Duplication of Benefits Overview and Hot Topics 2018 CDBG-DR - - PowerPoint PPT Presentation

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Duplication of Benefits Overview and Hot Topics 2018 CDBG-DR - - PowerPoint PPT Presentation

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Duplication of Benefits Overview and Hot Topics 2018 CDBG-DR Problem Solving Clinic Atlanta, GA | D e c e m b e r 1 2 - 1 4 , 2 0 1 8 2018 CDBG-DR PROGRAM 1 Welcome & Speakers Session Objectives Provide an overview of the

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2018 CDBG-DR PROGRAM

Duplication of Benefits

Overview and Hot Topics

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2018 CDBG-DR Problem Solving Clinic Atlanta, GA | D e c e m b e r 1 2 - 1 4 , 2 0 1 8

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

Welcome & Speakers

  • Session Objectives
  • Provide an overview of the core DOB requirements
  • Learn about new DOB legislation and timeline for implementation
  • Discuss key points to be addressed in upcoming guidance on DOB
  • Speaker
  • Dori Kojima, HUD
  • Makani Drummond, HUD
  • Carey Whitehead, HUD

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Agenda

  • Define Duplication of Benefits (DOB)
  • Review Source of DOB requirements
  • Review how DOB is calculated
  • Discuss Current Hot Topics in DOB

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2018 CDBG-DR PROGRAM

Overview: What is a duplication of benefits?

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

What is a DOB?

  • Recovery assistance may be provided by many sources
  • A duplication of benefits (DOB) occurs when:
  • Assistance from multiple sources and
  • Total Assistance > Need for that Type Assistance
  • Responsible use of taxpayer $$

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

What is a DOB?

  • Individuals, businesses, governments, and other entities are all

subject to DOB requirements

  • The amount of the duplication is the amount of assistance

provided in excess of need

  • Ex. Mr. Brown’s home was damaged by a tornado
  • Estimated cost to rehabilitate is 100k
  • Mr. Brown receives 150k ($25K from insurance, $25K from FEMA, and $100K

from CDBG-DR)

  • DOB amount is the last $50K of CBDG-DR funds

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

Sources of DOB Requirements

  • Section 312 (42 U.S.C. 5155) of the Robert T. Stafford Disaster

Relief and Emergency Assistance Act

  • CDBG-DR Appropriations Acts and HUD Federal Register

Notices

  • Necessary and reasonable requirements (24 CFR part 570 and

Uniform Requirements at 2 CFR part 200)

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2018 CDBG-DR PROGRAM

Primary Framework for CDBG-DR DOB analysis – 2011 DOB Federal Register Notice

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

Federal Register Notice

  • Published November 16, 2011
  • 76 Fed. Reg. 71060
  • Applies to any new program included in a new or amended

action plan after publication date

  • Link: http://www.gpo.gov/fdsys/pkg/FR-2011-11-16/pdf/2011-

29634.pdf

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Structure of Notice

  • Designed to outline the DOB process:
  • A. Determine need & duplicative benefits
  • B. Calculate award

C.Address remaining unmet need (if applicable) D.Use of CDBG funds

  • E. Recapture (if applicable)

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

  • A. Determine Need & Duplicative

Benefits

  • 1. Assess need………………….
  • Starting point for needs assessment:

Basic recovery need

  • Ex. How much will it cost to replace/repair a home

damaged by a Hurricane?

  • Additional needs may be considered,

depending on the program design

  • The CDBG-DR need may differ from an amount

identified by another agency

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

  • A. Determine Need & Duplicative

Benefits

  • 2. Identify all available assistance……
  • Calculate total assistance available to the

homeowner – e.g., insurance proceeds, FEMA award, private loan, line of credit, etc.

