[Federal Register Volume 89, Number 213 (Monday, November 4, 2024)]
[Proposed Rules]
[Pages 87518-87532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25469]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89, No. 213 / Monday, November 4, 2024 /
Proposed Rules
[[Page 87518]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5 and 902
[Docket No. FR-6356-P-01]
RIN 2577-AD17
Public Housing Evaluation and Oversight: Changes to the Public
Housing Assessment System (PHAS) and Determining and Remedying
Performance Deficiencies
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: The Public Housing Assessment System (PHAS) governs the
assessments, evaluation, and oversight of public housing agencies
(PHAs) administering public housing. This proposed rule would revise
the weight of PHAS performance indicators to emphasize the importance
of occupancy, financial condition, and physical assessments. To the
greatest extent possible, scoring indicators would be based on
measurable program outcomes and data that is already available to HUD.
Additionally, the proposed revisions would allow HUD to respond more
quickly and effectively to performance deficiencies when they are first
identified, to intervene based on trending performance data, and to
delay scoring or assessments when appropriate.
DATES: Comment Due Date: January 3, 2025.
ADDRESSES: There are two methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Electronic Submission of Comments. Comments may be submitted
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 comments immediately available
to the public. Comments submitted electronically through
www.regulations.gov can be viewed by other commenters and interested
members of the public. Commenters should follow the instructions
provided on that website to submit comments electronically.
2. 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 7th Street SW, Room 10276,
Washington, DC 20410-0500.
Note: To receive consideration as a public comment, comments
must be submitted through one of the two methods specified above.
Public Inspection of Public Comments. HUD will make all properly
submitted comments and communications available for public inspection
and copying during regular business hours at the above address. Due to
security measures at the HUD Headquarters building, you must schedule
an appointment in advance to review the public comments by calling the
Regulations Division at 202-708-3055 (this is not a toll-free number).
HUD welcomes and is prepared to receive calls from individuals who are
deaf or hard of hearing, as well as individuals with speech or
communication disabilities. To learn more about how to make an
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments
submitted are available for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Daniel Threet, Policy Advisor,
Department of Housing and Urban Development, 451 7th Street SW,
Washington, DC 20410-0500, telephone (202) 402-7513 (this is not a
toll-free number). HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as individuals
with speech or communication disabilities. To learn more about how to
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed
rule may be found at www.regulations.gov.
SUPPLEMENTARY INFORMATION:
I. Background
Last updated in February 2011, 24 CFR part 902 describes how HUD
assesses and scores the performance of PHAs in essential public housing
operations, on a program-wide and individual-project basis. PHAS
assesses PHA performance based on indicators and subindicators
described in part 902, which HUD then uses to determine a score or
designation for each PHA. The four key indicators, described in 24 CFR
902 subparts B through E, are the physical condition indicator, the
financial condition indicator, the management operations indicator, and
the Capital Fund program indicator.
The current regulations define the purpose and applicability of the
system, the general types of indicators used in assessment, the
frequency of assessments, incentives for high performers, and how HUD
will respond to PHAs with deficiencies or that are identified as
Troubled performers.
In current regulations, the physical condition indicator measures
the extent to which a PHA is ensuring that projects meet acceptable
basic housing conditions. It draws on independent physical inspections
of a PHA's projects provided by HUD and aims to ensure that all
residents live in safe, habitable dwellings. The financial condition
indicator measures a PHA's ability to maintain sufficient financial
resources to support the operation of its Public Housing program. It
draws on financial information reported to HUD by PHAs. The management
operations indicator measures the PHA's ability to operate its Public
Housing program in a way that assists as many households as possible
and meets obligations to participants. It draws on unit-status data as
well as financial information reported to HUD by PHAs. The Capital Fund
program indicator measures the PHA's ability to meet requirements to
obligate Capital Fund program grants in a timely fashion. It also
measures occupancy rates on the assumption that high occupancy rates
reflect success in addressing capital needs. It draws on PHA reporting
of the obligation of Capital Fund program grants and unit-status data.
Based on these four
[[Page 87519]]
indicators, a PHA receives a composite score and a corresponding
performance designation (i.e., a PHA may be designated as a High
performer, a Standard performer, a Substandard performer, or Troubled
performer based on its PHAS assessment).
A full PHAS assessment relies on components that are not
simultaneously assessed, so HUD can receive information about poor
performance months before a full performance designation status is
determined. Under the current regulations, HUD is not able to require a
PHA to take corrective action of any deficiency until the full PHAS
assessment is complete. For example, problems may be identified during
a physical inspection in December, but the PHA may not be identified as
a Troubled performer until after audited financials are submitted nine
months later. Greater flexibility is needed so that HUD can require,
and PHAs can complete, corrective action more promptly.
Beginning in fall 2022, HUD held a series of in-person and virtual
listening sessions with PHAs across the country, to solicit feedback
from PHAs on what they felt were viable and informative metrics for the
evaluation of PHA performance in managing Public Housing. In developing
the new proposed subindicators, HUD considered this feedback, striking
a balance between what it was important to measure, what is reasonably
possible to measure, and what is a fair assessment of PHA performance.
In considering various alternative indicators or subindicators, HUD
examined whether alternative metrics would require additional
information-collection burdens on PHAs, as well as whether alternative
metrics could be collected reliably and objectively.
II. This Proposed Rule
This proposed rule would revise and restructure the PHAS indicators
as well as adjust the weighting of indicators. It would also make
several changes not directly related to scoring. For example, to
correct the lag in timing and achieve the desired flexibility, this
proposed rule would allow HUD to have broad, flexible authority to
require interventions or corrective actions based on component scores
as soon as those scores are issued; in advance of a full assessment;
considering trending data; or in conjunction with a decision to
withhold, deny, or rescind a score or designation, as HUD determines
necessary. This proposed rule would also revise the performance
indicators and subindicators on which scores are based, in order to
better measure performance and align incentives with the long-term
viability of the program. Throughout this proposed rule, HUD has made
several technical changes that do not substantively affect
requirements.
Subpart A--General Provisions
a. Scope
The proposed rule would expand the scope of assessment tools HUD
will use in Sec. 902.1(d), adding other reviews or audits conducted on
the PHA to the tools HUD will use to assess management operations. It
would also allow HUD to advise PHAs of their performance designations
in addition to their scores.
b. Definitions
The proposed rule would make several changes to definitions in
Sec. 902.3. First, it would remove the existing definition of
``Assessed fiscal year'' and add a definition for ``Assessment year,''
which is defined as the period of time for a single PHAS assessment
including a schedule setting forth when component scores will be
determined. For example, any property required to undergo a physical
inspection once every three (3) years will retain the same PHAS
physical condition indicator score it received in the first year of
inspection for the second and third years for assessing the PHAS
physical condition. In the fourth year, the physical condition score
will be based on a new inspection. The financial condition, management
operations, and Capital Fund program indicators will still be based on
the PHA's fiscal year for each assessment.
The proposed rule would revise the definition of ``Capital Fund
troubled'' to refer to a PHA that does not satisfy the requirements to
pass the Capital Fund indicator evaluation rather than one that does
not meet a minimum passing score. This revision would align the
definition with HUD's proposal to determine Capital Fund troubled
status based on a pass/fail rather than a numeric score. It would also
revise the definition of ``Corrective Action Plan'' to note that such
plan is developed in concert with HUD or by HUD, to introduce the
concept that such plan may be based on an individual component score
determined prior to the issuance of the overall PHAS score and
designation, and that for small rural PHAs the equivalent term is
``Corrective Action Agreement'' as noted in Sec. 902.105(c). The
proposed rule would revise the definition of ``Deficiency,'' by
changing the score for the Capital Fund indicator to a failing
evaluation rather than below 50 percent. At Sec. 902.73, the proposed
rule specifies that a deficiency may be a finding or determination that
requires corrective action in advance of the issuance of an overall
PHAS score or performance designation. HUD would also remove the
definition of ``Dictionary of Deficiency Definitions.'' The NSPIRE
final rule (88 FR 30442) replaced this dictionary with the NSPIRE
Standards and Scoring notices (see 24 CFR 5.709). The NSPIRE final rule
revised and retained this definition to instead refer to the NSPIRE
Standards and Scoring notices, but after further consideration, HUD has
determined that term is no longer used and can be removed. HUD is
therefore proposing to remove this definition.
The proposed rule would add a definition for ``Designation'' to
mean a label given to a PHA--``High performer,'' ``Standard
performer,'' ``Substandard performer,'' or ``Troubled performer''--
based on its overall PHAS score. The definition would include the
notion that a PHA that receives a failing evaluation under the Capital
Fund program indicator would be designated as a ``Capital Fund troubled
performer.'' Finally, the proposed rule would add a definition for
``Score'' to distinguish between an overall PHAS score and a component
score (an indicator or subindicator score). The definition would
specify that the overall PHAS score is a number between 0 to 100 and is
calculated by adding together the physical condition, financial
condition, and management operations indicator scores. Small rural PHAs
(as defined by Sec. 902.101) would continue to be scored per Sec.
