2010-267. Public Housing Assessment System (PHAS): Asset Management Transition Year 2 Information

AGENCY:

Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Notice.

SUMMARY:

This notice provides new information related to scoring and submission requirements for public housing agencies (PHAs) under the Public Housing Assessment System (PHAS) for PHA fiscal years ending June 30, 2009, September 30, 2009, December 31, 2009, and March 31, 2010. These fiscal years coincide with the second year of project-based budgeting and accounting under asset management, also known as “Transition Year 2.”

FOR FURTHER INFORMATION CONTACT:

The Office of Public and Indian Housing, Real Estate Assessment Center (REAC), Attention: Wanda Funk, Department of Housing and Urban Development, 550 12th Street, SW., Suite 100, Washington, DC 20410; telephone number (REAC Technical Assistance Center) 888-245-4860 (this is a toll-free number). Persons with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. Background on PHAS

PHAS was established by a final rule published on September 1, 1998 (63 FR 46596). Prior to 1998, PHAs were evaluated by HUD under the Public Housing Management Assessment Program (PHMAP), the regulations for which are found at 24 CFR part 901. PHAS expanded assessment of a PHA to four key areas of a PHA's operations: (1) The physical condition of the PHA's properties; (2) the PHA's financial condition; (3) the PHA's management operations submitted as a self-certification; and (4) the resident service and satisfaction assessment (through a resident survey).

Under the current PHAS, and on the basis of these four indicators, a PHA receives a composite score that represents a single score for a PHA's entire operation and a corresponding performance designation. PHAs that are designated high performers receive public recognition and relief from specific HUD requirements. PHAs that are designated standard and substandard performers shall be required to take corrective action to remedy identified deficiencies. PHAs that are designated troubled performers are subject to remedial action.

By final rule published on January 11, 2000 (65 FR 1712), HUD amended the PHAS regulations and implemented certain statutory changes resulting from enactment of the Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, October 21, 1998).

B. Public Housing Operating Fund Program

The regulations governing the Public Housing Operating Fund program are of key relevance to the proper operation of PHAs and, consequently, to PHAS. Operating funds are made available to a PHA for the operation and management of public housing, and therefore the regulations applicable to a PHA's operation and management of public housing must be considered in any changes proposed to PHAS. The regulations for the Public Housing Operating Fund Program are found at 24 CFR part 990, were published on September 19, 2005 (70 FR 54983), followed by a correction published on October 24, 2005 (70 FR 61366), and became effective on November 18, 2005.

Subpart H of the part 990 regulations (§§ 990.255 to 990.290), as revised by the September 2005 rule, establishes the requirements regarding asset management. Under § 990.260(a), PHAs that own and operate 250 or more dwelling rental units must operate using an asset management model consistent with the subpart H regulations. PHAs with fewer than 250 dwelling rental units may elect to transition to asset management, but are not required to do so. In addition, § 223 of Title II of Division A of the 2010 Consolidated Appropriations Act, Pub. L. 111-117 (Approved December 16, 2009), states that PHAs that own and operate 400 or fewer public housing units may elect to be exempt from any asset management requirement for the remainder of Fiscal Year (FY) 2010, with the exception of PHAs that are seeking a discontinuance of a reduction of operating subsidy, i.e., a stop-loss. This provision may remain in effect for future years, depending on the language in that year's appropriations act.

PHAs with more than 400 public housing units in CY 2009 and for the remainder of FY 2010, PHAs with 250 or more public housing units thereafter, and PHAs that elect to transition to asset management are required to implement project-based management, project-based budgeting, and project-based accounting. All project-based components are defined in the regulations at 24 CFR part 990, subpart H, and are essential components of asset management.

C. PHAS Scoring During Transition Year 1

On August 21, 2008, HUD published Federal Register notice FR-5227-N-01, Public Housing Assessment System (PHAS): Asset Management Transition Year Information and Uniform Financial Reporting Standards (UFRS) Information (73 FR 49588). In that notice, HUD indicated that, for PHAs with fiscal years ending June 30, 2008, through March 31, 2009, HUD would not issue a new overall PHAS score. Further, PHAs were not required to submit their management operations information and were not subject to resident satisfaction surveys (other than PHAs with fiscal years ending June 30, 2008, for whom the survey results were informational only). PHAs still were required to submit their annual financial statements (not scored) and were subject to the same physical inspection frequencies, the scores from which also were for information purposes only.

