HAP Set-Aside Funding and Special Fees for Administrative Fee Funding

May 2019

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By Brian Alten, CPA

PIH Notice 2019-08, “The Notice” was issued on April 18, 2019 to explain the FFY 2019 Funding provisions for the Housing Choice Voucher (HCV) program, which is considered HUD’s largest program. HUD will provide $22,598,000,000 to fund the HCV program.

Consisting of 22 sections with additional appendices, the Notice is 37 pages long and comprehensive. It generally follows the same framework as previous PIH Notices announcing the HCV funding implementation.

Since all PHAs have already received their annual HAP renewal funding, it comes as no surprise that the formula remains the same as prior years. There has been an additional $100 million provided in HAP Set-Aside funding for four HAP Set-Aside categories. This has increased from $75 million from the prior year.
 

Category 1: Prevention of Terminations Due to Insufficient Funding

This category of HAP set-aside is for PHAs that, despite taking reasonable cost savings measures as determined by the Secretary, would otherwise be required to terminate participating families from the program due to insufficient funds. There are two scenarios:
  • Shortfall Scenario 1: This scenario is for PHAs already in an-SPT (Shortfall Prevention Team) confirmed shortfall. See Appendix D of The Notice for the applicable certification language.
  • Shortfall Scenario 2: This scenario is for those PHAs that are not currently in an SPT-confirmed shortfall position but are later determined to be in one, despite managing their HCV program budgets in a reasonable and responsible manner. Under this scenario, HUD will review each application on a case-by-case basis to determine if the PHA is eligible for funding under this category. The PHA signature at the bottom of Appendix D of The Notice indicates the PHA agrees to comply with all SPT-directed cost savings measures.
In determining a shortfall and the amount of funding to be provided, HUD will use the Two-Year Forecasting Tool.

PHAs with specific questions related to the calculation and determination of a HUD-confirmed shortfall should contact the SPT at: 2019ShortfallInquiries@hud.gov The subject line of the e-mail must include the PHA’s number (for example, TX123).

DEADLINE: The application period will remain open. PHAs may apply or re-apply at any time during the application period. PHAs that receive set-aside funds based on their current HAP costs may find it necessary to apply for additional set-aside funds. Similarly, PHAs that do not initially anticipate a shortfall, because they have suspended leasing and expect to decrease leasing by attrition, may apply later if the attrition fails to resolve their shortfall. PHAs should still be in contact with the HUD field office and SPT in cases where the PHA anticipates attrition will solve the shortfall.
 

Category 2a: Unforeseen Circumstances

PHAs should be aware that an unforeseen circumstance is an occurrence within or after the re-benchmarking period which the PHA could not reasonably have anticipated and which was out of the PHA’s control.

Appendix E of The Notice contains the application for Category 2a – Unforeseen Circumstances. A written narrative detailing the unforeseen circumstances that occurred during or after the CY 2018 re-benchmarking period that have significantly increased renewal costs must be included with the application. The PHA must provide evidence to support the request for increased costs for CY 2019.  Failure to provide any of the required documents, including the PHA calculation of the increased costs, will result in denial of the application. The deadline to submit the application is no later than 5 p.m. Eastern Time, Friday, May 31, 2019.
 

Category 2b: Portability Cost Increases

To be eligible for funding under this category, the PHA must have experienced a significant increase in renewal costs due to portability for tenant-based rental assistance under Section 8(r) of the Act. To calculate eligibility under this category, the Department will compare the average HAP Per Unit Cost (PUC) for the re-benchmarking period (1-1-2018 to 12-31-2018) to the average Port-out Vouchers HAP PUC based on year-to-date reporting in PIC (probably April 2019). If the portability average HAP exceeds 110% of the program-wide average HAP PUC for the re-benchmarking period, the PHA will be eligible for set-aside funding. The difference between the portability average PUC and 110% of the program-wide average PUC is multiplied by the year-to-date total unit months leased (UML) for the “Port Vouchers Paid” reported in PIC, extrapolated to 12 months.

HUD will calculate this eligibility for this category. No additional documentation will be required or accepted other than Appendix E contained in the Notice, which must be completed, signed and submitted by 5 p.m. Eastern Time, Friday, May 31, 2019.
 

Category 3:  Project-Based Vouchers

To be eligible for funding under this category, a PHA must show that vouchers were withheld from use during the CY 2018 re-benchmarking period to be available to meet a commitment for project-based voucher (PBV) assistance under Section 8(o) (13) of the Act. Adjustments only apply to vouchers withheld pursuant to a PBV Agreement to Enter into a Housing Assistance Payments Contract (AHAP) for newly constructed or rehabilitated housing. Adjustments do not apply to existing housing, as there is no waiting period for existing housing PBV commitments and accordingly, there is no need to withhold vouchers for such commitments. Adjustments will not be made under any circumstances for units under an AHAP commitment that, when added to units under lease for CY 2018, exceed the PHA’s baseline units under ACC for CY 2018. (The PHA would not have been able to lease those withheld vouchers during CY 2019 due to the restriction on over-leasing.)

We recommend you review Section 13, Sub-Section D of The Notice, to determine your PHA’s eligibility and the requirements to apply. The deadline to submit the application is no later than 5 p.m. Eastern Time, Friday, May 31, 2019.
 

