[Federal Register Volume 73, Number 163 (Thursday, August 21, 2008)]
[Proposed Rules]
[Pages 49544-49587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18753]
[[Page 49543]]
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Part II
Department of Housing and Urban Development
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24 CFR Parts 901, 902, and 907
Public Housing Evaluation and Oversight: Changes to the Public Housing
Assessment System (PHAS) and Determining and Remedying Substantial
Default; Asset Management Transition Year Information and Uniform
Financial Reporting Standards (UFRS) Information; Proposed Rule and
Notice
Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 /
Proposed Rules
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 901, 902 and 907
[Docket No. FR-5094-P-01]
RIN 2577-AC68
Public Housing Evaluation and Oversight: Changes to the Public
Housing Assessment System (PHAS) and Determining and Remedying
Substantial Default
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would make two sets of amendments to
improve evaluation and oversight of public housing agencies (PHAs).
First, this proposed rule would amend HUD's Public Housing Assessment
System (PHAS) regulations for the purposes of: Consolidating the
regulations governing assessment of a PHA's program in one part of the
Code of Federal Regulations (CFR); revising certain PHAS regulations
based on the Department's experience with PHAS since it was established
as the new system for evaluating a PHA in 1998; and updating certain
PHAS procedures to reflect recent changes in public housing operations
from conversion by PHAs to asset management, including updating and
revising the PHAS scoring. PHAS is designed to improve the delivery of
services in public housing and to enhance trust in the public housing
system among PHAs, public housing residents, and the general public, by
providing a management tool for effectively and fairly measuring the
performance of a PHA in essential housing operations of its projects,
based on standards that are uniform and verifiable. The changes
proposed by this rule are intended to enhance the efficiency and
utility of PHAS.
Second, the proposed rule would establish, in a separate part of
the CFR, the regulations that would specify the actions or inactions by
which a PHA would be determined to be in substantial default, the
procedures for a PHA to respond to such a determination or finding, and
the sanctions available to HUD to address and remedy substantial
default by a PHA. To date, such regulations have been included in the
PHAS regulations, but the actions or inactions that constitute
substantial default are not limited to failure to comply with PHAS
regulations. Accordingly, the proposed regulations applicable to
substantial default are more appropriately codified in a separate CFR
part.
This proposed rule is also publishing the scoring processes for
each of the PHAS scoring categories as appendices to part 902. Although
these scoring processes are proposed as appendices, it is also possible
that, at the final rule stage, they will be published as separate
notices as has been HUD's practice to this point.
DATES: Comment Due Date: October 20, 2008.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 Seventh
Street, SW., Room 10276, Washington, DC 20410-0500. Communications must
refer to the above docket number and title. There are two methods for
submitting public comments. All submissions must refer to the above
docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 Seventh Street, SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
www.regulations.gov. HUD strongly encourages commenters to submit
comments electronically. Electronic submission of comments allows the
commenter maximum time to prepare and submit a comment, ensures timely
receipt by HUD, and enables HUD to make them immediately available to
the public. Comments submitted electronically through the
www.regulations.gov Web site can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-402-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number via TTY by calling the Federal Information Relay
Service, toll-free, at 800-877-8339. Copies of all comments submitted
are available for inspection and downloading at www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Contact Wanda Funk, Senior Advisor,
Department of Housing and Urban Development, Office of Public and
Indian Housing, Real Estate Assessment Center (REAC), 550 12th Street,
SW., Suite 100, Washington, DC 20410; or the REAC Technical Assistance
Center at 888-245-4860 (this is a toll-free number). Persons with
hearing or speech impairments may access this number through TTY by
calling the toll-free Federal Information Relay Service at 800-877-
8339. Additional information is available from the REAC Internet site
at http://www.hud.gov/offices/reac/.
SUPPLEMENTARY INFORMATION:
I. Changes to the PHAS
A. Background on PHAS
PHAS was established by a final rule published on September 1, 1998
(63 FR 46596). Prior to 1998, a PHA was evaluated by HUD with respect
only to its management operations. PHAS expanded assessment of a PHA to
four key areas of a PHA's operations: (1) The physical condition of the
PHA's properties; (2) the PHA's financial condition; (3) the PHA's
management operations; and (4) the residents' service and satisfaction
assessment (through a resident survey). On the basis of these four
indicators, a PHA receives a composite score that represents a single
score for a PHA's entire operation and a corresponding performance
designation. PHAs that are designated high performers receive public
recognition and relief from some HUD requirements. PHAs that are
designated standard performers may be required to take corrective
action to remedy identified deficiencies. PHAs that are designated
substandard performers are required to take corrective action to remedy
identified deficiencies. PHAs that are designated troubled performers
are subject to remedial action.
By final rule published on January 11, 2000 (65 FR 1712), HUD
amended the PHAS regulations to, among other things, elaborate on some
PHAS procedures; revise the mechanism for obtaining technical review of
physical inspections results and resident survey
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results, and for appealing PHAS scores; and implement statutory changes
resulting from enactment of the Quality Housing and Work Responsibility
Act of 1998 (Pub. L. 105-276, October 21, 1998).
B. Public Housing Operating Fund Program
The regulations governing the Public Housing Operating Fund program
are of key relevance to the proper operation of PHAs and, consequently,
to PHAS. Operating funds are made available to a PHA for the operation
and management of public housing; therefore, the regulations applicable
to a PHA's operation and management of public housing must be
considered in any changes proposed to PHAS. The regulations for the
Public Housing Operating Fund program are found at 24 CFR part 990;
were published on September 19, 2005 (70 FR 54983), which was followed
by a correction published on October 24, 2005 (70 FR 61366); and became
effective on November 18, 2005.
Subpart H of the part 990 regulations (Sec. Sec. 990.255 to
990.290), as revised by the September 2005 rule, establishes the
requirements regarding asset management. Under Sec. 990.260(a), PHAs
that own and operate 250 or more dwelling rental units must operate
using an asset management model consistent with the subpart H
regulations. PHAs with fewer than 250 dwelling rental units may elect
to transition to asset management, but are not required to do so. HUD's
Fiscal Year (FY) 2008 appropriations, provided in Title IV of Division
K of the Consolidated Appropriations Act, 2008 (Pub. L. 110-161,
approved December 26, 2007), state, in administrative provision section
225, that PHAs that own or operate 400 or fewer public housing units
may elect to be exempt from any asset management requirement imposed by
HUD in connection with HUD's operating fund rule, with one exception: A
PHA seeking discontinuance of a reduction of subsidy under the
operating fund formula shall not be exempt from asset management
requirements. Since requirements in appropriations acts, unless
otherwise indicated, apply only to the fiscal year to which the
appropriations act is directed, HUD's proposed rule to revise PHAS does
not reflect this one-year provision. PHAs are required to implement
project-based management, project-based budgeting, and project-based
accounting, which are all defined in the regulations of 24 CFR part
990, subpart H, and are essential components of asset management.
C. Proposed Amendments to PHAS
The proposed amendments to PHAS retain the basic structure of the
existing regulations. PHAs will continue to be scored based on
evaluation in four indicators: Physical condition, financial condition,
management operations, and the PHA's management of its Capital Fund
program. PHAS would continue to rely on information that is verifiable
by a third party, wherever possible.
Overview of Proposed Changes to PHAS
This proposed rule modifies PHAS primarily to conform to the new
regulations on the Public Housing Operating Fund program and the
conversion by PHAs to asset management, including project-based
budgeting, project-based accounting, and project-based performance
evaluation. Highlights of some of the major changes proposed to each of
the four current PHAS indicators are as follows:
Physical. The physical inspection indicator would remain largely
unchanged. Independent physical inspections would continue to be
conducted on each public housing project, although the frequency of
inspections would depend on the scores of individual projects, not the
score for the entire PHA. For example, if a specific project scored
below 80 points, it would be inspected the following year, regardless
of whether the overall physical score for the PHA, based on all
projects, was 80 points or higher (as is the case in the currently
codified PHAS regulations). If a PHA's overall physical score is less
than 80 points, and one or more projects score 80 points or above,
those projects that score 80 points or above would be inspected every
other year.
Financial. The financial assessment system would be modified to
include an assessment of the financial condition of each project. A PHA
would continue to submit an annual Financial Data Schedule (FDS) to HUD
that contains financial information on all major programs and business
activities. However, for purposes of PHAS, the PHA would be scored on
the financial condition of each project, and these scores would be the
basis for a program-wide score.
Subindicators that are currently available through financial
reports but are more appropriately measures of management performance
(e.g., bad debt, tenant accounts receivables, and occupancy loss) would
be removed from this indicator and moved to the management operations
indicator. HUD considered the option of allowing these items to remain
as part of the financial condition indicator. HUD now has 10 years of
experience with PHAS, and, based on that experience, believes that bad
debt, accounts receivables, and occupancy loss are more properly
measures of management operations, as is currently the prevailing view
in the multifamily industry. Even after these items were moved from
their original location as part of the management operations
assessment, they were tracked in both the financial condition and
management operations indicators. The fact that these items continued
to be tracked as management operations-related even after they were
moved to the financial condition indicator demonstrates that they are,
in fact, closely related to management operations. The U.S. Housing Act
of 1937 (1937 Act) itself, in section 6(j), 42 U.S.C. 1437d(6)(j),
associates items in these categories with management operations (see 42
U.S.C. 1437d(j)(1)(A)) (vacancy rate, that is, occupancy loss) and
(j)(1)(C) (percentage of rents collected, related to tenant accounts
receivable and bad debt), both of which are referred to by the statute
as examples of ``indicators to assess the management performance.'' For
these reasons, HUD has decided to move these factors to management
operations, where HUD, based on multifamily industry practice and its
own experience, believes they belong.
Management. The current management operations assessment system
relies on PHA submission of a range of information that is self-
certified. Under the proposed rule, this current system would be
replaced with management reviews conducted of each project by HUD staff
(or, where applicable, HUD's agents). Preferably, such reviews would be
conducted annually, consistent with the standards for HUD's subsidized
housing programs. As part of this project management review process,
HUD would examine a PHA's performance in the area of resident programs
and participation, thereby eliminating a separate resident satisfaction
survey.
Resident Satisfaction Surveys. A PHA's performance in the area of
resident programs and participation would be evaluated as part of the
project management review, thus eliminating the need for a separate
indicator on resident satisfaction and, therefore, a separate
satisfaction survey. The project management review would include a
subindicator that would measure efforts to coordinate, promote, or
provide effective programs and activities to promote economic self-
sufficiency of residents, and measure the extent to
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which residents are provided with opportunities for involvement in the
administration of the public housing. This subindicator would include
all of the elements regarding economic self-sufficiency and resident
participation that are included in section 6(j) of the 1937 Act (42
U.S.C. 1437d(j)). Separately, HUD may perform resident surveys at
different frequencies that would be used as diagnostic tools that would
assess residents' satisfaction with their living conditions and not be
made part of a PHA's score.
The current survey instrument has been in place since 1999. In
evaluating the results of the survey, HUD has found strong indications
that the survey is not useful. Even some of the more troubled projects
have received high resident satisfaction scores. As the table below
shows, the average satisfaction rate is 82.57 percent. For the period
from FY 2002 through FY 2006, the satisfaction rate has varied by no
greater than 1.88 percent for the entire 5-year period. The services
survey area has consistently been in the 90th percentile, while the
lowest-scoring survey area, communication, has an average satisfaction
rate of 75.68 percent. Given the actual condition of some of the
projects surveyed, it is highly unlikely that these results are
accurately reflecting resident satisfaction.
Resident Satisfaction
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Survey area FY 2002 % FY 2003 % FY 2004 % FY 2005 % FY 2006 % Average %
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Maintenance & Repair.................................... 89.25 89.11 85.16 86.62 88.50 87.73
Communication........................................... 76.35 76.31 74.80 75.61 75.35 75.68
Safety.................................................. 74.40 82.31 80.69 81.24 80.13 79.75
Services................................................ 92.32 92.24 91.90 91.78 91.99 92.05
Appearance.............................................. 77.12 78.63 76.66 78.29 77.39 77.62
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Average............................................. 81.89 83.72 81.84 82.71 82.67 82.57
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The response rate for the survey has also remained relatively
static, as the following table shows.
Resident Survey Response Rates
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FY 2002 % FY 2003 % FY 2004 % FY 2005 % FY 2006 %
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40.33 37.12 39.15 42.40 39.06
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Average Response Rate: 39.61
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At some of the smaller PHAs, residents have complained that they
are answering the same questions year after year. Industry groups have
also indicated that they believe the survey instrument needs to be
revised.
As an alternative to the resident survey, the new management review
format for public housing projects includes two areas that take into
consideration resident participation: Economic self-sufficiency and
resident involvement in project administration. These two areas assess
the percentage of adults with some form of employment income, the
percentage of adults participating in self-sufficiency, the number of
self-sufficiency opportunities offered at the project, and the number
of resident involvement opportunities offered by a project. In
addition, as much as possible, the management operations subindicators
focus on residents. For example, the work order subindicator measures
tenant-generated work orders rather than emergency and nonemergency
work orders. The advantage of these management subindicators is that
they measure objective results rather than subjective satisfaction, and
also that they are not dependent on voluntary participation but rather
are determined by actual reviews and site visits.
HUD invites comments on whether the survey should be retained in
some form, how it might be improved, and whether HUD's proposed
solution is sufficient to gather resident feedback on resident
satisfaction.
Capital Fund. HUD proposes to establish a new indicator, which
previously was part of the management operations indicator, that
measures a PHA's performance with respect to the obligation and
expenditure of Capital Fund program grants. This Capital Fund program
indicator is statutory, required by section 6(j) of the 1937 Act (42
U.S.C. 1437d(j)(1)(B)), and can be measured only at the agency level.
In addition to the changes in the four indicators, discussed above,
the rule would modify the score adjustment for physical condition and
neighborhood environment. This adjustment would be applied to the
management operations indicator on a project-by-project basis rather
than to the physical condition indicator. The statutory language states
that HUD should reflect in the weights assigned to the various
indicators the differences in the difficulty in managing individual
projects that result from their physical condition and neighborhood
environment. The application of the adjustment to the management
operations indicator would specifically address the difficulty in
managing individual projects, and would also result in a true physical
condition score without any adjustments outside of the physical
condition inspection results.
HUD believes the changes proposed to the PHAS regulations by this
rule offer the following advantages:
HUD and PHAs would be better able to identify and measure
the performance of individual projects, which is necessary for asset
management.
The new system conforms to HUD's performance monitoring
protocols and regulations in the area of multifamily housing.
The new system would be much simpler for PHAs and HUD to
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administer. PHAs would only be required to submit their FDS schedule
and would no longer need to submit a management certification.
Moreover, PHAs would have greater flexibility in developing internal
monitoring systems.
The new system would focus more on performance than
process. Additional changes to PHAS proposed by this rule include:
Corrective Action Plans are proposed to replace current
Improvement Plans.
References to the Troubled Agency Recovery Center (TARC),
an area center to which troubled PHAs were referred for oversight,
monitoring, or other remedial action, have been removed since the TARCs
no longer exist. The duties and responsibilities of the TARCs were
transferred to and assumed by HUD's field offices.
D. Section-by-Section Overview of PHAS Amendments
The following section-by-section overview does not describe each
and every change made to the PHAS regulation, but provides an overview
of some of the key changes proposed by this rule.
1. Part 901, Public Housing Management Assessment Program (PHMAP)
This proposed rule would remove part 901, which contains the PHMAP
regulations. When HUD issued the final PHAS rule in September 1998, the
preamble to the final rule noted that the PHMAP regulations in part 901
would be retained because PHAS would not be implemented until October
1999, one year after the September 1998 rule became effective. The
preamble advised PHAs that they would continue to comply with the PHMAP
regulations until the implementation of PHAS in October 1999. This
proposed rule will consolidate all public housing assessment
regulations in the PHAS regulations in part 902, and part 901 will be
removed.
2. Part 902, PHAS
Subpart A--General Provisions
Section 902.1 (Purpose, scope, and general matters). Proposed Sec.
902.1 would consolidate the purpose, scope, and applicability sections
into a single introductory section to better capture the overall
objectives of PHAS in one regulatory location.
Proposed Sec. 902.1(a) is unchanged from the purpose paragraph of
the currently codified regulations.
Proposed Sec. 902.1(b) remains similar to currently codified Sec.
902.3.
Proposed Sec. 902.1(c) briefly describes PHAS indicators.
Proposed Sec. 902.1(d) would be revised to include the project
assessment approach, which is now the relevant assessment as PHAs
convert to asset management. With the proposed removal of the resident
survey, to be discussed more fully later in this preamble, a reference
to gathering data from residents would be removed. Material concerning
HUD data systems would be added.
Currently codified Sec. 902.1(e) pertaining to changes in a PHA's
fiscal year end would be moved to a revised Sec. 902.60(a). New
proposed Sec. 902.1(e) would provide for a PHA with fewer than 250
units that does not convert to asset management to be considered a
single project.
Proposed Sec. 902.1(f) would revise currently codified Sec.
902.1(b) to reflect that REAC is now part of HUD's Office of Public and
Indian Housing (PIH).
Section 902.3 (Definitions). Currently codified Sec. 902.3 would
be revised to include the definitions of additional important terms
used in the regulations. In the currently codified regulations, the
definitions are found in both 24 CFR 902.7 and 24 CFR 902.24, where
definitions used in the physical condition indicator are presented. HUD
proposes to place all definitions in one section for greater
convenience.
Currently codified Sec. 902.3 would be revised to remove the
following definitions that are no longer applicable or are not
referenced in the regulations: average number of days non-emergency
work orders were active; improvement plan; occupancy loss; property;
reduced actual vacancy rate within the previous 3 years; reduced
average time nonemergency work orders were active; tenant receivables
outstanding; unit months available; unit months leased; and work orders
deferred to the Capital Fund program.
The following definitions would be added to this section: Assistant
Secretary; Corrective Action Plan; decent, safe, sanitary and in good
repair (DSS/GR); memorandum of agreement (MOA); Alternative Management
Entity (AME); Resident Management Corporation (RMC); Direct Funding
RMC; and unit-weighted average. In addition, the following definitions
from currently codified Sec. 902.24 are proposed to be added to this
section: criticality; deficiencies; dictionary of deficiency
definitions; inspectable areas; inspectable item; item weights and
criticality levels document; normalized weight; score; severity; and
subarea.
Section 902.5 (Applicability). To allow sufficient time for PHAs to
adjust to PHAS, as proposed to be revised by this rule, proposed Sec.
902.5(b)(1) would change applicability to commence with PHAs with
fiscal years ending on and after June 30, 2009. The information in
currently codified Sec. 902.5(b), pertaining to the issuance of PHAS
advisory scores, would be removed because it is no longer applicable.
Proposed Sec. 902.5(b)(2) would address transition scores and the
fiscal-year-end dates for transition scores.
Section 902.9 (PHAS scoring). This proposed section would address
the PHAS scoring system. (Those parts of currently codified Sec. 902.9
that address the frequency of PHAS scoring would be incorporated into
proposed Sec. 902.13.)
Proposed Sec. 902.9(a) would briefly describe the PHAS indicators,
which would include the new Capital Fund program indicator that
replaces the current resident service and satisfaction indicator.
Proposed Sec. 902.9(b) would provide information about the weights
of the four indicators.
Proposed Sec. 902.9(c) would provide for PHAS scores to be
calculated in accordance with appendices A-D. Accordingly, repetitive
information about scoring is removed from the regulations governing
individual indicators. No further changes to any of the scoring
processes will be implemented until after they are published for public
comment in the Federal Register. The currently codified PHAS
regulations provide for this notice and comment process, and HUD does
not propose to change that process by this rule.
The proposed scoring documents that correspond to this proposed
rule are published as appendices to this proposed rule.
Section 902.11 (PHAS performance designation). Proposed Sec.
902.11 would address PHAS performance designation information. The
performance designations would be high performer, standard performer,
substandard performer, and troubled performer (except for the new
``substandard'' designation, these are the designations provided in
currently codified Sec. 902.67).
Proposed Sec. Sec. 902.11(a) and (b) would amend the performance
requirements for PHAS designations that are currently codified in
Sec. Sec. 902.67(a) and (b). Proposed Sec. 902.11(a) would state that
a high performer must achieve an overall PHAS score of 90 percent, in
contrast to currently codified Sec. 902.67(a), which requires at least
a 60 percent score in each PHAS indicator.
Proposed Sec. 902.11(a)(2) would provide that a PHA would not be
designated a high performer if more than 10 percent of the PHA's total
units are in projects that fail the physical
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condition, financial, or management operations indicators. Proposed
Sec. 902.11(c) would explain the new substandard designation.
Generally, a PHA's overall PHAS score determines its designation.
The ``substandard'' designation, however, would be calculated
differently. A substandard designation would be based on a PHA
achieving a PHAS score of at least 60 percent and a score of less than
60 percent under one or more of the physical condition, financial, or
management operations indicators. In the proposed rule, to avoid
confusion, ``substandard'' would not be used to mean a subcategory of
troubled performer.
Section 902.13 (Frequency of PHAS assessments). Proposed Sec.
902.13 would be added to address the revised frequency of PHAS
assessments, and would incorporate, in Sec. 902.13(a), the information
in currently codified Sec. 902.9, with the exception that a small PHA
with fewer than 250 units would not be able to elect an annual
assessment. As the PHAS regulations are proposed to be revised by this
rule, the frequency of physical condition assessments would be based on
the size of the PHA and the performance of the PHA under the physical
condition indicator.
Proposed Sec. 902.13(b) would provide that a project that scores
80 points or higher for the physical condition indicator would be
inspected every other year.
Proposed Sec. 902.13(c) would require a PHA to submit the
unaudited and audited financial information to HUD every year, whether
or not the PHA receives a PHAS assessment.
Subpart B--Physical Condition Indicator
Section 902.20 (Physical condition assessment). Proposed Sec.
902.20 would address the basic components of the physical condition
assessment. Proposed Sec. 902.20(b) would provide for independent
physical inspections in accordance with HUD's physical condition
standards for decent, safe, and sanitary housing as codified at 24 CFR
5.703-5.705.
Section 902.21 (Physical condition standards for public housing).
Proposed Sec. 902.21 would be similar to currently codified Sec.
902.23, and summarizes the standards that the five major inspectable
areas are required to meet. The five major inspectable areas are site,
building exterior, building systems, dwelling units, and common areas.
The main difference between this proposed rule and the currently
codified regulations is that where the currently codified section
incorporates provisions directly from HUD's physical conditions
standards at 24 CFR 5.703, the proposed section would cross-reference
to Sec. 5.703 where necessary, resulting in a more concise and
streamlined regulatory provision.
Section 902.22 (Physical inspection of PHA projects). The
information in proposed Sec. 902.22(a) would be similar to currently
codified Sec. 902.24(a), but it would add a specific reference to
HUD's standards for decent, safe, and sanitary housing. Proposed new
Sec. 902.22(b)(1) would address how HUD would achieve the objectives
of paragraph (a) and provides for an inspection of a ``statistically
valid'' sample of units.
Proposed Sec. 902.22(d) would clarify the differences between
health and safety deficiencies and exigent health and safety
deficiencies. Proposed Sec. 902.22(d)(1) would contain the information
in currently codified Sec. 902.24(a)(2), but would add that the
project or PHA should correct exigent health and safety deficiencies
within 24 hours, and that the PHA must certify the correction to HUD
within 3 business days.
Section 902.23 (Adjustment for physical condition and neighborhood
environment). HUD proposes to remove this section because physical
condition and neighborhood environment would be assessed under the
management operations indicator in the proposed rule. See new proposed
Sec. 902.44.
Section 902.24 (Database adjustment). Proposed Sec. 902.24 would
contain the information currently codified in Sec. 902.25(c) and would
be designated as a separate section for the purpose of greater clarity.
The section would be revised to be consistent with project-based
assessment.
Section 902.25 (Physical condition scoring and thresholds).
Proposed Sec. 902.25(a) revises currently codified Sec. 902.25(a) to
reflect the project-based approach to administration of public housing,
and to remove material regarding scoring, which would be consolidated
in proposed Sec. 902.9(c) rather than being restated as to each
indicator.
Proposed new Sec. 902.25(b) provides similar information as found
in currently codified Sec. 902.25(d), but with further explanation of
how the weighted scores are calculated.
Proposed new Sec. 902.25(c) would include new information
regarding the conversion of a project score from a 100-point scale to a
30-point scale for the overall PHAS physical condition indicator, and
provide the number of points required for a passing score and the score
at which a PHA would be considered a substandard performer.
Section 902.26 (Physical inspection report). Currently codified
Sec. Sec. 902.26(a) and (a)(3) would be slightly revised by this
proposed rule to be consistent with project-based assessment. Sections
902.26(a)(2) and (a)(5) would be revised to make the deadline for a
request for reinspection 30 days after a PHA's receipt of the physical
inspection report.
Current Sec. 902.27 (Physical condition portion of total PHAS
points). HUD proposes to remove this section and instead provide for
the number of points assigned to each indicator in Sec. 902.9(b).
Subpart C--Financial Condition Indicator
Section 902.30 (Financial condition assessment). Proposed Sec.
902.30 is similar to currently codified Sec. 902.30. The section would
be revised to reflect individual project assessment.
Section 902.33 (Financial reporting requirements). Proposed Sec.
902.33(b) pertains to unaudited financial information and contains the
same information in currently codified Sec. 902.33(b). As proposed to
be revised, this section removes a reference to the Uniform Financial
Reporting Standards in 24 CFR part 5, subpart H, and removes reference
to the information regarding an automatic 1-month extension, which no
longer applies.
Proposed Sec. 902.33(b) also includes the same unaudited reporting
deadlines included in currently codified Sec. 902.33(c).
Proposed Sec. 902.33(c) contains information related to audited
financial statements that is contained in currently codified Sec.
902.33(c).
Section 902.35 (Financial condition scoring and thresholds).
Proposed Sec. 902.35(a)(1) would be similar to currently codified
Sec. 902.35(a), but would remove the repetitive information about
scoring that, in the codified regulations, is provided in each section
addressing a PHAS indicator. This section also would provide a
reference to individual projects.
Proposed Sec. 902.35(a)(2) contains information regarding the
basis for the financial condition score. Currently codified Sec.
902.35(a)(2) would be removed because the information regarding
advisory scores and high liquidity would no longer be applicable.
Proposed Sec. 902.35(b) lists the new financial condition
subindicators under asset management and replaces the financial
management components listed in the current Sec. 902.35(b).
Proposed Sec. 902.35(c) would explain how the overall financial
condition score is calculated. This score would be
[[Page 49549]]
a unit-weighted average of the individual project scores on this
indicator.
Proposed Sec. 902.35(d) would address the maximum points and
scoring thresholds, similar in function to currently codified Sec.
902.35(c).
Current Sec. 902.37 (Financial condition portion of total PHAS
points). HUD proposes to remove this section and instead provide for
the number of points assigned to each indicator in Sec. 902.9(b).
Subpart D--Management Operations Indicator
Section 902.40 (Management operations assessment). Proposed Sec.
902.40(a) would be revised to more comprehensively address the
management operations assessment of projects, given the removal of 24
CFR part 901.
Section 902.43 (Management operations performance standards).
Proposed Sec. 902.43(a) would list the statutory subindicators that
must be utilized in this assessment. This section, as proposed, would
also reference the asset management review form that would be used to
assess a PHA's management operations and a PHA's individual project
management operations, and the subindicators are included in appendix
C. Specifically, new proposed Sec. Sec. 902.43(a)(1) through (a)(6)
would list the statutory subindicators that are not addressed elsewhere
in PHAS, and would replace the currently codified Sec. Sec.
902.43(a)(1) through (a)(6). Paragraphs (a)(7) through (a)(9) of Sec.
902.43 would address the following subindicators, respectively:
security, economic self-sufficiency, and resident involvement in
project management.
Proposed Sec. 902.43(b) would provide that a project management
review be used to assess this indicator, supported by other data
available to HUD. Currently codified Sec. Sec. 902.43(b)(1) and (b)(2)
would be removed because PHAs would no longer certify to the management
operations information and because manual submissions are no longer
necessary.
Section 902.44 (Adjustment for physical condition and neighborhood
environment). A proposed Sec. 902.44 would be added and the adjustment
for physical condition and neighborhood environment would apply to the
management operations indicator. Proposed Sec. 902.44(a) would include
the new definitions for physical condition and neighborhood
environment, and Sec. 902.44(b) would describe the application of the
adjustment.
Section 902.45 (Management operations scoring and thresholds).
Proposed Sec. 902.45(a) would be similar to currently codified Sec.
902.45(a), except that projects, as well as PHAs, would receive a
management operations score.
Proposed Sec. 902.45(b) would provide information regarding the
overall indicator score.
Proposed Sec. 902.45(c) would be similar to currently codified
Sec. 902.45(b), and would provide information regarding the maximum
points for this indicator and scoring thresholds. The section removes a
reference to sanctions under section 6(j)(4) of the 1937 Act (42 U.S.C.
1437d(j)(4)).
Current Sec. 902.47 (Management operations portion of total PHAS
points). HUD proposes to remove this section and instead provide for
the number of points assigned to each indicator in Sec. 902.9(b).
