24 CFR Part 990

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§ 985.108

24 CFR Ch. IX (4–1–16 Edition)

needs of the PHA and the actions required to address the program deficiencies.
(b) HUD written report. HUD must
provide the PHA a written report of its
on-site review containing HUD findings
of program management deficiencies,
the apparent reasons for the deficiencies, and recommendations for improvement.
(c) PHA corrective action plan. Upon
receipt of the HUD written report on
its on-site review, the PHA must write
a corrective action plan and submit it
to HUD for approval. The corrective action plan must:
(1) Specify goals to be achieved;
(2) Identify obstacles to goal achievement and ways to eliminate or avoid
them;
(3) Identify resources that will be
used or sought to achieve goals;
(4) Identify an PHA staff person with
lead responsibility for completing each
goal;
(5) Identify key tasks to reach each
goal;
(6) Specify time frames for achievement of each goal, including intermediate time frames to complete each
key task; and
(7) Provide for regular evaluation of
progress toward improvement.
(8) Be signed by the PHA board of
commissioners chairperson and by the
PHA executive director. If the PHA is a
unit of local government or a state, the
corrective action plan must be signed
by the Section 8 program director and
by the chief executive officer of the
unit of government or his or her designee.
(d) Monitoring. The PHA and HUD
must monitor the PHA’s implementation of its corrective action plan to ensure performance targets are met.
(e) Use of administrative fee reserve prohibited. Any PHA assigned an overall
performance rating of troubled may
not use any part of the administrative
fee reserve for other housing purposes
(see 24 CFR 982.155(b)).
(f) Upgrading poor performance rating.
HUD shall change an PHA’s overall
performance rating from troubled to
standard or high performer if HUD determines that a change in the rating is
warranted because of improved PHA

performance and an improved SEMAP
score.
(Information collection requirements in this
section have been approved by the Office of
Management and Budget under control number 2577–0215)
[63 FR 48555, Sept. 10, 1998, as amended at 68
FR 37672, June 24, 2003]

§ 985.108

SEMAP records.

HUD shall maintain SEMAP files, including certifications, notifications,
appeals, corrective action plans, and
related correspondence for at least 3
years.
(Information collection requirements in this
section have been approved by the Office of
Management and Budget under control number 2577–0215)

§ 985.109 Default under the Annual
Contributions Contract (ACC).
HUD may determine that an PHA’s
failure to correct identified SEMAP deficiencies or to prepare and implement
a corrective action plan required by
HUD constitutes a default under the
ACC.

Subpart C—Physical Assessment
Component [Reserved]
PART 990—THE PUBLIC HOUSING
OPERATING FUND PROGRAM
Subpart A—Purpose, Applicability,
Formula, and Definitions
Sec.
990.100 Purpose.
990.105 Applicability.
990.110 Operating fund formula.
990.115 Definitions.
990.116 Environmental review requirements.

Subpart B—Eligibility for Operating Subsidy;
Computation of Eligible Unit Months
990.120 Unit months.
990.125 Eligible units.
990.130 Ineligible units.
990.135 Eligible unit months (EUMs).
990.140 Occupied dwelling units.
990.145 Dwelling units with approved vacancies.
990.150 Limited vacancies.
990.155 Addition and deletion of units.

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Asst. Secry., for Public and Indian Housing, HUD
Subpart C—Calculating Formula Expenses
990.160 Overview of calculating formula expenses.
990.165 Computation of project expense level
(PEL).
990.170 Computation of utilities expense
level (UEL): Overview.
990.175 Utilities expense level: Computation
of the current consumption level.
990.180 Utilities expense level: Computation
of the rolling base consumption level.
990.185 Utilities expense level: Incentives
for energy conservation/rate reduction.
990.190 Other formula expenses (add-ons).

Calculation of formula income.

Subpart E—Determination and Payment of
Operating Subsidy
990.200 Determination of formula amount.
990.205 Fungibility of operating subsidy between projects.
990.210 Payment of operating subsidy.
990.215 Payments of operating subsidy conditioned upon reexamination of income
of families in occupancy.

Subpart F—Transition Policy and Transition
Funding
990.220 Purpose.
990.225 Transition determination.
990.230 PHAs that will experience a subsidy
reduction.
990.235 PHAs that will experience a subsidy
increase.

Subpart G—Appeals
990.240
990.245
990.250

General.
Types of appeals.
Requirements for certain appeals.

Subpart H—Asset Management
990.255 Overview.
990.260 Applicability.
990.265 Identification of projects.
990.270 Asset management.
990.275 Project-based management (PBM).
990.280 Project-based budgeting and accounting.
990.285 Records and reports.
990.290 Compliance with asset management
requirements.

Subpart I—Operating Subsidy for Properties
Managed by Resident Management
Corporations (RMCs)
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Subpart J—Financial Management
Systems, Monitoring, and Reporting
990.310 Purpose—General policy on financial
management, monitoring, and reporting.
990.315 Submission and approval of operating budgets.
990.320 Audits.
990.325 Record retention requirements.
AUTHORITY:
3535(d).

42

U.S.C.

1437g;

990.295 Resident Management Corporation
operating subsidy.
990.300 Preparation of operating budget.
990.305 Retention of excess revenues.

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U.S.C.

SOURCE: 70 FR 54997, Sept. 19, 2005, unless
otherwise noted.

§ 990.100 Purpose.
This part implements section 9(f) of
the United States Housing Act of 1937
(1937 Act), (42 U.S.C. 1437g). Section 9(f)
establishes an Operating Fund for the
purposes of making assistance available to public housing agencies (PHAs)
for the operation and management of
public housing. In the case of unsubsidized housing, the total expenses of
operating rental housing should be covered by the operating income, which
primarily consists of rental income
and, to some degree, investment and
non-rental income. In the case of public housing, the Operating Fund provides operating subsidy to assist PHAs
to serve low, very low, and extremely
low-income families. This part describes the policies and procedures for
Operating Fund formula calculations
and management under the Operating
Fund Program.
§ 990.105 Applicability.
(a) Applicability of this part. (1) With
the exception of subpart I of this part,
this part is applicable to all PHA rental units under an Annual Contributions
Contract (ACC). This includes PHAs
that have not received operating subsidy previously, but are eligible for operating subsidy under the Operating
Fund Formula.
(2) This part is applicable to all rental units managed by a resident management corporation (RMC), including
a direct-funded RMC.
(b) Inapplicability of this part. (1) This
part is not applicable to Indian Housing, section 5(h) and section 32 homeownership projects, the Housing Choice

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42

Subpart A—Purpose, Applicability,
Formula, and Definitions

Subpart D—Calculating Formula Income
990.195

§ 990.105

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§ 990.110

24 CFR Ch. IX (4–1–16 Edition)

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Voucher Program, the section 23
Leased Housing Program, or the section 8 Housing Assistance Payments
Programs.
(2) With the exception of subpart J of
this part, this part is not applicable to
the Mutual Help Program or the Turnkey III Homeownership Opportunity
Program.
§ 990.110 Operating fund formula.
(a) General formula. (1) The amount of
annual contributions (operating subsidy) each PHA is eligible to receive
under this part shall be determined by
a formula.
(2) In general, operating subsidy shall
be the difference between formula expense and formula income. If a PHA’s
formula expense is greater than its formula income, then the PHA is eligible
for an operating subsidy.
(3) Formula expense is an estimate of
a PHA’s operating expense and is determined by the following three components: Project Expense Level (PEL),
Utility Expense Level (UEL), and other
formula expenses (add-ons). Formula
expense and its three components are
further described in subpart C of this
part. Formula income is an estimate
for a PHA’s non-operating subsidy revenue and is further described in subpart D of this part.
(4) Certain portions of the operating
fund formula (e.g., PEL) are calculated
in terms of per unit per month (PUM)
amounts and are converted into whole
dollars by multiplying the PUM
amount by the number of eligible unit
months (EUMs). EUMs are further described in subpart B of this part.
(b) Specific formula. (1) A PHA’s formula amount shall be the sum of the
three formula expense components calculated as follows: {[(PEL multiplied
by EUM) plus (UEL multiplied by
EUM) plus add-ons] minus (formula income multiplied by EUM)}.
(2) A PHA whose formula amount is
equal to or less than zero is still eligible to receive operating subsidy equal
to its most recent actual audit cost for
its Operating Fund Program.
(3) Operating subsidy payments will
be limited to the availability of funds
as described in § 990.210(c).
(c) Non-codified formula elements. This
part defines the major components of

the Operating Fund Formula and describes the relationships of these various components. However, this part
does not codify certain secondary elements that will be used in the revised
Operating Fund Formula. HUD will
more appropriately provide this information in non-codified guidance, such
as a Handbook, FEDERAL REGISTER notice, or other non-regulatory means
that HUD determines appropriate.
§ 990.115 Definitions.
The following definitions apply to
the Operating Fund program:
1937 Act means the United States
Housing Act of 1937 (42 U.S.C. 1437 et
seq.).
Annual contributions contract (ACC) is
a contract prescribed by HUD for loans
and contributions, which may be in the
form of operating subsidy, whereby
HUD agrees to provide financial assistance and the PHA agrees to comply
with HUD requirements for the development and operation of its public
housing projects.
Asset management is a management
model that emphasizes project-based
management, as well as long-term and
strategic planning.
Current consumption level is the
amount of each utility consumed at a
project during the 12-month period
that ended the June 30th prior to the
beginning of the applicable funding period.
Eligible unit months (EUM) are the actual number of PHA units in eligible
categories expressed in months for a
specified time frame and for which a
PHA receives operating subsidy.
Formula amount is the amount of operating subsidy a PHA is eligible to receive, expressed in whole dollars, as determined by the Operating Fund Formula.
Formula expense is an estimate of a
PHA’s operating expense used in the
Operating Fund Formula.
Formula income is an estimate of a
PHA’s non-operating subsidy revenue
used in the Operating Fund Formula.
Funding period is the calendar year
for which HUD will distribute operating subsidy according to the Operating Fund Formula.
Operating Fund is the account/program authorized by section 9 of the

