FAQs REGARDING HOPWA ADMINSTRATIVE COSTS AND RELATED ISSUES 07/20/2011

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1 FAQs REGARDING HOPWA ADMINSTRATIVE COSTS AND RELATED ISSUES 07/20/2011 I. BACKGROUND The AIDS Housing Opportunity Act, 42 U.S.C , authorizes the Housing Opportunities for Persons With AIDS (HOPWA) program to provide housing assistance and supportive services to low-income persons living with HIV and AIDS (PLWHA). Implementing regulations are codified at Title 24 of the Code of Federal Regulations (C.F.R), Part 574 (24 C.F.R. part 574). HOPWA funding is awarded annually through formula awards based on population and AIDS surveillance data, and through competitive grant awards, including the renewal of expiring eligible permanent supportive housing projects. Grantees may enter into written agreements with project sponsors to carry out approved program activities related to the provision of housing assistance and supportive services to eligible HOPWA clients. Grantees and project sponsors may utilize a portion of their grant funds for administrative expenses related to general management, oversight, coordination, evaluation and reporting on eligible activities. The HOPWA regulation at 24 C.F.R defines administrative costs as costs for general management, oversight, coordination, evaluation and reporting on eligible activities. Costs directly related to carrying out eligible activities are specificallyexcluded. The Frequently Asked Questions (FAQs) that follow provide uniform guidance to HOPWA grantees and project sponsors on administrative costs. FAQs address the definition and allocation of administrative costs; administrative cost limits for grantees and sponsors; minimum administrative allowances for sponsors; the inclusion of staff costs in program activity costs; the potential use of program funds for HMIS-related costs; and other relevant questions raised by HOPWA grantees. II. FREQUENTLY ASKED QUESTIONS (FAQs) A. Administrative Cost Limits 1. Q: What are the administrative cost limits for HOPWA grantees and project sponsors? A: Section 856 of the AIDS Housing Opportunity Act and the implementing regulation at 24 C.F.R (b)(10) establish that a grantee can use not more than three percent of the grant amount for its administrative expenses and that a project sponsor may use not more than seven percent of its HOPWA grant for administrative costs. Example:

2 Grantee Award Sponsor Award Total Grantee Award $300,000 Total Sponsor Award $100,000 Maximum Allowable Grantee Administration $9,000 Maximum Allowable Sponsor Administration (7%) $7,000 Balance Available for Project Sponsor Awards $291,000 Balance Available for Program Activity Costs 2. Q: Can a HOPWA grantee deny administrative costs to a sponsor? $93,000 A: No. Sponsors must undertake the grant administration activities established at 24 C.F.R , including project management, recordkeeping, performance reporting and evaluation of HOPWA efforts. Carrying out these activities ensures that awards are being administered in compliance with all applicable laws. To ensure a reasonable level of funding is available to carry out administrative responsibilities, HOPWA grantees should allow a project sponsor to use at least four percent (and not more than seven percent) of amounts received for administrative expenses. In lieu of providing HOPWA grant funds for administration, grantees may identify and use leveraged funds or other resources, such as State, local or private funding, equivalent to at least four percent of the award for project sponsor administrative expenses. 3. Q: Can a HOPWA grantee or project sponsor exceed administrative cost limits? A: No. The limits on administrative costs, as set forth at 24 C.F.R (b), are derived from Section 856 of the AIDS Housing Opportunity Act and cannot be waived. Even in situations where all incurred administrative costs are reasonable and properly documented for the HOPWA program, if they exceed the applicable three or seven percent statutory administrative limits, they are unallowable and must be paid from other sources, such as State or local funds or other leveraged resources. B. Calculation and Disbursement of Administrative Costs 4. Q: Is the dollar amount of the project sponsor administrative cost limit calculation based on seven percent of the grant award to the sponsor, or seven percent of the grant funds expended (received) by the sponsor for project activities during the grant project period? (This assumes that a sponsor might not expend all of its project funds within the grant period). How can administrative expenses be tracked? A: The seven percent limitation is based on the award amount established in the grantee agreement with the project sponsor. Nonetheless, HUD expects grantees to monitor administrative costs throughout the grant period to ensure that they do not exceed the statutory limit. As a method for maintaining costs within the administrative limit, grantees may establish procedures that limit draws for administrative costs to the limitation of seven