Subpart E--Capital Fund Program Indicator
Proposed new subpart E addresses the Capital Fund program
indicator, and would replace the current subpart E, resident services
and satisfaction indicator. HUD is removing the resident services and
satisfaction indicator because, after almost 10 years of experience,
this indicator has not yielded the degree of feedback that HUD hoped to
obtain from this indicator. HUD has determined that PHAs expend
considerable effort to obtain resident input on the PHA's performance,
but with little change in the response rate over the past 5 years. HUD
will examine alternatives to obtain resident feedback, possibly through
funding for Resident Opportunities and Supportive Services (ROSS)
provided annually through its notice of funding availability (NOFA).
HUD specifically welcomes comment on proposals to improve resident
feedback on a PHA's performance and to measure resident satisfaction.
Section 902.50 (Capital Fund program assessment). Proposed Sec.
902.50(a) would provide for assessment of a PHA's Capital Funds that
remain unexpended after 4 years and unobligated after 2 years.
Proposed Sec. 902.50(b) would provide that this indicator would
not apply to PHAs that choose not to participate in the Capital Fund
program, and would only be applicable on a PHA-wide basis, rather than
a project basis. Section 9(j) of the 1937 Act (42 U.S.C. 1437g(9)(j)(1)
and (5)) makes the obligation to expend funds in a timely manner
applicable to PHAs.
Proposed Sec. 902.50(c) would provide that information for this
indicator would be derived through an analysis of HUD's electronic Line
of Credit Control System (e-LOCCS) (or its successor system). Proposed
Sec. Sec. 902.50(c)(1) and (c)(2) would address a PHA's responsibility
to submit Capital Fund program information in a timely manner and
appeal restrictions, respectively.
Section 902.53 (Capital Fund program scoring and thresholds). This
proposed section would explain the scoring and thresholds for this
indicator, overall points, and passing score.
Subpart F--PHAS Scoring
Section 902.60 (Data collection). This proposed section would
completely revise currently codified Sec. 902.60. Currently codified
Sec. 902.60(a), pertaining to fiscal year reporting periods, would be
revised to provide that a PHA would not be permitted to change its
fiscal year for the first 3 full fiscal years following June 30, 2009,
unless such change is approved by HUD for good cause. The moratorium on
changing fiscal years is consistent with the currently codified PHAS
regulations, which provide for a halt to fiscal year changes commencing
with the year new HUD regulations are to be implemented. Proposed Sec.
902.60(b) would address extensions for submitting unaudited financial
information. The information in currently codified Sec. 902.60(c),
pertaining to the submissions of financial information, would be
revised to include information about weighting and applicability of the
Single Audit Act (codified at 31 U.S.C. 7501 et seq.) and be moved to
proposed Sec. Sec. 902.9(b) and 902.33.
Proposed Sec. 902.60(c) would address waivers of the due date for
submitting audited financial information to HUD.
Proposed Sec. 902.60(d) would address rejection and resubmission
of a PHA's unaudited year-end financial information submission. The
requirement in currently codified Sec. 902.60(d)(2) pertaining to the
retention of documentation would be incorporated in proposed Sec.
902.3(b).
Information in currently codified Sec. 902.60(e)(2) and (f) would
be moved to proposed Sec. 902.62, with some revisions. Certifications
referenced in currently codified Sec. Sec. 902.60(e)(2) and (f), and
material regarding the performance designation of a PHA as ``troubled''
in currently codified Sec. 902.60(e)(2) would no longer be included.
Section 902.62 (Failure to submit data). Proposed Sec. 902.62
addresses penalties for failing to submit required information. Much of
this material is similar to that in currently codified Sec. 902.60(e).
Section 902.64 (PHAS scoring and audit reviews). Proposed Sec.
902.64(a) would be similar to currently codified Sec. 902.63(b).
[[Page 49550]]
Proposed Sec. 902.64(b) would be similar to currently codified
Sec. 902.63(c), except that references to certifications would be
removed.
Proposed Sec. 902.64(c) would include the material on the review
of audits in currently codified Sec. 902.63(d), along with certain
revisions. The revised material includes standards and procedures for
determining if an audit is deficient.
Section 902.66 (Withholding, denying, and rescinding designation).
Proposed Sec. 902.66 would provide that, in limited circumstances, HUD
may deny or rescind a high or standard performer designation. Denial or
rescission may occur in cases of fraud or misconduct, litigation cases
that bear directly on the performance of the PHA, where the PHA is
operating under a court order, or where the PHA demonstrates
substantial evidence of noncompliance with applicable laws or
regulations. HUD action taken in accordance with this section may be
appealed under Sec. 902.69(d).
Section 902.68 (Technical review of results of PHAS physical
condition indicator). Proposed Sec. 902.68 largely retains the
information regarding physical inspection technical reviews as provided
in currently codified Sec. 902.68, and removes reference to technical
reviews for the resident survey and satisfaction indicator, which will
no longer be an indicator. Proposed Sec. 902.68(b)(7) would be
included to provide that HUD's decision on a technical review is final
agency action.
Section 902.69 (PHA right of petition and appeal). Proposed Sec.
902.69 has been revised to elaborate on the rights of appeal, petition,
and the appeal of any refusal of a petition to remove a troubled
performer designation. Proposed Sec. 902.69(a) would revise the
current section to provide for four categories of appeals and one type
of petition.
Currently codified Sec. 902.69(b) would be designated Sec.
902.69(b)(1) in this proposed rule, and revised to take into account
the new designation of ``substandard performer.'' Proposed Sec.
902.69(b)(2) would provide that a PHA may not appeal its physical
condition score based on the subsequent correction of deficiencies
identified as the result of a physical inspection or technical review
items for which a decision has been previously rendered through the
technical review process. Proposed Sec. 902.69(b)(3) would specify
procedures for appealing the score for the Capital Fund program
indicator.
Proposed Sec. 902.69(c)(1) would be revised to address only the
appeal and petition procedures in currently codified Sec.
902.69(c)(1). As proposed to be revised, Sec. 902.69(c)(2) would
specify the procedures for the appeal of the refusal of a petition to
remove troubled performer designation, which is addressed in currently
codified Sec. 902.69(c)(1). Proposed Sec. 902.69(c)(3) would provide
that an appeal or petition must be submitted in writing to the Real
Estate Assessment Center, Attention: Technical Review. The address is:
Real Estate Assessment Center, 550 12th Street, SW., Suite 100,
Washington, DC 20024-2135. Proposed Sec. 902.69(c)(4) would include
information in currently codified Sec. Sec. 902.69(c)(1) and (c)(2)
that requires the inclusion of appropriate supporting information.
Proposed Sec. 902.69(d) would establish an appeal process for
cases of denial, withholding, or rescission of a PHAS performance
designation. Upon receipt of a request for reinstatement, the evidence
submitted by the PHA will be reviewed to determine whether a
reinstatement of the designation is warranted.
Proposed Sec. 902.69(e) would establish a process for
consideration of an appeal of an overall PHAS score, a troubled
performer designation, or a petition to remove a troubled performer
designation. HUD would evaluate the appeal and determine whether a
reassessment of the PHA is warranted. There would no longer be a Board
of Review as in the currently codified regulation.
Proposed Sec. 902.69(e)(2) addresses the appeal of refusal to
remove a troubled performer designation and provides that the decision-
making officials would be different individuals than those that
evaluated the petition to remove a troubled performer designation.
Proposed Sec. 902.69(f) would provide for final appeal decisions
similar to the provisions in currently codified Sec. 902.69(e), but
with some differences. Proposed Sec. 902.69(f) would specify the
remedies available to HUD if HUD grants an appeal, including
undertaking a new inspection, arranging for audit services, or other
reexamination of the results of assessment of a PHA's financial,
management, or Capital Fund program performance, as appropriate.
Following such reassessment, HUD will issue a new score and performance
designation. The proposed rule would remove the option available to HUD
to extend the deadline for HUD's decision to an additional 30 days.
Finally, the rule would provide that HUD's decision is final agency
action.
Subpart G--PHAS Incentives and Remedies
Section 902.71 (Incentives for high performers). Proposed Sec.
902.71 would be largely the same as currently codified Sec. 902.71.
The proposed rule would remove the material in Sec. 902.71(a)(1)(ii)
concerning the frequency of physical inspection, because the remainder
of the rule provides sufficient flexibility to relieve high-performing
PHAs of monitoring requirements.
Section 902.73 (PHAs with deficiencies). The heading of this
section would be changed from the section heading for currently
codified Sec. 902.73 to more accurately reflect the content in this
section. This proposed section would remove the concept of the
Improvement Plan and replace it with the concept of the Corrective
Action Plan. This concept is consistent with the Corrective Action Plan
terminology that is used in other program areas. If the PHA, under a
Corrective Action Plan, fails to correct its deficiencies within the
time period specified, HUD may take additional action, including, but
not limited to, the remedies for substantial default.
Section 902.75 (Troubled performers). The heading of this section
would be changed from the section heading for currently codified Sec.
902.75 (Referral to a Troubled Agency Recovery Center (TARC)). Proposed
Sec. 902.75(a) removes the references to 24 CFR part 901 and the
TARCs, because this proposed rule and accompanying proposed scoring
documents will replace part 901, and because the TARCs, as noted
previously, no longer exist. Their duties and responsibilities were
transferred and assumed by HUD field offices in 2003.
Proposed Sec. Sec. 902.75(b) and (c) cover the same subjects as
currently codified Sec. Sec. 902.75(b) and (c); that is, remedial
measures for troubled performers--albeit with revisions. Proposed Sec.
902.75(b) would specify that a memorandum of agreement (MOA) is
required for a troubled performer. Proposed Sec. 902.75(b)(3) would
require identification of the party responsible for meeting each
target. Proposed Sec. 902.75(b)(7) would: (1) Eliminate a reference to
the Departmental Enforcement Center, which is now part of HUD's Office
of General Counsel; and (2) add cross-references to HUD's statutory and
regulatory remedial authority in place of the current summary.
Proposed Sec. Sec. 902.75(d)(1) and (d)(2) would clarify the time
frames in currently codified Sec. Sec. 902.75(d)(1) and (d)(2) by
providing that the first- and second-year recovery periods are at least
[[Page 49551]]
12 months after issuance of the initial notice of troubled performer
designation, and at least 24 months after issuance of the initial
notice of troubled performer designation, respectively.
Proposed Sec. Sec. 902.75(e) and (f) would largely be the same as
the currently codified Sec. Sec. 902.75(e) and (f). However, proposed
Sec. 902.75(e) would remove the reference in Sec. 902.75(e)(3) to the
Director of the area TARC, which would be replaced by reference to the
regional or field office Public Housing Director.
Proposed Sec. Sec. 902.75(g) and (h) would be largely the same as
the current Sec. Sec. 902.75(g) and (h), with the exception of
proposed revisions to the example in Sec. 902.75(g)(3), to be
consistent with the proposed definitions of the one- and two-year
recovery periods in proposed Sec. 902.75(d). Proposed paragraph (i)
would remove the reference to the TARCs.
Section 902.79 (Verification and records). Proposed Sec. 902.79
would provide for the document retention and verification requirements
applicable to PHAs. The section would provide for penalties for failure
to maintain the required documentation for the required time period.
Section 902.81 (Resident petitions for remedial actions). Proposed
Sec. 902.81 is based on currently codified Sec. 902.85 and would
specify that residents of a PHA designated as troubled may petition HUD
in writing for remedial action. The section would retain the
requirement that 20 percent of the residents must support the petition,
as is required in currently codified Sec. 902.85. The section would
retain the reference to HUD's discretion over the determination as to
whether a substantial default has occurred, and provide for HUD to
respond in writing to a petition. The response would include the
planned course of action and, where the action differs from that
proposed by the residents, the reasons for the difference.
Section 902.83 (Sanctions for troubled performer PHAs). Proposed
Sec. 902.83 would provide for differing sanctions for small and large
PHAs. If a PHA that is designated as troubled and has less than 1,250
units fails to make substantial improvement within the recovery periods
specified in proposed Sec. 902.75(d), HUD has the option of
petitioning for the appointment of a receiver or taking possession of
all or a portion of the PHA or a PHA project. In the case of a PHA with
1,250 or more units that similarly fails, HUD shall petition for the
appointment of a receiver. If a troubled performer PHA fails to execute
the required MOA under Sec. 902.75, or fails to meet the requirements
of the MOA, the PHA may be declared to be in substantial default. In
this case, all the remedies under this rule and the 1937 Act are
available. Failure to execute the MOA, however, is not the only basis
for a finding of substantial default. A violation of the law,
regulations, or the annual contributions contract (ACC) can also be a
predicate for such a finding, in which case all available remedies
would equally be available. The procedures applicable to a finding of
substantial default are now provided in new part 907.
Current Sec. 902.85 (Resident petitions for remedial action). This
section is redesignated as Sec. 902.81, with only minor wording
changes made.
II. New Part 907--Substantial Default by a Public Housing Agency
This proposed rule would establish, in new part 907, the
regulations governing the determination of, and remedies for,
substantial default. The regulations applicable to substantial default
are currently codified in HUD's PHAS regulations. However, a
determination of substantial default is not limited to troubled
performance or violation of PHAS requirements. Therefore, it is more
appropriate for substantial default regulations to be codified in a
separate CFR part. The following provides a section-by-section overview
of new part 907.
Section 907.1 (Purposed and scope). Proposed Sec. 907.1 would
provide that the purpose of this part is to establish the regulations
for determination of, and remedies for, substantial default. This
section would clarify that nothing in this part limits the discretion
of HUD to take any action available under section 6(j)(3)(A) of the
1937 Act (42 U.S.C. 1437d(j)(3)(A)) to remedy a substantial default.
HUD has flexible discretion both to determine substantial default and
to apply the available remedies in any combination or order.
Section 907.3 (Bases for substantial default). Proposed Sec. 907.3
would describe the violations of laws and agreements, and the failures
to act on the part of the PHA that may result in a declaration of
substantial default.
Section 907.5 (Procedures for declaring substantial default).
Proposed Sec. 907.5(a) would describe the process for notification of
substantial default.
Section 907.5(b) would describe the opportunity of a PHA to respond
or cure the default, except in cases of fraud, criminality, or an
emergency posing an imminent threat to life and health.
Proposed Sec. 907.5(c) would provide for a PHA to waive written
notification of substantial default by HUD.
Proposed Sec. 907.5(d) (Emergency situations) would describe the
situations in which HUD may proceed to issue a default determination
without giving the PHA an opportunity to respond.
Section 907.7 (Remedies for substantial default). Proposed Sec.
907.7 would list the actions that may be taken by HUD against a PHA
upon a determination of substantial default.
III. Cost and Benefits of This Proposed Rule
This proposed rule would significantly streamline PHAS by
eliminating several PHA submissions, data collection requirements, and
related processes. Through such streamlining, this proposed rule would
reduce costs incurred by PHAs in compiling and submitting this
information to HUD. In addition, the systems put in place to substitute
for the data compilation and submissions would improve the assessment
process, which would benefit PHAs, public housing residents, and
taxpayers overall. The proposed rule would eliminate the requirement
for PHAs to submit a management operation certification and to
undertake resident satisfaction surveys, including pre- and post-survey
administrative requirements. HUD is replacing these submission
requirements with a system of on-site management reviews. Rather than
requiring a PHA to prepare a detailed submission of various management
indicators (inspections, work orders, security, etc.), HUD will assess
conditions through an on-site review, consistent with the process
utilized by HUD for its multifamily housing programs. Similarly,
information obtained from the on-site reviews will better gauge the
effectiveness of PHA efforts in the area of resident self-sufficiency
and participation. Moreover, the current system of PHA self-
certification requires HUD to conduct certification reviews. The
proposed rule would eliminate the need for these certification reviews.
Additionally, the new system of on-site management reviews are intended
to consolidate into one assessment tool what today are multiple
reviews. Through these measures, the proposed rule reduces
administrative costs associated with PHAS, while improving the accuracy
of PHAS assessments.
In seeking comment on this proposed rule, the Department would like
to highlight the following:
Vacancy rates. The Department believes that one of the primary
responsibilities of a PHA is to provide housing opportunities by
maintaining high occupancy levels. As a result, a
[[Page 49552]]
high weight is assigned in the management review to a project's non-
approved vacancy rate (the lower the rate, the higher the score). The
Department seeks comment on the adequacy of the weight assigned to a
project's vacancy rate. The Department also seeks comment on whether
the measure should be improved or another measure added to encompass
all vacancies, both approved and non-approved. Presently, the non-
approved vacancies are less than 4 percent, but all vacancies are
around 9 percent. A measure of all vacancies could provide a broader
focus for efforts to maximize the number of decent, safe, and sanitary
units available for tenants. The ``approved'' vacancies are defined
under 24 CFR 990.145.
Resident satisfaction surveys. As indicated, the Department
believes that the on-site management review is a better vehicle than
the current resident survey to measure both project performance and
resident satisfaction, consistent with the norms in HUD's own
multifamily housing programs. However, the Department is particularly
interested in views on practical methods for providing feedback to the
PHA and assessing resident satisfaction, through surveys or other
means.
Unrestricted program balances and reserves. Presently, PHAs have on
the order of $2.7 billion in public housing program reserves (also
known as ``unrestricted current net assets''). The Department is
concerned with high program balances in light of industry concerns over
the backlog of capital and maintenance needs. On the other hand, the
Department wants adequate cash balances at PHAs to cope with potential
unexpected events, such as a downturn in tenant rental payments. The
Department has decided to make this trade-off in favor of high cash
balances. For example, the Department proposes a very conservative
quick ratio standard of $1 of cash/cash equivalents for $1 of current
liabilities. The Department seeks comment as to whether the PHAS
scoring system should encourage the use of these reserves and suggested
ways to do that.
Capital Fund Indicator. As previously indicated, the proposed rule
only includes scoring on Capital Fund obligations and expenditures. It
does not include scoring related to other areas of Capital Fund program
management, e.g., quality of contract administration or effective
capital planning. The Department believes that such issues are best
addressed through on-site program assessments. The Department, however,
seeks comment as to whether other items should be added to the Capital
Fund indicator.
Verification of Tenant Income. The Department is strongly committed
to the proper reporting of tenant income for eligibility and rent
determinations and has developed various tools to assist PHAs in this
process. The Department has chosen not to include any scoring related
to the income verification process. Although important, income
verification would be one of many ``compliance'' areas to which PHAs
are subject. As with other similar areas, the Department has chosen not
to score, for PHAS purposes, areas of compliance. Instead, performance
is measured on more traditional real estate management indicators.
Compliance items are considered separately and could be a source of
corrective action; however, they are not scored. The Department seeks
comment on this approach, specifically, to income verifications and,
more broadly, on matters of compliance.
IV. Findings and Certifications
Information Collection Requirements
The information collection requirements contained in this proposed
rule have been submitted to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In
accordance with the Paperwork Reduction Act, an agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information, unless the collection displays a currently valid OMB
control number.
The burden of the information collections in this proposed rule is
estimated as follows:
Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Estimated
Number of average time Estimated
Section reference Number of responses per for annual burden
respondents respondent requirement (in hours)
(in hours)
----------------------------------------------------------------------------------------------------------------
24 CFR 902.24 Database adjustment............... 125 1 5.2 650
24 CFR 902.68 Technical review.................. 167 1 5.2 868
24 CFR 902.69 Appeals........................... 53 1 5.2 276
---------------------------------------------------------------
Totals...................................... 345 .............. .............. 1,794
----------------------------------------------------------------------------------------------------------------
In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
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 rule. Comments must refer
to the proposal by name and docket number (FR-5094-P-01) and must be
sent to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503, Fax number: 202-395-6947,
and
Mary Schulhof, Reports Liaison Officer, Office of Public and Indian
Housing, Department of Housing and Urban Development, 451 Seventh
Street, SW., Room 4116, Washington, DC 20410-8000.
Regulatory Planning and Review
OMB reviewed this rule under Executive Order 12866, Regulatory
[[Page 49553]]
Planning and Review. OMB determined that this rule is a ``significant
regulatory action'' as defined in section 3(f) of the Order (although
not an economically significant regulatory action under the Order). The
docket file is available for public inspection in the Regulations
Division, Office of General Counsel, Department of Housing and Urban
Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-
0500. Due to security measures at the HUD Headquarters building, an
advance appointment to review the public comments must be scheduled by
calling the Regulations Division at 202-402-3055 (this is not a toll-
free number).
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
establishes requirements for federal agencies to assess the effects of
their regulatory actions on state, local, and tribal governments and
the private sector. This rule will not impose any federal mandates on
any state, local, or tribal governments or the private sector within
the meaning of UMRA.
Environmental Review
A Finding of No Significant Impact with respect to the environment
has been 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. 4332). The Finding is available for public inspection
during regular business hours in the Regulations Division, Office of
General Counsel, Department of Housing and Urban Development, 451
Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to
security measures at the HUD Headquarters building, please schedule an
appointment to review the Finding by calling the Regulations Division
at 202-402-3055 (this is not a toll-free number).
Impact on Small Entities
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This rule revises HUD's existing PHAS regulations for the assessment of
public housing at 24 CFR part 902, to revise the PHAS regulations to
elaborate upon certain procedures, to conform the PHAS regulations to
current public housing operations, and to conform to certain statutory
changes. These revisions impose no significant economic impact on a
substantial number of small entities. Therefore, the undersigned
certifies that this rule will not have a significant impact on a
substantial number of small entities.
Notwithstanding HUD's belief that this rule will not have a
significant effect on a substantial number of small entities, HUD
specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This final rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments nor preempt state law
within the meaning of the Executive Order.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for Public
Housing is 14.850.
List of Subjects
24 CFR Part 901
Administrative practice and procedures, Public housing, Reporting
and recordkeeping requirements.
24 CFR Part 902
Administrative practice and procedures, Public housing, Reporting
and recordkeeping requirements.
24 CFR Part 907
Administrative practice and procedures, Public housing, Reporting
and recordkeeping requirements.
Accordingly, under the authority of 42 U.S.C. 3535d, HUD proposes
to remove 24 CFR part 901, revise part 902, and add a new part 907, as
follows:
PART 901--[REMOVED]
1. Remove and reserve 24 CFR part 901.
2. Revise 24 CFR part 902 to read as follows:
PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM
Subpart A--General Provisions
Sec.
902.1 Purpose, scope, and general matters.
902.3 Definitions.
902.5 Applicability.
902.9 PHAS scoring.
902.11 PHAS performance designation.
902.13 Frequency of PHAS assessments.
Subpart B--Physical Condition Indicator
902.20 Physical condition assessment.
902.21 Physical condition standards for public housing--decent,
safe, and sanitary housing in good repair (DSS/GR).
902.22 Physical inspection of PHA projects.
902.24 Database adjustment.
902.25 Physical condition scoring and thresholds.
902.26 Physical Inspection Report.
Subpart C--Financial Condition Indicator
902.30 Financial condition assessment.
902.33 Financial reporting requirements.
902.35 Financial condition scoring and thresholds.
Subpart D--Management Operations Indicator
902.40 Management operations assessment.
902.43 Management operations performance standards.
902.44 Adjustment for physical condition and neighborhood
environment.
902.45 Management operations scoring and thresholds.
Subpart E--Capital Fund Program Indicator
902.50 Capital Fund program assessment.
902.53 Capital Fund program scoring and thresholds.
Subpart F--PHAS Scoring
902.60 Data collection.
902.62 Failure to submit data.
902.64 PHAS scoring and audit reviews.
902.66 Withholding, denying and rescinding designation.
902.68 Technical review of results of PHAS physical condition
indicator.
902.69 PHA right of petition and appeal.
Subpart G--PHAS Incentives and Remedies
902.71 Incentives for high performers.
902.73 PHAs with deficiencies.
902.75 Troubled performers.
902.79 Verification and records.
902.81 Resident petitions for remedial action.
902.83 Sanctions for troubled performer PHAs.
Appendix A to Part 902--Physical Condition Scoring.
Appendix B to Part 902--Financial Condition Scoring.
Appendix C to Part 902--Management Operations Scoring.
Appendix D to Part 902--Capital Fund Scoring.
Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d).
Subpart A--General Provisions
Sec. 902.1 Purpose, scope, and general matters.
(a) Purpose. The purpose of the Public Housing Assessment System
(PHAS) is
[[Page 49554]]
to improve the delivery of services in public housing and enhance trust
in the public housing system among public housing agencies (PHAs),
public housing residents, and the general public, by providing a
management tool for effectively and fairly measuring the performance of
a PHA in essential housing operations of projects, on a program-wide
basis and individual project basis, and providing rewards for high
performers and remedial requirements for poor performers.
(b) Scope. PHAS is a strategic measure of the essential housing
operations of projects and PHAs. PHAS does not evaluate the compliance
of a project or PHA with every HUD-wide or program-specific requirement
or objective. Although not specifically evaluated through PHAS, 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
other federal 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 (ACC).
(c) PHAS indicators. HUD will assess and score the performance of
projects and PHAs based on the indicators, which are more fully
addressed in Sec. 902.9: Physical condition, financial condition,
management operations, and Capital Fund.
(d) Assessment tools. HUD will make use of uniform and objective
criteria for the physical inspection of projects and PHAs and the
financial assessment of projects and PHAs, and will use data from
appropriate agency data systems and project management reviews to
assess management operations. For the Capital Fund program indicator,
HUD will use information provided in the electronic Line of Credit
Control System (e-LOCCS) (or its successor) system. On the basis of
this data, HUD will assess and score the results, advise PHAs of their
scores, and identify low-scoring and poor-performing projects and PHAs
so that these projects and PHAs will receive the appropriate attention
and assistance.
(e) Small PHAs. A PHA with fewer than 250 units that does not
convert to asset management will be considered as one project by HUD.
Sec. 902.3 Definitions.
As used in this part:
Act means the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.)
Alternative management entity (AME) is a receiver, private
contractor, private manager, or any other entity that is under contract
with a PHA, under a management agreement with a PHA, or that is
otherwise duly appointed or contracted (for example, by court order or
agency action), to manage all or part of a PHA's operations.
Assessed fiscal year is the PHA fiscal year that has been assessed
under PHAS, the most recent assessment of record, or the period of
time, as defined in each management operations subindicator or
component.
Assistant Secretary means the Assistant Secretary for Public and
Indian Housing.
Corrective Action Plan means a plan, as provided in Sec.
902.73(a), that is developed by a PHA that specifies the actions to be
taken, including timetables, that shall be required to correct
deficiencies identified under any of the PHAS subindicators, and
identified as a result of a PHAS assessment, when a memorandum of
agreement (MOA) is not required.
Criticality means one of five levels that reflect the relative
importance of the deficiencies for an inspectable item.
(1) Based on the importance of the deficiency, reflected in its
criticality value, points are deducted from the score for an
inspectable area.
------------------------------------------------------------------------
Criticality Level
------------------------------------------------------------------------
Critical................................................ 5
Very Important.......................................... 4
Important............................................... 3
Contributes............................................. 2
Slight Contribution..................................... 1
------------------------------------------------------------------------
(2) The Item Weights and Criticality Levels document lists all
deficiencies with their designated levels, which vary from 1 to 5, with
5 as the most critical, and the point values assigned to them.
Days mean calendar days, unless otherwise specified.
Decent, safe, sanitary housing and in good repair (DSS/GR) is HUD's
standard for acceptable basic housing conditions and the level to which
a PHA is required to maintain its public housing.
Deficiency means any finding or determination that requires
corrective action, or any score below 60 percent of the available
points in any indicator or subindicator. In the context of physical
condition and physical inspection in subpart B of this part,
``deficiency'' means a specific problem, as described in the Dictionary
of Deficiency Definitions, such as a hole in a wall or a damaged
refrigerator in the kitchen that can be recorded for inspectable items.
Dictionary of Deficiency Definitions means the Dictionary of
Deficiency Definitions document that contains specific definitions of
each severity level for deficiencies under this subpart. The Dictionary
of Deficiency Definitions that is currently in effect can be found at
HUD's Web site at http://www.hud.gov/offices/reac/pdf/pass_dict2.3.pdf
or a hard copy may be obtained from HUD by calling 888-245-4860 (this
is a toll-free number).
Direct Funded RMC means a Resident Management Corporation to which
HUD directly provides operating and capital assistance under the
provisions of 24 CFR 964.225(h).
Inspectable areas (or area) mean any of the five major components
of public housing that are inspected, which are: Site, building
exteriors, building systems, dwelling units, and common areas.
Inspectable item means the individual parts, such as walls,
kitchens, bathrooms, and other things, to be inspected in an
inspectable area. The number of inspectable items varies for each area.
Weights are assigned to each item as shown in the Item Weights and
Criticality Levels document.
Item Weights and Criticality Levels document means the Item Weights
and Criticality Levels document that contains a listing of the
inspectable items, item weights, observable deficiencies, criticality
levels and values, and severity levels and values that apply to this
subpart. The Item Weights and Criticality Levels document that is
currently in effect can be found at HUD's Web site at http://www.hud.gov/offices/reac/library/documents/fr-notice20011126.pdf or a
hard copy may be obtained from HUD by calling 888-245-4860 (this is a
toll-free number).
Memorandum of Agreement (MOA) is defined in Sec. 902.75(b) of this
part.
Normalized weights mean weights adjusted to reflect the inspectable
items or areas that are present to be inspected.
Resident Management Corporation (RMC) is defined in 24 CFR 964.7.
Score for a project means a number on a scale of 0 to 100 that
reflects the physical condition of a project, inspectable area, or
subarea. To record a health or safety deficiency, a specific
designation (such as a letter--a, b, or c) is added to the project
score that highlights that a health or safety deficiency (or
deficiencies) exists. If smoke detectors are noted as inoperable or
missing, another designation (such as an asterisk (*)) is added to the
project score. Although inoperable or missing smoke detectors do not
reduce the score, they are fire safety hazards and are
[[Page 49555]]
included in the Notification of Exigent and Fire Safety Hazards
Observed Deficiency list that the inspector gives the PHA's project
representative.
