[Federal Register Volume 63, Number 125 (Tuesday, June 30, 1998)]
[Proposed Rules]
[Pages 35672-35692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17302]
[[Page 35671]]
_______________________________________________________________________
Part V
_______________________________________________________________________
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 901
Public Housing Assessment System; Proposed Rule
Federal Register / Vol. 63, No. 125 / Tuesday, June 30, 1998 /
Proposed Rules
[[Page 35672]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR PART 901
[Docket No. FR-4313-P-01]
RIN 2577-AB81
Public Housing Assessment System
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, and Office of the Director of the Real Estate Assessment
Center, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule establishes an entirely new system for the
assessment of public housing in the United States. The nation's public
housing system houses 1.2 million families in 20,000 projects across
the 50 States, Puerto Rico, Guam and the U.S. Virgin Islands, operated
by 3,400 public housing agencies. The major components of the new
system include:
The rule provides for the first-ever assessment of the physical
condition, financial health, and resident services in public housing.
For the first time, the physical condition of every project in the
nation's public housing inventory will be inspected on a regular basis
with uniform standards to ensure that residents receive decent, safe,
and sanitary housing. For the first time, the financial condition of
every public housing agency will be assessed on generally accepted
accounting principles. For the first time, resident satisfaction with
public housing services will be measured and counted in HUD's
assessment of public housing agency management.
The rule provides for increased flexibility for top performers.
Public housing agencies which score in the top ten percent in their
physical condition, financial health, resident satisfaction, and
management operations will receive substantial flexibility and bonus
points for funding competitions.
The rule provides for the establishment of a Troubled Agency
Recovery Center to improve poor performers. Public housing agencies
which perform unsuccessfully on these factors will be referred to a new
Troubled Agency Recovery Center to improve poor performers.
The rule provides for the establishment of an Enforcement Center
and Receivership for agencies which fail to improve performance. Public
housing agencies which fail to post significant improvement within a
year will be automatically referred to the new HUD Enforcement Center
which will institute proceedings for judicial receivership to remove
failed agency management.
The purpose of the new Public Housing Assessment System is to
enhance public trust by creating a comprehensive management tool that
effectively and fairly measures a PHA's performance based on standards
that are objective, uniform and verifiable, and provides real rewards
for high performers and consequences for poor performers. As more fully
discussed in the Supplementary Information section of the preamble, the
proposed rule was developed with the assistance of public housing
agency officials, representatives of public housing agency
organizations, and representatives of public housing residents
organizations.
DATES: Comment due date: July 30, 1998.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Regulations Division, Office of General
Counsel, Room 10276, Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410. Communications should refer
to the above docket number and title. Facsimile (FAX) comments are not
acceptable. A copy of each communication submitted will be available
for public inspection and copying between 7:30 a.m. and 5:30 p.m.
weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: For further information contact the
Real Estate Assessment Center, Attention William Thorson, Department of
Housing and Urban Development, 4900 L'Enfant Plaza East, SW, Room 8204,
Washington, DC 20410; telephone (202) 755-0102 (this is not a toll-free
number). Persons with hearing or speech impairments may access that
number via TTY by calling the Federal Information Relay Service at
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. HUD Constituents Participation in the Proposed Rule
President Clinton's Executive Order on Regulatory Planning and
Review (E.O. 12866, issued September 30, 1993) provides in section
(6)(a) that:
Each agency shall (consistent with its own rules, regulations,
or procedures) provide the public with meaningful participation in
the regulatory process. In particular, before issuing a notice of
proposed rulemaking, each agency should, where appropriate, seek the
involvement of those who are intended to benefit from and those
expected to be burdened by any regulation (including, specifically,
State, local and tribal officials).
Consistent with President Clinton's Executive and HUD's own
partnership initiatives with its constituents and clients, the new
assessment system for public housing was developed with extensive
discussion and consultation with public housing agency (PHA) officials,
officials from PHA representative organizations, representatives of
public housing resident groups, experts in the fields of finance and
audit and physical inspection of properties, and other interested
parties such as housing advocacy groups and local government
representatives. These discussions and consultations began in October
1997 and continued through April 1998. It was important to HUD that
these entities and individuals have input in the development of a
proposal for a new assessment system for public housing.
The consultation and discussions with PHA agency officials and
representative groups will continue through the final rulemaking
process and in the implementation of this new system. During the
transition period to the new system, HUD will work closely with PHAs
and resident groups to make any necessary refinements to the system.
HUD, PHAs and public housing residents all want to see an effective and
efficient management system for public housing, and will work together
to make this a successful system for all concerned.
II. HUD 2020 Management Reforms
On June 26, 1997, HUD released its plan, the ``HUD 2020 Management
Reform Plan,'' for significant management reforms at HUD. HUD published
the plan in the Federal Register on August 12, 1997 (62 FR 43204). The
HUD 2020 Management Reform Plan is directed to (1) empowering people
and communities to improve themselves, and (2) restoring HUD's
reputation and credibility by improving the efficiency and
effectiveness of HUD's programs, operations, and delivery of services.
To improve the efficiency and effectiveness of HUD's programs,
operations, and delivery of services, the HUD 2020 Management Reform
Plan calls for the restructuring of HUD's internal operations to
reallocate resources and consolidate major functions.
Under the HUD 2020 Management Reform Plan, resources will be
allocated in a way that is designed to align HUD's resources with its
long-term mission of empowering people and communities to improve
themselves and succeed in today's world. Consolidation of functions is
designed to avoid duplication of effort, achieve
[[Page 35673]]
consistency and uniformity in the performance of these functions, and
ensure fairness. With respect specifically to HUD's public housing
programs, the consolidation of certain functions is critical to the
survival of public housing as an affordable housing option for low-
income persons. Those consolidated functions that will significantly
impact and benefit public housing operations include the establishment
of a Real Estate Assessment Center, a Troubled Agency Recovery Center
(TARC) and an Enforcement Center. These centers provide the backbone of
HUD's new system for Federal management of the nation's public housing.
The following provides a brief overview of the functions of the three
centers and their relationship to public housing, as well as to other
HUD assisted properties.
A. Measuring Program Performance--the Real Estate Assessment Center
The Real Estate Assessment Center (the ``Assessment Center'' or
``REAC'') is charged with the responsibility for assessing and scoring
the condition of properties in which HUD has an interest and the
performance of entities that manage and own those properties. Until the
establishment of the Assessment Center, HUD's Office of Housing and the
Office of Public and Indian Housing independently operated separate
real estate assessment operations, yet the administration of both
organization's multifamily portfolios is a common function of asset
management. Under the Assessment Center, the assessment of all of the
properties of the Office of Housing and the Office of Public and Indian
Housing is consolidated and the evaluation standards and procedures are
made uniform, to the greatest extent feasible.
The establishment of the Assessment Center marks an important
change in HUD's way of doing business. Until the establishment of the
Assessment Center, HUD has never had an effective and comprehensive
property assessment system. Under HUD 2020 Management Reform, for the
first time in HUD's history, all properties will be physically
inspected and financially assessed using a comprehensive and uniform
protocol. The Assessment Center will play a key role in evaluating and
scoring the condition of public housing properties and the performance
of PHAs, and it also will play a key role in evaluating and scoring the
condition of other HUD-assisted housing and FHA-insured properties, and
the performance of the entities that manage and own those properties.
The Assessment Center will be staffed with individuals who are experts
in the areas of finance and audit, real estate functions, and housing
management operations.
In order for the Assessment Center to effectively perform its
functions, certain assessment tools--specifically, physical condition
standards for HUD properties, and financial information from HUD
reporting entities--need to be made uniform to the greatest extent
possible. As discussed later in this preamble, establishment of uniform
protocols for assessing physical condition and financial information is
underway. These new standardized protocols will become significant
diagnostic tools for the Assessment Center. For public housing, as will
be discussed in more detail later, these uniform protocols will form
part of the basis by which the Assessment Center will analyze the
performance of public housing agencies (PHAs) and assign a score. The
score assigned to a PHA will identify that PHA as a high performer,
standard performer or troubled PHA. High performers will receive
increased regulatory flexibility, bonus points and other incentives.
Those PHAs designated as troubled will be referred to the Troubled
Agency Recovery Center to improve performance.
The uniform protocols to be used by the Assessment Center, although
standardized, will not be static. The Assessment Center will provide an
ongoing analysis and evaluation of assessment methods to determine the
accuracy, the effectiveness and the relevance of inspection, management
and financial protocols, including factors, scoring, weights, sampling
and algorithms. The Assessment Center will keep the public and HUD
program participants advised of the findings obtained through this
ongoing analysis and of any recommended changes to the protocols and
indicators through issuance of Federal Register notice or other
appropriate notice.
One of HUD's objectives under HUD 2020 Management Reform is not
only to identify where performance by program participants fails to
meet acceptable standards, but to assist these participants in raising
their level of performance. For PHAs, such assistance will be provided
either by the appropriate HUD area HUB/Program Center, or by the TARC
if the PHA is designated as troubled.
B. Assisting Troubled Public Housing Agency Performers--Troubled Agency
Recovery Centers (TARCs)
The Troubled Agency Recovery Centers established by HUD will assist
PHAs designated as troubled to reach improved performance through the
development and implementation of sustainable solutions. Upon
designation as troubled, a PHA will be referred to the TARC for
assistance. The TARC will work with the PHA to develop and implement an
intervention strategy to help raise the PHA's level of performance. The
TARC will provide technical assistance to troubled PHAs on a variety of
public housing operation issues, including: property needs and
maintenance; occupancy procedures; resident and applicant relations;
and financial management. One of the principal objectives of the TARC
is to determine the appropriate course of action for the troubled PHA
to achieve recovery, considering the resources and the recovery period
best suited for the individual PHA, its community and the families the
PHA serves. If a troubled PHA is found to be making substantial
progress toward addressing its problems, consideration may be given to
allowing the PHA additional time to continue the recovery effort. If a
troubled PHA's problems are not addressed within the period established
by this rule, the PHA will be referred to the Enforcement Center.
C. Restoring Public Trust--the Enforcement Center
The greatest breach of the public trust at HUD is the waste, fraud
and abuse in HUD's existing portfolio of millions of housing units.
Until recently, each of HUD's program offices (the Offices of Public
and Indian Housing, Housing, and Community Planning and Development)
operated independent enforcement functions, with different standards
and procedures. HUD has combined non-civil rights enforcement actions
for the program offices into one authority--the Enforcement Center. The
Enforcement Center is a fundamental programmatic reform that HUD will
take to restore public trust in fulfilling its mission to provide
decent, safe and sanitary housing for lower and moderate income
households. The Enforcement Center is intended to be the central
Departmental focus for taking aggressive action against owners of HUD's
troubled assisted housing and public housing portfolios. The
Enforcement Center will be responsible for correcting long-standing
noncompliance issues with HUD grantees, and will take action against
owners who do not cooperate with HUD during any recovery process or who
may have put housing projects in jeopardy by engaging in waste, fraud
or abuse.
With respect to public housing, the Enforcement Center will be
responsible for troubled PHAs that fail to improve their performance
during the
[[Page 35674]]
established time period. The actions taken by the Enforcement Center
against such PHAs include judicial receivership to remove failed
management, and referrals for the imposition of civil and criminal
sanctions to the applicable Federal government agencies or offices,
where appropriate.
D. Achieving Fairness By Transferring Responsibility to Independent
Units
Each of the three centers, the Assessment Center, the TARC, and the
Enforcement Center, will be separate units, independent from
traditional HUD program areas and functions. This separation from
traditional program areas reflects a key objective of HUD 2020
Management Reform and that is to treat program participants and assess
program performance on the basis of uniform standards, not on the basis
of which HUD program office administers the assistance. Before the HUD
2020 Management Reforms, program office staff all too often were handed
conflicting mandates. On the one hand, staff were asked to provide
assistance to HUD program participants (communities, housing agencies,
multifamily owners, etc.) to help them meet their housing and urban
development needs; and on the other hand, these employees were directed
to monitor the actions of the program participants. HUD realizes that
both roles are important to HUD's mission and have a place in HUD, but
the role of facilitator and the role of monitor are inherently in
conflict. The creation of the Assessment Center, the TARC and the
Enforcement Center as independent units is designed to address the
inconsistent responsibilities previously handled by program staff.
Dividing the important functions of community facilitator and program
monitor into different offices is a critical step in restoring public
trust in HUD.
Restoring public trust not only will be achieved through
independence of the Assessment Center, TARC and the Enforcement Center,
but in the consistent uniform approach the centers take to the
performance of their respective functions. As discussed earlier, for
the Assessment Center, a consistent and fair approach to the evaluation
of HUD properties requires uniform assessment standards in two critical
areas: (1) The physical condition of properties receiving HUD financial
assistance; and (2) the financial condition of the owners and managers
of these properties.
E. Standardization of Physical Assessment of Properties--Uniform
Physical Condition Standards
As part of the HUD 2020 Management Reform objective to create a
uniform, assessment process for all HUD assisted properties, HUD is
establishing uniform physical conditions standards and inspection
procedures for its assisted housing, FHA related properties and public
housing. These standards are intended to ensure that such housing is
decent, safe, sanitary and in good repair--the physical condition
standard to which HUD assisted housing always has been subject. HUD's
Section 8 housing, public housing, HUD-insured multifamily housing, and
other HUD assisted housing currently must undergo an annual physical
inspection to determine that the housing qualifies as decent, safe,
sanitary and in good repair. The description or components of what
constitutes acceptable physical housing quality and the physical
inspection procedures by which the standards are determined to be met,
however, vary from HUD program to HUD program. To the extent possible,
HUD believes that housing assisted under its programs should be subject
to uniform physical standards, regardless of the source of the subsidy
or assistance. Additionally, to the extent feasible, HUD believes that
the physical inspection procedures by which the standards will be
assessed should be uniform in the covered programs. Therefore, for the
physical condition indicator of the Public Housing Assessment System
(PHAS), this proposed rule provides for public housing properties to be
evaluated on the basis of uniform physical condition standards that
ensure that the public housing is decent, safe, and sanitary. Through
separate rulemaking, HUD will propose to apply these uniform physical
condition standards to properties assisted under other HUD housing
programs. These standards are discussed in greater detail later in this
preamble.
