TITLE 10.COMMUNITY DEVELOPMENT

Part 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS

Chapter 5. COMMUNITY SERVICES PROGRAM

Subchapter A. COMMUNITY SERVICES BLOCK GRANT

The Texas Department of Housing and Community Affairs (the Department) adopts without changes the repeal of §5.1, concerning the Community Services Block Grant, as published in the September 15, 2006, issue of the Texas Register (31 TexReg 7800).

This Section is repealed in order to enact new sections to address and provide clarification on the requirements of the Community Services Block Grant.

No comments were received.

The repeal is adopted pursuant to the authority of the Texas Government Code, Chapter 2306.

No other code, articles or statutes are affected by this section.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 5, 2007.

TRD-200700856

Michael Gerber

Executive Director

Texas Department of Housing and Community Affairs

Effective date: March 25, 2007

Proposal publication date: September 15, 2006

For further information, please call: (512) 475-4595

Chapter 5. COMMUNITY SERVICES PROGRAMS

Subchapter A. COMMUNITY SERVICES BLOCK GRANT (CSBG)

10 TAC §§5.1 - 5.15

The Texas Department of Housing and Community Affairs (the Department) adopts with changes new §§5.1 - 5.15, concerning Community Services Block Grant (CSBG), as published in the September 15, 2006, issue of the Texas Register (31 TexReg 7808). Sections 5.4, 5.5, 5.8, 5.10, 5.12, and 5.15 had changes, including the addition of §5.15(4) which was added to address public comment. Sections 5.1 - 5.3, 5.6, 5.7, 5.9, 5.11, 5.13, and 5.14 did not have changes and, therefore, will not be republished.

These sections are adopted in response to public comment in order to codify the regulations governing the administration of Community Services Block Grant.

The scope of the public comment concerning the Community Services Block Grant pertains to the following sections:

SUMMARY OF COMMENT RECEIVED UPON PUBLICATION OF THE PROPOSED RULES IN THE TEXAS REGISTER AND COMMENTS PROVIDED AT PUBLIC HEARINGS HELD BY THE DEPARTMENT ON ITEMS THAT RELATE DIRECTLY TO COMMUNITY SERVICES BLOCK GRANT.

Comment: §§5.1 - 5.15. Commentator requested clarification on the repeal of §5.1 and the new proposed rules §§5.1 - 5.15. Dallas Urban League

Department Response: The Department, in its proposed rule, is repealing §5.1 from the existing rule and replacing it with the proposed §§5.1 - 5.15.

Comment: §5.4 Eligible Entities. "The Department administers the CSBG program through the existing superefficient organizations referenced in the CSBG Act as "eligible entities." Delete last 's.' in "subrecipients." Texas Association of Community Action Agencies

Department Response: The Department concurs with the recommendation.

Comment: §5.5 Designation and Redesignation of Eligible Entities in Unserved Areas. "In order to serve as the eligible entity for the area, an entity to ensure adequate representation in each of the three required categories." Strike the word "to" and substitute with the word "must." Texas Association of Community Action Agencies

Department Response: The Department concurs with the recommendation.

Comment: §5.8(d) State Application and Plan. "In conjunction with the development of the State plan, the Department is required to hold public hearings in four locations in different areas of the state to solicit public comment on the intended use of CSBG funds." Although it is the common practice of the Department to post the State plan on its website, it is recommended that the rule state that the Department will post on its website the State plan ten (10) days in advance of public hearings. Texas Association of Community Action Agencies

Department Response: The Department, as required in Texas Government Code, Chapter 2105.054, will provide notice of a public hearing regarding the plan for a block grant not later than the 15th day before the date of the hearing. The Department will publish the Draft State Plan on the Department's website at least 10 days before the first public hearing. The Department recommends adding the following statement to §5.8(d) "The Department will provide notice of the public hearings regarding the State Plan not later than the 15th day before the date of the hearing and publish the Draft State Plan on the Department's website at least 10 days before the first public hearing."

Comment: §5.10(c)(3)(A) "Representatives of Private Groups and Interests. Private Nonprofit Entities. The entity shall select persons representing the private sector to serve on the board or it may select private sector organizations from which representatives of the private sector would be chosen to serve on the board. Law enforcement representatives are included in this group." Suggest deleting the word 'private' in 'private groups' and as referenced because as defined in the CSBG Act, groups are not referenced as 'private,' e.g. educational and law enforcement groups. Texas Association of Community Action Agencies

Department Response: The Department recommends the following revision: strike the current language in §5.10(c)(3)(A) and replace it with: "The entity shall select officials or members of business, industry, labor, religious, law enforcement, education, or other major groups and interests in the community served."

Comment: §5.10(c)(5)(A)(i) Selection, Composition and Powers of Boards of Eligible Entities. "The board is responsible for abiding by the terms of contracts and shall determine the policies of the agency to assure accountability for public funding." Replace the word 'agency' with 'organization.' Texas Association of Community Action Agencies

Department Response: The Department concurs with the recommendation.

Comment: §5.10(c)(5)(A)(iii) "Powers of the Board. Private Nonprofit Entities. In the event of a conflict between the powers and responsibilities required of all nonprofit corporations and those required by the CSBG Act, this rule, and the contract, the latter shall control." Revise rule to state that conflicts will be resolved in accordance with the CSBG Act. A state contract cannot supersede federal law. When a State accepts a grant governed by federal statute, the State may not impose restrictions inconsistent with federal law. Texas Association of Community Action Agencies

Department Response: The Department does not recommend any revisions to the referenced rule. All terms and conditions of the CSBG Contract are consistent with the CSBG Act, 42 U.S.C. §9901 et. seq, OMB Circulars, Uniform Grant Management Standards, and all other applicable Federal and State rules and regulations. The CSBG contract serves as the legal obligation authority between the Department and the CSBG subrecipient organization.

Comment: §5.10(c)(5)(B)(i) "Selection, Composition and Powers of Boards of Eligible Entities Public Organizations. The powers, duties, and responsibilities of the board shall be determined by the governing officials of the political subdivision." Add at the end of the sentence "in accordance with the CSBG Act." Clarification ensures governing officials must act in accordance with the CSBG Act. Texas Association of Community Action Agencies

Department Response: The Department recommends the following revision: strike the current language in §5.10(a)(5)(B)(i) and replace with "The powers, duties, and responsibilities of the board shall be determined by the governing officials of the political subdivision in accordance with the CSBG Act §676B."