902.103.
c. Applicability
The proposed rule would amend Sec. 902.5(a)(3) to update the
applicability of this part to Moving-to-Work (MTW) agencies. The
proposed rule would eliminate language that PHAS scores do not apply to
MTW agencies and would instead state that MTW agencies operating under
the Standard MTW Agreement will not be scored in PHAS unless the PHA
elects to be scored. The proposed rule would also state that MTW
agencies operating under the MTW Operations Notice will be subject to
scoring in PHAS.
At the final rule stage, HUD does not plan to have an immediate
effective date. Instead, HUD plans to set an effective date one full
assessment cycle after the publication of the final rule so that PHAs
have time to learn about revised criteria prior to being assessed under
them. For example, if the final rule is published in September 2025,
the regulations in this part will be
[[Page 87520]]
applicable to PHAs beginning with the September 30, 2026 fiscal year
end date.
d. Scoring and Designations
In Sec. 902.9, the proposed rule would provide that each PHA will
receive an overall PHAS score determined by adding the physical
condition indicator (accounts for 40 points), the financial condition
indicator (accounts for 30 points), and the management operations
indicator (accounts for 30 points). The financial condition and
management operations indicators each contain subindicators. The
Capital Fund program indicator will no longer be awarded points in the
overall PHAS score and will only be evaluated on a pass/fail basis. If
a PHA fails the Capital Fund program indicator, its overall performance
designation will be Capital Fund troubled. The proposed rule adds a
clarification that a PHA will not receive an overall PHAS score nor a
performance designation if all of its projects are mixed-finance
projects. Part 902 already provides that mixed-finance projects are
subject to the physical condition inspections (Sec. 902.22) but are
excluded from the financial condition indicator (Sec. 902.30) and
management operations indicator (Sec. 902.40).
The proposed rule would amend Sec. 902.11 to allow HUD to withhold
a designation altogether if HUD exercises its authority at Sec. 902.66
to do so (as described further in the changes to Subpart F). To receive
a High performer or Standard performer designation, a PHA would need to
receive a passing evaluation under the Capital Fund program indicator
along with the existing percentage of available points available in its
overall PHAS score. This change is required to accommodate the move to
evaluating the Capital Fund program indicator on a pass/fail basis,
which is discussed in Subpart E below. The current regulation requires
that High performers and Standard performers receive at least 50
percent of the points available under the Capital Fund indicator. For
Standard performers, HUD may elect to craft Corrective Action Plans
rather than have a PHA submit a Corrective Action Plan. Further
assistance from HUD in crafting Corrective Action Plans will benefit
smaller PHAs or those with capacity-related challenges, allowing for
the collective development of plans quickly. Except for small rural
PHAs subject to Sec. 902.105, a PHA designated as a Troubled performer
would be subject to the remedies provided in 42 U.S.C. 1437d(j)(4). The
proposed rule would remove paragraph (d)(2) of this section and replace
it with a new paragraph (e) to Sec. 902.11--Capital Fund troubled
performer--explaining that if a PHA receives a failing evaluation under
the Capital Fund program indicator, it will be designated as a Capital
Fund troubled performer and be subject to corrective actions separate
from or in addition to the requirements of a memorandum of agreement.
e. Frequency
This proposed rule would amend Sec. 902.13 to allow HUD to suspend
or skip assessments and allow PHAs to request that HUD extend the time
between PHAS assessments in accordance with requirements HUD may issue
by Notice. HUD may grant such extension requests for good cause when it
deems it appropriate. HUD specifically seeks comment on what should
constitute good cause for HUD to approve a PHA delay request (see
``Questions for public comment,'' infra., Section III, #9). For
example, public input may suggest that PHAs need to request an
extension when they experience a natural disaster or other emergency
that affects their properties (e.g., severe localized flooding), or if
supply chain delays or staffing shortages prevent maintenance work. A
new paragraph (a)(4) would be added to Sec. 902.13 noting that
properties of small PHAs would be inspected per Sec. 5.705(c), which
describes the timing of inspection cycles for various HUD programs and
how inspection scores affect those cycles.
This proposed rule would revise paragraph (b)(2) of Sec. 902.13 to
indicate that if projects are not inspected in accordance with the
cycle laid out in Sec. 5.705, the assessment year will be extended
just for the physical condition indicator, to ensure that old
inspection scores are not rolled forward inappropriately. For example,
if a new inspection is required within 3 months of an anniversary date
of March 1 and the inspection is not performed until July 1, HUD will
not issue the overall PHAS score until those inspections are completed
and will use the July inspections, along with inspections of other PHA
properties completed on time, to determine the PASS score and the
overall PHAS score for that assessment year. HUD further proposes to
revise 902.13(b)(2) to note that HUD may exercise discretion to skip
the PHA's assessment year, should a delayed physical condition
inspection occur 6 months after the end of the assessment year. This
means that the PHA would not receive an overall PHAS score for that
assessment year, and the late physical inspection would be used for the
subsequent PHAS assessment instead. In the example above, should the
inspection that was due within 3 months of March 1 not be performed
until the following January, HUD would choose to not issue an overall
PHAS score for the PHA for that assessment year. The inspection
performed in January would be used for the overall PHAS score for the
next assessment year. This would ensure that HUD does not
inappropriately reuse inspection scores for the purpose of determining
overall PHAS scores. Other indicator scores will continue to be issued
as they are determined in either situation.
This proposed rule would revise paragraph (b)(4) of Sec. 902.13 to
specify that in years subsequent to the baseline year, the physical
inspection schedule in Sec. 5.705(c) will determine whether a
property's physical condition score is based upon a new inspection or
the previous inspection. The baseline year refers to the year in which
a physical inspection takes place and in which HUD determines whether a
property needs to be inspected again in one, two, or three years as
outlined in Sec. 5.705(c). The baseline year will also be used to
determine the next PHAS assessment for PHAs subject to small PHA
deregulation.
Subpart B--Physical Condition Indicator
This proposed rule would add language to paragraph (b) of Sec.
902.25 to clarify that indicator scores will be issued in advance of an
overall PHAS score and that, as with the financial condition and
management operations indicator scores, a PHA may be subject to
appropriate oversight and action as soon as project scores or the
overall physical condition indicator score is issued. The proposed
language would also note that indicator scores issued in advance of an
overall PHAS score are subject to revision by HUD.
Subpart C--Financial Condition Indicator
This proposed rule would add language to paragraph (b) of Sec.
902.35 describing the subindicators that will be used to determine the
financial condition indicator score. The language notes that the
formulas for these subindicators will be provided by Notice and that
MTW agencies will have variant formulas to account for the
flexibilities of the MTW Demonstration.
The proposed rule would amend the description of the Quick Ratio
(QR) subindicator, which compares quick assets--cash and assets that
are easily convertible to cash--to current liabilities. Specifically,
the proposed rule clarifies that neither quick assets nor current
liabilities include inter-
[[Page 87521]]
program balances due to or due from other PHA projects, programs, and
activities of a temporary nature. This is because HUD has found that
inclusion of inter-program balances in the QR may overstate liquidity.
The proposed rule would change the Months Expendable Net Assets Ratio
subindicator to the Months Operating Reserve (MOR) subindicator. The
MOR measures adequacy of reserves as a unit of time. It is the ratio of
current assets less current liabilities to average monthly operating
expenses and is the number of months a project can operate using
currently available, unrestricted resources, before reaching
insolvency. The proposed rule would change the Debt Service Coverage
Ratio subindicator to the Expense Management (EM) subindicator, which
would measure the efficiency of operations. The EM is the ratio of
operating revenues--tenant rents and Operating Fund grants less
transfers from the Capital Fund--to operating expenses as defined by
the HUD Financial Data Schedule. In general, the expense management
indicator is targeted to provide an assessment of how well a PHA is
managing its expenses given their revenues. PHAs would be evaluated on
the basis of how well they effectively ramp up or down expenses as
revenue streams change. (In the PHAS scoring notice, HUD may indicate
that this measurement takes place over a rolling 3-5 year period.) The
benefit of this change will be that PHAs will be incentivized to
improve budgeting work, and to ensure operations are right sized to
annual revenues, while also providing tools to HUD to work with PHAs to
address such deficiencies sooner in the process.
The proposed rule would add language to paragraph (c) of Sec.
902.35 noting that, as with the physical condition and management
operations indicator scores, the financial condition indicator score
will be issued in advance of an overall PHAS score, will be subject to
revision by HUD, and may subject a PHA to appropriate oversight and
action as soon as it is issued.
