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Playing by the Rules Ch. 1 Page Chapter 1 Introduction Contents 1.1 How to Use This Guide .................................................................................................................................1-2 1.2 Principal Regulations Governing CDBG Administrative Systems .................................................1-3 Playing by the Rules: CDBG Administrative Systems | Chapter 1-1 Playing by the Rules: CDBG Administrative Systems | Chapter 1-2 Notes Chapter 1: Introduction This guide will help you, as a CDBG subrecipient, to: • Understand the basic administrative requirements of the CDBG program. • Improve the management of your program activities through strong business practices. • Enhance program performance by tracking, reporting, and evaluating program activities and outcomes. • Ensure accountability and ensure clean audits by documenting compliance with CDBG reg- ulations. Taken together, these practices will protect and enhance the reputation of both your organiza- tion and the CDBG program in your community. CDBG Subrecipients A “subrecipient” may be a public agency, a public or private nonproft organization, a Commu- nity-Based Development Organization (CBDO) if designated as a subrecipient, or a for-proft entity authorized under 24 CFR 570.201(o) that the grantee awards CDBG funds to carry out agreed-upon activities on its behalf (see 24 CFR 570.500(c)). By administering your activities and meeting the administrative requirements covered in this guide, you are providing your grantee with fexibility in accomplishing its goals and helping to strengthen its ties with the community. 1.1 How to Use This Guide The complexity of regulations that mandate specifc procedures (the “means”) for achieving program objectives (the “ends”) can be daunting. Specifc procedures and extensive record- keeping may appear to be bureaucratic red tape. However, keep in mind that the required systems and procedures: • Are based on widely accepted standards for good business practices and apply to fnancial transactions in all areas of business. • Help ensure that every entity administering CDBG funds has basic management controls and fnancial safeguards in place to ensure maintenance of the public trust. • Provide better oversight and real-time analytic capacity that enable program managers to continuously adjust their operations and improve their performance. The chapters in this guide correspond to particular components of a subrecipient’s administra- tive operations: • Financial Management (Chapter 2). • Procurement and Contracting (Chapter 3). • Property Management and Disposition (Chapter 4). • Record-Keeping and Reporting Requirements (Chapter 5). • Other Administrative and Program Requirements (Chapter 6). • Audits (Chapter 7). • Closeout (Chapter 8). Each chapter begins with a brief explanation of the underlying management principles that apply to that facet of program administration, followed by the basic standards that grantees and their subrecipients must meet, as specifed in the applicable regulations. To the extent feasible, the guide lists performance standards in order from the most basic requirements to the most specialized. This makes it possible for you to use the guide as a checklist for building administrative systems “from the ground up,” or for reviewing existing systems for their adequacy in meeting the standards. Use this guide as a supplement to, not a replacement for, the regulations (including the re- lated requirements referenced in Subpart K of the CDBG regulations) identifed in Section 1.2(b), which follows below. Over time, using this guide as a reference tool should help you de-mystify the regulations and become more familiar with the requirements of the CDBG program. This knowledge, in turn, should help you avoid the pitfalls (and penalties) of noncompliance. Playing by the Rules: CDBG Administrative Systems | Chapter 1-3 Notes Chapter 1: Introduction You may notice some duplication from chapter to chapter in this guide. This refects the overlap that occasionally occurs in the regulations themselves and was retained in the text to minimize the amount of cross-referencing. Other Available Resources Along with this Playing by the Rules guide, the following resources can also help both grantees and subrecipients: • Managing CDBG: A Guidebook for Grantees on Subrecipient Management: A compan- ion volume as a resource for your local community in its relationship with your organization. • Training CDBG Subrecipients in Administrative Systems: A practical guide to best prac- tices in delivering CDBG-funded services through organizations like yours. • Web-based resources: These guides are linked to web-based resources that will provide you with guidance, materials, checklists, etc., to help you implement your programs. You can learn more about your community and HUD-funded activities for low- and moder- ate-income households and neighborhoods through the following resources: • Your own community’s Consolidated Plan: A tool to assess its afordable housing and community development needs and market conditions, to make data-driven, place-based investment decisions. The consolidated planning process serves as the framework for a community-wide dialogue to identify housing and community development priorities that align and focus funding from the CPD formula block grant programs. In addition to CDBG, these include the HOME Investment Partnerships Program (HOME), Housing Trust Fund (HTF), Emergency Solutions Grants (ESG) program, and Housing Opportunities for Persons with AIDS (HOPWA) program.  • CPD Maps: CPD Maps (HUD’s mapping and planning tool for communities) makes informa- tion about your community more broadly available to the general public. The CPD Maps Desk Guide is available online to help you make the best use of this valuable tool. 1.2 Principal Regulations Governing CDBG Administrative Systems 24 CFR 570, “Community Development Block Grants": Part 570 describes the regulations of the CDBG program in detail. 24 CFR 570, Subparts J and K include the basic program regulations governing management and fnancial systems for the CDBG program. These sections apply both to grantees and all subrecipients: • Subpart J (24 CFR 570.500–570.513) addresses general responsibilities for grant administra- tion, including the applicability of uniform administrative requirements, provisions of Sub- recipient Agreements, program income, use of real property, record keeping and reporting, and closeout procedures. • Subpart K (24 CFR 570.600–570.613) deals with other Federal requirements that may be applicable to a subrecipient’s CDBG funded activities. All CDBG funded activities must comply with regulations addressing civil rights, uniform administrative requirements, cost principles, and conficts of interest. Plus, depending on the activity, additional requirements may apply for labor standards; environmental standards; food insurance; relocation; dis- placement; acquisition; employment and contracting opportunities; lead-based paint; and/ or use of debarred, suspended, or ineligible contractors. The requirements in Subpart K are sometimes referred to as “cross-cutting” requirements, i.e., requirements outside the CDBG regulations that impose conditions on any activity receiving Federal funds, including CDBG-funded activities. As an example, an activity using Federal funds which alters a histor- ically signifcant resource must adhere to specifc public protections requiring reasonable eforts to preserve that resource. A working understanding of the requirements in this subpart will typically involve cross-referencing and becoming familiar with the relevant laws and regulations, as appropriate. Playing by the Rules: CDBG Administrative Systems | Chapter 1-4 Notes Chapter 1: Introduction 2 CFR 200, the Omnibus Circular: 2 CFR 200, from the Ofce of Management and Budget (OMB) governs cost principles, administrative systems, fscal procedures, and audit requirements for grantees and subrecipients. This regulation (also called the “Uniform Guidance” or the “Super- circular” amended 24 CFR 84 and 85, by removing all their provisions, but included a “saving provision” stating that all Federal awards made prior to December 26, 2014, will continue to be governed by Parts 84 or 85. The chart below provides a quick reference to the relationship of the Omnibus Circular, Part 84, Part 85, and the various OMB Circulars it replaces. • HUD has published a helpful guide ("2 CFR 200 Overview for HUD Grantees”) which identi- fes where provisions of Parts 84 and 85 may be found in the new Omnibus Circular. • A detailed analysis of the relationship between previous regulations and the Omnibus Cir- cular can be found in the “Uniform Guidance Crosswalk from Existing Guidance to Final Guidance,” which highlights policy changes, clarifcations, and updates to previous policy provisions. Executive Orders from the Office of the President: These implement various equal employ- ment opportunity and environmental policies; these are identifed in various sections of the regulations, as applicable. Former HUD regulation General purpose of the Where you now primarily or OMB Circular where former regulation or circular look to find provisions incor-you used to look for porated into or modified by administrative require-the Omnibus Circular (2 CFR ments 200) 24 CFR Part 84: HUD HUD regulation implementing 2 CFR 200, Subpart D, Post Federal “Uniform Administrative OMB Circular A-110 (applicable Award Requirements, 200.300-345. Requirements for Grants to nonproft subrecipients) and Administrative requirements for and Agreements with specifying standards relative to both nonprofts and governmental Institutions of Higher Edu-requirements as to bonding and entities are generally included cation, Hospitals, and Other insurance, retention and custodial within Subpart D. Non-proft Organizations” requirements for records, fnancial management systems (200.302), monitoring and reporting on performance, and