FINANCING ADJUSTMENT FACTOR FUNDS. U. S. Department of Housing and Urban Development. North Carolina Housing Finance Agency

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1 APRIL FINANCING ADJUSTMENT FACTOR FUNDS State Project/Program: CONSTRUCTION TRAINING PARTNERSHIP Federal Authorization: 24 CFR 883 U. S. Department of Housing and Urban Development North Carolina Housing Finance Agency Agency Contact Person Program Robert C. Jordan, III (919) Agency Contact Person Financial Bobby Waring (919) Address Confirmation Letters To: Bobby Waring North Carolina Housing Finance Agency P. O. Box Raleigh, NC The auditor should not consider the Supplement to be safe harbor for identifying audit procedures to apply in a particular engagement, but the auditor should be prepared to justify departures from the suggested procedures. The audit can consider the supplement a safe harbor for identification of compliance requirements to be tested if the auditor performs reasonable procedures to ensure that the requirements in the Supplement are current. The grantor agency may elect to review audit working papers to determine that audit tests are adequate. I. PROGRAM OBJECTIVES The primary objectives of the Construction Training Partnership (CTP or the Program)) are to: 1) provide basic, yet broad-scoped, construction training to unemployed and/or underemployed individuals; 2) upon completion of training, provide job placement services which result in students being employed within the construction field, and earning a living wage; 3) increase the number of skilled construction workers available for hire within the regions where CTP training is provided; and, 4) to facilitate the rehabilitation or new construction of affordable housing which, while serving as field laboratories for CTP training classes, also benefits low-income homeowners and/or renters. B

2 II. PROGRAM PROCEDURES 1. General Each Construction Training Partnership project is a cooperative venture between the North Carolina Home Builder s Association (NCHBA), various third party units of local governments and/or 501(C) (3) nonprofit organizations (Recipients), and the North Carolina Housing Finance Agency (the Agency). Role of The NCHBA: The NCHBA markets the Program to potential Recipients, submits its list of interested Recipient organizations to the Agency for its review and approval. Upon, Agency approval of Recipient organizations and the execution of a related funding agreement (Tri-Party Agreement), the NCHBA then works with the Recipient to procure classroom facilities and construction projects to be used as field laboratories. The NCHBA then recruits students and conducts a range of training services that typically consist of two or three, eight-to-ten-week construction classes, consisting of classroom and hands on residential new construction and/or rehabilitation field training. This training is followed by job placement activities. The Role of The Recipient: The Recipient pays the cost of the NCHBA-provided training and job placement activities. The Recipient identifies and selects eligible lowincome residential construction projects to serve as class-related field laboratories and instructional models. The Recipient chooses new construction and/or rehabilitation projects with a sufficiently broad scope of work so as to allow students the widest possible variety of construction training exposure and experiences. The Recipient serves as, or procures, a general contractor who will be generally responsible for the satisfactory completion of all work performed on program-related projects. The Recipient and/or the general contractor, as applicable, schedules work commensurate with the training needs of each class. The Recipient administers disbursement of Agency-provided funds, maintains accurate and detailed records of all eligible program-related transactions, and reports to the Agency as required by the funding agreement (Tri-Party Agreement). The Recipient ensures the satisfactory completion all new construction and rehabilitation work performed. The Role of The Agency: The Agency is acting solely as a funding provider and pays only the hard costs of eligible program- related new construction or rehabilitation activities. Eligible hard costs are: 1) the cost of building materials and supplies used or consumed; 2) the cost of subcontracted trades, 3) the reasonable costs associated with the short-term rental of specialty tools; and 4) the reasonable cost of contractor profit and overhead. 2. Funding The CTP Program is funded using Financing Adjustment Factor (FAF ) monies. FAF funds are federal funds that were awarded as a result of the Stewart B. McKinney Homeless Assistance Act, by the United States Department of Housing and Urban Development. FAF funds do not have a CFDA number. B

3 3. Monitoring of Recipients by the Agency In addition to remote monitoring through review of the quarterly CTP Beneficiary and Hard Cost Report, the Agency monitors recipient activity by assigning a Rehabilitation Officer to work with each Recipient, serving as "case manager" to ensure the success of their CTP project. The case manager periodically visits Recipients for on-site monitoring of their CTP-related activities. On-site monitoring visits are performed on an ad hoc basis. The emphasis is on the recipient's adherence to the Tri-Party Agreement and their fidelity to their own written policies (i.e. OMB Circular A102 for units of local Government, and OMB Circular A110 for non-profits.). The Funding Agreement does not require that have a CTP-specific disbursement or procurement policy. Therefore it is suggested that auditors review the Recipient s related policies and procedures to verify compliance. III. COMPLIANCE REQUIREMENTS A. Activities Allowed or Unallowed Agency provided CTP funds may be used only for the hard costs of eligible program-related new construction or rehabilitation activities. Eligible hard costs are: 1) the cost of building materials and supplies used or consumed; 2) the cost of subcontracted trades, 3) the reasonable costs associated with the short-term rental of specialty tools; and 4) the reasonable cost of contractor profit and overhead. If the total hard costs directly attributable to eligible class-related field laboratories and instructional models projects is something less than the total eligible Agency contribution, the Recipient may, with prior written approval from the Agency for each instance, use Agency-provided funds to pay the hard costs of new construction and/or rehabilitation projects that are not directly class related, but are otherwise eligible. The Recipient may, with prior written approval from the Agency for each instance, use Agency-provided funds to pay the hard costs for the construction of project-related non-dwelling structures, such as small transportable storage buildings, to be used as instructional models. Class participation in the construction of such structures should supplement the students training experience and exposure to new construction structural systems. In addition, it must be demonstrated that the completed structure will directly benefit an eligible household as described in Section E below. All Agency -provided CTP funds are to be used as grants to program-eligible households. B