3 percent of funds, subject to final reconciliation to the amount authorized by contract. A recommended practice is for grantees to calculate, at the beginning of the grant period, the maximum administrative allocation (not more than seven percent of the grant award/contract), and then reimburse sponsors for their incurred administrative costs at a rate proportionate to their spending of direct program funds. For example, if a sponsor spends ten percent of its awarded program funds during the first month, the grantee might reimburse the sponsor ten percent of its total allowance for administrative costs, provided that the sponsor documented actual administrative costs at least equal to that amount. If the sponsor billed for 13 percent of program activities in the second month, then the grantee could disburse 13 percent of the total allocated administrative funds that month, again assuming such costs were incurred, properly documented and billed. Doing it in this manner prevents spending the administrative portion of the grant funds disproportionately to the program portion. An example follows: Total Award to Project Sponsor for Supportive Services, STRMU, and Administrative Costs: $215,439 Eligible Program Costs: $200, (93%) Eligible Administrative Costs: $15, (7%) Month Program Costs Expended (Out of Eligible $200,358.27) % of Total Eligible $ Program Costs Expended this Month Balance Eligible Program Costs % of Total Eligible Admin Costs Expended (equals same % as eligible program costs) Admin $ Costs Expended this Month (out of Eligible $15,080.73) Balance Admin Costs January $15, % $185, % $1, $13, February $15, % $169, % $1, $12, March $15, % $154, % $1, $11, April $12, % $141, % $ $10, Alternatively, administrative cost disbursements to a project sponsor may exceed seven percent of the award at any particular point during the project period, provided that the total administrative costs at project expiration are below the limit allocated to this sponsor at the end of the grant period. Grantee expectations regarding documentation of costs and the terms of disbursement of administrative and eligible program costs to the sponsor should be clearly stated in the agreement between the grantee and sponsor. 5. Q: Can a grantee incur and be reimbursed for the full three percent off the top of their total HOPWA award, and can a project sponsor take seven percent off the top of their

4 total HOPWA award, for administrative costs incurred at the beginning of the grant period? A: Yes, but only in special situations, such as when the costs are documented and based on eligible activities incurred for grant administration after the grant agreement was signed and executed (e.g., startup costs for that project s operations). More likely, such costs would be incurred during the operation of the project and would be reimbursable as incurred. Administrative costs may only be reimbursed after the administrative activities have taken place and are properly documented. Generally, administrative costs are billed with each request for reimbursement from HUD or from the grantee based on actual program/grant administrative expenditures. 6. Q: Can a HOPWA grantee or a project sponsor take 1/12 of their allowable administrative costs (three percent or seven percent, respectively) each month throughout the program year to use for administrative costs? A: Yes, but only if the costs are based on documented eligible activities incurred for administering the grant award during that monthly period. Under no circumstances can the allowable administrative percentage be exceeded at the end of the grant term, and the allowable three percent or seven percent must be based on actual grant administrative expenditures. C. Administrative vs. Program Activity Costs 7. Q: What is the distinction between administrative and eligible program activity costs? Some activities, such as bookkeeping, often are administrative but also can be directly related to an eligible program activity. A: Program costs are costs for carrying out and delivering eligible program activities, as identified at 24 C.F.R (b). These costs include housing assistance activities (i.e., tenant- and project-based rental assistance; operating costs for housing; acquisition, rehabilitation, lease, and repair of facilities; new construction of SROs and community residences only; short-term rent, mortgage and utility assistance; and permanent housing placement activities). Also included as eligible program activities are supportive services; housing information services; resource identification to establish, develop and coordinate housing assistance resources; and technical assistance (for community residences only). As defined in 24 C.F.R , administrative costs are costs for general management, oversight, coordination, evaluation and reporting on eligible activities. The definition further clarifies that administrative costs do not include costs directly related to carrying out eligible activities, since those costs are eligible as part of the delivery costs of such activities. As one example, the cost of operating a tenant-based rental assistance program (TBRA) includes both the monthly rental assistance payments to landlords for rental units that meet Housing Quality Standards (HQS) and the staff to coordinate and administer those payments.