Severity means one of three levels, level 1 (minor), level 2
(major), and level 3 (severe), that reflect the extent of the damage or
problem associated with each deficiency. The Item Weights and
Criticality Levels document shows the severity levels for each
deficiency. Based on the severity of each deficiency, the score is
reduced. Points deducted are calculated as the product of the item
weight and the values for criticality and severity. Specific
definitions of each severity level are found in the Dictionary of
Deficiency Definitions.
Subarea means an inspectable area for one building. For example, if
a project has more than one building, each inspectable area for each
building in the project is treated as a subarea.
Unit-weighted average means the average of the PHA's individual
indicator scores, weighted by the number of units in each project,
divided by the total number of units in all of the projects of the PHA.
In order to compute a unit-weighted average, an individual project
score for a particular indicator is multiplied by the number of units
in each project to determine a ``weighted value.'' For example, for a
PHA with two projects, one with 200 units and a score of 90, and the
other with 100 units and a score of 60, the unit-weighted average score
for the indicator would be (200 x 90 + 100 x 60)/300 = 80.
Sec. 902.5 Applicability.
(a) PHAs, RMCs, AMEs. This part applies to PHAs, Resident
Management Corporations (RMCs), and AMEs. This part is also applicable
to RMCs that receive direct funding (DF-RMCs) from HUD in accordance
with section 20 of the Act.
(1) Scoring of RMCs and AMEs. (i) RMCs and DF-RMCs will be assessed
and issued their own numeric scores under PHAS based on the public
housing or portions of public housing that they manage and the
responsibilities they assume that can be scored under PHAS. References
in this part to PHAs include RMCs, unless stated otherwise. References
in this part to RMCs include DF-RMCs, unless stated otherwise.
(ii) AMEs are not issued PHAS scores. The performance of the AME
contributes to the PHAS score of the project(s)/PHA(s) for which they
assumed management responsibilities.
(2) ACC. The ACC makes a PHA legally responsible for all public
housing operations, except where DF-RMC assumes management operations.
(i) Because the PHA and not the RMC or AME is ultimately
responsible to HUD under the ACC, the PHAS score of a PHA will be based
on all of the projects covered by the ACC, including those with
management operations assumed by an RMC or AME (including a court-
ordered or administrative receivership agreement, if applicable).
(ii) A PHA's PHAS score will not be based on projects managed by a
DF-RMC.
(3) This rule does not apply to Moving-to-Work (MTW) agencies that
are specifically exempted in their grant agreement.
(b) Implementation of PHAS. The regulations in this part are
applicable to PHAs with fiscal years ending on and after June 30, 2009.
Sec. 902.9 PHAS scoring.
(a) Indicators and subindicators. Each PHA will receive an overall
PHAS score, rounded to the nearest whole number, based on the four
indicators: physical condition, financial condition, management
operations, and Capital Fund program. Each of these indicators contains
subindicators, and the scores for the subindicators are used to
determine a single score for each of these PHAS indicators. Individual
project scores are used to determine a single score for the physical
condition, financial condition, and management operations indicators.
The Capital Fund program indicator score is entity-wide.
(b) Overall PHAS score and indicators. The overall PHAS score is
derived from a weighted average of score values for the four
indicators, as follows:
(1) The physical condition indicator is weighted 30 percent (30
points) of the overall PHAS score. The score for this indicator is
obtained as indicated in subpart B of this part.
(2) The financial condition indicator is weighted 20 percent (20
points) of the overall PHAS score. The score for this indicator is
obtained as indicated in subpart C of this part.
(3) The management operations indicator is weighted 40 percent (40
points) of the overall PHAS score. The score for this indicator is
obtained as indicated in subpart D of this part.
(4) The Capital Fund program indicator is weighted 10 percent (10
points) of the overall PHAS score for all Capital Fund program grants
for which fund balances remain during the assessed fiscal year. The
score for this indicator is obtained as indicated in subpart E of this
part.
(c) Scoring procedures. (1) The scores for each PHAS indicator will
be calculated in accordance with the scoring procedures described in
appendices A-D.
(2) HUD will publish for public comment any significant proposed
amendments to these scoring procedures. After comments have been
considered, HUD will publish final documents.
Sec. 902.11 PHAS performance designation.
All PHAs that receive a PHAS assessment shall receive a performance
designation. The performance designation is based on the overall PHAS
score and the four indicator scores, as set forth below.
(a) High performer. (1) A PHA that achieves an overall PHAS score
of 90 percent or greater shall be designated a high performer, except
that such a PHA shall not be designated a high performer if more than
10 percent of its total units are in projects that fail the physical,
financial, or management operations indicator.
(2) High performers will be afforded incentives that include relief
from reporting and other requirements, as described in Sec. 902.71 of
this part.
(b) Standard performer. (1) A PHA that is not a high performer
shall be designated a standard performer if the PHA achieves an overall
PHAS score of at least 60 percent and at least 60 percent under each of
the four PHAS indicators.
(2) At HUD's discretion, a standard performer may be required by
the regional/field office to submit and operate under a Corrective
Action Plan.
(c) Substandard performer. A PHA will be designated a substandard
performer if a PHA achieves a total PHAS score of at least 60 percent
and achieves a score of less than 60 percent under one or more of the
physical condition, financial condition, or management operations
indicators. The PHA will be designated as substandard physical,
substandard financial, or substandard management, respectively. The HUD
office with jurisdiction over the PHA may require a Corrective Action
Plan if the deficiencies have not already been addressed in a current
Corrective Action Plan.
(d) Troubled performer. (1) A PHA that achieves an overall PHAS
score of less than 60 percent shall be designated as a troubled
performer.
(2) In accordance with section 6(j)(2)(A)(i) of the Act (42 U.S.C.
1437d(j)(2)(A)(i)), a PHA that receives less than 60 percent under the
Capital Fund program indicator under subpart E of this part will be
designated as a troubled performer and subject to the sanctions
provided in section 6(j)(4) of the Act (42 U.S.C. 1437(d)(j)(4)).
[[Page 49556]]
Sec. 902.13 Frequency of PHAS assessments.
The frequency of a PHA's PHAS assessments is determined by the size
of the PHA's Low-Rent program and its PHAS designation.
(a) Small PHAs. HUD will assess and score the performance of a PHA
with fewer than 250 public housing units every other PHA fiscal year,
unless the PHA is designated as troubled, in accordance with Sec.
902.75 of this part.
(b) Frequency of scoring for PHAs with 250 units or more.
(1) All PHAs, other than stated in paragraph (a) of this section,
may be assessed on an annual basis.
(2) The physical condition score for each project will determine
the frequency of inspections of each project. For projects with a
physical condition score of 80 points or higher, physical inspections
will be conducted every 2 years at the project. The physical condition
score of 80 points or higher will be carried over to the next
assessment year and averaged with the other project physical condition
score(s) for the next assessment year for an overall PHAS physical
condition indicator score. For projects whose physical condition score
for a project is less than 80 points, physical inspections will be
conducted annually at the project.
(c) Financial submissions. HUD shall not issue a PHAS score for the
unaudited and audited financial information in the years that a PHA is
not being assessed under PHAS. Although HUD shall not issue a PHAS
score under such circumstances, a PHA shall comply with the
requirements for submission of annual unaudited and audited financial
statements in accordance with subpart C of this part and 24 CFR 5.801.
Subpart B--Physical Condition Indicator
Sec. 902.20 Physical condition assessment.
(a) Objective. The objective of the physical condition indicator is
to determine whether a PHA is meeting the standard of decent, safe,
sanitary housing in good repair (DSS/GR), as this standard is defined
in 24 CFR 5.703.
(b) Method of assessment. The physical condition assessment is
based on an independent physical inspection of a PHA's projects
provided by HUD and performed by contract inspectors, and conducted
using HUD's Uniform Physical Condition Standards (UPCS) under 24 CFR
part 5, subpart G.
(c) Method of transmission. After the inspection is completed, the
inspector transmits the results to HUD, where the results are verified
for accuracy and then scored in accordance with the procedures in this
subpart B.
(d) PHA physical inspection requirements. The physical inspections
conducted under this part do not relieve the PHA of the responsibility
to inspect public housing units, as provided in section 6(f)(3) of the
Act (42 U.S.C. 1437d(f)(3)).
(e) Compliance with state and local codes. The physical condition
standards in this part 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.
(f) HUD access to PHA projects. All PHAs are required by the ACC to
provide HUD or its representative with full and free access to all
facilities in its projects. All PHAs are required to provide HUD or its
representative with access to its projects and to all units and
appurtenances in order to permit physical inspections, monitoring
reviews, and quality assurance reviews under this part. Access to the
units shall be provided whether or not the resident is home or has
installed additional locks for which the PHA did not obtain keys. In
the event that the PHA fails to provide access as required by HUD or
its representative, the PHA shall be given a physical condition score
of zero for the project or projects involved. This score of zero shall
be used to calculate the physical condition indicator score and the
overall PHAS score.
Sec. 902.21 Physical condition standards for public housing--decent,
safe, and sanitary housing in good repair (DSS/GR).
(a) General. Public housing must be maintained in a manner that
meets the physical condition standards set forth in this part in order
to be considered DSS/GR (standards that constitute acceptable basic
housing conditions). These standards address the major physical areas
of public housing: Site, building exterior, building systems, dwelling
units, and common areas (see paragraph (b) of this section). These
standards also identify health and safety considerations (see paragraph
(c) of this section). These standards address acceptable basic housing
conditions, not the adornment, d[eacute]cor, or other cosmetic
appearance of the housing.
(b) Major inspectable areas. (1) Site. The site includes the
components and must meet the requirements of 24 CFR 5.703(a).
(2) Building exterior. The building exterior includes the
components and must meet the standards stated in 24 CFR 5.703(b).
(3) Building systems. The building's systems include components
such as domestic water, electrical system, elevators, emergency power,
fire protection, heating/ventilation/air conditioning (HVAC), and
sanitary system. Each building's systems must meet the standards of 24
CFR 5.703(c).
(4) Dwelling units. Each dwelling unit within a building must meet
the standards of 24 CFR 5.703(d).
(5) Common areas. Each common area must meet the standards of 24
CFR 5.703(e).
(c) Health and safety concerns. All areas and components of the
housing must be free of health and safety hazards, as provided in 24
CFR 5.703(f).
Sec. 902.22 Physical inspection of PHA projects.
(a) The inspection, generally. The PHA's score for the physical
condition indicator is based on an independent physical inspection of a
PHA's project(s) provided by HUD and using HUD's UPCS inspection
protocols to ensure projects meet DSS/GR standards that constitute
acceptable basic housing conditions.
(b) Physical inspection under the PHAS physical condition
indicator. (1) To achieve the objective of paragraph (a) of this
section, HUD will provide for an independent physical inspection of a
PHA's project(s) that includes, at a minimum, a statistically valid
sample of the units in the PHA's projects to determine the extent of
compliance with the DSS/GR standard.
(2) Only occupied units will be inspected as dwelling units (except
units approved by HUD for nondwelling purposes, e.g., daycare or
meeting rooms, which are inspected as common areas). Vacant units that
are not under lease at the time of the physical inspection will not be
inspected, but vacant units are assessed under the management
operations indicator. The categories of vacant units not under lease
that are exempted from physical inspection are as follows:
(i) Units undergoing vacant unit turnaround--vacant units that are
in the routine process of turnover; i.e., the period between which one
resident has vacated a unit and a new lease takes effect;
(ii) Units undergoing rehabilitation--vacant units that have
substantial rehabilitation needs already identified, and there is an
approved implementation plan to address the identified rehabilitation
needs and the plan is fully funded;
(iii) Off-line units--vacant units that have repair requirements
such that the units cannot be occupied in a normal
[[Page 49557]]
period of time (considered to be between 5 and 7 days) and which are
not included under an approved rehabilitation plan.
(c) Observed deficiencies. During the physical inspection of a
project, an inspector looks for deficiencies for each inspectable item
within the inspectable areas, such as holes (deficiencies) in the walls
(item) of a dwelling unit (area). The dwelling units inspected in a
project are a randomly selected, statistically valid sample of the
units in the project, excluding vacant units not under lease at the
time of the physical inspection, as provided in paragraph (b)(2) of
this section.
(d) Exigent health and safety (EHS) deficiencies and health and
safety (H&S) deficiencies--(1) EHS deficiencies. To ensure prompt
correction of EHS deficiencies, before leaving the site the inspector
gives the project representative a Notification of Exigent and Fire
Safety Hazards Observed Deficiency form that calls for immediate
attention or remedy. The project representative acknowledges receipt of
the deficiency report by signature. The project or PHA shall correct or
remedy all EHS deficiencies cited in the deficiency report within 24
contiguous hours of the project representative's receipt of the
Notification of Exigent and Fire Safety Hazards Observed Deficiency
form. In addition, the project or PHA must certify to HUD within 3
business days of the project representative's receipt of the
Notification of Exigent and Fire Safety Hazards Observed Deficiency
form, that all EHS deficiencies were corrected or remedied within 24
contiguous hours.
(2) H&S deficiencies. The project or the PHA, or both, as
appropriate, is required to correct all H&S deficiencies within 72
contiguous hours of the project representative's receipt of the
Notification of Exigent and Fire Safety Hazards Observed Deficiency
form.
(e) Compliance with civil rights/nondiscrimination requirements.
Elements related to accessibility will be reviewed during the physical
inspection to determine possible indications of noncompliance with the
Fair Housing Act (42 U.S.C. 3601-19) and section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794). A PHA will not be scored on
those elements. Any indication of possible noncompliance will be
referred to HUD's Office of Fair Housing and Equal Opportunity.
Sec. 902.24 Database adjustment.
(a) Adjustments for factors not reflected or inappropriately
reflected in physical condition score. Under circumstances described in
this section, HUD may determine it is appropriate to review the results
of a project's physical inspection that are unusual or incorrect due to
facts and circumstances affecting the PHA's project that are not
reflected in the inspection or that are reflected inappropriately in
the inspection.
(1) The circumstances described in this section are not the
circumstances that may be addressed by the technical review process
described in Sec. 902.68 of this part. The circumstances addressed in
this paragraph (a)(1) may include inconsistencies between local code
requirements and the HUD physical inspection protocol; conditions that
are permitted by local variance or license or which are preexisting
physical features that do not conform to, or are inconsistent with,
HUD's physical condition protocol; or the project or PHA having been
scored for elements (e.g., roads, sidewalks, mail boxes, resident-owned
appliances, etc.) that it does not own and is not responsible for
maintaining. To qualify for an adjustment on this basis, the project or
PHA must have notified the proper authorities regarding the deficient
element.
(2) An adjustment due to these circumstances may be initiated by a
project or PHA's notification to the applicable HUD regional or field
office, and such notification shall include appropriate proof of the
reasons for the unusual or incorrect result. Projects and PHAs may
submit the request for this adjustment either prior to or after the
physical inspection has been concluded. If the request is made after
the conclusion of the physical inspection, the request must be made
within 30 days of issuance of the project's or PHA's physical condition
score. Based on the recommendation of the applicable HUD office
following its review of the project evidence or documentation submitted
by the project or PHA, HUD may determine that a reinspection and
rescoring of the project or PHA is necessary.
(b) Adjustments for adverse conditions beyond the control of the
PHA. Under certain circumstances, HUD may determine that certain
deficiencies that adversely and significantly affect the physical
condition score of the project were caused by circumstances beyond the
control of the PHA. The correction of these conditions, however,
remains the responsibility of the PHA.
(1) The circumstances addressed by this paragraph (b)(1) may
include, but are not limited to, damage caused by third parties (such
as a private entity or public entity undertaking work near a public
housing project that results in damage to the project) or natural
disasters. (The circumstances addressed in paragraph (b)(1) are not
those addressed by the technical review process in Sec. 902.68.)
(2) To adjust a physical condition score based on circumstances
addressed in this paragraph, the PHA must submit a request to the
applicable HUD regional/field office requesting a reinspection of the
PHA's project(s). The request must be submitted within 30 days of the
issuance of the physical condition score to the PHA and must be
accompanied by a certification that all deficiencies identified in the
original report have been corrected. Based on the recommendation of the
applicable HUD office following its review of the project's or PHA's
evidence or documentation, HUD may determine that a reinspection and
rescoring of the PHA's project(s) is necessary.
(c) Adjustments for modernization work in progress. HUD may
determine that an occupied dwelling unit or other areas of a PHA's
project, subject to physical inspection under this subpart, and are
undergoing modernization work, requires an adjustment to the physical
condition score.
(1) An occupied dwelling unit or other areas of a PHA's project
undergoing modernization are subject to physical inspection; the
unit(s) and other areas of the PHA's project are not exempt from
physical inspection. All elements of the unit or of the other areas of
the PHA's project that are subject to inspection and are not undergoing
modernization at the time of the inspection (even if modernization is
planned) will be subject to HUD's physical inspection protocol without
adjustment. For those elements of the unit or of the project that are
undergoing modernization, deficiencies will be noted in accordance with
HUD's physical inspection protocol, but the project or PHA may request
adjustment of the physical condition score as a result of modernization
work in progress.
(2) An adjustment due to modernization work in progress may be
initiated by a project's or PHA's notification to the applicable HUD
office, and the notification shall include supporting documentation of
the modernization work under way at the time of the physical
inspection. A project or PHA may submit the request for this adjustment
either prior to or after the physical inspection has been concluded. If
the request is made after the conclusion of the physical inspection,
the request must be made within 30 days of issuance of the
[[Page 49558]]
physical condition score. Based on the recommendation of the applicable
HUD office, HUD may determine that a reinspection and rescoring of the
PHA's project(s) are necessary.
Sec. 902.25 Physical condition scoring and thresholds.
(a) Scoring. Under the physical condition indicator, a score will
be calculated for the overall condition of a PHA's public housing
portfolio, as well as for individual projects, following the procedures
described in the separate scoring document.
(b) Overall PHA physical condition indicator score. The overall
physical condition indicator score is a unit-weighted average of
project scores. The sum of the unit-weighted values is divided by the
total number of units in the PHA's portfolio to derive the overall
physical condition indicator score.
(c) Thresholds. (1) The project(s) 100-point physical condition
score is converted to a 30-point basis for the overall physical
condition indicator score. The project scores on the 100-point basis
are multiplied by 30 in order to derive a 30-point equivalent score to
compute the overall physical condition score and overall PHAS score.
(2) In order to receive a passing score under the physical
condition indicator, the PHA must achieve a score of at least 18
points, or 60 percent.
(3) A PHA that receives fewer than 18 points will be categorized as
a substandard physical condition agency.
Sec. 902.26 Physical Inspection Report.
(a) Following the physical inspection of each project and the
computation of the score(s) under this subpart, the PHA receives a
Physical Inspection Report. The Physical Inspection Report allows the
PHA to see the magnitude of the points lost by inspectable area, and
the impact on the score of the H&S and EHS deficiencies.
(1) If EHS items are identified in the report and were not
corrected under the provisions of Sec. 902.22(d), the PHA shall
correct all EHS deficiencies within 24 contiguous hours and may request
a reinspection.
(2) The request for reinspection must be made within 30 days of the
PHA's receipt of the Physical Inspection Report. The request for
reinspection must be accompanied by the PHA's identification of the EHS
deficiencies that have been corrected, and by the PHA's certification
that all such deficiencies identified in the report have been
corrected.
(3) If HUD determines that a reinspection is appropriate, it will
arrange for a complete reinspection of the project(s) in question, not
just the deficiencies previously identified. The reinspection will
constitute the final physical inspection for the project, and HUD will
issue a new inspection report (the final inspection report).
(4) If any of the previously identified EHS deficiencies that the
PHA certified were corrected are found during the reinspection not to
have been corrected, the score in the final inspection report will
reflect a point deduction of triple the value of the original
deduction, up to the maximum possible points for the unit or area, and
the PHA must reimburse HUD for the cost of the reinspection.
(5) If a request for reinspection is not made within 30 days after
the date that the PHA receives the Physical Inspection Report, the
Physical Inspection Report issued to the PHA will be the final Physical
Inspection Report.
(b) A Physical Inspection Report includes the following items:
(1) Normalized weights as the ``possible points'' by area;
(2) The area scores, taking into account the points deducted for
observed deficiencies;
(3) The H&S (nonlife threatening) and EHS (life threatening)
deductions for each of the five inspectable areas; a listing of all
observed smoke detector deficiencies; and a projection of the total
number of H&S and EHS problems that the inspector potentially would see
in an inspection of all buildings and all units; and
(4) The overall project score.
Subpart C--Financial Condition Indicator
Sec. 902.30 Financial condition assessment.
(a) Objective. The objective of the financial condition indicator
is to measure the financial condition of each public housing project
within a PHA's public housing portfolio for the purpose of evaluating
whether there are sufficient financial resources to support the
provision of housing that is DSS/GR. Individual project scores for
financial condition, as well as overall financial condition scores,
will be issued.
(b) Financial reporting standards. A PHA's financial condition will
be assessed under this indicator by measuring the combined performance
of all public housing projects in each of the subindicators listed in
Sec. 902.35, on the basis of the annual financial report provided in
accordance with Sec. 902.33.
Sec. 902.33 Financial reporting requirements.
(a) Annual financial report. All PHAs must submit their unaudited
and audited financial data to HUD on an annual basis. The financial
information must be:
(1) Prepared in accordance with Generally Accepted Accounting
Principles (GAAP), as further defined by HUD in supplementary guidance;
and
(2) Submitted electronically in the format prescribed by HUD using
the Financial Data Schedule (FDS).
(b) Annual unaudited financial information report filing dates. The
unaudited financial information to be submitted to HUD in accordance
with paragraph (a) of this section must be submitted to HUD annually,
no later than 2 months after the PHA's fiscal year end, with no penalty
applying until the 16th day of the 3rd month after the PHA's fiscal
year end, in accordance with Sec. 902.62.
(c) Annual audited financial information compliance dates. Audited
financial statements will 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 85.26).
(d) Year-end audited financial information. All PHAs that meet the
federal assistance threshold stated in the Single Audit Act and OMB
Circular A-133 must also submit year-end audited financial information.
(e) Submission of information. In addition to the submission of
information required by paragraph (a) of this section, a PHA shall
provide one copy of the completed audit report package and the
Management Letter issued by the Independent Auditor to the local HUD
regional/field office having jurisdiction over the PHA.
Sec. 902.35 Financial condition scoring and thresholds.
(a) Scoring. (1) Under the financial condition indicator, a score
will be calculated for each project based on the values of financial
condition subindicators and an overall financial condition score, as
well as audit and internal control flags. Each financial condition
subindicator has several levels of performance, with different point
values for each level.
(2) The financial condition score for projects and PHAs will be
based on the Low-Rent and Capital Fund program information, consistent
with Sec. 990.280(a) of the Public Housing Operating Fund program
regulation.
(3) Under the financial condition indicator, a score will be
calculated following the procedures described in appendix B.
(b) Subindicators of the financial condition indicator. The
subindicators of financial condition indicator are:
[[Page 49559]]
(1) Quick Ratio (QR). The QR compares quick assets to current
liabilities. Quick assets are cash and assets that are easily
convertible to cash and do not include inventory. Current liabilities
are those liabilities that are due within the next 12 months. A QR of
less than one indicates that the project's ability to make payments on
a timely basis may be at risk.
(2) Months Expendable Net Assets Ratio (MENAR). The MENAR measures
a project's ability to operate using its net available, unrestricted
resources without relying on additional funding. In particular, this
ratio compares the net available unrestricted resources to the average
monthly operating expenses. The result of this calculation shows how
many months of operating expenses can be covered with currently
available, unrestricted resources.
(3) Debt Service Coverage Ratio (DSCR). The DSCR is a measure of
net operating income available to make debt payments to the amount of
the debt payments. This subindicator is used if the PHA has taken on
long-term obligations. A DSCR of less than one would indicate that the
project would have difficulty generating sufficient cash flow to cover
both its expenses and its debt obligations.
(c) Overall PHA financial condition indicator score. The overall
financial condition indicator score is a unit-weighted average of
project scores. The sum of the weighted values is then divided by the
total number of units in the PHA's portfolio to derive the overall
financial condition indicator score.
(d) Thresholds. (1) The PHA's financial condition score is based on
a maximum of 20 points.
(2) In order for a PHA to receive a passing score under the
financial condition indicator, the PHA must achieve a score of at least
12 points, or 60 percent of the available points under this indicator.
(3) A PHA that receives fewer than 12 points available under this
indicator will be categorized as a substandard financial condition
agency.
Subpart D--Management Operations Indicator
Sec. 902.40 Management operations assessment.
(a) Objective. The objective of the management operations indicator
is to measure the PHA's performance of management operations through
the management performance of each project.
(b) Management assessment. The management operations indicator
incorporates the majority of the statutory indicators of section 6(j)
of the Act (42 U.S.C. 1437d(j)). (The remaining statutory indicators
are addressed under the other PHAS indicators.)
Sec. 902.43 Management operations performance standards.
(a) Management operations component. The following statutory
subindicators listed in this section, as well as the project management
review, will be used to assess the management operations of projects
and PHAs, consistent with section 6(j)(1) of the Act (42 U.S.C.
1437d(j)(1)). Individual project scores for management operations, as
well as overall PHA management operations scores, will be issued. The
components and scoring for each subindicator and the project management
review are in appendix C.
(1) Vacancy rate and percentage. This component measures the
adjusted vacancy rate and the progress that a project has made within
the previous 3 fiscal years to reduce such vacancies. Implicit in this
component is that the project has an adequate system for tracking
vacancy days.
(2) Rent collection. This component measures the percentage of rent
collected by a project against the rent charged.
Implicit in this component is that a project has an adequate system
to track and document total rents charged and total rents collected.
(3) Utility consumption. This component examines a project's energy
conservation/utility consumption.
(4) Turnaround time. This component examines the amount of time it
takes a project to turn around the units that were released within the
assessment period. Implicit in this component is that the project has
an adequate system for tracking vacant unit turnaround time.
(5) Work orders. This component measures the average number of days
that tenant-generated work orders are outstanding, and any progress a
project has made during the preceding 3 fiscal years to reduce the
period of time tenant-generated work orders are outstanding. Implicit
in this component is the adequacy of the project's system for tracking
work orders and ensuring the thoroughness and quality of the project's
needed repairs.
(6) Unit inspection. This component measures the percentage of
units that a project inspected during the assessment period. Projects
are required to inspect their property in accordance with the HUD-
prescribed physical inspection procedures as set forth in 24 CFR part
5, subpart G.
(i) Adequacy of inspection program. This component requires that
projects adequately track inspections, ensuring the thoroughness and
quality of the project's inspections.
(ii) Units to be inspected. All occupied units and units available
for occupancy are required to be inspected annually, consistent with
section 6(f)(3) of the Act (42 U.S.C. 1437d(f)(3)). This includes units
used for nondwelling purposes, those occupied by an employee, and those
used for resident services.
(7) Security. This component evaluates a project's performance in
tracking crime-related problems in the project; the adoption and
implementation of applicant screening and resident eviction policies
and procedures, and other anticrime strategies; and coordination with
local government officials and residents in the project and PHA on
implementation of such strategies.
(8) Economic self-sufficiency. This component evaluates the self-
sufficiency opportunities provided for adult residents.
(9) Resident involvement in project administration. This component
evaluates the opportunities for resident involvement in project
administration.
(b) Assessment under the management operations indicator. Projects
will be assessed under this indicator through management operations
information that is electronically submitted to HUD, such management
data as is available through the FDS, project management reviews
conducted by HUD, and other HUD data systems, such as the Subsidy and
Grant Information System.
Sec. 902.44 Adjustment for physical condition and neighborhood
environment.
(a) General. In accordance with section 6(j)(1)(I)(2) of the Act
(42 U.S.C. 1437d(j)(1)(I)(2)), the overall management operations score
for a project will be adjusted upward to the extent that negative
conditions are caused by situations outside the control of the project.
These situations are related to the poor physical condition of the
project or the overall depressed condition of the major census tract in
which a project is located. The intent of this adjustment is to avoid
penalizing such projects, through appropriate application of the
adjustment.
(b) Definitions. Definitions and application of physical condition
and neighborhood environment factors are:
(1) Physical condition adjustment applies to projects at least 28
years old, based on the unit-weighted average Date of Full Availability
(DOFA) date.
[[Page 49560]]
(2) Neighborhood environment adjustment applies to projects located
in census tracts where at least 40 percent of the families have an
income below the poverty rate, as documented by the most recent census
data. If a project is located in more than one census tract, the census
data for the census tract where the majority of the project's units are
located shall be used.
(c) Adjustment for physical condition and neighborhood environment.
HUD will adjust the management operations score of a project subject to
one or both of the physical condition and neighborhood environment
conditions. The adjustments will be made to the overall management
operations score for each project so as to reflect the difficulty in
managing the projects. In each instance where the actual management
operations score is rated below the maximum score of 40 points, one
point each will be added for physical condition and neighborhood
environment, but not to exceed the maximum number of 40 points
available for the management operations indicator.
(d) Application of adjustment. The adjustment for physical
condition and neighborhood environment will be calculated by HUD and
applied to all eligible projects.
Sec. 902.45 Management operations scoring and thresholds.