F. Standardization of the Financial Assessment of Program
Participants--Uniform Financial Reporting
The uniform assessment of HUD properties under HUD 2020 Management
Reform also includes a uniform financial assessment process. To achieve
this objective, HUD is establishing uniform standards for annual
financial reporting for HUD's public housing, Section 8 housing, and
multifamily insured housing programs, and will require public housing
agencies, project owners, and managers (if applicable) of HUD-assisted
housing to submit to HUD annually in an electronic mode and
standardized format, to be established by HUD, certain financial
information, prepared in accordance with generally accepted accounting
principles (GAAP), as prescribed by the Governmental Accounting
Standards Board (GASB). Electronic submission is necessary because the
manual submission of annual financial information has become a
significant administrative burden to PHAs, project owners, and
mortgagees, as well as to HUD. HUD is developing a standardized format
for the reporting of the annual financial information, which will be
ready for dissemination in sufficient time to allow PHAs to comply with
the provisions of this rule. This format will be substantially the same
for all covered programs, but the format may vary in certain respects
to reflect different types of reporting entities (e.g., owners of
multifamily/Federal Housing Administration (FHA)-related entities vs.
PHAs). The objective of the uniform financial reporting requirements is
to standardize the annual financial information submission process and,
through standardization, bring consistency to the evaluation of the
financial condition of housing assisted under HUD programs. Therefore,
for the financial condition indicator of the PHAS, this proposed rule
provides for PHAs to submit electronically to HUD annual financial
reports prepared in accordance with GASB GAAP. Through separate
rulemaking, HUD will propose to apply these uniform financial reporting
requirements to program participants in other HUD housing programs. The
financial reporting requirements are discussed in greater detail later
in this preamble.
G. Enhancing Public Trust Through Improved Assessment of Public Housing
and PHAs
The new Public Housing Assessment (PHAS), proposed by this rule, is
designed to enhance public trust by creating a comprehensive oversight
tool that effectively and fairly measures a PHA based on standards that
are objective and uniform. The PHAS represents a major rethinking of
public housing management. The parties most involved in, and affected
by, public housing--PHAs and public housing residents--have expressed
concerns that the existing system largely ignores the physical
conditions of public housing. 1
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Under the current system, a PHA's management performance may be
assessed as acceptable when its residents are living in unacceptable
housing conditions. Other concerns are that the current system is
almost totally dependent on PHA self-certification, rather than on
objective evidence or third-party verification; does not focus on basic
real estate functions; and does not provide for opportunity for input
from those directly served by the PHA--the public housing residents.
The new PHAS responds to these concerns by adding indicators that
provide for independent assessment and specifically assess these
components of a PHA's operation--physical condition of the property;
financial condition; and resident feedback.
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\1\ The current Public Housing Management Assessment Program
(PHMAP), for which the regulations are codified at 24 CFR part 901,
was established in accordance with section 502 of the Cranston-
Gonzalez National Affordable Housing Act (Pub. L. 101-625, approved
November 29, 1990) (NAHA), which amended section 6(j) of the U.S.
Housing Act of 1937 (42 U.S.C. 1437d(j)) (the 1937 Act).
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Under the PHAS, HUD will evaluate a PHA based on the following
indicators: (1) the physical condition of the PHA's public housing
properties; (2) the PHA's financial condition; (3) the PHA's management
operations; and (4) residents' assessment (through a resident survey)
of the PHA's performance. The management indicator of this new
assessment system will incorporate the majority of the existing
statutory management assessment indicators (the remaining statutory
indicators will be part of the other PHAS indicators). Each of these
major indicators is comprised of components. The PHAS indicators are
discussed in further detail below. The PHAS, although applicable only
to public housing, reflects HUD's approach under HUD 2020 Management
Reform to all properties assisted by HUD. HUD will assess all HUD-
related properties in a manner similar to that outlined in this
proposed rule, utilizing uniform financial and physical indicators, and
resident feedback.
III. The Public Housing Assessment System (PHAS)
A. Overview of the PHAS
The new PHAS is designed to instill trust in public housing as a
cost effective and affordable housing option by demonstrating that
there is in place an assessment system that accurately determines
whether a PHA is doing an outstanding, acceptable, or unacceptable job
in providing decent, safe and sanitary housing to its residents. An
accurate assessment of a PHA's performance is critical because the
consequences of that assessment can be significant. For PHAs determined
to be performing well, the consequences will be less scrutiny and
additional flexibility. For PHAs determined not to be performing well,
the consequences will be intensive technical assistance, deadlines for
improvement and possible punitive actions for failure to improve during
established periods.
The approach provided by the PHAS maximizes the best use of public
funds by concentrating resources on those PHAs in most need of
attention and recognizing outstanding performers. The system is
fundamentally designed to provide relevant and verifiable measures that
directly relate to PHA performance. Additionally, the system is
designed to allow HUD to act upon the findings produced from four
comprehensive indicators.
Under the PHAS, the Assessment Center assumes responsibility from
the Office of Public and Indian Housing for assessing the performance
of PHAs. The Assessment Center will examine four essential areas of
housing operations to determine a PHA's performance in delivering HUD
programs and services. These indicators are: (1) the physical condition
of public housing (addressed in subpart B of the rule); (2) the
financial condition of a PHA (addressed in subpart C of the rule); (3)
the management operations capabilities of PHAs, which will incorporate
the majority of the existing statutory assessment requirements
(addressed in subpart D of the rule); and resident service and
satisfaction (addressed in subpart E of the rule). To assess the
performance of a PHA on the basis of the first two indicators, the
Assessment Center will utilize comprehensive and standardized protocols
to conduct physical inspections of public housing properties, as
described above, and to assess the financial condition of PHAs. For the
Management Operations Indicator and the Resident Service and
Satisfaction Indicator, the Assessment Center will gather and analyze
data and information provided by the PHA.
In order to determine a composite score for each PHA, the four
indicators of the PHAS will be individually scored and then combined to
present a composite score that reflects the overall performance of PHAs
for a total of 100 possible points. The 100 points are distributed as
follows:
30 total points for the physical condition;
30 total points for the financial condition;
30 total points for management operations; and
10 total points for resident service and satisfaction.
The following discussion presents a brief overview of each of the
four indicators to be used under the PHAS.
1. PHAS Indicator #1--Physical Condition of Public Housing Properties
Subpart B of part 901 of this proposed rule addresses the Physical
Condition Indicator. This indicator provides for the assessment of the
physical condition of a PHA's public housing. A PHA must maintain its
housing in decent, safe, and sanitary condition.
Statutory Standard of Decent, Safe and Sanitary. This well
established and longstanding physical condition standard has several
statutory sources, including section 3(b)(1) of the 1937 Act, which
provides in relevant part as follows:
The term ``low-income housing'' means decent, safe, and sanitary
dwellings assisted under this Act. The term ``public housing'' means
low-income housing, and all necessary appurtenances thereto,
assisted under this Act other than under section 8.
Section 14 of the 1937 Act, which addresses public housing
modernization, also emphasizes a decent, safe, and sanitary housing
standard. Section 14(j)(2) provides, in relevant part, that ``the
Secretary shall issue rules and regulations establishing standards
which provide for decent, safe, and sanitary living conditions in low-
rent public housing projects. * * *'' 2 In adopting uniform
physical condition standards for public housing, this proposed rule
would not alter the statutory standard for maintaining public housing.
Instead, the proposed rule, by using the statutory terminology, clearly
acknowledges that public housing must be maintained in ``decent, safe,
and sanitary'' condition.3
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\2\ The current regulatory provisions addressing the physical
condition of public housing projects are found in several sections
of HUD's regulations in Title IX of 24 CFR: Secs. 901.30 (of the
PHMAP regulations), 941.203 (of the Public Housing Development
regulations), 965.704 (of the PHA-Owned or Leased Projects
regulations), and 968.315 (of the Comprehensive Improvement Program
Regulations).
\3\ As the proposed regulatory text will show, the physical
condition standards are referred to as ``decent, safe, sanitary and
in good repair.'' As the preamble discussion notes the statutory
physical condition standard for public housing is expressed in terms
of ``decent, safe and sanitary.'' For FHA-related properties, the
statutory standard is expressed in terms of ``good repair and
condition.'' In adopting physical condition standards that are
applicable to both public housing and FHA-related properties, HUD
uses the descriptive term--``decent, safe, sanitary and in good
repair.''
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No Preemption of State and Local Building and Maintenance Codes.
The new uniform physical condition standards established by HUD do not
supersede or preempt State and local building and maintenance codes
with
[[Page 35676]]
which the PHA's public housing must comply. PHAs must continue to
adhere to these codes.
Uniform Physical Condition Standards. The uniform physical
standards being established would set parameters under which public
housing (as well as other HUD assisted housing) must be maintained and
will be evaluated. These standards are designed to analyze, score, and
rank the overall and general physical condition of a project. This
evaluation would not focus on a single element, but would take into
consideration significant observable deficiencies and score compliance
taken as a whole. A single critical element with a major defect (for
example, an inoperable heating system), however, could have a
significant impact on a project's overall evaluation. The standards
address six major areas of the housing to be evaluated: (1) site; (2)
building exterior; (3) building systems; (4) dwelling units; (5) common
areas; and (6) health and safety. The standards emphasize health and
safety considerations as essential to housing that is decent, safe, and
sanitary. Appendix A to the proposed rule lists the items to be
inspected within each of the six major areas.
Physical Inspection of Public Housing. Public housing is not only
currently subject to a standard of decent, safe and sanitary, there is
also an obligation on the PHA to ``inspect'' public housing units.
Section 6(j)(1)(G) of the 1937 Act requires the PHA to inspect units to
ascertain ``maintenance or modernization needs.'' This corresponding
regulatory requirement is found in HUD's regulations at 24 CFR 901.30.
Section 901.30, captioned ``Indicator #5, Annual Inspection of Units
and Systems,'' provides in relevant part that: ``All occupied units are
required to be inspected.'' This rule would not change the current
requirement for an annual inspection. That requirement remains and is
provided for under subpart D of this proposed rule, Management
Operations.
Under this proposed rule, an assessment of the physical condition
of a PHA's properties would be determined by an independent inspection
of the properties by HUD. Consistent with HUD's responsibilities under
the Assessment Center, HUD intends to conduct independent physical
inspections, using a new uniform, objective, and computerized
inspection software developed by HUD, of a statistically valid number
of public housing units for each PHA, in order to confirm compliance
with the uniform physical condition standards. The determination of
whether public housing meets the standard of decent, safe, and sanitary
would be based on a review of observable deficiencies of the site, the
building exterior, the building systems, the dwelling units, the common
areas, and the health and safety conditions of such housing. The
computer program will generate a score for these components. The scores
will allow HUD to assess the overall physical condition of the public
housing as determined by the computer-based inspection.
To ensure the independence of the physical inspection, HUD intends
to contract with private inspection firms to perform the inspections.
All inspectors will be trained under HUD auspices in the use of the
inspection protocol. Upon being certified, inspectors will obtain their
PHA inspection assignment from the Assessment Center. The inspector
will download property profile information on the selected PHA's
projects via the Internet from the HUD Home page. The inspector will
complete the inspection using a hand-held computer that uses the HUD
software. After the inspection is completed, the inspector will upload
the inspection results to HUD's central information data repository
(CIDR) where it will be verified for accuracy and then scored using
predetermined weights based on the relative importance of the property
areas inspected and factual observed deficiencies identified during the
inspection. HUD will exercise quality control procedures over the
contractor inspections to assure the validity and quality of the
inspections.
Total Points for PHAS Indicator #1. The total point value of the
Physical Condition Indicator is 30 of the 100 points available under
the PHAS. In order to receive a passing score on the Physical Condition
Indicator, a PHA must receive a score of at least 60 percent of the 30
points available.
2. PHAS Indicator #2--Financial Condition
Subpart C of this proposed rule addresses the Financial Condition
Indicator and would establish the process for the assessment of a PHA's
financial condition. The rule would require PHAs to submit to HUD, on
an annual basis, certain financial information, prepared in accordance
with generally accepted accounting principles (GAAP), as those
principles are prescribed by the Governmental Accounting Standards
Board (GASB). The rule also requires that the annual financial report
due to HUD must be submitted electronically and in a uniform format,
with the electronic mode and format to be determined by HUD. The
objective of the Financial Condition Indicator is to measure the
financial condition of PHAs for the purpose of evaluating whether they
have sufficient financial resources and are managing those financial
resources effectively to support the provision of decent, safe, and
sanitary housing.
Generally Accepted Accounting Principles (GAAP). Accounting and
reporting in accordance with GAAP would bring much needed consistency
to HUD program evaluation. GAAP requires the participant to manage its
accounting and reporting in accordance with a standard set of rules
published by auditing and accounting professionals and recognized both
within and outside of government. The use of GAAP, therefore, would
enable HUD and program participants to account for transactions and
report results of operations using widely accepted protocols. The audit
process would be enhanced by the use of GAAP, reducing audit costs. The
resulting reports are widely accepted by industry and government and
are, therefore, widely understood. The relative consistency of GAAP
would allow HUD to perform analysis on its large housing portfolio in
ways that assure the overall reliability and validity of the results.
The discussions that HUD had with PHAs, PHA representatives,
residents and other interested parties about the new PHAS included
conversion of PHA financial reports to GAAP. From these discussions,
HUD has learned that GAAP accounting and reporting is more meaningful
than present HUD accounting, and that the majority of PHAs seek the
benefits of the change. A number of PHAs already have begun using GAAP
or are in the process of converting to GAAP. At least two States
(Louisiana and Tennessee) require that all PHAs in those States convert
their HUD basis of accounting financial statements to a GAAP basis for
State reporting purposes. Therefore, PHAs, as well as the accountants
and auditors in those two States, have experience with the GAAP
conversion process. Additionally, several large PHAs (New York,
Chicago, Denver, Seattle, and Baltimore, for example) have already
converted to GAAP. Further, it is expected that many PHAs have
quantified the effect of the differences between GAAP and the HUD basis
of accounting because of the guidance given in the Public and Indian
Housing Low Rent Technical Accounting Guide and because of other
business and operating needs (e.g., the need to fund liabilities for
sick and vacation leave).