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

  • A. Determine Need & Duplicative

Benefits

  • 3. Exclude non-duplicative funds…………...
  • Exclude the private loan and the line of credit –

these will not reduce the CDBG-DR award available to the homeowner

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2018 CDBG-DR PROGRAM 2018 CDBG-DR PROGRAM

  • B. Calculate Award
  • Subtract all assistance found to be

duplicative from identified need; reduce award if program cap in place

  • Basic framework:

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  • 1. Identify Applicant’s Total Need

$100,000

  • 2. Identify All Assistance Received

$ 35,000

  • 3. Deduct Assistance Determined to be Duplicative

$ 30,000

  • 4. Maximum Eligible Award (Item 1 less Item 3)

$ 70,000

  • 5. Program Cap (if applicable)

$ 50,000

  • 6. Final Award (lesser of Items 4 and 5)

$ 50,000

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  • C. Unmet Needs
  • Disaster recovery needs are calculated at a point in time; a

subsequent change may affect need

  • e.g., vandalism, contractor fraud, an increase in the cost of

materials and/or labor, subsequent damage, etc.

  • May provide additional assistance if initial need not fully met
  • Unmet need is typically identified after CDBG-DR funds have been

provided…but in some cases, may be provided before

  • Discretion to determine ways to identify and verify unmet

need; physical inspection/professional appraisals are highly recommended

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  • D. Use of CDBG-DR Funds
  • Funds must be used for eligible purposes of the program or

activity for which they have been provided

  • e.g., funds provided to repair a home should be used strictly for

the repair of that home; funds provided to a business for equipment replacement, or structural repair, should be used only for those purposes

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  • E. Recapture
  • Federal Agency that provides the funds responsible for
  • recapture. For HUD, means CBDG-DR grantees
  • DOB policies and procedures should address recapture
  • To ensure recapture, a subrogation agreement or similar

agreement must be signed by every applicant prior to the receipt of assistance

  • Risk of DOB may inform policy regarding monitoring for

DOB after CDBG-DR award

  • Ex: If future assistance is nearly certain but amount is uncertain,

higher risk of DOB

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OMB Cost Principles – Necessary and Reasonable

  • OMB Cost Principles
  • Necessary – not defined in 2 CFR part 200. Is it eligible? For a

permissible recovery purpose?

  • Reasonable – a cost is reasonable if, in its nature and amount, it does

not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.

  • Other factors related to the reasonableness of the cost are described in 2 CFR

part 200

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Appropriations Requirements

  • DOB requirements in most CDBG-DR appropriations
  • Recent appropriations include a certification requirement: That as a

condition of making any grant, the Secretary shall certify in advance that such grantee . . . has established adequate procedures to prevent any duplication of benefits as defined by section 312 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5155)

  • Order of Assistance provisions in CDBG-DR appropriations
  • Provided further, That such funds may not be used for activities

reimbursable by, or for which funds are made available by, the Federal Emergency Management Agency or the Army Corps of Engineers.

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Monitoring for DOB

  • HUD may ask a grantee to walk through a typical DOB analysis
  • Data sharing with NFIP and FEMA?
  • Policies and procedures, including recapture policies and

procedures?

  • Reasonable assumptions regarding necessary documentation and

due diligence

  • Analysis at the applicant level, not program level (e.g., cannot fail to

check DOB because you determine DOB is impossible for a certain program)

  • DOB policies covering all programs, including infrastructure and

economic development

  • DOB requirements passed down to subgrantees in agreements

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Critical information

  • When reviewing activities, HUD expects to see:
  • Description of DOB (likely in application)
  • Identification of applicant’s CDBG-DR need
  • Signed privacy waiver
  • Identification of sources of assistance provided to applicant
  • Verification of FEMA assistance, insurance proceeds (e.g., FEMA

award letter, insurance letter)

  • At least a question asking whether the applicant received other forms
  • f assistance for the same purpose from another source
  • CDBG-DR award calculation
  • Subrogation agreement (or similar agreement to recapture funds if

necessary)