(a) Scoring. Under the management operations indicator, a score
will be calculated for each project, as well as for the overall
management operations of a PHA, that reflects weights based on the
relative importance of the individual management subindicators. Under
the management operations indicator, HUD will calculate a score
following the procedures described in the separate PHAS Management
Operations Scoring document.
(b) Overall PHA management operations indicator score. The overall
management operations indicator score is a unit-weighted average of
project scores. The sum of the weighted values is divided by the total
number of units in the PHA's portfolio to derive the overall management
operations indicator score.
(c) Thresholds. (1) The PHA's management operations score is based
on a maximum of 40 points.
(2) In order to receive a passing score under the management
operations indicator, a PHA must achieve a score of at least 24 points
or 60 percent.
(3) A PHA that receives fewer than 24 points will be categorized as
a substandard management operations agency.
Subpart E--Capital Fund Program Indicator
Sec. 902.50 Capital Fund program assessment.
(a) Objective. The Capital Fund program indicator examines the
period of time taken by a PHA to obligate funds and expend funds in
relation to statutory deadlines for obligation and expenditure for all
Capital Fund program grants for which fund balances remain during the
assessed fiscal year. Funds from the Capital Fund program under section
9(d) of the Act (42 U.S.C. 1437g(d)) do not include HOPE VI program
funds.
(b) Applicability. This indicator is applicable on a PHA-wide
basis, and not to individual projects. This indicator is not applicable
to PHAs that choose not to participate in the Capital Fund program
under section 9(d) of the Act.
(c) Method of assessment. The assessment required under the Capital
Fund program indicator will be performed through analysis of obligated
and expended amounts in HUD's e-LOCCS (or its successor) for all
Capital Fund program grants that were open during the assessed fiscal
year. This indicator measures the statutory requirements for the
Capital Fund program. Other aspects of the Capital Fund program will be
monitored by HUD through other types of reviews.
(1) PHAs are responsible to ensure that their Capital Fund program
information is submitted to e-LOCCS by the submission due date.
(2) A PHA may not appeal its PHAS score, Capital Fund program
score, or both, based on the fact that it did not submit its Capital
Fund program information to e-LOCCS by the submission due date.
Sec. 902.53 Capital Fund program scoring and thresholds.
(a) Scoring. The Capital Fund program indicator score provides an
assessment of a PHA's ability to obligate and expend Capital Fund
program grants in a timely manner. Under the Capital Fund program
indicator, a score will be calculated following the procedures
described in the separate PHAS Capital Fund program Scoring document.
(b) Thresholds. (1) The PHA's Capital Fund program score is based
on a maximum of 10 points.
(2) In order to receive a passing score under the Capital Fund
program indicator, a PHA must achieve a score of at least 6 points, or
60 percent.
Subpart F--PHAS Scoring
Sec. 902.60 Data collection.
(a) Fiscal year reporting period--limitation on changes after PHAS
effective date. To allow for a period of consistent assessments to
refine and make necessary adjustments to PHAS, a PHA is not permitted
to change its fiscal year for the first 3 full fiscal years following
June 30, 2009, unless such change is approved by HUD for good cause.
(b) Request for extension of time to submit unaudited financial
information. In the event of extenuating circumstances, a PHA may
request extensions of time to submit its unaudited financial
information. To receive an extension, a PHA must ensure that HUD
receives the extension request electronically 15 days before the
submission due date. The PHA's electronic extension request must
include an objectively verifiable justification as to why the PHA
cannot submit the information by the submission due date. PHAs shall
submit their requests for extensions of time for the submission of
unaudited financial information through the FASS Secure Systems Web
site. HUD shall forward its determination electronically to the
requesting PHA.
(c) Request for waiver of due date for PHA submission of audited
financial information. (1) HUD, for good cause, may grant PHAs a waiver
of the due date of the submission of audited financial information to
HUD. HUD shall consider written requests from PHAs for a waiver of the
report submission due date (established by OMB as no later than 9
months after the end of the fiscal year). The PHA's written request for
a waiver of the due date of the submission of audited financial
information must include an objectively verifiable justification as to
why the PHA cannot submit the information by the submission due date. A
PHA shall submit its written request for such a waiver, 30 days prior
to the submission due date, to the Assistant Secretary for Public and
Indian Housing, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC 20410-2135. HUD shall forward its
written determination of the waiver request to the PHA and, if
appropriate, establish a new submission due date for the audited
financial information.
(2) A waiver of the due date for the submission of audited
financial information to HUD does not relieve a PHA of its
responsibility to submit its audited information to the Federal Audit
Clearinghouse, as established by
[[Page 49561]]
OMB no later than 9 months after the end of its fiscal year.
(d) Rejected unaudited financial submissions. When HUD rejects a
PHA's year-end unaudited financial information after the due date, a
PHA shall have 15 days from the date of the rejection to resubmit the
information without a penalty being applied, in accordance with Sec.
902.62.
Sec. 902.62 Failure to submit data.
(a) Failure to submit data by due date. (1) If a PHA without a
finding of good cause by HUD does not submit its year-end financial
information, required by this part, or submits its unaudited year-end
financial information more than 15 days past the due date, appropriate
sanctions may be imposed, including a reduction of one point in the
total PHAS score for each 15-day period past the due date.
(2) If the unaudited year-end financial information is not received
within 3 months past the due date, or extended due date, the PHA will
receive a presumptive rating of failure for its unaudited information
and shall receive zero points for its unaudited financial information
and the final financial condition indicator score. The subsequent
timely submission of audited information does not negate the score of
zero received for the unaudited year-end financial information
submission.
(3) The PHA's audited financial statement must be received no later
than 9 months after the PHA's fiscal year-end, in accordance with OMB
Circular A-133 (see Sec. 902.33(c)). If the audited financial
statement is not received by that date, the PHA will receive a
presumptive rating of failure for the financial condition indicator.
(b) Verification of information submitted. (1) A PHA's year-end
financial information and any supporting documentation are subject to
review by an independent auditor, as authorized by section 6(j)(6) of
the Act (42 U.S.C. 1437(d)(j)(6)). 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 the financial condition
indicator, and a lower overall PHAS score.
(2) A PHA that cannot provide justifying documentation to HUD for
the assessment under any indicator(s), subindicator(s), or component(s)
shall receive a score of zero for the relevant indicator(s),
subindicator(s), or component(s), and its overall PHAS score shall be
lowered accordingly.
Sec. 902.64 PHAS scoring and audit reviews.
(a) Adjustments to PHAS score. (1) 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 adjusted (e.g., reduced in
points) in accordance with the audited results.
(2) A PHA's PHAS score under individual indicators, subindicators,
or components, or its overall PHAS score, may be changed by HUD in
accordance with data included in the audit report, or obtained through
such sources as HUD project management and other reviews,
investigations by HUD's Office of Fair Housing and Equal Opportunity,
investigations or audits by HUD's Office of Inspector General, or
reinspection by HUD, as applicable.
(b) Issuance of a score by HUD. An overall PHAS score will be
issued for each PHA after the later of one month after the submission
due date for financial data or one month after submission by the PHA of
its financial data. The overall PHAS score becomes the PHA's final PHAS
score after any adjustments requested by the PHA and determined
necessary under the processes provided in Sec. Sec. 902.25(d),
902.35(a), and 902.68; any adjustments resulting from the appeal
process provided in Sec. 902.69; and any adjustments determined
necessary as a result of the independent public accountant (IPA) audit.
(c) Review of audit--(1) Quality control review. HUD may undertake
a quality control review of the audit work papers or as part of the
Department's ongoing quality assurance process.
(2) Determination of deficiency. If HUD determines that the PHA's
financial statements, electronic financial submission, or audit are
deficient, it shall notify the PHA of such determination in writing.
The PHA will have 30 days in which to respond to the notice of
deficiency and to establish that the determination is erroneous.
Following consideration of any PHA response, HUD will issue a final
determination in writing to the PHA.
(i) Deficient financial statements. Deficient financial statements
are statements that are not presented, in some material respect, in
accordance with accounting principles generally accepted in the United
States, as set forth by the Government Accounting Standards Board, or
if applicable, the Financial Accounting Standards Board.
(ii) Deficient electronic submission. A deficient electronic
financial submission is a filing that was not made, in some material
respect, in accordance with HUD requirements or attested to in
accordance with the Standards for Attestation Engagements issued by the
American Institute of Certified Public Accountants or Generally
Accepted Government Auditing Standards.
(iii) Deficient audit. A deficient audit is one that was not
performed, in some material respect, in compliance with Generally
Accepted Government Auditing Standards; Generally Accepted Auditing
Standards; OMB Circular A-133, when applicable; or HUD requirements.
(3) HUD actions. If HUD determines that the financial statements,
electronic financial submission, or audit are deficient, HUD may adjust
the financial indicator score to zero and/or reduce the overall PHAS
score in accordance with the provisions of this section. Additionally,
if HUD determines that the audit is deficient, HUD may, at its
discretion, elect to serve as the audit committee for the PHA for the
next fiscal year and select the audit firm that will perform the audit
in question.
Sec. 902.66 Withholding, denying, and rescinding designation.
(a) Withholding designation. In exceptional circumstances, even
though a PHA has satisfied all of the PHAS indicators for high
performer or standard performer designation, HUD may conduct any review
as it may determine necessary, and may deny or rescind incentives or
high performer designation or standard performer designation, in the
case of a PHA that:
(1) Is operating under a special agreement with HUD (e.g., a civil
rights compliance agreement);
(2) Is involved in litigation that bears directly upon the
physical, financial, or management performance of a PHA;
(3) Is operating under a court order;
(4) Demonstrates substantial evidence of fraud or misconduct,
including evidence that the PHA's certifications, submitted in
accordance with this part, are not supported by the facts, as evidenced
by such sources as a HUD review, routine reports, an Office of
Inspector General investigation/audit, an independent auditor's audit,
or an investigation by any appropriate legal authority; or
(5) Demonstrates substantial noncompliance in one or more areas of
a PHA's required compliance with applicable laws and regulations,
including areas not assessed under PHAS. Areas of substantial
noncompliance include, but are not limited to, noncompliance with civil
rights, nondiscrimination and fair
[[Page 49562]]
housing laws and regulations, or the ACC. Substantial noncompliance
casts doubt on the capacity of a PHA to preserve and protect its public
housing projects and operate them consistent with federal laws and
regulations.
(b) High performer designation. If a high performer designation is
denied or rescinded, the PHA shall be designated either a standard
performer, substandard performer, or troubled performer, depending on
the nature and seriousness of the matter or matters constituting the
basis for HUD's action. If a standard performer designation is denied
or rescinded, the PHA shall be designated as a substandard performer or
troubled performer.
(c) Effect on score. The denial or rescission of a designation of
high performer or standard performer shall not affect the PHA's
numerical PHAS score, except where the denial or rescission is under
paragraph (a)(4) of this section.
Sec. 902.68 Technical review of PHAS physical condition indicator.
(a) Request for technical reviews. This section describes the
process for requesting and granting technical reviews of physical
inspection results.
(1) For these reviews, the burden of proof is on the PHA to show
that an error occurred.
(2) A request for technical review must be submitted in writing to
the Real Estate Assessment Center, Attention: Technical Review, and
must be received by HUD no later than 30 days following the issuance of
the applicable results to the PHA.
(b) Technical review of results of physical inspection results. (1)
For each project inspected, the results of the physical inspection and
a score for that project will be provided to the PHA. If the PHA
believes that an objectively verifiable and material error(s) occurred
in the inspection of an individual project, the PHA may request a
technical review of the inspection results for that project. Material
errors are the only grounds for technical review of physical inspection
results.
(2) A PHA's request for a technical review must be accompanied by
the PHA's evidence that an objectively verifiable and material error(s)
has occurred. The documentation submitted by the PHA may be
photographic evidence; written material from an objective source, such
as a local fire marshal or building code official; or other similar
evidence. The evidence must be more than a disagreement with the
inspector's observations, or the inspector's finding regarding the
severity of the deficiency.
(3) A technical review of a project's physical inspection will not
be conducted based on conditions that were corrected subsequent to the
inspection, nor will a request for a technical review be considered if
the request is based on a challenge to the inspector's findings as to
the severity of the deficiency (i.e., minor, major, or severe).
(4) Upon receipt of a PHA's request for technical review of a
project's inspection results, the PHA's file will be reviewed,
including any objectively verifiable evidence produced by the PHA. If
HUD's review determines that an objectively verifiable and material
error(s) has been documented, then one or a combination of the
following actions may be taken by HUD:
(i) Undertake a new inspection;
(ii) Correct the physical inspection report;
(iii) Issue a corrected physical condition score; and
(iv) Issue a corrected PHAS score.
(5) In determining whether a new inspection of the project is
warranted and a new PHAS score must be issued, the PHA's file will be
reviewed, including any evidence submitted, to determine whether the
evidence supports that there may have been a material contractor error
in the inspection that results in a significant change from the
project's original physical condition score and the PHAS designation
assigned to the PHA (i.e., high performer, standard performer,
substandard performer, or troubled performer). If HUD determines that a
new inspection is warranted, and the new inspection results in a
significant change from the original physical condition score, and from
the PHA's PHAS score and PHAS designation, the PHA shall be issued a
new PHAS score.
(6) Material errors are those that exhibit specific characteristics
and meet specific thresholds. The three types of material errors are:
(i) Building data error. A building data error occurs if the
inspection includes the wrong building or a building that was not owned
by the PHA, including common or site areas that were not a part of the
project. Incorrect building data that does not affect the score, such
as the address, building name, year built, etc., would not be
considered material, but will nonetheless be corrected upon notice to
HUD.
(ii) Unit count error. A unit count error occurs if the total
number of public housing units considered in scoring is incorrect.
Since scoring uses total public housing units, HUD will examine
instances where the participant can provide evidence that the total
units used is incorrect.
(iii) Nonexistent deficiency error. A nonexistent deficiency error
occurs if the inspection cites a deficiency that does not exist.
(7) HUD's decision on a request for technical review is final and
may not be further appealed under the administrative process in Sec.
902.69.
Sec. 902.69 PHA right of petition and appeal.
(a) Appeal of troubled performer designation and petition for
removal of troubled performer designation. A PHA may take any of the
following actions:
(1) Appeal its troubled performer designation (including Capital
Fund program troubled performer designation);
(2) Appeal its final overall PHAS score;
(3) Petition for removal of troubled performer designation;
(4) Appeal any refusal of a petition to remove troubled performer
designation; and
(5) Appeal actions under Sec. 902.66.
(b) Appeal of PHAS score. (1) If a PHA believes that an objectively
verifiable and material error(s) exists in any of the scores for its
PHAS indicators, which, if corrected, will result in a significant
change in the PHA's PHAS score and its designation (i.e., as troubled
performer, substandard performer, standard performer, or high
performer), the PHA may appeal its PHAS score in accordance with the
procedures of paragraphs (c), (d), and (e) of this section. A
significant change in a PHAS score is a change that would cause the
PHA's PHAS score to increase, resulting in a higher PHAS designation
for the PHA (i.e., from troubled performer to substandard performer or
standard performer, or from standard performer to high performer).
(2) A PHA may not appeal its PHAS score, physical condition score,
or both, based on the subsequent correction of deficiencies identified
as a result of a project's physical inspection or the denial of a
technical review request.
(3) A PHA may not appeal its PHAS score, Capital Fund program
score, or both, based on the fact that it did not submit its Capital
Fund program information to e-LOCCS by the submission due date.
(c) Appeal and petition procedures. (1) To appeal a troubled
performer designation or a final overall PHAS score, a PHA must submit
a request in writing to the Deputy Assistant Secretary of the Real
Estate Assessment Center, which must be received by HUD no later than
30 days following the issuance of the overall PHAS score to
[[Page 49563]]
the PHA. To petition the removal of a troubled performer designation, a
PHA must submit its request in writing to the Deputy Assistant
Secretary of the Real Estate Assessment Center.
(2) To appeal the denial of a petition to remove a troubled
performer designation, a PHA must submit a written request to the
Deputy Assistant Secretary of the Real Estate Assessment Center, which
must be received by HUD no later than 30 days after HUD's decision to
refuse to remove the PHA's troubled performer designation.
(3) To appeal the petition for the removal of a troubled performer
designation, or appeal the denial of a petition to remove a troubled
performer designation, a PHA shall submit its request in writing to the
Deputy Assistant Secretary of the Real Estate Assessment Center.
(4) An appeal of a troubled performer designation, the petition for
removal of a troubled performer designation, or the appeal of a refusal
of a petition to remove a troubled performer designation must include
the PHA's supporting documentation and reasons for the appeal or
petition. An appeal of a PHAS score must be accompanied by the PHA's
evidence that a material error occurred. An appeal or petition
submitted to HUD without supporting documentation will not be
considered and will be returned to the PHA.
(d) Denial, withholding, or rescission. A PHA that disagrees with
the basis for denial, withholding, or rescission of its designation
under Sec. 902.66 may make a written request for reinstatement within
30 days of notification by HUD of the denial or rescission of the
designation to the Assistant Secretary, and the request shall include
reasons for the reinstatement.
(e) Consideration of petitions and appeals. (1) Consideration of a
petition or the appeal of a final overall PHAS score, of a troubled
performer designation, or of a petition to remove troubled performer
designation. Upon receipt of such an appeal or a petition from a PHA,
HUD will evaluate the appeal and its merits for purposes of determining
whether a reassessment of the PHA is warranted. HUD will review the
PHA's file and the evidence submitted by the PHA to determine whether
an error occurred.
(2) Consideration of an appeal of refusal to remove a troubled
performer designation. Upon receipt of an appeal of refusal to remove a
troubled performer designation, HUD will evaluate the appeal and its
merits for the purposes of determining whether a reassessment of the
PHA is warranted. The officials evaluating an appeal of refusal to
remove a troubled performer designation will not be the same officials
who evaluated the PHA's petition to remove the troubled performer
designation.
(f) Notice and finality of decisions. (1) If HUD determines that
one or more objectively verifiable and material error has occurred, HUD
will undertake a new inspection of the project, arrange for audit
services, adjust the PHA's score, or perform other reexamination of the
financial, management, or Capital Fund program information, as
appropriate in light of the nature of the error that occurred. A new
score will be issued and an appropriate performance designation made by
HUD. HUD's decision on appeal of a PHAS score, issuance of a troubled
performer designation, or refusal to remove a troubled performer
designation will be final agency action. No reconsideration will be
given by HUD of such decisions.
(2) HUD will issue a written decision on all appeals and petitions
made under this section.
Subpart G--PHAS Incentives and Remedies
Sec. 902.71 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, and such
other incentives that HUD may determine appropriate and permissible
under program statutes or regulations.
(1) Relief from specific HUD requirements. A PHA that is designated
a high performer will be relieved of specific HUD requirements (e.g.,
will receive fewer reviews and less monitoring), effective upon
notification of a high performer designation.
(2) Public recognition. High performer PHAs and RMCs that receive a
score of at least 60 percent of the points available under each of the
four PHAS Indicators and achieve an overall PHAS score of 90 percent,
and no more than 10 percent of the total units are in projects that
fail any physical, financial, or management indicator, will receive a
Certificate of Commendation from HUD, as well as special public
recognition, as provided by the regional/field office.
(3) Bonus points in funding competitions. A high performer PHA may
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 and are provided in the relevant notice of funding
availability.
(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 audits;
(2) Office of Inspector General audits or investigations as
circumstances may warrant; and
(3) Reviews identified by the regional or field office in its
current Risk Assessment of PHAs and projects.
Sec. 902.73 PHAs with deficiencies.
(a) Oversight and action. Standard and substandard performers will
be referred to the regional/field office for appropriate oversight and
action.
(1) A standard performer that receives a total score of at least 60
percent shall be required to correct the deficiencies in performance
within the time period for correction, as stated in Sec. 902.73(c). If
the PHA fails to correct the deficiencies, HUD may either require the
PHA to enter into a Corrective Action Plan, or HUD may take other
action, as appropriate.
(2) A substandard performer, i.e., a PHA that achieves a score of
less than 60 percent of the total points available under one or more of
the physical condition, management, or financial condition PHAS
indicators, shall be required to correct the deficiencies in
performance within the time period for correction. If the PHA fails to
correct the deficiencies, HUD may require the PHA to enter into a
Corrective Action Plan, or take other action, as appropriate.
(3) A PHA with a project(s) that receives less than 60 percent of
the points available for any indicator or subindicator shall be
required to correct the deficiencies in performance within the time
period for correction, as stated in Sec. 902.73(b). If the PHA fails
to correct the deficiencies within the time period allowed, HUD may
either require the PHA to enter into a Corrective Action Plan, or take
other action, as appropriate.
(b) Correction of deficiencies--(1) Time period for correction.
After a
[[Page 49564]]
PHA's (or DF-RMC's) receipt of its final overall PHAS score and
designation as: A standard performer, within the range described in
Sec. 902.73(a)(1); or substandard performer, within the range
described in Sec. 902.73(a)(2), or, in the case of an RMC, after
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-executed Corrective Action Plan, if
required.
(2) Notification and report to regional or field office. A PHA
shall notify the regional or field office of its action to correct a
deficiency. A PHA shall also forward to the regional or field office an
RMC's report of its action to correct a deficiency. A DF-RMC shall
forward directly to the regional or field office its report of its
action to correct a deficiency.
(c) Failure to correct deficiencies. (1) If a PHA (or DF-RMC or
RMC) fails to correct deficiencies within the time period noted in
paragraph (b) of this section, or to correct deficiencies within the
time specified in a Corrective Action Plan, or within such extensions
as may be granted by HUD, the regional/field office will notify the PHA
of its noncompliance.
(2) The PHA (or DF-RMC or RMC) will provide the regional/field
office with its reasons for lack of progress in negotiating, executing,
or carrying out the Corrective Action Plan, within 30 days of the PHA's
receipt of the noncompliance notification. HUD will advise the PHA as
to the acceptability of its reasons for lack of progress.
(3) If HUD finds the PHA's (or DF-RMC or RMC) reasons for lack of
progress unacceptable, HUD will notify the PHA (or DF-RMC or RMC) that
it will take such actions as it may determine appropriate in accordance
with the provisions of the 1937 Act and other statutes, the ACC, this
part, and other HUD regulations, including, but not limited to, the
remedies available for substantial default.
Sec. 902.75 Troubled performers.
(a) General. Upon a PHA's designation as a troubled performer, in
accordance with the requirements of section 6(j)(2)(B) of the Act (42
U.S.C. 1437d(j)(2)(B) and in accordance with this part, HUD must notify
the PHA and shall refer each troubled performer PHA to the PHA's
regional/field office, or other designated office(s) at HUD, for
remedial action, oversight, and monitoring. The actions to be taken by
HUD and the PHA will include actions statutorily required, and such
other actions as may be determined appropriate by HUD.
(b) Memorandum of agreement (MOA). Within 30 days of notification
of a PHA's designation as a troubled performer, HUD will initiate
activities to negotiate and develop an MOA. An MOA is required for a
troubled performer. 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. It shall include, but not be
limited to:
(1) Baseline data, which should be data without adjustments or
weighting but may be the PHA's score in each of the PHAS indicators,
subindicators, components identified as a deficiency;
(2) Performance targets for such periods specified by HUD (e.g.,
annual, semiannual, quarterly, monthly), which may be the attainment of
a higher score within an indicator, subindicator, or component 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, including the identification
of the party responsible for the completion of each task and for
reporting progress;
(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 a
troubled performer designation or troubled with respect to the program
for assistance from the Capital Fund program under section 9(d) of the
Act (42 U.S.C. 1437g(d)) and HUD recognition for the most-improved
PHAs;
(7) The consequences of failing to meet the targets, which include,
but are not limited to, the interventions stated in 24 CFR part 907 and
in section 6(j)(3) of the Act (42 U.S.C. 1437d(j)(3)); 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 commitments of support, financial or otherwise.
(c) PHA review of MOA. The PHA will have 10 days to review the MOA.
During this 10-day period, the PHA shall resolve any claimed
discrepancies in the MOA with HUD, and discuss any recommended changes
and target dates for improvement to be incorporated in the final MOA.
Unless the time period is extended by HUD, the MOA is to be executed 15
days following issuance of the draft MOA.
(d) Maximum recovery period--(1) Expiration of the first-year
improvement period. Upon the expiration of the one-year period that
started on the date on which the PHA receives initial notice of a
troubled performer designation, the PHA shall, by the next PHAS
assessment that is at least 12 months after the initial notice of the
troubled performer designation, improve its performance by at least 50
percent of the difference between the initial PHAS assessment score
that led to the troubled performer status and the score necessary to
remove the PHA's designation as a troubled performer.
(2) Expiration of 2-year recovery period. Upon the expiration of
the 2-year period that started on the date on which the PHA received
the initial notice of a troubled performer designation, the PHA shall,
by the next PHAS assessment that is at least 24 months after the
initial notice of the troubled performer designation, improve its
performance and achieve an overall PHAS score of at least 60 percent of
the total points available.
(e) Parties to the MOA. An MOA shall be executed by:
(1) The PHA Board Chairperson (supported 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 regional or field office Public Housing Director; and
(4) The appointing authorities of the Board of Commissioners, if
required by the regional/field office Public Housing Director.
(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 performer PHA fails or
[[Page 49565]]
refuses to execute an MOA within the period provided in paragraph (c)
of this section, or a troubled performer PHA operating under an
executed MOA does not show a substantial improvement, as provided in
paragraph (d) of this section, toward a passing PHAS score following
the issuance of the failing PHAS score by HUD, the regional/field
office Public Housing Director shall refer the PHA to the Assistant
Secretary to determine such remedial actions, consistent with the
provisions of the ACC and other HUD regulations, including, but not
limited to, remedies available for substantial default.
(2) For purposes of paragraph (g) of this section, substantial
improvement is defined as the improvement required by paragraph (d) of
this section. The maximum period of time for remaining in troubled
performer status before being referred to the Assistant Secretary is 2
years after the initial notification of the troubled performer
designation. Therefore, the PHA must make substantial improvement in
each year of this 2-year period.
(3) The following example illustrates the provisions of paragraph
(g)(1) of this section:
Example: A PHA receives a score of 50 points; 60 points is a
passing score. Upon the expiration of the one-year period that
started on the date on which the PHA received the initial
notification of the troubled performer designation, the PHA must
achieve at least 55 points (50 percent of the 10 points necessary to
achieve a passing score of 60 points) to continue recovery efforts.
In the second year, the PHA must achieve a minimum score of 60
points (a passing score). If, in the first year that started on the
date on which the PHA received the initial notification of the
troubled designation, the PHA fails to achieve the 5-point increase,
or if the PHA achieves the 5-point increase within the first year
that started on the date on which the PHA received the initial
notification of the troubled designation, but fails to achieve the
minimum passing score of 60 points after the second year after the
initial notification, HUD will notify the PHA that it will take such
actions as it may determine appropriate in accordance with the
provisions of the ACC and other HUD regulations, including, but not
limited to, the remedies available for substantial default.
(h) Audit review. For a PHA designated as a troubled performer, HUD
may perform an audit review and may, at its discretion, select the
audit firm that will perform the audit of the PHA; and HUD may, at its
discretion, serve as the audit committee for the audit in question.
(i) Continuation of services to residents. To the extent feasible,
while a PHA is in a troubled performer status, all services to
residents will continue uninterrupted.
Sec. 902.79 Verification and records.
All project and PHA certifications, year-end financial information,
and supporting documentation are subject to HUD verification at any
time, including review by an independent auditor. All PHAs must retain
supporting documents for any certifications and for asset management
reviews for at least 3 years. Failure to maintain and provide
supporting documentation for a period of 3 years for any indicator(s),
subindicator(s), or other methods used to assess performance shall
result in a score of zero for the indicator(s) or subindicator(s), and
a lower overall PHAS score for the applicable assessment period.
Sec. 902.81 Resident petitions for remedial action.
Residents of a PHA designated as troubled pursuant to section
6(j)(2)(A) of the Act (42 U.S.C. 1437d(j)(2)(A)), may petition HUD in
writing to take one or more of the actions referred to in section
6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)). HUD will consider any
petition from a group of residents totaling at least 20 percent of the
PHA's residents, or from an organization or organizations of residents
whose membership equals at least 20 percent of the PHA's residents. HUD
shall respond to such petitions in a timely manner with a written
description of the actions, if any, HUD plans to take and, where
applicable, the reasons why such actions differ from the course
proposed by the residents. Nothing in this section shall limit HUD's
discretion to determine whether a substantial default has occurred or
to select the appropriate intervention upon such determination.
Sec. 902.83 Sanctions for troubled performer PHAs.
(a) If a troubled performer PHA fails to make substantial
improvement, as set forth in Sec. 902.75(d), HUD shall:
(1) In the case of a troubled performer PHA with 1,250 or more
units, declare substantial default in accordance with Sec. 907.3(b)(3)
and petition for the appointment of a receiver pursuant to section
6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or
(2) In the case of a troubled performer PHA with fewer than 1,250
units, declare substantial default in accordance with Sec. 907.3(b)(3)
and either petition for the appointment of a receiver pursuant to
section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)), or
take possession of the PHA (including all or part of any project or
program of the PHA) pursuant to section 6(j)(3)(A)(iv) of the Act (42
U.S.C. 1437d(j)(3)(A)(iv)), and appoint, on a competitive or
noncompetitive basis, an individual or entity as an administrative
receiver to assume the responsibilities of HUD for the administration
of all or part of the PHA (including all or part of any project or
program of the PHA).
