hud nsp open forum q&a, 11/29/12 · that's just a bookkeeping thing, ... ~~~ noble...

HUD NSP Open Forum Q&A, 11/29/12

Kent Buhl: And so for today's main event, a Q&A with HUD staff. This webinar is an opportunity for NSP grantees and partners to ask DRGR questions and solve NSP problems through discussion with two DRGR experts and our Department of Housing and Urban Development staff and peers. Whether your questions deal with rules, regulations or any other current issues of interest, please let them fly. And this webinar is for all NSP grantees and their partners.

So with us today are the familiar voices of NSP managers from HUD headquarters in Washington, DC: John Laswick, David Noguera, and Hunter Kurtz. And also with us today, Ryan Flanery and Jennifer Hylton. Let me unmute you all, and here we go.

So first of all I know John's got some things to go over -- I think it's John -- in terms of expenditures in your QPRs.

John Laswick: Yeah, thanks. This is kind of our major hot topic. I know a lot of people want to hear about closeouts and we will discuss those briefly at the end. Jennifer's going to talk about the importance of expenditures and then Ryan's going to talk a little bit about how to report expenditures, because there's a difference between drawdowns and expenditures. When the deadline comes, it's the expenditures number that we are going to be looking at. So Jennifer?

Jennifer Hylton: Hi, everyone. We just wanted to take a minute to let everyone know that we're going to be sending out letters in the month of December to your authorizing official, who's usually the person who signs your NSP grant agreement. Basically these letters will go out to grantees whose expenditures are not close enough to the either 100 percent mark for NSP 1 and 2 or 50 percent mark to NSP 3 to let you know we're worried you're not going to make the expenditure deadline.

Mostly this'll be just because some folks just need to spend their money quicker, but there are also people out there who are not reporting expenditures in their QPR. As of now, we've been pulling drawdown numbers as a way to look to see where each grantee is at, but that'll stop now and we're just going to be looking at those cumulative expenditure numbers in your QPR. So you need to make sure that you're going into your QPR -- Ryan's going to show some screens and explain how to do that.

But we just want to give everyone a warning that these warning letters are going to go out in December, so you'll be getting those if you're not close enough to meet the goal. We haven't decided what the cutoff is yet. They'll just sort of be a reminder to you and your authorizing official that we're worried about those expenditure numbers and they need to be updated if you haven't updated them.

John Laswick: Right. And there's cases where grantees are more than 100 percent expended as far as drawdowns, but they're not reporting any or very few actual expenditures on the QPR. That's just a bookkeeping thing, but it's going to be a critical bookkeeping thing. NSP 2 grantees

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went through this at the 50 percent level, and actually the NSP 2 grantees look pretty close overall. So I think it's just the NSP 1 and 3 folks that haven't been through this.

So I know that even some of our staff have been a little bit frustrated about how to get this done, and so we've asked Ryan to just take us through and hit a couple of points that were in a webinar about six weeks ago. So Ryan, are you there?

Ryan Flanery: I am. Can you hear me?

John Laswick: Yep. Thanks.

Ryan Flanery: Okay. Great. So this is just a quick refresher on how to enter expenditures in the QPR. You know, fortunately, relative to the importance of entering expenditures, it's one of the easier things that you can do in the system.

As John and Jen mentioned, it's entered in the QPR. It's the first screen when you go to enter your information for a particular activity. You'll see on that first screen a financial summary. It'll show financial data, both in-quarter, in the column to the left, and then to-date, and that's the far column to the right. You're seeing everything that's taken place within this particular quarter and then everything that's taken place to-date throughout the life of your grant.

These fields are not editable for the most part. The only fields that are editable are your total funds expended and the match contributed in this particular section. What we're focusing on today is the total funds expended. This is where you're entering expenditure amounts. And what you'll be entering here -- or you should have been entering to this point -- would be the in-quarter amounts. So if you've registered $100,000 worth of expenditures in that particular quarter, you enter $100,000. And then DRGR does the math to calculate what's been expended to date. So again, pretty simple, pretty cut and dry.

We can move on to the next slide. Just a couple points I wanted to hit on real quick, for those of you who have not entered expenditures to-date or haven't done them accurately. One thing that we won't be doing is opening up previous QPRs for you to enter those quarterly amounts. It's not looked at too favorably by the inspector general or by us, for that matter; so we avoid whenever possible. It's not something that needs to be done. There's a functionality in the system that allows you to make up, basically, for any past underreporting or changes that needs to be made for incorrect reporting in the past.

So what you'll do is in your current QPR you enter the cumulative amount -- for those of you who haven't entered anything you enter the total amount that you've spend to-date in the most recent QPR. A key point here would be to just make sure that you enter an explanation in your narrative that says that you're bringing everything current; that this isn't only in-quarter data, this counts for everything that should have taken place in the past history of your grant.

And then going forward you'll enter only the in-quarter amounts. So if you are making up for $2 million worth of expenditures that should have been recorded in the past and you're entering that $2 million in this quarter, the next quarter you have $100,000 worth of expenditures, you'll be

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entering $100,000 next quarter; DRGR does the math for you and says that you have a total recorded amount of $2.1 million. And that's it. It's pretty simple, pretty cut and dry. If anybody has any questions, I'm more than happy to answer them right now.

Kent Buhl: So if you've got a question on your QPR expenditures, just click your "raise hand" button underneath the participant list, or you can type them into Q&A. Not seeing any at the moment, but Ryan will be here if you come up with any. Shall we move on to hot topics, John?

John Laswick: Yeah, sure. Thanks. Thanks, Ryan and Jennifer. We don't want to alarm you about that stuff, but we also know that it will be better if you knew that a warning letter was coming to your mayor or city manager or whatever. Hopefully that's just an accounting discrepancy. Your expenditures should almost always be higher than your drawdowns, unless you're incredibly efficient or you haven't drawn anything down lately or done much lately. So just take a look at that. That's what we're going to be looking at in February or March when the deadline comes.

Now, just two other follow-up things on that. One is that we will be having a webinar in January to talk more in detail about expenditures, and that is on the 15th of January. That will look at more about this and more about the accounting aspects of it. But the one, I think, important accounting aspect of it that NSP 2 grantees know about is that an expenditure does not have to be drawn for you. It counts as an expenditure if you have received it as an invoice for work that's been performed.