Comment: §5.10(c)(5)(B)(ii) Selection, Composition and Powers of Boards of Eligible Entities. "The governing officials (of a public organization) may establish: (1) an advisory board, in which case the authority given to the advisory board depends on the powers delegated to it by the governing officials of the political subdivision; or (2) a governing board, empowering the board of directors with substantive decision-making authority and delegating the powers, duties, and responsibilities to carry out its CSBG-supported contract and functions." Replace 'advisory' board with 'administering' board, which is consistent with language in the CSBG Act and promotes a more active role. Texas Association of Community Action Agencies

Department Response: §676B.(b) of the CSBG Act does not reference the term administering board. The Act states that private nonprofit entities shall administer CSBG through a tripartite board and that public organizations shall administer the grant through a tripartite board or another mechanism specified by the State. Section 5.10(B)(ii) of the proposed CSBG rule prescribes the mechanism specified by the State. The Department recommends that the language to the referenced rule remain as published.

Comment: §5.12 Monitoring of Eligible Entities. This section makes reference to monitoring reviews, follow-up reviews, and training and technical assistance the Department may request from the Secretary; however no mention is made about the training and technical assistance the Department will provide to the superefficient, in accordance with the CSBG Act. It is recommended that this section be revised to include training and technical assistance the Department will provide to the CSBG entities. Texas Association of Community Action Agencies

Department Response: The Department recommends that the language to the referenced rule remain as published. The CSBG Act only requires that the State provide technical assistance to an eligible entity that has failed to comply with the terms of an agreement, or the State plan, or to provide services under the subtitle or to meet appropriate standards, goals, and other requirements established by the State. Additionally, the CSBG contract states that "The Department will provide technical assistance to Subrecipient and will require or suggest changes in the subrecipient's program implementation or in Subrecipient's accounting, personnel, procurement, management procedures in order to correct any deficiencies noted." The Department also provides training and technical assistance to tri-partite boards of eligible entities.

Comment: §5.12 (b) and (c) apply to the State and should be deleted from rules which apply to superefficient. Staff Recommendation

Department Response: Department staff recommends deletion of the referenced sections.

Comment: §5.15 Program Administration. "Upon Executive approval, CSBG superefficient shall enter into and execute an agreement for the receipt of CSBG funds. (1) Amendments. The Department, acting by and through its Executive Director or his/her designee, may authorize, execute, and deliver modifications and/or amendments to the CSBG contract." Revise rule to state that both parties will agree to contracts, agreements and/or amendments, as is the common practice of the Department. Texas Association of Community Action Agencies

Department Response: The Department recommends that the language to the referenced rule remain as published. While amendments to budgets and performance statements may be requested by the subrecipient and are subject to the Department's approval, the Department will modify and/or amend the contract without agreement of the subrecipient.

Comment: §5.15 (2) Program Administration. "The Department reserves the right to deobligate funds." Move to a new 'termination' section and state in accordance with the CSBG Act what will constitute deobligation of funds. Texas Association of Community Action Agencies

Department Response: Department concurs with the recommendation and will publish the proposed §5.16 in the Texas Register . The new §5.16 on Termination and Reduction of Funding will read as follows: "If the State determines, on the basis of a final decision in a review pursuant to §678B of the CSBG Act, that an eligible entity fails to comply with the terms of an agreement, or the State plan, to provide services under this subtitle or to meet appropriate standards, goals, and other requirements established by the State (including performance objectives), the State shall- (1) inform the entity of the deficiency to be corrected (2) require the entity to correct the deficiency; (3)(A) Offer training and technical assistance, if appropriate, to help correct the deficiency, and prepare and submit to the Secretary a report describing the training and technical assistance offered; or (B) if the State determines that such training and technical assistance are not appropriate, prepare and submit to the Secretary a report stating the reasons for the determination; (4)(A) at the discretion of the State (taking into account the seriousness of the deficiency and the time reasonably required to correct the deficiency), allow the entity to develop and implement, within 60 days after being informed of the deficiency, a quality improvement plan to correct such deficiency within a reasonable period of time, as determined by the State, and (B) not later than 30 days after receiving from an eligible entity a proposed quality improvement plan pursuant to subparagraph (A) of this paragraph, either approve such proposed plan or specify the reasons why the proposed plan cannot be approved; and (5) after providing adequate notice and an opportunity for a hearing, initiate proceedings to terminate the designation of or reduce CSBG funding of the eligible entity unless the entity corrects the deficiency."

Comment: Throughout the rule, many references are made regarding termination of the CSBG contract, deobligation of funds and/or sanctions. However, reference is vague in several instances. It is recommended that all references to these topics be consolidated into one section and that the section address at a minimum and consistent with definitions in the CSBG Act, the causes for termination, training and technical assistance the Department will provide, sanctions the Department may impose, and the appeal process available to a CSBG entity. Texas Association of Community Action Agencies

Department Response: Department staff recommends the addition of a new §5.16 Termination and Reduction of Funding which addresses the basis and procedures related to the termination and reduction in funding.

Comment: Change the word "subrecipient" to "subcontractor." The CSBG entities subcontract with the Department and must provide a service, meet performance standards, and comply with contractual obligations. The clients of the agencies are recipients. Texas Association of Community Action Agencies

Department Response: The Department recommends that the language to the referenced rule remain as published. Community Affairs contracts and documents utilize the word subrecipient. For consistency, Department recommends continuing the use of "subrecipient."

Comment: Commenter spoke in favor of draft rules but was concerned that implementing the rules process could cause delays in getting funding to the agencies. The delays would negatively affect nonprofit organizations' cash flow and could slow or impede services to clients. As an example, the commenter spoke of the Department's quick response to Hurricanes Katrina and Rita. The commentator urged the Board to retain practices which allow timely response, such as the continued use of the policy issuance system. Combined Community Action, Inc.

Department Response: The Department appreciates the comments and will continue to operate CSBG in a manner that is responsive to the needs of the subrecipient and the persons in need while at the same time allowing public comment for rules which outline the administration and eligibility of the grant.

Comment: Commentator spoke in favor of the draft rules but cautioned the board not to implement anything that could potentially interrupt a subrecipient's ability to operate any programs for any length of time. Commenter stated that in times of crisis, such as Hurricanes Katrina and Rita, when timely responses are needed it is very important that the Department be able to respond in a timely manner. She appreciated the opportunity to provide public comment. Commenter stated that she believes the wisdom of the Board will find a balance between the two, the need for public comment and the need to meet the urgent needs of low-income persons in a timely manner. Greater East Texas Community Action Program

The new sections are adopted pursuant to the authority of the Texas Government Code, Chapter 2306.

§5.4.Eligible Entities.

The Department administers the CSBG program through the existing subrecipient organizations referenced in the CSBG Act as "eligible entities."

§5.5.Designation and Redesignation of Eligible Entities in Unserved Areas.