Paragraph (d) of Sec. 902.35 specifies how many points make up the
financial condition indicator score. The proposed rule would change the
maximum number of points on which this score is based from 25 to 30.
The proposed rule would provide that a score of at least 18 points is
needed for a PHA to receive a passing score under the financial
condition indicator.
Subpart D--Management Operations Indicator
The proposed rule would replace paragraphs (a)(2) and (3) of Sec.
902.43, which describe management operations subindicators. The Tenant
Accounts Receivable subindicator and Accounts Payable subindicator
would be removed, as a PHA's performance on these issues is already
indirectly reflected in the financial condition indicator. Paragraph
(a)(2) would assess a PHA's ``timely reexaminations'' of tenants based
on the PHA's approved reexamination schedule. This subindicator would
rely on tenant data already provided to HUD by PHAs. Paragraph (a)(3)
would measure ``audit compliance'' by using findings in independent
audits or HUD audits or reviews. The audit compliance subindicator
would measure the extent to which the PHA is meeting program compliance
requirements. In paragraph (b) of Sec. 902.43, the proposed rule would
allow HUD to assess the management operations indicator through other
information available to HUD, in addition to information electronically
submitted to HUD through FDS.
As noted above, HUD considered a wide range of alternative
subindicators (e.g., work-order fulfillment), but found that many would
require additional information-collection burdens or would be difficult
for HUD to collect in a reliable, consistent manner.
The proposed rule would remove and reserve Sec. 902.44, which
would mean that the management operations indicator would no longer be
adjusted for physical condition and neighborhood environment (PCNE).
Analysis of the pattern of adjustments between 2015 and 2019 indicates
that nearly all properties received points for physical condition
(which reflects only the age of the housing stock), so the adjustment
does not highlight exceptional challenges for select PHAs. Likewise, a
diminishing minority of PHAs received points for neighborhood
environment, which is an adjustment made if the project is in a census
tract in which at least 40% of families have an income below the
poverty rate, suggesting it is no longer an issue that requires
adjustment.
This proposed rule would add language to paragraph (b) of Sec.
902.45 to clarify that, as with the financial and physical condition
indicators, the management operations indicator score will be issued in
advance of an overall PHAS score, will be subject to revision by HUD
and may subject a PHA to appropriate oversight and action as soon it is
issued. The proposed rule would change the maximum number of points for
the management operations indicator from 25 points to 30 points. A PHA
must achieve at least 18 points to receive a passing score under the
management operations indicator.
Subpart E--Capital Fund Program Indicator
The proposed rule would make several changes to the Capital Fund
program indicator meant to improve the performance indicator system and
remove duplication. The current Capital Fund program indicator measures
occupancy according to different standards from the management
operations indicator. The proposed rule would revise paragraph (a) of
Sec. 902.50 to remove the occupancy subindicator from the Capital Fund
program indicator and limit what the indicator examines to the time
taken by a PHA to obligate funds in relation to statutory deadlines. It
would also restructure PHA evaluation under the paragraph (c) of Sec.
902.50 to remove subindicators. Instead, PHAs would be evaluated on a
pass/fail basis based on whether they satisfied the timeliness of fund
obligation required by statute. Because assessments would now be pass/
fail rather than scored, the proposed rule would revise references to
``scores'' throughout this subpart. It would also change the language
in paragraph (b) of Sec. 902.53 to reflect that in order to achieve a
passing evaluation under the Capital Fund program indicator, a PHA must
obligate at least 90 percent of Capital Fund program grants or receive
HUD approved extensions as documented by the system of record within
the time required by statute.
The proposed rule would also remove an unnecessary mention of HOPE
VI and Choice Neighborhoods program funds in paragraph (a) of Sec.
902.50.
Subpart F--PHAS Scoring
The proposed rule would revise paragraph (a) of Sec. 902.60, to
require a PHA to wait three full fiscal years after the effective date
of the final rule before it is allowed to change its fiscal year-end,
unless such change is approved by HUD for good cause. For example, PHAs
may need to request a change due to a merger with another PHA or
another significant organizational change. PHAs or the public may
recommend other circumstances that provide good cause.
The proposed rule would require that PHAs submit their written
request for a waiver of their audited financial information submission
due date to HUD rather than specifying it must be submitted to their
local field office in paragraph (c)(1) of Sec. 902.60. HUD
[[Page 87522]]
intends to provide a mechanism for the waiver process via notice and
update such process by notice as required.
The proposed rule would also remove existing paragraph (e) from
Sec. 902.60 and make several revisions to Sec. 902.62. These changes
would be prompted by the revision of the management operations
indicator to include a subindicator for audit compliance. Because the
findings in audit compliance will inform the management operations
score, HUD proposes revisions to allow HUD to reduce the management
operations score for failure to submit financial statements timely.
Paragraphs (a)(2), (a)(3), and (b)(1) of Sec. 902.62 would be revised
so that the responsive actions may apply to the management operations
indicator, just as they currently apply to the financial condition
indicator.
Currently, HUD may only withhold, deny, or rescind a High Performer
or Standard designation and does not have flexibility to require
corrective action when withholding a score or designation. This
proposed rule would give HUD the authority to withhold any score or
designation if it determines the circumstances necessitate HUD not
issuing that score or designation. In exceptional circumstances (e.g.,
when gross malfeasance is discovered that would not be identified by
PHAS), withholding a score or designation would help avoid any
miscommunication about HUD's assessment of the PHA. Withholding a low
score or troubled designation may be appropriate in rare circumstances
when corrective action should be undertaken without first engaging in a
two-year Memorandum of Agreement. Paragraph (a)(2) of Sec. 902.64
would be revised to allow HUD to withhold, deny or rescind a PHAS score
in addition to changing it, as is currently allowed. Section 902.66
would add paragraph (a)(1), which would allow HUD to withhold, deny, or
rescind a score as well as a designation of any level from troubled
performer to high performer. A designation may be withheld even when
all component scores have been issued. Paragraph (a)(2) of Sec. 902.66
would allow HUD to withhold, deny or rescind incentives or high
performer designation or standard performer designation and add that it
may do so, among other reasons, if a PHA demonstrates egregious
performance issues not reflected in its PHAS score. Paragraph (a)(3) of
Sec. 902.66 would allow HUD to withhold, deny or rescind substandard
performer or troubled performer designations at its discretion.
Paragraph (a)(4) of Sec. 902.66 would allow HUD to withhold, deny or
rescind component scores or an overall PHAS score at its discretion.
When scores are withheld, denied or rescinded, HUD would need to notify
the PHA, provide the basis for the decision, and allow for an appeal as
described in Sec. 902.69.
The proposed rule would also permit HUD to require corrective
action while a score or designation is being withheld if performance
deficiencies are identified. Paragraph (b) of Sec. 902.64 would be
revised to describe the new notification timeline: HUD will issue
component scores for indicators and subindicators after they are
determined and in advance of the overall PHAS score. Such scores would
be provisional and subject to revision by HUD, and PHAs would be
subject to oversight and action as soon as a component score is issued.
The overall PHAS score would be issued one month after the indicator
scores for the assessment year have been finalized unless HUD withholds
a component score or overall score. Paragraph (a)(3) of Sec. 902.66
would allow HUD to substitute corrective requirements when deemed
necessary, and under paragraph (a)(4) of Sec. 902.66 HUD could require
a PHA to exercise appropriate oversight and take corrective actions as
specified in Sec. 902.73, requiring a PHA to correct deficiencies
within a specified time period.
Paragraph (b) of Sec. 902.66 would give HUD discretion to re-
designate a PHA where that PHA's designation has been denied or
rescinded. HUD may also decide not to assign the PHA a new designation.
The proposed rule would revise 902.69 to remove potentially
confusing language that there are multiple distinct processes--one to
appeal a designation and another to petition to remove a designation.
These revisions to 902.66, 902.69, and 902.73 would not limit a PHA's
ability to appeal HUD decisions or to make second order appeals when
compared to the current regulatory language.
Subpart G--PHAS Incentives and Remedies
The proposed rule would revise Sec. 902.73 to expand HUD's
authority to subject a PHA to appropriate oversight and corrective
action as soon as a component score is issued or considering trending
data, in advance of issuance of a PHAS designation category. Paragraph
(a) would provide HUD the authority to require corrective actions when
scores or designations are withheld, denied, or rescinded, as HUD
determines appropriate and would also provide HUD greater authority to
determine the appropriate time for corrective action and progress
reports. It would allow required corrective actions to be incorporated
into a Memorandum of Agreement (MOA) or Corrective Action Plan (CAP) if
the PHA is later designated as a troubled or substandard performer.
Paragraphs (b) and (d) would be amended to allow HUD to relay deadlines
by means other than through a CAP because there may not always be a CAP
depending on when HUD requires corrective action under paragraph (a).