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Asst. Secry., for Public and Indian Housing, HUD
1937 Act for making operating subsidy
available to PHAs for the operation
and management of public housing.
Operating Fund Formula (or Formula)
means the data and calculations used
under this part to determine a PHA’s
amount of operating subsidy for a
given period.
Operating subsidy is the amount of
annual contributions for operations a
PHA receives each funding period
under section 9 of the 1937 Act as determined by the Operating Fund Formula
in this part.
Other operating costs (add-ons) means
PHA expenses that are recognized as
formula expenses but are not included
either in the project expense level or in
the utility expense level.
Payable consumption level is the
amount for all utilities consumed at a
project that the Formula recognizes in
the computation of a PHA’s utility expense level at that project.
Per unit per month (PUM) describes
a dollar amount on a monthly basis per
unit, such as Project Expense Level,
Utility Expense Level, and formula income.
Project means each PHA project
under an ACC to which the Operating
Fund Formula is applicable. However,
for purposes of asset management, as
described in subpart H of this part,
projects may be as identified under the
ACC or may be a reasonable grouping
of projects or portions of a project or
projects under the ACC.
Project-based management is the provision of property management services
that is tailored to the unique needs of
each property, given the resources
available to that property.
Project expense level (PEL) is the
amount of estimated expenses for each
project (excluding utilities and addons) expressed as a PUM cost.
Project units means all dwelling units
in all of a PHA’s projects under an
ACC.
Rolling base consumption level (RBCL)
is the average of the yearly consumption levels for the 36-month period ending on the June 30th that is 18 months
prior to the beginning of the applicable
funding period.
Transition funding is the timing and
amount by which a PHA will realize increases and reductions in operating

§ 990.120

subsidy based on the new funding levels
of the Operating Fund Formula.
Unit months are the total number of
project units in a PHA’s inventory expressed in months for a specified time
frame.
Utilities means electricity, gas, heating fuel, water, and sewerage service.
Utilities expense level (UEL) is a product of the utility rate multiplied by
the payable consumption level multiplied by the utilities inflation factor
expressed as a PUM dollar amount.
Utility rate (rate) means the actual average rate for any given utility for the
most recent 12-month period that
ended the June 30th prior to the beginning of the applicable funding period.
Yearly consumption level is the actual
amount of each utility consumed at a
project during a 12-month period ending June 30th.
§ 990.116 Environmental review requirements.
The environmental review procedures
of the National Environmental Policy
Act of 1969 (42 U.S.C. 4332(2)(C)) and the
implementing regulations at 24 CFR
parts 50 and 58 are applicable to the Operating Fund Program.

Subpart B—Eligibility for Operating
Subsidy; Computation of Eligible Unit Months
§ 990.120 Unit months.
(a) Some of the components of HUD’s
Operating Fund Formula are based on
a measure known as unit months. Unit
months represent a PHA’s public housing inventory during a specified period
of time. The unit months eligible for
operating subsidy in a 12-month period
are equal to the number of months that
the units are in an operating subsidyeligible category, adjusted for changes
in inventory (e.g., units added or removed), as described below.
(b) A PHA is eligible to receive operating subsidy for a unit on the date it
is both placed under the ACC and occupied. The date a unit is eligible for operating subsidy does not change the
Date of Full Availability (DOFA) or
the date of the End of Initial Operating
Period (EIOP), nor does this provision
place a project into management status.

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§ 990.125

24 CFR Ch. IX (4–1–16 Edition)

§ 990.125 Eligible units.
A PHA is eligible to receive operating subsidy for public housing units
under an ACC for:
(a) Occupied dwelling units as defined
in § 990.140;
(b) A dwelling unit with an approved
vacancy (as defined in § 990.145); and
(c) A limited number of vacancies (as
defined in § 990.150).
§ 990.130 Ineligible units.
(a) Vacant units that do not fall
within the definition of § 990.145 or
§ 990.150 are not eligible for operating
subsidy under this part.
(b) Units that are eligible to receive
an asset-repositioning fee, as described
in § 990.190(h), are not eligible to receive operating subsidy under this subpart.

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§ 990.135 Eligible unit months (EUMs).
(a) A PHA’s total number of EUMs
will be calculated for the 12-month period from July 1st to June 30th that is
prior to the first day of the applicable
funding period, and will consist of eligible units as defined in § 990.140,
§ 990.145, or § 990.150.
(b)(1) The determination of whether a
public housing unit satisfies the requirements of § 990.140, § 990.145, or
§ 990.150 for any unit month shall be
based on the unit’s status as of either
the first or last day of the month, as
determined by the PHA.
(2) HUD reserves the right to determine the status of any and all public
housing units based on information in
its information systems.
(c) The PHA shall maintain and, at
HUD’s request, shall make available to
HUD, specific documentation of the
status of all units, including, but not
limited to, a listing of the units, street
addresses or physical address, and
project/management control numbers.
(d) Any unit months that do not meet
the requirements of this subpart are
not eligible for operating subsidy, and
will not be subsidized by the Operating
Fund.
§ 990.140 Occupied dwelling units.
A PHA is eligible to receive operating subsidy for public housing units
for each unit month that those units
are under an ACC and occupied by a

public housing-eligible family under
lease.
§ 990.145 Dwelling units
proved vacancies.

with

(a) A PHA is eligible to receive operating subsidy for vacant public housing
units for each unit month the units are
under an ACC and meet one of the following HUD-approved vacancies:
(1) Units undergoing modernization.
Vacancies resulting from project modernization or unit modernization (such
as work necessary to reoccupy vacant
units) provided that one of the following conditions is met:
(i) The unit is undergoing modernization (i.e., the modernization contract
has been awarded or force account
work has started) and must be vacant
to perform the work, and the construction is on schedule according to a HUDapproved PHA Annual Plan; or
(ii) The unit must be vacant to perform the work and the treatment of
the vacant unit is included in a HUDapproved PHA Annual Plan, but the
time period for placing the vacant unit
under construction has not yet expired.
The PHA shall place the vacant unit
under construction within two federal
fiscal years (FFYs) after the FFY in
which the capital funds are approved.
(2) Special use units. Units approved
and used for resident services, resident
organization offices, and related activities, such as self-sufficiency and anticrime initiatives.
(b) On a project-by-project basis, subject to prior HUD approval and for the
time period agreed to by HUD, a PHA
shall receive operating subsidy for the
units affected by the following events
that are outside the control of the
PHA:
(1) Litigation. Units that are vacant
due to litigation, such as a court order
or settlement agreement that is legally
enforceable; units that are vacant in
order to meet regulatory and statutory
requirements to avoid potential litigation (as covered in a HUD-approved
PHA Annual Plan); and units under
voluntary compliance agreements with
HUD or other voluntary compliance
agreements acceptable to HUD (e.g.,
units that are being held vacant as
part of a court-order, HUD-approved

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Asst. Secry., for Public and Indian Housing, HUD
desegregation plan, or voluntary compliance agreement requiring modifications to the units to make them accessible pursuant to 24 CFR part 8).
(2) Disasters. Units that are vacant
due to a federally declared, state-declared, or other declared disaster.
(3) Casualty losses. Damaged units
that remain vacant due to delays in
settling insurance claims.
(c) A PHA may appeal to HUD to receive operating subsidy for units that
are vacant due to changing market
conditions (see subpart G of this part—
Appeals).
§ 990.150 Limited vacancies.
(a) Operating subsidy for a limited number of vacancies. HUD shall pay operating subsidy for a limited number of
vacant units under an ACC if the
annualized vacancy rate is less than or
equal to:
(1) Three percent of the PHA’s total
unit inventory (not to exceed 100 percent of the unit months under an ACC)
for the period July 1, 2004, to June 30,
2005, and
(2) Three percent of the total units
on a project-by-project basis based on
the definition of a project under subpart H of this part, beginning July 1,
2005.
(b) Exception for PHAs with 100 or
fewer units. Notwithstanding paragraph
(a) of this section, a PHA with 100 or
fewer units will be paid operating subsidy for up to five vacant units not to
exceed 100 percent of the unit months
under an ACC. For example, a PHA
with an inventory of 100 units and four
vacancies during its fiscal year will be
eligible for operating subsidy for all 100
units. A PHA with an inventory of 50
units with seven vacancies during its
fiscal year will be eligible for operating
subsidy for 48 units.

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EFFECTIVE DATE NOTE: At 81 FR 12377,
March 8, 2016, § 990.150(a) was revised, effective April 7, 2016. For the convenience of the
user, the revised text is set forth as follows:
§ 990.150 Limited vacancies.
(a) Operating subsidy for a limited number of
vacancies. HUD will pay operating subsidy
for a limited number of vacant units under
an ACC. The limited number of vacant units
must be equal to or less than 3 percent of the
unit months on a project-by-project basis
based on the definition of a project under

§ 990.160

§ 990.265 (provided that the number of eligible
unit months does not exceed 100 percent of
the unit months for a project).