For those PHAs that may not be familiar with GAAP or that have not
had
[[Page 35677]]
occasion to prepare GAAP financial reports for other submissions (for
example, reports that may be required to be submitted to State or local
governments), accounting support services are an eligible expense under
the Performance Funding System (PFS). To ease the conversion, the
current PHA accounting guide and chart of accounts will not be modified
except to add those additional accounts needed to record new
transactions in accordance with GAAP or to enhance the existing chart
of accounts to address current business operation requirements. Some
illustrative examples of these new accounts are: (1) an allowance for
uncollectible receivables and the related bad debt expense; (2) an
allowance for depreciation of buildings, structures and equipment and
the related depreciation expense; and (3) liability and expense
accounts for probable losses expected from litigation, claims, and
other contingencies. While a PHA's accounting staff will have to
quantify the amounts to be recorded in these new accounts, the PHA's
independent public accountants can provide guidance on GAAP. HUD also
will offer guidance for purposes of standardizing the conversion
results. Since HUD funds all audit costs as an add-on to the
performance funding system (PFS), PHAs should not bear any increase in
the costs of an audit that may result in converting to GAAP.
Electronic Submission. HUD is aware that automated systems are
being used more extensively among the various entities that participate
in HUD programs, and the use of such systems is expanding within HUD
itself. Vice President Gore's Report of the National Performance Review
has, as a stated objective, the expanded use of new technologies and
telecommunications to create an electronic government. (September 7,
1993, Report of the Vice President's National Performance Review, pp.
113-117, Ref. 2). Requiring the electronic submission of financial data
in HUD housing programs is another step in implementing the Vice
President's objective. The electronic submission of information results
in significant benefits, such as increasing the speed of information
preparation and exchange, cost savings from reduced need for storage
space, improved product because electronic preparation generally
results in reduced errors, and faster HUD review and analysis.
This rule would require PHAs to submit their financial reports to
HUD electronically, via the Internet, rather than through tape,
diskette, or paper. HUD, however, may approve transmission of the data
by tape or diskette if HUD determines that the cost of electronic
Internet transmission would be excessive. HUD anticipates that the
instances in which covered entities will not be able to comply with
submission of financial data electronically via Internet will be very
few. This rule would help to bring HUD up to speed with its program
partners in terms of modern technology.
Assessing Financial Condition. The key indicators used to
distinguish PHAs in strong financial condition from those which may be
financially troubled include: (1) A measure of liquidity, the Current
Ratio (defined as current assets divided by current liabilities), and
(2) a measure of viability, the Number of Months Expendable Fund
Balance (defined as the Expendable Fund Balance divided by monthly
Operating Expenditures); (3) Days Receivable Outstanding (defined as
the average number of days tenant receivables are outstanding); (4)
Vacancy Loss (defined as the loss of potential rental income due to
vacancy); (5) Expense Management/Energy Consumption (defined as expense
per unit for key expenses); and (6) Net Income or Loss divided by the
Expendable Fund Balance (defined as the net income or loss, if any, for
the operating year, divided by the expendable fund balance).
The liquidity measure is evidence of the property's ability to
cover its near term obligations with resources available in the near
term. The viability measure is evidence of the PHA's ability to operate
using its expendable fund balance without relying on additional
funding. Prudent financial management practices, appropriate to the PHA
environment, suggest that these components be maintained at certain
levels, although a range may be acceptable for peer groups of PHAs.
The Days Receivable Outstanding component measures the ability of
the PHA to collect its tenant receivables in a timely fashion. The
inability to collect tenant receivables in a timely fashion might help
explain poor performance in the liquidity and viability measures.
The Vacancy Loss component measures the extent to which the PHA is
maximizing its revenue from operations.
The Expense Management/Energy Consumption component, adjusted for
size and region, and includes energy consumption expenses as well as
any other factors that would reasonably contribute to differences in
expense ratios, will provide a measure of the PHA's ability to maintain
its expense ratios at a reasonable level relative to its peers.
Net Income or Loss divided by the Expendable Fund Balance will
provide a measure of how the year's operations have affected the PHA's
viability to a substantial degree.
Total Points for PHAS Indicator #2. The total point value of the
Financial Condition Indicator is 30 of the 100 points available under
the PHAS. In order to receive a passing score on the Financial
Condition Indicator, a PHA must receive a score of at least 60 percent
of the 30 points available.
Financial Reporting Compliance Dates. HUD intends that the
requirement of electronic submission of GAAP-based financial reports,
in the manner and in the format prescribed by HUD, will begin with
those PHAs with fiscal years ending September 30, 1999 and later. This
compliance schedule will allow sufficient conversion time for PHAs that
are not currently using GAAP. Unaudited financial statements will be
required 60 days after the PHA's fiscal year end (i.e., November 30,
1999), and audited financial statements will then be required no later
than 9 months after the PHA's fiscal year end, in accordance with the
Single Audit Act and OMB Circular A-133. A PHA with a fiscal year
ending September 30, 1999 that elects to submit its unaudited financial
report earlier than the due date of November 30, 1999 must submit its
report electronically and prepared in accordance with GAAP, in the
manner and in the format prescribed by HUD, as provided by this rule.
On or after September 30, 1998 but prior to November 30, 1999 (except
for a PHA with its fiscal year ending September 30, 1999), PHAs may
submit their financial reports in accordance with the financial
reporting requirements of this rule, but would not be required to do
so.
3. PHAS Indicator #3--Management Operations
Subpart D of this proposed rule addresses the Management Operations
Indicators of PHAs and provides for the assessment of a PHA's
management operations. PHAS Indicator #3 (Management Operations)
basically reflects the requirements of the existing PHMAP system.
The PHAS preserves the statutory indicators found in section 6(j)
of the 1937 Act, with some minor reorganization (from that in the
existing system) which is designed to reflect their integration into
the broader PHAS assessment and to establish their new point values
within the PHAS. The statutory indicators are: (1) Vacancy rate; (2)
unexpended Section 14 (of the
[[Page 35678]]
1937 Act) funds; (3) rents uncollected; (4) energy consumption; (5)
unit turn-around time; (6) outstanding work orders; and (7) annual
inspection of units. The Management Operations Indicator of the PHAS
incorporates the seven statutory indicators. As is currently the case
under the existing system, statutory indicators (1) and (5) are
combined under the new PHAS. The statutory energy consumption indicator
is part of PHAS Indicator 2 (Financial Condition), just as it was
folded into the financial management indicator of existing system. The
energy/utility consumption expenses faced by a PHA on an annual basis
will be part of the PHA's annual financial report to HUD.
With respect to non-statutory indicators, the security indicator
remains part of the Management Operations assessment under the PHAS.
The resident services and community building indicator is now replaced
by a separate indicator (PHAS Indicator #4--Resident Service and
Satisfaction). Similarly, the financial condition indicator is now
replaced by a separate indicator (PHAS Indicator #2--Financial
Condition).
The analysis of the individual statutory management indicators will
not deviate significantly from the existing assessment system. Scores
will continue to be based on a PHA's certification to the various
management operations indicators. For example, under Management
Indicator #1 (Vacancy Rate and Unit Turnaround Time), a low vacancy
rate will score higher than a high vacancy rate. Under Management
Indicator #4 (Work Orders) a high percentage of emergency work orders
completed or abated within 24 hours or less will score better than a
lower percentage of emergency work orders completed or abated within 24
hours or less.
As under the existing system, for the Management Operations
Indicator of the PHAS, a PHA will continue to submit certifications as
to its performance under each of the management indicators, and a PHA's
certifications will be subject to independent verification. Appropriate
sanctions for intentional false certification will be imposed,
including civil penalties, suspension or debarment of the signatories.
Total Points for PHAS Indicator #3. The total point value of the
Management Operations Indicator is 30 of the 100 points available under
the PHAS. In order to receive a passing score on the Indicator #3
(Management Operations), a PHA must receive a score of at least 60
percent of the 30 points available.
4. PHAS Indicator #4--Resident Service and Satisfaction
Subpart E of this rule addresses PHAS Indicator #4, Resident
Service and Satisfaction. This indicator assesses the level of resident
satisfaction with PHA housing and services. This assessment would
consist of existing PHMAP Indicator #7, resident services and community
building, revised to (1) be consistent with the framework of the new
PHAS, and (2) provide a separate resident services satisfaction survey.
The objective of this Indicator #4 is to seek input from all public
housing residents. To achieve an acceptable score under this indicator,
a PHA must obtain a response from a statistically significant sample of
public housing residents. The PHA will be responsible for maintaining
original copies of completed survey data, subject to independent audit,
and for developing a follow-up plan to address issues resulting from
the survey.
The resident service and satisfaction assessment score will include
three components of the survey process.
The first component will be the score of the survey results. The
survey content will focus on resident evaluation of overall living
conditions to include topics such as: (1) Resident organizations; (2)
program activities; (3) surrounding environment; (4) management
responsiveness; (5) safety; (6) involvement; (7) resources; and (8)
communication.
The second component will be a score based on the PHA's level of
implementation and its follow-up or corrective actions based on the
results of the survey.
The third component is verification that the data collection,
tabulation and submission was undertaken consistent with guidelines to
be provided by HUD. HUD reserves the right to conduct the survey at any
time on its own.
Total Points for PHAS Indicator #4. The total point value of the
Resident Service and Satisfaction Indicator is 10 of the 100 points
available under the PHAS. A PHA will not receive any points if the
survey is not conducted in accordance with HUD prescribed methodology
or if the survey results are determined to be altered by the PHA.
5. Scoring Performance Under the PHAS and Consequences of the Score
Issuance of the PHAS Score. An overall PHAS score will be issued by
HUD for each PHA 60 to 90 days after the end of the PHA's fiscal year.
As discussed earlier in this preamble, each of the four PHAS indicators
will be graded individually and these four indicators will then be used
to determine an overall score for the PHA. Components within each of
the four PHAS indicators will be graded individually and will be used
to determine a single score for the major indicator. Based on the
score, a PHA will fall into one of three categories:
High Performer PHAs. A PHA that achieves a score of at least 60% of
the points available for each of the four indicators and achieves an
overall score of 90% or greater shall be designated as a high
performer. A PHA shall not be designated as a high performer if it
scores below the threshold established for any of the four indicators.
High performers will be afforded incentives and include relief from
reporting and other requirements as described in the rule.
Standard Performer PHAs. A PHA that achieves a total score of less
than 90% but not less than 60% shall be designated as a standard
performer. All standard performers must correct reported deficiencies.
A standard performer PHA that receives a score of less than 70% but not
less than 60% shall be referred to the appropriate HUD area HUB/Program
Center and will be required to submit an improvement plan to correct
and eliminate deficiencies in the PHA's performance. Standard
performers that receive a score over 70% may also be required to submit
an improvement plan to correct or eliminate any deficiency.
Troubled Performer PHAs. A PHA that receives a total score of less
than 60% shall be designated as a troubled performer. Upon designation
as troubled, in accordance with the requirements of section 6(j)(2)(B)
of the 1937 Act and in accordance with the requirements of this rule,
the PHA shall be referred to the TARC for longer term intensive
assistance in raising its performance level.
The actions that HUB/Program Centers and the TARC with respect to
PHAs receiving low or failing scores under the PHAS are discussed
further in the following section.
6. Consequences of a PHAS Score
As under the existing system, PHAS scores will be made public. PHAs
designated as high performers will be relieved of certain HUD
requirements, effective upon notification of a high performer
designation. Additionally, high performer PHAs may be eligible for
bonus points for funding competitions, where permissible by the statute
and regulations governing the grant program. High performer PHAs also
will receive a Certificate of Commendation from HUD and public
recognition of their
[[Page 35679]]
outstanding performance. Representatives of high performer PHAs may be
requested to serve on HUD working groups that will advise HUD in such
areas as troubled PHAs and performance standards for all PHAs.
Referral to the HUB Program Center. PHAs that are designated as
standard performer and have a score of less than 70% but not less than
60% will be referred to HUD's area HUB/Program Center. The HUB/Program
Center will work with the PHA to correct any deficiency indicated in
its assessment within a period of 90 days, as described in the
Improvement Plan to be submitted to HUD. The Improvement Plan will,
among other things, describe the procedures that the PHA will follow to
correct the deficiencies. If the PHA fails to submit an acceptable
Improvement Plan or correct deficiencies within the time specified in
an Improvement Plan, the HUB/Program Center will refer the PHA to the
TARC for appropriate action.
Referral to the TARC. PHAs that are designated as troubled are
referred to the TARC. The TARC will require the troubled PHA to prepare
and execute a Memorandum of Agreement (MOA), a binding contractual
agreement by which the PHA will commit to take certain action that will
lead to its recovery from a troubled status. The scope of the MOA may
vary depending upon the extent of the problems present in the PHA, but
shall include, among other things, annual and quarterly performance
targets and strategies to be used by the PHA in achieving the
performance targets. The TARC may impose budget and/or management
controls on a PHA referred to the TARC.
Referral to the Enforcement Center. A troubled PHA that fails to
execute or meet the requirements of the MOA will be referred to the
Enforcement Center. The Enforcement Center shall initiate judicial
appointment of a receiver, and where appropriate, the Enforcement
Center may investigate the PHA and seek the imposition of civil or
criminal penalties through the appropriate Federal government agencies
or offices.
The purpose of the referral to one of the three centers discussed
above is to provide for a more effective, efficient and expeditious
resolution of a PHA's problems than is currently the case under the
existing assessment system. The HUB/Program Center and the TARC will
work with PHAs to quickly address performance deficiencies. The
Enforcement Center will seek quick action to replace the management of
PHAs that fail or refuse to address their performance deficiencies.