You may not have paid it yet yourselves or you may not have drawn it down from us. But if you have an invoice and the invoice is received and the work was done by the deadline date, then you can count that and you can get those numbers by having your subrecipients or other partners report to you just on that number. We will be, then, verifying those numbers. But it's not -- and I think there's a little bit of space there, and there will be some time for everybody to get those in straight.

Ryan Flanery: John, can I just add that we're also going to be doing, on January 8th, a webinar looking more at the DRGR and QPR side, making sure that you have your data correct; as well as webinar December 11th on expenditures with the peer-to-peer roundtable. So if you notice, there's sort of a theme going on here between now and January/February.

John Laswick: Yes. And the theme is that as exciting as the closeout notice is, it's not the most important thing on your desk right now.

So the first hot topic is that we do have a closeout notice that was published on Tuesday. Hopefully it will answer a number of questions and make life easier in most respects for grantees. We are not going to talk about today. At the end of all regular questions I will summarize the issues that are in the closeout notice, but we have a whole two-hour webinar this coming Tuesday on the closeout notice. We will have on Thursday the 6th a two-hour webinar just on demolition, disposition, land banks, and other related issues which we believe, from what we hear, are the most confusing issues for people.



And I think that once you've had a chance to read the closeout notice and once you've had a chance to listen to our webinar next Tuesday, you will see that some of these frustrating elements I think have been largely taken care of. But we are still working on that and we are just not prepared to take any questions, frankly, on the closeout agreement today. So I'm going to watch that participant list go from 195 to zero, here -- [chuckles] -- but hopefully keep us tuned. I hope you can understand that. I will go through it with you and we already have the slides in development and so forth. We just want to make sure that we have the best answers possible and the most complete presentation. I don't want to go off half-ready.

One other item that I wanted to mention is that we are still offering a prize for the best marketing graphics. This is going to be a real prize, of a $100 gift certificate to Amazon, so you can pretty much buy anything. A special NSP gift -- but we really want to get people to give us their best shot on ads that they've published, flyers -- any sort of graphic material that you've used to promote sales in the program. This isn't just what a great program it is, but how are you getting people to buy properties, because that is the big question these days. And you're not going to be able to close out your grant until all your units are occupied. So once we get past the expenditure deadline, I think that's going to be the biggest feature on people's horizons.

So we are incentivizing that with a non-federal source of funds, and just hoping that you can get these in. You have to submit them to us either through the grantee webpage on the NSP resource exchange or you can email them directly to me by December 31st. It's a real thing, and we really want to get good ads. I know there's some out there, so don't be shy.

Okay. So that's really the major hot topic that we have. I know the hot elephant in the room is the closeout notice. As I said, we'll do a brief summary of that at the end of the regular Q&A session. So let's just open it up for questions at this point, Kent.

Kent Buhl: Very good. Thank you, John and Ryan and Jennifer. So I think probably almost everybody in the audience is familiar with this part -- time for your questions. Go ahead and let them fly. You can raise your hand, which is done by clicking the button underneath the participant list on your screen. You can also use the Q&A box to submit written questions.

And people did not come loaded for bear today yet. Okay. Here we go; now they're coming.

Let's go to Dave. Hi, Dave.

Q: Hi. Our NSP coordinator has a question.

Q: Hi. This is Nicole Janks [ph]. How are you?

John Laswick: Good. How are you?

Q: Fine, thank you. I have a question about the HUD prepurchase homebuyer education course certificate, because it states that it has to be done and completed prior to the buyer signing a purchase contract. But the problem that we're having is because we're a rural area, we don't really



have any regular classes scheduled for that class, so we're having to set them up. And what's happening is when he have a house available, that buyer has to wait sometimes a month or five or six weeks before they can get that class. So it's kind of holding up our sales progress. Any way around that?

John Laswick: Well, I think that one of the issues for rural areas that don't have regular locations and organizations that are offering these on a regular basis is that there are provisions in the reg, as I recall, for doing this on a remote basis. That means they have to have a computer or something like that. There's some one-on-one aspects of it -- like telephone, computer, that sort of thing. Is anything like that possible in your area?

Q: Well, the only online courses that are available, they're charging $300.

John Laswick: Well, you can pay that for them. That's an eligible cost for the program. I think every grantee is paying --

Q: Yeah. We're paying for the classes already for them to go live. So that's our option, is to pay for them to do the online course if they're already set to go?

John Laswick: Yeah. So here's the thing. You could say, well, we'll have them do it later. But the whole point of the counseling is to make sure that somebody's really ready. I mean, financially they're ready from the standpoint of maintaining and paying for repairs and all that stuff that people don't always know about.

David Noguera: Yeah. You know, one of the big reasons why the housing counseling component was added to the program from the start was because of the foreclosure crisis that we had. And the effort here was really to try to bring in buyers that are going to maintain the homes that are going to keep them long-term. The last thing that we want to have is a couple years from now or sooner a bunch of early-payment defaults or foreclosures because homes were sold to people that really weren't ready for it.

So we want to try to avoid treating the housing counseling requirement as just a process, but really as an opportunity to make sure that these folks are ready; that they know what they're up against.

John Laswick: Yeah. In some places -- and again, this may not work as well in a rural area -- but you can treat qualified buyers -- you can basically sort of have a simultaneous process of redeveloping a home and a town, and then you reach out to the neighborhood organizations or other community groups and say, we're going to have these homes available; if people are interested they should get a credit check, they should get pre-approved for a loan, and they can take these classes.

Now, not everybody who takes the class might end up buying the house, but --

Ryan Flanery: And that's an eligible expense.



John Laswick: Right. It's okay if they don't buy that house. I mean, if the program's working correctly, not everybody will end up buying a house because they'll realize, geez, I can't afford it right now, whatever. So I think those are [inaudible] options. I realize this stuff works better in places where there's existing agencies and set schedules and so forth. But if you can get ahead of the curve by either prequalifying people and getting them into the program or doing it on a remote basis, I think those are your best options.

I mean, I suppose there's probably places that have rented the house temporarily, but I think that it gets hard to take somebody out of a house if they end up not qualifying if the counseling indicates that they're not ready for it. I don't think I would do that, myself.