*

*

§ 990.155 Addition
units.

*

*
and

deletion

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of

(a) Changes in public housing unit inventory. To generate a change to its
formula amount within each one-year
funding period, PHAs shall periodically
(e.g., quarterly) report the following information to HUD, during the funding
period:
(1) New units that were added to the
ACC, and occupied by a public housingeligible family during the prior reporting period for the one-year funding period, but have not been included in the
previous EUMs’ data; and
(2) Projects, or entire buildings in a
project, that are eligible to receive an
asset repositioning fee in accordance
with the provisions in § 990.190(h).
(b) Revised EUM calculation. (1) For
new units, the revised calculation shall
assume that all such units will be fully
occupied for the balance of that funding period. The actual occupancy/vacancy status of these units will be included to calculate the PHA’s operating subsidy in the subsequent funding period after these units have one
full year of a reporting cycle.
(2) Projects, or entire buildings in a
project, that are eligible to receive an
asset repositioning fee in accordance
with § 990.190(h) are not to be included
in the calculation of EUMs. Funding
for these units is provided under the
conditions described in § 990.190(h).

Subpart C—Calculating Formula
Expenses
§ 990.160 Overview of calculating formula expenses.
(a) General. Formula expenses represent the costs of services and materials needed by a well-run PHA to sustain the project. These costs include
items such as administration, maintenance, and utilities. HUD also determines a PHA’s formula expenses at a
project level. HUD uses the following
three factors to determine the overall
formula expense level for each project:

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§ 990.165

24 CFR Ch. IX (4–1–16 Edition)

(1)The project expense level (PEL)
(calculated
in
accordance
with
§ 990.165);
(2) The utilities expense level (UEL)
(calculated
in
accordance
with
§§ 990.170, 990.175, 990.180, and 990.185);
and
(3)Other formula expenses (add-ons)
(calculated
in
accordance
with
§ 990.190).
(b) PEL, UEL, and Add-ons. Each
project of a PHA has a unique PEL and
UEL. The PEL for each project is based
on ten characteristics and certain adjustments described in § 990.165. The
PEL represents the normal expenses of
operating public housing projects, such
as maintenance and administration
costs. The UEL for each project represents utility expenses. Utility expense levels are based on an incentive
system aimed at reducing utility expenses. Both the PEL and UEL are expressed in PUM costs. The expenses not
included in these expense levels and
which are unique to PHAs are titled
‘‘other formula expenses (add-ons)’’ and
are expressed in a dollar amount.
(c) Calculating project formula expense.
The formula expense of any one project
is the sum of the project’s PEL and the
UEL, multiplied by the total EUMs
specific to the project, plus the addons.

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§ 990.165 Computation of project expense level (PEL).
(a) Computation of PEL. The PEL is
calculated in terms of PUM cost and
represents the costs associated with
the project, except for utility and addon costs. Costs associated with the
PEL are administration, management
fees, maintenance, protective services,
leasing, occupancy, staffing, and other
expenses, such as project insurance.
HUD will calculate the PEL using regression analysis and benchmarking
for the actual costs of Federal Housing
Administration (FHA) projects to estimate costs for public housing projects.
HUD will use the ten variables described in paragraph (b) of this section
and their associated coefficient (i.e.,
values that are expressed in percentage
terms) to produce a PEL.
(b) Variables. The ten variables are:
(1) Size of project (number of units);

(2) Age of property (Date of Full
Availability (DOFA));
(3) Bedroom mix;
(4) Building type;
(5) Occupancy type (family or senior);
(6) Location (an indicator of the type
of community in which a property is
located; location types include rural,
city central metropolitan, and non-city
central metropolitan (suburban) areas);
(7) Neighborhood poverty rate;
(8) Percent of households assisted;
(9) Ownership type (profit, non-profit,
or limited dividend); and
(10) Geographic.
(c) Cost adjustments. HUD will apply
four adjustments to the PEL. The adjustments are:
(1) Application of a $200 PUM floor
for any senior property and a $215 PUM
floor for any family property;
(2) Application of a $420 PUM ceiling
for any property except for New York
City Housing Authority projects, which
have a $480 PUM ceiling;
(3) Application of a four percent reduction for any PEL calculated over
$325 PUM, with the reduction limited
so that a PEL will not be reduced to
less than $325; and
(4) The reduction of audit costs as reported for FFY 2003 in a PUM amount.
(d) Annual inflation factor. The PEL
for each project shall be adjusted annually, beginning in 2005, by the local inflation factor. The local inflation factor shall be the HUD-determined
weighted average percentage increase
in local government wages and salaries
for the area in which the PHA is located, and non-wage expenses.
(e) Calculating a PEL. To calculate a
specific PEL for a given property, the
sum of the coefficients for nine variables (all variables except ownership
type) shall be added to a formula constant. The exponent of that sum shall
be multiplied by a percentage to reflect
the non-profit ownership type, which
will produce an unadjusted PEL. For
the calculation of the initial PEL, the
cost adjustments described in paragraphs (c)(1), (c)(2), and (c)(3) of this
section will be applied. After these initial adjustments are applied, the audit
adjustment described in paragraph
(c)(4) of this section will be applied to
arrive at the PEL in year 2000 dollars.
After the PEL in year 2000 dollars is

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Asst. Secry., for Public and Indian Housing, HUD

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created, the annual inflation factor as
described in paragraph (d) of this section will be applied cumulatively to
this number through 2004 to yield an
initial PEL in terms of current dollars.
(f) Calculation of the PEL for Moving
to Work PHAs. PHAs participating in
the Moving to Work (MTW) Demonstration authorized under section 204
of the Omnibus Consolidated Rescissions and Appropriations Act of 1996
(Pub. L. 104–134, approved April 26, 1996)
shall receive an operating subsidy as
provided in Attachment A of their
MTW Agreements executed prior to November 18, 2005. PHAs with an MTW
Agreement will continue to have the
right to request extensions of or modifications to their MTW Agreements.
(g) Calculation of the PELs for mixedfinance developments. If, prior to November 18, 2005, a PHA has either a
mixed-finance arrangement that has
closed or has filed documents in accordance with 24 CFR 941.606 for a
mixed-finance transaction, then the
project covered by the mixed-finance
transaction will receive funding based
on the higher of its former Allowable
Expense Level or the new computed
PEL.
(h) Calculation of PELs when data are
inadequate or unavailable. When sufficient data are unavailable for the calculation of a PEL, HUD may calculate
a PEL using an alternative methodology. The characteristics may be used
from similarly situated properties.
(i) Review of PEL methodology by advisory committee. In 2009, HUD will convene a meeting with representation of
appropriate stakeholders, to review the
methodology to evaluate the PEL
based on actual cost data. The meeting
shall be convened in accordance with
the Federal Advisory Committee Act (5
U.S.C. Appendix) (FACA). HUD may determine appropriate funding levels for
each project to be effective in FY 2011
after following appropriate rulemaking
procedures.
§ 990.170 Computation of utilities expense level (UEL): Overview.
(a) General. The UEL for each PHA is
based on its consumption for each utility, the applicable rates for each utility, and an applicable inflation factor.
The UEL for a given funding period is

§ 990.170

the product of the utility rate multiplied by the payable consumption level
multiplied by the inflation factor. The
UEL is expressed in terms of PUM
costs.
(b) Utility rate. The utility rate for
each type of utility will be the actual
average rate from the most recent 12month period that ended June 30th
prior to the beginning of the applicable
funding period. The rate will be calculated by dividing the actual utility
cost by the actual utility consumption,
with consideration for pass-through
costs (e.g., state and local utility taxes,
tariffs) for the time period specified in
this paragraph.
(c) Payable consumption level. The
payable consumption level is based on
the current consumption level adjusted
by a utility consumption incentive.
The incentive shall be computed by
comparing current consumption levels
of each utility to the rolling base consumption level. If the comparison reflects a decrease in the consumption of
a utility, the PHA shall retain 75 percent of this decrease. Alternately, if
the comparison reflects an increase in
the consumption of a utility, the PHA
shall absorb 75 percent of this increase.
(d) Inflation factor for utilities. The
UEL shall be adjusted annually by an
inflation/deflation factor based upon
the fuels and utilities component of the
United States Department of Labor,
Bureau of Labor Statistics (BLS) Consumer Price Index for All Urban Consumers (CPI–U). The annual adjustment to the UEL shall reflect the most
recently published and localized data
available from BLS at the time the annual adjustment is calculated.
(e) Increases in tenant utility allowances. Increases in tenant utility allowances, as a component of the formula
income, as described in § 990.195, shall
result in a commensurate increase of
operating subsidy. Decreases in such
utility allowances shall result in a
commensurate decrease in operating
subsidy.
(f) Records and reporting. (1) Appropriate utility records, satisfactory to
HUD, shall be developed and maintained, so that consumption and rate
data can be determined.