Appeal of ``Troubled'' Designation. As provided by section 6(j) of
the 1937 Act, a PHA may appeal designation as a trouble agency
(including designation as troubled with respect to the modernization
program); petition for removal of such designation; and appeal any
refusal to remove such designation as permitted under section
6(j)(2)(A)(iii) of the 1937 Act. The appeal shall be submitted by a PHA
to the Assessment Center within 30 days of a PHA's receipt of its
score, and shall include supporting documentation and justification of
the reasons for the appeal. Appeals submitted to the Assessment Center
without appropriate documentation will not be considered and will be
returned to the PHA. Upon receipt of an appeal from a PHA, the
Assessment Center will convene a Board of Review (the Board) to
evaluate the appeal and its merits for purpose of determining whether a
reassessment of the PHA is warranted. Board membership will be
comprised of a representative from REAC, the Office of Public and
Indian Housing, and such other office or representative as the
Secretary may designate (excluding, however, representation from the
TARC).
HUD will make final decisions of appeals within 30 days of receipt
of an appeal, and may extend this period an additional 30 days if
further inquiry is necessary. Failure by a PHA to submit requested
information within the time period provided is grounds for denial of an
appeal.
7. Timeline for Implementation of Inspection and Reporting Dates Under
the PHAS
The new PHAS is proposed to become effective for PHAs with fiscal
years ending September 1999 and later. Financial reports due for PHAs'
fiscal years ending in September, 1999 and later must be prepared on a
GAAP basis. The first scores under the new PHAS will be issued not
later than December, 1999 for PHAs with FYs ending in September, 1999.
Thus, PHAs will have at least one year before the new PHAS scores are
issued. Until September 30, 1999, PHAs will continue to be scored under
the current PHMAP. During this one year transition period, advisory
scores for physical condition and financial management may be issued to
provide guidance to PHAs. The implementation schedule for inspection of
public housing properties and reporting is as described in the
following table:
Real Estate Assessment Center (REAC)
[Assessment Periods and Reporting Dates]
----------------------------------------------------------------------------------------------------------------
REAC assessment results Financial Physical Management Resident survey
------------------------------------- reporting inspection operations ------------------
Period covered ---------------------------------------------------------
Score issued fiscal year end Inspection dates Submission due Survey dates (5)
(1) Due date (2) (3) date (4)
----------------------------------------------------------------------------------------------------------------
12/1999.......... 9-30-99 11-30-99 7/99-9/99 11-30-99 4/99-9/99
03/2000.......... 12-31-99 2-28-2000 10/99-12/99 2-28-2000 10/99-12/99
06/2000.......... 3-31-2000 5-31-2000 1/2000-3/2000 5-31-2000 1/2000-3/2000
09/2000.......... 6-30-2000 8-31-2000 4/2000-6/2000 8-31-2000 4/2000-6/2000
12/2000.......... 9-30-2000 11-30-2000 7/2000-9/2000 11-30-2000 7/2000-9/2000
----------------------------------------------------------------------------------------------------------------
Notes:
1. The period covered for each indicator will be the PHA's entire fiscal year ending on dates shown above. Once
the new PHAS is effective, a PHA cannot change its fiscal year for a period of three years.
2. PHAs with fiscal years ending 9-30-99 and later must provide GAAP financial reports. These reports must be
provided by electronic submission not later than 60 days after the end of the PHA's FY. Audited GAAP reports
(due 9 months after the close of the FY in accordance with the Single Audit Act and OMB Circular A-133) will
be used to update and confirm unaudited financial results. If significant differences are noted between
unaudited and audited results, scoring penalties will apply. For those PHAs that spend less than $300,000 of
Federal funds, HUD cannot require or pay for an audit in accordance with the Single Audit Act. HUD, however,
can require and pay for an ``Agreed-Upon Procedures'' report that could be specifically directed at verifying
calculations.
3. Physical inspections will be scheduled to approximate the new PHAS calculation dates; i.e. within the final
quarter of the PHA's fiscal year.
[[Page 35680]]
4. The certifications and supporting documentation required for the Management Operations Indicator will be due
60 days after the end of the PHA's fiscal year.
5. Resident surveys will be required to be conducted during the course of a PHA's fiscal year and will be
required to be submitted by a PHA at the time that the PHA submits the certifications required under the
Management Operations Indicator.
8. Other Issues Related to the New PHAS
PHA Fiscal Year for First Three Years of the new PHAS. As noted in
footnote 1 to the chart, to allow for a period of consistent
assessments to refine and make necessary adjustments to the new PHAS, a
PHA is not permitted to change its fiscal year for the first three full
fiscal years following the effective date of the PHAS.
Compliance with Other Departmentwide and Program Specific
Requirements. The PHAS is a strategic measure of a PHA's essential
housing operations. The PHAS, however, does not evaluate a PHA's
compliance with every departmentwide or program specific requirement.
For example, a PHA must comply with fair housing and equal opportunity
requirements, requirements under Section 504 of the Rehabilitation Act
of 1973, and requirements of programs under which the PHA is receiving
assistance. A PHA's adherence to these requirements will be monitored
in accordance with the applicable program regulations and the PHA's
annual contributions contract.
Adding, Subtracting and Modifying Indicators. HUD reserves the
right to add new indicators or components of indicators, or remove
indicators or modify indicators of the new PHAS if HUD believes that
such action will contribute to a comprehensive and more accurate
assessment of a PHA's performance. For example, HUD may include in the
Management Operations Indicator a component on verification of tenant
income by a PHA. PHAs and the public will be notified of any change in
indicators or components through issuance of the appropriate type of
notice.
Streamlining of Regulation. Consistent with Executive Order 12866
on Regulatory Planning and Review, HUD reviews its regulations to
determine, among other things, whether the regulations are redundant or
duplicative of other HUD or other agency regulations, and should
therefore be streamlined or consolidated. As part of this review,
streamlining or consolidation changes may be made to this rule at the
final rule stage.
IV. Justification for 30-Day Comment Period
In general, it is HUD's policy that notices of proposed rulemaking
are to afford the public not less than 60 days for submission of
comments, in accordance with its regulations on rulemaking in 24 CFR
part 10. However, HUD has determined that there is good cause to reduce
the public comment period for this proposed rule to 30 days. As
discussed in more detail earlier in this preamble, the announcement,
through this proposed rule, of HUD's new PHAS has been developed with
the participation of PHAs, PHA representatives, residents,
representatives from resident organizations, and experts in the field
of finance and real estate. Therefore, the proposal of a new assessment
system, and the fundamental concepts and components of this new system
are not unfamiliar to PHAs and public housing residents. As discussed
earlier in the preamble and in this section, the diagnostic tools
(physical assessment, financial assessment and resident services and
satisfaction) that are added to the current ``management'' assessment
of the existing system are requirements and standards familiar to PHAs.
With respect to the uniform standards for physical condition and
financial reporting, the components of these standards are not
significantly ``new.'' HUD's physical condition standards closely
resemble the Section 8 housing quality standards and, are therefore,
standards that the PHAs are familiar with. The financial reporting
requirements, as discussed earlier in this preamble, provide for a new
submission format, electronic and in a uniform format prescribed by
HUD, but the overall content of the report largely includes the
financial information that PHAs are already submitting in their annual
financial reports. The requirement to prepare the financial reports in
accordance with GAAP will be a change for some PHAs, but many PHAs are
already preparing GAAP financial reports. The rule provides a
sufficient period for PHAs to convert to GAAP. HUD also will offer
guidance for purposes of standardizing the conversion results, and
since HUD funds audit costs, PHAs should bear minimal, if any, increase
in the costs of an audit that may result in converting to GAAP.
With respect to the Management Operations Indicator, this is
substantially the same as in existing PHMAP, and therefore already
familiar to PHAs.
With respect to the new Resident Service and Satisfaction
Indicator, this indicator builds on the existing resident indicator in
PHMAP.
For the above reasons, HUD has determined that the 30-day comment
period for this proposed rule should provide sufficient notice and
opportunity for interested entities to comment. In order to provide the
fullest and most expedient access to the provisions of this proposed
rule, HUD will make it available on the HUD Home Page on the World Wide
Web at http://www.hud.gov, on the date of publication in the Federal
Register.
V. Findings and Certifications
Paperwork Reduction Act Statement
The proposed information collection requirements contained at
Secs. 901.25(b)(3) (Certification of the extent to which the physical
condition and neighborhood environment adjustment applies; 901.25(b)(5)
(Maintenance of supporting documentation for physical condition and
neighborhood environment adjustment); 901.33(a) (Annual financial
reports); 901.50(b) (Reporting information on resident service and
satisfaction); 901.60 (Data collection); 901.63 (Exclusion request);
901.69 (PHA right of petition and appeal); 901.75 (MOA); 901.77
(Improvement Plan); and 901.81 (Notice and response), of this rule have
been submitted to the Office of Management and Budget (OMB) for review,
under section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35).
(a) In accordance with 5 CFR 1320.5(a)(1)(iv), HUD is setting forth
the following concerning the proposed collection of information:
(1) Title of the information collection proposal:
Public Housing Assessment System (PHAS)
(2) Summary of the collection of information:
PHAs shall be required to maintain certain records and submit
certain information, as specified in the rule text, for the purpose of
HUD review. The HUD review will result in a numerical score and the
designation of a PHA's status. A PHA's status may result in: the award
of recognition and incentives from HUD, the requirement
[[Page 35681]]
to design and implement a plan to increase the PHAS score, or the
referral of the PHA for enforcement action. The PHA may petition or
appeal certain aspects of the scoring and designation, and is provided
an opportunity to respond before the imposition of enforcement actions.
(3) Description of the need for the information and its proposed
use:
The information is needed to assess the performance of a PHA in
essential housing operations. The information will be used to reward
good performance and improve or correct deficient performance.
(4) Description of the likely respondents, including the estimated
number of likely respondents, and proposed frequency of response to the
collection of information:
Respondents will be PHAs. The estimated number of respondents is
included in paragraph (5), immediately below. The proposed frequency of
responses is once annually.
(5) Estimate of the total reporting and recordkeeping burden that
will result from the collection of information:
Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Est. avg. time
Annual freq. for Est. annual
Section reference Number of parties of requirement requirement burden (hours)
(hours)
----------------------------------------------------------------------------------------------------------------
901.25(b)(3)......................... 3,268.................... 1 .5 1,634
901.25(b)(5)......................... 750...................... 1 .5 375
901.33(a)............................ 3,268.................... 1 1.0 3,268
901.50(b)............................ 3,268.................... 1 10.0 32,680
901.50(b)............................ 1.2 million.............. 1 .5 600,000
901.60............................... 3,268.................... 1 25.0 81,700
901.63............................... 350...................... 1 2.0 700
901.69............................... 200...................... 1 2.0 400
901.75............................... 100...................... 1 25.0 2,500
901.77............................... 500...................... 1 10.0 5,000
901.81............................... 5........................ 1 2.0 10
---------------
Total Reporting and Recordkeeping ......................... .............. .............. 728,267
Burden (Hours).
----------------------------------------------------------------------------------------------------------------
(b) In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting
comments from members of the public and affected agencies concerning
the proposed collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond; including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this proposal. Comments must be
received within sixty (60) days from the date of this proposal.
Comments must refer to the proposal by name and docket number (FR-4313)
and must be sent to:
Joseph F. Lackey, Jr., UD Desk Officer, Office of Management and
Budget, New Executive Office Building, Washington, DC 20503
and
Reports Liaison Officer, Office of the Assistant Secretary for Public
and Indian Housing, Department of Housing & Urban Development, 451--7th
Street, SW, Room 4244, Washington, DC 20410
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on State, local, and tribal governments and the
private sector. This proposed rule would not impose any Federal
mandates on any State, local, or tribal governments or the private
sector within the meaning of the Unfunded Mandates Reform Act of 1995.
Environmental Review
A Finding of No Significant Impact with respect to the environment
was made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4223). The Finding is available for public inspection
between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules
Docket Clerk, Office of General Counsel, Room 10276, Department of
Housing and Urban Development, 451 7th Street, SW, Washington, DC
20410.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this rule, and in so doing
certifies that this rule is not anticipated to have a significant
economic impact on a substantial number of small entities. This
proposed rule would revise HUD's existing regulations for the
assessment of public housing (PHMAP). The new the PHAS incorporates the
statutory indicators of PHMAP, and adds three additional indicators.
One of the new indicators--physical condition--would assess the extent
to which PHAs are providing public housing that is decent, safe, and
sanitary. As explained above, public housing has always been subject to
a statutory standard of ``decent, safe, and sanitary.'' This rule
proposes to simply provide a clear and objective statement of the
standard. This indicator would also entail an annual independent HUD
inspection of public housing, but it would not impose additional
inspection requirements upon PHAs. The clarity and consistency of this
new indicator would provide a fair, accurate, and reliable assessment
of the physical condition of the large public housing portfolio.
However, since this proposed rule would not alter the statutory
standard for physical condition, nor impose additional inspection
obligations, the new physical condition indicator would not have a
[[Page 35682]]
significant economic impact on a substantial number of small entities.
The second indicator--financial condition--would assess the
financial condition of PHAs, requiring them to submit financial reports
to HUD electronically and in accordance with GAAP. HUD estimates that
electronic submission of financial information will be less burdensome
to PHAs, since many PHAs are making more extensive use of automated
systems. This proposed rule would allow exceptions if the cost of
electronic submission would be excessive. GAAP-based accounting
reports, which are widely accepted and recognized, are not
substantially different than the reports that PHAs are currently
submitting. A number of PHAs are already required to use GAAP or are
otherwise using GAAP, and the majority of the PHAs with which HUD has
consulted support the change to GAAP. For those PHAs that are not yet
using GAAP, HUD is taking several steps to ease the conversion,
including making only simple additions to the current PHA accounting
guide and chart of accounts, and providing other conversion guidance
and training, particularly to small entities. Increasing the speed of
information exchange (through electronic submission) and the
consistency and accuracy of the information (through GAAP) would
greatly enhance the assessment of a PHA's financial condition. However,
this new indicator would not have a significant economic impact on a
substantial number of small entities.
The fourth indicator--resident service and satisfaction--entails a
new resident service and satisfaction survey. This survey is key to
obtaining input from public housing residents, which is an important
aspect of assessing public housing. HUD intends that this survey will
be conducted through an automated process, and accordingly, will
present a minimal administrative burden for PHAs in terms of
administering and evaluating the survey. HUD intends to provide the
survey format and the electronic reporting format, as well as software
specifications. Therefore, this survey would not have a significant
economic impact on a substantial number of small entities.