(a) If any geographic area of the State ceases to be served by an eligible entity, the Governor may solicit applications from, and designate as an eligible entity:

(1) A private nonprofit organization (which may include an eligible entity) that is geographically located in the unserved area, that is capable of providing a broad range of services designed to eliminate poverty and foster self-sufficiency, and that meets the requirements of this subtitle;

(2) A private nonprofit eligible entity that is geographically located in an area contiguous to or within reasonable proximity of the unserved area and that is already providing related services in the unserved area; and

(3) In order to serve as the eligible entity for the area, an entity must ensure adequate representation in each of the three required categories.

(b) In designating an eligible entity, the Governor shall grant the designation to an organization of demonstrated effectiveness in meeting the goals and purposes of the CSBG Act and may give priority, in granting the designation, to eligible entities that are providing related services in the unserved area, consistent with the needs identified by a community needs assessment.

(c) If no private, nonprofit organization is identified or determined to be qualified to serve the unserved area as an eligible entity, the Governor may designate an appropriate political subdivision of the State to serve as an eligible entity for the area. In order to serve as the eligible entity for that area, the political subdivision shall have a board or other mechanism as required by the Department.

§5.8.State Application and Plan.

(a) The Department submits an application and State plan to the Secretary.

(b) The Department will submit a State plan every two years.

(c) The State plan will be submitted not later than 30 days prior to the beginning of the first fiscal year covered by the plan.

(d) In conjunction with the development of the State plan, the Department is required to hold public hearings in four locations in different areas of the state to solicit public comment on the intended use of CSBG funds. The Department will provide notice of the public hearings regarding the State Plan not later than the 15th day before the date of the hearing and publish the Draft State Plan on the Department's website at least 10 days before the first public hearing.

(e) In order to be eligible to received CSBG funds, the Department must hold at least one legislative hearing every three (3) years in conjunction with the development of the State plan. The Department submits the CSBG budget to the Texas State Legislature every two (2) years as part of the Legislative Appropriations Request (LAR), which meets the legislative hearing requirement.

§5.10.Selection, Composition and Powers of Boards of Eligible Entities.

(a) Private Nonprofit Entities.

(1) Board. In order for a private, nonprofit entity to be considered to be an eligible entity, the entity shall administer the community services block grant program through a tripartite board that fully participates in the development, planning, implementation, and evaluation of the program to serve low-income communities.

(2) Selection and composition of board. The members of the board shall be selected by the entity and the board shall be composed so as to assure that

(A) One-third of the members of the board are elected public officials, holding office on the date of selection, or their representatives, except that if the number of such elected officials reasonably available and willing to serve on the board is less than one-third of the membership on the board of appointive public officials or their representatives may be counted in meeting such one-third requirement;

(B) Not fewer than one-third of the members are persons chosen in accordance with democratic selection procedures adequate to assure that these members are representative of low-income individuals and families in the neighborhood served. Each representative of low-income individuals and families selected to represent a specific neighborhood within a community must reside in the neighborhood represented by the member; and

(C) The remainder of the members are officials or members of business, industry, labor, religious, law enforcement, education, or other major groups and interests in the community served.

(b) Public Organizations. In order for a public organization to be considered to be an eligible entity, the entity shall administer the community services block grant program through:

(1) A tripartite board, which shall have members selected by the organization and shall be composed so as to assure that not fewer than one-third of the members are persons chosen in accordance with democratic selection procedures adequate to assure that these members:

(A) Are representative of low-income individuals and families in the neighborhood served;

(B) Reside in the neighborhood served; and

(C) Are able to participate actively in the development, planning, implementation, and evaluation of programs funded with CSBG funds; or

(2) A mechanism specified by the Department to assure decision-making and participation by low-income individuals in the development, planning, implementation, and evaluation of programs funded under this subtitle.

(1) Public Officials.

(A) Private Nonprofit Entities.

(i) The CSBG eligible entity may select elected public officials or their representatives to serve on the board. In the event that there are not enough elected public officials reasonably available and willing to serve on the board, the entity may select appointed public officials to serve on the board.

(ii) The entity may allow governing officials of the political jurisdiction to select and/or recommend an elected or appointed official to serve on the board.

(B) Public Organizations. The public organization may select elected public officials to serve on the board. If there are not enough elected public officials reasonably available and willing to serve on the board, the public organization may select appointed public officials to serve on the board.

(C) Elected public officials or appointed public officials selected to serve on the board of either a private nonprofit entity or a public organization shall have either general governmental responsibilities, or responsibilities which require them to deal with poverty-related issues. They may not be officials with only limited, specialized, or administrative responsibilities.

(2) Low Income Representatives.

(A) An essential objective of community action is participation by low-income individuals in the programs which affect their lives; therefore, the CSBG Act and its amendments require representation of low-income individuals on boards or state-specified governing bodies. Low-income representatives need not themselves be poor, but they must be selected in a manner that ensures that they truly represent low-income individuals.

(B) The procedure used to select the low-income representatives must be documented to demonstrate that a democratic selection process was used.

(i) Nominations and elections, either within neighborhoods or within the community as a whole.

(ii) Selection at a meeting or conference to which all neighborhood residents, and especially those who are poor, are openly invited.

(iii) Selection of representatives to a community-wide board by members of neighborhood or sub-area boards who are themselves selected by neighborhood or area residents.

(iv) Selection, on a small area basis (such as a city block), of representatives who in turn select members for a community-wide board.

(v) Selection of representatives by existing organizations whose membership is predominately composed of poor persons.

(3) Representatives of Private Groups and Interests.

(A) Private Nonprofit Entities. The entity shall select officials or members of business, industry, labor, religious, law enforcement, education, or other major groups and interests in the community served.

(B) Public Organizations.

(i) The public organization may select persons representing the private sector to serve on the board or it may select private sector organizations from which representatives of the private sector would be chosen to serve on the board.

(ii) The individuals and/or organizations representing the private sector shall be selected in such a manner as to assure that the board will benefit from broad community involvement.

(iii) The board composition for the private sector shall draw from officials or members of business, industry, labor, religious, education, law enforcement, and other major groups and interests in the community served.

(4) Permanent Representatives and Alternates.

(A) Private Nonprofit Entities.

(i) The public officials selected by a private non profit entity to serve on the board may each choose one permanent representative to serve on the board in either a full-time capacity or in place of a public official whenever the public official is unable to attend a meeting.

(ii) The representative need not be a public official but shall have full authority to act for the public official at meetings of the board.

(iii) Permanent representatives may hold an officer position on the board.

(iv) If a permanent representative is not chosen, then an alternate may be designated by the public official selected to serve on the board.

