State of Louisiana Disaster Recovery Unit CDBG-DR Economic Development Programs
Agenda Louisiana Hurricanes: An Overview To engage or not to engage a subrecipient? Pros and Cons Programmatic Design and Considerations Selecting a Subrecipient Contracts and Agreements Pre-Monitoring and Technical Assistance Reporting and Monitoring Closeout Direct Program Implementation Cheat Sheet: Big Lessons Learned
Hurricanes Katrina & Rita (2005) Hurricane Katrina Hurricane Rita
Hurricanes Katrina & Rita (2005) Total CDBG-DR Allocation to OCD-DRU: Total Economic Development Programs: Programs Administered Directly by OCD-DRU: Programs Administered by Subrecipients: Total OCD-DRU Staff: Total Subrecipient Staff: $13.4 billion $362 million (3%) 1 ($40 million); 18 projects 11 ($322 million); 45+ subrecipients and sub-grantees 5-8 FTE Staff: 75+ (# of staff per agency varies based upon nature of program)
Hurricanes Gustav & Ike (2008) Total CDBG-DR Allocation to OCD-DRU: Total Economic Development Programs: Programs Administered Directly by OCD-DRU (same staff as for K/R): Programs Administered by Subrecipients: Total Subrecipient Staff: $1.1 billion $232 million (21%) 7 ($150 million); 34 projects 7 ($82 million); 26 projects 50+ (# of agency staff varies based upon nature of program)
Hurricane Isaac (2012) Total CDBG allocation to OCD-DRU : $64 million Total Economic Development Programs: $4.4 million (7%) Program administered by a subrecipient of a parish Program-administration incorporated by existing state and subrecipient staff
Program Administration: To engage or not to engage a subrecipient?
What are some of the benefits of engaging subrecipients? STAFF: Experienced Existing and/or Expedited Hiring Processes Relationship with the target community ORGANIZATIONAL INFRASTRUCTURE: Human Resources, Financial and Accounting Departments and Systems Equipment, Lending Software, other Databases Grants Management Experience MONITORING Grantee state agency monitors subrecipients through sampling of program documentation, policies and procedures, thereby potentially minimizing time spent at the state-level on compliance
What are some of the potential risks associated with engaging subrecipients? RISKS of COMPLIANCE and CONTROL: Failure to follow program policies and procedures Insufficient record keeping and program documentation Failure to comply with CDBG-DR requirements (environmental review, procurement, prevailing wage rates, flood insurance) Ineligible and/or unsupported costs, potentially leading to findings or a recapture of program funding
What are some of the ways these risks might be mitigated? ENGAGE YOUR SUBS; THEY RE YOUR PARTNERS! Establish frequent, positive and open communication between the state agency and subrecipient(s) Provide extensive Technical Assistance (TA) at multiple points throughout the life of the program, particularly on the front-end Provide tools (templates, file structure, manuals, etc.) to the subrecipient to ensure all documentation and information is collected Establish clear performance requirements and obtain frequent reporting on programmatic metrics Perform periodic sampling of program files Require and provide a list of comprehensive invoice documentation on the front-end
Program Design: Considerations What are your recovery needs? Provide direct financial assistance to businesses for physical or other damages Train an impacted workforce to help recover from the storm or adapt to post-storm economic climate Give business owners the training or technical assistance needed to get through the recovery period and become more resilient Who are you trying to serve? Businesses Individuals What type of assistance do you want to provide and why? Grants Loans Both?
Direct Assistance Programs
Program Design: Eligible Activities and National Objectives Eligible Activities: Direct Assistance Section 105(a)17: provision of assistance to private, for-profit entities, when the assistance is appropriate to carry out an economic development project that- (A) creates or retains jobs for low- and moderate-income persons; (B) prevents or eliminates slums and blight; (C) meets urgent needs; (D) creates or retains businesses owned by community residents; (E) assists businesses that provide goods or services needed Section 105(a)15: assistance to neighborhood-based nonprofit organizations, local development corporations, nonprofit organizations serving the development needs of the communities Section 105(a)22: to facilitate economic development through the establishment, stabilization and expansion of microenterprises through credit and/or technical assistance activities
Program Design: Eligible Activities and National Objectives National Objectives: Direct Assistance LMI Job Retention or Creation: The assisted project involves the creation or retention of jobs at least 51% of which benefit L/M income persons. LMI Limited Income: The microenterprise assistance is provided to a L/M income person who owns or is developing a microenterprise. LMI Limited Clientele: The only use of CDBG is to provide job training or other employment support services as part of a CDBGeligible economic development project, and the percent of total project cost contributed by CDBG does not exceed the percent of all persons assisted who are L/M income. LMI Area: The assistance is to a business which provides goods or services to residents of a L/M income residential area.
