Program Income Basics and Closeout Requirements

U.S. Department of Housing and Urban Development

Program Income:

Basics and Closeout Requirements

February 10, 2015

Community Planning and Development

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Moderators and Host • Moderator

– Paul Patterson, Dept. of Housing and Urban Development

– Njeri Santana, Dept. of Housing and Urban Development

– Hunter Kurtz, Dept. of Housing and Urban Development

– Larry Reyes, Dept. of Housing and Urban Development

• Host

– Jennifer Alpha, TDA

– George Martin, TDA

2 U.S. Department of Housing and Urban Development • Community Planning and Development

mailto:[email protected]


• Program Income Resources

• Basic Requirements

– Regulations

– Waiver for NSP 2 Grantees

• Closeout Reminders

• Uses of Post-closeout Program Income

• Exceptions

• Using PI for Revolving Loan Funds

Today’s Topics

Program Income Resources

• NSP combined program notice dated 10/19/10

• Policy Alert on Program Income dated 7/13/11

• Policy Alert on RLF dated 8/20/12

• Closeout & Recapture notice dated 11/27/12

• Waiver for NSP 2 Grantees dated 1/28/15

• CDBG regulations at 24 CFR 570.500(a) &

570.504 4 U.S. Department of Housing and Urban Development • Community Planning and Development

More Program Income Resources

• Search NSP Webinars (onecpd.info)

– Program Income, Activity Delivery, and General Administration (7/1/10)

– Greatest Hits of Program Income (8/23/11)

– DRGR Updates NSP Webinar (12/6/11)

– Effective Use of NSP2 PI (9/18/12)

– Program Income & NSP Administration Strategies Post Closeout (11/5/13)

• FAQs (search onecpd.info for program income)


Program Income Basics

Program Income = Gross income received by a grantee or subrecipient from the use of program funds

Examples:

• Proceeds from sale/lease of property acquired, rehabbed, or redeveloped with NSP funds

• Proceeds from the sale of equipment purchased with NSP funds

• Gross rental income from property acquired, rehabbed, or redeveloped with NSP funds

• Principal and interest on NSP loans


Program Income Basics (cont.)

Program Income is NOT:

• Income earned and retained by a developer

• Review developer agreement to ensure that nonprofit developer:

– Was not designated a subrecipient

– Is not required to return income to the grantee/subrecipient


Program Income Basics (cont.)

• NSP1 and NSP3: Program income must be spent before Line of Credit Funds for NSP1 and NSP3 grants

• New waiver allows NSP2 grantees to spend program income in advance of Line of Credit funds

– Assists grantees in meeting September 30, 2015

spending deadline

– Applies ONLY to 42 NSP2 grantees

– DRGR instructions available www.hudexchange.info/resources/documents/DRGR-Guidance-NSP2-

Grantees-Receiving-Waiver-Program-Income-Expenditures.pdf


https://www.hudexchange.info/resources/documents/DRGR-Guidance-NSP2-Grantees-Receiving-Waiver-Program-Income-Expenditures.pdf

















Closeout Reminders Regarding

Program Income

• Grantee retains any Program Income on hand at

closeout and generated following closeout

• If 25% Set-Aside Requirement is not met for Program

Income at the time of closeout, then grantee has three

(3) years to meet the requirement

• Program Income is earned in perpetuity- Income that

comes back after closeout is still PI.

Note: Exception for grantees with NO open CDGB

grant.

• Program Income will be reported annually.


Uses of Post-Closeout PI

Generally, for NSP admin & eligible activities:

• NSP eligible use

• Eligible activity (not limited to target areas)

• National objective

• 25% Set-aside Requirement

Exceptions:

• Special requirements depending on grantee type and program

• Grantee PI below annual thresholds


Post Closeout Requirements by

Grantee Type

Category 1:

– NSP1 and NSP3 state and entitlement grantees

– NSP2 state and entitlement grantees who are members of an NSP2 Consortium subject to a consortium funding agreement

– NSP3 Non-entitlement with OPEN CDBG grants



Grantee Type (cont.)

Category 1 PI Rules:

• Income generated for the duration of the NSP program is must be used for NSP-eligible activities that meet a national objective.

• If PI does not exceed $25,000 per year- use funds for administration or include in a CDBG activity.

• If the program income generated exceeds $250,000 per year – 25% Set-aside Requirement applies.




Category 2:

– NSP3 Non-entitlement Grantees with NO CDBG grant open at closeout

– NSP2 Consortium Non-Profit Lead Agencies or Members and NSP2 Non-Profit Direct Grantees




Category 2 PI Rules:

• Income received prior to closeout must meet all NSP requirements.

• Income received during the first five years following closeout:

– must be used for NSP- eligible activities that meet a national objective.

– Other cross-cutting federal requirements do not apply, including environmental and Davis-Bacon, for example.




Category 2 PI Rules (cont.):

• Income received five years or more from the date of the closeout agreement will be considered “miscellaneous revenue.”

• Funds are not subject to ongoing NSP or CDBG program requirements, but HUD encourages nonprofit grantees to use the funds in the same manner.

Figure 6 of the Closeout Guide summarizes all PI requirements.


• Program Income policies will be set by State to show how State will allocate future PI

• Program Income is aggregated at State level (even if retained by subrecipients) and follows $25,000 rule

• States must report and are responsible for Program Income


Post-Closeout Requirements-

State Grantee Considerations

Post Closeout Provisions


Revolving Loan Funds

Basics:

• Tool for managing the flow of Program Income

• May be operated by grantee or subrecipients

• Funded with Program Income

• Funds tracked separately from LOC and other PI.

• Funds disbursed, replenished, and again disbursed in perpetuity


Revolving Loan Funds (cont.)

Uses: Each RLF must be for an NSP-eligible, income-generating activity meeting an NSP national objective.

Examples:

• Loans to purchase and redevelop foreclosed homes and residential properties (including first and second mortgages)

• Funding a loan loss reserve

• Shared-equity loans for low- and moderate income homebuyers



Key Requirements:

• Plan Amendment – RLF must be for a specific activity

• Capitalize RLF from PI*

• Separate Accounts for each RLF

• Funds held in interest bearing account

• Comply with NSP1, NSP2, or NSP3 requirements, as applicable

• Repayment to the RLF is treated as PI

(*Exception under the limited CDBG rules related to lump sum draw downs for

rehabilitation only activities, as provided for in 24 CFR 570.513.) 20 U.S. Department of Housing and Urban Development • Community Planning and Development


Considerations:

• Select activities that are appropriate for the size and scope of the program to ensure that funds will revolve

• Consider administrative maintenance

• Policies and procedures and a monitoring plan are recommended

• Establishing a revolving fund does not constitute meeting a national objective and is not inherently an eligible activity

• Consult DRGR resources for set up


Questions?


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Program Income Basics and Closeout Requirements

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