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§ 990.175

24 CFR Ch. IX (4–1–16 Edition)

(2) All records shall be kept by utility and by project for each 12-month
period ending June 30th.
(3) HUD will notify each PHA when
HUD has the automated systems capacity to receive such information. Each
PHA then will be obligated to provide
consumption and cost data to HUD for
all utilities for each project.
(4) If a PHA has not maintained or
cannot recapture utility data from its
records for a particular utility, the
PHA shall compute the UEL by:
(i) Using actual consumption data for
the last complete year(s) of available
data or data of comparable project(s)
that have comparable utility delivery
systems and occupancy, in accordance
with a method prescribed by HUD; or
(ii) Requesting field office approval
to use actual PUM utility expenses for
its UEL in accordance with a method
prescribed by HUD when the PHA cannot obtain necessary data to calculate
the UEL in accordance with paragraph
(f)(4)(i) of this section.
§ 990.175 Utilities expense level: Computation of the current consumption level.
The current consumption level shall
be the actual amount of each utility
consumed during the 12-month period
ending June 30th that is 6 months prior
to the first day of the applicable funding period.

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§ 990.180 Utilities expense level: Computation of the rolling base consumption level.
(a) General. (1) The rolling base consumption level (RBCL) shall be equal
to the average of yearly consumption
levels for the 36-month period ending
on the June 30th that is 18 months
prior to the first day of the applicable
funding period.
(2) The yearly consumption level is
the actual amount of each utility consumed during a 12-month period ending
June 30th. For example, for the funding
period January 1, 2006, through December 31, 2006, the RBCL will be the average of the following yearly consumption levels:
(i) Year 1 = July 1, 2001, through June
30, 2002.
(ii) Year 2 = July 1, 2002, through
June 30, 2003.

(iii) Year 3 = July 1, 2003, through
June 30, 2004.
NOTE TO PARAGRAPH (a)(2): In this example,
the current year’s consumption level will be
July 1, 2004, through June 30, 2005.

(b) Distortions to rolling base consumption level. The PHA shall have its RBCL
determined so as not to distort the
rolling base period in accordance with
a method prescribed by HUD if:
(1) A project has not been in operation during at least 12 months of the
rolling base period;
(2) A project enters or exits management after the rolling base period and
prior to the end of the applicable funding period; or
(3) A project has experienced a conversion from one energy source to another, switched from PHA-supplied to
resident-purchased utilities during or
after the rolling base period, or for any
other reason that would cause the
RBCL not to be comparable to the current year’s consumption level.
(c) Financial incentives. The threeyear rolling base for all relevant utilities will be adjusted to reflect any financial incentives to the PHA to reduce consumption as described in
§ 990.185.
§ 990.185 Utilities expense level: Incentives for energy conservation/rate
reduction.
(a) General/consumption reduction. If a
PHA undertakes energy conservation
measures that are financed by an entity other than HUD, the PHA may qualify for the incentives available under
this section. For a PHA to qualify for
these incentives, the PHA must enter
into a contract to finance the energy
conservation measures, and must obtain HUD approval. Such approval
shall be based on a determination that
payments under a contract can be
funded from reasonably anticipated energy cost savings. The contract period
shall not exceed 20 years. The energy
conservation measures may include,
but are not limited to: Physical improvements financed by a loan from a
bank, utility, or governmental entity;
management of costs under the performance contract; or a shared savings
agreement with a private energy service company. All such contracts shall

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Asst. Secry., for Public and Indian Housing, HUD
be known as energy performance contracts. PHAs may extend an executed
energy performance contract with a
term of less than 20 years to a term of
not more than 20 years, to permit additional energy conservation improvements without the reprocurement of
energy performance contractors. The
PHA must obtain HUD approval to extend the term of an executed energy
performance contract.
(1) Frozen rolling base. (i) If a PHA undertakes energy conservation measures
that are approved by HUD, the RBCL
for the project and the utilities involved may be frozen during the contract period. Before the RBCL is frozen, it must be adjusted to reflect any
energy savings resulting from the use
of any HUD funding. The RBCL also
may be adjusted to reflect systems repaired to meet applicable building and
safety codes as well as to reflect adjustments for occupancy rates increased by rehabilitation. The RBCL
shall be frozen at the level calculated
for the year during which the conservation measures initially shall be implemented.
(ii) The PHA operating subsidy eligibility shall reflect the retention of 100
percent of the savings from decreased
consumption until the term of the financing agreement is complete. The
PHA must use at least 75 percent of the
cost savings to pay off the debt, e.g.,
pay off the contractor or bank loan. If
less than 75 percent of the cost savings
is used for debt payment, however,
HUD shall retain the difference between the actual percentage of cost
savings used to pay off the debt and 75
percent of the cost savings. If at least
75 percent of the cost savings is paid to
the contractor or bank, the PHA may
use the full amount of the remaining
cost savings for any eligible operating
expense.
(iii) The annual three-year rolling
base procedures for computing the
RBCL shall be reactivated after the
PHA satisfies the conditions of the
contract. The three years of consumption data to be used in calculating the
RBCL after the end of the contract period shall be the yearly consumption
levels for the final three years of the
contract.

§ 990.185

(2) PHAs undertaking energy conservation measures that are financed
by an entity other than HUD may include resident-paid utilities under the
consumption reduction incentive, using
the following methodology:
(i) The PHA reviews and updates all
utility allowances to ascertain that
residents are receiving the proper allowances before energy savings measures are begun;
(ii) The PHA makes future calculations of rental income for purposes of
the calculation of operating subsidy
eligibility based on these baseline allowances. In effect, HUD will freeze the
baseline allowances for the duration of
the contract;
(iii) After implementation of the energy conservation measures, the PHA
updates the utility allowances in accordance with provisions in 24 CFR
part 965, subpart E. The new allowance
should be lower than baseline allowances;
(iv) The PHA uses at least 75 percent
of the savings for paying the cost of
the improvement (the PHA will be permitted to retain 100 percent of the difference between the baseline allowances and revised allowances);
(v) After the completion of the contract period, the PHA begins using the
revised allowances in calculating its
operating subsidy eligibility; and
(vi) The PHA may exclude from its
calculation of rental income the increased rental income due to the difference between the baseline allowances and the revised allowances of the
projects involved, for the duration of
the contract period.
(3) Subsidy add-on. (i) If a PHA qualifies for this incentive (i.e., the subsidy
add-on, in accordance with the provisions of paragraph (a) of this section),
then the PHA is eligible for additional
operating subsidy each year of the contract to amortize the cost of the loan
for the energy conservation measures
and other direct costs related to the
energy project under the contract during the term of the contract subject to
the provisions of this paragraph (a)(3)
of this section. The PHA’s operating
subsidy for the current funding year
will continue to be calculated in accordance with paragraphs (a), (b), and
(c) of § 990.170 (i.e., the rolling base is

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§ 990.190

24 CFR Ch. IX (4–1–16 Edition)

not frozen). The PHA will be able to retain part of the cost savings in accordance with § 990.170(c).
(ii) The actual cost of energy (of the
type affected by the energy conservation measure) after implementation of
the energy conservation measure will
be subtracted from the expected energy
cost, to produce the energy cost savings for the year.
(iii) If the cost savings for any year
during the contract period are less
than the amount of operating subsidy
to be made available under this paragraph to pay for the energy conservation measure in that year, the deficiency will be offset against the PHA’s
operating subsidy eligibility for the
PHA’s next fiscal year.
(iv) If energy cost savings are less
than the amount necessary to meet
amortization payments specified in a
contract, the contract term may be extended (up to the 20-year limit) if HUD
determines that the shortfall is the result of changed circumstances, rather
than a miscalculation or misrepresentation of projected energy savings by
the contractor or PHA. The contract
term may be extended only to accommodate payment to the contractor and
associated direct costs.
(b) Rate reduction. If a PHA takes action beyond normal public participation in rate-making proceedings, such
as well-head purchase of natural gas,
administrative appeals, or legal action
to reduce the rate it pays for utilities,
then the PHA will be permitted to retain one-half the annual savings realized from these actions.
(c) Utility benchmarking. HUD will
pursue benchmarking utility consumption at the project level as part of the
transition to asset management. HUD
intends to establish benchmarks by
collecting utility consumption and cost
information on a project-by-project
basis. In 2009, after conducting a feasibility study, HUD will convene a meeting with representation of appropriate
stakeholders
to
review
utility
benchmarking options so that HUD
may determine whether or how to implement utility benchmarking to be effective in FY 2011. The meeting shall be
convened in accordance with the Federal Advisory Committee Act (5 U.S.C.
Appendix) (FACA). The HUD study

shall take into account typical levels
of utilities consumption at public housing developments based upon factors
such as building and unit type and size,
temperature zones, age and construction of building, and other relevant factors.
[70 FR 54997, Sept. 19, 2005, as amended at 73
FR 61352, Oct. 16, 2008]

§ 990.190 Other formula expenses (addons).
In addition to calculating operating
subsidy based on the PEL and UEL, a
PHA’s eligible formula expenses shall
be increased by add-ons. The allowed
add-ons are:
(a) Self-sufficiency. A PHA may request operating subsidy for the reasonable cost of program coordinator(s) and
associated costs in accordance with
HUD’s self-sufficiency program regulations and notices.
(b) Energy loan amortization. A PHA
may qualify for operating subsidy for
payments of principal and interest cost
for energy conservation measures described in § 990.185(a)(3).
(c) Payments in lieu of taxes (PILOT).
Each PHA will receive an amount for
PILOT in accordance with section 6(d)
of the 1937 Act, based on its cooperation agreement or its latest actual
PILOT payment.
(d) Cost of independent audits. A PHA
is eligible to receive operating subsidy
equal to its most recent actual audit
costs for the Operating Fund Program
when an audit is required by the Single
Audit Act (31 U.S.C. 7501–7507) (see 2
CFR part 200, subpart F) or when a
PHA elects to prepare and submit such
an audit to HUD. For the purpose of
this rule, the most recent actual audit
costs include the associated costs of an
audit for the Operating Fund Program
only. A PHA whose operating subsidy
is determined to be zero based on the
formula is still eligible to receive operating subsidy equal to its most recent
actual audit costs. The most recent actual audit costs are used as a proxy to
cover the cost of the next audit. If a
PHA does not have a recent actual
audit cost, the PHA working with HUD
may establish an audit cost. A PHA
that requests funding for an audit shall
complete an audit. The results of the