(3) In the case of substantial default by a troubled performer PHA,
nothing in this section shall be construed to limit the courses of
action available to HUD under this part, 24 CFR part 907, or section
6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)) for any other
substantial default by a PHA.
(b) If a troubled performer PHA fails to execute or meet the
requirements of an MOA in accordance with Sec. 902.75, other than as
specified in paragraph (a) of this section, the PHA may be deemed to be
in substantial default by HUD and any remedy available therefore may be
invoked in the discretion of HUD.
Appendix A to Part 902--Physical Condition Scoring
I. Purpose of This Appendix
This appendix describes the physical condition scoring process
under the proposed revisions to the PHAS regulation and prescribes
the frequency of individual project inspections.
II. Purpose of the PHAS Physical Condition Assessment
The purpose of the PHAS physical condition assessment is to
ensure that public housing units are decent, safe, sanitary and in
good repair, as determined by an inspection conducted in accordance
with HUD's Uniform Physical Condition Standards (UPCS) codified at
24 CFR part 5, subpart G. The physical condition assessment under
the PHAS utilizes uniform physical inspection procedures to
determine compliance with uniform standards and is an important
indicator of performance for a project and a PHA. All projects will
be assessed under the Physical Condition Indicator, even if a PHA
has not converted to asset management.
The Physical Condition Indicator score is based on a maximum of
30 points. In order to receive a passing score under this indicator,
a project must achieve at least 18 points or 60 percent of the
points available under this indicator. Under the PHAS Physical
Condition Indicator, REAC will calculate a score for each project,
as well as for the overall physical condition of a PHA. The physical
condition score, based on a 30-point scale, is included in each
PHA's aggregate PHAS score.
III. Transition to Asset Management and Frequency of Inspections
The number of units in a PHA's Low-Rent program and the PHAS
designation for small PHAs will determine the frequency of physical
inspections during and after the transition to asset management.
Deregulation of small PHAs provides that PHAs with less than 250
public housing units are assessed and scored every other year,
unless
[[Page 49566]]
designated a PHAS troubled performer. PHAs with less than 250 units
that are designed troubled will be assessed every year. The score of
a project in a PHA with less than 250 units will not affect the
frequency of inspections for either that project or the associated
PHA, unless the PHA has a single project resulting in the project
score equating to the overall physical inspection indicator score.
The frequency of physical inspections for small PHAs will be
determined based upon the PHAS designation.
For PHAs with 250 or more units of any PHAS designation, the
inspection score of each project (not the overall physical indicator
score) will determine the frequency of inspections for that project.
Projects that score 80 points or higher based on a possible 100-
point project score will be inspected every other year. Projects
that score less than 80 points based on the possible 100-point
project score will be inspected annually. The performance incentive,
to be inspected every other year, will change from PHA-based to
project-based. A troubled physical PHAS designation will not affect
the frequency of project inspections for such PHAs. Project
inspections for PHAs with 250 or more units will be based on the
project's prior year inspection score.
Projects of overall troubled PHAs with 250 or more units that
score 80 points or higher based on a possible 100-point project
score will be inspected every other year. Projects that score less
than 80 points based on the possible 100-point project score will
then be inspected annually. PHAs with 249 or less units, inspected
and designated as troubled, will be inspected again the next year.
PHAs of 250 units or more with unit-weighted project scores from 2
different years will have all their prior year scores of 80 and
above (and current year scores for each project that was inspected),
multiplied by 30 percent, totaled together, and rounded to produce
an overall physical indicator score.
IV. Item Weights and Criticality Levels and Dictionary of Deficiency
Definitions
The Item Weights and Criticality Levels tables and the
Dictionary of Deficiency Definitions currently in use are available
in HUD's REAC Physical Inspection Library Internet site at: http://www.hud.gov/offices/reac/library/lib_phyi.cfm#FEDERAL.
V. Validity and Reliability of the Physical Inspection Protocols
The Conference Report (H.R. Conf. Rep. 106-988; October 18,
2000) accompanying HUD's FY 2001 Appropriations Act (Pub. L. 106-
377, approved October 27, 2000) directed HUD to continue to assess
the accuracy and effectiveness of the PHAS system, in particular the
physical condition inspection protocol. HUD was also directed to
perform a statistically valid test of PHAS, conduct a thorough
analysis of the results, and have the methodology and results
reviewed by an independent expert before taking any adverse action
against a PHA based solely on its PHAS score. HUD retained the Louis
Berger Group (the contractor) to conduct the review of the
methodology and results of the statistically valid test.
The findings of the contractor's study concluded that the
physical condition inspection protocol is repeatable and reliable. A
report addressing the issues raised in the Conference Report,
entitled the Review and Assessment of the REAC Study of the Physical
Assessment Sub-System (PASS) Process, was provided to the House and
Senate Committees on Appropriations on March 1, 2001.
VI. The Physical Inspection Scoring Process
The PHAS physical inspection generates comprehensive results,
including physical inspection scores reported at the project level,
area level scores for each of the five physical inspection areas, as
applicable, and observations of deficiencies recorded electronically
by the inspector at the time of the inspection.
1. Definitions
The following are the definitions of the terms used in the
physical condition scoring process:
Criticality means one of five levels that reflect the relative
importance of the deficiencies for an inspectable item. Appendix 1
lists all deficiencies with their designated criticality levels,
which vary from 1 to 5, with 5 being the most critical. Based on the
criticality level, each deficiency has an assigned value that is
used in scoring. Those values are as follows:
------------------------------------------------------------------------
Criticality Level Value
------------------------------------------------------------------------
Critical.............................................. 5 5.00
Very Important........................................ 4 3.00
Important............................................. 3 2.25
Contributes........................................... 2 1.25
Slight Contribution................................... 1 0.50
------------------------------------------------------------------------
Based on the importance of the deficiency as reflected by its
criticality value, points are deducted from the project score. For
example, a clogged drain in the kitchen is more critical than a
damaged surface on a counter top. Therefore, more points will be
deducted for a clogged drain than for a damaged surface.
Deficiencies refer to specific problems that are recorded for
inspectable items, such as a hole in a wall or a damaged
refrigerator in the kitchen.
Inspectable area means any of the five major components of the
project: Site, building exteriors, building systems, common areas,
and dwelling units.
Inspectable items refer to walls, kitchens, bathrooms, and other
features that are inspected in an inspectable area. The number of
inspectable items varies for each inspectable area from 8 to 17.
Weights are assigned to each item to reflect their relative
importance and are shown in the Item Weights and Criticality Levels
tables. The tables refer to the weight of each item as the nominal
item weight, which is also known as the amenity weight.
Normalized area weight represents weights used with area scores
to calculate project-level scores. The weights are adjusted to
reflect the inspectable items actually present at the time of the
inspection. These weights are proportional, as follows:
For dwelling units, the area score is the weighted
average of sub-area scores for each unit, weighted by the total of
item weights present for inspection in each unit, which is referred
to as the amenity weight.
For common areas, the area score is the weighted
average of sub-area common area scores weighted by the total weights
for items available for inspection (or amenity weight) in each
residential building common area or common building. Common
buildings refer to any inspectable building that contains no
dwelling units. All common buildings are inspected.
For building exteriors or building systems, the area
scores are weighted averages of sub-area scores.
For sites, the area score is calculated as follows: (1)
The amenity weights found on a site, (2) minus deductions for
deficiencies, and (3) normalized to a 100-point scale.
Normalized sub-area weight means the weight used with sub-area
scores to compute an inspectable area score. These weights are
proportional:
For dwelling units, the item weight of amenities
available in the unit at the time of inspection is the amenity
weight.
For common areas, the common area amenity weight is
divided by a building's probability of being selected for
inspection. All residential buildings with common areas may not be
selected for inspection; however, all buildings with common areas
are selected to determine the amenity weight.
For building exterior and building systems, the
building exterior or building system amenity weight is multiplied by
the building's size (number of units) and then divided by its
probability of being selected for inspection.
For the site, there is no sub-area score. For each
project, there is a single site.
Note that dividing by a building's probability of being selected
for inspection is the same as multiplying by the probability weight,
since the probability weight is 1 divided by the probability of
being selected for inspection.
Project is used synonymously with the term ``property.''
Severity means one of three levels that reflect the extent of
damage associated with each deficiency, with values assigned as
follows:
------------------------------------------------------------------------
Severity level Value
------------------------------------------------------------------------
3.............................................................. 1.00
2.............................................................. 0.50
1.............................................................. 0.25
------------------------------------------------------------------------
The Item Weights and Criticality Levels tables show the severity
levels that are possible for each deficiency. Based on the severity
of each deficiency, the score is reduced. Points deducted are
calculated by multiplying the item weight by the values for
criticality and severity, as described below. For specific
definitions of each severity level, see the Dictionary of Deficiency
Definitions, which is available from REAC's Physical Inspection
Library Internet site at: http://www.hud.gov/offices/reac/library/lib_phyi.cfm#FEDERAL.
Score means a number between 0 and one hundred (100) that
reflects the physical
[[Page 49567]]
condition of a project, inspectable area, dwelling area, or sub-
area. A property score includes both an alphabetical and a numerical
component. The number represents an overall score for the basic
physical condition of a property, including points deducted for
health and safety deficiencies other than those associated with
smoke detectors. The letter code specifically indicates whether
health and safety deficiencies were detected, as shown in the chart
below:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Health and safety deficiencies
-------------------------------------------------------------------
No health and Life Fire safety
Physical inspection score alphanumeric codes safety Non-life threatening ---------------------------------
deficiencies threatening (LT)/exigent No smoke
(NLT) health and detector Smoke detector
safety (EHS) problems problems
--------------------------------------------------------------------------------------------------------------------------------------------------------
a.................................................................. X ............... ............... X ...............
a*................................................................. X ............... ............... ............... X
b.................................................................. ............... X ............... X ...............
b*................................................................. ............... X ............... ............... X
c.................................................................. ............... ............... X X ...............
c*................................................................. ............... ............... X ............... X
--------------------------------------------------------------------------------------------------------------------------------------------------------
To record a health or safety problem, a letter is added to the
project score (a, b, or c); and to note that one or more smoke
detectors are inoperable or missing, an asterisk (*) is added to the
project score.
Sub-area means an area that will be inspected for all
inspectable areas except the site. For example, the building
exterior for building ``2'' is a sub-area of the building exterior
area. Likewise, unit ``5'' would be a sub-area of the dwelling units
area. Each inspectable area for each building in a property is
treated as a sub-area.
2. Scoring Protocol
To generate accurate scores, the inspection protocol includes a
determination of the appropriate relative weights of the various
components of the inspection; that is, which components are the most
important, the next most important, and so on. For example, in the
building exterior area, a blocked or damaged fire escape is more
important than a cracked window, which is more important than a
broken light fixture. The Item Weights and Criticality Levels tables
provide the nominal weight of observable deficiencies by inspectable
item for each area/sub-area. The Dictionary of Deficiency
Definitions provides a definition for the severity of each
deficiency in each area/sub-area.
3. Equity Principles
In addition to determining the appropriate relative weights,
consideration is also given to several issues concerning equity
between properties so that scores fairly assess all types of
properties:
Proportionality. The scoring methodology includes an important
control that does not allow any sub-area scores to be negative. If a
sub-area, such as the building exterior for a given building, has so
many deficiencies that the sub-area score would be negative, the
score is set to zero. This control mechanism ensures that no single
building or dwelling unit can affect the overall score more than its
proportionate share of the whole.
Configuration of project. The scoring methodology takes into
account different numbers of units in buildings. To fairly score
projects with different numbers of units in buildings, the area
scores are calculated for building exteriors and systems by using
weighted averages of the sub-area scores, where the weights are
based on the number of units in each building and on the building's
probability of being selected for inspection. In addition, the
calculation for common areas includes the amenities existing in the
residential common areas and common buildings at the time of
inspection.
Differences between projects. The scoring methodology also takes
into account that projects have different features and amenities. To
ensure that the overall score reflects only items that are present
to be inspected, weights to calculate area and project scores are
adjusted depending on how many items are actually there to be
inspected.
4. Deficiency Definitions
During a physical inspection of a project, the inspector looks
for deficiencies for each inspectable item within the inspectable
areas, such as the walls (the inspectable item) of a dwelling unit
(the inspectable area). Based on the observed condition, the
Dictionary of Deficiency Definitions defines up to the three levels
of severity for each deficiency: Level 1 (minor), Level 2 (major),
and Level 3 (severe). The associated values were shown earlier in
the first chart of Section VI. A specific criticality level, with
associated values as shown in that chart, is also assigned to each
deficiency. The criticality level reflects the importance of the
deficiency relative to all other possible observable deficiencies
for the inspectable area.
5. Health and Safety Deficiencies
The UPCS physical inspection emphasizes health and safety (H&S)
deficiencies because of their crucial impact on the well-being of
residents. A subset of H&S deficiencies is exigent health and safety
(EHS) deficiencies. These are life threatening (LT) and require
immediate action or remedy. EHS deficiencies can substantially
reduce the overall project score. As noted in the definition for the
word ``score'' in the Definitions section, all H&S deficiencies are
highlighted by the addition of a letter to the numeric score. The
Item Weights and Criticality Levels tables list all H&S deficiencies
with an LT designation for those that are EHS deficiencies and an
NLT designation for those that are non-life threatening. The LT and
NLT designations apply only to severity level 3 deficiencies.
To ensure prompt correction of H&S deficiencies, the inspector
gives the project representative a deficiency report identifying
every observed EHS deficiency before the inspector leaves the site.
The project representative acknowledges receipt of the deficiency
report by signature. The inspector also transmits the deficiency
report to HUD no later than the morning of the first business day
after completing the inspection. HUD makes available to all PHAs an
inspection report that includes information about all of the H&S
deficiencies recorded by the inspector. The report shows:
The number of H&S deficiencies (EHS and NLT) that the
inspector observed;
All observed smoke detector deficiencies; and
A projection of the total number of H&S problems that
the inspector potentially would see in an inspection of all
buildings and all units.
Problems with smoke detectors do not currently affect the
overall score. When there is an asterisk indicating that the project
has at least one smoke detector deficiency, that part of the score
may be identified as ``risk;'' for example, ``93a, risk'' for 93a*,
and ``71c, risk'' for 71c*. There are six distinct letter grade
combinations based on the H&S deficiencies and smoke detector
deficiencies observed: a, a*, b, b*, c, and c*. For example:
A score of 90c* means that the project contains at
least one EHS deficiency to be corrected, including at least one
smoke detector deficiency, but is otherwise in excellent condition.
A score of 40b* means the project is in poor condition,
has at least one non-life threatening deficiency, and has at least
one missing or inoperable smoke detector.
A score of 55a means that the project is in poor
condition, even though there are no H&S deficiencies.
A project in excellent physical condition with no H&S
deficiencies would have a score of 90a to 100a.
6. Scoring Process Elements
The physical condition scoring process is based on three
elements within each project: (1) Five inspectable areas (site,
exterior, systems, common areas, and dwelling units); (2)
inspectable items in each inspectable area; and (3) observed
deficiencies. In broad
[[Page 49568]]
terms, the score for a property is the weighted average of the five
inspectable area scores, where area weights are adjusted to account
for all of the inspectable items that are actually present to be
inspected. In turn, area scores are calculated by using weighted
averages of sub-area scores (e.g., building area scores for a single
building or unit scores for a single unit) for all sub-areas within
an area.
7. Scoring Using Weighted Averages
For all areas except the site, normalized sub-area weights are
determined using the size of sub-areas, the items available for
inspection, and the sub-area's probability of selection for
inspection. Sub-area scores are determined by deducting points for
deficiencies based on the importance (weight) of the item, the
criticality of the deficiency, and the severity of the deficiency.
The maximum deduction for a single deficiency will not calculate a
score of less than zero. Points will be deducted only for one
deficiency of the same kind within a sub-area. For example, if
multiple deficiencies for broken windows are recorded, only the most
severe deficiency observed (or one of the most severe, if there are
multiple deficiencies with the same level of severity) will result
in a point deduction.
8. Essential Weights and Levels
The process of scoring a project's physical condition depends on
the weights, levels, and associated values of the following
quantities:
Weights for the 5 inspectable areas (site, building
exteriors, building systems, common areas, and dwelling units).
Weights for inspectable items within inspectable areas
(8 to 17 per area).
Criticality levels (critical, very important,
important, contributes, and slight contribution) plus their
associated values for deficiencies within areas inspected.
Severity levels (3, 2, and 1) and their associated
values for deficiencies.
Health and safety deductions (exigent/fire safety and
non-life threatening for all inspectable areas).
9. Area Weights
Area weights are used to obtain a weighted average of area
scores. A project's overall physical condition score is a weighted
average of all inspectable area scores. The approximate relative
weights are:
------------------------------------------------------------------------
Weight
Inspectable area (percent)
------------------------------------------------------------------------
Site......................................................... 15
Building Exterior............................................ 15
Building Systems............................................. 20
Common Areas................................................. 15
Dwelling Units............................................... 35
------------------------------------------------------------------------
These weights are assigned for all inspections when all
inspectable items are present for each area and for each building
and unit. All of the inspectable items may not be present in every
inspectable area. When items are missing in an area, the area
weights are modified to reflect the missing items so that within
that area they will add up to 100 percent. Area weights are
recalculated when some inspectable items are missing in one or more
area(s).
Although rare, it is possible that an inspectable area could
have no inspectable items available; for example, there could be no
common areas in the inspected residential buildings and no common
buildings. In this case, the weight of the ``common areas'' would be
0 percent and its original 15 percent weight would be equitably
redistributed to the other inspectable areas, as shown in the
example below:
----------------------------------------------------------------------------------------------------------------
Missing common Adjusted
Inspectable area Normal weight areas Adjustment weight
(percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Site................................. 15 15 .15/.85 =................ 18
Building Exterior.................... 15 15 .15/.85 =................ 18
Building Systems..................... 20 20 .20/.85 =................ 23
Common Areas......................... 15 0 ......................... 0
Dwelling Units....................... 35 35 .35/.85 =................ 41
--------------------------------------------------------------------------
Total............................ 100 85 ......................... 100
----------------------------------------------------------------------------------------------------------------
The original 15 percent weight for the common areas is redistributed
by totaling the weights of other inspectable areas (100 percent
minus 15 percent = 85 percent) and dividing the weights of each
other area by that amount (0.85). The modified weights would then be
18 percent for site, 18 percent for building exterior, 23 percent
for building systems, 0 percent for common areas, 41 percent for
dwelling units, and again be equal to (be normalized to) 100
percent.
10. Area and Sub-Area Scores
For inspectable areas with sub-areas (all areas except sites),
the inspectable area score is a weighted average of the sub-area
scores within that area. The scoring protocol determines the amenity
weight for the site and each sub-area as noted in Section VI.1 under
the definition for normalized sub-area weight. For example, a
property with no fencing or gates in the inspectable area of the
site would have an amenity weight of 90 percent or 0.9 (100 percent
minus 10 percent for lack of fencing and gates), and a single
dwelling unit with all items available for inspection except a call-
for-aid would have an amenity weight of 0.98 or 98 percent (100
percent minus 2 percent for lack of call-for-aid).
The amenity weight excludes all health and safety items. Each
deficiency as weighted and normalized are subtracted from the sub-
area or site-weighted amenity score. Sub-area and site area scores
are further reduced for any observed health and safety deficiencies.
These deductions are taken at the site, building, or unit level. At
this point, a control is applied to prevent a negative site,
building, or unit score. The control ensures that no single building
or unit can affect an area score more than its weighted share.
11. Overall Project Score
The overall project score is the weighted average of the five
inspectable area scores, with the five areas weighted by their
normalized weights. Normalized area weights reflect both the initial
weights and the relative weights between areas of inspectable items
actually present. For reporting purposes, the number of possible
points is the normalized area weight adjusted by multiplying by 100
so that the possible points for the five areas add up to 100. In the
Physical Inspection Report for each project that is sent to the PHA,
the following items are listed:
Normalized weights as the ``possible points'' by area;
The area scores, taking into account the points
deducted for observed deficiencies;
The deductions for H&S for each inspectable area; and
The overall project score.
The Physical Inspection Report allows the PHA and the project
manager to see the magnitude of the points lost by inspectable area
and the impact on the score of the H&S deficiencies.
12. Examples of Physical Condition Score Calculations
The physical inspection scoring is deficiency based. All
projects start with 100 points. Each deficiency observed reduces the
score by an amount dependent on the importance and severity of the
deficiency, the number of buildings and units inspected, the
inspectable items actually present to be inspected, and the relative
weights between inspectable items and inspectable areas.
The calculation of a physical condition score is illustrated in
the examples below. The examples go through a number of interim
stages in calculating the score, illustrating how sub-area scores
are calculated for a single project, how the sub-area scores are
rolled up into area scores, and how area scores are combined to
calculate the overall project score. One particular
[[Page 49569]]
deficiency is carried through the examples showing the end result.
As will be seen, the deduction starts out as a percent of the
sub-area. Then the area score is considerably decreased in the final
overall project score because the deduction is averaged across other
sub-areas and then averaged across the five inspectable areas.
Although interim results in the examples are rounded, only the final
results are rounded for actual calculations.
To illustrate how physical condition scores are calculated,
three examples are provided below. Following this section, another
example is given specifically for public housing projects to show
how project scores are rolled up into the PHAS physical indicator
score for the PHA as a whole.
Example #1 illustrates how the score for a sub-area of building
systems is calculated. Consider a 10-unit residential building in
which the five inspectable areas are present. During the inspection,
damaged vents in the roof are observed. This deficiency reflected a
severity level of 1, which has a severity weight of 0.25; a
criticality level of 4, which has a criticality weight of 3; and an
item weight of 16.0. The amount of the points deducted is the item
weight, multiplied by the criticality weight multiplied by the
severity value. This is illustrated in the table below.
Area: Building Exterior.
Item: Roof.
Deficiency: Damaged Vents.
Criticality Level: 4, Severity Level: 1.
------------------------------------------------------------------------
Element Associated value
------------------------------------------------------------------------
Item Weight...................... 16
Criticality Weight............... 3.0
Severity Weight.................. 0.25
Calculation of Points Deducted 16 x 3 x 0.25 = 12
for Deficiency.
------------------------------------------------------------------------
If this building exterior has all inspectable items except for a
fire escape, the amenity weight for the first building exterior adds
up to 84 percent (100 percent starting point minus 16 percent for
the lack of a fire escape, excluding H&S items). If the damaged roof
vents were the only deficiency observed, then the initial
proportionate score for this sub-area (Building Exterior 1)
would be the amenity score minus the deficiency points and then
normalized to a 100-point basis, as shown below. Additional
deficiencies or H&S deficiencies (calculated in the same manner)
would further decrease the sub-area score, and if the score dropped
below zero, it would be set to zero.
------------------------------------------------------------------------
Element Associated value
------------------------------------------------------------------------
Amenity Score.................... 84
Deficiency Points................ 12
Calculation for the Initial 84 - 12 = 72
Proportionate Score.
Normalizing Factor............... 100
Calculation for the Initial Sub- (72/84) x 100 = 85.7
Area Score.
Building Exterior 1.....
------------------------------------------------------------------------
Example #2 illustrates how the area score is calculated.
Consider a property with two buildings with the following
characteristics:
Building 1 (from Example 1, above):
--10 units
--84 percent amenity weight for items that are present to be
inspected in the building exterior
--Building exterior score is 85.7 points
Building 2:
--20 units
--100 percent amenity weight for items that are present to be
inspected in the building exterior
--Building exterior score is 69.1 points
The building exterior score for the building exterior area is
the weighted average of the individual scores for each building
exterior. Each building exterior score is weighted by the number of
units and the percent of the weight for items present to be
inspected in the building exterior.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unit Sum of the Initial Building
Building Number of x Amenity = weighted / building x proportionate = exterior
units weight average weights score area score
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................ 10 .. 0.84 .. 08.4 .. 28.4 .. 85.7 .. 25.3
2........................................ 20 .. 1.00 .. 20.0 .. 28.4 .. 69.1 .. 48.7
-----------------------------------------------------------------------------------------------------
Total......................................... 30 .. ........... .. 28.4 .. ........... .. ............... .. 74.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Example #3 illustrates how the overall weighted average for the
building exterior area amenity weight is calculated. The separate
amenity weights for buildings 1 and 2, above, are
used in conjunction with the total units to calculate the building
exterior area amenity weight. Each building amenity weight is
multiplied by the number of units in that building and then divided
by the total number of units for all buildings, as shown below. For
purposes of the next example, the Overall Building Exterior Area
Amenity Weight of 94.7 was rounded to 95.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Overall
building
Number of Amenity Unit Normalized to exterior area
Building exterior units x weight = weighted / Total units x a 100 point = weighted
average basis average
amenity weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................... 10 .. 0.84 .. 08.4 .. 30 .. 100 .. 28.0
2...................................... 20 .. 1.00 .. 20.0 .. 30 .. 100 .. 66.7
-------------------------------------------------------------------------------------------------------
[[Page 49570]]
Total....................................... 30 .. ........... .. 28.4 .. ........... .. .............. .. 94.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Example #4 illustrates how the score for a property is
calculated. Consider a property with the following characteristics:
Site:
--Score: 90 points
--100 percent amenity weight
--Nominal weight: 15 percent
Building Exteriors (from example 2 and
3, above):
--Score: 74 points
--95 percent weighted average amenity weight
--Nominal weight: 15 percent
Building Systems:
--Score: 70 points
--80 percent weighted average amenity weight
--Nominal weight: 20 percent
Common Areas:
--Score: 60 points
--30 percent weighted average amenity weight
--Nominal weight: 15 percent
Dwelling Units:
--Score: 80 points
--90 percent weighted average amenity weight
--Nominal weight: 35 percent
To continue the scoring protocol, the adjusted area weights for
all five inspectable areas are determined. For purposes of this
example, the adjusted weights and maximum possible points for each
of the five inspectable areas are shown in the table below. All of
the values in this table, except for the values for building
exteriors, are presumed. The values for building exteriors were
calculated as part of this ongoing example.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Amenity Total Normalized to Maximum
Inspectable area Area weight x Amenity = weighted / adjusted x 100 point = possible
weight average weight scale points
--------------------------------------------------------------------------------------------------------------------------------------------------------
Site............................................ 15 .. 1.00 .. 15.0 .. 81.2 .. 100 .. 18.5
Building Exterior............................... 15 .. 0.95 .. 14.2 .. 81.2 .. 100 .. 17.5
Building Systems................................ 20 .. 0.80 .. 16.0 .. 81.2 .. 100 .. 19.7
Common Areas.................................... 15 .. 0.30 .. 04.5 .. 81.2 .. 100 .. 05.5
Dwelling Units.................................. 35 .. 0.90 .. 31.5 .. 81.2 .. 100 .. 38.8
-------------------------------------------------------------------------------------------------------
Total....................................... ........... .. ........... .. 81.2 .. ........... .. .............. .. 100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
The nominal possible points for each inspectable area is
multiplied by the amenity weight, divided by the total adjusted
amenity weight, and normalized to a 100-point basis to produce the
possible points for the inspectable area. The property score is the
sum of all weighted area scores for that property. The sample shown
below reflects how the deficiency from example 1 in the
building exterior area impacts the overall property score. The
property score of 77.8 is rounded to 78 for the final example.
----------------------------------------------------------------------------------------------------------------
Project 1 weighted
Inspectable area Area points x Area score / a 100 point = area scores
scale
----------------------------------------------------------------------------------------------------------------
Site................................ 18.5 .. 90 .. 100 .. 16.7
Building Exterior................... 17.5 .. 74 .. 100 .. 13.0
Building Systems.................... 19.7 .. 70 .. 100 .. 13.8
Common Areas........................ 05.5 .. 60 .. 100 .. 03.3
Dwelling Units...................... 38.8 .. 80 .. 100 .. 31.0
---------------------------------------------------------------------------
Total........................... 100.0 .. .............. .. .............. .. 77.8
----------------------------------------------------------------------------------------------------------------
13. Computing the PHAS Physical Inspection Score
The overall physical inspection score for the PHAS for a PHA is
the weighted average of the PHA's individual project physical
inspection scores, where the weights are the number of units in each
project divided by the total number of units in all projects for the
PHA. For example, the project described in Example 1 from
above has a score of 78 with 30 units. Using another project with a
score of 92 and 650 units with project from Example 1 would
calculate to an overall physical inspection score of 91. Note the
impact on the overall physical inspection of a single property with
a large number of units.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Weighted Number of
average Rescaling units in Total PHA Project
Project property x to the 30- = x the / units = weighted
score point basis property area score
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................................... 78 .. .3 23.4 .. 30 .. 680 .. 1.0
2..................................................... 92 .. .3 27.6 .. 650 .. 680 .. 26.4
----------------------------------------------------------------------------------------
Total...................................................... 100 .. ........... ...... .. ........... .. ........... .. 27.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 49571]]
The physical subsystem indicator score for this PHA provided to
HUD's centralized scoring system would be 27.4, rounded to a score
of 27. Weighted-average property scores are scaled to a 30-point
basis by multiplying by 0.3. The total is then multiplied by the
number of units within the property and divided by the total number
of PHA units, to produce a unit-weighted average. All of the
project's weighted area scores are totaled and rounded using a
rounding policy of rounding up to the nearest whole number a score
ending in 0.5 and above, and rounding down a score ending in 0.4 and
below.