The proposed rule would revise paragraph (b) of Sec. 902.75 to
clarify that an executed MOA for a troubled performer is an enforceable
contract, the material breach of which by a PHA, is the basis, among
other remedies available under law, for determination of substantial
default.
The proposed rule would amend the example in paragraph (g)(3) of
Sec. 902.75 to align with the proposed changes to part 902. The
example provides a scenario in which a troubled performer PHA fails to
execute a MOA with HUD or fails to show a substantial improvement.
The proposed rule would add a new Sec. 902.76 to distinguish
Capital Fund troubled as its own designation rather than as one
dependent on a designation of ``Troubled.'' The new section would
describe remedies with respect to the Capital Fund troubled performer
designation and provide HUD authority to require a PHA to correct
deficiencies within a time period specified by HUD. The requirements to
correct deficiencies, and consequences for failure to correct
deficiencies so identified, will otherwise be the same as for
substandard performers as described in Sec. 902.73. Separating the
Capital Fund troubled performer designation from the troubled performer
designation will allow the PHA to avoid entering into a MOA when the
only performance deficiency is with respect to the Capital Fund, and
the underlying deficiency can be resolved upon the next timely
obligation. The Capital Fund troubled performer designation would also
allow HUD to combine such designation with the substandard performer
designation or the troubled performer designation.
The proposed rule would add a sentence to the end of Sec. 902.81
making clear that a resident is not restricted from communicating any
complaint or concern about a PHA to HUD in writing at any time. This
addition is not a change to the current regulations and is being added
only for clarification.
[[Page 87523]]
Subpart H--Assessment of Small Rural Public Housing Agencies
The proposed rule would revise sections of 24 CFR 902 subpart H--
Assessment of small rural Public Housing Authorities to conform with
the revisions in the rest of part 902. The proposed rule would delete
references to PCNE from paragraph (a) of 902.103 to parallel the
removal of that concept in Sec. 902.44. Paragraphs (c), (c)(5) and (d)
of Sec. 902.105 would be revised to align with Sec. 902.75. Changes
would be made throughout Sec. Sec. 902.107 and 902.109 to conform with
Sec. Sec. 902.66 and 902.69, with variations where necessary to
reflect the differences between the PHAS assessment and the Small and
Rural assessment. Section 902.111 would be renamed ``Remedies for
troubled small rural PHAs'' to align with Sec. 902.83.
Additionally, among the changes this proposed rule would make to
small PHAs, it would remove paragraph (c)(4) from Sec. 5.705 applying
a triennial inspection cycle for small PHAs per 24 CFR 902.13(a).
III. Questions for Public Comments
HUD welcomes comments on all aspects of this proposed rule. In
addition, HUD specifically requests comments on the following topics:
Question for Comment #1: PHAS Metrics--The proposed rule would
revise indicators and subindicators to allow HUD to conduct a more
accurate PHAS assessment. Do the proposed metrics accurately assess a
PHA's performance or are there other metrics that would be appropriate
for inclusion in PHAS? Do the new proposed subindicators for the
financial condition indicator appropriately measure the PHA's financial
performance? Do the new proposed subindicators for the management
operations indicator appropriately measure the PHA's ability to manage
its Public Housing program? Would scoring PHAs for the proposed
subindicators create incentives to maintain and improve the quality of
housing for families in the Public Housing program?
The proposed rule would also make minor modifications to the
relative weight of the indicators in the overall PHAS score. Are the
proposed weights of the Physical Condition, Financial Condition, and
Management Operations indicators appropriate?
Question for Comment #2: MTW Agencies--MTW Expansion agencies
operate under the MTW Operations Notice and will be scored in PHAS.
Given the flexibilities available to MTW agencies, variant formulas or
subindicators may be necessary to properly evaluate such agencies. What
are the appropriate indicators and subindicators for MTW agencies? If
any of the proposed indicators and subindicators for non-MTW PHAs are
not appropriate for MTWs, what would serve as a suitable replacement?
Do other considerations need to be made for incentives and remedies for
MTW agencies?
Question for Comment #3: Capital Fund program indicator--This
proposed rule would change several aspects of the Capital Fund program
indicator. The Capital Fund program indicator would no longer be scored
but would be evaluated on a pass/fail basis; however, Capital Fund
Troubled performers could still be subject to oversight. The Capital
Fund Troubled performer designation would be revised such that it could
be combined with the Substandard or Troubled Performer designation, and
requirements to correct deficiencies due to Capital Fund Troubled
status would otherwise be the same as for Substandard performers. HUD
solicits feedback on the extent to which removing points from the
obligation indicator and making it a pass/fail standard improves its
usefulness as a metric. HUD also solicits feedback on whether it should
maintain the Capital Fund-troubled designation.
Question for Comment #4: Reserves--This proposed rule does not
provide specific scoring criteria for the subindicators, but it does
propose a subindicator for Months of Operating Reserve (MOR). When
specific scoring criteria are defined, should HUD set upper and lower
limits on reserves held? Would that answer be different if PHAs had
specific accounts into which they could put reserves that would be
treated differently (e.g., Capital Replacement Reserve accounts)?
Should scoring upper or lower reserve limits interact with other
features of the financial, physical, or management performance? For the
Months of Operating Reserve subindicator and all other financial
subindicators, how should HUD take into consideration other sources of
funds (i.e., those generated through entrepreneurial activities or
other actions by the PHA) that PHAs secure to pay for expenses? How can
HUD ensure that PHAs are not penalized for entrepreneurial activity
that secures additional sources of funding? Additionally, HUD would
like to solicit comment with respect to MTW and non-MTW agencies alike
on the topic of a reserve calculation. If HUD establishes such a
calculation, what should be included?
Question for Comment #5: Expense management--This proposed rule
replaces the Debt Service Coverage Ratio with the Expense Management
subindicator. Should the Expense Management subindicator include other
sources of Public Housing operating revenue, such as program income?
Should it exclude any specific operating expenses? Is there value to
looking only at Public Housing subsidy plus rent rather than looking at
all sources of revenue?
Question for Comment #6--Physical Condition and Neighborhood
Assessment--HUD has proposed eliminating the PCNE adjustment to the
management operations indicator. Will the removal of those adjustments
improve HUD's ability to accurately assess a PHA's performance? If
there are strong reasons not to eliminate the PCNE adjustment, would
moving the PCNE adjustment to the physical condition indicator be a
better location for such adjustments?''
Question for Comment #7--Risk assessment and other models of
assessment--The indicators and subindicators that are appropriate to
measuring a PHA's performance in operating its Public Housing program
may not provide a full picture of the long-term health of that program,
or some criteria may not be appropriate for inclusion in PHAS although
they are informative for assessing future risks. Are there any
indicators that are not appropriate for performance assessment but
valuable for a separate system of risk assessment? How should HUD act
upon findings from a separate system of risk assessment? More
generally, should HUD consider other models for assessing PHA
management of Public Housing, as an alternative or complement to PHAS?
Question for Comment #8: Interventions--This proposed rule would
make it explicit that HUD may require corrective action as soon as
component scores are issued or in response to multi-year downward
trends in performance. It would also make explicit that HUD may
withhold a designation or score and require corrective action. When HUD
does withhold, deny, or rescind a designation or score, how should HUD
notify the PHA and what is the appropriate process for a PHA to appeal
such a decision?
Question for Comment #9: PHA requests for delay--The proposed rule
allows PHAs to request a delay in inspection timing. What should
constitute good cause for HUD to approve a PHA delay request? How
[[Page 87524]]
should HUD evaluate requests to delay inspections or assessments?
Question for Comment #10: SEMAP--Should HUD seek to better align
PHAS and SEMAP (Section Eight Management Assessment Program), and if
so, how? What would be the benefits and potential problems of such an
alignment? Do PHAs who operate both Public Housing and the Housing
Choice Voucher program face challenges because of differences between
PHAS and SEMAP?
IV. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Under Executive Order 12866 (Regulatory Planning and Review), a
determination must be made whether a regulatory action is significant
and, therefore, subject to review by the Office of Management and
Budget (OMB) in accordance with the requirements of the order.
Executive Order 13563 (Improving Regulations and Regulatory Review)
directs executive agencies to analyze regulations that are ``outmoded,
ineffective, insufficient, or excessively burdensome, and to modify,
streamline, expand, or repeal them in accordance with what has been
learned.'' Executive Order 13563 also directs that, where relevant,
feasible, and consistent with regulatory objectives, and to the extent
permitted by law, agencies are to identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public. Executive Order 14094 entitled ``Modernizing
Regulatory Review'' (hereinafter referred to as the ``Modernizing
E.O.'') amends section 3(f) of Executive Order 12866 (Regulatory
Planning and Review), among other things.