(v) Alternates may not hold an officer position on the board.

(B) Public Organizations.

(i) The public officials selected by a public organization to serve on the board may each choose one permanent representative to serve on the board (or other governing body) in either a full-time capacity or in place of a public official whenever the public official is unable to attend a meeting.

(ii) The representative need not be a public official but shall have full authority to act for the public official at meetings of the board.

(iii) Permanent representatives may hold an officer position on the board.

(iv) If a permanent representative is not chosen, then an alternate may be designated by the public official selected to serve on the board or by the public organization.

(v) Alternates may not hold an officer position on the board. If the entity or board chooses to allow alternates, alternates for low-income representatives shall be elected at the same time and in the same manner as the board representative is elected to serve on the board.

(vi) Alternates for representatives of private sector organizations may be designated to serve on the board and should be selected at the same time the board representative is selected.

(vii) In the event that the board member or alternate ceases to be a member of the organization represented, he/she shall no longer be eligible to serve on the board.

(viii) Alternates may not hold an officer position on the board.

(5) Powers of the Board.

(A) Private Nonprofit Entities.

(i) The board is responsible for abiding by the terms of contracts and shall determine the policies of the organization to assure accountability for public funding.

(ii) The board shall function as the organization's governing body with the same legal powers and responsibilities as the board of directors of any nonprofit corporation.

(iii) In the event of a conflict between the powers and responsibilities required of all nonprofit corporations and those required by the CSBG Act, this rule, and the contract, the latter shall control.

(B) Public Organizations.

(i) The powers, duties, and responsibilities of the board shall be determined by the governing officials of the political subdivision in accordance with the CSBG Act §676B.

(ii) The governing officials may establish: (1) an advisory board, in which case the authority given to the advisory board depends on the powers delegated to it by the governing officials of the political subdivision; or (2) a governing board, empowering the board of directors with substantive decision-making authority and delegating the powers, duties, and responsibilities to carry out its CSBG-supported contract and functions.

(6) Residence Requirement.

(A) All board members shall reside within the contractor's CSBG service area designated by the CSBG contract.

(B) Board members should be selected so as to provide representation for all geographic areas within the designated service area; however, greater representation may be given on the board to areas with greater poverty population. Low-income representatives must reside in the area that they represent.

(7) Limitations of Board Service.

(A) Private Nonprofit Entities.

(i) Public officials, or their representatives, serve at the pleasure of the board as long as the public official remains in office.

(ii) Low-income representatives and representatives of private organizations also serve at the pleasure of the board.

(B) Public Organizations.

(i) Board members serve at the pleasure of the public organization, or at the pleasure of the board if the board is so empowered by the public organization.

(ii) Public officials, or their representatives, may not serve on the board as a public official representative after relinquishing their elective or appointive office.

(iii) The board may petition the designating governmental body for removal of a board member.

(C) Low-income representatives and representatives of private organizations may serve up to five consecutive years but not more than a total of ten years. After five consecutive years, these representatives may not serve on the board in any capacity for one full year, after which they may serve another five consecutive years, for a total of ten years.

(8) Board Size. The board shall consist of at least fifteen (15) but not more than fifty-one (51) members.

(9) Quorum.

(A) A quorum shall consist of at least fifty (50%) percent of the non-vacant board positions. A motion may be adopted only if it receives the votes of at least a majority of the members present at a properly called meeting where there is a quorum present.

(B) Members represented by proxy (if the articles of incorporation or by-laws allow proxies) may not be counted toward a quorum.

(10) Vacancies.

(A) All board vacancies shall be filled as soon as reasonably possible.

(B) In no event shall the board allow 25% or more of either the public or poverty sector board positions to remain vacant for more than 90 days.

(C) CSBG superefficient shall report to the Department, on their monthly performance reports, the number of board vacancies by sector.

(D) Compliance with the CSBG Act requirements for board membership is a condition for eligible entities to receive CSBG funding, and there is no provision in the Act for a waiver or exception to these requirements.

(11) Removal of Board Members.

(A) Private Nonprofit Entities.

(i) Public officials, or their representatives, may be removed from the board by the board or by the entity that appointed them to serve on the board.

(ii) Other members of the board may be removed by the board or pursuant to any procedure provided in the entity's articles of incorporation or by-laws.

(B) Public Organizations.

(i) Board members may be removed from the board by the public organization, or by the board if the board is so empowered by the public organization.

(ii) The board may petition the public organization to remove a board member or the public organization may delegate the power of removal to the board.

(12) Compensation. Board members are not entitled to compensation for their service on the board. Reimbursement of reasonable and necessary expenses incurred by a board member in carrying out his/her duties is allowed.

(13) Conflict of Interest.

(A) No board member may participate in the selection, award, or administration of a subcontract supported by CSBG funds if:

(i) the board member,

(ii) any member of his/her immediate family (as defined in the CSBG contract),

(iii) the board member's partner, or

(iv) any organization which employs or is about to employ any of the above, has a financial interest in the firm or person selected to perform a subcontract.

(B) No employee of the local CSBG subrecipient nor of the Department may serve on the board.

(14) Improperly Constituted Board. If the Department determines that a board of an eligible entity is improperly constituted, the Department shall prescribe the necessary remedial action which many include termination of funding.

§5.12.Monitoring of Eligible Entities.

(a) The Department will conduct monitoring reviews to determine whether eligible entities meet the performance goals, administrative standards, financial management requirements, and other requirements of the CSBG program. The Department will conduct the following reviews of eligible entities:

(1) A full onsite review of each such entity at least once during each 3-year period.

(2) An onsite review of each newly designated entity immediately after the completion of the first year in which such entity receives funds through the community services block grant program.

(3) Follow-up reviews including prompt return visits to eligible entities, and their programs, that fail to meet the goals, standards, and requirements established by the Department.

(4) Other reviews as appropriate, including reviews of entities with programs that have had other Federal, State, or local grants (other than assistance provided under the CSBG Act) terminated for cause.

(b) The Department may place an eligible entity on a reimbursement method of payment, terminate the contract, or invoke other remedies in the event monitoring or other reliable sources reveal material deficiencies in performance or if the entity fails to correct any deficiency within the time allowed by federal or state law.

§5.15.Program Administration.

Upon Executive approval, CSBG superefficient shall enter into and execute an agreement for the receipt of CSBG funds.

(1) Amendments. The Department, acting by and through its Executive Director or his/her designee, may authorize, execute, and deliver modifications and/or amendments to the CSBG contract.

(2) The Department reserves the right to deobligate funds.