14. Examples of Sampling Weights for Buildings
As shown above, buildings with the most dwelling units have the
greatest impact on the project's overall physical score. Buildings
with the most dwelling units also have the greatest likelihood of
being selected for inspection. The determination of which buildings
will be inspected is a two-phase process. In Phase 1 of the process,
all buildings that contain dwelling units are sorted by size and
then the units are randomly sorted within each building. A computer
program selects a random sample of units to be inspected.
All buildings in a project may not be selected in the building
sample during Phase 1 sampling, because a building may have so few
units such as a sole scattered-site single family unit. A Phase 2
sampling is used to increase the size of the number of buildings
selected. In Phase 2, the additional buildings that are included in
the sample are selected with equal probability so that the
residential building sample size is the lesser of either the
dwelling unit sample size or the number of all residential
buildings. All common buildings are selected for inspection. To
illustrate the process for sampling buildings, two examples are
provided below:
Example #1. This first example uses a project with two buildings
where both buildings are selected for inspection. Building A has 10
dwelling units and building B has 20 dwelling units, for a total of
30 dwelling units. The target dwelling unit sample size for a
project with 30 dwelling units is 15 units. The sampling ratio for
this project is two and is calculated by dividing the 15 target
units by the total number of units (30/15=2). In this illustration,
every second dwelling unit will be selected from the random sort of
the units within each building. Since both buildings have at least 2
dwelling units, both buildings are certain to be selected for
inspection in Phase 1. Since all buildings were selected in Phase 1
of sampling, Phase 2 is not required. Both buildings in this example
have a selection probability of 1.00 and a sampling weight of 1.00.
Example #2. This example uses a project where only some of the
buildings within the project are selected for inspection in Phase 1,
so a Phase 2 sampling is required. For this example, a project is
comprised of 22 residential buildings. Two buildings each have 10
dwelling units and 20 buildings are scattered-site single family
dwelling units. The project has 40 total dwelling units (two
buildings with 10 units each added to 20 single units (20+20)). The
target sample size for a project with 40 dwelling units is 16 units,
and the sampling ratio would be 2.5 (40 total dwelling units divided
by 16 target dwelling units). Since the target sample size is the
lesser of either the dwelling unit sample size (16) or the number of
all residential buildings (22), 16 residential buildings would be
inspected for this project.
In Phase 1 of sampling, the 2 buildings with 10 dwelling units
are selected with certainty since they both have more than 2.5
dwelling units. Each of the scattered-site single family buildings
then have a 40 percent probability of selection (100 percent or 1
divided by the 2.5 sampling ratio equals 0.40). Assume that both
large buildings and 8 of the single family buildings (10 buildings
in all) were selected in Phase 1. This leaves 12 single family
buildings available for selection during Phase 2. Since 16
residential buildings need to be inspected, the sample of 10
buildings selected in Phase 1 falls 6 buildings short of a full
sample. Therefore, the system will select 6 of the 12 previously
unselected buildings during Phase 2 sampling. The chance of any
single building, of the 12 remaining buildings, being selected
during Phase 2 is 0.50 or 50 percent (6 target buildings divided by
12 previously unselected buildings). The overall probability of any
one of the 20 single family units being selected during either Phase
1 or Phase 2 is calculated as follows:
----------------------------------------------------------------------------------------------------------------
Element Protocol Calculation
----------------------------------------------------------------------------------------------------------------
Phase 1 Single Family Unit Building 8 of 20 buildings............ 8/20 = .40
Selection.
Phase 2 Single Family Unit Building 6 of 12 buildings............ 6/12 = .50
Selection.
Overall Possibility of Single Family 100% minus the 40% already (1.00-.40) x .50 = .30s
Unit Building Selection During Phase selected during Phase 1 and
2. multiplied by the 50% chance
of being selected during
Phase 2.
Overall Probability of a Single Probability from Phase 1 .40 + .30 = .70
Family Unit Building Selection. added to probability from
Phase 2.
Verification--Overall Single Family 14 of 20 buildings........... 14/20 = .70
Unit Building Selection.
Probability Weight* of Selection for 1 divided by the overall 1.00/.70 = 1.43
Single Family Unit Building probability of Single Family
Selection. Unit Building Selection.
----------------------------------------------------------------------------------------------------------------
*See the note in Section VI.1 under the definition for normalized sub-area weight.
15. Accessibility Questions
HUD reviews particular elements during the physical inspection
to determine possible indications of noncompliance with the Fair
Housing Act (42 U.S.C. 3601-3619) and section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794). More specifically,
during the physical inspection, the inspector will record if: (1)
There is a wheelchair-accessible route to and from the main ground
floor entrance of the buildings inspected; (2) the main entrance for
every building inspected is at least 32 inches wide, measured
between the door and the opposite door jamb; (3) there is an
accessible route to all exterior common areas; and (4) for multi-
story buildings that are inspected, the interior hallways to all
inspected units and common areas are at least 36 inches wide. These
items are recorded, but do not affect the score.
Appendix B to Part 902--Financial Condition Scoring
I. Purpose of This Appendix
This appendix provides information about the scoring process for
PHAS Indicator 2, Financial Condition. The purpose of the
Financial Condition Indicator is limited to measuring the financial
condition of the Low-Rent and Capital Fund programs of the
project(s) and PHA.
II. Background
A. Financial Condition Indicator Regulatory Background
To reflect a shift from a PHA-wide based assessment to one that
is property based, HUD is revising the Financial Assessment Sub-
System for public housing (FASS-PH) Financial Data Schedule (FDS)
and financial condition scoring process. Project-based management is
defined in 24 CFR 990.115 as ``the provision of property management
services that is tailored to the unique needs of each property.''
PHAs must also implement project-based budgeting and project-based
accounting, which are essential components of asset management.
Project-based accounting is critical to a property-based assessment
of financial condition, because it mandates the submission of
property-level financial data. Accordingly, PHAs will now be scored
at a property level, using the already designated projects as the
basis for assessment.
The condition of the Low-Rent program and Capital Fund program
will be evaluated at the project level, producing individual project
scores within the PHA. Project performance will be scored and
averaged across the PHA, weighted according to unit count. The
projects within a PHA will be
[[Page 49572]]
evaluated and scored based on the project's performance relative to
industry standards.
B. Comparable Scoring Systems
The financial condition subindicators are not unique to public
housing. The subindicators included in the Financial Condition
Indicator scoring process are common measurements used throughout
the multifamily industry to rank properties and identify the
properties that require further attention.
III. Subindicators
A. Subindicators of the Financial Condition Indicator
There are three subindicators that examine the financial
condition of each project. The values of the three subindicators,
calculated from the project level data, comprise the overall
financial assessment of a project. The three subindicators of the
Financial Condition Indicator are:
Quick Ratio (QR);
Months Expendable Net Assets Ratio (MENAR); and
Debt Service Coverage Ratio (DSCR).
B. Description of the Financial Condition Subindicators
The subindicators are described as follows:
Subindicator #1, QR. This subindicator is a liquidity measure of
the project's ability to cover current liabilities. It is measured
by dividing adjusted unrestricted current assets by current
liabilities. The purpose of this ratio is to indicate whether a
project could meet all current liabilities if they became
immediately due and payable. A project should have available current
resources equal to or greater than its current liabilities in order
to be considered financially liquid. The QR is a commonly used
liquidity measure across the industry. Maintaining sufficient
liquidity is essential for the financial health of an individual
project.
Subindicator #2, MENAR. This subindicator measures a project's
ability to operate using net available, unrestricted resources
without relying on additional funding. In particular, it is computed
as the ratio of net available unrestricted resources to average
monthly operating expenses. The result of this calculation shows how
many months of operating expenses can be covered with currently
available, unrestricted resources.
Subindicator #3, DSCR. This subindicator is a measure of a
project's ability to meet regular debt obligations. This
subindicator is calculated by dividing adjusted operating income by
a project's annual debt service. It indicates whether the project
has generated enough income from operations to meet annual interest
and principal payment on long-term debt service obligations.
IV. GAAP-Based Scoring Process and Elements of Scoring
A. Points and Threshold
The Financial Condition Indicator is based on a maximum of 20
points. In order to receive a passing score under this indicator, a
project must achieve at least 12 points, or 60 percent of the
available points under this indicator.
B. Scoring Elements
The Financial Condition Indicator score provides an assessment
of a project's financial condition. Under the PHAS Financial
Condition Indicator, HUD will calculate a score for each project, as
well as for the PHA overall financial condition, that reflects
weights based on the relative importance of the individual financial
subindicators. The overall Financial Condition Indicator score for a
PHA is a unit-weighted average of the PHA's individual project
financial condition scores. In order to compute an overall financial
condition score, an individual project financial condition score is
multiplied by the number of units in each project to determine a
``weighted value.'' The sum of the weighted values is then divided
by the total number of units in a PHA's portfolio to derive the
overall PHAS Financial Condition Indicator score. The three
subindicator scores are produced using GAAP-based financial data
contained in the FDS. The minimum number of points (zero) and the
maximum number of points (twenty) can be achieved over a range of
values.
------------------------------------------------------------------------
Subindicators Measurement of Points
------------------------------------------------------------------------
QR................................ Liquidity........... 9.0
MENAR............................. Adequacy of reserves 9.0
DSCR.............................. Capacity to cover 2.0
debt.
---------------
Total......................... .................... 20.0
------------------------------------------------------------------------
QR
A project will receive zero points when its QR is less than 1.0.
If its QR equals 1.0, it will receive 5.4 points. If its QR is
between 1.0 and 2.0, it will receive a score of between 5.4 and 9.0
points, on a proportional basis. A project will receive the maximum
of 9.0 points when its QR is equal to or greater than 2.0.
------------------------------------------------------------------------
QR value Points
------------------------------------------------------------------------
<1.0...................................... 0.0.
1.0....................................... 5.4.
>=1.0 but >=2.0........................... >5.4 to <9.0.
>=2.0..................................... 9.0.
------------------------------------------------------------------------
The following graph depicts the relationship between the QR and
scores.
[[Page 49573]]
[GRAPHIC] [TIFF OMITTED] TP21AU08.000
MENAR
A project will receive zero points when its MENAR is less than
1.0. If its MENAR equals 1.0, it will receive 5.4 points. If its
MENAR is between 1.0 and 4.0, it will receive a score of between 5.4
and 9.0 points, on a proportional basis. A project will receive the
maximum of 9 points when its MENAR is equal to or greater than 4.0.
------------------------------------------------------------------------
MENAR value Points
------------------------------------------------------------------------
<1.0...................................... 0.0
1.0....................................... 5.4
>=1.0 but <4.0............................ >5.4 to <9.0
>=4.0..................................... 9.0
------------------------------------------------------------------------
The following graph depicts the relationship between the MENAR
and scores.
[GRAPHIC] [TIFF OMITTED] TP21AU08.001
DSCR
A project will receive zero points when its DSCR ratio is less
than 1.0. If its DSCR equals at least 1.0 but less than 2.0, it will
receive 1 point. A project will receive the maximum of 2.0 points if
its DSCR is equal to or greater than 2.0 or if it has no debt at
all.
------------------------------------------------------------------------
DSCR value Points
------------------------------------------------------------------------
<1.0...................................... 0.0
>=1.0 but <2.0............................ 1.0
>=2.0..................................... 2.0
No Debt Service........................... 2.0
------------------------------------------------------------------------
The following graph depicts the relationship between the DSCR
and scores.
[[Page 49574]]
[GRAPHIC] [TIFF OMITTED] TP21AU08.002
V. Audit Adjustment
Pursuant to 24 CFR 902.30, HUD calculates a revised financial
condition score after it receives audited financial information. The
revised financial condition score, which is based on the audited
information, can increase or decrease the initial PHA-wide score
that was based on the unaudited financial information. The audited
score reflects two types of adjustments. The first type is based on
audit flags and reports that result from the audit itself.
Significant deficiencies and material weaknesses are considered to
be audit flags, alerting the REAC to an internal control deficiency
or an instance of noncompliance with laws and regulations. The
second adjustment type addresses significant differences between the
unaudited and audited financial information reported to HUD pursuant
to Sec. 902.30.
Audit Opinion and Flags
As part of the analysis of the financial health of a PHA,
including assessment of the potential or actual waste, fraud, or
abuse at a PHA, HUD will look to the Audit Report to provide an
additional basis for accepting or adjusting the financial component
scores. The information collected from the annual Audit Report
pertains to the type of audit opinion; details of the audit opinion;
and the presence of significant deficiencies, material weaknesses,
and noncompliance.
If the auditor's opinions on the financial statements and major
federal programs are anything other than unqualified, points could
be deducted from the PHA's audited financial score. The REAC will
review audit flags to determine their significance as it directly
pertains to the assessment of the PHA's financial condition. If the
flags have no effect on the financial components or the overall
financial condition of the PHA as it relates to the PHAS assessment,
the audited score will not be adjusted. However, if the flags have
an impact on the PHA's financial condition, the PHA's audited score
will be adjusted according to the seriousness of the reported
finding.
These flags are collected on the Data Collection Form (OMB
approval number 2535-0107). The PHA completes this form for audited
submissions. If the Data Collection Form indicates that the
auditor's opinion will be anything other than unqualified, points
can be deducted from the financial condition score. The point
deductions have been established using a three-tier system. The
tiers give consideration to the seriousness of the audit
qualification and limit the deducted points to a reasonable portion
of the PHA's total score.
Audit Flag Tiers
Audit flags are assigned tiers, as stated in the following
chart.
Audit Flags and Tier Classifications
----------------------------------------------------------------------------------------------------------------
Audit flags Tier classification Comments
----------------------------------------------------------------------------------------------------------------
Financial Statement Audit Opinion(s):
1. Unqualified opinion(s)........................ None. ...............................
2. Qualified opinion(s)..........................
Departures from GAAP not significant Tier 2.................... Deduction only if the departure
enough to cause an adverse opinion(s). includes the Low Rent or
Limitations on the scope of the audit Capital Fund programs.
(regardless of cause) not significant enough
to cause a disclaimer of opinion..
3. Adverse opinion(s) regardless of reason(s).... Tier 1. ...............................
4. Disclaimer of opinion(s) regardless of Tier 1. ...............................
reason(s).
Opinion(s) on Supplemental Information (Statement
of Auditing Standard (SAS) 29 ``in relation to''
type of opinion):
1. Fairly stated................................. None...................... Applies to the FDS.
2. Fairly stated except for:..................... Tier 2. ...............................
3. No opinion.................................... Tier 1. ...............................
4. Incomplete or missing......................... Tier 1. ...............................
Report on Internal Control and Compliance and Other
Matters Noted in an Audit of the Financial
Statement performed in accordance with Government
Auditing Standards (GAS) (Yellow Book):
1. Control deficiencies.......................... Tier 3. ...............................
Significant deficiencies;
Material weakness;
[[Page 49575]]
2. Material noncompliance........................ Tier 3.................... Deduction applies only if the
3. Fraud......................................... Tier 3.................... internal control deficiency
4. Illegal acts.................................. Tier 3.................... and/or noncompliance relates
5. Abuse......................................... Tier 3.................... to the Low Rent or Capital
Fund programs.
Report on Compliance with Requirements Applicable
to Major Federal Programs and Internal Control
over Compliance with OMB Circular A-133--
Opinion on compliance with each major federal
program requirements:
1. Unqualified opinion(s) on compliance with Low None. ...............................
Rent program and Capital Fund program major
federal requirements.
2. Qualified opinion(s) on compliance with Low Tier 2. ...............................
Rent Program program and Capital Fund program
major federal requirements (regardless of cause).
3. Adverse opinion(s) on compliance with Low Rent Tier 1. ...............................
program and Capital Fund program major federal
requirements (regardless of cause).
4. Disclaimer of opinion(s) on compliance with Tier 1. ...............................
Low Rent Program and Capital Fund program major
federal requirements (regardless of cause).
Internal Controls and Compliance:
1. Control Deficiencies:......................... Tier 3. ...............................
Significant deficiencies in internal
controls over compliance with Low Rent program
and Capital Fund program requirements.
Material weakness in internal controls
over compliance with Low Rent program and
Capital Fund program requirements.
2. Material noncompliance with Low Rent program Tier 3. ...............................
and Capital Fund program requirements.
Other Consideration:
1. Significant change penalty deduction applies Tier 2. ...............................
only if the significant change(s) relate to the
Low Rent or Capital Fund programs.
2. Ongoing concerns.............................. Tier 1. ...............................
3. Management Discussion and Analysis and other Tier 2. ...............................
supplemental information omitted.
4. Financial statements using basis other than Tier 1. ...............................
GAAP.
----------------------------------------------------------------------------------------------------------------
Each tier assesses point deductions of varying severity. The
following chart illustrates the point schedule:
------------------------------------------------------------------------
Tier PHAS points deducted
------------------------------------------------------------------------
Tier 1....................... Any Tier 1 finding assesses a 100 percent
deduction of the PHA's financial
condition indicator score.
Tier 2....................... Any Tier 2 finding assesses a point
deduction equal to 10 percent of the
unadjusted financial condition indicator
score.
Tier 3....................... Each Tier 3 finding assesses a 0.5 point
deduction per occurrence, to a maximum
of 4 points of the financial condition
indicator score.
------------------------------------------------------------------------
Review of Audited Versus Unaudited Submission
The purposes of comparing the ratios and scores from the
unaudited FDS submission to the ratios and scores from the audited
submission are to:
Identify significant changes in ratio calculation
results and/or scores from the unaudited submission to the audited
submission;
Identify PHAs that consistently provide significantly
different data from their unaudited submission in their audited
submission; and
Assess or alleviate penalties associated with the
inability to provide reasonably accurate unaudited data within the
required time frame.
This review process will be performed only for the audited
submissions.
Significant Change Penalty
HUD views the transmission of significantly inaccurate unaudited
financial data as a serious condition. Therefore, projects are
encouraged to assure that financial data is as reliable as possible
for their unaudited submissions.
A significant change penalty will be assessed for significant
differences between the unaudited and audited submissions. A
significant difference is considered to be an overall financial
condition score decrease of three or more points from the unaudited
to the audited submission. A significant change penalty is
considered a tier 2 flag and will result in a reduction of 10
percent of the total audited financial condition score.
For example: A PHA scores 30 points on its unaudited submission.
The audited submission score is 26 points. Because the 10 percent
reduction is 2.6 points, 2.6 is rounded to the next whole number,
3.0 points. Therefore, the PHA audited score is 23 points (26 points
minus 3 points equals 23 points).
The PHAS system automatically deducts the significant change
penalty from the audited score, and this reduction triggers the REAC
analyst's review. REAC may waive the significant change penalty if
the project provides reasonable documentation of the significant
difference in its submission.
Appendix C to Part 902--Management Operations Scoring
I. Purpose of This Appendix
This appendix provides additional information about the scoring
process for the PHAS Management Operations Indicator. The purpose of
the management operations assessment is to assess the project's and
PHA's management operations capabilities. All projects will be
assessed under the Management Operations Indicator, even if a PHA
has not converted to asset management.
This PHAS Management Operations Scoring document has been
revised to reflect research HUD conducted through informal meetings
with representatives of PHAs, residents, projects, and public
housing industry groups, and to provide the basis for scoring
projects on the management operations. This management operations
scoring document is applicable to PHAs with fiscal years ending on
and after June 30, 2009.
[[Page 49576]]
II. Definitions
As used in this appendix:
Adjusted vacancy rate is a project's vacancy rate excluding all
exemptions. If a project qualifies for this adjustment, it shall
retain justifying documentation for HUD review.
Assessment period is the 12-calendar-month period as of the end
of the calendar month before the management review of public housing
projects begins, or the period of time as defined in each component.
Average number of days tenant-generated work orders were open
during the assessment period is the total number of days tenant-
generated work orders were open divided by the total number of
tenant-generated work orders.
Changing market conditions are when projects are in communities
that are undergoing dramatic population loss or economic
dislocations. Projects should maintain documentation of the specific
condition, i.e., population loss, business relocations, etc., along
with evidence of the marketing and outreach approaches utilized by
projects. Projects must demonstrate:
(1) Exhaustive marketing efforts;
(2) Efforts to modernize the units to make the units more
closely match market demand in terms of size, type, or amenities;
and
(3) Consideration given to deprogramming if the market does not
respond to marketing or modernization efforts.
Invoices in dispute are invoices challenged by the project and
the project has sent documentation to the vendor that explains why
the invoices are challenged.
Management Review Form (Review Form), form HUD-5834, Management
Review for Public Housing Projects, is the review form used by HUD
when conducting a management review of public housing projects.
Preventive maintenance plan is a planned course of action for
scheduled maintenance procedures that are systematically performed
at regular intervals to prevent premature deterioration of buildings
and systems. A preventive maintenance plan should include:
(1) The identification of:
(a) Critical systems, such as heating, ventilation and air
conditioning (HVAC), and fire safety;
(b) Building elements, such as roofs and exterior walls; and
(c) Grounds care, such as parking lots and fencing.
(2) Appropriate strategies and protocols for performing
preventive maintenance on each system and building element, and for
grounds care; and
(3) A schedule for conducting preventive maintenance appropriate
to each system and building element, and for grounds care.
Reduced average number of days tenant-generated work orders were
open during the previous 3 years is a comparison of the average time
tenant-generated work orders were open in the current assessment
period to the average number of days tenant-generated work orders
were open in the single calendar month that is 3 years prior to the
current assessment period. It is calculated by subtracting the
average number of days tenant work orders were open in the current
assessment period from the average number of days tenant-generated
work orders were open in the earlier assessment period. In order to
receive credit for a reduction in the average time tenant-generated
work orders were active during the previous 3 years, the project
shall retain justifying documentation for HUD review.
Reduced vacancy rate during the previous 3 years is a comparison
of the adjusted vacancy rate in the current assessment period to the
adjusted vacancy rate in the single calendar month that is 3 years
prior to the current assessment period. It is calculated by
subtracting the adjusted vacancy rate in the current assessment
period from the adjusted vacancy rate in the earlier assessment
period.
Vacancy days associated with a vacant unit receiving section
9(d) funds in accordance with 24 CFR 990.145. Neither vacancy days
associated with a vacant unit prior to that unit meeting the
condition of being a unit receiving section 9(d) fund nor vacancy
days associated with a vacant unit after construction work has been
completed or after the time frame for placing the vacant unit under
construction has expired shall be exempted. The following apply when
computing time frames for a vacant unit receiving section 9(d)
funds:
(1) The calculation of turnaround time for newly modernized
units starts when the unit is turned over to the PHA from the
contractor and ends when the lease goes into effect for the new or
returning resident. The total vacancy time would be the sum of the
pre-modernization vacancy time (vacancy days that had accumulated
prior to the unit being included in the section 9(d) budget), and
the post-modernization vacancy time (from the time the unit is
turned over to the PHA from the contractor).
(2) Unit-by-unit documentation, showing the date a vacant unit
was included in a HUD-approved section 9(d) budget, the date it was
released to the PHA by the contractor, and the date a new lease is
effective for the new or returning resident, or the date the time
period for placing the vacant unit under construction expired.
III. Subindicators
A. Subindicators of Management Assessment Indicator
The criteria (subindicators and components) of the management
review of projects are included in form HUD-5834, Management Review
for Public Housing Projects. The Management Operations Indicator
consists of 5 management subindicators and 12 components that are
scored. The remaining 2 subindicators and 9 components are
compliance areas and are not scored. Table 1 lists the subindicators
and components.
Table 1--Management Operations Indicator
------------------------------------------------------------------------
Subindicator Component
------------------------------------------------------------------------
1. General Appearance and Security..... 1.1 Appearance and Market
Appeal.
1.2 Security.
2. Follow-Up and Monitoring of Project 2.1 Exigent Health and Safety
Inspections (Not Scored). (EHS) Deficiencies (Not
Scored).
2.2 Lead-Based Paint (LBP)
Inspection Deficiencies (Not
Scored).
3. Maintenance and Modernization...... 3.1 Unit Inspections.
3.2 Work Orders.
3.3 Preventive Maintenance.
3.4 Energy Conservation/Utility
Consumption.
3.5 Modernization (Not Scored).
4. Financial Management............... 4.1 Percentage of Accounts
Payable.
4.2 Rent Collection.
4.3 Budget Management (Not
Scored).
4.4 Procurement (Not Scored).
5. Leasing and Occupancy.............. 5.1 Vacancy Rate.
5.2 Turnaround Time.
5.3 Occupancy Review (Not
Scored).
6. Tenant/Management Relations........ 6.1 Economic Self-Sufficiency.
6.2 Resident Involvement in
Project Administration.
7. General Management Practices (Not 7.1 Management Review Findings
Scored). (Not Scored).
7.2 Other Prior Review Findings
(Not Scored).
7.3 Insurance (Not Scored).
------------------------------------------------------------------------
[[Page 49577]]
The areas that are not scored are included in the management
review of public housing projects, because the information they
provide is integral to supporting good management operations.
B. Grades for Management Assessment Subindicators and Components
Subindicator #1, General Appearance and Security. This
subindicator evaluates the appearance of a project, and the level of
security, including level of crime, screening of applicants,
eviction of residents for crime and crime-related activities, and
coordination with local officials and residents to implement anti-
crime strategies.
Component #1.1, Appearance and Market Appeal. This component
evaluates, at the time of the review, the appearance of a project's
exterior and common areas, including the degree to which the project
is attractive, appealing, and clean, and that it demonstrates market
appeal. The project's evaluation will be based on either
``Superior,'' ``Satisfactory,'' or ``Unsatisfactory'' ratings in 12
areas. If any area does not apply to the project, the area's points
will not be included in the total points for this component, to
avoid penalizing a project. The 12 areas are as follows:
Superior Performance:
(1) Attractive project entrance with appropriate signage and
plantings.
(2) Attractive, well-maintained landscaping--trees, shrubs,
grass not overgrown.
(3) Building exteriors including paint, siding, and masonry are
in good repair.
(4) No graffiti.
(5) Paved surfaces--parking lots, streets, and walks are in good
repair.
(6) Public spaces and amenities are well maintained.
(7) Fencing, railing, porches, overhangs, and ramps are in good
condition and enhance project appearance.
(8) Windows have no torn or damaged window treatments, and
blankets, bed sheets, or other materials not designed to be window
treatments are not used for window coverings.
(9) Overall project appearance is not institutional (i.e.,
building looks like an institution, dull, uniform, unimaginative)
and exceeds the standards in the surrounding neighborhood.
(10) Project is clean and free of debris, trash, clutter, and/or
abandoned vehicles.
(11) Dumpsters and trash cans are clean and properly enclosed.
(12) No evidence of damaged and/or boarded-up units.
Satisfactory Performance:
(1) Moderately attractive project entrance with signage and
plantings.
(2) Landscaping is average--trees, shrubs, grass not overgrown.
(3) Building exteriors including paint, siding, and masonry are
at least in fair repair.
(4) Limited graffiti in no more than 5 places.
(5) Paved surfaces--parking lots, streets, and walks are at
least in moderate repair.
(6) Public spaces and amenities are at least moderately
maintained.
(7) Fencing, railing, porches, overhangs, and ramps are at least
in moderate condition and do not detract from project appearance.
(8) Windows have no more than 5 torn or damaged window
treatments and blankets, bed sheets, or other materials not designed
to be window treatments are not used for window coverings.
(9) Overall project appearance is somewhat institutional and is
at least equivalent to surrounding neighborhood.
(10) Project is at least moderately clean, with minimal debris,
trash, clutter, and/or abandoned vehicles.
(11) Dumpsters and trash cans are at least moderately clean and
usually enclosed.
(12) No more than 5 damaged and/or boarded-up units.
Unsatisfactory Performance:
(1) Project entrance is not attractive, with no signage and
limited plantings.
(2) Landscaping is below average--trees, shrubs and/or grass are
overgrown.
(3) Building exteriors including paint, siding, and masonry are
in poor repair.
(4) Excessive graffiti in 6 or more places.
(5) Paved surfaces--parking lots, streets, and walks are in poor
repair.
(6) Public spaces and amenities are not maintained.
(7) Fencing, railing, porches, overhangs, and ramps are in poor
condition and detract from project appearance.
(8) Windows have 6 or more torn or damaged window treatments and
blankets, bed sheets, or other materials not designed to be window
treatments are used for curtains.
(9) Overall project appearance is institutional and is worse
than the surrounding neighborhood.
(10) Project is not clean because of significant debris, trash,
clutter and/or abandoned vehicles.
(11) Dumpsters and/or trash cans are not clean and generally
unenclosed.
(12) Six or more damaged and/or boarded-up units.
Grade A: The project:
(1) Achieves 80 percent or greater of the points possible for
all of the criteria for which the project is assessed; and
(2) Has zero unsatisfactory ratings.
Grade C: The project achieves less than 80 percent but greater
than or equal to 50 percent of the points possible for all of the
criteria for which the project is assessed.
Grade F: The project achieves less than 50 percent of the points
possible for all of the criteria for which the project is assessed.
Component #1.2, Security. This component evaluates, at the time
of the review, a project's performance in tracking crime-related
problems on project property, the adoption and implementation,
consistent with section 9 of the Housing Opportunity Program
Extension Act of 1996 (42 U.S.C. 1437d(r)) and the Quality Housing
and Work Responsibility Act of 1998 (Pub. L. 105-276, October 21,
1998), of applicant screening and resident eviction policies and
procedures, and the coordination with local officials and residents
to implement anti-crime strategies.