So maybe not a great set of options, but you can pay for that extra cost of doing it on a remote basis. Are you losing the houses -- I mean, if nobody's qualified to buy the house, then your closings are delayed but you're not really losing the house. You're probably not getting as much vandalism as you might in an urban area or something like that.

Q: Yeah. And the person is prequalified with a lender, so they've kind of gone through some process with their lender anyways. But these are good options, so I will definitely work from there. Thank you.

John Laswick: Okay. Well, if you still get stuck, write in or call back.

Q: Okay. Thanks.

John Laswick: Good luck.

Kent Buhl: Thank you. And now let's go to Chris. Hi, Chris.

Q: Hi. This question may be more for Ryan, but let me shoot it anyway. A grantee spent NSP funds on two single-family homes, and because of some [inaudible] they decided that those were not houses that they wanted to spend NSP funds on. So those dollars were returned back to the grantee; actually it's sitting in a bank account of the subrecipient that received the funding. Now, they have the option, as I understand it, to send the money back for locks or to do an offset/adjustment.

The challenge is they don't want to send it back to locks. But in terms of doing the offset change, the vouchers in DRGR, what would the amount that they received from the subrecipient -- is that considered program income at that point, or return of grant funds? And how is that input in DRGR, or do they just leave the money in that account and spend it on the next houses that are to be done? Trying to figure out -- the literature is not clear as to how you actually receipt those funds if they are not program income funds.

Ryan Flanery: All right. Just to clarify, if it's just simply money that was spent on a house or on units that were being built; decided they weren't NSP, so they set the money -- the subgrantee, developer or whatever -- sent the money back to the grantee; correct.



Q: No. The house was actually acquired and repaired, but the money was repaid. So it's not the original amount that they sent [inaudible].

Ryan Flanery: It's not the original amount.

Q: Right.

Ryan Flanery: I would say from a DRGR standpoint, provided they're repaying these funds, the only amount that would be offset -- you know, as far as offsetting a future voucher to account for these funds that have come back -- would be the amount that was spent, that was drawn from DRGR, right, from locks.

Q: Right.

Ryan Flanery: So if they want to include the additional amount, the additional amount could be shown as "other source of funds." That's done in the action plan and then you can report on it even as a match in the QPR. But those additional funds would be similar to just saying if the grantee decided to contribute their own funds to a project. It wouldn't really be handled in DRGR outside of saying, hey, we contributed this much. Whether they came back from another source or it was out of the general fund I don't think from a DRGR standpoint that matters all that much in how it's treated. I mean, you'd specify how much it was, but it wouldn't matter how it was treated.

So generally speaking, if you have a $10,000 repayment, let's say you have a future voucher for $10,000. As opposed to drawing those funds, you revise the original voucher or vouchers in the amount of $10,000 to whatever expense is coming up, this future voucher. There are specific instructions on this online.

Q: But no. I'm okay on this side of the voucher, on the whole project of vouchers. The side that I'm not clear on is how do you record the $10,000 if it's not considered program income, if it's just a receipt of repaid funds?

Ryan Flanery: Well, let's say that the total amount was $10,000 and the funds that you drew from DRGR was $10,000; and let's say, for whatever reason, you got $12,000 repaid back to you. The way that you handle the $10,000 is through that voucher revision, right? You write in your voucher narrative section, this is being applied to this activity for this reason. You just create an audit trail for yourself.

The additional $2,000 would be handled, again, as an "other funding source" and it wouldn’t be program income. It would just be another funding source that you contributed as a subsidy to that particular project. So none of this would be program income. It would all just be repaid funds or funds that have been reallocated to a different activity or a different project at the local level. Does that answer your question?

Q: Right. But are you registering the $10,000 receipt in DRGR? That's my question.



Ryan Flanery: No. No, because you're not receiving additional funds. These are funds that would have been a part of your overall grant allocation. These are only funds that you had paid out -- you drew the money down, so you paid it out. And by revising those receipts, by offsetting a future draw, you're basically just saying that, oh, instead of this activity that we had originally drawn it on, we're going to draw it on this activity instead; we're going to apply it to this activity.

So it's still there. You're not increasing your available amount for your grant. You're just spending funds here instead of here.

Q: So you will take the $10,000 out of the bank account and rehab the next house?

Ryan Flanery: Right.

Q: Outside of DRGR?

Ryan Flanery: Right. Mm-hmm. There would be no draw. That's the thing; that's the key part. There's no drawdown from locks. So therefore you're just reassigning those funds. And that's what the voucher revision in effect does.

Q: Okay. So you would be taking that $10,000 out of Bank of America and then rehabbing that next house and then adjusting the voucher in DRGR?

Ryan Flanery: Exactly. Yes. If you need a little bit of help or guidance, the 1CPD AAQ, the new system that we have set up, the folks that are working this are really good. If you do want a little bit of guidance as far as the logistics of going through that revision, they'd be able to help you out.

John Laswick: Right. One other thing before we move on to the next person, is to keep in mind if that original purchase of the homes never met a national objective, then the program is really supposed to be reimbursed in full for those expenses. So if you've got less than you paid for them, you should probably give us a call offline and talk about that.

Q: That's fully reimbursed.

John Laswick: Good.

Kent Buhl: Thank you, Chris. And let's go now to Jolene [ph]. Hi, Jolene.

Q: Hi. Can you hear me?

Kent Buhl: Yes, we can.

Q: Okay. I just wanted to clarify the counseling requirement and whether it has to be before entering into contract or just before purchase.

John Laswick: Before closing.



Q: Okay. Thank you.

John Laswick: We did also get a note from somebody -- I don't know if everyone can see the screens that we see -- but somebody mentioned that they had a $60 online housing counseling course. So for Nicole [ph], who spoke earlier, I think maybe you want to look around and see if there's some stuff that may not be provided directly in your state but meets the HUD criteria.

Kent Buhl: Marcia [ph] submits a question about relocation, as it relates to permanent relocation. "If it has been calculated that tenants who are being permanently relocated qualify for $10,000 in moving expenses, rent, etc., must that $10,000 be paid in one lump sum, especially now that the grant ends soon?"

John Laswick: Yeah. I would really recommend that you send that in to the Ask A Question. But I believe that there are some provisions that allow you to spread those payments out when it's like a increment on the rent. But if it's a progressively modest amount like $10,000, I believe you can pay those at once. And certainly for the moving expenses, that's a cost that is incurred right up front. But for those people that qualified for a rent differential payment that's calculated over a number of months, then you really want to check and make sure that you can let us get an expert to answer that question for you. I am personally afraid of the relocation requirement. They're very complicated.