(3) Accounting Requirements. Within 60 days following the conclusion of a contract issued by the Department, the recipient shall provide a full accounting of funds expended under the terms of the contract. Failure of a recipient to provide a full accounting of funds expended under the terms of the contract shall be sufficient reason to terminate the contract and for the Department to deny any future contract to the subrecipient.

(4) Termination and Reduction of Funding. If the State determines, on the basis of a final decision in a review pursuant to §678B of the CSBG Act, that an eligible entity fails to comply with the terms of an agreement, or the State plan, to provide services under this subtitle or to meet appropriate standards, goals, and other requirements established by the State (including performance objectives), the State shall

(A) inform the entity of the deficiency to be corrected;

(B) require the entity to correct the deficiency;

(i) Offer training and technical assistance, if appropriate, to help correct the deficiency, and prepare and submit to the Secretary a report describing the training and technical assistance offered; or

(ii) if the State determines that such training and technical assistance are not appropriate, prepare and submit to the Secretary a report stating the reasons for the determination;

(D) Quality Improvement Plan.

(i) at the discretion of the State (taking into account the seriousness of the deficiency and the time reasonably required to correct the deficiency), allow the entity to develop and implement, within 60 days after being informed of the deficiency, a quality improvement plan to correct such deficiency within a reasonable period of time, as determined by the State, and

(ii) not later than 30 days after receiving from an eligible entity a proposed quality improvement plan, either approve such proposed plan or specify the reasons why the proposed plan cannot be approved; and

(E) after providing adequate notice and an opportunity for a hearing, initiate proceedings to terminate the designation of or reduce CSBG funding of the eligible entity unless the entity corrects the deficiency.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 5, 2007.

TRD-200700855

Michael Gerber

Executive Director

Texas Department of Housing and Community Affairs

Effective date: March 25, 2007

Proposal publication date: September 15, 2006

For further information, please call: (512) 475-4595

Chapter 51. HOUSING TRUST FUND RULES

10 TAC §§51.1 - 51.11

The Texas Department of Housing and Community Affairs (the Department) adopts the repeal of §§51.1 - 51.11, concerning the Housing Trust Fund, without changes to the proposal as published in the September 15, 2006, issue of the Texas Register (31 TexReg 7896).

No comments were received regarding adoption of the repeals.

The repeals are adopted pursuant to the authority of the Texas Government Code, Chapter 2306.

No other code, article or statute is affected by the repeals.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 5, 2007.

TRD-200700850

Michael Gerber

Executive Director

Texas Department of Housing and Community Affairs

Effective date: March 25, 2007

Proposal publication date: September 15, 2006

For further information, please call: (512) 475-4595

10 TAC §§51.1 - 51.11

The Texas Department of Housing and Community Affairs (the Department) adopts new §§51.1 - 51.11, concerning the Housing Trust Fund Rules. Sections 51.3 - 51.8 and 51.10 are adopted with administrative changes as published in the September 15, 2006, issue of the Texas Register (31 TexReg 7897). Sections 51.1, 51.2, 51.9 and 51.11 are adopted without changes and will not be republished.

These sections are adopted in order to improve the operation of the program, respond to public input, and improve consistency with other Department rules.

The scope of the public comment concerning the Housing Trust Fund pertains to the following section:

§51.4. Basic Eligible Activities.

Comment: United Cerebral Palsy of Texas: Speaker at the Austin hearing recommended the Department undertake a capacity building program to provide technical assistance to nonprofits for the development of consumer-driven barrier removal programs. The speaker further requested the use of Housing Trust funds to support consumer-driven barrier removal programs.

Board Response: The Department is committed to ensuring that Housing Trust Funds are utilized to maximize the benefit to the citizens of Texas. No change is recommended since the proposed activity would be permissible under the current rule, to the extent funds are available.

The new sections are adopted pursuant to the authority of the Texas Government Code, Chapter 2306.

§51.3.Allocation of Housing Trust Funds.

(a) Pursuant to §2306.201 of the Texas Government Code, the Housing Trust Fund is a fund administered by the Department, and placed with the Texas Treasury Safekeeping Trust Company.

(b) The fund consists of:

(1) appropriations or transfers made to the fund;

(2) unencumbered fund balances;

(3) public or private gifts or grants;

(4) investment income, including all interest, dividends, capital gains, or other income from the investment of any portion of the fund;

(5) repayments received on loans made from the fund; and

(6) funds from any other source.

(c) Each biennium the first $2.6 million available through the housing trust fund for loans, grants, or other comparable forms of assistance shall be set aside and made available exclusively for local units of government, public housing authorities, and nonprofit organizations. Any additional funds may also be made available to for-profit organizations so long as at least 45 percent of available funds in excess of the first $2.6 million shall be made available to nonprofit organizations. The remaining portion shall be competed for by nonprofit organizations, for-profit organizations, and other eligible entities, pursuant to §2306.202 of the Texas Government Code.

(d) Funds shall be allocated to achieve broad geographic dispersion by awarding funds in accordance with §2306.111(d) and (g), Texas Government Code.

(e) The Department shall require that applicants target at least 50% of those units served by housing trust funds to individuals and families earning less than 60% of median family income.

(f) Bond indenture requirements governing expenditure of bond proceeds deposited in the housing trust fund shall govern and prevail over all other allocation requirements established in this section. However, the Department shall distribute these funds in accordance with the requirements of this section to the extent possible.

(g) Housing Trust Funds may also be allocated to the Texas Bootstrap Loan Program and will be awarded in accordance with §2306.753 of the Texas Government Code.

§51.4.Basic Eligible Activities.

(a) The Department, through the housing finance division, shall use the housing trust fund to provide loans, grants, or other comparable forms of assistance to local units of government, public housing authorities, for profit entities, nonprofit organizations, and income-eligible individuals, families, and households to finance, acquire, rehabilitate, and develop decent, safe, and sanitary housing. In each biennium the first $2.6 million available through the housing trust fund for loans, grants, or other comparable forms of assistance shall be set aside and made available exclusively for local units of government, public housing authorities, and nonprofit organizations. Any additional funds may also be made available to for-profit organizations so long as at least 45 percent of available funds in excess of the first $2.6 million shall be made available to nonprofit organizations for the purpose of acquiring, rehabilitating, and developing decent, safe, and sanitary housing. The remaining portion shall be competed for by nonprofit organizations, for-profit organizations, and other eligible entities. Notwithstanding any other section of this chapter, but subject to the limitations in §2306.251(c) of the Texas Government Code, the Department may also use the fund to acquire property to endow the fund.

(b) Use of the fund is limited to providing:

(1) assistance for individuals and families of low and very low income;

(2) technical assistance and capacity building to nonprofit organizations engaged in developing housing for individuals and families of low and very low income; and

(3) security for repayment of revenue bonds issued to finance housing for individuals and families of low and very low income.