This rule has been determined to be a ``significant regulatory
action'' as defined in Section 3(f) of Executive Order 12866, but not
significant under section 3(f)(1) of the Order. HUD has prepared an
initial regulatory impact analysis and has assessed the potential costs
and benefits, both quantitative and qualitative, of this proposed
regulatory action and has determined that the benefits would justify
the costs. The analysis is available at www.regulations.gov and is part
of the docket file for this rule.
Regulatory Flexibility Act
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 the performance indicators in HUD's PHAS regulations.
The changes allow HUD to base scores more on measurable program data
rather than process. Revisions would allow HUD to respond more quickly
and effectively to performance deficiencies when they are first
identified, to intervene based on trending performance data, and to
delay scoring or assessments when appropriate. 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 view 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.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is available through the
Federal eRulemaking Portal at http://www.regulations.gov.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either: (i) imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (ii) preempts
State law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive Order. This proposed rule
does not have federalism implications and does not impose substantial
direct compliance costs on State and local governments or preempt State
law within the meaning of the Executive Order.
Paperwork Reduction Act
The information collection requirements contained in this rule are
currently approved by OMB and have been given OMB Control Numbers 2502-
0369, 2535-0107, 2577-0083, and 2577-0157. 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.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
Tribal governments, and on the private sector. This proposed rule will
not impose any Federal mandates on any State, local, or Tribal
governments, or on the private sector, within the meaning of the UMRA.
List of Subjects
24 CFR Part 5
Administrative practice and procedure; Aged; Claims; Crime;
Government contracts; Grant programs--housing and community
development; Individuals with disabilities; Intergovernmental
relations; Loan programs--housing and community development; Low and
moderate income housing; Mortgage insurance; Penalties; Pets; Public
housing; Rent subsidies; Reporting and recordkeeping requirements;
Social security; Unemployment compensation; Wages.
24 CFR Part 902
Administrative practice and procedure; Public housing; Reporting
and recordkeeping requirements.
For the reasons stated above, HUD proposes to amend 24 CFR parts 5
and 902 as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f,
1437n, 3535(d); 42 U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.;
Sec. 327, Pub. L. 109-115, 119 Stat. 2396; E.O. 13279, 67 FR 77141,
3 CFR, 2002 Comp., p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010
Comp., p. 273; E.O. 14015, 86 FR 10007, 3 CFR, 2021 Comp., p. 517.
Sec. 5.705 [Amended]
0
2. Amend Sec. 5.705 by removing paragraph (c)(4) and redesignating
paragraphs (c)(5) through (8) as paragraphs (c)(4) through (7),
respectively.
PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM
0
3. The authority citation for part 902 continues to read as follows:
[[Page 87525]]
Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d), 1437z-10.
Subpart A--General Provisions
0
4. Amend Sec. 902.1 by revising paragraphs (b), (d), and (f) to read
as follows:
Sec. 902.1 Purpose, scope, and general matters.
* * * * *
(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
are responsible for complying with nondiscrimination and equal
opportunity requirements, including but not limited to those specified
in 24 CFR 5.105, requirements under the Fair Housing Act (42 U.S.C.
3601-19), the obligation to affirmatively further fair housing,
requirements under title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d-2000d-4), requirements under section 504 of the Rehabilitation
Act of 1973 (29 U.S.C. 794), requirements under title II of the
Americans with Disabilities Act (42 U.S.C. 12101 et seq.), requirements
under the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107), 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 statutes, program regulations and the
PHA's Annual Contributions Contract (ACC).
* * * * *
(d) Assessment tools. HUD will make use of uniform and objective
criteria for the physical inspection of projects and PHAs and for the
financial confidence of projects and PHAs and will use data from
appropriate PHA data systems, as well as from other reviews or audits
conducted on the PHA to assess management operations. For the Capital
Fund program indicator, HUD will use information provided in the
electronic Line of Credit Control System (eLOCCS) or successor systems.
Based on this data, HUD will assess and score the results, advise PHAs
of their scores and performance designations, and identify low-scoring
and poor-performing projects and PHAs so that these projects and PHAs
will receive the appropriate consideration and assistance.
* * * * *
(f) Scoring procedures. HUD's scoring procedures will be published
from time to time in the Federal Register for public comment.
0
5. Amend Sec. 902.3 as follows:
0
a. Remove the definition of ``Assessed fiscal year'';
0
b. Add in alphabetical order the definition of ``Assessment year'';
0
c. Remove the definition of ``Capital-fund troubled'';
0
d. Add in alphabetical order the definition of ``Capital-fund troubled
performer'';
0
e. Revise the definitions of ``Corrective action plan'' and
``Deficiency'';
0
f. Remove the definition of ``Dictionary of Deficiency Definitions'';
and
0
g. Add in alphabetical order the definitions of ``Designation'' and
``Score''.
The revisions and additions read as follows:
Sec. 902.3 Definitions.
* * * * *
Assessment year is the period of time evaluated for a single PHAS
assessment, in which all component scores and an overall PHAS score are
generated. Component scores are based on the PHA's fiscal year for the
financial condition, management operations, and Capital Fund program
indicators, and are based on physical inspections completed prior to
score generation, as determined by 24 CFR 5.705(c) for the physical
condition indicator.
* * * * *
Capital fund troubled performer refers to a PHA that does not
satisfy the requirements to pass the Capital Fund indicator evaluation.
Corrective Action Plan (CAP) means a plan, as provided in Sec.
902.73(a), that is developed by a PHA in concert with HUD or by HUD
that specifies the actions to be taken, including timeframes, that
shall be required to correct deficiencies identified under any of the
PHAS indicators and subindicators, and identified as a result of a PHAS
assessment or on the basis of individual component scores determined
prior to issuance of the overall PHAS score and designation, when a
memorandum of agreement (MOA) is not required. For small rural PHAs,
the equivalent term is Corrective Action Agreement (CAA), as noted in
Sec. 902.105(c).
* * * * *
Deficiency means any finding or determination that requires
corrective action, or any score below 60 percent of the available
points for the physical condition, financial condition, or management
operations indicators, and any failing evaluation for the Capital Fund
indicator. In the context of physical condition and physical inspection
in subpart B of this part, ``deficiency'' means a specific problem, as
described in the documents published in the Federal Register that
contain the inspection standards and scoring values pursuant to 24 CFR
part 5, subpart G, such as a hole in a wall or a damaged refrigerator
in the kitchen that can be recorded for inspectable items.
Designation means the performance category or label given to a PHA
(i.e., ``High performer,'' ``Standard performer,'' ``Substandard
performer,'' or ``Troubled performer'') based on their overall PHAS
score. A PHA that receives a failing evaluation under the Capital Fund
program indicator will be designated as a ``Capital Fund troubled
performer.''
* * * * *
Score means the overall PHAS score, which is a number from 0 to 100
calculated by adding the physical condition indicator score, the
financial condition indicator score, and the management operations
indicator score, except as provided in Sec. 902.103 for small rural
PHAs. By contrast, ``component score'' refers to an indicator score
itself (e.g., the financial condition indicator score) or to a
subindicator score (e.g., the number of points awarded for the Quick
Ratio subindicator).
* * * * *
0
6. Amend Sec. 902.5 by revising paragraphs (a)(2) introductory text
and (a)(3), and removing and reserving paragraph (b) to read as
follows:
Sec. 902.5 Applicability.
(a) * * *
(2) ACC. The ACC assigns legal responsibility for all public
housing operations to the PHA, except where DF--RMC assumes management
operations.
* * * * *
(3) Moving to Work (MTW) PHAs operating under the MTW Standard
Agreement shall not be scored in PHAS unless the PHA elects to be
scored. If the PHA elects to be scored, the agency shall continue to be
scored for the duration of the demonstration. MTW PHAs operating under
the MTW Operations Notice shall be subject to this rule.
(b) [Reserved]
0
7. Revise Sec. 902.9 to read as follows:
Sec. 902.9 PHAS Scoring.
(a) Indicators and subindicators. Each PHA will receive an overall
PHAS score, rounded to the nearest whole number, and designation based
on three
[[Page 87526]]
indicators: Physical condition, financial condition, and management
operations. The financial condition and management operations
indicators contain 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. A fourth indicator, the Capital Fund program indicator,
does not contribute to the overall PHAS score but can affect the
performance designation. The Capital Fund program indicator is entity-
wide and evaluated on a pass/fail basis. If all of a PHA's projects are
mixed-finance projects, they will not receive an overall PHAS score nor
a performance designation.
(b) Overall PHAS score and indicators. The overall PHAS score is
determined by adding the score values for three of the four indicators,
as follows:
(1) The physical condition indicator accounts for 40 percent (40
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 accounts for 30 percent (30
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 accounts for 30 percent (30
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 not awarded points in the
overall PHAS score, though when a PHA fails the Capital Fund program
indicator, they will be designated as a Capital Fund troubled
performer. The evaluation for this indicator is obtained as indicated
in subpart E of this part.
