CARES Act Supplemental Operating Fund Guidance Released

On April 28, HUD issued Notice PIH-2020-07 titled “Implementation of Supplemental Guidance to the Federal Fiscal Year 2020 Operating Fund Appropriations.” The Notice provides guidance on the allocation and eligible uses of the $685 million supplemental funding included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as the additional flexibilities provided through the CARES Act to use previously appropriated Capital and Operating Funds to prevent, prepare for, and respond to coronavirus. The Notice applies to both MTW and Non-MTW PHAs. Obligations of the supplemental funding will be calculated based on each project’s pro rata Calendar Year (CY) 2020 Operating Fund grants. Using the waiver authority provided in the CARES Act, HUD is waiving the requirement to make payments equal to one-twelfth of the total annual Operating Fund under the formula so that HUD may make CARES Act supplemental funding available to PHAs via a single obligation.

CARES Act supplemental Operating Funds are subject to all Operating Fund Requirements; however HUD is allowing PHAs to transfer funds to the Central Office Cost Center (COCC) to pay for immediate needs of the COCC that exceed the normal safe harbors. Funds transferred to the COCC in excess of the safe harbors must comply with cost reasonableness standards and shall not exceed the safe harbors by more than 50 percent. Funds transferred to the COCC remain CARES Act Supplemental Operating Funds. These funds may not roll into a PHA’s reserves and must be tracked and accounted for separately. Additional HUD guidance on tracking the funds is forthcoming.

The CARES Act supplemental funding is available “…to prevent, prepare for, and respond to coronavirus … during the period of time the program is impacted by coronavirus.” This includes using funds to maintain normal operations and take other necessary actions. HUD defines “the period that the program is impacted by coronavirus” as through December 31, 2020. HUD will continue to evaluate the impact of the coronavirus on the public housing program and may extend this date if needed. CARES Act supplemental Operating Funds cannot be used for the repayment of debts or any amounts owed to HUD including, but not limited to, Office of Inspector General (OIG), or any other monitoring review findings.

CARES Act supplemental Operating Funds, along with Operating and Capital Funds provided through prior Acts, can be used flexibly for eligible activities under the Operating Fund and the Capital Fund. This flexibility will remain available to PHAs through December 31, 2020, unless HUD determines it is necessary to extend the flexibility.

PHAs must continue reporting on Capital Fund expenditures. PHAs that use Capital Funds for Operating Fund eligible activities must follow the current procedure of including an “Operations” Work Activity in the Annual Statement/Budget for the Capital Fund grant in the EPIC system. HUD is raising the Capital Fund Administration cost limitation of 10 percent to 15 percent. HUD has also created a budget-line item specifically for Capital Funds used for the preparing, preventing, and responding to coronavirus in EPIC. HUD will also be suspending the requirement for Field Office approval of Five-Year Action Plans as a prerequisite for creating Annual Statement/Budgets in EPIC. Field Offices will retain the ability and authority to require revisions to Five-Year Action Plans after submission if a PHA fails to comply with programmatic requirements.

PHAs should retain all documents related to financial management and activities under the Operating Fund for at least five fiscal years. This includes financial management and activities under the supplemental funding provided through the CARES Act. HUD will notify PHAs in writing if the PHA needs to retain records for longer than five fiscal years.

HUD is developing a process by which PHAs will report all expenditures of CARES Act supplemental funds and will provide guidance on reporting and submission requirements at a later date. PHAs may also be required to report on the expenditure of the supplemental funds, as well as Operating Funds, program income, and Capital Funds used for coronavirus-related expenses.

PHAs that receive $150,000 or more of CARES Act funding will also be required to submit, not later than 10 days after the end of each calendar quarter, a report containing information regarding the amount of funds received; the amount of funds obligated or expended for each project or activity; a detailed list of all such projects or activities, including a description of the project or activity; and detailed information on any subcontracts or subgrants awarded.

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