§51.5.Ineligible Activities and Restrictions.

(a) Ineligible Applicants: The following violations will cause an Applicant, and any applications they have submitted, to be ineligible:

(1) Previously funded recipient(s) whose Housing Trust Funds have been partially or fully deobligated due to failure to meet contractual obligations during the 12 months prior to the current funding cycle;

(2) Applicants, or persons affiliated with the Applicant that have been barred, suspended, or terminated from procurement in a state or federal program and listed in the List of Parties Excluded from Federal Procurement of Non-procurement Programs;

(3) Applicants or persons affiliated with the Applicant that are subject of enforcement action under state or federal securities law, or are the subject of an enforcement proceeding with a state or federal agency or another governmental entity;

(4) Applicants or persons affiliated with the Applicant that have unresolved audit findings related to previous or current funding agreements with the Department;

(5) Applicants or persons affiliated with the Applicant that have delinquent loans, fees or other commitments with the Department, until payment is made;

(6) Applicants who have not satisfied all threshold requirements described in this title, and the NOFA to which they are responding, and for which Administrative Deficiencies were unresolved;

(7) Refinancing or rehabilitation of properties constructed within the past 5 years and previously funded by the Department are not eligible;

(8) Applicants who have submitted incomplete Applications;

(9) Applicants or persons affiliated with the Applicant that have been otherwise barred by the Department;

(10) Applicants are subject to §1.13 of this title;

(11) Applicants or persons affiliated with the Applicant that have breached a contract with a public agency; or

(12) The acquisition, rehabilitation, reconstruction or refinancing of affordable rental housing constructed within the past 5 years or previously funded by the Department.

(b) Displacement of Existing Affordable Housing. Pursuant to §2306.203(a)(4) of the Texas Government Code, Housing Trust Funds shall not be utilized on a development that has the effect of permanently displacing low, very low, and extremely low income persons and families. Low-Income persons who may be temporarily displaced by the rehabilitation of affordable housing may be eligible for compensation of moving and relocation expenses. If a Housing Trust Fund recipient violates the permanent dislocation provision of this subsection, that recipient risks loss of Housing Trust Funds and the landlord/developer must pay the affected tenant's costs and all moving expenses.

(c) Communication with Department Employees. Communication with Department staff by Applicants that submit a Pre-Application or Application must follow the following requirements. During the period beginning on the date a Development Pre-Application or Application is filed and ending on the date the Board makes a final decision with respect to any approval of that Application, the Applicant or a Related Party, and any Person that is active in the construction, rehabilitation, ownership or Control of the proposed Development including a General Partner or contractor and a Principal or Affiliate of a General Partner or contractor, or individual employed as a lobbyist by the Applicant or a Related Party, may communicate with an employee of the Department about the Application orally or in written form, which includes electronic communications through the Internet, so long as that communication satisfies the conditions established under paragraphs (1) - (3) of this subsection. Section 49.5(b)(6) of this title applies to all communication with Board members. Communications with Department employees is unrestricted during any board meeting or public hearing held with respect to that Application.

(1) The communication must be restricted to technical or administrative matters directly affecting the Application;

(2) The communication must occur or be received on the premises of the Department during established business hours (emails may be sent and received after business hours);

(3) A record of the communication must be maintained by the Department and included with the Application for purposes of board review and must contain the date, time, and means of communication; the names and position titles of the persons involved in the communication and, if applicable, the person's relationship to the Applicant; the subject matter of the communication; and a summary of any action taken as a result of the communication. (2306.1113)

(d) Material Noncompliance. Each Application will be reviewed for its compliance history by the Department, consistent with Chapter 60 of this title. Applicants, or persons affiliated with an Application, found to have a Development or Contract in Material Noncompliance with the Department, will have their Applications terminated.

(e) Rental Housing Development Site and Development Restrictions. Restrictions include all those items referred to in Chapter 2306 of the Texas Government Code and any additional items included in the NOFA for rental housing developments.

(f) Limitations on the Size of Developments. Developments involving new construction will be limited to 252 units. These maximum Unit limitations also apply to those Developments which involve a combination of rehabilitation and new construction. Developments that consist solely of acquisition/rehabilitation or rehabilitation only may exceed the maximum unit restrictions. The minimum number of units shall be 4 units.

§51.6.Application Procedure and Requirements.

(a) In distributing funds, the Department will release a NOFA and/or request for proposals that identifies the uses of the available funds and the specific criteria that will be utilized in evaluating applicants.

(b) Applicants must submit a complete application to be considered for funding, along with an application fee determined by the Department and outlined in the NOFA. Applications containing false information will be disqualified. Applications submitted under a Competitive Application Cycle must be received by the application deadline or they will be disqualified. Disqualified Applicants will be notified in writing. All applications must be received by the Department by 5:00 p.m. regardless of method of delivery.

(c) Applications received by the Department in response to a Competitive Application Cycle NOFA for housing development activities will be handled in the following manner:

(1) Threshold Evaluation. Applications submitted for Rental Housing Developments will be required to meet the Threshold Criteria defined by the NOFA and any Threshold Criteria that may be applicable to the Housing Trust Fund as defined by this rule and Chapter 2306 of the Texas Government Code.

(2) Scoring Evaluation. For an Application to be scored, the Application must demonstrate that the Development meets all of the Threshold Criteria requirements. Applications that satisfy the Threshold Criteria will then be scored and ranked according to the Scoring Criteria identified in the NOFA.

(3) Financial Feasibility Evaluation. After the Application is scored, the Department will assign, as herein described, Developments for review for financial feasibility by the Department's Real Estate Analysis Division. The Department shall underwrite an Application to determine the financial feasibility of the Development and an appropriate funding amount and terms. In making this determination, the Department will use the Underwriting Rules and Guidelines, §1.32 of this title.

(d) Applications received by the Department in response to an Open Application Cycle NOFA for housing development activities will be handled in the following manner:

(1) The Department will accept applications on an ongoing basis, until such date when the Department makes notice to the public that the Open Application Cycle has been closed. All applications must be received during business hours and no later than 5:00 p.m. on any business day. The Department may limit the eligibility of applications in the NOFA.

(2) Each application will be handled on a first-come, first-served basis as further described in this section. Each application will be assigned a ''received date" based on the date and time it is physically received by the Department. Then each application will be reviewed on its own merits in three review phases. Applications will continue to be prioritized for funding based on their ''received date" unless they do not proceed into the next phase(s) of review. Applications proceeding in a timely fashion through a phase will take priority over applications that may have an earlier ''received date" but that did not timely complete a phase of review.