Kent Buhl: Indeed. Fair enough. Thank you, Marcia, for that question.

Let's go now to Peggy [ph]. Hi, Peggy.

Q: Hello. So my question is whether, in thinking about sanctions for not meeting the expenditure deadline, is HUD planning to apply the same concerns to unspent administrative funds as to unspent programmatic funds?

John Laswick: Yes. There really is no distinction. It's all grant funds that have to be expended by the deadline. They're all considered to be the same.

Q: Okay. It seemed as if there was some discretion about what the sanctions would be and if a grantee -- want to coach the grantees to sort of rush through their administrative money when they're going to have some additional closeout and other requirements?

John Laswick: Yeah. I mean, I see the need for continued administrative funds; I'm not trying to minimize that. It's just that we don't consider those to be a separate category of funds. Our intention is to recapture funds that aren't spent. The solution to that problem is program income, but not everybody has access to program income or has a program that generates it, so I realize that's not a universal solution; if you have it, it may not be enough.

I think realistically we would probably also be looking at CDBG programs or other programs like that to assist with the additional requirements related to NSP.



Q: Okay.

Kent Buhl: Thank you, Peggy. And who's next? Looks like Sherri [ph] is up next. Hi, Sherri.

Q: How are you?

John Laswick: Good. What can we help you with?

Q: Well, my question is this: We did an internal reconciliation of our PI receipts and, of course, our drawdowns, and we discovered that one or two PI receipts had errors in them. When we corrected the errors, it now shows on the QPRs that the cumulative number -- it's appearing that we've spent more than we've earned, which is not the case once we actually made the corrections. My question is, on this QPR can we go in and actually enter a negative number to bring our numbers back in line?

John Laswick: I hope Ryan's still there.

Ryan Flanery: I am.

John Laswick: -- change the number, can't you?

Ryan Flanery: Well, this is something that if you could send this to me I'd appreciate it. Because we have seen this issue a little while back and thought that our developers had fixed it; apparently they haven't. When did these revisions take place?

Q: Last week.

Ryan Flanery: So it was recent. Okay. Yeah, if you could send it to me, then that would be helpful. That way I could forward it on to them.

Q: Absolutely I can do that for you. Thank you.

Ryan Flanery: Sure.

Kent Buhl: Thank you, Sherri.

John Laswick: And that goes for all you folks out there. Jim Yerdon and Ryan are both really great to work with and really helpful, so we don't want you feeling stuck out there. Most of these issues they've encountered before, so you should not hesitate to give them a call if you're stuck.

Send your question into the AAQ on 1CPD. As Ryan mentioned, we have a much better crew of people working on those than we have for the last year. That's all gotten much better.

Kent Buhl: Very good. And who's up next? It looks like a question from Leslie [ph]. "Can a grantee spend 100 percent of their admin allocation even if they don't spend 100 percent of the



program funds? Or are they only allowed to draw admin in the same percentage as the program funds that are drawn?"

John Laswick: Well, I think those kind of things are going to be worked -- that's going to need to be worked out by the closeout. In fact we've seen more often that grantees are spending less than they're allowed to, sort of hoping to hold on to some of that. But I don't think it's every going to work out exactly perfectly by the deadline, but we won't be able to close your grant if you have spent too much money on admin and not enough on the rest of your program. But I don't think --- I'm positive -- that doesn't have to be resolved by the expenditure deadline. But if you're way out of whack you should definitely get in touch with your field office or us and try to figure it out.

David Noguera: It's really an accounting issue that you want to try to address on an ongoing basis. So as funds are being received from activity -- as program income's being received from activities that you're carrying out, you want to make sure that you're staying in line with the requirements -- with the 10 percent from program admin and however else the other funds are being allocated for other parts of your program.

John Laswick: Yeah. And let me mention that 10 percent of your grant for general and administrative costs does not include the costs of your activity delivery costs, which are the staff time to do the inspections and the work write-ups and the applicant interviews -- all that stuff is part of your line item. So you may want to take a look and see if you've been charging more to your general and administrative costs than you really need to.

David Noguera: But to the extent that you want to charge things to activity delivery, you will need time sheets to justify the time spent on those activities.

Ryan Flanery: I may be interpreting this question a little differently, but it seems to me that they may be asking, at the end of the day, if they don't reach 100 percent expended.

David Noguera: If they only spend 90 percent? I thought that they might have been asking that. If that is the question, then the answer is that come next spring -- whether it be February 11th for NSP 2 or March/April, depending on when your deadline is for NSP 1 and 3 -- you'll be expected to spend an amount equal to 100 percent of your grant allocation -- not 90 percent, but 100 percent.

So if you're concerned that you may need to program admin fund after the expenditure deadline to maintain your program, that'll have to be funded out of program income that you are generating. But the expenditure deadline does mean 100 percent, not 90 percent or some other amount less than 100.

John Laswick: If that's not what you're talking about, just write back or call in and let us know.

Kent Buhl: Thanks for the question, Leslie. And I've got one now from Debra [ph], who says that a subrecipient has approximately seven units unoccupied but has zeroed out the grant amount. Can they deed those remaining units to a community development corporation to sell,



rent, or lease? The CDC only works with people that would be considered in the 120 percent AMI category.

John Laswick: Well, yes, you could do that. I mean, if all seven of these units are going to go to people in that income range, then you need to make sure that you've got your 25 percent covered through some other program. But each individual subcomponent of your program doesn't have to meet the 25 percent requirement; you just have to meet it overall. I mean, a lot of places do that. They make each subrecipient take a 25 percent requirement on. But if you have some overspending in another category that offsets this, then you could do that.

David Noguera: The one thing you want to be careful with is by selling it to a CDC it doesn't get you off the hook, because you are the HUD grantee and you're the one that's going to have to report on the national objective and the affordability period.

So what I'd encourage you do, if you're looking at selling it to a CDC that's then going to find one of these eligibility homebuyers, is to set up a subrecipient agreement with them and make sure that all of the rules that apply to you as the grantee are now passed on them as the subrecipient, so that you cover yourself from a liability standpoint.