4 Verify through a review of documentation that hard cost disbursements match those reported on the CTP Beneficiary and Hard Cost Report, and that CTP funds disbursed by the recipient were used exclusively for eligible rehabilitation hard costs. B. Allowable Costs/Cost Principles See paragraph III.A. "Activities allowed or unallowed". The costs of any activities other than those listed there are not allowed. C. Cash Management Typically, one half of a total Award to a Recipient is disbursed to the Recipient upon execution of the CTP Tri-Party Agreement. The second half of the Award is typically disbursed to the recipient when the recipient demonstrates that they have successfully spent 90% of the first disbursement. However, upon written request from a recipient, the Agency may approve a disbursement variance to allow the Recipient to be reimbursed for actual CTP-related costs. When this is the case the recipient must provide documentation of the expenses incurred for which they are requesting reimbursement. Upon conclusion of each project any funds held by the Recipient and not committed to CTP-eligible and project-related activity must be returned to the Agency. The Tri-Party Agreement makes no provision requiring that CTP funds be held in an interest-bearing Bank account or addressing how interest earned on Recipient-held CTP funds (if any) are to be used. The Agency tracks Recipient expenses and disbursements via review of a CTP Beneficiary and Hard Cost Report provided quarterly by the Recipient, and though a review of related source documentation during monitoring site-visits. D. Davis-Bacon Act It is the Recipients responsibility to comply with the provisions of the Davis-Bacon Act when and where applicable. E. Eligibility All dwellings constructed or rehabilitated with Agency-provided CTP funds must be occupied by eligible beneficiary households. To be eligible, the beneficiary household must have an annual income of 80% or less of the area median income as adjusted for family size. The Recipient determines beneficiary household characteristics and eligibility through written, third party verification. The Recipient provides this information to the Agency quarterly in a written CTP Beneficiary and Hard Cost Report. F. Equipment and Real Property Management B

5 Acquisition of equipment or real property with CTP program funds is not an eligible use of Program funds; therefore, federal guidelines on equipment and real property management do not apply. G. Matching, Level of Effort, Earmarking The amount of Agency-Provided CTP funds must be less than or equal to the amount paid to the NCHBA for the actual cost of training services. This amount is typically specified in the Tri-Party Agreement. Prior to close-out of each award, the case manager verifies the actual amount paid to the NCHBA by the Recipient for related training services. On occasion, this amount is less than the amount originally agreed upon. When this is the case the Recipient is required to refund any amount it has received from the Agency in excess of the amount it has paid to the NCHBA. Verify through a review of documentation that any matching funds reported on quarterly CTP Beneficiary and Hard Cost Report were actually contributed to the reported rehabilitation job(s). H. Period of Availability of Federal Funds The CTP Tri-Party Agreement makes provision for each project to be completed within a 12 month period (typically beginning July 1, and ending the following June 30). The agreement also makes provision for the possibility of an extension of the agreement if the Agency agrees to a specific extension in writing. I. Procurement and Suspension and Debarment The Recipient serves as, or procures, a general contractor who will be generally responsible for the satisfactory completion of all work performed on program-related projects. It is the Recipient s responsibility to assure that it upholds and enforces their written and formally adopted policies regarding procurement of contractors and/or materials (i.e. OMB Circular A102 for units of local Government, and OMB Circular A110 for non-profits). Verify that recipients who use staff labor for construction work are following procurement practices for materials and tracking job costs as appropriate. J. Program Income The current CTP funding agreement makes no provision regarding program income. B

6 K. Real Property Acquisition and Relocation Assistance Real property acquisition and relocation assistance with CTP program funds is not an eligible use of Program funds; therefore, federal guidelines on equipment and real property management do not apply. L. Reporting Each Recipient submits to the Agency a quarterly CTP Beneficiary and Hard Cost Report. This report includes an accurate and descriptive accounting of the use of all funds advanced during the preceding quarter. The report specifies the eligible project hard cost items or services purchased by the Recipient. It also includes the location/address where the funds were used as well as the beneficiary household demographic information. This report must be submitted on or before the fifteenth day of the month following the end of each calendar quarter. M. Subrecipient Monitoring Each Recipient is responsible for upholding and enforcing their written and formally adopted policies regarding procurement contractors and/or materials. The Recipient is also responsible for disbursement of Agency-provided funds and to uphold and abide by their adopted Disbursement Policy. The Recipient ensures the satisfactory completion all new construction and rehabilitation work performed. N. Special Tests and Provisions None. B