procurement.1 24 CFR Part 85: HUD For governmental entities and 2 CFR 200, Subpart D, Post Federal “Uniform Administrative Re-public agencies, detailed stan-Award Requirements, 200.300-345. quirements for Grants and dards for fnancial management Administrative requirements for Cooperative Agreements to systems, payment, property both nonprofts and governmental State, Local, and Federal-management, procurement, entities are generally included ly-Recognized Indian Tribal monitoring and reporting program within Subpart D. Governments” (also known performance, fnancial reporting, as “the Common Rule.”) record retention, and termination. OMB Circular A-122: “Cost Established principles for deter-2 CFR 200, Subpart E: Cost Prin- Principles for Non-Proft mining costs that are allowed ciples, 200.400-475; Appendix Organizations” to be charged to Federal grants, contracts, and other agreements with nonproft organizations (ex- cept educational institutions). The principles are designed to ensure that the Federal Government will bear its fair share of costs except VII—States and Local Government and Indian Tribe Indirect Cost Proposals; and Appendix VIII—Nonproft Organi- zations Exempted From Subpart E: Cost Principles. where restricted or prohibited by law. Cost principles for both nonprofts and local governments are gener- ally included within Subpart D.2 1 Not all the requirements of 2 CFR 200 are applicable to CDBG subrecipients; see 24 CFR 570.502(a) and (b) which specify the sections and paragraphs of the Common Rule that apply to CDBG recipients and subrecipients. 2 For an exhaustive review of the relationship of the Uniform Guidance to previous circulars on cost principles for governmental entities, nonprofts, and educational institutions (i.e., A-87, A-21, and A-122), see the “Cost Principles Comparison Chart.” Playing by the Rules: CDBG Administrative Systems | Chapter 1-5 Notes Chapter 1: Introduction Former HUD regulation or OMB Circular where you used to look for administrative require- ments General purpose of the former regulation or circular Where you now primarily look to find provisions incor- porated into or modified by the Omnibus Circular (2 CFR 200) OMB Circular A-21: “Cost Principles for Educational Institutions” Covered much of the same subject matter as OMB Circular A-122, but aimed at educational institutions (public and private). 2 CFR 200, Subpart E: Cost Prin- ciples, 200.400-475; Appendix III—Indirect (F&A) Costs Identif- cation and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) OMB Circular A-87: “Cost Principles for State and Local Government” Equivalent of A-122 for a govern- mental subrecipient (i.e., public agency that is independent of the grantee government, such as a public housing authority, parks commission, or a jurisdiction cooperating with an urban county CDBG grantee3). Established the principles for determining the allowable costs of programs administered by public entities under grants or contracts from the Federal Government. The princi- ples are designed to provide the basis for a uniform approach to determining costs and promoting efciency. 2 CFR 200, Subpart E: Cost Prin- ciples, 200.400-475; Appendix V—State/Local Government and Indian Tribe—Wide Central Service Cost Allocation Plans; Appendix VI—Public Assistance Cost Alloca- tion Plans; Appendix VII—States and Local Government and Indian Tribe Indirect Cost Proposals OMB Circular A-133: “Audits of States, Local Govern- ments and Non-proft Organizations” Defned audit requirements for both governments and nonprofts receiving Federal funds. The document addresses the mandat- ed frequency and scope of audits, allowability of audit costs, and the process of auditor selection. 2 CFR 200, Subpart F, Audit Requirements, 200.500-520; Appendix X—Data Collection Form (Form SF-SAC); Appendix XI—Com- pliance Under the CDBG program, participating units under an urban county are considered to be part of the grantee; however, the grantee is responsible for applying the same requirements to these participating jurisdictions as are applicable to subrecipients. 3 Playing by the Rules: CDBG Administrative Systems | Chapter 1-6 Notes Chapter 1: Introduction Exhibit 1–1 below describes the regulatory framework for the CDBG program for Entitlement Communities (i.e., metro cities and urban counties). Exhibit 1–1: Regulatory Framework for CDBG Entitlement Program Beneficiaries Executive Orders2 CFR 200 $/M LegislativeLocal Executive Federal Hand- books HUD Notices Policy Memos Additional tools and resources on HUD.gov and HUDexchange.com $/M Local Public Agencies (treated as Subrecipients) Private, Non-profit Subrecipients* Contractors ContractorsContractors Entitlement Grantees (Metropolitan Cities/Urban Counties) HUD Regulations HCDA Section 105(a) CDBG Program 24 CFR 570 Other Program Requirements: Subpart K Federal Statutes Housing andCommunityDevelopment Act Other Federal Laws $/M $/M $/M$/M $=Funds provided. M=Monitoring required. * Includes 24 CFR 570.204(c)(2) for-profit CBDOs.