Transcript CDBG Economic Development

LOCAL REVOLVING
LOAN FUND (RLF)
Local Revolving Loan Funds
Indications that HUD and GAO will heavily monitor
and audit the RLF activities
HUD is finalizing rules and regulations
Following primarily based on DCA’s traditional
approach to Revolving Loan Funds
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Loan payments capitalize local RLF
RLFs can be used for local economic development
needs and must be CDBG-eligible
RLF funds should be used first for new projects.
Additional stimulus funds should be used to fill
financial gaps
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Local Revolving Loan Funds
Administered by local government with DCA’s oversight
and guidance (as needed)
Currently 66 RLF’s throughout Georgia, with:
$33 million in RLF assets
$12 million in cash
$21 million in loan receivables
9,729 jobs created
RLF must be used in a timely manner – at least one new
loan every five (5) years [rule subject to future HUD
regulations]
For RLF cash balances greater than $125k, cash balance
should be maintained at less than 30% of total RLF assets
[rule subject to future HUD regulations]
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Local Government RLF Responsibilities
Maintenance of an accounting and financial management
system that complies GAAP, DCA’s guidelines for RLF
financial management systems, and HUD regulations
Maintenance of a loan servicing and monitoring capacity
system to ensure that loan payments are collected, that loan
covenants are enforced, and that loan secured assets are
maintained [UCC filings, etc.]
Maintenance of a well documented application and selection
process
Capacity to review and analyze funding requests to determine
whether such projects represent prudent investments
Maintain and structure RLF so that local administrators can
assess the RLF’s loan portfolio status and quickly identify any
problem areas that need attention.
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RLF Administrative Costs
10% per annum based on program income
derived for a particular period [fiscal year,
calendar year, etc]
Administrative costs must be adequately
documented – only eligible costs are
ACTUAL costs incurred
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Federal OMB Circulars
In absence of, in conjunction with, or
complimenting HUD regulations, Local
Governments RLF expenses must adhere to
Federal Office of Management and Budget
(OMB) Circulars:
A-87
A-133
A-123
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OMB Circular A-87 Requirements
The RLF expense must be:
Necessary and reasonable for the proper
and efficient performance and
administration of the federal award
Authorized or not prohibited under State or
local laws or regulation
Accorded consistent treatment
Adequately documented
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OMB Circular A-87 Requirements
What are Reasonable Costs?
Costs that do not exceed that which would be
incurred by a prudent person
Generally recognized as ordinary and necessary
Controlled by factors such as sound business
practices and arms length bargaining [i.e., no
conflicts of interest]
Costs at market prices for comparable goods or
services
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OMB Circular A-133 Requirements
Primarily to assist Local Government’s
auditors
Local Government is charged with
maintaining adequate internal control over
Federal programs. The internal control
exhibited by the Local Government should
provide reasonable assurance that the
Federal program is being managed in
compliance with laws, regulations, and the
provisions of contracts or grant agreements
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OMB Circular A-123 Requirements
Improper Payments Information Act
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OMB Circular A-123 Requirements
An improper payment includes any payment that was made to
an ineligible recipient or for an ineligible service, duplicate
payments, payments for services not received, and payments
that are for the incorrect amount
An improper payment is also defined as any payment that
should not have been made or that was made in an incorrect
amount under statutory, contractual, administrative, or other
legally applicable requirements
“when an agency’s review [i.e., an audit] is unable to discern
whether a payment was proper as a result of insufficient or lack
of documentation, this payment must also be considered an
error.”
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OMB Circular A-123 Requirements
What may constitute an improper loan payment?
Disbursements to borrowers or other thirdparty payments that are based on incomplete,
inaccurate, or fraudulent information.
These improper loan payment disbursements
may include:
Duplicate disbursements
Disbursements in the incorrect amount
Loan funds used for purposes other than those
allowed by law, program regulations, or HUD/State
policy
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OMB Circular A-123 Requirements
“Agencies shall have a cost effective
program of internal control to
prevent, detect, and recover
overpayments to contractors
resulting from payment errors.”
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OMB Circular A-123 Requirements
How can Local Government identify, eliminate,
and recover improper payments?
Prevention
Prevention activities are proactive and made
prior to payment issuance to assure payment
is accurate when made
Examples include: pre-payment audits, due
diligence based on risk prioritization, and
predictive modeling
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OMB Circular A-123 Requirements
How can Local Government identify, eliminate,
and recover improper payments?
Detection
Detection activities occur subsequent to payment and
test the accuracy of payment processes to identify
errors made during those processes.
Examples include: routine payment verification,
quality control reviews of a universe of payments using
different criteria than used on the front-end
Data matching to compare data fields or sets to confirm
consistent input
Data mining to detect payment patterns or anomalies
for isolation and subjected to further review
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OMB Circular A-123 Requirements
How can Local Government identify,
eliminate, and recover improper payments?
Recovery
Recovery or collection activities refer to efforts directed
toward recapturing improperly made payments.
For example, Local Government can obligate contractors to
assume financial responsibility for any payment errors
deemed as unallowable contract costs
Local Government may impose financial penalties on
contractors when payment errors exceed certain thresholds
Local Governments may, along with demanding repayment,
impose sanctions or other punitive measures against
contractors
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Things to Remember
• Local Government is
responsible for ensuring
RLF’s allowable costs
• Exercise Due Diligence
and actively monitor loan
status
• Ensure loans are for
program eligible activities
• Document, document,
document, and document!
• HUD and GAO will be
heavily auditing
• HUD regulations may be
amended in future
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Program Manager Contact Information
Michael Casper – RLF Program Manager
(404) 679-0594
[email protected]
OMB Circulars may be obtained at:
www.whitehouse.gov/omb/circulars/
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