0
8. Amend Sec. 902.11 by revising the introductory text and paragraphs
(a)(1), (b), and (d), and adding paragraph (e) to read as follows:
Sec. 902.11 PHAS performance designation.
All PHAs that receive a PHAS assessment shall receive a performance
designation, unless HUD exercises authority at Sec. 902.66 to withhold
a designation. The performance designation is based on the overall PHAS
score and the four indicators, as set forth below.
(a) * * *
(1) A PHA that achieves a score of at least 60 percent of the
points available under the financial condition, physical condition, and
management operations indicators, receives a passing evaluation under
the Capital Fund program indicator, and achieves an overall PHAS score
of 90 percent or greater of the total available points under PHAS shall
be designated a high performer. A PHA shall not be designated a high
performer if it scores below the threshold established for any
indicator.
* * * * *
(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 of the
available points for the physical condition, financial condition, and
management operations indicators, and a passing evaluation for the
Capital Fund program indicator.
(2) At HUD's discretion, a standard performer may be required to
submit and operate under a Corrective Action Plan. At HUD's discretion,
HUD may elect to craft Corrective Action Plans rather than to have the
PHA submit a Corrective Action Plan.
* * * * *
(d) Troubled performer. A PHA that achieves an overall PHAS score
of less than 60 percent shall be designated as a troubled performer,
except for those PHAs subject to Sec. 902.105. A PHA designated as a
troubled performer will be subject to the remedies provided in section
6(j)(4) of the Act (42 U.S.C. 1437d(j)(4)).
(e) Capital Fund troubled performer. 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 a failing evaluation under the Capital Fund program indicator
under subpart E of this part will be designated as a Capital Fund
troubled performer. A PHA designated as a Capital Fund troubled
performer will be subject to corrective actions separate from or in
addition to the requirements of a memorandum of agreement.
0
9. Amend Sec. 902.13 by revising the introductory text and paragraph
(a)(3), adding paragraph (a)(4), and revising paragraphs (b)(2) and (4)
as follows:
Sec. 902.13 Frequency of PHAS assessments.
The frequency of a PHA's PHAS assessment is determined by the size
of the PHA's Low-Rent program and its PHAS designation. HUD may, due to
unforeseen circumstances or other cause as determined by HUD, extend
the time between assessments or suspend or skip assessments by direct
notice to the PHA and relevant resident organization or resident
management entity, and any other general notice that HUD deems
appropriate. PHAs may request that HUD extend the time between PHAS
assessments in accordance with such requirements as HUD may issue by
Notice, and HUD may grant requests for good cause when HUD deems it
appropriate.
(a) * * *
(3) All other small PHAs may receive a PHAS assessment every year,
including a PHA that is designated as troubled in accordance with Sec.
902.75.
(4) Properties of small PHAs will be inspected as described in
Sec. 5.705(c).
(b) * * *
(2) The physical condition score for each project will determine
the frequency of inspections of each project in accordance with the
inspection cycle laid out in Sec. 5.705(c). The PHAS physical
condition indicator score for an assessment year shall be calculated by
taking the unit-weighted average of the most recent physical condition
score for each project, except that, starting July 1, 2023, no new
physical condition indicator will be issued for a PHA until every
project under the PHA has been inspected on or after July 1, 2023. If
projects are not inspected in accordance with the cycle laid out in
Sec. 5.705(c), the assessment year will be extended only for the
physical inspection indicator until such time as the relevant
inspections are performed to ensure that the last physical condition
score of record will not be reused for future assessments. HUD may
exercise discretion to skip the assessment should a delayed physical
condition inspection occur 6 months after the assessment year ends. A
PHA will not receive an overall PHAS assessment score until all
inspections are completed.
* * * * *
(4) In the first, baseline year, each PHA will receive an
evaluation on all four PHAS indicators (physical condition, financial
condition, management operations, and Capital Fund program), which will
be used to generate their overall PHAS score. In subsequent years, if
the physical inspection schedule requires a new inspection for a PHA
property, the physical condition score for that property will be based
upon the new inspection. If a new physical inspection is not required
that year, the physical condition score for that property will be based
upon the most recent physical inspection. This baseline year will also
be used to determine the next PHAS assessment for PHAs subject to small
PHA deregulation.
* * * * *
[[Page 87527]]
Subpart B--Physical Condition Indicator
0
10. Amend Sec. 902.25 by revising paragraph (b) to read as follows:
Sec. 902.25 Physical condition scoring and thresholds.
* * * * *
(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. The overall physical condition
indicator score will be issued after it is determined, in advance of
issuance of the overall PHAS score. PHAs may be subject to appropriate
oversight and action as soon as project scores or the overall physical
condition indicator score is issued, as noted in Sec. 902.73.
Indicator scores issued in advance of an overall PHAS score are
provisional and are subject to revision by HUD.
* * * * *
Subpart C--Financial Condition Indicator
0
11. Amend Sec. 902.35 by revising paragraphs (b) through (d) to read
as follows:
Sec. 902.35 Financial condition scoring and thresholds.
* * * * *
(b) Subindicators of the financial condition indicator. The
following subindicators will be used to determine the financial
condition indicator score. The formulas for these subindicators will be
provided by public notification. Please note that MTW agencies will
have variant formulas, which will also be provided by public
notification, to account for the flexibilities of the MTW
Demonstration.
(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 or inter-program
balances due from other PHA projects, programs, and activities of a
temporary nature. Current liabilities are those liabilities that are
due within the next 12 months, not including inter-program balances due
to other PHA projects, programs, and activities of a temporary nature.
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 Operating Reserve (MOR). The MOR measures adequacy of
reserves as a unit of time. The MOR is the ratio of current assets less
current liabilities to average monthly operating expenses. The result
of this calculation is the number of months that a project can operate
using currently available, unrestricted resources, before reaching
insolvency.
(3) Expense Management (EM). The EM ratio measures the efficiency
of operations. EM is the ratio of operating revenues to operating
expenses. EM operating revenues are tenant rents and Operating Fund
grants less transfers from Capital Fund. EM expenses are all operating
expenses as defined by the HUD Financial Data Schedule (FDS).
(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. The overall financial condition
indicator score will be issued after it is determined, in advance of
issuance of the overall PHAS score. PHAs may be subject to appropriate
oversight and action as soon as the overall financial condition
indicator score is issued, as noted in Sec. 902.73. Indicator scores
issued in advance of an overall PHAS score are provisional and are
subject to revision by HUD.
(d) Thresholds. (1) The PHA's financial condition score is based on
a maximum of 30 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
18 points, or 60 percent of the available points under this indicator.
(3) A PHA that receives fewer than 18 points available under this
indicator will be categorized as a substandard financial condition
agency.
Subpart D--Management Operations Indicator
0
12. Amend Sec. 902.43 by revising paragraphs (a)(2) and (3) and
paragraph (b) to read as follows:
Sec. 902.43 Management operations performance standards.
(a) * * *
(2) Timely Reexaminations. This subindicator measures the extent to
which the PHA is performing regular reexaminations of family income and
composition on time. Assessment will monitor timely reexamination based
on the PHA's approved reexamination schedule (e.g., triennially where
MTW waiver authority allows a PHA to delay reexamination up to three
years).
(3) Audit Compliance. This subindicator measures the extent to
which the PHA is meeting program compliance requirements, as measured
by findings in independent audits or HUD audits or reviews.
(b) Assessment under the Management Operations Indicator. Projects
will be assessed under this indicator through information that is
electronically submitted to HUD through the FDS and other information
available to HUD.
Sec. 902.44 [Removed and Reserved]
0
13. Remove and reserve Sec. 902.44.
0
14. Amend Sec. 902.45 by revising paragraphs (b) and (c) to read as
follows:
Sec. 902.45 Management operations scoring and thresholds.
* * * * *
(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. The overall management operations indicator
score will be issued after it is determined, in advance of issuance of
the overall PHAS score. PHAs may be subject to appropriate oversight
and action as soon as the overall management operations indicator score
is issued, as noted in Sec. 902.73. Indicator scores issued in advance
of an overall PHAS score are provisional and are subject to revision by
HUD.
(c) Thresholds. (1) The PHA's management operations score is based
on a maximum of 30 points.
(2) In order to receive a passing score under the management
operations indicator, a 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 management operations agency.
Subpart E--Capital Fund Program Indicator
0
15. Amend Sec. 902.50 by revising paragraphs (a), (c), and (d) to read
as follows:
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 in relation to
statutory deadlines for obligation for all Capital Fund program
[[Page 87528]]
grants for which fund balances remain during the assessment year.
