As the expenditure deadlines approach, NSP grantees have asked several questions. The answers to the questions below may prove useful to other grantees:
1. Will HUD block payment of expenses incurred in the NSP Program after the expenditure deadline?
It depends on whether the grantee meets the spending requirement. However, HUD will allow draws for legitimate expenses incurred on or before the expenditure deadline.
HUD will process draws for any expense legitimately incurred by the deadline, even if the draw occurs several weeks later. For example, staff and administrative costs may be incurred through the deadline date, although they will not be paid immediately. Therefore, they are expenditures which may be counted even though they may not be drawn down and disbursed for several weeks.
Grantees that achieve 100% expenditure by the deadline will always be able to make such payments. They will also be able to spend program income and any remaining funds in the line of credit.
Grantees that do not meet the expenditure requirement will have 30 days to post correct expenditure amounts in the QPR. If at the end of that period, the grantee still cannot document 100% expenditures, HUD will evaluate the reasons for the failure and take appropriate corrective action. Such action could include grant reduction or blocks on the grantee’s line of credit. Draws for valid expenses incurred by the deadline will continue to be approved.
2. How will HUD treat program income earned by state grantees? In NSP, unlike in CDBG, states may act directly to administer programs. Will this change treatment of program income at the state or subrecipient level?
Most state funds flowed through subgrantees and subrecipients such as cities and towns. Non-entitlement subrecipients will operate as before, following the regulations at 24 CFR 570.489(e). Non-entitlement subrecipients will continue to report program income to the state. States that receive revenues from direct administration of NSP activities will report on, and be subject to the same limitations, as subrecipients.
In NSP, some states made grants to entitlement cities and counties. The same limits will apply to these subrecipients and they will continue to report program income to the states until closeout. After closeout of the state grant, these subrecipients will report any program revenues as part the CDBG program, although such funds must be used for NSP-eligible activities and national objectives.
The $25,000 minimum amount to be considered program income has been increased to $35,000 per year for state subrecipients. If program income generated from all sources does not exceed $25,000 in a program year for entitlement grantees and $35,000 for state grantees, the grantee shall use the funds for administration or include the funds in another CDBG program activity.