HUD Logo
USA%20Flag  
Site Map         A-Z Index         Text   A   A   A

HOME FACTS - Vol. 3 No. 1, June, 2010



header image

Topic
This issue of HOME FACTS announces and explains an important change in HUD's treatment of HOME activities with commitments in the Integrated Disbursement and Information System (IDIS) that are over 12 months old with no funds disbursed. Effective January 1, 2011, these activities will be automatically cancelled by HUD and the funds uncommitted, following the process described below.

Requirement
The definition of "commitment" states that HOME funds may only be committed: (1) to a project that involves acquisition of standard housing if the property will be transferred within 6 months; or (2) to a project involving new construction or rehabilitation of housing if there is a reasonable expectation that construction will begin within 12 months. Consequently, HUD expects that PJs that are in compliance with the regulations will have drawn funds for a project within 12 months of activity funding in IDIS. Section 92.502(b)(2) of the HOME regulations permits HUD to automatically cancel an activity that has been committed in the system for 12 months without an initial disbursement of funds. Currently, there are 1,806 HOME activities in IDIS that meet the criteria for cancellation (as of the 5/31/2010 Open Activities Report). These activities, in total, have commitments of over $326 million with no disbursements made during the commitment period. Some of these activities were funded as long ago as 1993. Due to the magnitude of the problem of activities with no disbursements after 12 months, HUD has determined that it is necessary to exercise its authority to automatically cancel these activities.

HUD Inspector General Findings
Two recent HUD Office of Inspector General (OIG) audits of the HOME Program (2010-FO-0003; and 2009-AT-0001) identified open activities with a commitment of funds for more than 12 months but no disbursements as a significant issue for the HOME Program. These funded activities count as commitments towards a PJ's statutory 24-month HOME commitment deadline.

There are several reasons why an activity that has been funded for more than 12 months would not have disbursed any funds, including: (1) the project may have been cancelled in reality, but not cancelled in IDIS; (2) the project may be waiting for additional approvals before construction proceeds; or (3) the project may be under construction but the HOME funds will be disbursed last or used for permanent financing. Irrespective of the cause, HUD will cancel all projects funded for more than 12 months with no disbursements beginning in January 2011, and on the first business day of each month thereafter.

Process
Beginning on January 1, 2011, and on the first business day of each month thereafter, HUD will change the status of any "Open" activities in IDIS to "Cancelled" when: (1) the "Initial Funding Date" is over 12 months prior; (2) the "Funded Amount" is greater than $0; and (3) the "Drawn Amount" is $0. Once the activity is cancelled, any funds that were committed to that activity will no longer be considered committed HOME funds. They will be available to the PJ for commitment to other projects. Please note that this has important implications in determining whether or not a PJ has met its annual commitment of funds requirement.

For example, assume that a HOME PJ set up activity #1525 on December 15, 2009, and funded it for $29,000 but has not drawn down funds for the activity. On January 1, 2011, HUD will change that activity's status in IDIS from "Open" to "Cancelled." If this PJ's commitment deadline is March 31, 2011 and its total commitments as of January 1, 2011 are exactly equal to its commitment requirement, the PJ would have 90 days after automatic cancellation of the activity to commit the $29,000. If it does not commit the $29,000 by its March 31, 2011 deadline, the PJ will have a commitment shortfall and HUD will deobligate the shortfall amount.

HUD urges all PJs to review the status of all projects in IDIS that have been open for more than 12 months without a draw and immediately take appropriate action to avoid loss of funds. Note that committing funds in IDIS before executing a legally binding written agreement for the use of the funds violates the HOME regulations. In April 2010, CPD amended its monitoring procedures to require HUD Field Offices to compare the execution dates of written agreements with the project funding date in IDIS to ensure that activities are not set up in IDIS before a legally binding agreement is executed.

The Open Activities Report, found here: http://www.hud.gov/offices/cpd/affordablehousing/reports/open/, can be used to identify activities in jeopardy of being cancelled. Follow these steps to identify your activities:
 

  1. Open the report for your state.
  2. Use Excel filter to filter activities for your PJ.
  3. Use Excel filter to filter activities with a status of "OP".
  4. Use Excel filter to filter activities with a drawn amount of "0.00".
  5. Look at the "Funding Date" of the activities to find activities funded more than 12 months prior to the date on the report.

IMPORTANT NOTE: Activities that have been cancelled in IDIS can be re-opened by HOME PJ IDIS users. Activities that are re-opened after automatic cancellation should receive a new commitment of funds only if construction will begin immediately (i.e., within 30 days) or, if after consultation with your field office, it is determined that the commitment of HOME funds to the project is justified. If a previously funded activity is cancelled and then re-opened, and funds are again committed to that activity, please note that the "Initial Funding Date" will not change. Therefore, it is important for PJs to draw down funds for re-opened activities during the month in which funds were re-committed to the activity; otherwise the activity will be cancelled again on the first business day of the following month.