Program Design: Eligible Activities and National Objectives National Objectives: Direct Assistance Elimination of Slum and Blight (Area): The assistance is to a business in a designated slum or blighted area and addresses one or more of the conditions which contributed to the deterioration of the area. Slum and Blight (Spot): The assistance is to a business located outside of a designated slum or blighted area where: (1) The assistance is designed to eliminate specific conditions of blight or physical decay; and (2) The assistance is limited to the following activities: acquisition, clearance, relocation, historic preservation, and building rehabilitation. Urgent Need: The assistance to a commercial or industrial business is designed to alleviate existing conditions and the grantee certifies that such conditions pose a serious and immediate threat to the health or welfare of the community, they are of recent origin or recently became urgent, the grantee is unable to finance the activity on its own, and other sources of funds are not available.
Sample Non-Profit Organization (Subrecipient)- Implemented Economic Development Program : Business Recovery Grant and Loan Program Summary: Program subrecipients selected eligible participants and provided low-interest loans to qualified storm-impacted businesses located in stormimpacted areas Subrecipients: 9 community development financial institutions Total Program Delivery and Administrative Costs: $13.8 million Eligible Uses of Funding: Working capital, inventory and movable equipment (no construction-related activities)
BRGL Program Summary: Award Phase I Phase II Total Businesses Assisted 3773 773 Total Assistance Provided to Businesses $87.7 million $62.5 million Grant/Loan Grants up to $20K 20% grant / 80% loan 0% loans up to $250K from $20K $100K (0% interest, 4% after 2 years) Underwriting Each subrecipient followed their own criteria Standardized program criteria Timing 50% up front / 50% after One payment
Eligibility Phase I Phase II Location Zone A or Zone B One Zone only 20 affected parishes Opening Date 6 months prior to storm Prior to storm, and still open Max. Employees 50 100 Single Employee Firms Must sell tangible goods Tangible must be >10% of business' annual revenue Minimum Size (pre-storm) n/a $20,000 pre-storm revenue Financial Loss 30% revenue decline 20% revenue decline or $20,000 asset loss Documentation Various, including attestations Tax returns only, signed Compare: Q205 v Q206 Compare 2004 v 2006 full year Insurance claims, invoice for replacement of lost assets
Who is eligible? Areas to Consider: Direct Assistance Program Small Business Administration Guidelines: get to know them, consider limits and target businesses (e.g. farms) Consider more stringent maximum employee or annual revenue thresholds Consider hobby businesses (minimum thresholds) Private recreational facilities, privately-owned utilities Federal and/or state debarment lists and consider if delinquent on federal/state taxes What costs are eligible? Necessary and reasonable: award ranges, underwriting process, duplication of benefits, unmet needs Support documentation: proof of loss, proof of payment Environmental Review: construction or non-construction activities Davis Bacon Compliance: construction activities (including equipment requiring installation) Flood Insurance: building and contents Policies and Procedures Design considerations: volume of applicants, variety of impacted industries, documentation requirements and businesses capacity to complete the application
Service Programs
Program Design: Eligible Activities and National Objectives Eligible Activities: Services to Businesses and/or Individuals Section 105(a)8: provision of public services, including but not limited to those concerned with employment, crime prevention, child care, health, drug abuse, education, energy conservation, welfare or recreation needs, if such services have not been provided by the unit of general local government Section 105(a)17: provision of assistance to private, for-profit entities, when the assistance is appropriate to carry out an economic development project that provides technical assistance to promote any of the activities under subparagraphs (A) through (E); Section 105(a)21: provision of assistance by recipients under this title to institutions of higher education having a demonstrated capacity to carry out eligible activities under this subsection for carrying out such activities Section 105(a)22: to facilitate economic development through the establishment, stabilization and expansion of microenterprises through credit and/or technical assistance activities
Program Design: Eligible Activities and National Objectives Eligible Activities: Services to Businesses or Individuals NOTE: No more than 15% of program funds may be used for Public Services activities However, these activities are not subject to Public Services Cap: Employment services (including job training) related to employment opportunities generated by CDBG-eligible economic development activities, under the authority of 570.203(c); Services provided by a CBDO under the authority of 570.204 and that are specifically designed to increase economic opportunities though job training and placement and other related support services, such as child care and transportation; General support services provided to owners of and/or persons developing microenterprises, under the authority of 570.201(o).
