HOME Commitments, Grant
Based Accounting, and
Managing HOME Deadlines
March 14, 2016
U.S. Department of Housing and Urban Development
HOME CommitmentsBackground
• Statutory requirement (Section 218(g)): HOME
funds must be committed within 24-months
• Regulatory requirement at 92.500(d)(1)(B)
• Definition of commitment at 92.2
– Commitments to programs & specific local projects
• Pre-commitment requirements at 92.250(b)
• Written agreement requirements at 92.504(c)
• Notice CPD-15-09: Requirements for
Committing HOME Funds (Nov. 2015)
Slide 2
Definition of Commitment
• A HOME written agreement that complies with
92.504(c) is the HOME commitment
• Legally binding, fully executed
– Signed and dated by all parties (signature page)
– Last dated signature is commitment date
• Should be separate from financing documents
(mortgage/deed of trust, note, etc.)
Slide 3
Commitments to PROJECTS
Pre-Commitment Requirements
1) The Project
• Must have an identifiable project/property
• Address or legal description
2) Market Assessment
• Assess the current market demand in the
neighborhood for type and # of units
Slide 5
Pre-Commitment Requirements
(cont.)
3) Environmental Review
• PJs cannot commit HOME funds or non-HUD
funds prior to completion of ER
• EXCEPT: PJS can make a “conditional
commitment pending completion of ER”
– this is a commitment, and will count towards the PJ’s
24-month deadline
– must include language which prohibits undertaking
choice limiting actions
Slide–
6 wait to enter into IDIS
Pre-Commitment Requirements
(cont.)
4) Secured Financing
• Required from all sources for all phases
(acquisition, construction, permanent)
• Documentation:
– In writing, dated prior to commitment
– Award letter, letters of intent, term sheets, other
commitments conditioned on receipt of HOME
funds
Slide 7
Pre-Commitment Requirements
(cont.)
5) Budget
• Budget established and approved
– Reflects total development costs and funding
– HOME within minimum/maximum subsidy limits
– HOME supports eligible costs
6) Cost Reasonableness (Sources & Uses)
• Sources sufficient to cover costs
• All project costs are reasonable and
necessary
Slide 8
Pre-Commitment Requirements
(cont.)
7) Underwriting and Subsidy Layering
• PJ must determine that HOME funds are
reasonable, necessary, and sufficient to ensure
financial viability
– Reasonable profit or return to owner/developer
– HOME units/investment determined by cost
allocation
• Affirmatively review and approve (w/ dated
signatures)
• Note: must also underwrite the homebuyer
Slide 9
Pre-Commitment Requirements
(cont.)
8) Experience & Financial Capacity of
Developer
• PJ must establish assessment standards:
– Size, scope, complexity of project
– What information is required from the developer?
• Financial statement, audits
– How will it document?
Slide 10
Pre-Commitment Requirements
(cont.)
9) Construction Start within 12 Months
• PJ must assess and document the feasibility of
meeting this requirement
10) Completion Schedule
• Consistent with HOME deadlines:
– Construction start within 12 months
– Project completed with 4 years
– Homebuyer: 9 months to sales contract
– Rental: 18 months for initial occupancy
Slide 11
Set-up in IDIS
• Projects can only be entered into IDIS
AFTER written agreement is executed
• When calculating compliance with 24month commitment deadline, HUD will
include commitments not yet entered into
IDIS
Slide 12
Preliminary Awards
• Can be made in advance of firm
commitments
• May be used when securing other financing
• ARE NOT COMMITMENTS & CANNOT BE
ENTERED INTO IDIS
• Must include language prohibiting choice
limiting actions
Slide 13
Commitments to PROGRAMS
Program Commitments
• Legally binding written
agreement with State recipient or
subrecipient, to use a specific
amount of HOME funds for
affordable housing, DPA, or TBRA
PJ
Subrecipient
Project
Slide 15
State Recipients & Subrecipients
• State recipient  unit of general local
government
• Subrecipient  public agency or nonprofit
organization
– If the PJ controls the entity (a PJ’s social service
agency), this is not a subrecipient
• Consortia agreements: must be for a specific
project (agreements between lead entity and
members are not commitments)
Slide 16
Grant Based AccountingBackground
• HOME along with other CPD formula programs
historically committed and disbursed funds on a
first-in first-out (FIFO) basis in IDIS
• This was to ensure the oldest uncommitted/
undisbursed grant funds were committed and
expended without grantee/PJs having to identify
funds from specific grants or subgrants
• For HOME, FIFO operation in IDIS necessitated the
use of a cumulative method of determining
compliance with HOME deadlines
– 24 CFR 92.550(d)(2)
Changes
• July 2013 - GAO decision determined that the
cumulative method was not in compliance
w/HOME statute
• September 2013 - OMB determined that HUD
should stop using the FIFO method of committing
and disbursing funds from IDIS
• September 1, 2014 - IDIS release 11.10 removed
FIFO processing for all 2015 and future CPD
formula block grants (i.e., CDBG, HOME, ESG,
HOPWA)
– No rulemaking necessary for FIFO
Future
• Because of the GAO decision, HUD must undertake
rulemaking to change the method of determining
compliance with HOME deadline requirements
from a cumulative to a grant specific method
– Requires further IDIS changes
IDIS Functionality
• IDIS allows PJs to fund activities with:
– FIFO funds (1992-2014) and/or
– Grant-specific funds (2015+)
• FIFO funds will continue to be committed and
disbursed FIFO
• Grant-specific funds will be committed based on
the specific grant or subgrant selected by the PJ
and the same funds will be disbursed at drawdown
• Program income differences for FIFO and grantspecific PI
FIFO
Drawdown
Activity Funding
2012
2013
2014
21
Grant-specific
Drawdown
2016
Activity Funding
2015
2017
22
FIFO and Grant-specific
FIFO
Drawdown
2015
Activity Funding
2012
2013
2014
2016
23
HOME Deadline Requirements
• Currently continue to be measured cumulatively
because that is what the regulation requires
• Implemented changes to CHDO reservation
requirement and new CHDO expenditure
requirement in calendar year 2015
• Currently, commitments, CHDO reservations,
CHDO expenditures, and expenditures from 2015
(and soon 2016) grants are counted toward
cumulative requirements
• HUD will not reduce CHDO subfunds on FY 2015
and future grants
Grant-Specific Issues
• HOME funds from each grant must be committed
within 24 months of receiving the grant
• After the deadline passes funds becoming
uncommitted must be deobligated by HUD
–
–
–
–
Completing a project for less than the amount committed
Project cancellation
Auto-cancellation
Disbursing PI, HP, or IU in place of EN
• 15% of each grant must be reserved to CHDOs (i.e.,
committed to a specific CHDO project)
Must Do List
• Check HOME Deadline Compliance Status Report
each month without fail (posted to HUD Exchange)
• Run IDIS PR27 and PR49 reports after HOME
funds are committed and disbursed to see impact
• Check PR21 HOME Auto Cancel Report monthly to
ensure no activities were auto-cancelled by IDIS
• Establish policies that enable you to commit all
grant funds + funds in local account each year
• Have a pipeline of projects that could quickly
receive uncommitted funds
For more information….
• visit the Grant Based Accounting
website at:
https://www.hudexchange.info/manage-aprogram/grant-based-accounting/
• Review Notice CPD-15-09:
“Requirements for Committing
HOME Funds”
Questions?
U.S. Department of Housing and Urban Development