Category 4:  HUD-VASH

A PHA would be eligible administering VASH vouchers that can demonstrate a need for adjustment funding for at least one of the following situations:
  1. Per Unit Cost Increase: For PHAs whose program-wide funded CY 2019 HAP PUC is less than their current VASH HAP PUC, based on their latest VASH HAP expenses in CY 2019. HUD will calculate eligibility under this category.
  2. Leasing Increase: For PHAs whose total VASH leasing for CY 2019 will exceed the leasing level included in their renewal funding, plus the leasing that will be supported by the RNP and HUD-held program reserves, HUD will calculate eligibility under this category.
No additional documentation will be required or accepted other than a completed and signed Appendix E, as attached in The Notice.  The deadline to submit the application is no later than 5 p.m. Eastern Time, Friday, May 31, 2019.

Section 7 of The Notice also provides information regarding funding for Administrative Fees. $1,886,000,000 will be provided in Administrative Fee funding. $30,000,000 of that funding will be made available to PHAs that need Special Fees to administer their Section 8 programs. There are five categories of Special Fees.
 

Special Fee 1: HCV Homeownership Fees

HUD provides a $200 special fee for every homeownership closing reported in PIC for HCV families who have become homeowners through the HCV Homeownership program, MTW Homeownership program and the Family Self-Sufficiency program (HCV only). These special fees are allocated to the PHAs administering the vouchers, or FSS participation, after the homebuyers’ closings are reported in PIC and closing dates are provided / confirmed to the FMC staff. PHAs do not need to apply for these funds as HUD provides these fees automatically based on PIC data and closing dates confirmations. HUD will also fund a one-time $500 special fee for each newly created HCV Homeownership Program at any PHA in CY 2019.
 

Special Fee 2: PHAs Administering TPVs In Connection with Multifamily Housing Conversion Actions

For multifamily housing conversions, a special (one-time) fee of $200 will be provided for each unit occupied on the date of the eligibility event. PHAs do not need to apply for these funds as HUD provides these fees automatically based on PIC data. This special fee will also be allocated to PHAs that agree to administer vouchers on behalf of a Multifamily Choice Neighborhoods Grantee.
 

Special Fee 3: Portability

Receiving PHAs with numbers of portability vouchers that comprise a significant portion of their vouchers under lease are eligible for a special fee. PHAs must have been administering a number of port-in vouchers equal to 20% or more of the PHA’s total number of leased vouchers as of December 31, 2018 to be eligible for special portability fees.

For each eligible port-in voucher, the receiving PHA will receive 12 months of funding equal to 15% of the PHA’s 2019 Column A rate for administrative fees. This is a one-time award of special fees and will be calculated based on PHA portability data found in PIC for actions through December 31, 2018 and leased data from the VMS as of December 31, 2018 (from the same VMS database used to determine the 2019 HCV renewal allocations). PHAs do not need to apply for these funds as HUD provides these fees automatically based on PIC data and the VMS data used for the 2019 renewal allocation. PHAs are advised of the deadline date of no later than 5 p.m. Eastern Time, Wednesday, May 15, 2019 to ensure all PIC data is updated and successfully submitted.
 

Special Fee 4: Audit Costs for Declaring Major HCV Programs per Notice 2015-16, and for HCV Voluntary Transfers per PIH Notice 2018-12

PIH Notice 2015-16 provides guidance for the general purpose governments that have not declared their HCV related programs as a major fund for financial statement purposes or as a major enterprise fund under 2 CFR 200. The audit obtained by the general purpose government may not be sufficient for HUD to properly monitor its financial and compliance interest in these entities and HUD is willing to provide funding (Admin Fees) to have an acceptable audit completed.

Therefore, for HUD to gain an acceptable level of assurance, these PHAs may be directed to procure Independent Public Accountant (IPA) services for financial and compliance procedures as specified by HUD.

This additional work is normally completed as part of the audit and is specifically known as “Auditor Agreed Upon Procedures”. Annually, these PHAs must contact the PIH Office of Housing Voucher Programs (OHVP), Financial Management Division (FMD) at PIH.Financial.Management.Division@hud.gov in order to confirm whether they must procure a separate audit. If the PIH OHVP, FMD determines that a separate audit is required, HUD will provide set-aside funding, if available, to reimburse the agency for any additional audit costs unless sufficient UNP exists, in which case these funds may be used for the special purpose audit cost.

PIH Notice 2018-12, Section 6 provides guidance for PHAs that are transferring their Housing Choice Voucher program to another PHA. The HUD Field Office will ensure the divesting PHA has properly procured and entered into a contract with an auditor to conduct its close-out audit and has the funds available to pay for the audit.  HUD may assign extraordinary administrative fees (EAF), subject to availability of funds and justifiable circumstances, from the Administrative Fee set-aside funds (Special Fees) to cover close-out audit costs and may conduct a final close-out or forensic audit of a divesting PHA, either prior to or following to the transfer/consolidation. The HUD Field Offices must contact the Housing Voucher Financial Management Division at PIH.Financial.Management.Division@hud.gov to confirm availability of extraordinary administrative fees (EAF); however, the divesting PHA’s available administrative fee, UNP, and/or other non-federal funds must be considered first and restricted for this purpose.


Special Fee 5: Special Fees Needed for Administration of Section 8 Tenant-Based Rental Assistance Program

PHAs experiencing increased administrative expenses, including as a result of administration of tenant protection rental assistance, disaster related vouchers, HUD-VASH vouchers, and other special purpose incremental vouchers can request special fees. HUD will provide a separate Appendix and guidance for submitting special fee requests to the Financial Management Division under specified categories. This guidance will be provided to PHAs via email notification at a later date. The guidance will include deadlines for submissions.

Each PHA should be aware of the deadline for submissions for all HAP and Administrative Fee Set Aside funds. There is only $100 million available for HAP Set-Aside funds and it is expected the funds will be allocated quickly. We would recommend submitting your applications as soon as possible.