HUD is also seeking to minimize any burden on PHAs by allowing a
significant transition period for converting to the new PHAS. PHAs will
have at least one year before new scores are issued under the PHAS.
During that transition period, HUD intends to issue advisory scores
regarding physical condition and financial management to provide
guidance to PHAs and to ease the conversion to the new PHAS.
The new PHAS is fundamentally designed to provide relevant and
verifiable measures that directly relate to a PHA's performance and
that result in an accurate and reliable score. This improved assessment
process will allow HUD to target its oversight resources on those PHAs
most in need of attention; high-performing PHAs will receive
recognition, along with reduced HUD scrutiny and additional
flexibility. Since the revised assessment system in this rule would not
impose any significant new requirements upon PHAs, and since HUD will
assist PHAs in their conversion to the system, this rule would not have
a significant economic impact on a substantial number of small
entities. However, HUD specifically invites comments regarding any less
burdensome alternatives to this proposed rule that would meet HUD's
objectives as described in this preamble.
Federalism
The General Counsel, as the Designated Official under Executive
Order 12612, Federalism, has determined that the policies contained in
this proposed rule would not have substantial direct effects on States
or their political subdivisions, on the relationship between the
Federal Government and the States, or on the distribution of power and
responsibilities among the various levels of government. The proposed
rule is intended to promote good management practices by including, in
HUD's relationship with PHAs, continuing review of PHAs' compliance
with already existing requirements. The proposed rule would not create
any new significant requirements. As a result, the proposed rule is not
subject to review under the Order.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers for Public
Housing is 14.850.
List of Subjects in 24 CFR Part 901
Administrative practice and procedure, Public housing, reporting
and recordkeeping requirements.
Accordingly, part 901 of title 24 of the Code of Federal
Regulations is proposed to be revised to read as follows:
PART 901--PUBLIC HOUSING ASSESSMENT SYSTEM
Subpart A--General Provisions
Sec.
901.1 Purpose and general description.
901.3 Scope.
901.5 Applicability.
901.7 Definitions.
Subpart B--PHAS Indicator #1: Physical Condition
901.20 Physical condition assessment.
901.23 Physical condition standards for public housing--decent,
safe, sanitary and in good repair (DSS/GR).
901.25 Physical condition scoring and thresholds.
901.27 Physical condition portion of total PHAS points.
Subpart C--PHAS Indicator #2: Financial Condition
901.30 Financial condition assessment.
901.33 Financial reporting requirements.
901.35 Financial condition scoring and thresholds.
901.37 Financial condition portion of total PHAS points.
Subpart D--PHAS Indicator #3: Management Operations
901.40 Management operations assessment.
901.43 Management operations performance standards.
901.45 Management operations scoring and thresholds.
901.47 Management operations portion of total PHAS points.
Subpart E--PHAS Indicator #4: Resident Service and Satisfaction
901.50 Resident service and satisfaction assessment.
901.53 Resident service and satisfaction scoring and thresholds.
901.55 Resident service and satisfaction portion of total PHAS
points.
Subpart F--PHAS Scoring
901.60 Data collection.
901.63 PHAS scoring.
901.67 Score and designation status.
901.69 PHA right of petition and appeal.
Subpart G--PHAS Incentives and Remedies
901.71 Incentives for high performers.
901.73 Referral to an Area HUB/Program Center.
901.75 Referral to a TARC.
901.77 Referral to the Enforcement Center.
901.79 Substantial default.
901.83 Interventions.
901.85 Resident petitions for remedial action.
Appendix A to Part 901--Areas and Items to be Inspected
Authority: 42 U.S.C. 1437d(j); 42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 901.1 Purpose and general description.
(a) Purpose. The purpose of the Public Housing Assessment System
(PHAS) is to enhance trust in the public housing system among public
housing agencies (PHAs), public housing residents, HUD and the general
public by providing a comprehensive management tool for effectively and
fairly measuring the performance of a public housing agency in
essential housing operations,
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including rewards for high performers and consequences for poor
performers.
(b) Responsible office for PHAS assessments. The Real Estate
Assessment Center (REAC) is responsible for assessing and scoring the
performance of PHAs.
(c) PHAS indicators of a PHA's performance. REAC will assess and
score a PHA's performance based on the following four indicators:
(1) PHAS Indicator (Apprentice)#1--the physical condition of a
PHA's properties (addressed in subpart B of this part);
(2) PHAS Indicator #2--the financial condition of a PHA (addressed
in subpart C of this part);
(3) PHAS Indicator #3--the management operations of a PHA
(addressed in subpart D of this part); and
(4) PHAS Indicator #4--the resident service and satisfaction
feedback on a PHA's operations (addressed in subpart E of this part).
(d) Assessment tools. REAC will make use of uniform and objective
protocols for the physical inspection of properties and the financial
assessment of the PHA, and will gather relevant data from the PHA on
the management operations indicator and the resident service and
satisfaction indicator. On the basis of this data, REAC will assess and
score the results, advise PHAs of their scores and identify low scoring
and failing PHAs so that these PHAs will receive the appropriate
attention and assistance.
(e) Limitation of change of PHA's fiscal year. To allow for a
period of consistent assessment of the PHAS indicators, a PHA is not
permitted to change its fiscal year for the first three full fiscal
years following [effective date of final rule to be inserted at final
rule stage].
Sec. 901.3 Scope.
The PHAS is a strategic measure of a PHA's essential housing
operations. The PHAS, however, does not evaluate a PHA's compliance
with or response to every departmentwide or program specific
requirement or objective. Although not specifically referenced in this
part, PHAs remain responsible for complying with such requirements as
fair housing and equal opportunity requirements, requirements under
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and
requirements of programs under which the PHA is receiving assistance.
PHAs' adherence to these requirements will be monitored in accordance
with the applicable program regulations and the PHA's annual
contributions contract.
Sec. 901.5 Applicability.
(a) PHAs, RMCs, AMEs. This part applies to PHAs, Resident
Management Corporations (RMCs) and Alternate Management Entities
(AMEs). The management assessment of an RMC/AME differs from that of a
PHA. Because an RMC/AME enters into a contract with a PHA to perform
specific management functions on a development-by-development or
program basis, and because the scope of the management that is
undertaken varies, not every indicator that applies to a PHA would be
applicable to each RMC/AME.
(b) PHA ultimate responsible entity under ACC. Due to the fact that
the PHA and not the RMC/AME is ultimately responsible to HUD under the
Annual Contributions Contract (ACC), the PHAS score of a PHA will be
based on all of the developments covered by the ACC, including those
with management operations assumed by an RMC or AME (pursuant to a
court ordered receivership agreement, if applicable).
(c) Assumption of management operations by AME. When a PHA's
management operations have been assumed by an AME:
(1) If the AME assumes only a portion of the PHA's management
operations, the provisions of this part that apply to RMCs apply to the
AME (pursuant to a court ordered receivership agreement, if
applicable); or
(2) If the AME assumes all, or substantially all, of the PHA's
management functions, the provisions of this part that apply to PHAs
apply to the AME (pursuant to a court ordered receivership agreement,
if applicable).
Sec. 901.7 Definitions.
As used in this part:
Adjustment for physical condition (project age) and neighborhood
environment is a total of three additional points added to PHAS
Indicator #1 (Physical Condition). The three additional points,
however, shall not result in a total point value over the total points
available for PHAS Indicator #1 (established in subpart B of this
part).
Assessed fiscal year is the PHA fiscal year that has been assessed
under the PHAS.
Average number of days nonemergency work orders were active is
calculated:
(1) By dividing the total of--
(i) The number of days in the assessed fiscal year it takes to
close active nonemergency work orders carried over from the previous
fiscal year;
(ii) The number of days it takes to complete nonemergency work
orders issued and closed during the assessed fiscal year; and
(iii) The number of days all active nonemergency work orders are
open in the assessed fiscal year, but not completed;
(2) By the total number of nonemergency work orders used in the
calculation of paragraphs (1)(i), (ii) and (iii) of this definition.
Days Receivable Outstanding is Tenant Receivables divided by Daily
Tenant Revenue.
Deficiency means any PHAS score below 60% of the available points
in an indicator or component.
Improvement plan is a document developed by a PHA, specifying the
actions to be taken, including timetables, that shall be required to
correct deficiencies identified under any of the indicators and
components within the indicator(s), identified as a result of the PHAS
assessment when an MOA is not required.
Reduced actual vacancy rate within the previous three years is a
comparison of the vacancy rate in the PHAS assessed fiscal year (the
immediate past fiscal year) with the vacancy rate of that fiscal year
which is two years previous to the assessed fiscal year. It is
calculated by subtracting the vacancy rate in the assessed fiscal year
from the vacancy rate in the earlier year. If a PHA elects to certify
to the reduction of the vacancy rate within the previous three years,
the PHA shall retain justifying documentation to support its
certification for HUD post review.
Reduced the average time nonemergency work orders were active
during the previous 3 years is a comparison of the average time
nonemergency work orders were active in the PHAS assessment year (the
immediate past fiscal year) with the average time nonemergency work
orders were active in that fiscal year that is 2 years previous to the
assessment year. It is calculated by subtracting the average time
nonemergency work orders were active in the PHAS assessment year from
the average time nonemergency work orders were active in the earlier
year. If a PHA elects to certify to the reduction of the average time
nonemergency work orders were active during the previous 3 years, the
PHA shall retain justifying documentation to support its certification
for HUD post review.
Vacancy loss is vacant unit potential rent divided by gross
potential rent.
Work order deferred for modernization is any work order that is
combined with similar work items and completed within the current PHAS
assessment year, or will be completed in
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the following year if there are less than three months remaining before
the end of the PHA fiscal year when the work order was generated, under
the PHA's modernization program or other PHA capital improvements
program.
Subpart B--PHAS Indicator #1: Physical Condition
Sec. 901.20 Physical condition assessment.
(a) Objective. The objective of the Physical Condition Indicator is
to determine whether a PHA is maintaining its public housing in a
condition that is decent, safe, sanitary and in good repair (DSS/GR),
as this standard is defined Sec. 901.23.
(b) Physical inspection under PHAS Indicator #1. REAC will provide
for an independent physical inspection of, at minimum, a statistically
valid sample of the units in the PHA's public housing portfolio to
determine compliance with DSS/GR standard.
(c) PHA physical inspection requirement. The HUD-conducted physical
inspections required by this part do not relieve the PHA of the
responsibility to inspect public housing units as provided in section
6(j)(1) of the U.S. Housing Act of 1937 (42 U.S.C. 1437d(j)(1)), and
Sec. 901.43(a)(5).
(d) Compliance with State and local codes. The physical condition
standards in this subpart do not supersede or preempt State and local
building and maintenance codes with which the PHA's public housing must
comply. PHAs must continue to adhere to these codes.
Sec. 901.23 Physical condition standards for public housing--decent,
safe, sanitary and in good repair (DSS/GR).
(a) Public housing must be maintained in a manner that meets the
physical condition standards set forth in this section in order to be
considered decent, safe, sanitary and in good repair. These standards
address the major areas of public housing: the site; the building
exterior; the building systems; the dwelling units; the common areas;
and health and safety considerations.
(1) Site. The site components, such as fencing and retaining walls,
grounds, lighting, mailboxes/project signs, parking lots/driveways,
play areas and equipment, refuse disposal, roads, storm drainage and
walkways must be free of health and safety hazards and be in good
repair. The site must not be subject to material adverse conditions,
such as abandoned vehicles, dangerous walks or steps, poor drainage,
septic tank back-ups, sewer hazards, excess accumulations of trash,
vermin or rodent infestation or fire hazards.
(2) Building exterior. Each building on the site must be
structurally sound, secure, habitable, and in good repair. Each
building's doors, fire escapes, foundations, lighting, roofs, walls,
and windows, where applicable, must be free of health and safety
hazards, operable, and in good repair.
(3) Building systems. Each building's domestic water, electrical
system, elevators, emergency power, fire protection, HVAC, and sanitary
system must be free of health and safety hazards, functionally
adequate, operable, and in good repair.
(4) Dwelling units. (i) Each dwelling unit within a building must
be structurally sound, habitable, and in good repair. All areas and
aspects of the dwelling unit (for example, the unit's bathroom, call-
for-aid, ceiling, doors, electrical systems, floors, hot water heater,
HVAC (where individual units are provided), kitchen, lighting, outlets/
switches, patio/porch/balcony, smoke detectors, stairs, walls, and
windows) must be free of health and safety hazards, functionally
adequate, operable, and in good repair.
(ii) Where applicable, the dwelling unit must have hot and cold
running water, including an adequate source of potable water.
(iii) If the dwelling unit includes its own sanitary facility, it
must be in proper operating condition, usable in privacy, and adequate
for personal hygiene and the disposal of human waste.
(iv) The dwelling unit must include at least one battery-operated
or hard-wired smoke detector, in proper working condition, on each
level of the unit.
(5) Common areas. The common areas must be structurally sound,
secure, and functionally adequate for the purposes intended. The
basement/garage/carport, restrooms, closets, utility, mechanical,
community rooms, day care, halls/corridors, stairs, kitchens, laundry
rooms, office, porch, patio, balcony, and trash collection areas, if
applicable, must be free of health and safety hazards, operable, and in
good repair. All common area ceilings, doors, floors, HVAC, lighting,
outlets/switches, smoke detectors, stairs, walls, and windows, to the
extent applicable, must be free of health and safety hazards, operable,
and in good repair.
(6) Health and safety concerns. All areas and components of the
housing must be free of health and safety hazards. These areas include,
but are not limited to, air quality, electrical hazards, elevators,
emergency/fire exits, flammable materials, garbage and debris, handrail
hazards, infestation, and lead-based paint. For example, the buildings
must have fire exits that are not blocked and are accessible to all
residents, and have hand rails that are undamaged and have no other
observable deficiencies. The housing must have no evidence of
infestation by rats, mice, or other vermin, or of garbage and debris.