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Asst. Secry., for Public and Indian Housing, HUD
audit shall be transmitted in a time
and manner prescribed by HUD.
(e) Funding for resident participation
activities. Each PHA’s operating subsidy calculation shall include $25 per
occupied unit per year for resident participation activities, including, but not
limited to, those described in 24 CFR
part 964. For purposes of this section, a
unit is eligible to receive resident participation funding if it is occupied by a
public housing resident or it is occupied by a PHA employee, or a police officer or other security personnel who is
not otherwise eligible for public housing. In any fiscal year, if appropriations are not sufficient to meet all
funding requirements under this part,
then the resident participation component of the formula will be adjusted accordingly.
(f) Asset management fee. Each PHA
with at least 250 units shall receive a $4
PUM asset management fee. PHAs with
fewer than 250 units that elect to transition to asset management shall receive an asset management fee of $2
PUM. PHAs with fewer than 250 units
that elect to have their entire portfolio
treated and considered as a single
project as described in § 990.260(b) or
PHAs with only one project will not be
eligible for an asset management fee.
For all PHAs eligible to receive the
asset management fee, the fee will be
based on the total number of ACC
units. PHAs that are not in compliance
with asset management as described in
subpart H of this part by FY 2011 will
forfeit this fee.
(g) Information technology fee. Each
PHA’s operating subsidy calculation
shall include $2 PUM for costs attributable to information technology. For
all PHAs, this fee will be based on the
total number of ACC units.
(h) Asset repositioning fee. (1) A PHA
that transitions projects or entire
buildings of a project out of its inventory is eligible for an asset-repositioning fee. This fee supplements the
costs associated with administration
and management of demolition or disposition, tenant relocation, and minimum protection and service associated with such efforts. The asset-repositioning fee is not intended for individual units within a multi-unit building undergoing similar activities.

§ 990.190

(2) Projects covered by applications
approved for demolition or disposition
shall be eligible for an asset repositioning fee on the first day of the
next quarter six months after the date
the first unit becomes vacant after the
relocation date included in the approved relocation plan. When this condition is met, the project and all associated units are no longer considered
an EUM as described in § 990.155. Each
PHA is responsible for accurately applying and maintaining supporting documentation on the start date of this
transition period or is subject to forfeiture of this add-on.
(3) Units categorized for demolition
and which are eligible for an asset
repositioning fee are eligible for operating subsidy at the rate of 75 percent
PEL per unit for the first twelve
months, 50 percent PEL per unit for
the next twelve months, and 25 percent
PEL per unit for the next twelve
months.
(4) Units categorized for disposition
and which are eligible for an asset
repositioning fee are eligible for operating subsidy at the rate of 75 percent
PEL per unit for the first twelve
months and 50 percent PEL per unit for
the next twelve months.
(5) The following is an example of
how eligibility for an asset-repositioning fee is determined:
(i) A PHA has HUD’s approval to demolish (or dispose of) a 100-unit project
from its 1,000 unit inventory. On January 12th, in conjunction with the
PHA’s approved Relocation Plan, a
unit in that project becomes vacant.
Accordingly, the demolition/disposition-approved project is eligible for an
asset-repositioning fee on October 1st.
(This date is calculated as follows: January 12th + six months = July 12th. The
first day of the next quarter is October
1st.)
(ii) Although payment of the assetrepositioning fee will not begin until
October 1st, the PHA will receive its
full operating subsidy based on the
1,000 units through September 30th. On
October 1st the PHA will begin to receive the 36-month asset-repositioning
fee in accordance with paragraph (h)(3)
of this section for the 100 units approved for demolition. (Asset repositioning fee requirements for projects

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§ 990.195

24 CFR Ch. IX (4–1–16 Edition)

approved for disposition are found in
paragraph (h)(4) of this section.) On October 1st, the PHA’s units will be 900.
(i) Costs attributable to changes in Federal law, regulation, or economy. In the
event that HUD determines that enactment of a Federal law or revision in
HUD or other Federal regulations has
caused or will cause a significant
change in expenditures of a continuing
nature above the PEL and UEL, HUD
may, at HUD’s sole discretion, decide
to prescribe a procedure under which
the PHA may apply for or may receive
an adjustment in operating subsidy.
[70 FR 54997, Sept. 19, 2005, as amended at 80
FR 75943, Dec. 7, 2015]

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct.
24, 2005; 80 FR 75943, Dec. 7, 2015]

Subpart D—Calculating Formula
Income

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formula income may be recalculated if
the PHA appeals to HUD for an adjustment in its formula.
(d) Calculation of formula income when
data are inadequate or unavailable. When
audited data are unavailable in HUD’s
information systems for the calculation of formula income, HUD may use
an alternative methodology, including,
but not limited to, certifications, hard
copy reports, and communications with
the respective PHAs.
(e) Inapplicability of 24 CFR 85.25 (as
revised April 1, 2013). Formula income is
not subject to the provisions regarding
program income in 24 CFR 85.25 (as revised April 1, 2013).

§ 990.195 Calculation of formula income.
(a) General. For the purpose of the
formula, formula income is equal to
the amount of rent charged to tenants
divided by the respective unit months
leased, and is therefore expressed as a
PUM. Formula income will be derived
from a PHA’s year-end financial information. The financial information used
in the formula income computation
will be the audited information provided by the PHA through HUD’s information systems. The information will
be calculated using the following PHA
fiscal year-end information:
(1) April 1, 2003, through March 31,
2004;
(2) July 1, 2003, through June 30, 2004;
(3) October 1, 2003, through September 30, 2004; and
(4) January 1, 2004, through December
31, 2004.
(b) Calculation of formula income. To
calculate formula income in whole dollars, the PUM amount will be multiplied by the EUMs as described in subpart B of this part.
(c) Frozen at 2004 level. After a PHA’s
formula income is calculated as described in paragraph (a) of this section,
it will not be recalculated or inflated
for fiscal years 2007 through 2009, unless a PHA can show a severe local economic hardship that is impacting the
PHA’s ability to maintain some semblance of its formula income (see subpart G of this part—Appeals). A PHA’s

Subpart E—Determination and
Payment of Operating Subsidy
§ 990.200 Determination
amount.

of

(a) General. The amount of operating
subsidy that a PHA is eligible for is the
difference between its formula expenses (as calculated under subpart C
of this part) and its formula income (as
calculated under subpart D of this
part).
(b) Use of HUD databases to calculate
formula amount. HUD shall utilize its
databases to make the formula calculations. HUD’s databases are intended to
be employed to provide information on
all primary factors in determining the
operating subsidy amount. Each PHA
is responsible for supplying accurate
information on the status of each of its
units in HUD’s databases.
(c) PHA responsibility to submit timely
data. PHAs shall submit data used in
the formula on a regular and timely
basis to ensure accurate calculation
under the formula. If a PHA fails to
provide accurate data, HUD will make
a determination as to the PHA’s inventory, occupancy, and financial information using available or verified data,
which may result in a lower operating
subsidy. HUD has the right to adjust
any or all formula amounts based on
clerical, mathematical, and information system errors that affect any of
the data elements used in the calculation of the formula.

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Asst. Secry., for Public and Indian Housing, HUD
§ 990.205 Fungibility of operating subsidy between projects.
(a) General. Operating subsidy shall
remain fully fungible between ACC
projects until operating subsidy is calculated by HUD at a project level.
After subsidy is calculated at a project
level, operating subsidy can be transferred as the PHA determines during
the PHA’s fiscal year to another ACC
project(s) if a project’s financial information, as described more fully in
§ 990.280, produces excess cash flow, and
only in the amount up to those excess
cash flows.
(b) Notwithstanding the provisions of
paragraph (a) of this section and subject to all of the other provisions of
this part, the New York City Housing
Authority’s
Development
Grant
Project Amendment Number 180, dated
July 13, 1995, to Consolidated Annual
Contributions Contract NY–333, remains in effect.

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§ 990.210 Payment of operating subsidy.
(a) Payments of operating subsidy
under the formula. HUD shall make
monthly payments equal to 1⁄12 of a
PHA’s total annual operating subsidy
under the formula by electronic funds
transfers through HUD’s automated
disbursement system. HUD shall establish thresholds that permit PHAs to request monthly installments. Requests
by PHAs that exceed these thresholds
will be subject to HUD review. HUD approvals of requests that exceed these
thresholds are limited to PHAs that
have an unanticipated and immediate
need for disbursement.
(b) Payments procedure. In the event
that the amount of operating subsidy
has not been determined by HUD as of
the beginning of the funding period, operating subsidy shall be provided
monthly, quarterly, or annually based
on the amount of the PHA’s previous
year’s formula or another amount that
HUD may determine to be appropriate.
(c) Availability of funds. In the event
that insufficient funds are available,
HUD shall have discretion to revise, on
a pro rata basis, the amounts of operating subsidy to be paid to PHAs.