Hunter Kurtz: And selling the units to a CDC does not meet a national objective. It's the CDC getting the units occupied.

John Laswick: Right. So I think David's point is a good one. You basically don't have a relationship with this original subrecipient anymore. So rather than making them go set up a relationship with this new CDC, it'd be much cleaner if you could establish your own relationship with them so that they're reporting to you; you've got continuing affordability requirements to report on for the next 10, 15 years maybe.

But that might be one where you need to get a little technical assistance, so you could call in. We could probably get you some people to just talk you through it for a few hours or even come out in person if necessary.

Kent Buhl: So with lots of people on this call today, that can't be all the questions -- it's not. Imagine that. So Leslie, who had just asked the question about spending down admin along with program funds, her clarification -- that at the deadline of February or March 2013, if the grantee has not spent all of their program dollars, can they still have spent 100 percent of their admin?

John Laswick: No. It's going to be 10 percent of whatever your grant ended up being. So if you spent 90 percent of your grant and recapture 10 percent, then you're going to get 9 percent of your original grant. You're going to be 10 percent of the 90 percent.

David Noguera: But it's possible that maybe you still have money in your line of credit and other money that you've been spending has been program income. So if you add the program income with whatever you spent from your line of credit, that's what got you past 100 percent.



You know, you can do the math a number of different ways to get 100 percent. You just want to make sure, to the extent possible, that the amount you're spending on the program income works out to be 10 percent of your initial allocation plus 10 percent of any program income that you have generated.

Hunter Kurtz: You know, if you're having problems meeting your expenditure deadline, please consider contacting us to get some technical assistance. We'll help you try to hit that mark, because it's very important that everyone get there.

David Noguera: Yeah. I can't tell from your question if this is an accounting issue that you're struggling with or if it's an expenditure issue. But either way, let's try to get you some help if we can.

Kent Buhl: And next, Debra [ph] asks, "Can a rental building leave one unit free as a 'swing unit'? Example was if someone had bed bugs and needed to move out of one unit; the open unit would be available for them."

John Laswick: Not really. I mean, I think maybe those situations come up. But you need to occupy all the units that you have in order to meet a national objective, and you won't be able to close out your grant until you do that. So just having a spare unit around isn't achieving the point of the program, so generally speaking, no, you can't do that. You need to deal with that issue, but this isn't the way to do it.

Kent Buhl: Let's go now to Linda [ph]. Hi, Linda.

Q: Hi. How are you doing? My name's Linda Calvert. I'm a realtor with Welcome Home Realty in Surprise, Arizona. My question is this: We have buyers that have been fully approved for the NSP program. The problem is that when we go to bid on these homes through the HUD bid process, we can't seem to get the bids accepted because they're being overbid by other buyers. How do we get around that?

John Laswick: These are FHA?

Q: These are FHA-HUD homes. But there's no place on the original HUD page where we can show that's it's NSP.

John Laswick: Uh-huh. I think the way that most communities have dealt with this problem -- and almost all of them have had it in one form or another -- is to go through the National Community Stabilization Trust First Look program. That's designed specifically for this problem of being beat to the punch or outbid or whatever. This is a program that a number of the major seller services as well as FHA are participating. What it does is it gives you a short window of looking at these properties before they go to the rest of the world.

Now, you have to move pretty quickly, to be honest with you. You get these updates every day. It's run off a computer with the map on it so you can see exactly where they are, you can see what the new listings are. Chances are you'd know at least ballpark if it's on this street or it's on



this neighborhood it's something you're going be interested in. You have a couple of days to put a bid in, and that's before the clock starts on anybody else.

It's called National Community Stabilization Trust -- NCST -- First Look. And there's a tab on it on the resource exchange -- it's definitely on the NSP website; I can't find it right now.

Q: No, if it's there, I'll find it. I'm pretty tenacious.

John Laswick: Yeah, that's been working. And I'm pretty sure City of Phoenix has used it extensively, so it's something that's working in your area.

Yeah, that's a tough one, because most of the banks are saying, oh, yeah, well, this person from wherever is just going to write me a check. So that's why we designed it and it's been operating -- it's really a pretty effective program and it doesn't cost anything.

Q: You know, even if it did, a little bit --

John Laswick: But we're paying for it; let's put it that way.

Q: I've got to get my people into something, you know? Okay. Thank you so much.

Kent Buhl: Thanks, Linda. And Leslie, I see your hand up but there's no phone icon next to your name. And if anybody else wants to ask a question verbally and there is no phone icon next to your name, here's how to do it.

But here we've got a couple folks who do have phone icons. So let's go to Megan [ph]. Hi, Megan.

Q: Hi. I just wanted to clarify regarding the question about the expenditure deadlines. For NSP 1, it's to expend 100 percent of the original allocation, the PI will continue to be recycled after that; is that correct?

John Laswick: Yeah. The program income will continue indefinitely. I guess the point we were trying to make is that if you've received a bunch of program income you may have only drawn 90 percent of your actual grants through the letter of credit but you've spent that extra 10 percent through program income, then you're there. We look at both of those numbers together. In that case you could have a balance in your line of credit; that'll just stay there until you spend it down.

Q: Okay. Thank you.

John Laswick: Yeah. We'll be dealing with that stuff a lot more on Tuesday in the closeout webinar.

Q: Okay. Great. Thanks.



Kent Buhl: Thanks, Megan. And now we've got Wilma [ph]. Hello, Wilma.

Q: Actually you can disregard. My question was just answered.

Kent Buhl: Okay. Excellent. That leaves us at the moment with no questions. Got any jokes to tell?

David Noguera: Don't start him. [Chuckles.]

John Laswick: I want to remind everybody for your holiday buying we have the virtual NSP merchandise store that exists in your mind only. NSP logowear; charcoal from various demolition candidates --

Hunter Kurtz: We're even offering a 99 percent deal today, and today only. [Laughter.]

John Laswick: Make an offer. But for that hard-to-satisfy person on your list, there is nothing like a complete listing of all the NSP policy alerts or possibly a CD containing the greatest hits of the webinars -- would be a very short CD, I think.

Hunter Kurtz: I just want to point out that if you do get the complete policy alert listing, that only comes with the listing. You have to pay extra for the policy alert.

[Chuckles.]