The housing must have no evidence of electrical hazards, natural
hazards, or fire hazards. The dwelling units and common areas must have
proper ventilation and be free of mold, odor, or other observable
deficiencies. The housing must comply with all requirements related to
the evaluation and reduction of lead-based paint hazards and have
available proper certifications of such (see 24 CFR part 35).
(b) Appendix A to this part lists the areas to be inspected and the
items in each area to be inspected.
Sec. 901.25 Physical condition scoring and thresholds.
(a) Scoring. Under PHAS Indicator #1, REAC will calculate a score
of the overall condition of the PHA's public housing portfolio which
reflects weights based on the relative importance of the individual
inspectable areas and the deficiencies observed.
(b) Adjustment for physical condition (project age) and
neighborhood environment. In accordance with section 6(j)(1)(I)(2) of
the 1937 Act (42 U.S.C. 1437d(j)(1)(I)(2)), the physical score for a
project will be upwardly adjusted to the extent that negative
conditions are caused by situations outside the control of the PHA.
These situations are related to the poor physical condition of the
project or the overall depressed condition of the immediately
surrounding neighborhood. The intent of this adjustment is to not
unfairly penalize the PHA, and to appropriately apply the adjustment.
(1) Adjustments in three areas. Adjustments to the PHA physical
project score will be made in three factually observed and assessed
areas (inspectable areas):
(i) Physical condition of the site;
(ii) Physical condition of the common areas on the project; and
(iii) Physical condition of the building exteriors.
(2) Definitions. Definitions and application of physical condition
and neighborhood environment factors are:
(i) Physical condition applies to projects over ten years old and
that have not been had substantial rehabilitation in the last 10 years.
(ii) Neighborhood environment applies to projects located where the
immediate surrounding neighborhood (that is a majority of the census
tracts or
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census block groups on all sides of the development) has at least 51%
of families with incomes below the poverty rate as documented by the
latest census data.
(3) Adjustment is for physical condition (project age) neighborhood
environment. HUD will adjust the physical score of a PHA's project
subject to both the physical condition (project age) and neighborhood
environment conditions. The adjustments will be made to the scores
assigned to the applicable inspectable areas so as to reflect the
difficulty in managing. In each instance where the actual physical
condition of the inspectable area (site, common areas, building
exterior) is rated below the maximum score for that area, 1 point will
be added, but not to exceed the maximum number of points available to
that inspectable area.
(i) These extra points will be added to the score of the specific
inspectable area, by project, to which these conditions may apply. A
PHA is required to certify on form HUD-50072, PHAS Certification (which
is available from the Department of Housing and Urban Development, HUD
Custom Service Center, 451 Seventh Street, SW, Room B-102, Washington,
DC 20410; telephone (800) 767-7468), the extent to which the conditions
apply, and to the inspectable area the extra scoring point should be
added.
(ii) A PHA that receives the maximum potential weighted points on
the inspectable areas may not claim any additional adjustments for
physical condition and/or neighborhood environments for the respective
inspectable area(s). In no circumstance shall a PHA's score for the
inspectable area, after any adjustment(s) for physical condition and/or
neighborhood environments, exceed the maximum potential weighted points
assigned to the respective inspectable area(s).
(4) Scattered site projects. The Date of Full Availability (DOFA)
shall apply to scattered site projects, where the age of units and
buildings vary, to determine whether the projects have received
substantial rehabilitation within the past ten years and are eligible
for an adjusted score for the Physical Condition Indicator.
(5) Maintenance of supporting documentation. PHAs shall maintain
supporting documentation to show how they arrived at the determination
that the project's score is subject to adjustment under this section.
(i) If the basis was neighborhood environments, the PHA shall have
on file the appropriate maps showing the census block groups
surrounding the development(s) in question with supporting census data
showing the level of poverty. Projects that fall into this category but
which have already been removed from consideration for other reasons
(permitted exemptions and modifications and/or exclusions) shall not be
counted in this calculation.
(ii) For the physical condition factor, a PHA would have to
maintain documentation showing the age and condition of the projects
and the record of capital improvements, indicating that these
particular projects have not received modernization funds.
(iii) PHAs shall also document that in all cases, projects that
were exempted for other reasons were not included in the calculation.
(c) Thresholds. In order to receive a passing score under the
Physical Condition Indicator, the PHA's score must fall above a minimum
threshold of 18 points or 60% of the available points under this
indicator. Further, in order to receive an overall passing score under
the PHAS, the PHA must receive a passing score on the Physical
Condition Indicator.
Sec. 901.27 Physical condition portion of total PHAS points.
Of the total 100 points available for a PHAS score, a PHA may
receive up to 30 points based on the Physical Condition Indicator.
Subpart C--PHAS Indicator #2: Financial Condition
Sec. 901.30 Financial condition assessment.
(a) Objective. The objective of the Financial Condition Indicator
is to measure the financial condition of a PHA for the purpose of
evaluating whether it has sufficient financial resources and is capable
of managing those financial resources effectively to support the
provision of housing that is decent, safe, sanitary and in good repair.
(b) Financial reporting standards. A PHA's financial condition will
be assessed under this indicator on the basis of the annual financial
report provided in accordance with Sec. 901.33.
Sec. 901.33 Financial reporting requirements.
(a) Annual financial reports. PHAs must provide to HUD, on an
annual basis, such financial information, as required by HUD. The
financial information must be:
(1) Prepared in accordance with Generally Accepted Accounting
Principles (GAAP) as further defined by HUD in supplementary guidance;
(2) Submitted electronically in the electronic format designated by
HUD; and
(3) Submitted in such form and substance prescribed by HUD.
(b) Annual financial report filing dates. The financial information
to be submitted to HUD in accordance with paragraph (a) of this
section, must be submitted to HUD annually, no later than 60 days after
the end of the fiscal year of the reporting period, and as otherwise
provided by law.
(c) Reporting compliance dates. The requirement for compliance with
the financial reporting requirements of this section begins with PHAs
with fiscal years ending September 30, 1999 and thereafter. Unaudited
financial statements will be required 60 days after the PHA's fiscal
year end, and audited financial statements will then be required no
later than 9 months after the PHA's fiscal year end, in accordance with
the Single Audit Act and OMB Circular A-133 (See 24 CFR 84.26). A PHA
with a fiscal year ending September 30, 1999 that elects to submit its
unaudited report earlier than the due date of November 30, 1999 must
submit its financial report as required in this section. On or after
September 30, 1998, but prior to November 30, 1999 (except for a PHA
with its fiscal year ending September 30, 1999), PHAs may submit their
financial reports in accordance with this section.
Sec. 901.35 Financial condition scoring and thresholds.
(a) Scoring. Under PHAS Indicator #2, REAC will calculate a score
that relies on the key components of financial health and management as
well as audit and internal control flags.
(1) The key components of PHAS Indicator #2 include:
(i) Current Ratio--current assets divided by current liabilities;
(ii) Number of Months Expendable Fund Balance--number of months a
PHA can operate on the Expendable Fund Balance without additional
resources; Expendable Fund Balance is the portion of the fund balance
representing expendable available financial resources; unreserved and
undesignated fund balance;
(iii) Days Receivable Outstanding--average number of days tenant
receivables are outstanding;
(iv) Vacancy Loss--loss of potential rent due to vacancy;
(v) Expense Management/Energy Consumption--expense per unit for key
expenses, including energy consumption; and
(vi) Net Income or Loss divided by the Expendable Fund Balance--
measures how the year's operations have affected the PHA's viability.
(2) Additional components. Additional components may be used to
identify circumstances in which there
[[Page 35686]]
exists the possibility of higher risk of waste, fraud and abuse. These
components will be used to detect fraud and will be used to generate
``flags'' that will signal field staff, Enforcement Center staff, or
fraud investigators to take appropriate action. These components will
primarily relate to financial management, but may also be used to
provide a PHA with benchmarking information to allow the PHA to measure
its own performance against its peers.
(b) Thresholds. In order to receive a passing score under the
Financial Condition Indicator, the PHA's score must fall above a
minimum threshold of 18 points or 60% of the available points under
this indicator. Further, in order to receive an overall passing score
under the PHAS, the PHA must receive a passing score on the Financial
Condition Indicator.
Sec. 901.37 Financial condition portion of total PHAS points.
Of the total 100 points available for a PHAS score, a PHA may
receive up to 30 points based on the Financial Condition Indicator.
Subpart D--PHAS Indicator #3: Management Operations
Sec. 901.40 Management operations assessment.
(a) Objective. The objective of the Management Operations Indicator
is to measure certain key management operations and responsibilities of
a PHA for the purpose of assessing the PHA's management operations
capabilities.
(b) Management assessment. PHAS Indicator #3 pertaining to
Management Operations incorporates the majority of the statutory
indicators of section 6(j) of the U.S. Housing Act of 1937, and an
additional non-statutory indicator (security) as provided in
Sec. 901.43.
Sec. 901.43 Management operations performance standards.
(a) Management operations indicators. The following indicators will
be used to assess a PHA's management operations:
(1) Management Indicator #1--Vacancy rate and unit turnaround time.
This management indicator examines the vacancy rate, a PHA's progress
in reducing vacancies, and unit turnaround time. Implicit in this
management indicator is the adequacy of the PHA's system to track the
duration of vacancies and unit turnaround, including down time, make
ready time, and lease up time.
(2) Management Indicator #2--Modernization. This management
indicator is automatically excluded if a PHA does not have a
modernization program. This management indicator examines the amount of
unexpended funds over three Federal fiscal years (FFY) old, the
timeliness of fund obligation, the adequacy of contract administration,
the quality of the physical work, and the adequacy of budget controls.
All components of this management indicator #2 apply to the
Comprehensive Grant Program (CGP), the Comprehensive Improvement
Assistance Program (CIAP), the HOPE VI assistance, vacancy reduction,
and lead based paint risk assessment funding (1992-1995), and any
successor program(s) to the CGP or the CIAP.
(3) Management Indicator #3--Rents uncollected. This management
indicator examines the PHA's ability to collect dwelling rents owed by
residents in possession during the immediate past fiscal year by
measuring the balance of dwelling rents uncollected as a percentage of
total dwelling rents to be collected.
(4) Management Indicator #4--Work orders. This management indicator
examines the time it takes to complete or abate emergency work orders,
the average number of days non-emergency work order were active, and
any progress a PHA has made during the preceding three years to reduce
the period of time non-emergency maintenance work orders were active.
Implicit in this management indicator is the adequacy of the PHA's work
order system in terms of how a PHA accounts for and controls its work
orders, and its timeliness in preparing/issuing work orders.
(5) Management Indicator #5--PHA annual inspection of units and
systems. This management indicator examines the percentage of units
that a PHA inspects on an annual basis in order to determine short-term
maintenance needs and long-term modernization needs. This management
indicator requires a PHA's inspection to utilize the HUD uniform
physical condition standards set forth in subpart B of this part. All
occupied units are required to be inspected.
(6) Management Indicator #6--Security. This management indicator
evaluates the PHA's performance in tracking crime related problems in
their developments, reporting incidence of crime to local law
enforcement agencies, the adoption and implementation, consistent with
section 9 of the Housing Opportunity Program Extension Act of 1996
(One-Strike and You're Out) (42 U.S.C. 1437d(r)), of applicant
screening and resident eviction policies and procedures, and, as
applicable, PHA performance under any HUD drug prevention or crime
reduction grant(s). A PHA may receive credit for performance under non-
HUD funded programs if it provides auditable financial and statistical
documentation for these programs. A PHA with fewer than 250 units will
not be assessed under this management indicator unless it provides
auditable financial and statistical documentation for these programs.
(b) Reporting on performance under the Management Operations
Indicator. Each PHA will provide to HUD a certification on its
performance under each of the management indicators in paragraph (a) of
this section. The certifications shall comply with the requirements of
Sec. 901.60.
Sec. 901.45 Management operations scoring and thresholds.
(a) Scoring. Under PHAS Indicator #3, REAC will calculate a score
of the overall management operations of a PHA which reflects weights
based on the relative importance of the individual management
indicators.
(b) Thresholds. In order to receive a passing score under the
Management Operations Indicator, the PHA's score must fall above a
minimum threshold of 18 points or 60% of the available points under
this PHAS Indicator #3. Further, in order to receive an overall passing
score under the PHAS, the PHA must receive a passing score on the
Management Operations Indicator.
Sec. 901.47 Management operations portion of total PHAS points.
Of the total 100 points available for a PHAS score, a PHA may
receive up to 30 points based on the Management Operations Indicator.
Subpart E--PHAS Indicator #4: Resident Service and Satisfaction
Sec. 901.50 Resident service and satisfaction assessment.
(a) Objective. The objective of the Resident Service and
Satisfaction Indicator is to measure the level of resident satisfaction
with living conditions at the PHA.
(b) Reporting information on resident service and satisfaction. The
assessment will be performed through the use of a resident service and
satisfaction survey to be administered by the PHA in accordance with a
methodology prescribed by HUD. The PHA will be responsible for
maintaining original copies of completed survey data, subject to
independent audit, and for developing a follow-up plan to address
issues resulting from the survey.
[[Page 35687]]
Sec. 901.53 Resident service and satisfaction scoring and thresholds.
(a) Scoring. Under PHAS Indicator #4, REAC will calculate a score
that includes three components of the survey process. One component
will be the score of the survey results. The survey content will focus
on resident evaluation of overall living conditions, to include topics
such as: resident organizations; program activities; surrounding
environment; management responsiveness; safety; involvement; resources;
and communication. The second component will be a score based on the
level of implementation and follow-up or corrective actions based on
the results of the survey. The final component is verification that the
data collection, tabulation and submission was conducted in a manner
consistent with guidance provided by HUD.
(b) Thresholds. A PHA will not receive any points under this PHAS
Indicator if the survey is not conducted in accordance with a HUD
prescribed methodology or the survey results are determined to be
altered by the PHA. A PHA will receive a passing score on the Resident
Service and Satisfaction Indicator if it receives at least 6 points, or
60% of the available points under this PHAS Indicator #4.
Sec. 901.55 Resident service and satisfaction portion of total PHAS
points.
Of the total 100 points available for a PHAS score, a PHA may
receive up to 10 points based on the Resident Service and Satisfaction
Indicator.
Subpart F--PHAS Scoring
Sec. 901.60 Data collection.