5 Thus, a bookkeeper s time for writing rental checks to landlords would be billed under TBRA as an eligible program activity cost, whereas their time spent on payment of general office expenditures would be billed as administrative costs. Similarly, a supervisor s time may be split between the applicable program activity and administrative costs, depending upon the tasks the supervisor is carrying out. For example, supervisory participation in case conferences with staff to discuss complex client cases may be an eligible supportive service cost. However, supervisory activities such as staff meetings and employee evaluations are clearly administrative tasks for managing and providing oversight of the program. All personnel funded through the HOPWA grant must carefully track their time and record their activity in sufficient detail to document it as an allowable project activity cost or administrative cost. 8. Q: Under what category of funds (administrative or programmatic) should a grantee or project sponsor charge staff time and costs related to reporting on monthly or quarterly grant and project activities and APR/CAPER and IDIS reporting to HUD? A: Staff costs related to preparation and execution of reports to the grantee or to HUD are charged against administrative costs under the applicable three percent limit for grantees and seven percent limit for project sponsors. As discussed below, a portion of the costs of operating the management information system that both generates the data and also is used for coordination and other purposes may be allocated to Housing Information Services. (See questions 9-12 for further guidance on costs related to the development and use of HMIS and other information systems). D. Management Information Systems Costs 9. Q: Can a grantee use HOPWA funds to pay for a Homeless Management Information System (HMIS) or a similar management information system that complies with HOPWA program reporting requirements, including those incorporated into HMIS, and protects client confidentiality? A: Yes, costs of including HOPWA in community HMIS and/or implementing HMIS or HMIS-compliant systems are eligible HOPWA costs, provided that such systems comply with HOPWA reporting requirements (as incorporated into HMIS) and protect client confidentiality. HOPWA funds may be used for HMIS costs incurred by grantees and project sponsors that are required to participate in their community HMIS (i.e., projects that target and serve persons who are homeless), as well as HOPWA grantees that participate in HMIS on a voluntary basis. Grantees and project sponsors are encouraged to integrate with HMIS to improve coordination and to enhance beneficiary access to other community assistance programs. Costs of developing, implementing and training in HMIS and other HMIS-compliant information systems may be billed to the HOPWA grant. See for further information on HMIS standards. 10. Q: Are the costs associated with developing or using the Homeless Management Information System (HMIS) or other management information systems that comply with HOPWA reporting requirements and protect client confidentiality considered

6 administrative or eligible program activity costs? A: The purpose and use of the HMIS or other management information system determines the cost category under which such activity may be billed. As detailed below, when the HMIS is used for tracking and collecting data for purposes of grant reporting, the costs are administrative costs. When the HMIS is developed or used to improve linkages to community services and resources or to enhance beneficiary access to other community programs, the costs are program costs. In general, HMIS-related costs are considered to be administrative when the system is used for the purpose of compiling information on grant operations and to report to HUD (or to the grantee, if a sponsor) on program beneficiaries, program activities and performance outcomes. If the system is used by the grantee or sponsor solely for the purpose of reporting on beneficiaries, services and outcomes to HUD or to the grantee, the costs must be allocated to administrative costs and are subject to the limit of three or seven percent, respectively. However, community HMIS systems may also be utilized as a tool for housing information services to support case manager activities, such as an electronic case file or as a tool to facilitate beneficiary access to available housing and related services, track available housing units, reduce duplication in services, and provide essential data on client utilization to assess the effectiveness of the housing assistance. Costs incurred for these and other activities that use HMIS in the delivery of HOPWA assistance are eligible as direct program activity costs, and may be billed to and reimbursed as Housing Information Service costs. 11. Q. Can a grantee or sponsor use HOPWA funds to develop and/or implement systems that utilize Ryan White CARE Act data systems or software to allow HOPWA data integration with Ryan White CARE Act client and services data, either for reporting purposes or for delivery of HOPWA and other services to clients? If so, would the cost of such systems be billable as administrative costs or eligible Housing Information Services costs? A: Yes, HOPWA funds can be used to build upon or integrate with Ryan White CARE Act data systems (or other systems), provided that the system meets HMIS program specific data elements/standards and protects client confidentiality. When the systems are developed or used to facilitate data reporting, the costs are considered administrative costs and are subject to the administrative cost limit. These costs may be eligible Housing Information Services costs if the system is developed or used for purposes of better integration of community resources and tracking of clients and housing resources, as well as for client case file management. E. Management Information Systems Cost Limit 12. Q: Is there a limit on the use of HOPWA funds charged to the Housing Information Services category for HMIS or HMIS-compliant systems? A: HUD would consider reasonable and allow for up to three percent of the HOPWA grant to