Kent Buhl: But at 99 percent off, it's not too much. All right.

John Laswick: If there aren't any more questions I will do a summary of the closeout --

Kent Buhl: We do have another one. We're going to go back to Chris here again. Hi, Chris. Chris, are you there? Hello, Chris.

Q: Yes. I'm here. Sorry.

I did send in a question but I'll ask it, and then I have another one. If you have a mixed-use project on NSP 1 that is residential on the top floor and commercial on the ground floor, do you enter that in DRGR as two separate activities, since it would have two different national objectives and two different sets of performance measures?

Ryan Flanery: Yes, you would. Yes, that's really the only way to make sense.

Q: Okay. And then my second question has to do with the whole matter of program income and the 25 percent set-aside. If NSP is used as a construction loan that's recycled several times throughout the process, when the funds -- so say it's been used to construct four units at any one time. When they're sold, the program funds come back. When it comes back in as program income, the first go-around I would assume that 25 percent of the program income had to be used on units for 50 percent AMI. So the first go-around of the four units, then I'll just use, and then



those numbers, is for 50 percent AMI. So if that money recycles another four or five times, do you have to have, each time it comes back in, one of the units going towards 50 percent AMI or does it cut off at a certain point?

John Laswick: No. It doesn't cut off at a certain point. Every time it becomes program income, 25 percent of it needs to be spent on low-income set-asides. I mean, if that's the only money you have, then you're constrained to that. On the other hand, that's 25 percent of all your funds. So if you have other sources of funds and you're doing 100 percent low-income set-aside with another fund -- it doesn't apply to every individual activity, but it does apply and it basically will continue to be considered to be NSP money until it's all used up.

Q: Well, in this case another activity's being used to meet the 25 percent set-aside on the original grant. But once program income starts coming back from the construction loan, I was seeing it as yes, it has to meet the 25 percent set-aside; but I guess the question was how many times. And you're saying each time it comes back in, you have to have a 25 percent set-aside.

John Laswick: Yes, for program income every time. Now, we'll talk about this more on Tuesday, but there is a limit after you close out that the 25 percent set-aside only applies if you receive $250,000 a year or more in program income because we don't think that a smaller amount is feasible to expect people to create an affordable unit. But up until the point of closeout and after closeout, if it's insignificant numbers, it applies.

Q: Okay. All right. Thank you.

Kent Buhl: Thank you, Chris. And got a question from Jennifer, "What threshold was used for determining if a warning letter was being issued to grantees relative to concern for meeting NSP 1 and/or NSP 3 expenditures?"

John Laswick: So this is a little bit different in the sense that, I mean, it's a warning letter we're worried about your expenditures not meeting the requirement, but it's based on the expenditures, which may have nothing to do, unfortunately, with your drawdown numbers. So it's really hopefully mostly an accounting problem for people, but it's also a letter -- the number we've been using here is 85 percent. We've been using 85 percent as a cutoff place, and we keep increasing that as we go along. So basically I don't think it's something to be worried about, but I do think you want to be able to explain this if the question gets asked. [Pause.]

Hunter says we haven't decided on the percentage yet, but that's kind of where we were going.

Kent Buhl: So maybe approximately 85 percent right now?

John Laswick: Right. And the 85 percent that we're looking at is the drawdown, which is much closer to reality. But like I said, I mean, we've got some grantees that have draws over 100 percent of their grant amount and they have zero expenditures recorded. That's not a performance problem; that's a reporting problem. We're concerned about both of them.

Kent Buhl: That's at the moment all the questions that have come in. So John, did you want to --



John Laswick: Yeah. Let me just summarize this.

For those of you who weren't here at the top of the program, we are offering a closeout webinar next Tuesday, December 4th at 2:00. And also on Thursday we're going to have a webinar on disposition and demolition, with implications for land banks, and it's all about how do you meet a national objective with properties that are not going to have occupants in them for the most part. That's usually what that boils down to.

So we're not going to take questions on this today. We're still working on the webinar, but I do want to just summarize for those of you who haven't had the time, to take a look at the closeout notice that came out on Tuesday in the Federal Register. You can get it online.

The context of this is that we are going to have this webinar. We are already starting to develop a grantee's guide to closeouts, because as with most Federal Register publications it's not an especially user-friendly device. That should be ready sometime in January, at which point we will have another webinar on how to close it out. And then we'll have another one after that to deal with questions and so forth.

So you're not on your own on this one; there's going to be a lot more information. But the bottom line is that nobody -- there might be five grantees that are actually ready to close out, according to our information. In order to close out, you have to have all your money spent; you have to basically have no money left in your line of credit or a negligible amount. You have to -- and this is the important one -- you have to have met a national objective for every activity. So you have to show us that every demolition you did met a national objective through area benefit. Mostly you will showing us that you have not only rehabbed houses, but sold them or rented them and that they're occupied.

So that'll be your focus after the expenditure deadlines. But the big priority now is still to make sure you can actually spend out 100 percent of your grant amount by February or March. And you all have somewhat different dates for that in NSP 1 or 3 -- 50 percent expenditures for NSP 3 by next March. NSP 3, we publish these drawdown figures every week. If you look at the NSP 3 numbers you will be horrified to find out how many grantees have spent less than 1 percent of their grants. So if you're in that bind and you don't have a plan, please get a hold of us and we'll try to get you some technical assistance.

So just to summarize the closeout notice, it's kind of broken into two parts. One is fairly straightforward. It talks about what is a closeout, when do you qualify to close out -- and again, I say all of your costs have been paid, all of your activities have been completed, your 25 percent set-aside has been expended, and you have fulfilled all your other responsibilities primarily, including the one to meet a national objective for each activity. So if you do that, you would be eligible to close out.

Timing-wise, there is no deadline for closeouts. You are not going to be under any gun in the foreseeable future to closeout. Probably a couple years from now we'll start setting some limits. But right now it's really driven by your ability to get your units completed and occupied and all



your costs taken care of. I know after four years of deadlines you're going to miss them, but that'll finally burn off.

And then there's a section on how do you actually do the closeouts. I'm not going to go through that, but basically it boils down to filing a final quarterly progress report. You will celebrate that day, I'm sure. You will have annual performance reports to deal with after closeout, but you will no longer have the QPR to deal with.