§ 990.220

§ 990.215 Payments of operating subsidy conditioned upon reexamination of income of families in occupancy.
(a) General. Each PHA is required to
reexamine the income of each family in
accordance with the provisions of the
ACC, the 1937 Act, and HUD regulations. Income reexaminations shall be
performed annually, except as provided
in the 1937 Act, in HUD regulations, or
in the MTW agreements. A PHA must
be in compliance with all reexamination requirements in order to be eligible to receive full operating subsidy. A
PHA’s calculations of rent and utility
allowances shall be accurate and timely.
(b) A PHA in compliance. A PHA shall
submit a certification that states that
the PHA is in compliance with the annual income reexamination requirements and its rent and utility allowance calculations have been or will be
adjusted in accordance with current
HUD requirements and regulations.
(c) A PHA not in compliance. Any PHA
not in compliance with annual income
reexamination requirements at the
time of the submission of the calculation of operating subsidy shall furnish
to the responsible HUD field office a
copy of the procedures it is using to
achieve compliance and a statement of
the number of families that have undergone reexamination during the 12
months preceding the current funding
cycle. If, on the basis of this submission or any other information, HUD determines that the PHA is not substantially in compliance with all of the annual income reexamination requirements, HUD shall withhold payments
to which the PHA may be entitled
under this part. Payment may be withheld in an amount equal to HUD’s estimate of the loss of rental income to the
PHA resulting from its failure to comply with the requirements.

Subpart F—Transition Policy and
Transition Funding
§ 990.220

Purpose.

This policy is aimed at assisting all
PHAs in transitioning to the new funding levels as determined by the formula set forth in this rule. PHAs will

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§ 990.225

24 CFR Ch. IX (4–1–16 Edition)

be subject to a transition funding policy that will either increase or reduce
their total operating subsidy for a
given year.
§ 990.225 Transition determination.
The determination of the amount and
period of the transition funding shall
be based on the difference in subsidy
levels between the formula set forth in
this part and the formula in effect
prior to implementation of the formula
set forth in this part. The difference in
subsidy levels will be calculated using
FY 2004 data. When actual data are not
available for one of the formula components needed to calculate the formula
of this part for FY 2004, HUD will use
alternate data as a substitute (e.g.,
unit months available for eligible unit
months, etc.) If the difference between
these formulas indicates that a PHA
shall have its operating subsidy reduced as a result of this formula, the
PHA will be subject to a transition policy as indicated in § 990.230. If the difference between these formulas indicates that a PHA will have its operating subsidy increased as a result of
this formula, the PHA will be subject
to the transition policy as indicated in
§ 990.235.
[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct.
24, 2005]

§ 990.230 PHAs that will experience a
subsidy reduction.
(a) For PHAs that will experience a
reduction in their operating subsidy, as
determined in § 990.225, such reductions
will have a limit of:
(1) 5 percent of the difference between the two funding levels in the
first year of implementation of the formula contained in this part;
(2) 24 percent of the difference between the two funding levels in the second year of implementation of the formula contained in this part;

(3) 43 percent of the difference between the two levels in the third year
of implementation of the formula contained in this part;
(4) 62 percent of the difference between the two levels in the fourth year
of implementation of the formula contained in this part; and
(5) 81 percent of the difference between the two levels in the fifth year of
implementation of the formula contained in this part.
(b) The full amount of the reduction
in the operating subsidy level shall be
realized in the sixth year of implementation of the formula contained in this
part.
(c) For example, a PHA has a subsidy
reduction from $1 million, under the
formula in effect prior to implementation of the formula contained in this
part, to $900,000, under the formula contained in this part using FY 2004 data.
The difference would be calculated at
$100,000 ($1 million ¥ $900,000 =
$100,000). In the first year, the subsidy
reduction would be limited to $5,000 (5
percent of the difference). Thus, the
PHA would receive an operating subsidy amount pursuant to this rule plus
a transition-funding amount of $95,000
(the $100,000 difference between the two
subsidy amounts minus the $5,000 reduction limit).
(d) If a PHA can demonstrate a successful conversion to the asset management requirements of subpart H of this
part, as determined under paragraph (f)
of this section, HUD will discontinue
the reduction at the PHA’s next subsidy calculation following such demonstration, as reflected in the schedule
in paragraph (e) of this section, notwithstanding § 990.290(c).
(e) The schedule for successful demonstration of conversion to asset management for discontinuation of PHA
subsidy reduction is reflected in the
table below:

Lhorne on DSK30JT082PROD with CFR

STOP-LOSS DEMONSTRATION TIME LINE AND EFFECTIVE DATES
Demonstration date by

Applications due

Reduction stopped at

September 30, 2007 ..........................

October 15, 2007 ..............................

April 1, 2008 ......................................

April 15, 2008 ....................................

October 1, 2008 .................................

October 15, 2008 ..............................

5 percent of the PUM
difference.
24 percent of the PUM
difference.
43 percent of the PUM
difference.

Reduction effective for
Calendar Year 2007
and thereafter.
Calendar Year 2008
and thereafter.
Calendar Year 2009
and thereafter.

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Asst. Secry., for Public and Indian Housing, HUD

§ 990.240

Lhorne on DSK30JT082PROD with CFR

STOP-LOSS DEMONSTRATION TIME LINE AND EFFECTIVE DATES—Continued
Demonstration date by

Applications due

Reduction stopped at

October 1, 2009 .................................

October 15, 2009 ..............................

October 1, 2010 .................................

October 15, 2010 ..............................

62 percent of the PUM
difference.
81 percent of the PUM
difference.

Reduction effective for
Calendar Year 2010
and thereafter.
Calendar Year 2011
and thereafter.

(f)(1) For purposes of this section,
compliance with the asset management
requirements of subpart H of this part
will be based on an independent assessment conducted by a HUD-approved
professional familiar with property
management practices in the region or
state in which the PHA is located.
(2) A PHA must select from a list of
HUD-approved professionals to conduct
the independent assessment. The professional review and recommendation
will then be forwarded to the Assistant
Secretary for Public and Indian Housing (or designee) for final determination of compliance with the asset management requirements of subpart H of
this part.
(3) Upon completion of the independent assessment, the assessor shall
conduct an exit conference with the
PHA. In response to the exit conference, the PHA may submit a management response and other pertinent
information (including, but not limited
to, an additional assessment procured
at the PHAs’ own expense) within ten
working days of the exit conference to
be included in the report submitted to
HUD.
(4) In the event that HUD is unable to
produce a list of independent assessors
on a timely basis, the PHA may submit
its own demonstration of a successful
conversion to asset management directly to HUD for determination of
compliance.
(5) The Assistant Secretary for Public and Indian Housing (or designee)
shall consider all information submitted and respond with a final determination of compliance within 60 days
of the independent assessor’s report
being submitted to HUD.

§ 990.235 PHAs that will experience a
subsidy increase.

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct.
24, 2005, as amended at 72 FR 45874, Aug. 15,
2007]

§ 990.240

(a) For PHAs that will experience a
gain in their operating subsidy, as determined in § 990.225, such increases
will have a limit of 50 percent of the
difference between the two funding levels in the first year following implementation of the formula contained in
this part.
(b) The full amount of the increase in
the operating subsidy level shall be realized in the second year following implementation of the formula contained
in this part.
(c) For example, a PHA’s subsidy increased from $900,000 under the formula
in effect prior to implementation of
the formula contained in this part to $1
million under the formula contained in
this part using FY 2004 data. The difference would be calculated at $100,000
($1 million¥$900,000 = $100,000). In the
first year, the subsidy increase would
be limited to $50,000 (50 percent of the
difference). Thus, in this example the
PHA will receive the operating subsidy
amount of this rule minus a transitionfunding amount of $50,000 (the $100,000
difference between the two subsidy
amounts minus the $50,000 transition
amount).
(d) The schedule for a PHA whose
subsidy would be increased is reflected
in the table below.
Funding
period

Increase limited to

Year 1 ..............
Year 2 ..............

50 percent of the difference.
Full increase reached.

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct.
24, 2005]

Subpart G—Appeals
General.

(a) PHAs will be provided opportunities for appeals. HUD will provide up to

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§ 990.245

24 CFR Ch. IX (4–1–16 Edition)

a two percent hold-back of the Operating Fund appropriation for FY 2006
and FY 2007. HUD will use the holdback amount to fund appeals that are
filed during each of these fiscal years.
Hold-back funds not utilized will be
added back to the formula within each
of the affected fiscal years.
(b) Appeals are voluntary and must
cover an entire portfolio, not single
projects. However, the Assistant Secretary for Public and Indian Housing
(or designee) has the discretion to accept appeals of less than an entire portfolio for PHAs with greater than 5,000
public housing units.

Lhorne on DSK30JT082PROD with CFR

§ 990.245

Types of appeals.