* * * * *
(c) Capital Fund Indicator. Performance under the Capital Fund
program indicator is evaluated on a pass or fail basis, determined by
whether the PHA satisfied the timeliness of fund obligation requirement
in section 9(j) of the Act. This 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 Act (42 U.S.C. 1437g(j)(1)).
(d) Method of assessment. The assessment required under the Capital
Fund program indicator will be performed through analysis of obligated
amounts in HUD's eLOCCS (or its successor) for all Capital Fund program
grants that were open during the assessment year. This indicator
measures a statutory requirement for the Capital Fund program. Other
aspects of the Capital Fund program will be monitored by HUD through
other types of reviews under 24 CFR part 905.
(1) PHAs are responsible to ensure that their Capital Fund program
information is submitted to eLOCCS by the submission due date.
(2) A PHA may not appeal its PHAS score, Capital Fund program
indicator failure, or both, based on the fact that it did not submit
its Capital Fund program information to eLOCCS and/or the PIC systems
by the submission due date.
0
16. Revise Sec. 902.53 to read as follows:
Sec. 902.53 Capital Fund program assessment and thresholds.
(a) Assessment. The Capital Fund program indicator provides an
assessment of a PHA's ability to obligate Capital Fund program grants
in a timely manner on capital, modernization, development and financing
needs.
(b) Thresholds. (1) The PHA's Capital Fund program indicator is not
assigned points but assessed on a pass/fail basis.
(2) In order to receive a passing evaluation under the Capital Fund
program indicator, a PHA must obligate at least 90 percent of Capital
Fund program grants as documented in eLOCCS (or its successor) within
the time required by statute or have HUD approved extensions under
section 9(j)(2) of the Act (42 U.S.C. 1437g(j)(2)).
Subpart F--PHAS Scoring
0
17. Amend Sec. 902.60 by:
0
a. Revising paragraph (a);
0
b. In paragraph (c)(1), removing the words ``its local field office'',
and adding, in their place, the word ``HUD''; and
0
c. Removing paragraph (e) and redesignating paragraph (f) as paragraph
(e).
The revision to read as follows:
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 end for the first 3 full fiscal years
following [EFFECTIVE DATE OF FINAL RULE] unless such change is approved
by HUD for good cause.
* * * * *
Sec. 902.62 [Amended]
0
18. Amend Sec. 902.62 by:
0
a. In paragraph (a)(2), removing the words ``financial condition
indicator score'' and adding, in their place, the words ``financial
condition and management operations indicator scores'';
0
b. In paragraph (a)(3), removing the words ``financial condition
indicator'' and adding, in their place, the words ``financial condition
and management operations indicators''; and
0
c. In paragraph (b)(1), after the words ``financial condition'' adding
the words ``or management operations''.
0
19. Amend Sec. 902.64 by:
0
a. In paragraph (a)(2) after the words ``may be changed'', adding the
words ``or withheld, denied, or rescinded''; and
0
b. Revising paragraph (b).
The revision to read as follows:
Sec. 902.64 PHAS scoring and audit reviews.
* * * * *
(b) Issuance of a score by HUD. (1) The component scores for
individual indicators will be issued after they are determined, in
advance of issuance of the overall PHAS score. PHAs may be subject to
appropriate oversight and action as soon as a component score is
issued, as noted in Sec. 902.73. Indicator scores issued in advance of
an overall PHAS score are provisional and are subject to revision by
HUD.
(2) An overall PHAS score will be issued for each PHA one month
after all indicator scores for the assessment year have been finalized,
unless HUD uses the authority in Sec. 902.66 to withhold a component
score or overall PHAS score. 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.
(3) Each PHA (or RMC) shall post a notice of its final PHAS score
and designation in appropriate conspicuous and accessible locations in
its offices within 2 weeks of receipt of its final PHAS score and
designation. In addition, HUD will post every PHA's PHAS score and
designation on HUD's internet site.
* * * * *
0
20. Revise Sec. 902.66 to read as follows:
Sec. 902.66 Withholding, denying, and rescinding score or
designation.
(a) Withholding, denying, and rescinding score or designation. (1)
If determined as appropriate or necessary by HUD, HUD may withhold,
deny, or rescind a designation of any level, from troubled performer to
high performer. A designation may be withheld or denied even when all
component scores have been issued. HUD may conduct any review as it may
determine necessary.
(2) HUD may withhold, deny or rescind incentives or high performer
designation or standard performer designation, including in but not
limited to circumstances in which a PHA:
(i) Is operating under a special agreement with HUD (e.g., a civil
rights Conciliation or Voluntary Compliance Agreement);
(ii) Is involved in litigation that bears directly upon the
physical, financial, or management performance of a PHA;
(iii) Is operating under a court order;
(iv) 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;
(v) 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 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; or
(vi) Demonstrates other egregious performance issues not reflected
in
[[Page 87529]]
PHAS component scores that require significant corrective action, as
HUD determines necessary.
(3) HUD may withhold, deny, or rescind substandard performer or
troubled performer designation and accompanying requirements at its
discretion. HUD may substitute other corrective requirements when HUD
determines it is necessary.
(4) HUD may withhold, deny, or rescind component scores or an
overall PHAS score at its discretion. HUD must notify the PHA when
scores are withheld, denied, or rescinded, provide the basis for the
decision, and allow for appeal as described in Sec. 902.69. At the
time of withholding, denying, or rescinding scores, HUD may also
require the PHA to undertake corrective actions as specified in Sec.
902.73.
(b) Effect on designation. If a high performer designation is
denied or rescinded, the PHA may be designated 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 may be designated as a substandard performer or
troubled performer. Alternatively, HUD may choose not to assign the PHA
a new designation status, as it deems appropriate.
(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)(2)(iv) of this section.
0
21. Revise Sec. 902.69 to read as follows:
Sec. 902.69 PHA right of 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;
(2) Appeal its final overall PHAS score; and
(3) 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).
Inspection appeals must be made in accordance with the requirements of
Sec. 5.711.
(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 eLOCCS or updated profile information in
PIC or subsequent PIC replacement system by the submission due date.
(c) Appeal 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 the PHA.
(2) An appeal of a troubled performer designation must include the
PHA's supporting documentation and reasons for the appeal. An appeal of
a PHAS score must be accompanied by the PHA's evidence that a material
error occurred. An appeal 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 or
score 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 appeals. Upon receipt of an appeal of a final
overall PHAS score, of a troubled performer designation, or appeal of
action taken under Sec. 902.66 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.
(f) Notice and finality of decisions. (1) If HUD determines that
one or more objectively verifiable and material errors 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, or issuance of a
troubled performer designation will be final agency action.
(2) HUD will issue a written decision on all appeals made under
this section.
Subpart G--PHAS Incentives and Remedies
0
22. Amend Sec. 902.71 by revising paragraph (a)(2) and the first
sentence of paragraph (b) to read as follows:
Sec. 902.71 Incentives for high performers.
(a) * * *
(2) Public recognition. High performer PHAs and DF-RMCs or RMCs
that receive a score of at least 60 percent of the points available for
the physical condition, financial condition, and management operations
indicators, and a passing score for the Capital Fund program indicator,
and achieve an overall PHAS score of 90 percent or greater of the total
available points under PHAS shall be designated a high performer and
will receive a Certificate of Commendation from HUD, as well as special
public recognition, as provided by the HUD field office.
* * * * *
(b) * * * Relief from any 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 regulatory
requirements. * * *
* * * * *
0
23. Revise Sec. 902.73 to read as follows:
Sec. 902.73 PHAs with deficiencies.
(a) Oversight and action. Standard and substandard performers will
be subject to appropriate oversight and action by HUD. PHAs may also be
subject to appropriate oversight and action by HUD as soon as a
component score is issued for the PHA or for a specific project, or in
light of performance trends (e.g., if overall PHAS scores or component
scores notably decline for three years, even if the latest score would
not classify the PHA as substandard), or when scores or designations
are withheld, denied, or rescinded.
(1) HUD may require a PHA to correct deficiencies in performance
within a time period as specified by HUD when HUD determines it is
necessary to do so on the basis of a component score, overall PHAS
score or performance designation, or performance trend. HUD may require
such action as a result of performance at the Asset Management Project
(AMP) or PHA level (i.e., HUD may require corrective action for one AMP
or across all a PHA's projects). HUD may require the PHA to undertake
[[Page 87530]]
such corrective actions in advance of issuance of an overall PHAS score
or PHAS designation. If the PHA is subsequently identified as a
troubled or substandard performer after being required to undertake
corrective actions, such corrective actions may be later incorporated
into a Memorandum of Agreement or Corrective Action Plan, as
appropriate.
(2) When HUD exercises authority at Sec. 902.66 to withhold, deny,
or rescind a score or designation, HUD may also require a PHA to
correct deficiencies in performance or undertake other corrective
action, in a time period as specified by HUD. If the PHA is
subsequently identified as a troubled or substandard performer after
being required to undertake corrective actions, such corrective actions
may be later incorporated into a Memorandum of Agreement or Corrective
Action Plan, as appropriate.