Program Design: Eligible Activities and National Objectives National Objectives: Services to Businesses or Individuals LMI Limited Clientele: a) Exclusively benefit a clientele who are generally presumed by HUD to be principally L/M income persons. Some examples of groups generally presumed: Abused children; Elderly persons; Battered spouses; Homeless persons; Adults meeting Bureau of Census definition of severely disabled adults; Illiterate adults; Persons living with the disease AIDS; and Migrant farm workers. b) Require information on family size and income so that it is evident that at least 51 percent of the clientele are persons whose family income does not exceed the L/M income limit. (This includes the case where the activity is restricted exclusively to L/M income persons). c) Be of such nature and in such location that it may reasonably be concluded that the activity s clientele will primarily be L/M income persons.
Sample Subrecipient-Implemented Public Service Program : Recovery Workforce Training Program Summary: Program subrecipients selected eligible participants and provided training and placement of workers in critical recovery industry sectors (e.g. construction, oil and gas, healthcare, advanced manufacturing) Subrecipient: State of Louisiana Workforce Commission (LWC) Subrecipients to LWC: 18 non-profit education providers and public technical and community colleges Total Funding: $38 million
RWTP Program Summary Recovery Workforce Training Program Performance Total Trained: 15,512 Total Completed Training: 12,084 Total Placed Directly in Employment: 926 Total Placed in Employment following Training: 6,439
Areas to Consider: Services to Businesses or Individuals Who is eligible? individuals from eligible disaster declared parishes individuals who meet the program requirements and/or pre-requisites for training courses What costs are eligible? Salaries and benefits of instructors when providing free training to participants Operating costs of subrecipient Supplies and materials necessary to carry out training program (textbooks, software, ink cartridge, etc.) Equipment- HUD s definition: $300 or over with a useful life of one year Equipment should be procured, tagged and reported. Procure all supplies and equipment that is under $100,000 using small purchase method Support services to participants: book reimbursement, bus tokens to attend training or job interview Policies and Procedures 51% of participants be persons from low-to-moderate income households Collect household income data on all participants Make it a requirement to provide job placement services and track job placements Section 504 and Procurement- collect policies upfront
Areas to Consider: Selecting Subrecipients What is the program s method of distribution (MOD)? Identify in Action Plan Amendment Notice of Funding Availability (NOFA) Clearly set expectations: Scope of work (compliance and program processes, outreach, data management, application intake, applicant management, underwriting criteria) Application and documentation templates Administrative expenses and limits Reporting and records management: file structure and data collection requirements Invoicing process (documentation for actual costs incurred, indirect cost rates) Selection process and criteria: Prior experience requirements (federal grants, relevance of past services, existing processes, organization s mission) Past performance (audits, other grants) Capacity (equipment, software, experienced and existing staff) Defensible scoring process for successful and unsuccessful NOFA respondents
Contracts and Agreements Agreements should include: Scope of Work that includes performance measures and completion of pertinent documents CDBG Compliance Provisions- Equal Employment Opportunity, Section 504, Section 3, Access to Records, Duplication of Benefits, etc. Statement of Assurances that covers all federal regulations and CDBG requirements Budget line-items with general categories such as Salaries & Benefits, Supplies, Travel, Professional Services & Contracts: maintain detailed budget separately from the contract Term of Agreement
Pre-monitoring and Technical Assistance Have a pre-program orientation with subrecipient to review all programmatic requirements Review the Invoicing Process with subrecipient to ensure they are know what is considered to be sufficient support documentation for each budget line-item Discuss Environmental Review requirements in detail Participant Files- What needs to be kept in files? Documentation showing national objective and performance measures are met
Pre-monitoring and Technical Assistance Go through CDBG provisions necessary for Subrecipient Agreements and Contractor or Professional Services contracts Detail monitoring requirements for subrecipients and contractors Highlight reporting requirements and deadlines Provide technical assistance throughout grant Document and maintain technical assistance reports Set them up for success!!