(a) Fiscal Year Reporting Period--limitation on changes after PHAS
effectiveness. An assessed fiscal year for purposes of the PHAS
corresponds to a PHA's fiscal year. To allow for a period of consistent
assessments to refine and make necessary adjustments to the PHAS, a PHA
is not permitted to change its fiscal year for the first three full
fiscal years following the effective date of this part.
(b) Physical Condition information. Information necessary to
conduct the physical condition assessment under subpart B of this part
will be obtained from HUD inspectors during the fiscal year being
scored through electronic transmission of the data.
(c) Financial Condition information. Year-end financial information
to conduct the assessment under subpart C, Financial Condition, of this
part will be submitted by a PHA through electronic transmission of the
data to HUD not later than 60 days after the end of the PHA's fiscal
year. An audited report of the year-end financial information is due
not later than 9 months after the end of the PHA's fiscal year.
(d) Management Operations and Resident Service and Satisfaction
Information. A PHA shall provide certification to HUD as to data
required under subpart D, Management Operations, of this part and
subpart E, Resident Services Satisfaction, of this part not later than
60 days after the end of the PHA's fiscal year.
(1) The certification shall be approved by PHA Board resolution,
and signed and attested to by the Executive Director.
(2) PHAs shall maintain documentation for three years verifying all
certified indicators for HUD on-site review.
(e) Failure to submit data by due date. If a PHA without a finding
of good cause by HUD does not submit its certifications or year-end
financial information, required by this part, or submits its
certifications or year-end financial information more than 15 days past
the due date, appropriate sanctions may be imposed, including a
reduction of 1 point in the total PHAS score for each 15 day period
past the due date. If all certifications or year-end financial
information are not received within 90 days past the due date, the PHA
will receive a presumptive rating of failure in all of the PHAS
indicators and components certified to, which shall result in troubled
and mod-troubled designations.
(f) Verification of information submitted. (1) A PHA's
certifications, year-end financial information and any supporting
documentation are subject to verification by HUD at any time.
Appropriate sanctions for intentional false certification will be
imposed, including civil penalties, suspension or debarment of the
signatories, the loss of high performer designation, a lower score
under individual PHAS indicators and a lower overall PHAS score.
(2) A PHA that cannot provide justifying documentation to REAC, or
to the PHA's independent auditor for the assessment under any
indicator(s) or component(s) shall receive a score of 0 for the
relevant indicator(s) or component(s), and its overall PHAS score shall
be lowered.
(3) A PHA's PHAS score under individual indicators or components,
or its overall PHAS score, may be changed by HUD pursuant to the data
included in the independent audit report, or obtained through such
sources as HUD on-site review, investigations by HUD's Office of Fair
Housing and Equal Opportunity, or reinspection by REAC, as applicable.
(g) Management operations assumed by an RMC. For those developments
of a PHA where management operations have been assumed by an RMC, the
PHA's certification shall identify the development and the management
functions assumed by the RMC. The PHA shall obtain a certified
questionnaire from the RMC as to the management functions undertaken by
the RMC. Following verification of the RMC's certification, the PHA
shall submit the RMC's certified questionnaire along with its own. The
RMC's certification shall be approved by its Executive Director or
Chief Executive Officer or responsible party.
Sec. 901.63 PHAS scoring.
(a) Issuance of score by HUD. An overall PHAS score will be issued
by REAC for each PHA 60 to 90 days after the end of the PHA's fiscal
year.
(b) Computing the PHAS score. Each of the four PHAS indicators in
this part will be scored individually, and then will be used to
determine an overall score for the PHA. Components within each of the
four PHAS indicators will be scored individually, and the scores for
the components will be used to determine a single score for each of the
PHAS indicators.
(c) Adjustments to the PHAS score. Adjustments to the score may be
made after a PHA's audit report for the year being assessed is
transmitted to HUD. If significant differences (as defined in GAAP
guidance materials provided to PHAs) are noted between unaudited and
audited results, a PHA's PHAS score will be raised or lowered, as
applicable, in accordance with the audited results.
(d) Posting and publication of PHAS scores. Each PHA shall post a
notice of its final PHAS score and status in appropriate conspicuous
and accessible locations in its offices within two weeks of receipt of
its final score and status. In addition, HUD will publish every PHA's
score and status in the Federal Register.
Sec. 901.67 Score and designation status.
(a) Designation status corresponding to score. A PHA will be scored
with a corresponding designation of status as follows:
(1) High Performer. A PHA that achieves a score of at least 60% of
the points available under each of the four PHAS Indicators (addressed
in subparts B through E of this part) and achieves an overall PHAS
score of 90% or greater shall be designated a high performer. A PHA
shall not be designated a high performer if it scores below the
threshold established for any indicator.
[[Page 35688]]
High performers will be afforded incentives that include relief from
reporting and other requirements, as described in Sec. 901.71.
(2) Standard Performer. A PHA that achieves a total PHAS score of
less than 90% but not less than 60% shall be designated a standard
performer. All standard performers must correct reported deficiencies.
A standard performer that receives a score less than 70% but not less
than 60% shall be subject to other oversight, as described in
Sec. 901.73. A PHA that achieves a score of less than 60% of the total
points available under PHAS Indicators 1, 2 or 3 shall not be
designated a standard performer, but shall be designated a troubled
performer, as provided in paragraph (a)(3) of this section.
(3) Troubled Performer. A PHA that achieves a total PHAS score of
less than 60%, or achieves a score of less than 60% of the total points
available under PHAS Indicators 1, 2, or 3, shall be designated as
troubled, and referred to the TARC as described in Sec. 901.75. In
accordance with section 6(j)(2) of the 1937 Act, a PHA that receives
less than 60% of the maximum calculation for the modernization
indicator under PHAS Indicator #3 (Management Operations, subpart D of
this part) may be subject to the following sanctions: under the
Comprehensive Grant Program to a reduction of formula allocation or
other sanctions (24 CFR part 968, subpart C); under the Comprehensive
Improvement Assistance Program to disapproval of new funding or other
sanctions (24 CFR part 968, subpart B); or disapproval of funding under
the HOPE VI Program.
(b) Exceptional circumstances of high performer or standard
performer--(1) Independent reviews, rescission of incentives or status.
In exceptional circumstances, even though a PHA has received
designation as a high performer or standard performer, the HUB/Program
Center may conduct any review as necessary, and deny or rescind
incentives or high performer or standard performer status in the case
of a PHA that:
(i) Is operating under a special agreement with HUD;
(ii) Is involved in litigation that bears directly upon the
management of a PHA;
(iii) Is operating under a court order;
(iv) Demonstrates substantial evidence of fraud or misconduct,
including evidence that the PHA's certification of indicators is not
supported by the facts, resulting from such sources as an independent
review, routine reports and reviews, an Office of Inspector General
investigation/audit, an independent auditor's audit or an investigation
by any appropriate legal authority; or
(v) Demonstrates substantial noncompliance in one or more areas
(including areas not assessed by the PHAS). Areas of substantial
noncompliance include, but are not limited to, noncompliance with
statutes (e.g., Fair Housing and Equal Opportunity statutes);
regulations (e.g., 24 CFR part 85); or the Annual Contributions
Contract (ACC) (e.g., the ACC, form HUD-53012A, Section 4, Mission of
the PHA). Substantial noncompliance would cast doubt on the PHA's
capacity to preserve and protect its public housing developments and
operate them consistent with Federal law and regulations.
(2) When a HUB/Program Center acts for any of the reasons stated in
paragraph (b)(1) of this section, the HUB/Program Center will send
written notification to the PHA with a specific explanation of the
reasons. An informational copy will be forwarded to the Assistant
Secretary for Public and Indian Housing.
Sec. 901.69 PHA right of petition and appeal.
(a) Appeal of troubled designation and petition for removal. As
permitted under section 6(j)(2)(A)(iii), a PHA may:
(1) Appeal designation as a troubled agency (including designation
as troubled with respect to the modernization program);
(2) Petition for removal of such designation; and
(3) Appeal any refusal to remove such designation.
(b) Appeal process. The appeal shall be submitted by a PHA to the
REAC within 30 days of a PHA's receipt of its score, and shall include
supporting documentation and justification of the reasons for the
appeal. Appeals submitted to the REAC without appropriate documentation
will not be considered and will be returned to the PHA.
(c) Consideration of appeal by REAC. Upon receipt of an appeal from
a PHA, the REAC will convene a Board of Review (the Board) to evaluate
the appeal and its merits for the purpose of determining whether a
reassessment of the PHA is warranted. Board membership will be
comprised of a representative from REAC, the Office of Public and
Indian Housing, and such other office or representative as the
Secretary may designate (excluding, however, representation from the
Troubled Agency Recovery Center). For purposes of reassessment, the
REAC will schedule a reinspection and/or acquire audit services, as
determined by the Board, and a new score will be issued, if
appropriate.
(d) Final appeal decisions. HUD will make final decisions of
appeals within 30 days of receipt of an appeal, and may extend this
period an additional 30 days if further inquiry is necessary. Failure
by a PHA to submit requested information within the 30-day period or
any additional period granted by HUD is grounds for denial of an
appeal.
Subpart G--PHAS Incentives and Remedies
Sec. 901.71 Incentives for high performers.
(a) Incentives for high-performer PHAs. A PHA that is designated a
high performer will be eligible for the following incentives:
(1) Relief from specific HUD requirements. A PHA that is designated
high performer will be relieved of specific HUD requirements (for
example, fewer reviews and less monitoring), effective upon
notification of high performer designation.
(2) Public recognition. High-performer PHAs and RMCs that receive a
score of at least 90% on each of the indicators for which they are
assessed, will receive a Certificate of Commendation from HUD as well
as special public recognition, as provided by the HUB/Program Center.
(3) Bonus points in funding competitions. A high-performer PHA will
be eligible for bonus points in HUD's funding competitions, where such
bonus points are not restricted by statute or regulation governing the
funding program.
(b) Compliance with applicable Federal laws and regulations. Relief
from any standard procedural requirement that may be provided under
this section, does not mean that a PHA is relieved from compliance with
the provisions of Federal law and regulations or other handbook
requirements. For example, although a high performer or standard
performer may be relieved of requirements for prior HUD approval for
certain types of contracts for services, the PHA must still comply with
all other Federal and State requirements that remain in effect, such as
those for competitive bidding or competitive negotiation (see 24 CFR
85.36).
(c) Audits and reviews not relieved by designation. A PHA
designated as a high performer or standard performer remains subject
to:
(1) Regular independent auditor (IA) audits.
(2) Office of Inspector General (OIG) audits or investigations will
continue to
[[Page 35689]]
be conducted as circumstances may warrant.
(d) HUB/Program Center to impose requirements. The HUB/Program
Center will have discretion to subject a PHA to any requirement that
would otherwise be omitted under the specified relief, in accordance
with Sec. 901.67(b)(1).
Sec. 901.73 Referral to an Area HUB/Program Center.
(a) Standard performers will be referred to the HUB/Program Center
for appropriate action. A standard performer that receives a total
score of less than 70% but not less than 60% shall be required to
submit an Improvement Plan to eliminate deficiencies in the PHA's
performance. A standard performer that receives a score of not less
than 70% may be required, at the discretion of the appropriate area
HUB/Program Center, to submit an Improvement Plan to address specific
deficiencies.
(b) Submission of an Improvement Plan. (1) Within 30 days after a
PHAS score is issued, a standard performer with a score less than 70%
is required to submit an Improvement Plan, which includes the
information stated in paragraph (d) of this section and determined
acceptable by the HUB/Program Center, for each indicator and/or
component identified as deficient as well as other performance and/or
compliance deficiencies as may be identified as a result of an on-site
review of the PHA's operations. A RMC that is required to submit an
Improvement Plan must develop the plan in consultation with its PHA and
submit the Plan to the HUB/Program Center through its PHA.
(2) The HUB/Program Center may require, on a risk management basis,
a standard performer with a score of not less than 70% to submit within
30 days after receipt of its PHAS score an Improvement Plan, which
includes the information stated in paragraph (d) of this section, for
each indicator and/or component of a PHAS indicator identified as
deficient.
(c) Correction of deficiencies--(1) Time period for correction.
After a PHA's receipt of its PHAS score and designation as a standard
performer or, in the case of an RMC, notification of its score from a
PHA, a PHA or RMC shall correct any deficiency indicated in its
assessment within 90 days, or within such period as provided in the HUD
approved Improvement Plan if an Improvement Plan is required.
(2) Notification and report to HUB/Program Center. A PHA shall
notify the HUB/Program Center of its action to correct a deficiency. A
PHA shall also forward to the HUB/Program Center an RMC's report of its
action to correct a deficiency.
(d) Improvement Plan. An Improvement Plan shall:
(1) Identify baseline data, which should be raw data but may be the
PHA's score under each individual PHAS indicator and/or component which
was identified as a deficiency;
(2) Describe the procedures that will be followed to correct each
deficiency;
(3) Provide a timetable for the correction of each deficiency; and
(4) Provide for or facilitate technical assistance to the PHA.
(e) Determination of acceptability of Improvement Plan (1) The HUB/
Program Center will approve or deny a PHA's (or RMC's Improvement Plan
submitted to the HUB/Program Center through the RMC's PHA), and notify
the PHA of its decision. A PHA that submits an RMC's Improvement Plan
must notify the RMC in writing, immediately upon receipt of the HUB/
Program Center notification, of the HUB/Program Center approval or
denial of the RMC's Improvement Plan.
(2) An Improvement Plan that is not approved will be returned to
the PHA with recommendations from the HUB/Program Center for revising
the Improvement Plan to obtain approval.
(f) Submission of revised Improvement Plan. A revised Improvement
Plan shall be resubmitted by the PHA within 30 calendar days of its
receipt of the HUB/Program Center recommendations.
