title
Presentation, discussion, and possible action on a staff initiated waiver of 10 TAC §13.11(c)(14)(I) for Developments that received funding from the Department's 2020 National Housing Trust Fund grant
end
RECOMMENDED ACTION
recommendation
WHEREAS, federal regulations require that all National Housing Trust Fund (NHTF)-funded projects submit a cost certification prepared by a Certified Public Accountant (CPA), and HUD has clarified that such certifications must demonstrate that all costs are necessary and reasonable;
WHEREAS, the Department’s rule at 10 TAC §13.11(c)(14)(I) requires that the cost certification be submitted prior to the final disbursement of funds;
WHEREAS, federal regulation permits submission of the cost certification up to 120 days after final disbursement;
WHEREAS, the Development known as Balcones Terrace, sponsored by Foundation Communities, is nearing its NHTF expenditure deadline and has completed construction, but the Development’s accounting firm has indicated they cannot execute the Department’s existing cost certification form due to their perception of a conflict with national accounting standards; and
WHEREAS, staff is actively working with that firm to revise the cost certification form in a manner that satisfies both HUD guidance and professional accounting standards, and anticipates that resolution is forthcoming, but may not be completed prior to the expenditure deadline of August 12, 2025, and therefore staff is requesting a waiver to allow for the disbursement of these funds prior to the cost certification being received;
NOW, therefore, it is hereby
RESOLVED, that the Board approves a waiver of 10 TAC §13.11(c)(14)(I) for Balcones Terrace to allow final disbursement of NHTF funds prior to receipt of the CPA cost certification, provided that the certification is submitted within 120 days following the final disbursement, in accordance with federal requirements.
end
BACKGROUND
Balcones Terrace is an affordable housing development sponsored by Foundation Communities and funded in part through the National Housing Trust Fund (NHTF). Federal regulations require a CPA-prepared cost certification for all NHTF-funded transactions, and HUD has clarified in additional written guidance that that the cost certification must demonstrate that, “that all costs of a project are necessary and reasonable.” While federal rules allow the certification to be submitted up to 120 days after the final disbursement of funds, the Department’s rule at 10 TAC §13.11(c)(14)(I) requires the cost certification to be submitted before the final disbursement of funds can be released.
The CPA firm engaged for this development, which is highly experienced in the affordable housing realm, has stated they cannot execute the Department’s current certification form as written because they interpret the required language as conflicting with professional accounting standards as they cannot certify that all costs related to a project are necessary and reasonable. The Department’s internal CPAs have confirmed the reasonableness of this concern.
Staff is working in good faith with the accounting firm to revise the certification form; however, the project is approaching a critical federal expenditure deadline, and any delay in final disbursement could result in not meeting that deadline.
To avoid jeopardizing the timely expenditure of federal funds, staff is requesting a waiver of 10 TAC §13.11(c)(14)(I) for the Balcones Terrace development. Under the proposed waiver, the cost certification would still be required within 120 days of final disbursement, ensuring continued compliance with federal regulations. The Development’s sponsor, Foundation Communities, has an extensive history with the Department, and staff has no concerns about compliance with the requirement once an acceptable certification is agreed upon.