Reporting and Monitoring Collect quarterly reports to include project status and report on performance measures Perform site visits or observations of project Review subrecipient files to ensure they are maintaining proper files Conduct at least one formal on-site monitoring visit: establish monitoring policies and procedures appropriate for the program Use monitoring checklist as a monitoring guide Issue monitoring report providing findings of monitoring visit state findings and concerns and provide corrective action guidance
Closeout Create a closeout packet collecting all information needed to show eligibility, national objective, performance measures and other requirements were met. Collect information right away! Establish a deadline for closeout packet to be submitted. OCD-DRU deadline is 90 after CEA end date. Opportunity to clean files, leaving only what is necessary Make sure the closeout packet/files tell the story
What are some of the benefits of administering programs directly? STAFF and ORGANIZATIONAL INFRASTRUCTURE: Experience with governmental systems, processes and checks and balances CDBG and/or CDBG-DR Institutional Knowledge/Systems If CDBG-DR can be absorbed into existing organization, then implementation costs might be minimized COMPLIANCE: State maintains control over implementation: Ensure consistent and objective processes for selecting eligible applicants Establish sound recordkeeping and documentation practices Ability to control adherence to CDBG-DR compliance requirements Potentially minimize conflicts of interest
What are some of the potential risks associated with administering programs directly? RISKS and LIMITATOINS of DIRECT ADMINISTRATION: Bureaucratic or limited hiring processes may cause delays in the grantee state agency s ability to adequately staff and expeditiously implement a program Existing staff may not be trained to address the particular economic recovery needs presented by the disaster event With a limited local presence, the grantee state agency may not adequately address the recovery needs of local businesses and communities If a new state agency is created in order to address the recovery needs, this increases the administrative costs, the timeline and risks of compliant implementation
What are some of the ways these risks might be mitigated? ENGAGE YOUR PARTNERS! Frequent, positive and open communication Engage CDBG-experienced staff Work with local public and private organizations, communities and other state agencies to ensure programs are designed using best practices Reach out to other states impacted by storms
Sample Grantee State Agency Administered Program: Project Based Recovery Opportunity Program (PROP): Summary: State receives and reviews all applications, performs the underwriting and selects eligible participants for a low-interest, gap financing loan program. The state directly monitors all projects for compliance with all CDBG-DR requirements, collects and tracks the principal and interest payments and financial documentation and maintains the revolving loan fund for future program applicants. Approved Projects: 18 businesses and non-profit organizations with varying (up to 30 year and up to 2% interest) loan terms Initial Program Allocation: $40 million Total Loans Made to Date: $36.5 million Total Collections to Date: $3.05 million
St. Thomas Community Health Center Total Project Cost $5,400,000 CDBG-DR Funding = $2,000,000 Before After
Joy Theatre Total Project Cost $12,000,000 CDBG-DR Funding = $3,000,000 Before After
Areas to Consider: Medium Project Loan and/or Grant Program Who is eligible? What costs are eligible? Underwriting and cost reasonableness requirements Equity or other funding participation requirements? Documented community support for the project Job creation requirements (CDBG-DR dollar per job created) Forgiveness/Grant incentives Local, state and federal partnerships: local banks (Community Reinvestment Act); state agencies or tax credits; local tax incentives; New Market and Historic Tax Credits Loan terms, default and write-off policy: balancing public benefit, risk management and future of the program Process and Implementation: WHO IS GOING TO DO THE LEGAL and COMPLIANCE WORK, ANALYSIS, DOCUMENTATION MANAGEMENT, TRACKING AND REPORTING?
Cheat Sheet: Big Lessons Learned Design the program with the beginning, middle and end in mind: what is involved with every step and who is going to do the work? Be clear in your mission, but allow some flexibility in your program: you can t design for every situation Reach out to other grantees and HUD: Technical Assistance and Templates Document, Document, Document! Every File Must tell the Full and Complete Story
Contact Us Lasonta Davenport Economic Development Manager Office of Community Development Disaster Recovery Unit Phone: (225) 219-9616 Email: lasonta.davenport@la.gov Lauren Tichenor Nichols Deputy Director of Recovery Programs Office of Community Development Disaster Recovery Unit Phone: (225) 342-1802 Email: lauren.tichenor@la.gov