(a) Streamlined appeal. This appeal
would demonstrate that the application of a specific Operating Fund formula component has a blatant and objective flaw.
(b) Appeal of formula income for economic hardship. After a PHA’s formula
income has been frozen, the PHA can
appeal to have its formula income adjusted to reflect a severe local economic hardship that is impacting the
PHA’s ability to maintain rental and
other revenue.
(c) Appeal for specific local conditions.
This appeal would be based on demonstrations that the model’s predictions are not reliable because of specific local conditions. To be eligible,
the affected PHA must demonstrate a
variance of ten percent or greater in its
PEL.
(d) Appeal for changing market conditions. A PHA may appeal to receive operating subsidy for vacant units due to
changing market conditions, after a
PHA has taken aggressive marketing
and outreach measures to rent these
units. For example, a PHA could appeal
if it is located in an area experiencing
population loss or economic dislocations that faces a lack of demand for
housing in the foreseeable future.
(e) Appeal to substitute actual project
cost data. A PHA may appeal its PEL if
it can produce actual project cost data
derived from actual asset management,
as outlined in subpart H of this part,
for a period of at least two years.

§ 990.250 Requirements for certain appeals.
(a) Appeals under § 990.245 (a) and (c)
must be submitted once annually. Appeals under § 990.245 (a) and (c) must be
submitted for new projects entering a
PHA’s inventory within one year of the
applicable Date of Full Availability
(DOFA).
(b) Appeals under § 990.245 (c) and (e)
are subject to the following requirements:
(1) The PHA is required to acquire an
independent cost assessment of its
projects;
(2) The cost of services for the independent cost assessment is to be paid
by the appellant PHA;
(3) The assessment is to be reviewed
by a professional familiar with property management practices and costs
in the region or state in which the appealing PHA is located. This professional is to be procured by HUD. The
professional review and recommendation will then be forwarded to the Assistant Secretary for Public and Indian
Housing (or designee) for final determination; and
(4) If the appeal is granted, the PHA
agrees to be bound to the independent
cost assessment regardless of new funding levels.

Subpart H—Asset Management
§ 990.255 Overview.
(a) PHAs shall manage their properties according to an asset management model, consistent with the management norms in the broader multifamily management industry. PHAs
shall also implement project-based
management, project-based budgeting,
and project-based accounting, which
are essential components of asset management. The goals of asset management are to:
(1) Improve the operational efficiency
and effectiveness of managing public
housing assets;
(2) Better preserve and protect each
asset;
(3) Provide appropriate mechanisms
for monitoring performance at the
property level; and
(4) Facilitate future investment and
reinvestment in public housing by public and private sector entities.

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Asst. Secry., for Public and Indian Housing, HUD
(b) HUD recognizes that appropriate
changes in its regulatory and monitoring programs may be needed to support PHAs to undertake the goals identified in paragraph (a) of this section.
§ 990.260

Applicability.

(a) PHAs that own and operate 250 or
more dwelling rental units under title I
of the 1937 Act, including units managed by a third-party entity (for example, a resident management corporation) but excluding section 8 units, are
required to operate using an asset management model consistent with this
subpart.
(b) PHAs that own and operate fewer
than 250 dwelling rental units may
treat their entire portfolio as a single
project. However, if a PHA selects this
option, it will not receive the add-on
for the asset management fee described
in § 990.190(f).
§ 990.265

Identification of projects.

For purposes of this subpart, project
means a public housing building or set
of buildings grouped for the purpose of
management. A project may be as identified under the ACC or may be a reasonable grouping of projects or portions of a project under the ACC. HUD
shall retain the right to disapprove of a
PHA’s designation of a project. PHAs
may group up to 250 scattered-site
dwelling rental units into a single
project.

Lhorne on DSK30JT082PROD with CFR

§ 990.270

Asset management.

As owners, PHAs have asset management responsibilities that are above
and beyond property management activities. These responsibilities include
decision-making on topics such as
long-term capital planning and allocation, the setting of ceiling or flat rents,
review of financial information and
physical stock, property management
performance, long-term viability of
properties, property repositioning and
replacement strategies, risk management responsibilities pertaining to regulatory compliance, and those decisions otherwise consistent with the
PHA’s ACC responsibilities, as appropriate.

§ 990.280

§ 990.275 Project-based
(PBM).

management

PBM is the provision of propertybased management services that is tailored to the unique needs of each property, given the resources available to
that property. These property management services include, but are not limited to, marketing, leasing, resident
services, routine and preventive maintenance, lease enforcement, protective
services, and other tasks associated
with the day-to-day operation of rental
housing at the project level. Under
PBM, these property management services are arranged, coordinated, or overseen by management personnel who
have been assigned responsibility for
the day-to-day operation of that property and who are charged with direct
oversight of operations of that property. Property management services
may be arranged or provided centrally;
however, in those cases in which property management services are arranged
or provided centrally, the arrangement
or provision of these services must be
done in the best interests of the property, considering such factors as cost
and responsiveness.
§ 990.280 Project-based budgeting and
accounting.
(a) All PHAs covered by this subpart
shall develop and maintain a system of
budgeting and accounting for each
project in a manner that allows for
analysis of the actual revenues and expenses associated with each property.
Project-based budgeting and accounting will be applied to all programs and
revenue sources that support projects
under an ACC (e.g., the Operating
Fund, the Capital Fund, etc.).
(b)(1) Financial information to be
budgeted and accounted for at a project
level shall include all data needed to
complete project-based financial statements in accordance with Accounting
Principles Generally Accepted in the
United States of America (GAAP), including revenues, expenses, assets, liabilities, and equity data. The PHA
shall also maintain all records to support those financial transactions. At
the time of conversion to project-based
accounting, a PHA shall apportion its

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Lhorne on DSK30JT082PROD with CFR

§ 990.285

24 CFR Ch. IX (4–1–16 Edition)

assets, liabilities, and equity to its respective projects and HUD-accepted
central office cost centers.
(2) Provided that the PHA complies
with GAAP and other associated laws
and regulations pertaining to financial
management (e.g., 2 CFR part 200it
shall have the maximum amount of responsibility and flexibility in implementing project-based accounting.
(3) Project-specific operating income
shall include, but is not limited to,
such items as project-specific operating subsidy, dwelling and non-dwelling rental income, excess utilities income, and other PHA or HUD-identified income that is project-specific for
management purposes.
(4) Project-specific operating expenses shall include, but are not limited to, direct administrative costs,
utilities costs, maintenance costs, tenant services, protective services, general expenses, non-routine or capital
expenses, and other PHA or HUD-identified costs which are project-specific
for management purposes. Project-specific operating costs also shall include
a property management fee charged to
each project that is used to fund operations of the central office. Amounts
that can be charged to each project for
the property management fee must be
reasonable. If the PHA contracts with
a private management company to
manage a project, the PHA may use
the difference between the property
management fee paid to the private
management company and the fee that
is reasonable to fund operations of the
central office and other eligible purposes.
(5) If the project has excess cash flow
available after meeting all reasonable
operating needs of the property, the
PHA may use this excess cash flow for
the following purposes:
(i) Fungibility between projects as
provided for in § 990.205.
(ii) Charging each project a reasonable asset management fee that may
also be used to fund operations of the
central office. However, this asset management fee may be charged only if the
PHA performs all asset management
activities described in this subpart (including project-based management,
budgeting, and accounting). Asset man-

agement fees are considered a direct
expense.
(iii) Other eligible purposes.
(c) In addition to project-specific
records, PHAs may establish central
office cost centers to account for nonproject specific costs (e.g., human resources, Executive Director’s office,
etc.). These costs shall be funded from
the property-management fees received
from each property, and from the asset
management fees to the extent these
are available.
(d) In the case where a PHA chooses
to centralize functions that directly
support a project (e.g., central maintenance), it must charge each project
using a fee-for-service approach. Each
project shall be charged for the actual
services received and only to the extent that such amounts are reasonable.
[70 FR 54997, Sept. 19, 2005, as amended at 80
FR 75943, Dec. 7, 2015]

§ 990.285 Records and reports.
(a) Each PHA shall maintain projectbased budgets and fiscal year-end financial statements prepared in accordance with GAAP and shall make these
budgets and financial statements available for review upon request by interested members of the public.
(b) Each PHA shall distribute the
project-based budgets and year-end financial statements to the Chairman
and to each member of the PHA Board
of Commissioners, and to such other
state and local public officials as HUD
may specify.
(c) Some or all of the project-based
budgets and financial statements and
information shall be required to be submitted to HUD in a manner and time
prescribed by HUD.
§ 990.290 Compliance with asset management requirements.
(a) A PHA is considered in compliance with asset management requirements if it can demonstrate substantially, as described in paragraph (b) of
this section, that it is managing according to this subpart.
(b) Demonstration of compliance
with asset management will be based
on an independent assessment.
(1) The assessment is to be conducted
by a professional familiar with property management practices and costs

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Asst. Secry., for Public and Indian Housing, HUD
in the region or state in which the PHA
is located. This professional is to be
procured by HUD.
(2) The professional review and recommendation will then be forwarded to
the Assistant Secretary for Public and
Indian Housing (or designee) for final
determination of compliance to asset
management.
(c) Upon HUD’s determination of successful compliance with asset management, PHAs will then be funded based
on this information pursuant to
§ 990.165(i).
(d) PHAs must be in compliance with
the project-based accounting and budgeting requirements in this subpart by
FY 2007. PHAs must be in compliance
with the remainder of the components
of asset management by FY 2011.