Grade A: The project can meet the criteria for the three
following items:
(1) There is no evidence of a crime problem at the project or
the crime rate at the project is equal to or less than the crime
rate for the surrounding neighborhood;
(2) The project has formally adopted effective applicant
screening policies and procedures that deny admissions to applicants
on the basis of the following, as stated in 24 CFR 960.204:
The applicant was evicted because of drug-related
activity from assisted housing within the last 3 years, unless the
applicant has successfully completed a rehabilitation program
approved by the project;
The project has reason to believe the applicant is
illegally using a controlled substance, or engages in any drug-
related activity on or off the project;
The project has reason to believe the applicant is
abusing alcohol, which interferes with the health, safety, or right
to peaceful enjoyment of the premises by other residents;
The applicant or any household member of the applicant
has been convicted of drug-related criminal activity for the
manufacture or production of methamphetamine on the premises of
federally assisted housing; or
The applicant or any member of the applicant's
household is subject to a lifetime registration requirement under a
state sex offender registration program.
(3) The project has formally adopted effective policies and
procedures to evict residents who the project has reasonable cause
to believe, as follows:
Engage in criminal activity that threaten the health,
safety, or right to peaceful enjoyment of the premises by other
residents or project personnel;
Engage in any drug-related criminal activity on or off
the project premises; or
Abuse alcohol in a way that interferes with the health,
safety, and peaceful enjoyment of the premises by other residents or
project personnel.
Grade C: The project:
(1) Can meet the criteria for items (2) and (3) in grade A of
this component; and
(2) Cannot meet the criteria in item (1) in grade A of this
component; and
(3) Has formally adopted an effective security plan developed in
coordination with local police officials and residents to implement
anti-crime strategies.
Grade F: The project:
(1) Cannot meet the criteria for items (2) and (3) in grade A,
above; or
(2) Cannot meet the criteria in item (1) in grade A of this
component; and
(3) Has not formally adopted an effective security plan
developed in coordination with local police officials and residents
to implement anti-crime strategies.
Subindicator #2, Follow-Up and Monitoring of Project
Inspections. This subindicator examines a project's performance, at
the time of the review, in correcting or abating exigent health and
safety (EHS) deficiencies and lead-based paint (LBP) abatement. This
subindicator is not scored.
Component #2.1, Exigent Health and Safety (EHS) Deficiencies.
This component examines a project's performance, at the time of the
review, in correcting or abating EHS deficiencies identified during
its most recent HUD physical condition inspection. This component is
not scored.
[[Page 49578]]
Component #2.2, Lead-Based Paint (LBP) Inspection Deficiencies.
This component examines a project's performance, at the time of the
review, in maintaining current LBP certifications for projects built
before 1978, and performing risk assessments and hazard reduction,
if necessary, for reported elevated intervention blood lead levels
(EIBLLs). This component is not scored.
Subindicator #3, Maintenance and Modernization. This
subindicator measures a project's performance in conducting unit
inspections, responding to tenant-generated work orders, performing
preventive maintenance, managing utility consumption/energy
conservation, and managing modernization activities.
Component #3.1, Unit Inspections. This component measures the
percentage of units that a project inspected for the 12-calendar-
month period as of the end of the calendar month before the
management review of public housing projects begins in order to
determine short-term maintenance needs and long-term modernization
needs. The project is required to conduct unit inspections using the
HUD inspection protocol that is based on the Uniform Physical
Condition Standards (UPCS) set forth in 24 CFR part 5, subpart G.
HUD will consider the following:
Adequacy of the inspection program. The project must
have an adequate inspection program in terms of tracking
inspections, and in ensuring the thoroughness and quality of the
project's inspections.
Units to be inspected. All occupied units and/or units
available for occupancy are required to be inspected. This includes
units used for non-dwelling purposes, those occupied by employees,
and those used for resident services.
Units exempted. Units in the following categories are
exempted and not included in the calculation of the total number of
units, and the percentage of units inspected for the assessed
period.
(1) Occupied units for which a project has documented two
attempts to inspect the unit during the assessment period, but only
if the project can document that appropriate legal action (up to and
including eviction of the legal or illegal occupant(s)) has been
taken under the lease to ensure that the unit can be subsequently
inspected.
(2) Units vacant during the assessment period for the following
reasons:
(a) Vacant units that are receiving section 9(d) Capital Funds;
or
(b) Vacant units that are documented to be uninhabitable for
reasons beyond a project's control due to:
(i) High/unsafe levels of hazardous/toxic materials;
(ii) An order of the local health department or state agency or
a directive of the Environmental Protection Agency;
(iii) Natural disasters; or
(iv) Units that are kept vacant because they are structurally
unsound.
Supporting documentation for vacant units that are
uninhabitable for reasons beyond project's control. A project shall
maintain information to support its determination of vacant units
that are uninhabitable due to circumstances and actions beyond the
project's control. This supporting information is subject to review
and may be requested for verification purposes at any time by HUD.
The project shall, at a minimum, maintain:
(1) The date on which the unit met the conditions of being a
vacant unit that is uninhabitable due to circumstances and actions
beyond a project's control;
(2) Documentation identifying the specific conditions that
distinguish the unit as a unit vacant due to circumstances and
actions beyond a project's control;
(3) A description or list of the actions taken by a project to
eliminate or mitigate these conditions; and
(4) The date on which the unit ceased to meet such conditions
and became an available unit.
Grade A: The project:
(1) Scores 90 percent or more on a 100-point scale on HUD's
physical condition inspection; or
(2) Inspects 99 percent or more of the units; and
(3) Has an adequate system for tracking unit inspections.
Grade C: The project:
(1) Inspects at least 95 percent but less than 99 percent of the
units; and
(2) Has an adequate system for tracking dwelling unit
inspections.
Grade F: The project:
(1) Inspects less than 95 percent of the units; or
(2) Does not have an adequate system for tracking dwelling unit
inspections.
Component #3.2, Work Orders. This component measures the average
number of days that tenant-generated maintenance work orders are
outstanding. A project may choose either to be assessed: (1) for the
most recent one-month period where the required information is
available; or (2) for the 12-calendar-month period as of the end of
the calendar month before the management review of public housing
projects begins. For grade C(3), the assessment comparison is the
completion performance in the single calendar month that is 3 years
prior to the single calendar month being used in the assessment. The
assessment of this component includes only those work orders that
were closed during the period of time being assessed, even if the
work order was opened prior to the period of time being assessed. It
does not assess those work orders that were not closed during the
period of time being assessed.
Adequacy of the system to track work orders. It is
implicit in this component that the project has an adequate system
for tracking work orders, and ensuring the thoroughness and quality
of the project's needed repairs.
Grade A: The project has:
(1) Scored 90 percent or more on a 100-point scale on HUD's
physical condition inspection; or
(2) Completed tenant-generated work orders in less than an
average of 3 days; and
(3) An adequate system for tracking work orders.
Grade C: The project has:
(1) Completed tenant-generated work orders in an average of at
least 3 days but less than 10 days; and
(2) An adequate system for tracking work orders; or
(3) Completed tenant-generated work orders within an average of
between 10 and 20 days; and
(a) Reduced the average time it takes to complete tenant-
generated work orders by at least 10 days during the past 3 years;
and
(b) An adequate system for tracking work orders.
Grade F: The project:
(1) Completed all tenant-generated work orders in an average of
10 or more days; or
(2) Does not have an adequate system for tracking work orders.
Component #3.3, Preventive Maintenance. This component evaluates
a project's implementation of a written preventive maintenance plan,
including but not limited to the identification of critical systems,
building elements, grounds care and equipment, appropriate
strategies and protocols for performing preventive maintenance on
all plan items, and a schedule for conducting preventive maintenance
for each item in the plan.
Grade A: The project:
(1) Conducts annual inspections of buildings, grounds, common
areas, non-dwelling space, and major systems; and
(2) Has a sufficient preventive maintenance plan; and
(3) All of the elements in the project's preventive maintenance
plan have been implemented.
Grade C: The project:
(1) Conducts annual inspections of buildings, grounds, common
areas, non-dwelling space, and major systems; and
(2) Has a sufficient preventive maintenance plan; and
(3) At least 70 percent of the elements in the project's
preventive maintenance plan have been implemented.
Grade F: The project:
(1) Does not conduct annual inspections of buildings, grounds,
common areas, non-dwelling space, and major systems; or
(2) Does not have a sufficient preventive maintenance plan; or
(3) Less than 70 percent of the elements in the project's
preventive maintenance plan have not been implemented.
Component #3.4, Energy Conservation/Utility Consumption. This
component examines a project's energy conservation/utility
consumption measures for projects that have had an energy audit
within the past 5 years.
Grade A: The project:
(1) Has completed or updated its energy audit within the past 5
years and the project has implemented all of the recommendations
that were cost-effective; or
(2) Is doing the maximum feasible to reduce energy consumption
such that no energy audit conducted within the past 5 years has made
cost-effective recommendations.
Grade C: The project:
(1) Has completed or updated its energy audit within the past 5
years and the energy audit is less than one-year old; or
(2) Has completed or updated its energy audit within the past 5
years, the energy audit is as least one-year old, and the project
[[Page 49579]]
has developed an implementation plan for all cost-effective
recommendations and is on schedule with the implementation plan,
based on available funds. The implementation plan identifies, at a
minimum, the cost-effective items from the audit, the estimated
cost, the planned funding source, and the anticipated date of
completion for each item.
Grade F: The project did not complete or update its energy audit
within the past 5 years, or the project has not developed an
implementation plan for all cost-effective recommendations, or is
not on schedule with its implementation plan based on available
funds, or has not implemented all of the recommendations that were
cost-effective.
Component #3.5, Modernization. This component examines the
project's management of modernization and non-routine maintenance
through the physical needs assessment, and examines project plans
and budgets for modernization activities. This component is not
scored.
Subindicator #4, Financial Management. This subindicator
examines a project's timeliness in paying invoices that are not in
dispute, the percentage of rents collected, the adequacy of a
project's budget management, and the project's ability to plan and
implement procurement actions.
Component #4.1, Percentage of Accounts Payable. This component
examines, at the end of the most recent one-month period where the
required information is available, a project's timeliness in paying
invoices that are not in dispute.
Adequacy of the system to track accounts payable. It is
implicit in this component that the project has an adequate system
for tracking accounts payable.
Grade A:
(1) All of the invoices that are not in dispute are 30 days or
less outstanding; and
(2) The project has an adequate system for tracking accounts
payable.
Grade C:
(1) One or more of the invoices that are not in dispute are
greater than 30 days but no more than 60 days outstanding; and
(2) The project has an adequate system for tracking accounts
payable.
Grade F:
(1) One or more of the invoices that are not in dispute are
greater than 60 days outstanding; or
(2) The project does not have an adequate system for tracking
accounts payable.
Component #4.2, Rent Collection. This component measures the
percentage of rents collected, which is determined by dividing the
total rents collected by the total rents charged to tenants. A
project may choose to be assessed for either: (1) the most recent
one-month period for which the required information is available, or
(2) the 12-calendar-month period as of the end of the most recent
calendar month where the required information is available. Rents
include rental charges only and would not include other charges to
tenants, such as court costs, maintenance costs, etc.
Adequacy of the system to track rents collected.
Implicit in this component is that the project has an adequate
system to track and document total rents charged and total rents
collected.
Grade A:
(1) The percentage of rents collected is at least 97 percent of
the total rent to be collected; and
(2) The project has an adequate system to track and document
total rents charged and total rents collected.
Grade C:
(1) The percentage of rents collected is at least 93 percent but
less than 97 percent of the total rent to be collected; and
(2) The project has an adequate system to track and document
total rents charged and total rents collected.
Grade F:
(1) The percentage of rents collected is less than 93 percent of
the total rent to be collected; or
(2) The project does not have an adequate system to track and
document total rents charged and total rents collected.
Component #4.3, Budget Management. This component examines the
project's budgeting revenue and expenditure performance, as well as
actual year-to-date revenue and expenditure performance, for the
current fiscal year (or the prior fiscal year if the management
review of public housing projects is conducted within the first
quarter of the project's current fiscal year). This component is not
scored.
Component #4.4, Procurement. This component examines a project's
ability to plan for and implement procurement actions for the
project in accordance with 24 CFR 85.36 and all other applicable
laws and regulations. This component is not scored.
Subindicator #5, Leasing and Occupancy. This subindicator
measures the average adjusted vacancy rate and unit turnaround time.
The following categories of units that are not considered available
for occupancy are exempted from the computation of adjusted vacancy
rate and unit turnaround time.
(1) Units approved for special use. Units approved for special
use that are exempt during the assessment period are HUD-approved
units used to promote self-sufficiency and anti-drug and anti-crime
activities, or for non-dwelling purposes, including but not limited
to resident services, resident organization offices, police
substations, day care centers, public safety activities, or resident
job training.
(2) Employee occupied units. Employee occupied units that are
exempt during the assessment period are units occupied by employees
whose occupancy is contingent upon their continued employment by a
project. However, units that are occupied by residents who meet the
project's eligibility criteria and are also employed by the project
shall not be exempted from the computation of adjusted vacancy rate
and unit turnaround time.
(3) Vacant units approved for deprogramming. Vacant units
approved for deprogramming that are exempt during the assessment
period are HUD-approved units for demolition and/or disposition,
vacant units that have been approved for conversion/reprogramming,
or units vacated for vacancy consolidation.
(4) Vacancy days associated with vacant units receiving section
9(d) Capital Funds during the assessment period. Vacancies resulting
from project modernization or unit modernization, provided that one
of the following conditions are met:
(a) The unit is undergoing modernization (i.e., the
modernization contract has been awarded or force account work has
started) and must be vacant to perform the work, and the
construction is on schedule according to a HUD-approved PHA Annual
Plan; or
(b) The unit must be vacated to perform the work and the
treatment of the vacant unit is included in a HUD-approved PHA
Annual Plan, but the time period for placing the vacant unit under
construction has not yet expired. The PHA shall place the vacant
unit under construction within 2 federal fiscal years (FFYs) after
the FFY in which the capital funds are approved.
(c) Vacancy days associated with a vacant unit prior to the time
the unit meets the conditions of being a unit receiving section 9(d)
Capital Funds, and vacancy days associated with a vacant unit after
construction work has been completed or after the time period for
placing the vacant unit under construction has expired, shall not be
exempted from the computation of adjusted vacancy rate and unit
turnaround time.
(5) Vacancy days associated with units vacant during the
assessment period due to circumstances and actions beyond a
project's control. Circumstances and actions beyond a project's
control may include, but are not limited to:
(a) Litigation. Units that are vacant due to litigation, such as
a court order or settlement agreement that is legally enforceable;
units that are vacant in order to meet regulatory and statutory
requirements to avoid potential litigation (as covered in a HUD-
approved PHA Annual Plan); and units under voluntary compliance
agreements with HUD or other voluntary agreements acceptable to HUD
(e.g., units that are being held vacant as part of a court-order,
HUD-approved desegregation plan, or as part of a voluntary
compliance agreement requiring modifications to the units to make
them accessible pursuant to 24 CFR part 8);
(b) Changing market conditions;
(c) Disasters. Units that are vacant due to a federally
declared, state-declared, or other declared disaster; or
(d) Casualty losses. Damaged units that have sustained casualty
damage and remain vacant due to delays in settling insurance claims,
but only until the insurance claims are settled.
Supporting documentation for section 9 Capital Fund
program units. A project shall maintain information to support its
determination of vacancy days associated with a vacant unit that
meets the conditions of being a unit receiving section 9(d) Capital
Funds under paragraph (4) of this section. The project shall, at a
minimum, maintain:
(1) The date on which the unit met the conditions of being a
vacant unit receiving section 9(d) Capital Funds; and
(2) The date on which construction work was completed or the
time period for placing the vacant unit under construction expired.
Supporting documents for vacancies beyond a project's
control. A project shall
[[Page 49580]]
maintain information to support its determination of vacancy days
associated with units vacant due to circumstances and actions beyond
the project's control. This supporting information is subject to
review and may be requested for verification purposes at any time by
HUD. The project shall, at a minimum, maintain:
(1) The date on which the unit met the conditions of being a
unit vacant due to circumstances and actions beyond a project's
control;
(2) Documentation identifying the specific conditions that
distinguish the unit as a unit vacant due to circumstances and
actions beyond a project's control;
(3) A description or list of the actions taken by a project to
eliminate or mitigate these conditions; and
(4) The date on which the unit ceased to meet such conditions
and became an available unit.
Component #5.1, Vacancy Rate. This component measures the
average adjusted vacancy rate for the 12-calendar-month period as of
the end of the calendar month before the management review of public
housing projects begins (except as noted in grades C(3) and D(3)),
and the project's progress in reducing vacancies.
Adequacy of the system to track vacancy rate. It is
implicit in this component that the project has an adequate system
for tracking vacancy rate.
Grade A: The project has:
(1) An adjusted vacancy rate of 2 percent or less; or
(2) For a project with fewer than 100 units, not more than the
number of unit days for 2 units vacant for the entire year; and
(3) An adequate system for tracking vacancy days.
Grade B: The project has:
(1) An adjusted vacancy rate of greater than 2 percent and less
than or equal to 4 percent; and
(2) An adequate system for tracking vacancy days.
Grade C: The project:
(1) Has an adjusted vacancy rate of greater than 4 percent and
less than or equal to 6 percent; and
(2) Has an adequate system for tracking vacancy days; or
(3) Has:
(A) An adjusted vacancy rate of greater than 6 percent and less
than or equal to 10 percent; and
(B) For the same calendar month 3 years prior, the adjusted
vacancy rate was 16 percent or greater; and
(C) An adequate system for tracking vacancy days.
Grade D: The project:
(1) Has an adjusted vacancy rate of greater than 6 percent and
less than or equal to 10 percent; and
(2) Has an adequate system for tracking vacancy days; or
(3) Has:
(A) An adjusted vacancy rate of greater than 10 percent and less
than or equal to 14 percent;
(B) An adjusted vacancy rate of 20 percent or greater for the
same calendar month 3 years prior; and
(C) An adequate system for tracking vacancy days.
Grade F: The project:
(1) Has an adjusted vacancy rate greater than 10 percent; or
(2) Does not have an adequate system for tracking vacancy days.
Component #5.2, Turnaround Time. This component examines the
amount of time it takes a project to turn around units that were
leased within the 12-calendar-month period as of the end of the
calendar month before the management review of public housing
projects begins.
Adequacy of the system to track vacant unit turnaround
time. It is implicit in this component that the project has an
adequate system for tracking vacant unit turnaround time.
Grade A: The project has:
(1) Achieved a grade of A under component 5.1, vacancy rate; or
(2) Turned around vacant units in an average of less than 15
calendar days; and
(3) An adequate system for tracking vacant unit turnaround days.
Grade B: The project has:
(1) Turned around vacant units in an average of at least 15
calendar days but less than 20 calendar days; and
(2) An adequate system for tracking vacant unit turnaround days.
Grade C: The project has:
(1) Turned around vacant units in an average of at least 20
calendar days but less than 25 calendar days; and
(2) An adequate system for tracking vacant unit turnaround days.
Grade D: The project has:
(1) Turned around vacant units in an average of at least 25
calendar days but less than 30 calendar days; and
(2) An adequate system for tracking vacant unit turnaround days.
Grade F: The project:
(1) Has turned around vacant units in an average of 30 calendar
days or more; or
(2) Does not have an adequate system for tracking vacant unit
turnaround days.
Component #5.3, Occupancy Review. This component addresses all
of the activities and procedures necessary to house and retain
occupancy eligible low-income families, including accepting and
processing applications, selecting families for assistance,
minimizing vacancies and unit turnaround time in public housing,
ensuring that public housing families comply with program
requirements, and properly computing income and rent. This component
is not scored.
Subindicator #6, Tenant/Management Relations. This subindicator
evaluates the economic self-sufficiency opportunities provided for
residents and the degree of resident involvement in the project's
administration.
Component #6.1, Economic Self-Sufficiency. This component
evaluates--for the calendar month ending before the management
review of public housing projects begins--employment, self-
sufficiency participation, and self-sufficiency opportunities
provided for adult residents.
This component excludes any adult who:
(1) Is 62 years or older;
(2)(i) Is a blind or disabled individual, as defined under
216(i)(1) or 1614 of the Social Security Act (42 U.S.C. 416(i)(1);
1382c), or
(ii) Is a primary caretaker of such an individual;
(3) Meets the requirements for being exempted from having to
engage in a work activity under the state program funded under part
A of title IV of the Social Security Act (42 U.S.C. 601 et seq.) or
under any other welfare program of the state in which the PHA is
located, including a state-administered welfare-to-work program; or
(4) Is a member of a family receiving assistance, benefits, or
services under a state program funded under part A of title IV of
the Social Security Act (42 U.S.C. 601 et seq.) or under any other
welfare program of the state in which the PHA is located, including
a state administered welfare-to-work program, and has not been found
by the state or other administering entity to be in noncompliance
with such a program.
Grade A: The project has: (1) At least 85 percent of its
households with a head, spouse, or sole member that is an elderly
person or a disabled person; or
(2) At least 50 percent of its adult residents employed either
full or part-time; or
(3) At least 10 percent of its adult residents participating in
a self-sufficiency program.
Grade C: The project offers or coordinates with an outside
agency to make available at least one economic self-sufficiency
activity.
Grade F: The project does not offer or coordinate with an
outside agency to make available at least one economic self-
sufficiency activity.
Component #6.2, Resident Involvement in Project Administration.
This component evaluates, for the calendar month ending before the
management review of public housing projects begins, the
opportunities for resident involvement in project administration.
Grade A: The project offers at least one opportunity for tenants
to be involved in the administration of the project.
Grade F: The project does not offer at least one opportunity for
tenants to be involved in the administration of the project.
Subindicator #7, General Management Practices. This subindicator
tracks a project's ability to take appropriate actions to provide
the information needed to close all findings resulting from any
review of public housing projects. This subindicator is not scored.
An asterisk (*) will be used to indicate that a project has an
outstanding finding(s) from a prior management review or from the
current management review. An asterisk (*) will also be used to
indicate that a PHA has an outstanding finding(s) under the
Management Operations Indicator from any prior review or from the
current management review.
Component #7.1, Management Review Findings. This component
tracks a project's ability to take appropriate actions to provide
the information needed to close all findings resulting from any
prior HUD management review of public housing projects, by the due
dates, and any finding(s) resulting from the current management
review. For prior HUD management reviews, this component applies to
reports with findings issued more than 75
[[Page 49581]]
days prior to the management review of public housing projects. This
component is not scored.
Component #7.2, Other Prior Review Findings. This component
tracks a project's ability to take appropriate actions to provide
the information needed to close all findings resulting from any
review, including, but not limited to independent public accountant
audits; Government Accountability Office reviews; HUD Inspector
General reviews; and reviews based on the Guidance for the On-Site
Limited Monitoring Review of Civil Rights Related Program
Requirements (CRRPR) for Low-Rent Public Housing (LR) Program and
Housing Choice Voucher (HCV) Program and based on the On-Site
Limited Monitoring Review--Section 504 (OMB approval number 2577-
0251, expires May 31, 2010), by the due dates for closing the
findings. This information will be used for civil rights and fair
housing purposes to determine compliance with 24 CFR 5.105(a) and 24
CFR 903.7(p). This component applies to reports with findings issued
more than 75 days prior to the management review of public housing
projects. This component is not scored.
Component #7.3, Insurance. This component assesses whether a
project has sufficient insurance coverage as applicable to the
project. This component is not scored.
Elements of Scoring
A. Points and Threshold
The Management Operations Indicator score is based on a maximum
of 40 points. In order to receive a passing score under this
indicator, a project must achieve at least 24 points or 60 percent
of the available points available under this indicator.
B. Scoring Elements
The Management Operations Indicator score provides an assessment
of a project's management effectiveness. Under the PHAS Management
Operations Indicator, HUD will calculate a score for each project,
as well as for the overall management operations of a PHA, that
reflects weights based on the relative importance of the individual
management subindicators and components. The overall Management
Operations Indicator score for a PHA is a unit-weighted average of
the PHA's individual project management operations scores. In order
to compute the score, an individual project management operations
score is multiplied by the number of units in each project to
determine a ``weighted value.'' The sum of the weighted values is
then divided by the total number of units in a PHA's portfolio to
derive the overall PHAS Management Operations Indicator score.
The computation of the score under this PHAS indicator utilizes
data obtained through a management review of public housing projects
by HUD and requires four main calculations for the subindicators and
components, which are:
Scores are first calculated for each component, where
applicable.
Scores are then calculated for each subindicator, where
applicable.
A score is calculated for form HUD-5834, Management
Review for Public Housing Projects, which is the project score.
A score is calculated for the overall indicator score,
which is a unit-weighted average of the individual project
management operations scores.
The calculations are performed on the basis of the following:
The point value and/or grades of the subindicators and
components that are listed in Table 2; and
The point equivalent to the grades assigned for each
component that are listed in Table 3.
Table 2--Management Operations Indicator
------------------------------------------------------------------------
Subindicator/component Grades Points
------------------------------------------------------------------------
1, General Appearance ............................ 6.0
and Security.
1.1 Appearance and Market A, C, F..................... 5.0
Appeal.
1.2 Security............... A, C, F..................... 1.0
2, Follow-Up and Not Scored.................. .........
Monitoring of Project
Inspections.
2.1 Exigent Health and Not Scored.................. N/S
Safety (EHS) Deficiencies.
2.2 Lead-Based Paint (LBP) Not Scored.................. N/S
Inspection Deficiencies.
3, Maintenance and ............................ 6.0
Modernization.
3.1 Unit Inspections....... A, C, F..................... 1.0
3.2 Work Orders............ A, C, F..................... 3.0
3.3 Preventive Maintenance. A, C, F..................... 1.0
3.4 Energy Conservation/ A, C, F..................... 1.0
Utility Consumption.
3.5 Modernization.......... Not Scored.................. N/S
4, Financial ............................ 8.0
Management.
4.1 Percentage of Accounts A, C, F..................... 4.0
Payable.
4.2 Rent Collection........ A, C, F..................... 4.0
4.3 Budget Management...... Not Scored.................. N/S
4.4 Procurement............ Not Scored.................. N/S
5, Leasing and ............................ 18.0
Occupancy.
5.1 Vacancy Rate........... A, B, C, D, F............... 16.0
5.2 Turnaround Time........ A, B, C, D, F............... 2.0
5.3 Occupancy Review....... Not Scored.................. N/S
6, Tenant/Management ............................ 2.0
Relations.
6.1 Economic Self- A, C, F..................... 1.0
Sufficiency.
6.2 Resident Involvement in A, F........................ 1.0
Project Administration.
7, General Management Not Scored.................. N/S
Practices.
7.1 Management Review Not Scored.................. N/S
Findings.
7.2 Other Prior Review Not Scored.................. N/S
Findings.
7.3 Insurance.............. Not Scored.................. N/S
----------
Total.................. ............................ 40.0
------------------------------------------------------------------------
The grades for each component are assigned values to indicate
the percentage of the component points that will be awarded in the
calculation. The assigned values for the grades, which are listed in
Table 3, are the same for each component. For example, a project
with a grade of C for vacancy rate will receive 70 percent of the
component points of 16, for a score of 11.20 for the component.
Table 3--Possible Grades
------------------------------------------------------------------------
Grade Points
------------------------------------------------------------------------
A............................................................ 1.00
B............................................................ 0.85
C............................................................ 0.70
D............................................................ 0.50
[[Page 49582]]
F............................................................ 0.00
------------------------------------------------------------------------
C. Scoring of Component 1.1, Appearance and Market Appeal
The scoring for component 1.1 has a base calculation
different from the other components. The project is assessed in the
following 12 categories:
(1) Project entrance;
(2) Landscaping;
(3) Building exterior;
(4) Graffiti;
(5) Paved surfaces;
(6) Public spaces and amenities;
(7) Fencing, railing, porches, overhangs, and ramps;
(8) Windows;
(9) Overall project appearance;
(10) Debris;
(11) Trash receptacles; and
(12) Units.
A Superior Performance in a category is valued at two points; a
Satisfactory Performance in a category is valued at one point; and
an Unsatisfactory Performance in a category is valued at zero
points.
A project's score in appearance and market appeal may be a
single project-wide assessment, or may be a compilation of multiple
assessments of one or more of the individual sites that comprise the
project.
Project-wide assessment: For a project-wide assessment, the
project as a whole receives a single assessment in each of the 12
categories listed above. For any given assessment, one or more of
these categories may be excluded if they do not apply to a
particular project. The total points earned for all of the
categories for which a PHA is assessed is divided by the maximum
points possible to determine the grade equivalent for this
component. The maximum points possible are determined by identifying
the total number of criteria that were not excluded and multiplying
that number by two points.
Example 1: A project is assessed in all 12 categories for a
maximum of 24 possible points. If the project achieves a total of 22
points, the 22 points are divided by 24 points, which equals 91.67
percent, or a grade of A.
Example 2: A project is not assessed under public spaces and
amenities for a total of 11 categories and a maximum of 22 possible
points. If the project achieves a total of 15 points, the 15 points
are divided by 22 points, which equals 68.18 percent, or a grade of
C.
Multiple site assessment: A project may be comprised of two or
more discreet, individual sites. HUD may elect to assess one or more
of these sites individually. If so, each site assessed will be
assessed in each of the 12 categories listed above. For any given
reason, one or more of these categories may be excluded if they do
not apply to a particular site. The total points earned for all of
the categories for which a site is assessed is divided by the
maximum points possible to determine the overall score for each
site. The maximum points possible are determined by identifying the
total number of criteria that were not excluded and by multiplying
the number by two points, as described above.