(A) Phase One will begin as of the received date. Applications not being considered as CHDOs will be passed through to Phase Two upon receipt. Phase One will only entail the review of the CHDO Certification package. The Department will ensure review of these materials and issue notice of any deficiencies on the CHDO Certification package within 30 days of the received date. Applicants who are able to resolve their deficiencies within seven business days will be forwarded into Phase Two and will continue to be prioritized by their received date. Applications that do not resolve all deficiencies seven business days will be retained in Phase One until all deficiencies have been addressed or resolved by the Applicant to the Department's satisfaction. Only upon satisfaction of all deficiencies will the Application be forwarded to Phase Two. Applications that have not proceeded out of Phase One within 50 days of the received date will be terminated and must reapply for consideration of funds.

(B) Phase Two will include a review of all application requirements. The Department will ensure review of all application materials required under the NOFA and issue notice of any deficiencies on the application's satisfaction of threshold and eligibility within 45 days of the date it enters Phase Two. Applicants who are able to resolve their deficiencies within seven business days will be forwarded into Phase Three and will continue to be prioritized by their received date. Applications which do not resolve all deficiencies within seven business days, will be retained in Phase Two until all deficiencies have been addressed or resolved by the Applicant to the Department's satisfaction. Only upon resolution of all deficiencies will the Application be forwarded to Phase Three. Applications that have not left Phase Two within 65 days of the date it entered Phase Two will be terminated and must reapply for consideration of funds.

(C) Phase Three will include a comprehensive review for material noncompliance and financial feasibility by the Department. Financial feasibility reviews will be conducted by the Department's Real Estate Analysis (REA) Division consistent with 10 TAC §1.32, Underwriting Rules and Guidelines. REA will draft an underwriting report that will identify staff's recommended loan terms, the loan or grant amount and any conditions to be placed on the development. The Department will ensure financial feasibility review and issue notice of any required deficiencies for that feasibility review within 45 days of the date it enters Phase Three. Applicants who are able to resolve their deficiencies within seven business days will be forwarded into ''Recommended Status" and will continue to be prioritized by their received date. Applications with deficiencies not satisfied within seven business days, will be retained in Phase Three until Applicant resolves all deficiencies to the Department's satisfaction. Only upon satisfaction of all deficiencies will the Application be forwarded to the Department's Executive Award Review and Advisory Committee for final approval before recommendation to the Board. Any application that has not left Phase Three after 65 days of the date it entered Phase Three will be terminated and must reapply for consideration of funds.

(D) Upon completion of Phase Three, applications will be presented to the Executive Awards Review and Advisory Committee (the Committee). If satisfactory, the Committee will then recommend the award of funds to the Board, as long as funds are still available for this activity under the applicable NOFA. If Phase Three is completed at least 21 days prior to the next Board meeting, it will be placed on the next Board meeting's agenda. If Phase Three is completed with less than 21 days before the next Board meeting, the recommendation will be placed on the following month's Board meeting agenda.

(E) Because applications are prioritized by ''received date," it is possible that the Department will expend all available funds before an application has been completely reviewed. If all funds are committed before an application has completed all phases of the review process, the Department will notify the applicant that their application will remain active for 90 days in its current phase. If new funds become available applications already under review will continue with their review without losing their received date status. If new funds do not become available within 90 days of the notification, the applicant will be notified that their application is no longer under consideration and in the event of future funding, they would be required to reapply. If on the date an application is received by the Department, no funds are available under the NOFA, the applicant will be notified that no funds remain under the NOFA and that the application will not be processed.

(F) The Department may decline to consider any application if the proposed activities do not, in the Department's sole determination, represent a prudent use of the Department's funds. Beyond the use of the ''received date", staff will make selections based upon the need for housing in the community where the development is located, the effectiveness with which the proposed use of funds would aid in continuing to provide affordable housing, the general feasibility of the proposed transaction, and the credibility of the applicant. The Department is not obligated to proceed with any action pertaining to any applications which are received, and may decide it is in the Department's best interest to refrain from funding any application. The Department strives, through its terms, to maximize the return on its funds while ensuring the financial feasibility of a development. The Department reserves the right to negotiate individual elements of any application.

(e) Layered Applications. If an Application is submitted to the Department for a Development that requests funds from two separate housing finance programs, and only one of the housing finance programs is operated as a competitive cycle, then the Application will be handled in accordance with the competitive cycle guidelines for that program. If an Application is submitted for two separate housing finance programs where both programs are either open cycle, or competitive, the Application will be handled in accordance with the most restrictive program rules with the approval of the Department's Executive Director.

(f) Administrative Deficiencies. If an application contains deficiencies which, in the determination of the Department staff, require clarification or correction of information submitted at the time of the application, the Department staff may request clarification or correction of such Administrative Deficiencies including both threshold and/or scoring documentation. The Department staff may request clarification or correction in a deficiency notice in the form of a facsimile and a telephone call to the Applicant advising that such a request has been transmitted. Administrative Deficiencies given to Applications submitted under an Open Application Cycle NOFA will be handled in the manner described under Part B of this subsection (d)(2)(B). Applications submitted under a Competitive Application Cycle NOFA will be treated in the following manner. If Administrative Deficiencies are not clarified or corrected to the satisfaction of the Department within five business days of the deficiency notice date, then five points shall be deducted from the application score for each additional day the deficiency remains unresolved. If deficiencies are not clarified or corrected within seven business days from the deficiency notice date, then the application shall be terminated. The time period for responding to a deficiency notice begins at the start of the business day following the deficiency notice date. Deficiency notices may be sent to an Applicant prior to or after the end of the Application Acceptance Period. An Applicant may not change or supplement an application in any manner after the filing deadline, except in response to a direct request from the Department.

(g) All applications for housing development activities will be reviewed in the following manner:

(1) A site visit will be conducted. Applicants must receive recommendation for approval from the Department to be considered for funding by the Board.

(2) Board approval for the award of Development activity funds is conditioned upon a completed loan closing and any other conditions deemed necessary by the Department.

(h) Applications other than Rental Housing Developments will be reviewed and evaluated in accordance with the NOFA for that activity.

(i) Applicants may appeal staff's decisions regarding their applications consistent with §1.7 of this title.

(j) Alternative Dispute Resolution Policy. Applicant's may utilize the Department's Alternative Dispute Resolution process as defined by §1.17 of this title.

