grantees must cooperate with HUD in the conducting of compliance reviews and complaint investigations pursuant to applicable civil rights statutes, Executive Orders, and related rules and regulations. [CA-23.C]
Grantees must maintain source documentation of direct costs, such as invoices, receipts, cancelled checks, and salary reports, to support all eLOCCS draw requests for payment. This information must be made available to HUD upon request and maintained for a period of at least three (3) years after the initial funding cycle, or the date of the last payment in the initial funding cycle, whichever occurs last. For example, documentation of expenses from year one (1) to year five (5) can be purged at year eight (8). Documentation of expenses from year six (6) can be purged at year nine (9). [CA-13.F]
Fidelity Bond Coverage
Grantees must carry adequate fidelity bond coverage to compensate the grantee and HUD for any theft, fraud or other loss of program property resulting from action or non-action by grantee officers or employees or other individuals with administrative functions or responsibility for contract administration under their Cooperative Agreement.
- HUD allows a grantee to utilize the grantee’s state self-insurance/fidelity bond program upon evidence that under the state program the grantee and HUD shall also be compensated for any theft, fraud, or other loss of program property resulting from the misconduct of grantee employees. [CA-21]
PRA requirements mimic the Performance-Based Contract Administration (PBCA) program, so the following coverage is required:
- The amount of the Fidelity Bond should be sufficient to cover the maximum possible monthly Rental Assistance Payments (RAPs) that can be received by a grantee once the grantee starts making RAPs to Owners.
- Debt service offsets are not received by the grantee and, therefore, need not be covered by the Fidelity Bond.
- RAPs for a given month may significantly exceed the normally vouchered amounts. This can be caused by factors such as retroactive vouchers for several months resulting from owners’ failure to submit past vouchers or delayed contract increases or other processing delays.
- Grantees should increase the “normal” coverage of one month’s “net” payments by an amount that gives them comfort in discharging their fiduciary responsibilities.
- As additional Rental Assistance Contracts (RACs) are assigned, the Fidelity Bond must be increased before the grantee begins making RAPs for the added contracts. [FAQ-2709]
HUD will allow grantees to utilize their state’s self-insurance/fidelity bond program upon evidence that under the state program the grantee and HUD shall also be compensated for any theft, fraud, or other loss of program property resulting from the misconduct of grantee employees. [CA-21]
Grantees assume solely responsible for the administration, management and oversight of the Grant and the program as described in their Cooperative Agreements, including monitoring Owners of Eligible Multifamily Properties. Grantees must monitor Owners to ensure that program and audit requirements are met as delineated in the Omnibus Circular (or 24 CFR part 85, as applicable).
Grantees are expected to fully and promptly cooperate with HUD’s or its designees’ inquiries about any alleged, perceived or actual fraud and comply with any anti-fraud and legal compliance procedures that HUD may require. [CA-16.B]
Grant Amount and Total Assisted Units
Grantees must provide Rental Assistance Payments to Owners of Eligible Multifamily Properties consistent with their Cooperative Agreement. After the initial five (5) year period, HUD will continue the grant, as may be amended, annually, or in any other frequency as determined by HUD, subject to appropriations. [CA-6.A]
The funding authorized under a Cooperative Agreement must be disbursed by DATE CERTAIN. If all funds have not been disbursed by HUD/grantee to the Owner by the aforementioned time, the funds, even though obligated, will be cancelled and no further disbursements will be made. [CA-6.A.1]
Within 30 days of the execution of the last RAC – the one that results in a grantee’s fully encumbering funds provided under their Agreement – the grantee must provide HUD with confirmation of the final number of Assisted Units. The final number of Assisted Units will be compared with the number of units listed on Exhibit 4 of their Agreement. [CA-6.C]
Grantee Audit Requirements
Grantees must submit audited annual financial statements that comply with the requirements of the applicable OMB Circular by the earlier of: (1) 30 days after receipt of the auditor’s report or (2) 9 months after the grantee’s fiscal year end (FYE). Grantees are not required to submit an audited financial statement specific to a grant award. [CA-13.G.1]
The audit must be performed by an independent auditor, procured using the standards in the applicable OMB Circular and other documents referenced in the applicable Circular. [CA-13.G.2]
If there are audit findings that require corrective actions that relate to the PRA Program, the grantee must complete corrective actions described in the audit submission package. [CA-13.G.3]
Grantees’ Operational Responsibilities:
Grantees must ensure that the PRA Program will be executed in accordance with their CA, including but not limited to ensuring that each Owner of an Eligible Multifamily Property records the HUD required Section 811 Project Rental Assistance Use Agreement (CA Exhibit 10) and utilizes the Section 811 Project Rental Assistance Model Lease (CA Exhibit 11) for all Assisted Units. Additionally, grantees assume responsibility for all activities relative to implementing the PRA Program under their CA and must be in compliance with Cranston-Gonzalez National Affordable Housing Act of 1990 (NAHA) and all other applicable federal laws and requirements. [CA-12.A]
- Grantee mergers, acquisitions or other changes in the legal structure must be reported to HUD as soon as a grantee is aware such change is likely. [CA-12.B]
- Grantees must develop and maintain adequate system functionality that allows for the flow of documentation and information between the grantee and HUD. Grantees must ensure their systems have adequate security measures and staff is appropriately trained to protect the confidentiality of certain records, including but not limited to income and tenancy information of the families assisted under the RAC. [CA-12.C]
HUD will have ongoing involvement in the review, development, approval and targeting of the work to be carried out under Cooperative Agreements. HUD’s involvement may include, but is not limited to: (1) conducting evaluation and research, (2) reviewing grantees’ administrative processes as they relate to implementing the PRA, including reviews of grantees’ forms, verifications, and other documentation; (3) reviewing outreach and training materials belonging to grantees. Grantees are expected to be timely and cooperate fully. HUD will provide instructions and guidance on the requirements for data and program materials for any and all HUD reviews and evaluations in a timely manner. [CA-16.A]
Internal Control Reviews
Grantees must provide HUD or its designee with access to all internal control reviews and reports that relate to the PRA, including those proposed by independent auditing firms, including state auditors, to enable HUD to examine grantees for compliance with applicable provisions of the PRA Program, their Cooperative Agreement and applicable laws. A copy of the reviews and reports must be provided to HUD upon request. [CA-16.C]
- Assignment: Cooperative Agreements may not be assigned by grantees without the prior written consent of HUD. [CA-29.F]
- Defaults and Remedies: Details can be found at [CA-19]
- Equal Opportunity: Details can be found at [CA-23]
- Exclusion of Third Party Rights: Details can be found at [CA-24]
- Limitations on Use of Funds to Influence: Details restricting Certain Federal Contracting and Financial Transactions can be found at [CA-18]
Period of Performance
Grantees must also provide official notification of the expiration date of the very last RAC – the one that results in the grantee’s fully encumbering funds provided under their Agreement – within 30 days of execution of that RAC. Based on this date, HUD will establish a closeout date for the Agreement. If funds are not fully encumbered by that DATE CERTAIN, HUD may request a plan for remediation and reserves the right to reprogram the funds. [CA-7.A]
At the time the Agreement expires, and subject to future appropriations, it may be renewed upon written approval by HUD. Should a grantee desire to renew the Agreement, the grantee must make a written request for renewal and provide the request to HUD at least 120 days prior to the expiration of the Agreement. The grantee’s request must: (1) state the specific time frame of the proposed renewal, and (2) outline how grant funds will be effectively spent within the proposed renewal period.
Upon receipt of the written request, HUD may, by and through the PRA or successor program, approve a renewal depending on the PRA Program or successor program funding levels and Program Requirements that may be imposed at that time. [CA-7.C]
If Congress fails to appropriate funds adequate to meet the funding needs of the CA after the initial five-year funding period, HUD may terminate the Agreement. In the event the Agreement is terminated, HUD will not require the grantee to enforce the RAC or PRA use agreement and the grantee may, at its discretion, continue to enforce or terminate such RACs and use agreements. [CA-7.D]
Grantees must have sufficient knowledge and experience to identify and account for program income as defined in the OMB Omnibus Circular (2 CFR §200.80) or 24 CFR Part 85, as applicable. All program income including interest earned on any award-supported activity (if it generates program income it has to be accounted for whether it is paid to a grantee or is used for a program purpose without passing back to the grantee) is subject to the terms and conditions of the Cooperative Agreement and such U.S. Treasury rules as may apply. More specifically, grantees must document receipt of program income and how the funds were used. [CA-Exhibit 5: §218]
Rental Assistance Contract Initiation and Termination
Grantees must execute a HUD-required Rental Assistance Contracts (RAC) with each Owner of an Eligible Multifamily Property that agrees to provide Eligible Tenants with rental assistance in accordance with their Cooperative Agreement.