We will have issues that we resolve. And then the big thing is that we'll have a closeout agreement, and it'll deal with what's required to be done going forward; the program assets, how are you going to deal with property that you still hold, how are you going to deal with land bank property, how are you going to ensure continued affordability for all the units that you have occupied? And you'll be giving us your plan for doing that.

So those are all, I think, fairly understandable, fairly straightforward. You'll have certifications, assurances, and so forth. And then it'll be kind of an ongoing monitoring responsibility for the HUD field offices and probably for a couple of folks here in headquarters as we go forward.

So the part of the closeout notice that people I think were most interested in is actually not part of the closeout process so much as technical corrections to previous notices that we needed to clarify, or in some cases, try to improve the reading of this so that it works better out there in the real world.

The first one of these is demolition. Those of you who are faithful followers will recall that we have said that if you've acquired a property to demolish it, you can meet a national objective for the acquisition by improving the low-to-moderate/middle income neighborhood. But then you still have this problem of how to dispose of it. And so what we've tried to do here is to say essentially that we've move acquisition and disposition into Use D as eligible activities. Then you only have to meet another national objective if you dispose of the property, and chances are you will want to dispose of the property at some point.

And we have tried to simplify that process by making the requirement that you meet a national objective with the subsequent use, even if the activity itself is not something that's eligible for NSP. A simple example is a community garden in NSP 2 or 3. You can't build a community garden in NSP 2 or 3, but you can donate that land or give that land to a neighborhood association and they can build the garden with their own money or sweat equity, and the project meets a national objective. We'll be happy; you have disposed of it, that's the eligible activity and it meets a national objective and you can close that one out. That's been a thorn in everyone's side for a couple of years now. So that I think is going to -- we hope -- remove a lot of sort of headaches of how do I actually get rid of some of these properties and environments where there isn't any demand for housing.

The same thing is going to be true for land banks. One good piece of news is that the 10-year period to dispose of a property will begin with your closeout agreement date rather than the date you acquired the property. Chances are you acquired a lot of different properties on a lot of



different dates and it didn't make sense to try to track all that, so we will just be declaring that the 10-year clock starts when you sign your closeout agreement.

But the disposition approach -- and we'll have a webinar on disposition on Thursday, a week from today -- disposition will follow the same philosophy; that anything that meets the national objective basically is okay. If you can eligibly create that activity with NSP funds, you can do that. But if you have another source of funds, as long as it meets a national objective you'll be able to do it. There's going to be some issues, I think, with -- there's going to be any number of little side issues on that question, so I'm not going to get into those today.

But I think if you just think of disposing of a property and meeting a national objective -- and I think if you look at the list of examples of things that you could do to meet a national objective under land banks, you will see that it's probably going to be a lot easier than you think to do that. And obviously we want to get things happening on those parcels but it's just not realistic in some places to think that's going to happen in 10 years.

Economic development. We are adding 572.03 from the CDBG regulations, the economic development activities, as an eligible activity. It will be applicable to NSP 1 under Use E -- only NSP 1 under Use E, because under NSP 2 and 3 Use E has to be for housing. NSP 1, 2 and 3, you can redevelop foreclosed residential property under Use B, so there may be some ways to do some redevelopment. Realistically, if you're in the middle of a residential neighborhood, this is probably not going to add to your list of tricks too much, but it does open up a new opportunity. Some of these things were eligible under NSP 1; the mixed-use scenario that Chris Plummer [ph] mentioned recently will be one of those. We are adding back a low/moderate middle-income jobs, and some economic development activities can meet an area of benefit as well.

Program income. Basically you will need to spend down your program income as far as you can prior to closeout. You can continue to receive it after that. But at some point we're going to have to zero out your bank account, so that'll be a timing issue and we'll work with you on that. But post-closeout, program income will continue to be NSP money for the most part. You can still do new construction; you can still go up to 120 percent of area median income. But 25 percent of that money will have to go to a low-income set-aside as before.

So basically this means that you will have sort of a small component of NSP funds that will eventually dwindle down to nothing, but it should be, I think, a pretty good companion to your CDBG and HOME programs.

I'm not going to get into here, but the rules for nonprofit consortium of leaders and non-entitlement NSP 3 grantees are going to be slightly different for program income, but there aren't too many of those, so I'm not going to get into that today.

Long-term affordability. You will have to report for the affordability period. We will be transitioning over to the IDIS system eventually, but for the foreseeable future you'll still be reporting through DRGR and that'll be part of the closeout process, as in how many units are there and how are you going to assure that you do some reviews of those on a regular basis to



make sure that the requirements are being met. I know you'll all be thrilled to be transitioning into IDIS, but we'll be developing a new system and it hasn't even started yet.

And then finally, for those of you who wanted to -- had some hope of getting a little additional funding for your program, the amount of funding that we have recaptured through NSP 1 so far from failure to meet obligation requirements has been negligible -- I mean, it's $20 million approximately; I wouldn't mind having that in my bank account -- but it's negligible. It's half a percent of the original $4 billion NSP 1 allocation where it came from.

So those funds are going to go back to a disaster fund, which is our default setting for recaptured funds. That's where we actually started out with the NSP notice back in 2008. So I'm sorry to disappoint those of you who thought you might get a little extra funding, but realistically it's just administratively not feasible to administer that small amount of money on a whole new timetable and everything else. So that will go to disaster relief. That's where CDBG funds that were recaptured have historically gone.

So that's the highlights of it. I personally feel that people are going to be a little maybe letdown in the sense that this thing has just dragged on for so long that people might have expected more. I hope you won't be disappointed. I think that on balance the number of things that we've made easier and more attractive far outweighs the number that might seem more difficult or constrained.

So like I said, we're not prepared to answer questions on this yet, so please give us a little more time to prepare for that. Closeouts are not -- we keep saying this, but I want to say it again -- this is life after deadlines, and that's where closeouts happen, and there's no deadline for closeouts. Your highest priority right now is to make sure that you get your grant funds 100 percent expended if you're NSP 1 or 2 and 50 percent expended if you're NSP 3 by February/March, when most of your deadlines come due. If you are at all concerned about that, we need to hear from you right away. You can write in through our website; you can call your field office; you can call us here.

There is a way to request technical assistance directly through the website. Typically those requests are for short-term, limited kinds of assistance that we can provide remote -- somebody working with you on your computer or over the phone. We generally turn those around in about a week. So we can get you some help pretty quickly, but you need to let us know.