All individual site assessments will be combined to produce a
single project-wide assessment score in each of the 12 categories,
as follows:
(1) The site-specific scores for each category will be averaged
to determine a unit-weighted average project-wide score for each
category. Any category that is excluded from the assessment at all
sites will also be excluded from the project-wide assessment.
(2) All average project-wide scores in all categories will be
summed to determine the unit-weighted overall project-wide total
points. These points will be divided by the maximum points possible
to determine the grade equivalent for this component. The maximum
points possible are determined by identifying the total number of
non-excluded criteria from all site assessments and by multiplying
that number by 2 points.
D. Scoring of Component 5.3, Occupancy Review
The questions listed under this component on form HUD-5834,
Management Review for Public Housing Projects, cannot be completed
unless form HUD-5834-A, Tenant File Review, and form HUD-5834-B,
Upfront Income Verification Review, have been completed. This
component is not scored, and forms HUD-5834-A and HUD-5834-B are not
scored.
E. Example of Score Computations
The indicator score equals the sum of the subindicator scores,
as shown in Table 4. The indicator score for a project is rounded to
two decimal places. The indicator score for a PHA is rounded to the
nearest whole number. The subindicator scores equal the sum of the
component scores.
Table 4--Example Assessment of the Management Operations Indicator
----------------------------------------------------------------------------------------------------------------
Subindicator/Component Points Grade Value Calculations Score
----------------------------------------------------------------------------------------------------------------
1, General Appearance 6.0 4.50
and Security.
----------------------------------------------------------------------------------------------------------------
1.1 Appearance and Market 5.0 C .70 (5.0) x (.70) = 3.50............. 3.50
Appeal.
----------------------------------------------------------------------------------------------------------------
1.2 Security................ 1.0 A 1.00 (1.0) x (1.0) = 1.00............. 1.00
----------------------------------------------------------------------------------------------------------------
2, Follow-Up and 0.0 Not Scored N/S
Monitoring of Project
Inspections.
----------------------------------------------------------------------------------------------------------------
2.1 Exigent Health and 0.0 Not Scored N/S
Safety (EHS) Deficiencies.
----------------------------------------------------------------------------------------------------------------
2.2 Lead-Based Paint (LBP) 0.0 Not Scored N/S
Inspection Deficiencies.
----------------------------------------------------------------------------------------------------------------
3, Maintenance and 6.0 5.10
Modernization.
----------------------------------------------------------------------------------------------------------------
3.1 Unit Inspections........ 1.0 C .70 (1.0) x (.70) = .70.............. .70
----------------------------------------------------------------------------------------------------------------
3.2 Work Orders............. 3.0 A 1.00 (3.0) x (1.0) = 3.00............. 3.00
----------------------------------------------------------------------------------------------------------------
3.3 Preventive Maintenance.. 1.0 C .70 (1.0) x (.70) = .70.............. .70
----------------------------------------------------------------------------------------------------------------
3.4 Energy Conservation/ 1.0 C .70 (1.0) x (.70) = .70.............. .70
Utility Consumption.
----------------------------------------------------------------------------------------------------------------
3.5 Modernization........... 0.0 Not Scored N/S
----------------------------------------------------------------------------------------------------------------
4, Financial Management 8.0 5.60
----------------------------------------------------------------------------------------------------------------
4.1 Percentage of Accounts 4.0 C .70 (4.0) x (.70) = 2.80............. 2.80
Payable.
----------------------------------------------------------------------------------------------------------------
4.2 Rent Collection......... 4.0 C .70 (4.0) x (.70) = 2.80............. 2.80
----------------------------------------------------------------------------------------------------------------
[[Page 49583]]
4.3 Budget Management....... 0.0 Not Scored N/S
----------------------------------------------------------------------------------------------------------------
4.4 Procurement............. 0.0 Not Scored N/S
----------------------------------------------------------------------------------------------------------------
5, Leasing and 18.0 9.40
Occupancy.
----------------------------------------------------------------------------------------------------------------
5.1 Vacancy Rate............ 16.0 D .50 (16.0) x (.50) = 8.00............ 8.00
----------------------------------------------------------------------------------------------------------------
5.2 Turnaround Time........ 2.0 C .70 (2.0) x (.70) = 1.40............. 1.40
----------------------------------------------------------------------------------------------------------------
5.3 Occupancy Review........ 0.0 Not Scored NS
----------------------------------------------------------------------------------------------------------------
6, Tenant/Management 2.0 1.70
Relations.
----------------------------------------------------------------------------------------------------------------
6.1 Economic Self- 1.0 C .70 (1.0) x (.70) = .70.............. .70
Sufficiency.
----------------------------------------------------------------------------------------------------------------
6.2 Resident Involvement in 1.0 A 1.00 (1.0) x (1.0) = 1.00............. 1.00
Project Administration.
----------------------------------------------------------------------------------------------------------------
7, General Management 0.0 Not Scored N/S
Practices.
----------------------------------------------------------------------------------------------------------------
7.1 Finding Correction: 0.0 Not Scored N/S
Management Review Findings.
----------------------------------------------------------------------------------------------------------------
7.2 Finding Correction: 0.0 Not Scored N/S
Other Prior Review Findings.
----------------------------------------------------------------------------------------------------------------
7.3 Insurance............... 0.0 Not Scored N/S
----------------------------------------------------------------------------------------------------------------
Total Points............ ......... .......... ......... ................................. 26.30
----------------------------------------------------------------------------------------------------------------
F. Scoring Projects During the First Year and Subsequent Years of
Implementation Under the New PHAS
During the first year of implementation under the new PHAS, a
PHA's Management Operations Indicator score of record will be
converted to the 40-point value if a project does not have a
management review during the first year. Table 5 shows the
conversion from a 30-point value to a 40-point value.
Table 5--Conversion from 30-Point Value to 40-Point Value
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
30-Pt. Value.................... 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16
--------------------------------------------------------------------------------------------------------------------------------------------------------
40-Pt. Value.................... 40.0 38.7 37.3 36.0 34.7 33.3 32.0 30.7 29.3 28.0 26.7 25.3 24.0 22.7 21.3
========================================================================================================================================================
30-Pt. Value.................... 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
40-Pt. Value.................... 20.0 18.7 17.3 16.0 14.7 13.3 12.0 10.7 9.3 8.0 6.7 5.3 4.0 2.7 1.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
The score that will be used is the PHA's most recent score of
record. Table 6 includes an example of how scoring will be computed
during the first year of implementation of the new PHAS, with each
project having 100 units.
Table 6--First Year of Implementation Scoring
----------------------------------------------------------------------------------------------------------------
PHA's 30-point First year of
Project Management value score of Conversion to 40- implementation
review score record point value scoring
----------------------------------------------------------------------------------------------------------------
1....................................... 0.0 24.0 32.0 32.0
2....................................... 27.0 0.0 0.0 27.0
3....................................... 36.0 0.0 0.0 36.0
----------------------------------------------------------------------------------------------------------------
Overall Total: First Year of Implementation PHAS Scoring.................................. 31.7
----------------------------------------------------------------------------------------------------------------
During the second year of implementation under the new PHAS, a
PHA's score of record will be converted to the 40-point value if a
project does not have a management review during the first or second
years. The score that will be used is the PHA's most recent score of
record. Table 7 includes an example of how scoring will be computed
during the second year of implementation of the new PHAS, with each
project having 100 units. In this example, every project has
received a management review.
[[Page 49584]]
Table 7--Second Year of Implementation Scoring
----------------------------------------------------------------------------------------------------------------
PHA's 30-point Second year of
Project Management value score of Conversion to 40- implementation
review score record point value score
----------------------------------------------------------------------------------------------------------------
1....................................... 36.0 0.0 0.0 36.0
2....................................... 32.0 0.0 0.0 32.0
3....................................... 37.0 0.0 0.0 37.0
----------------------------------------------------------------------------------------------------------------
Overall Total: Second Year of Implementation PHAS Scoring................................. 35.0
----------------------------------------------------------------------------------------------------------------
For subsequent years, the most recent management review score
for a project will be used for a project's management operations
score, or the most recent score of record will be used. The most
recent management operations scores for all projects will be used to
calculate a PHA's overall management operations score.
G. Examples of Score Computations for the Redistribution of Points
An example of computing a subindicator score with a
non-assessed component. When a non-assessed component exists, the
value of the component shall be redistributed proportionally across
the components that have been assessed within the same subindicator
in order to maintain the same scoring ratios. To redistribute the
points for a non-assessed component, each assessed component shall
be multiplied by the total possible points for the subindicator and
divided by the total points of the assessed components, as shown in
Table 8.
Table 8--Example of a Redistribution of Points Within the Maintenance and Modernization Subindicator
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Assessed
Component possible comp. Redistribution Redis. Grade Grade Score calculation Comp.
points points calculation points value score
--------------------------------------------------------------------------------------------------------------------------------------------------------
3.1 Unit Inspections.............. 1.0 1.0 (1.0 x 6.0)/5.0...... 1.20 F 0.0 1.20 x 0.0........... 0.00
3.2 Work Orders................... 3.0 3.0 (3.0 x 6.0)/5.0...... 3.60 A 1.0 3.60 x 1.0........... 3.60
3.3 Prev. Maint................... 1.0 1.0 (1.0 x 6.0)/5.0...... 1.20 C 0.7 1.20 x 0.7........... 0.84
3.4 Energy/Utility................ 1.0 N/A N/A.................. N/A N/A N/A N/A.................. N/A
3.5 Mod........................... 0.0 N/S N/S.................. N/S N/S N/S N/S.................. N/S
---------------------------------------------------------------------------------------------------------------------
Total Points.................. 6.0 5.0 ..................... 6.0 .......... .......... ..................... 4.44
--------------------------------------------------------------------------------------------------------------------------------------------------------
In the example in Table 8, the energy/utility component under
maintenance is not assessed. To redistribute the energy/utility
points, each assessed component must be multiplied by the total
possible points for the subindicator (6), and divided by the total
possible points of the assessed components (5). The redistributed
value of the total possible points for the preventive maintenance
component is calculated to be 1.20 points. In the example, the
project has received a grade of C for preventive maintenance and the
project then receives 70 percent of the redistributed point value
for preventive maintenance. As shown in Table 8, 70 percent of 1.20
equals 0.84 points. The maintenance subindicator score is then
computed by summing the redistributed components, thus making the
final score for the maintenance subindicator 4.44 points.
An example of computing the Management Operations
Indicator score for a project excluding the tenant/management
relations subindicator. Table 9 provides an example for the
calculation of the Management Operations Indicator score when the
tenant/management relations subindicator has not been assessed. When
a non-assessed subindicator exists, the value of the non-assessed
subindicator shall be redistributed proportionally across the
subindicators that have been assessed. To redistribute the tenant/
management relations subindicator points, each assessed subindicator
shall be multiplied by the total possible points for the Management
Operations Indicator (40), and divided by the total possible points
of the assessed subindicators (38). The final Management Operations
Indicator score is derived by summing the redistributed subindicator
points.
Table 9--Example of the Exclusion of a Subindicator
----------------------------------------------------------------------------------------------------------------
Total possible Actual Redistributed
Subindicator Total possible assessed subindicator Redistributed subindicator
points points score calculation points
----------------------------------------------------------------------------------------------------------------
General Appearance and 6.0 6.0 3.00 (3.00 x 40)/38.. 3.16
Security.
Maintenance and Modernization. 6.0 6.0 4.44 (4.44 x 40)/38.. 4.67
Financial Management.......... 8.0 8.0 8.00 (8.00 x 40)/38.. 8.42
Leasing and Occupancy......... 18.0 18.0 18.00 (18.0 x 40)/38.. 18.95
Tenant/Management Relations... 2.0 N/A N/A N/A............. N/A
---------------------------------------------------------------------------------
Total Points.............. 40.0 38.0 .............. ................ 35.20
----------------------------------------------------------------------------------------------------------------
An example of rescaling components so that the sum of
components equals a redistributed subindicator. In the previous
example, the subindicator points were redistributed because the
tenant/management relations subindicator was not assessed. After the
subindicator points were redistributed, the component points
comprising the subindicator no longer added up to the redistributed
value of the subindicator. Therefore, a calculation must be
performed to rescale the components of subindicators that were
assessed so that those components add up to the redistributed
subindicators. Table 10 contains an example of rescaling the
maintenance subindicator components so that they add up to the
redistributed maintenance subindicator. In Table 10, each
[[Page 49585]]
component is rescaled by multiplying by a factor of 40 (total
possible points), divided by 38 (total assessed points). The
rescaled component values add up to 4.67 points, which are the
redistributed subindicator points for the maintenance subindicator.
Table 10--Example of Rescaling of Components
----------------------------------------------------------------------------------------------------------------
Component rescaling Component values
Component Component value calculation after rescaling
----------------------------------------------------------------------------------------------------------------
Unit Inspections.......................... 0.00 0.00 x (40/38).............. 0.00
Work Orders............................... 3.60 3.60 x (40/38).............. 3.79
Preventive Maint.......................... 0.84 0.84 x (40/38).............. .88
Energy/Utility............................ N/A N/A......................... N/A
Modernization............................. N/S N/S......................... N/S
---------------------------------------------------------------------
Total Points.......................... 4.44 ............................ 4.67
----------------------------------------------------------------------------------------------------------------
H. Physical Condition and/or Neighborhood Environment
The overall management operations score for a project will be
adjusted upward to the extent that negative conditions are caused by
situations outside the control of the project. These situations are
related to the poor physical condition of the project or the overall
depressed condition of the major census tract in which a project is
located. The intent of this adjustment is to avoid penalizing
projects through appropriate application of the adjustment. In
addition, the overall PHA Management Operations Indicator score will
be adjusted upward to reflect the individual project adjustments.
Definitions and application of physical condition and
neighborhood environment factors are:
(1) A physical condition adjustment applicable to projects at
least 28 years old, based on the unit-weighted average Date of Full
Availability (DOFA) date.
(2) A neighborhood environment adjustment applicable to projects
in census tracts in which at least 40 percent of the families have
an income below the poverty rate, as documented by the most recent
census data. If a project is in more than one census tract, the
census data for the census tract where the majority of units are
located shall be used. If there is no census tract data available
for a project, the census data for that project will be based on the
county's census data, and if county data is not available, then the
state census data will be used.
Adjustment for physical condition and neighborhood
environment. HUD will adjust the overall management operations score
of a project subject to one or both of the physical condition and
neighborhood environment conditions. The adjustments will be made to
the individual project scores, and then to the overall management
operations score, so as to reflect the difficulty in managing the
projects.
The adjustment for physical condition and neighborhood
environment will be calculated by HUD and applied to all eligible
projects. The data to determine if a project is eligible for either
adjustment will be derived from the Public and Indian Housing
Information Center databases.
In each instance where the actual management operations score
for a project is rated below the maximum score of 40 points, one
unit-weighted point each will be added for physical condition and/or
neighborhood environment, but not to exceed the maximum number of 40
points available for the Management Operations Indicator for a
project. Table 11 shows an example of the calculation of physical
condition and/or neighborhood environment points for a hypothetical
PHA with four projects. The adjustment for physical condition and/or
neighborhood environment is a unit-weighted average of a PHA's
individual project physical condition and/or neighborhood
environment adjustments.
Table 11--Calculation of Physical Condition and/or Neighborhood Environment (PCNE) Points
----------------------------------------------------------------------------------------------------------------
Proj. Proj. Proj. Proj.
Line Project 1 2 3 4 Total PHA
----------------------------------------------------------------------------------------------------------------
1.............................. Units............... 133 65 89 25 12
----------------------------------------------------------------------------------------------------------------
2.............................. Weight.............. 42.6% 20.8% 28.5% 8.0% 100.0%
================================================================================================================
3.............................. Physical Condition 1 1 1 0 .........
Points.
----------------------------------------------------------------------------------------------------------------
4.............................. Neighborhood 1 1 0 0 .........
Environment Points.
----------------------------------------------------------------------------------------------------------------
5.............................. Total PCNE Points at 2 2 1 0 .........
Project Level.
================================================================================================================
6.............................. Weighted Physical 0.43 0.21 0.29 0.00 0.92
Condition Points.
----------------------------------------------------------------------------------------------------------------
7.............................. Weighted 0.43 0.21 0.00 0.00 0.63
Neighborhood
Environment Points.
----------------------------------------------------------------------------------------------------------------
8.............................. Weighted PCNE Points 0.85 0.42 0.29 0.00 1.55
----------------------------------------------------------------------------------------------------------------
This PHA has 312 total units in four projects (see line 1). The
weight of each project is based on units and is calculated by
dividing the project units into the total PHA units (see line 2).
Project 1 and project 2 qualify for both points;
project 3 qualifies for only physical condition; and
project 4 does not qualify for any points (see lines 3
through 5). Each project contributes its physical condition and/or
neighborhood environment points to the overall PHA Management
Operations Indicator score based on its weight. For example, in
project 1, the weighted physical condition and neighborhood
environment point is 0.85 and is calculated by multiplying the
project weight of 42.6 percent (line 2) by the physical condition
and neighborhood environment point of 2 (see line 5). The overall
physical condition and neighborhood environment adjustment at the
PHA level is calculated at 1.55 points by adding the individual
project weighted scores (see line 8 under the Total PHA column).
Appendix D to Part 902--Capital Fund Scoring
I. Purpose of This Appendix
This appendix provides information about the scoring process for
PHAS Indicator 4, Capital Fund program. The purpose of the
Capital Fund program assessment is to
[[Page 49586]]
examine the period of time it takes a PHA to obligate and expend the
funds provided to a PHA from the Capital Fund program under section
9(j) of the Act (42 U.S.C. 1437g(9)(j)). Funds from the Capital Fund
program under section 9(d) of the 1937 Act (42 U.S.C. 1437g(d)(2))
do not include HOPE VI program funds.
This indicator is not applicable for PHAs that choose not to
participate in the Capital Fund program under section 9(d) of the
1937 Act. This indicator is applicable on a PHA-wide basis, and not
to individual projects.
The assessment required under the PHAS Capital Fund program
indicator will be performed through analysis of obligated and
expended amounts in HUD's electronic Line of Credit Control System
(e-LOCCS) (or its successor) for all Capital Fund program grants
that were open during a PHA's assessed fiscal year. Of the total 100
points available for a PHAS score, a PHA may receive up to 10 points
based on the Capital Fund program indicator. Scoring for this
indicator will be dependent on the amount of time it takes a PHA to
obligate and expend its capital funds. If a PHA has no obligation
end dates or no expenditure end dates in the assessed fiscal year,
and does not have any Sec. 9(j) of the 1937 Act sanctions against
it, the points for that subindicator will be redistributed to the
remaining subindicator.
II. Subindicators
A. Subindicators of Capital Fund Program Indicator. The two
subindicators of the Capital Fund program indicator are:
Timeliness of fund obligation; and
Timeliness of fund expenditure.
B. Grades for Capital Fund Program Indicator. This indicator
measures the statutory requirements for the Capital Fund program.
Subindicator #1, Timeliness of Fund Obligation. This
subindicator examines the period of time it takes for a PHA to
obligate funds from the Capital Fund program under section 9(j)(1)
of the 1937 Act (42 U.S.C. 1437g(9)(j)). HUD may extend the period
of time for the obligation of funds in accordance with 24 CFR
905.120 and section 9(j)(2) of the 1937 Act.
Grade A: The PHA has obligated 90 percent or more of the grant
amount for all of its grants on its obligation end date for all open
Capital Fund program grants that have obligation end dates during
the assessed fiscal year and does not have any grants that have been
sanctioned pursuant to Sec. 9(j) of the 1937 Act during the
assessed fiscal year.
Grade F: The PHA has obligated less than 90 percent of the grant
amount for any of its open grants on the obligation end date during
the assessed fiscal year or is undergoing sanctions as per Section
III of this appendix D.
Subindicator #2, Timeliness of Fund Expenditure. This
subindicator examines the period of time it takes for a PHA to
expend funds from the Capital Fund program under section 9(j)(5) of
the 1937 Act.
Grade A: The PHA has:
(1) Expended 100 percent of the grant amount for all of its
grants on the expenditure end date for all Capital Fund program
grants that have an expenditure end date within a PHA's assessed
fiscal year; or
(2) A remaining balance of one percent or less of the grant
amount or $1,000 or less of the grant amount (whichever is smaller)
for all Capital Fund program grants that have an expenditure end
date within a PHA's assessed fiscal year.
Grade F: The PHA has a remaining balance of greater than one
percent of the grant amount or more than $1,000 of the grant amount
(whichever is smaller) for all Capital Fund program grants that have
an expenditure end date within a PHA's assessed fiscal year.
III. Sanctions
Sanctions for the obligation and expenditure of funds, and HUD's
right to recapture funds are in accordance with 24 CFR 905.120. If a
PHA has been sanctioned during the assessment period, the PHA will
receive an automatic grade of ``F'' for the timeliness of fund
obligation, the timeliness of fund expenditure, or both, as
appropriate.
IV. Elements of Scoring
A. Points and Threshold. The Capital Fund program indicator is
based on a maximum of 10 points. In order to receive a passing score
under this indicator, a PHA must achieve at least 6 points or 60
percent of the available points under this indicator.
B. Scoring Elements. The Capital Fund program indicator score
provides an assessment of a PHA's ability to obligate and expend
Capital Fund program funds in a timely manner. The computation of
the score under this PHAS indicator utilizes data obtained through
analysis of obligated and expended amounts in HUD's e-LOCCS (or its
successor) for all Capital Fund program grants that were open during
the assessed fiscal year and requires two main calculations, which
are:
Scores are first calculated for each subindicator.
From the two subindicator scores, an indicator score is
then calculated.
The two calculations are performed based on:
The point value of the two subindicators, which are
listed in Table 1; and
The point equivalent to the grades assigned for each
subindicator, which are listed in Table 2.
Table 1--Capital Fund Program Subindicator and Points
------------------------------------------------------------------------
Subindicator Points
------------------------------------------------------------------------
Timeliness of Fund Obligation................................ 5
Timeliness of Fund Expenditure............................... 5
------------------------------------------------------------------------
The grades for each subindicator are assigned point equivalent
values to indicate the percentage of the subindicator points that
will be awarded in the calculation. The assigned point equivalent
values for the grades, which are listed in Table 2, are the same for
each subindicator. For example, a PHA with a grade of A for
timeliness of fund obligation will receive all of the subindicator
points of 5, for a score of 5.0 for the subindicator.
Table 2--Possible Grades
------------------------------------------------------------------------
Point
Grade value
------------------------------------------------------------------------
A............................................................ 1.00
F............................................................ 0.00
------------------------------------------------------------------------
C. Example of Score Computations. The indicator score equals the
sum of the subindicator scores, as shown in Table 3.
Table 3--Example Assessment of the Capital Fund Program Indicator
----------------------------------------------------------------------------------------------------------------
Point
Subindicator Points Grade value Calculations Score
----------------------------------------------------------------------------------------------------------------
Timeliness of Fund Obligation....... 5 A 1.00 (5.0) x (1.0) = 5.0... 5.0
Timeliness of Fund Expenditure...... 5 A 1.00 (5.0) x (1.0) = 5.0... 5.0
----------------------------------------------------------------------------------------------------------------
Total Points................................................................................... 10.0
----------------------------------------------------------------------------------------------------------------
D. PHA Responsibility. PHAs are responsible for ensuring that
their Capital Fund program information is submitted to e-LOCCS by
the submission due date. A PHA may not appeal its PHAS and/or
Capital Fund program score based on the fact that it did not submit
its Capital Fund program information to e-LOCCS by the submission
due date. PHAs shall retain supporting documentation for the Capital
Fund program for at least 3 years.
3. Part 907 is added to read as follows:
PART 907--SUBSTANTIAL DEFAULT BY A PUBLIC HOUSING AGENCY
Sec.
907.1 Purpose and scope.
907.3 Bases for substantial default.
907.5 Procedures for declaring substantial default.
907.7 Remedies for substantial default.
Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d).
[[Page 49587]]
Sec. 907.1 Purpose and scope.
This part provides the criteria and procedures for determining and
declaring substantial default by a public housing agency (PHA) and the
actions available to HUD to address and remedy substantial default by a
PHA. Nothing in this part shall limit the discretion of HUD to take any
action available under the provisions of section 6(j)(3)(A) of the 1937
Act (42 U.S.C. 1437d(j)(3)(A)), any applicable annual contributions
contract (ACC), or any other law or regulation that may authorize HUD
to take actions against a PHA that is in substantial default.
Sec. 907.3 Bases for substantial default.
(a) Violations of laws and agreements. A PHA may be declared in
substantial default when the PHA:
(1) Violates a federal statute;
(2) Violates a federal regulation; or
(3) Violates one or more terms of an ACC, or other covenants or
conditions to which the PHA is subject.
(b) Failure to act. In addition to the violations listed in
paragraph (a) of this section, in the case where a PHA is designated as
a troubled performer under PHAS, the PHA shall be in substantial
default if the PHA:
(1) Fails to execute an MOA;
(2) Fails to comply with the terms of an MOA; or
(3) Fails to show substantial improvement, as provided in Sec.
902.75(d).
Sec. 907.5 Procedures for declaring substantial default.
(a) Notification of finding of substantial default. If the PHA is
found in substantial default, the PHA shall be notified of such
determination in writing. Except in situations as described in
paragraph (d) of this section, the PHA shall have an opportunity to
respond to the written determination, and an opportunity to cure the
default, if a cure of the default is determined appropriate by HUD. The
determination of substantial default shall be transmitted to the
Executive Director of the PHA, the Chairperson of the Board of the PHA,
and the appointing authority(ies) of the PHA's Board of Commissioners,
and shall:
(1) Identify the specific statute, regulation, covenants,
conditions, or agreements of which the PHA is determined to be in
violation;
(2) Identify the specific events, occurrences, or conditions that
constitute the violation;
(3) Specify the time period, which shall be a period of 10 but not
more than 30 days, during which the PHA shall have an opportunity to
demonstrate that the determination or finding is not substantively
accurate, if required;
(4) If determined by HUD to be appropriate, provide for an
opportunity to cure and specify the time period for the cure; and
(5) Notify the PHA that, absent a satisfactory response in
accordance with paragraph (b) of this section, action shall be taken as
determined by HUD to be appropriate.
(b) Receipt of notification and response. Upon receipt of the
notification described in paragraph (a) of this section, the PHA may
submit a response, in writing and within the specified time period,
demonstrating:
(1) The description of events, occurrences, or conditions described
in the written determination of substantial default is in error, or
establish that the events, occurrences, or conditions described in the
written determination of substantial default do not constitute
noncompliance with the statute, regulation, covenants, conditions, or
agreements that are cited in the notification under paragraph (a) of
this section; or
(2) If any opportunity to cure is provided, that the violations
have been cured or will be cured in the time period specified by HUD.
(c) Waiver of notification and the opportunity to respond. A PHA
may waive, in writing, receipt of written notification from HUD of a
finding of substantial default and the opportunity to respond to such
finding. HUD may then immediately proceed with the remedies as provided
in Sec. 907.7.
(d) Emergency situations. A PHA shall not be afforded the
opportunity to respond to a written determination or to cure a
substantial default in any case where:
(1) HUD determines that conditions exist that pose an imminent
threat to the life, health, or safety of public housing residents or
residents of the surrounding neighborhood; or
(2) The events or conditions precipitating the default are
determined to be the result of criminal or fraudulent activity.
Sec. 907.7 Remedies for substantial default.
(a) Except as provided in Sec. 907.7(c), upon determining that
events have occurred or conditions exist that constitute a substantial
default, HUD may:
(1) Take any action provided for in section 6(j)(3) of the Act (42
U.S.C. 1437d(j)(3));
(2) Provide technical assistance for existing PHA management staff;
or
(3) Provide assistance deemed necessary, in the discretion of HUD,
to remedy emergency conditions.
(b) HUD may take any of the actions described in paragraph (a) of
this section sequentially or simultaneously in any combination.
(c) In the case of a substantial default by a troubled PHA pursuant
to Sec. 902.83(b):
(1) For a PHA with 1,250 or more units, HUD shall petition for the
appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the
1937 Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or
(2) For a PHA with fewer than 1,250 units, HUD shall either
petition for the appointment of a receiver pursuant to section
6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)), or take
possession of the PHA (including all or part of any project or program
of the PHA) pursuant to section 6(j)(3)(A)(iv) of the 1937 Act (42
U.S.C. 1437d(j)(3)(A)(iv)), and appoint, on a competitive or
noncompetitive basis, an individual or entity as an administrative
receiver to assume the responsibilities of HUD for the administration
of all or part of the PHA (including all or part of any project or
program of the PHA).
(d) To the extent feasible, while a PHA is operating under any of
the actions that may have been taken by HUD, all services to residents
will continue uninterrupted.
(e) HUD may limit remedies under this part to one or more of a
PHA's specific operational areas (e.g., maintenance, capital
improvement, occupancy, or financial management), to a single program
or group of programs, or to a single project or a group of projects.
For example, HUD may select, or participate in the selection of, an AME
to assume management responsibility for a specific project, a group of
projects in a geographical area, or a specific operational area, while
permitting the PHA to retain responsibility for all programs,
operational areas, and projects not so designated.
Dated: July 14, 2008.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. E8-18753 Filed 8-20-08; 8:45 am]
BILLING CODE 4210-67-P