- Grantees may not disburse Rental Assistance Payments to the Owners of Eligible Multifamily Properties until the RAC is executed.
- All RACs executed should, to the extent applicable, incorporate and impose all terms and conditions found in their Cooperative Agreement.
- Grantees may not waive any terms of their CA for the benefit of any Owner of an Eligible Multifamily Property.
- With HUD approval, grantees may include an addendum to the RAC, provided that the provisions of the addendum do not conflict with the CA. [CA-11]
- In cases where grantees award contracts to non-profit organizations, such contracts must contain the appropriate provisions set forth in the “Contract Provisions” sections of the Omnibus Circular (Appendix II) or CFR part 85 (Appendix A), as appropriate. [CA-27]
HUD acknowledges that a grantee may need to terminate a RAC due to lack of interest from a PRA eligible applicant in a particular location, insufficient unit sizes, or persistent lack of Owner compliance with Uniform Physical Condition Standards (UPCS)/occupancy related issues.
- Therefore, a grantee may initiate the request to terminate the RAC and “zero out” an active RAC. If the termination of a RAC is due to unforeseen circumstances, other than lack of Owner compliance, then the grantee and the Owner must mutually agree to end the RAC.
- The grantee may then move the units to a new development and issue a new RAC to the owner of this new development. [FAQ-2631]
Please note that the RAC is a 20-year commitment on the owner’s behalf. Although a grantee has discretion to terminate a RAC due to unique circumstances, an Owner cannot be approved to opt-out of a RAC in the middle of their 20-year term. [FAQ-2633]
Rental Assistance Payments
Rental Assistance Payments are made monthly by grantees upon proper requisition by Owners. Rental assistance payments made under the RAC are either:
- Payments to Owners to assist Eligible Tenant residing in Eligible Multifamily Properties
- Payments to Owners for vacant Assisted Units (“vacancy payments”) if the conditions specified in HUD administrative guidance are satisfied.
The amount of the Rental Assistance Payment made to the Owner of an Assisted Unit being leased by an Eligible Tenant is the difference between the contract rent for the unit and the tenant rent owed by the Eligible Tenant as determined in accordance with applicable administrative and regulatory requirements.
- If a grantee’s program includes vacancy payments, a Rental Assistance Payment may be made to the Owner for a vacant Assisted Unit that may not exceed 80 percent of the contract rent for up to 60 days of vacancy, subject to the conditions as may be imposed by HUD administrative guidance. If the Owner collects any tenant rent or other amount for this period which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid as HUD directs.
- Where applicable, the Owner will pay a utility reimbursement in accordance with 24 CFR § 5.632 (Utility Reimbursements). [CA-Exhibit 5: §301]
Retention Requirements for Records
Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a sub-recipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. [2 CFR §200.333]
- Additional details related to record keeping and the retention of records related to program activities can be found at [CA-22.A-G]
Systems Confidentiality Protocols
Grantees must undertake customary and industry standard efforts to ensure that the systems developed and utilized under their Cooperative Agreement protect the confidentiality of every Eligible Applicants’ and Eligible Tenants’ personal and financial information, both electronic and paper, including credit reports, whether the information is received from the Eligible Applicants’, Tenants’ or from another source. Grantees must undertake customary and industry standard efforts so that neither they nor their systems vendors disclose any Eligible Applicants’ or Tenants’ personal or financial information to any third party, except for authorized personnel in accordance with their Cooperative Agreement, without their consent. [CA-26]
Subsequent Adjustments and Continuing Responsibilities
At the end of the Performance Period, or upon the earlier termination of their Cooperative Agreement, grantees remain subject to the closeout procedures, subsequent adjustments and continuing responsibilities. All records must be kept in a safe place and be accessible to auditors and other government officials. [CA-28.B]