(b) Correction of deficiencies--(1) Time period for correction.
After a PHA's (or DF-RMC's or 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), a PHA, DF-RMC 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 or as otherwise communicated by HUD, if required.
(2) Notification and report to regional or field office. A PHA
shall notify the regional or field office, as identified by HUD, of its
action to correct a deficiency. A PHA shall also forward an RMC's
report of its action to the regional or field office 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 as otherwise specified by
HUD, or within such extensions as may be granted by HUD, the field
office will notify the PHA of its noncompliance.
(2) The PHA (or DF-RMC or RMC) will provide the field office with
its reasons for lack of progress in negotiating, executing, or carrying
out the Corrective Action Plan or making the corrective actions
otherwise required by HUD, 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 determines that the reasons the PHA (or DF-RMC or RMC)
has provided for lack of progress are 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 Act and
other statutes, the ACC, this part, and other HUD regulations,
including, but not limited to, the remedies available for substantial
default.
0
24. Amend Sec. 902.75 by:
0
a. Revising paragraphs (b) introductory text and (b)(5);
0
b. In the second sentence of paragraph (c), adding the word ``factual''
before the word ``discrepancies''; and
0
c. Revising paragraphs (d)(1) and (2), and (g)(2) and (3).
The revisions read as follows:
Sec. 902.75 Troubled performers.
* * * * *
(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 draft an MOA. An MOA is required for a
troubled performer. The executed MOA is an enforceable contractual
agreement between HUD and a PHA. Material breach of the MOA by the PHA
is a basis, among other remedies available under law, for determination
of substantial default. 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:
* * * * *
(5) The PHA's commitment to take all prescribed actions to achieve
the targets;
* * * * *
(d) * * *
(1) Expiration of the first assessment year improvement period.
Upon the expiration of the one assessment 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 assessment year recovery period. Upon the
expiration of the 2 assessment 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.
* * * * *
(g) * * *
(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 assessment year of this 2-year period.
(3) The following example illustrates the provisions of paragraph
(g)(1) of this section:
Example:
A PHA receives an overall PHAS score of 50 points; 60 points is a
passing score. The PHA must achieve at least 55 points overall (50
percent of the 10 points necessary to achieve a passing score of 60
points) on the next PHAS assessment that is at least 12 months after
the initial notice of the troubled performer designation to continue
recovery efforts. In the second year, the PHA must achieve a minimum
score of 60 points overall (a passing score) on the PHAS assessment
that is at least 24 months after the initial notice of the troubled
performer designation. If the PHA fails to achieve the 5-point increase
on the year-one assessment, or if the PHA achieves the 5 point increase
on the year-one assessment, but fails to achieve the minimum passing
score of 60 points on the year-two assessment, 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.
* * * * *
0
25. Add Sec. 902.76 to subpart G to read as follows:
Sec. 902.76 Capital Fund troubled performers.
Upon a PHA's designation as a Capital Fund troubled performer, the
PHA will be subject to appropriate oversight and actions by HUD. HUD
may require a PHA to correct deficiencies in performance within a time
period as specified by HUD. The requirements to correct deficiencies,
and consequences for failure to correct deficiencies so identified,
will otherwise be the same as
[[Page 87531]]
for substandard performers as described in Sec. 902.73 unless HUD
exercises remedies and enforcement actions provided in 24 CFR part 905.
Sec. 902.79 [Amended]
0
26. Amend Sec. 902.79 by removing the final word of the paragraph,
``period'', and adding, in its place, the word ``year''.
Sec. 902.81 [Amended]
0
27. Amend Sec. 902.81 by adding, to the end of the paragraph, the
words ``Further, nothing in this section prohibits any resident from
communicating to HUD in writing regarding their experience or complaint
with the PHA at issue.''
Sec. 902.83 Remedies for troubled performer PHAs.
0
28. Amend Sec. 902.83 by removing, from the end of paragraph (a)(3),
the words ``for any other substantial default by a PHA'', and revising
the section heading to read as shown above.
Subpart H--Assessment of Small Rural Public Housing Agencies
0
29. Amend Sec. 902.103 by revising paragraph (a) to read as follows:
Sec. 902.103 Public housing assessment of small rural PHAs.
(a) Small rural public housing assessment. The public housing
program of small rural PHAs as defined in Sec. 902.101 shall be
assessed and scored based only on the physical condition of their
public housing properties in accordance with 24 CFR part 5, subpart G.
Such agencies shall not be subject to PHAS except as noted below.
* * * * *
0
30. Amend Sec. 902.105 by:
0
a. Revising paragraphs (c) introductory text and (c)(5); and
0
b. In the second sentence of paragraph (d), adding the word ``factual''
before the word ``discrepancies''.
The revisions read as follows:
Sec. 902.105 Troubled small rural PHAs.
* * * * *
(c) Corrective Action Agreement (CAA). Within 30 days of
notification of a PHA's designation as a troubled performer, HUD will
initiate activities to negotiate and develop a CAA. A CAA is required
for a troubled performer. The final executed CAA is an enforceable
contractual agreement between HUD and a PHA. The scope of the CAA may
vary depending upon the extent of the problems present in the PHA. The
term of the CAA will not exceed one year and is subject to renewal at
the discretion of HUD if HUD determines that the circumstances
requiring the CAA still exist at the expiration of the term of the CAA
based on the annual assessment frequency as included in Sec. 902.103.
It shall include, but not be limited to:
* * * * *
(5) The PHA's commitment to take all prescribed actions to achieve
the targets;
* * * * *
0
31. Revise Sec. 902.107 to read as follows:
Sec. 902.107 Withholding, denying, and rescinding score or
designation.
(a) Withholding score or designation. (1) If determined as
appropriate or necessary by HUD, HUD may withhold, deny, or rescind a
designation of any level, from troubled performer to high performer.
HUD may conduct any review as it may determine necessary.
(2) HUD may withhold, deny, or rescind incentives or high performer
designation or non-troubled performer designation, including in but not
limited to circumstances in which a PHA:
(i) Is operating under a special agreement with HUD (e.g., a civil
rights Conciliation or Voluntary Compliance Agreement);
(ii) Is involved in litigation that bears directly upon the
physical performance of a PHA;
(iii) Is operating under a court order;
(iv) 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;
(v) Demonstrates substantial noncompliance in one or more areas of
a PHA's required compliance with applicable laws and regulations,
including areas not assessed under the small rural assessment. Areas of
substantial noncompliance include, but are not limited to,
noncompliance with civil rights, nondiscrimination and fair 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;
or
(vi) Demonstrates other egregious performance issues not reflected
in PHAS component score that require significant corrective action, as
HUD determines necessary.
(3) HUD may withhold, deny, or rescind non-troubled or troubled
performer designation and accompanying requirements at its discretion.
HUD may substitute other corrective requirements when HUD determines it
is necessary.
(4) HUD may withhold, deny, or rescind an overall PHAS score at its
discretion. HUD must notify the PHA when scores are withheld, denied,
or rescinded, provide the basis for the decision, and allow for appeal
as described in Sec. 902.109.
0
32. Amend Sec. 902.109 by revising the section heading, paragraph (a)
and paragraphs (c) through (f) to read as follows:
Sec. 902.109 Right to appeal troubled designation.
(a) Appeal of troubled performer designation. A PHA may take any of
the following actions:
(1) Appeal its troubled performer designation; and
(2) Appeal any actions taken under Sec. 902.107.
* * * * *
(c) Appeal procedures. (1) To appeal a troubled performer
designation 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
score to the PHA.
(2) An appeal of a troubled performer designation must include the
PHA's supporting documentation and reasons for the appeal. An appeal of
an assessment score must be accompanied by the PHA's evidence that a
material error occurred.
(d) Denial, withholding, or rescission.A PHA that disagrees with
the basis for denial, withholding, or rescission of its designation or
score under Sec. 902.107 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 appeals. Upon receipt of an appeal of a final
overall assessment score, of a troubled performer designation, or
appeal of action taken under Sec. 902.107 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.
(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
[[Page 87532]]
new inspection of the project, adjust the PHA's score, or perform other
reexamination of 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 an
assessment score, or issuance of a troubled performer designation will
be final agency action.
(2) HUD will issue a written decision on all appeals made under
this section.
0
33. Revise Sec. 902.111 to read as follows:
Sec. 902.111 Remedies for troubled small rural PHAs.
The remedies for small rural PHAs with troubled public housing
programs that remain troubled under Sec. 902.108 will be the same as
those remedies for PHAs assessed under PHAS as described in Sec.
902.83.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2024-25469 Filed 11-1-24; 8:45 am]
BILLING CODE 4210-67-P