7 be used for HMIS or HMIS-compliant systems to track client access and utilization and enhance housing access. These costs are separate from the three percent grantee administrative cost cap and may be billed under Housing Information Services, provided that such information systems comply with requirements for confidentiality of personal information. The agreement between the grantee and the project sponsor should clearly specify the amount designated for each of these activities. F. Distribution of Administrative Costs among Administering Entities 13. Q: How does a HOPWA grantee that utilizes another organization for some or all administrative functions, such as the distribution of HOPWA awards, coordination and oversight of HOPWA programs and project sponsors, and development and preparation of HOPWA performance reports, allocate administrative amounts? A: In some instances, grantees may select another entity to carry out administrative activities on behalf of the grantee. A grantee may select a government entity within the grantee s organizational structure, an external governmental entity, or a nonprofit organization or governmental housing agency to provide administrative activities. When a grantee utilizes another organization to carry out some or all of the grantee s administrative functions, the administrative activities, costs, and terms of payment should be clearly delineated in a contract or other written agreement between the parties. All costs associated with administering the grant, whether incurred by the grantee or the other organization, are subject to the three percent administrative cost limit. 14. Q: What is the administrative cost limit when a HOPWA grantee awards grant funds to an organization both for program management and as a sponsor to carry out one or more program activities? A: In some instances, grantees may select other entities to carry out administrative activities on behalf of the grantee and to deliver direct program services to HOPWA eligible clients. A grantee may select a governmental entity within the grantee s organizational structure, an external governmental entity, or a nonprofit organization or governmental housing agency to provide both grantee administrative and program activities. In such instances, the entity is considered a HOPWA project sponsor and may spend not more than seven percent of the total grant amount for administrative activities. The administrative activities would include both those designated by the grantee and those necessary for the project sponsor to administer their HOPWA grant funds. The agreement between the grantee and the project sponsor should clearly specify each of these functions to be carried out by the sponsor and the amount of funding designated for each of these functions (i.e., costs of administrative activities conducted on behalf of the grantee, and administrative and program activity costs for project sponsor grant award). 15. Q: What is the administrative cost limit for a HOPWA competitive grantee that both provides eligible direct service activities to beneficiaries and also contracts with other entities as project sponsors?

8 A: When a competitive grantee provides direct service activities to beneficiaries and also contracts with other organizations as project sponsors, that entity is considered a grantee and is eligible to use not more than three percent of the total grant amount for both functions. 16. Q: Is the seven percent limitation on project sponsor administrative costs applicable to contracted services for carrying out eligible program activities? If a sponsor contracts with a sub-recipient for specialized services (e.g., mental health services), is the subcontractor subject to a seven percent administrative cost limit? A: No. There are no specific administrative limits on contracted services to provide benefits to eligible persons. Purchase orders, contracts or other similar agreements with subcontractors generally include overhead costs or amounts required to cover the cost of carrying out the contracted services, which are specified within the scope and cost provision of the contract. Rates approved for contracted services must comply with the requirements in the applicable procurement standards (24 C.F.R or 24 C.F.R ). G. Use of HOPWA Funds for Other Activities 17. Q: Can HOPWA funds be used for costs to conduct comprehensive planning, coordination and integration of services with local planning bodies and other community resources, including community advisory groups, to develop and enhance housing assistance resources? A: Yes. HOPWA grantees and project sponsors can use HOPWA funds for comprehensive planning, community meetings, and other activities to plan, establish, coordinate and develop HIV/AIDS housing assistance and services for eligible persons (including conducting preliminary research and making expenditures necessary to determine the feasibility of specific housing-related initiatives (see 24 C.F.R (b)(2)). HUD encourages grantees to collaborate with State and/or community partners, as appropriate, to assess needs using local data and to strategically plan how to use HUD and other resources to meet housing and related needs, as envisioned in the President s July, 2010 National HIV/AIDS Strategy. HUD may allow up to 10 percent of the HOPWA grant to be budgeted under the Resource Identification activity and used for such purposes. 18. Q: Can administrative costs pay for staff recruitment and security clearances? A: Yes, administrative costs can be used to pay for staff recruitment and related security clearance if reasonable and associated with management and delivery of HOPWA activities. Where the recruitment and related expenses are necessary to fill a vacancy that occurs during project implementation, such personnel administrative expenses could be eligible. Also, charges to HOPWA for this purpose must be consistent with the allocation of such personnel costs to other cost objectives.

9 19. Q: Can administrative costs pay for costs related to displacement and relocation assistance for displaced persons? A: No. Costs related to displacement and relocation assistance for displaced persons are considered direct costs, as provided at 24 C.F.R (e)(2), and chargeable to the approved budget line item for the direct activity, which is limited to acquisition, rehabilitation and demolition of the HOPWA-funded project.

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