Otherwise we will be focusing over the next couple of months, as Hunter mentioned before -- our webinar schedule is really heavily built around getting DRGR straight, getting your expenditures straight. Paul Webster's going to come -- is that the one on the 15th?

Hunter Kurtz: That's the one on the 15th, yes.

John Laswick: Yes. So if you've never heard of the name "Paul Webster" you'll need to know, he is the man-mountain of financial management here at HUD. I just saw on his wall, they had his 30-year government service award in 2000. That's 42 years in my way of calculating it. So if he doesn't know it, it's unknowable.



Kent Buhl: [Chuckles.] We have gotten a couple more questions that have come in. Hopefully they're on non-closeout topics. First up is Tatiana [ph] in -- is it Miami Gardens?

Q: That is correct. Hello, Kent; how are you?

Kent Buhl: Doing well. Thank you.

Q: Okay. This is the question, and it's related to NSP 3. The amount of units that we were supposed to accomplish in our target area was originally 17. We had on a developer's agreement that was supposed to create 189 units. However, it seems like that deal is going to fall through. So my question is this: What happened or what are the consequences of not being able to actually accomplish the full amount of units that are required for that target area? Because we're not going to have the leverage at this point.

John Laswick: Right. So there's two related questions there; one is the expenditures and the other is the accomplishments, being occupied units.

With the expenditures there's not a lot of flexibility. We're going to be looking for those to be met. But we do recognize that projections, particularly in NSP 1 and 3, and to some extent NSP 2, were just that -- they were estimates. So we'll look at what you've been able to do. We'll look at why you might have fallen short. And on an individual basis determine if there was good cause for what happened, you should be okay.

Obviously if you fall a little bit short, it's one thing. If you don't do anything, then you've got a problem. But if it's a matter of just coming up somewhat short, we'll look at the circumstances and try to work with you and see if there was a good reason for it.

Q: Okay. Perfect. Now, the other question: If we at this point -- because the market we have seen has changed a little bit since we originally proposed the target area -- we just checked and there are only 16 units that are foreclosed on that particular census tract. We're supposed to get, again, 17. If we see that another area within the city is at the tipping point where we can actually get a better amount of units and make a bigger impact, can we just make that change in the action plan and just proceed with the other area?

John Laswick: Yes. You need to do a local amendment, and it has to go to Maria in Miami there at the field office. But yes, and many NSP 3 grantees -- it's been a couple of years since we first developed that and the market conditions have shifted for any number of communities. I personally would recommend, rather than just adding and adding and adding -- if you're going to move to another area, then subtract the one you started from.

Because again, we don't want people to get spread too thin. You stay in the original area and you do two units and you go someplace else and you do five units -- ultimately we want you to have an impact, and it's not likely to happen if you're just doing it in small sprinkles. But if it makes sense and the market conditions are there, you have the ability to make that amendment.



Q: Okay. Perfect. Thank you.

John Laswick: You're welcome.

Kent Buhl: Thank you, Tatiana. And another question here from Leslie, who says that, "Previous Q&A provided guidance on moving funds between awards. I agree that once NSP 2 funds are expended or drawn down you can't change your mind. But if front-end work is done, like an action plan or DRGR, can't funds be moved if not drawn, even if they are allocated?"

John Laswick: Not if they're allocated. We've been learning this the hard way lately. You may need to contact us and figure out where you are. There's an OMB rule against shifting funds around that have already been allocated, and it was really designed for situations in which people are just kind of trying to avoid one set of restrictions, but I don't think that's what you're talking about here.

If there is -- on the other hand, we've talked to Paul Webster about this just recently. Paul is saying, look, if you have both of these activities and both of the programs and you have not made a commitment to a particular activity in one year, you can take those and commit those to another activity. But once it's allocated it's tougher to do that. The first time I had this question, the funds had already been spent, and the question was, well, can we back the funds out of this program and put them into that program to make things work out better? And the answer to that is no, not at all.

But if you haven't spent them and you think it's possible that they're not allocated, then you may be able to shift them around. But you really would want to talk to your field staff or somebody to work through the particulars. This is something that I was just really made aware of a couple of months ago, and it's a question that we're getting a lot these days.

The reality is it's going to pretty much always be determined on a case-by-case basis because unless you've just got the money sitting there and you haven't done anything with it yet, you could have allocated it. So you want to get a decision on that.

Kent Buhl: And John, what is the definition of "allocated"?

John Laswick: Well, it's committed or obligated, basically. And so in my mind, that's under contract. Clearly if you have a rehab contract, that would be allocated. Some activities aren't quite as clear -- staffing, that kind of stuff. So you can go to the OMB Circular A-87 and read the definition of "allocated" and they give examples and so forth.

David Noguera: Comes under "allocable costs."

John Laswick: Yeah. It's an accounting issue and I'm not an accountant, so I can't give you the absolutely perfect answer. But when I've asked people I haven't gotten what I consider to be a clear-cut line.

Kent Buhl: Which circular is that?



John Laswick: A-87.

Kent Buhl: Good. Okay. At this point it does seem that questions have come to a halt.

So again, remember that this webinar is being recorded, and the recording will be on the NSP resource exchange along with the transcript that will be there soon and the slides. And you did see the coming webinars just a little bit ago, but there's a reminder about them. Those start as early as Tuesday, with the closeout webinar.

And when you leave you'll be automatically redirected to a SurveyMonkey form, and we appreciate your taking a couple minutes to fill that out. That's all it requires. And written comments are particularly helpful there, so if you have anything more to say than just indicating numbers, that would be great.

And I'd like to thank all of our panelists today -- John, David, Hunter, Jennifer, and Ryan; big cast of characters for a Q&A webinar. Any final words from any of you?

John Laswick: No. We appreciate everyone's showing up. I think part of that was driven by the closeout, but that's Tuesday. So come back and tear into it on Tuesday; start thinking about how this affects you. We'll try to have answers for as many questions as we can. Just get out there and do your best and call us if you need help.

Thanks, everybody.

Kent Buhl: Terrific. Thank you, guys, and thanks everyone for being here.

(END)


hud nsp open forum q&a, 11/29/12 · that's just a bookkeeping thing, ... ~~~ noble...

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