(k) Public Notification. Applicants for Rental Development activities will be required to provide written notification to each of the following persons or entities 14 days prior to the submission of any application package. Failure to provide written notifications 14 days prior to the submission of an application package at a minimum will cause an application to lose its ''received by date" under open application cycles, or be terminated under competitive application cycles. Applicants must provide notifications to:

(1) the executive officer and elected members of the governing board of the community where the development will be located. This includes municipal governing boards, city councils, and County governing boards;

(2) all neighborhood organizations whose defined boundaries include the location of the Development;

(3) executive officer and Board President of the school district that covers the location of the Development;

(4) residents of occupied housing units that may be rehabilitated, reconstructed or demolished; and

(5) the State Representative and State Senator whose district covers the location of the Development.

(6) The notification letter must include, but not be limited to, the address of the development site, the number of units to be built or rehabilitated, the proposed rent and income levels to be served, and all other details required of the NOFA and Application Manual.

§51.7.Criteria for Funding.

(a) In considering applications for funding, the Department considers the following requirements under §2306.203, Texas Government Code, and such others as may be enumerated during the funding cycle:

(1) Minimum Eligibility Criteria. To be considered for funding, an Applicant must first demonstrate that it meets each of the following threshold criteria:

(A) the application is consistent with the requirements established in this rule and the NOFA;

(B) the applicant provides evidence of its ability to carry out the proposal in the areas of financing, acquiring, rehabilitating, developing or managing an affordable housing development;

(C) the proposal addresses and identifies a housing need. This assessment will be based on statistical data, surveys and other indicators of need as appropriate; and

(D) any outstanding Housing Trust Fund Pre-Development loans for the same proposed Development site must be paid in full at the time of loan closing for the current requested funds.

(2) Evaluation Factors. Pursuant to §2306.203(c) of the Texas Government Code, the criteria used to evaluate applications, as more fully reflected in the NOFA, will include at a minimum the:

(A) leveraging of federal funds including the extent to which the project will leverage State funds with other resources, including federal resources, and private sector funds;

(B) cost-effectiveness of a proposed development; and

(b) The Board has final approval on all recommendations for funding.

(c) Eligible Applicants that have been approved for funding and that require a material change in the project description must provide a written request for the material change to the Department prior to implementing the change.

(1) A material change may include, but is not limited to, the following:

(A) Change in project site;

(B) Change in the number of units or set asides; and

(2) Failure to comply with this subsection may result in the termination of funding to Applicant.

(d) The Department, acting by and through its Executive Director or his/her designee, may authorize, execute, and deliver modifications and/or amendments to any Housing Trust Fund development proposal or written agreement provided that:

(1) in the case of a modification or amendment to the dollar amount of the request or award, such modification or amendment does not increase the dollar amount by more than 25% of the original request or award, or $50,000, whichever is greater;

(2) in the case of all other modifications or amendments, such modification or amendment does not, in the estimation of the Executive Director, significantly decrease the benefits to be received by the Department as a result of the award; and

(3) Modifications and/or amendments that increase the dollar amount by more than 25% of the original award or $50,000, whichever is greater; or significantly decrease the benefits to be received by the Department, in the estimation of the Executive Director, will be presented to the Board for approval.

§51.8.Other Program Requirements.

(a) Employment opportunities. In connection with the planning and carrying out of any project assisted under the Act, to the greatest extent feasible, opportunities for training and employment shall be given to low, very low, and extremely low-income persons who meet position requirements residing within the area in which the project is located.

(b) Conflict of Interest.

(1) Conflict Prohibited. No person described in paragraph (2) of this subsection who exercises or has exercised any functions or responsibilities with respect to Housing Trust Fund activities under the Statute or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from a Housing Trust Fund assisted activity, or have an interest in any Housing Trust Fund contract, subcontract or agreement or the proceeds hereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter.

(2) Persons Covered. The conflict of interest provisions of paragraph (1) of this subsection apply to any person who is an employee, agent, consultant, officer, elected official or appointed official of the Recipient.

(1) The Department may, at any time, inspect and monitor the records and the work of the project so as to ascertain the level of project completion, quality of work performed, inventory levels of stored material, compliance with the approval plans and specifications, property standards, and program rules and requirements.

(2) Any unsatisfactory findings in the inspection may result in a reduction in the amount of funds requested or termination of funding.

(3) Within 45 days of completion of any construction, and before the release of any retainage funds, Recipients are required to notify the Department of the completion by submitting a certificate of completion and any other documents required by program guidelines, including, but not limited to, the following:

(A) Architect's Certification of Substantial Compliance;

(B) Recipient's Certificate of Substantial Completion; and

(4) The Department performs a final close-out visit and assists owners in preparing for long-term compliance requirements upon completion of project development.

(d) Compliance.

(1) Recipient must maintain compliance with each of its written agreements with the Department.

(2) Restrictions are stated and enforced through a regulatory agreement.

(3) These restrictions include, but are not limited to the following:

(A) Rent restrictions;

(B) Record keeping and reporting; and

(4) The Department monitors compliance with project restrictions and any other covenants by Recipient in any Housing Trust Fund agreement. An annual per unit compliance fee of $25.00 may be charged for this review.

(e) For funds being used for multifamily rental properties, the Recipient must establish a reserve account consistent with §2306.186, Texas Government Code, and as further described in §1.37 of this title.

(f) Accounting Requirements. Within 60 days following the conclusion of a contract issued by the Department the Recipient shall provide a full accounting of funds expended under the terms of the contract. Failure of a recipient to provide full accounting of funds expended under the terms of a contract shall be sufficient reason to terminate the contract and for the Department to deny any future contract to the recipient.

§51.10.Records to be Maintained.

(a) Recipients are required, at least on an annual basis, to submit to the Department information required under Chapter 1 of this title, which may include, but is not limited to:

(1) such information as may be necessary to determine whether a project is benefiting low, very low, and extremely low-income persons and families;

(2) the monthly rent or mortgage payment for each dwelling unit in each structure assisted;

(3) such information as may be necessary to determine whether Recipients have carried out their housing activities in accordance with the requirements and primary objectives of the Housing Trust Fund and implementing regulations;

(4) the size and income of the household for each unit occupied by a low, very low, or extremely low-income person or family;

(5) data on the extent to which each racial and ethnic group and households have applied for and benefited from any project or activity funded in whole or in part with funds made available under the Statute. This data shall be updated annually; and

(6) A final statement of accounting upon completion of the project.

(b) Recipients shall maintain records pertinent to the tenant's files for a period of at least three years.

(c) Recipients shall maintain records pertinent to funding awards including but not limited to project costs and certification work papers for a period of at least five years.

(d) Recipient shall maintain records in an accessible location.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on March 5, 2007.

TRD-200700851

Michael Gerber

Executive Director

Texas Department of Housing and Community Affairs

Effective date: March 25, 2007

Proposal publication date: September 15, 2006

For further information, please call: (512) 475-4595