Lhorne on DSK30JT082PROD with CFR

Subpart I—Operating Subsidy for
Properties Managed by Resident Management Corporations (RMCs)
§ 990.295 Resident Management Corporation operating subsidy.
(a) General. This part applies to all
projects managed by a Resident Management Corporation (RMC), including
a direct funded RMC.
(b) Operating subsidy. Subject to paragraphs (c) and (d) of this section, the
amount of operating subsidy that a
PHA or HUD provides a project managed by an RMC shall not be reduced
during the three-year period beginning
on the date the RMC first assumes
management responsibility for the
project.
(c) Change factors. The operating subsidy for an RMC-managed project shall
reflect changes in inflation, utility
rates, and consumption, as well as
changes in the number of units in the
resident managed project.
(d) Exclusion of increased income. Any
increased income directly generated by
activities by the RMC or facilities operated by the RMC shall be excluded
from the calculation of the operating
subsidy.
(e) Exclusion of technical assistance.
Any technical assistance the PHA provides to the RMC will not be included
for purposes of determining the
amount of funds provided to a project
under paragraph (b) of this section.

§ 990.300

(f) The following conditions may not
affect the amounts to be provided
under this part to a project managed
by an RMC:
(1) Income reduction. Any reduction in
the subsidy or total income of a PHA
that occurs as a result of fraud, waste,
or mismanagement by the PHA; and
(2) Change in total income. Any change
in the total income of a PHA that occurs as a result of project-specific characteristics when these characteristics
are not shared by the project managed
by the RMC.
(g) Other project income. In addition to
the operating subsidy calculated in accordance with this part and the
amount of income derived from the
project (from sources such as rents and
charges), the management contract between the PHA and the RMC may
specify that income be provided to the
project from other legally available
sources of PHA income.
§ 990.300 Preparation
of
operating
budget.
(a) The RMC and the PHA must submit operating budgets and calculations
of operating subsidy to HUD for approval in accordance with § 990.200. The
budget will reflect all project expenditures and will identify the expenditures
related to the responsibilities of the
RMC and the expenditures that are related to the functions that the PHA
will continue to perform.
(b) For each project or part of a
project that is operating in accordance
with the ACC amendment relating to
this subpart and in accordance with a
contract vesting maintenance responsibilities in the RMC, the PHA will
transfer into a sub-account of the operating reserve of the PHA an operating
reserve for the RMC project. When all
maintenance responsibilities for a resident-managed project are the responsibility of the RMC, the amount of the
reserve made available to a project
under this subpart will be the per-unit
cost amount available to the PHA operating reserve, excluding all inventories, prepaids, and receivables at the
end of the PHA fiscal year preceding
implementation, multiplied by the
number of units in the project operated. When some, but not all, maintenance responsibilities are vested in the

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§ 990.305

24 CFR Ch. IX (4–1–16 Edition)

RMC, the management contract between the PHA and RMC may provide
for an appropriately reduced portion of
the operating reserve to be transferred
into the RMC’s sub-account.
(c) The RMC’s use of the operating
reserve is subject to all administrative
procedures applicable to the conventionally owned public housing program. Any expenditure of funds from
the reserve must be for eligible expenditures that are incorporated into an operating budget subject to approval by
HUD.
(d) Investment of funds held in the
reserve will be in accordance with HUD
regulations and guidance.

Lhorne on DSK30JT082PROD with CFR

§ 990.305

Retention of excess revenues.

(a) Any income generated by an RMC
that exceeds the income estimated for
the income categories specified in the
RMC’s management contract must be
excluded in subsequent years in calculating:
(1) The operating subsidy provided to
a PHA under this part; and
(2) The funds the PHA provides to the
RMC.
(b) The RMC’s management contract
must specify the amount of income
that is expected to be derived from the
project (from sources such as rents and
charges) and the amount of income to
be provided to the project from the
other sources of income of the PHA
(such as operating subsidy under this
part, interest income, administrative
fees, and rents). These income estimates must be calculated consistent
with HUD’s administrative instructions. Income estimates may provide
for adjustment of anticipated project
income between the RMC and the PHA,
based upon the management and other
project-associated responsibilities (if
any) that are to be retained by the
PHA under the management contract.
(c) Any revenues retained by an RMC
under this section may be used only for
purposes of improving the maintenance
and operation of the project, establishing business enterprises that employ residents of public housing, or acquiring additional dwelling units for
lower income families. Units acquired
by the RMC will not be eligible for payment of operating subsidy.

Subpart J—Financial Management Systems, Monitoring,
and Reporting
§ 990.310 Purpose—General policy on
financial management, monitoring
and reporting.
All PHA financial management systems, reporting, and monitoring of program performance and financial reporting shall be in compliance with the requirements of 2 CFR part 200. Certain
HUD requirements provide exceptions
for additional specialized procedures
that are determined by HUD to be necessary for the proper management of
the program in accordance with the requirements of the 1937 Act and the ACC
between each PHA and HUD.
[70 FR 54997, Sept. 19, 2005, as amended at 80
FR 75943, Dec. 7, 2015]

§ 990.315 Submission and approval of
operating budgets.
(a) Required documentation:
(1) Prior to the beginning of its fiscal
year, a PHA shall prepare an operating
budget in a manner prescribed by HUD.
The PHA’s Board of Commissioners
shall review and approve the budget by
resolution. Each fiscal year, the PHA
shall submit to HUD, in a time and
manner prescribed by HUD, the approved Board resolution.
(2) HUD may direct the PHA to submit its complete operating budget with
detailed supporting information and
the Board resolution if the PHA has
breached the ACC contract, or for
other reasons, which, in HUD’s determination, threaten the PHA’s future
serviceability, efficiency, economy, or
stability. When the PHA no longer is
operating in a manner that threatens
the future serviceability, efficiency,
economy, or stability of the housing it
operates, HUD will notify the PHA that
it no longer is required to submit a
complete operating budget with detailed supporting information to HUD
for review and approval.
(b) If HUD finds that an operating
budget is incomplete, inaccurate, includes illegal or ineligible expenditures, contains mathematical errors or
errors in the application of accounting
procedures, or is otherwise unacceptable, HUD may, at any time, require

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Asst. Secry., for Public and Indian Housing, HUD
the PHA to submit additional or revised information regarding the budget
or revised budget.
§ 990.320 Audits.
All PHAs that receive financial assistance under this part shall submit
an acceptable audit and comply with
the audit requirements in 2 CFR part
200, subpart F.
[70 FR 54997, Sept. 19, 2005, as amended at 80
FR 75943, Dec. 7, 2015]

§ 990.325 Record retention requirements.
The PHA shall retain all documents
related to all financial management
and activities funded under the Operating Fund for a period of five fiscal
years after the fiscal year in which the
funds were received.

PART 1000—NATIVE AMERICAN
HOUSING ACTIVITIES

Lhorne on DSK30JT082PROD with CFR

Subpart A—General
Sec.
1000.1 What is the applicability and scope of
these regulations?
1000.2 What are the guiding principles in the
implementation of NAHASDA?
1000.4 What
are
the
objectives
of
NAHASDA?
1000.6 What is the nature of the IHBG program?
1000.8 May provisions of these regulations
be waived?
1000.9 How is negotiated rulemaking conducted when promulgating NAHASDA
regulations?
1000.10 What definitions apply in these regulations?
1000.12 What nondiscrimination requirements are applicable?
1000.14 What relocation and real property
acquisition policies are applicable?
1000.16 What labor standards are applicable?
1000.18 What environmental review requirements apply?
1000.20 Is an Indian tribe required to assume
environmental review responsibilities?
1000.21 Under what circumstances are waivers of the environmental review procedures available to tribes?
1000.22 Are the costs of the environmental
review an eligible cost?
1000.24 If an Indian tribe assumes environmental review responsibility, how will
HUD assist the Indian tribe in performing the environmental review?
1000.26 What are the administrative requirements under NAHASDA?

Pt. 1000

1000.28 May a self-governance Indian tribe
be exempted from the applicability of
§ 1000.26?
1000.30 What prohibitions regarding conflict
of interest are applicable?
1000.32 May exceptions be made to the conflict of interest provisions?
1000.34 What factors must be considered in
making an exception to the conflict of
interest provisions?
1000.36 How long must a recipient retain
records regarding exceptions made to the
conflict of interest provisions?
1000.38 What flood insurance requirements
are applicable?
1000.40 Do lead-based paint poisoning prevention requirements apply to affordable
housing activities under NAHASDA?
1000.42 Are the requirements of section 3 of
the Housing and Urban Development Act
of 1968 applicable?
1000.44 What prohibitions on the use of
debarred, suspended, or ineligible contractors apply?
1000.46 Do drug-free workplace requirements apply?
1000.48 Are Indian or tribal preference requirements applicable to IHBG activities?
1000.50 What tribal or Indian preference requirements apply to IHBG administration activities?
1000.52 What tribal or Indian preference requirements apply to IHBG procurement?
1000.54 What procedures apply to complaints arising out of any of the methods
of providing for Indian preference?
1000.56 How are NAHASDA funds paid by
HUD to recipients?
1000.58 Are there limitations on the investment of IHBG funds?
1000.60 Can HUD prevent improper expenditure of funds already disbursed to a recipient?
1000.62 What is considered program income?
1000.64 What are the permissible uses of program income?

Subpart B—Affordable Housing Activities
1000.101 What is affordable housing?
1000.102 What are eligible affordable housing activities?
1000.103 How may IHBG funds be used for
tenant-based or project-based rental assistance?
1000.104 What families are eligible for affordable housing activities?
1000.106 What families receiving assistance
under title II of NAHASDA require HUD
approval?
1000.108 How is HUD approval obtained by a
recipient for housing for non-low-income
families and model activities?
1000.110 Under what conditions may nonlow-income Indian families participate in
the program?

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