II. PHAS Scoring During Transition Year 2

Transition Year 2 includes those PHAs with fiscal years ending June 30, 2009, September 30, 2009, December 31, 2009, and March 31, 2010. This notice also applies to Moving-to-Work PHAs that are not specifically exempted from a PHAS assessment in their grant agreements.

Under the current PHAS rule, small PHAs (fewer than 250 public housing units) generally are assessed every other year. During Transition Year 2, small PHAs will be assessed pursuant to 24 CFR 902.9. All other PHAs will be issued a new overall PHAS score under the current PHAS rule.

The following are specific instructions for submissions and scoring:

Physical Condition Inspections. Physical condition inspections will be conducted for PHAs during Transition Year 2 in accordance with existing protocols. Physical condition inspection scores for projects on both the 100-point scale and the 30-point scale will be available in Secure Systems, through the Integrated Assessment Subsystem (NASS). HUD also will give inspected projects credit for the physical condition and neighborhood environment factor. The performance incentive for PHAs that score 24 points or more on the 30-point scale that provides for physical condition inspections every other year will apply after the adjustment for the physical condition and neighborhood environment factor. Physical condition inspections of projects will be conducted on the same schedule as past inspections, and conducted, if applicable, in the quarter prior to a PHA's fiscal year end. Because of scheduling logistics, HUD may need to have physical condition inspections conducted sooner than one year from the last physical condition inspection. However, no physical condition inspections for the purposes of PHAS scoring will occur any sooner than 6 months from the last physical condition inspection for PHAS scoring, but HUD is not prevented from conducting a physical condition inspection of projects for purposes other than PHAS scoring. PHAs will continue to be able to request a technical review or database adjustment for their physical condition inspections during Transition Year 2, in accordance with the current PHAS regulations.

Financial Condition Indicator. PHAs will be required to submit their unaudited financial condition information and audited financial condition information, if applicable, in accordance with 24 CFR part 5, subpart H, and 24 CFR part 902, subpart C. The financial condition then will be assessed pursuant to the current PHAS rule.

Management Operations Indicator. PHAs will be required to submit their management operations certification, pursuant to 24 CFR 902, subpart D. Small PHAs that are not being assessed in Transition Year 2 (see above) are not required to submit a management operations certification.

PHAs that are converting to asset management and for which the submission of the current management operations certification would impose an administrative hardship should request a waiver for their management operations certification, pursuant to 24 CFR 5.110, within 30 days from the date of this notice. Upon a determination of good cause, HUD may waive the requirement for a PHA to submit its management operations certification. Please send all waiver requests to your local field office pursuant to PIH Notice 2009-41.

If a PHA's waiver request is approved, the most recent management operations score of record will be carried over to the fiscal year being assessed. If a PHA's waiver request is not approved, it shall have 60 days from the date of its notification of denial to submit its management operations certification.

For PHAs with fiscal years ending June 30, 2009, or September 30, 2009, their management operations certification is due 2 months after the date of this notice.

Resident Assessment Indicator. HUD will not administer the resident service and satisfaction survey during Transition Year 2. A PHA has a choice regarding its resident service and satisfaction assessment score:

(1) The most recent resident service and satisfaction assessment score will be carried over for PHAs with fiscal years ending June 30, 2009, September 30, 2009, December 31, 2009, and March 31, 2010; or

(2) If a PHA believes it would have received a higher resident service and satisfaction assessment score if a new resident survey had been conducted, it may appeal its resident service and satisfaction assessment score pursuant to 24 CFR 902.69 and must include the PHA's supporting documentation and reasons for the appeal. Please send all appeal requests to the Deputy Assistant Secretary, Real Estate Assessment Center, at the following address:

U.S. Department of Housing and Urban Development, Office of Public and Indian Housing, Attention: Deputy Assistant Secretary, Departmental Real Estate Assessment Center, 550 12th Street, SW., Suite 100, Washington, DC 20410.

HUD will determine if an adjustment is warranted. All other aspects of the current PHAS rule will remain in effect during Transition Year 2.

III. Environmental Review

This notice provides operating instructions and procedures in connection with activities under a Federal Register document that has previously been subject to a required environmental review. Accordingly, under 24 CFR 50.19(c)(4), this notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

Dated: January 4, 2010.

Sandra B. Henriquez,

Assistant Secretary for Public and Indian Housing.