(g) Failure to submit acceptable Improvement Plan. If a PHA fails
to submit an acceptable Improvement Plan, or to correct deficiencies
within the time specified in an Improvement Plan or such extensions as
may be granted by HUD, the HUB/Program Center will notify the PHA of
its noncompliance. The PHA (or the RMC through the PHA) will provide
the HUB/Program Center its reasons for lack of progress in submitting
or carrying out the Improvement Plan within 30 calendar days of its
receipt of the noncompliance notification. HUD will advise the PHA as
to the acceptability of its reasons for lack of progress and, if
unacceptable, will notify the PHA that it will be referred to the TARC
for remedial actions or such actions as the TARC may determine
appropriate in accordance with the provisions of the ACC, this part and
other HUD regulations.
Sec. 901.75 Referral to a TARC.
Upon designation of a PHA as troubled, in accordance with the
requirements of section 6(j)(2)(B) of the 1937 Act and in accordance
with this part, the REAC shall refer each troubled PHA to the PHA's
area TARC for remedial action. The actions to be taken by the TARC and
the PHA shall be as follows:
(a) Recovery plan and MOA. Within 30 days of notification of the
designation of a troubled PHA within its area, the appropriate TARC
will deploy an on-site team to develop a Recovery Plan. The Recovery
Plan shall include recommendations for improvements to correct or
eliminate deficiencies that resulted in a failing PHAS score and
designation as troubled. The Recovery Plan will incorporate a
memorandum of agreement (MOA) as described in paragraph (c) of this
section.
(b) PHA review of recovery plan and MOA. The PHA will have 10 days
to review the recovery plan and the MOA. During this 10-day period, the
PHA shall resolve any claimed discrepancies in the plan with its area
TARC, and discuss any recommended changes and target dates for
improvement to be incorporated in the final MOA. Unless the time period
is extended by the TARC, the MOA is to be executed 15 days following
issuance of the preliminary MOA.
(c) Memorandum of Agreement (MOA). The final MOA is a binding
contractual agreement between HUD and a PHA. The scope of the MOA may
vary depending upon the extent of the problems present in the PHA, but
shall include:
(1) Baseline data, which should be raw data but may be the PHA's
score in each of the PHAS indicators or components identified as a
deficiency;
(2) Annual and quarterly performance targets, which may be the
attainment of a higher score within an indicator that is a problem, or
the description of a goal to be achieved;
(3) Strategies to be used by the PHA in achieving the performance
targets within the time period of the MOA;
(4) Technical assistance to the PHA provided or facilitated by HUD,
for example, the training of PHA employees in specific management areas
or assistance in the resolution of outstanding HUD monitoring findings;
(5) The PHA's commitment to take all actions within its control to
achieve the targets;
(6) Incentives for meeting such targets, such as the removal of
troubled or mod-troubled designation and Departmental recognition for
the most improved PHAs;
(7) The consequences of failing to meet the targets, including, but
not limited to, such sanctions as the imposition of budget and
management
[[Page 35690]]
controls by the TARC, declaration of substantial default and subsequent
actions, including referral to the Enforcement Center for judicial
appointment of a receiver, limited denial of participation, suspension,
debarment, or other actions deemed appropriate by the Enforcement
Center; and
(8) A description of the involvement of local public and private
entities, including PHA resident leaders, in carrying out the agreement
and rectifying the PHA's problems. A PHA shall have primary
responsibility for obtaining active local public and private entity
participation, including the involvement of public housing resident
leaders, in assisting PHA improvement efforts. Local public and private
entity participation should be premised upon the participant's
knowledge of the PHA, ability to contribute technical expertise with
regard to the PHA's specific problem areas and authority to make
preliminary/tentative commitments of support, financial or otherwise.
(d) Maximum recovery period. Unless extended by the TARC and
documented in the MOA, the maximum recovery period for a troubled PHA
is the first full fiscal year following execution of the MOA.
(e) Parties to the MOA. An MOA shall be executed by:
(1) The PHA Board Chairperson and accompanied by a Board
resolution, or a receiver (pursuant to a court ordered receivership
agreement, if applicable) or other AME acting in lieu of the PHA Board;
(2) The PHA Executive Director, or a designated receiver (pursuant
to a court ordered receivership agreement, if applicable) or other AME-
designated Chief Executive Officer;
(3) The Director of the area TARC; and
(4) The appointing authorities of the Board of Commissioners,
unless exempted by the HUB/Program Center.
(f) Involvement of resident leadership in the MOA. HUD encourages
the inclusion of the resident leadership in the execution of the MOA.
(g) Failure to execute MOA or make substantial improvement under
MOA.
(1) If a troubled PHA does not execute an MOA within the period
provided in paragraph (b) of this section, or the TARC determines that
the PHA does not show a substantial improvement toward a passing PHAS
score following the issuance of the failing PHAS score by the REAC, the
TARC shall refer the PHA to the Enforcement Center, which shall
initiate proceedings for judicial appointment of a receiver, and other
sanctions as may be appropriate. For purposes of this paragraph (g),
substantial improvement is defined as 50% of the points needed to
achieve a passing score.
(2) The following example illustrates the provisions of paragraph
(g)(1) of this section:
Example. A PHA receives a score of 50; 60 is a passing score.
The PHA is referred to the TARC. Within one year after the score is
issued to the PHA, the PHA must achieve a five point increase to
continue recovery efforts in the TARC. If the PHA fails to achieve
the 5 point increase, the PHA will be referred to the Enforcement
Center.
Sec. 901.77 Referral to the Enforcement Center.
Failure of a troubled PHA to execute or meet the requirements of a
memorandum of agreement in accordance with Sec. 901.75 constitutes a
substantial default in accordance with Sec. 901.79 and shall result in
referral to the Enforcement Center. The Enforcement Center is
officially responsible for recommending to the Assistant Secretary for
Public and Indian Housing that a troubled performer PHA be declared in
substantial default. The Enforcement Center shall initiate the judicial
appointment of a receiver or the interventions provided in Sec. 901.83;
and may initiate limited denial of participation, suspension,
debarment, the imposition of other sanctions available to the
Enforcement Center including referral to the appropriate Federal
government agencies or offices for the imposition of civil or criminal
sanctions.
Sec. 901.79 Substantial default.
(a) Events or conditions that constitute substantial default. The
following events or conditions shall constitute substantial default.
(1) HUD may determine that events have occurred or that conditions
exist that constitute a substantial default if a PHA is determined to
be in violation of Federal statutes, including but not limited to, the
1937 Act, or in violation of regulations implementing such statutory
requirements, whether or not such violations would constitute a
substantial breach or default under provisions of the relevant ACC.
(2) HUD may determine that a PHA's failure to satisfy the terms of
a Memorandum of Agreement entered into in accordance with Sec. 901.75 ,
or to make reasonable progress to execute or meet requirements included
in a Memorandum of Agreement, are events or conditions that constitute
a substantial default.
(3) HUD shall determine that a PHA that has been designated as
troubled and does not show substantial improvement, as defined in
Sec. 901.75(h), in its PHAS score in one year following issuance of the
failed score is in substantial default;
(4) HUD may declare a substantial breach or default under the ACC,
in accordance with its terms and conditions.
(5) HUD may determine that the events or conditions constituting a
substantial default are limited to a portion of a PHA's public housing
operations, designated either by program, by operational area, or by
development(s).
(b) Notification of substantial default and response. If
information from an annual assessment or audit, or any other credible
source indicates that there may exist events or conditions constituting
a substantial breach or default, HUD shall advise a PHA of such
information. HUD is authorized to protect the confidentiality of the
source(s) of such information in appropriate cases. Before taking
further action, except in cases of apparent fraud or criminality, and/
or in cases where emergency conditions exist posing an imminent threat
to the life, health, or safety of residents, HUD shall afford the PHA a
timely opportunity to initiate corrective action, including the
remedies and procedures available to PHAs designated as ``troubled
PHAs,'' or to demonstrate that the information is incorrect.
(1) Form of notification. Upon a determination or finding that
events have occurred or that conditions exist that constitute a
substantial default, the Assistant Secretary shall provide written
notification of such determination or finding to the affected PHA.
Written notification shall be transmitted to the Executive Director,
the Chairperson of the Board, and the appointing authority(ies) of the
Board, and shall include, but are not limited to:
(i) Identification of the specific covenants, conditions, and/or
agreements under which the PHA is determined to be in noncompliance;
(ii) Identification of the specific events, occurrences, or
conditions that constitute the determined noncompliance;
(iii) Citation of the communications and opportunities to effect
remedies afforded pursuant to paragraph (a) of this section;
(iv) Notification to the PHA of a specific time period, to be not
less than 10 calendar days, except in cases of apparent fraud or other
criminal behavior, and/or under emergency conditions as described in
paragraph (a) of this section, nor more than 30 calendar days, during
which the PHA shall be required to demonstrate that the
[[Page 35691]]
determination or finding is not substantively accurate; and
(v) Notification to the PHA that, absent a satisfactory response in
accordance with paragraph (b) of this section, HUD will refer the PHA
to the Enforcement Center, using any or all of the interventions
specified in Sec. 901.83, and determined to be appropriate to remedy
the noncompliance, citing Sec. 901.83, and any additional authority for
such action.
(2) Receipt of notification. Upon receipt of the notification
described in paragraph (b)(1) of this section, the PHA must
demonstrate, within the time period permitted in the notification,
factual error in HUD's description of events, occurrences, or
conditions, or show that the events, occurrences, or conditions do not
constitute noncompliance with the statute, regulation, or covenants or
conditions to which the PHA is cited in the notification.
(3) Waiver of notification. A PHA may waive, in writing, receipt of
explicit notice from HUD as to a finding of substantial default, and
voluntarily consent to a determination of substantial default. The PHA
must concur on the existence of substantial default conditions which
can be remedied by technical assistance, and the PHA shall provide HUD
with written assurances that all deficiencies will be addressed by the
PHA. HUD will then immediately proceed with interventions as provided
in Sec. 901.83.
(4) Emergency situations. In any situation determined to be an
emergency, or in any case where the events or conditions precipitating
the intervention are determined to be the result of criminal or
fraudulent activity, the Secretary or the Secretary's designee is
authorized to intercede to protect the residents' and HUD's interests
by causing the proposed interventions to be implemented without further
appeals or delays.
Sec. 901.83 Interventions.
(a) Interventions under this part (including an assumption of
operating responsibilities) may be limited to one or more of a PHA's
specific operational areas (e.g., maintenance, modernization,
occupancy, or financial management) or to a single development or a
group of developments. Under this limited intervention procedure, HUD
could select, or participate in the selection of, an AME to assume
management responsibility for a specific development, a group of
developments in a geographical area, or a specific operational area,
while permitting the PHA to retain responsibility for all programs,
operational areas, and developments not so designated.
(b) Upon determining that a substantial default exists under this
part, HUD may initiate any interventions deemed necessary to maintain
decent, safe, and sanitary dwellings for residents. Such intervention
may include:
(1) Providing technical assistance for existing PHA management
staff;
(2) Selecting or participating in the selection of an AME to
provide technical assistance or other services up to and including
contract management of all or any part of the public housing
developments administered by a PHA;
(3) Assuming possession and operational responsibility for all or
any part of the public housing administered by a PHA;
(4) Entering into agreements, arrangements, and/or contracts for or
on behalf of a PHA, or acting as the PHA, and expending or authorizing
the expenditure of PHA funds, irrespective of the source of such funds,
to remedy the events or conditions constituting the substantial
default;
(5) The provision of intervention and assistance necessary to
remedy emergency conditions;
(6) After the solicitation of competitive proposals, select an
administrative receiver to manage and operate all or part of the PHA's
housing; and
(7) Petition for the appointment of a receiver to any District
Court of the United States or any court of the State in which real
property of the PHA is located.
(c) The receiver is to conduct the affairs of the PHA in a manner
consistent with statutory, regulatory, and contractual obligations of
the PHA and in accordance with such additional terms and conditions
that the court may provide.
(d) The appointment of a receiver pursuant to this section may be
terminated upon the petition to the court by the PHA, the receiver, or
HUD, and upon a finding by the court that the circumstances or
conditions that constituted substantial default by the PHA no longer
exist and that the operations of the PHA will be conducted in
accordance with applicable statutes and regulations, and contractual
covenants and conditions to which the PHA and its public housing
programs are subject.
(e) HUD may take the actions described in this part sequentially or
simultaneously in any combination.
Sec. 901.85 Resident petitions for remedial action.
The total number of residents that petition HUD to take remedial
action pursuant to sections 6(j)(3)(A)(i) through (iv) of the 1937 Act
must equal at least 20 percent of the residents, or the petition must
be from an organization or organizations of residents whose membership
must equal at least 20 percent of the PHA's residents.
Appendix A to Part 901--Areas and Items To Be Inspected
AREA: Site
Items
Fencing and Retaining Walls
Grounds
Lighting
Mail Boxes/Project Signs
Market Appeal
Parking Lots/Driveways
Play Areas and Equipment
Refuse Disposal
Roads
Storm Drainage
Walkways
AREA: Building Exterior
Items
Doors
Fire Escapes
Foundations
Lighting
Roofs
Walls
Windows
AREA: Building Systems
Items
Domestic Water
Electrical System
Elevators
Emergency Power
Fire Protection
HVAC
Sanitary System
AREA: Dwelling Unit
Items
Bathroom
Call-for-Aid
Ceiling
Doors
Electrical System
Floors
Hot Water Heater
HVAC System
Kitchen
Lighting
Outlets/Switches
Patio/Porch/Balcony
Smoke Detector
Stairs
Walls
Windows
AREA: Common Areas
Items
Basement/Garage/Carport
Closets/Utility/Mechanical
Community Room
Day Care
[[Page 35692]]
Halls/Corridors/Stairs
Kitchen
Laundry Room
Lobby
Office
Other Community Spaces
Patio/Porch/Balcony
Pools and Related Structures
Restroom
Storage
Trash Collection Areas
AREA: Health and Safety
Items
Air Quality
Electrical Hazards
Elevator
Emergency/Fire Exits
Fire Escapes
Flammable Materials
Garbage and Debris
Ground Fault Interrupters
Handrails
Hazards
Hot Water Heater
Infestation
Lead Paint
Pools and Related Structures
Smoke Detectors
Dated: June 5, 1998.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
Donald J. LaVoy,
Director, Real Estate Assessment Center.
[FR Doc. 98-17302 Filed 6-29-98; 8:45 am]
BILLING CODE 4210-33-P