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2018 CDBG-DR PROGRAM

New DOB Developments

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Declined Loans - CDBG-DR appropriation approved Feb. 9, 2018 (Public Law 115-123)

Provided further, That with respect to any such duplication of benefits, the Secretary and any grantee under this section shall not take into consideration or reduce the amount provided to any applicant for assistance from the grantee where such applicant applied for and was approved, but declined assistance related to such major declared disasters that occurred in 2014, 2015, 2016, and 2017 from the Small Business Administration under section 7(b) of the Small Business Act (15 U.S.C. 636(b)):

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Declined Loans - CDBG-DR appropriation approved Feb. 9, 2018 (Public Law 115-123)

  • What are declined loans?
  • Loans that the borrower never accepted and could

not draw down because the borrower never signed a loan agreement.

  • Does not include undrawn loan amounts.

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Declined Loans - CDBG-DR appropriation approved Feb. 9, 2018 (Public Law 115-123)

  • No Effect on disasters between 2011 and 2013
  • CDBG-DR awards made in response to disasters 2011 - 2013 are subject to HUD’s July 2013

policy on declined SBA loans. See July 25, 2013 Memorandum, “HUD Guidance on Duplication of Benefit Requirements and Provision of CDBG Disaster Recovery (DR) Assistance”

  • Required grantees to take steps to make a necessary and reasonable determination before

assisting applicants that declined SBA loans.

  • Effect on disasters between 2014 and 2017
  • Affirmed HUD’s policy that declined SBA loans are not a duplication.
  • 2013 memo on declined loans has never applied to disasters occurring after 2013.

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Disaster Recovery Reform Act of 2018 (PL 115-254, Division D) (“DRRA”)

Section 1210 of the DRRA amended the DOB provision in the Stafford Act to add a new subsection 312(b)(4) (42 U.S.C. 5155(b)(4)). “(4) WAIVER OF GENERAL PROHIBITION.— “(A) IN GENERAL.—The President may waive the general prohibition provided in subsection (a) upon request of a Governor on behalf of the State or

  • n behalf of a person, business concern, or any other entity suffering losses as a result of a major

disaster or emergency, if the President finds such waiver is in the public interest and will not result in waste, fraud, or abuse. “(B) GRANT OR DENIAL OF WAIVER.—A request under subparagraph (A) shall be granted or denied not later than 45 days after submission of such request. “(C) PROHIBITION ON DETERMINATION THAT LOAN IS A DUPLICATION.—Notwithstanding subsection (c), in carrying out subparagraph (A), the President may not determine that a loan is a duplication of assistance, provided that all Federal assistance is used toward a loss suffered as a result of the major disaster or emergency.”.

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Disaster Recovery Reform Act of 2018 (PL 115-254, Division D) (“DRRA”)

  • These DRRA amendments apply to major disasters
  • ccurring between 2016 and 2021.
  • HUD is working with SBA to update guidance applicable to

disasters occurring before 2016.

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Disaster Recovery Reform Act of 2018 (PL 115-254, Division D) (“DRRA”)

  • Guidance is forthcoming
  • Timing
  • Interim Guidance
  • Loan Repayment
  • Treatment of FEMA assistance, including Community Disaster Loans

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Disaster Recovery Reform Act of 2018 (PL 115-254, Division D) (“DRRA”)

  • Input Requested: Top Five DOB and DRRA Implementation

Issues to Address in Forthcoming Guidance:

  • How should grantees treat undrawn loan amounts?
  • How should grantees treat SBA loan funds that are drawn down but not

used, and could be returned to SBA?

  • How should grantees document “that all Federal assistance is used

toward a loss suffered as a result of the major disaster or emergency”, which is a requirement of the provision that a loan is not a DOB?

  • Must grantees complete a new DOB check for beneficiaries that

previously took SBA loans before providing additional assistance?

  • Can CDBG-DR be used to make a loan to cover an existing DOB?

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Questions?

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