HUD PIH Notice § 2022-20

 Special Attention of:                               Notice PIH-2022-20 (HA)

 Directors of Public Housing                         Issued: July 27, 2022
 Regional Directors,
 Housing Authorities/Agencies                        Cross Reference: None
                                                     This notice remains in effect until
                                                     amended, superseded, or rescinded



SUBJECT: Family Self-Sufficiency (FSS) Program: Establishment of the Escrow Account
and Use of Forfeited FSS Escrow

 1. Background and Purpose
    Section 306 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“the
    Act”) made multiple amendments to the Family Self-Sufficiency (FSS) program. In
    response to the Act, HUD published a proposed rule on September 20, 2020, to implement
    changes required by the Act and to streamline the FSS program. After consideration of
    public comments and further consideration of issues addressed during the proposed rule
    stage, HUD published a final rule on May 17, 2022, effective on June 17, 2022

    The purpose of this notice is to clarify a few sections of the new rule (24 CFR part 984)
    related to the establishment of the FSS escrow account, the use of forfeited FSS escrow, and
    the reporting of FSS escrows in the Financial Assessment Sub-System for Public Housing
    Authorities (FASS-PH).

 2. Establishment of FSS Escrow Account
    24 CFR § 984.305 (a)(1) requires the PHA or owner to deposit FSS escrow account funds of
    all families participating in an FSS program into a single interest-bearing depository account.
    The new rule adds: The depository account may be part of the PHA’s or owner’s overall
    accounts or a separate account. Therefore, the PHA or owner has the option to:

     (1) Deposit the FSS escrow account funds into a separate bank account which will be used
         to account solely for the FSS escrow; or
     (2) Deposit the FSS escrow account funds into a bank account that is used for other
         PHA/owner activity.

    PHAs or owners that choose to deposit the FSS escrow funds into a bank account that is also
    used for other PHA/owner activity must ensure that FSS escrow funds are used only for the
    permitted uses of escrow. For example, the PHA has one bank account that the PHA uses for
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   HCV administrative activity and FSS escrow activity. The bank account balance is $100,000
   of which $40,000 is escrow balances. At most the PHA could incur costs up to $60,000 in
   HCV administrative expenses as any other additional HCV administrative expense would
   result in the expense being covered by FSS escrow which would not be an eligible cost.

   Under either option, PHAs and owners must comply with all accounting requirements found
   at 24 CFR § 984.305(a)(2) “Accounting for FSS escrow account funds.” All escrow
   transactions must be supported by the PHAs accounting records, including the use of
   forfeited escrow (see section 3 of this Notice).

   In addition, all FSS escrow funds are to be deposited into an account(s) that are subject to a
   properly executed General Depository Agreement (GDA) – form HUD-51999.

   For convenience the full regulatory language of 24 CFR § 984.305 (a)(1) and (a)(2) is
   provided below.

      (a) Establishment of FSS account—(1) General. The PHA or owner shall deposit the FSS
        account funds of all families participating in an FSS program into a single interest-
        bearing depository account. The PHA or owner must deposit the FSS account funds in
        one or more of the HUD-approved investments. This account may be part of the PHA’s
        or owner’s overall accounts, as long as it is in compliance with § 984.305(a)(2).

      (2) Accounting for FSS account funds—(i) Accounting records. The total of the
        combined FSS account funds will be supported in the accounting records by a subsidiary
        ledger showing the balance applicable to each FSS family. During the term of the
        contract of participation, the escrow credit amount shall be determined in accordance
        with paragraph (b) of this section at each reexamination of income which occurs after
        the effective date of the contract of participation. Such escrow credit amount must be
        applied each month by the PHA or owner to each family’s FSS account.

3. Forfeited FSS Escrow Account Funds
   Now, under the Final Rule, 24 CFR § 984.305(f)(2) requires that forfeited FSS escrow funds
   be used by the PHA/owner for the benefit of FSS participants in good standing (as opposed
   to being returned to HAP or Operating Fund). The requirement that forfeited FSS escrow
   funds must be used for the benefit of FSS participants in good standing is a new program
   requirement that resulted from language in the Act. This notice clarifies that forfeited FSS
   escrow funds can be used to benefit any FSS participant in good standing in the
   PHA/owner’s FSS program, regardless of the original funding source (e.g., public housing,
   HCV, etc.) used to fund the now forfeited FSS escrow accounts. For example, an HCV
   family is in the PHA’s FSS program and their escrow account was funded with HCV HAP
   funds. If the family forfeits its escrow, the funds can be used for the benefit of any FSS
   participant in good standing, including FSS participants that are not in the HCV program.

   The requirement that forfeited FSS escrow account funds must be used for the benefit of any
   FSS participant in good standing is effective per the effective date of the Final Rule (June 17,
   2022). Therefore, if for example, an FSS participant forfeits their escrow six months after
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   the new rule is effective, the entire accumulated FSS escrow balance as of the forfeiture date
   is considered forfeited and must be used by the PHA/owner to benefit any FSS participant in
   good standing. Prior to the effective date, any FSS forfeiture that occurred must be treated
   as under the previous rule (returned to the Operating fund or HCV HAP fund from whence
   they came).

   24 CFR § 984.305(f)(2) under the Final Rule provides a list of those eligible and ineligible
   uses of FSS forfeited escrow funds.

     (2) Treatment of forfeited FSS escrow account funds. FSS escrow account funds forfeited
         by the FSS family must be used by the PHA or owner for the benefit of the FSS
         participants.
         (i) Specifically, such funds may be used for the following eligible activities:
              (A) Support for FSS participants in good standing, including, but not limited to,
         transportation, child care, training, testing fees, employment preparation costs, and
         other costs related to achieving obligations outlined in the CoP;
              (B) Training for FSS Program Coordinator(s); or
              (C) Other eligible activities as determined by the Secretary.
         (ii) Such funds may not be used for salary and fringe benefits of FSS Program
         Coordinators; general administrative costs of the FSS program, for housing
         assistance payments (HAP) expenses or public housing operating funds; or any other
         activity determined ineligible by the Secretary.

4. Financial Data Schedule Reporting
   HUD’s Uniform Financial Reporting Standards (UFRS) Rule (24 CFR § 5.801) requires
   PHAs that administer the Section 8 and/or Section 9 programs to submit annual financial
   data to HUD (FASS-PH Financial Data Schedule). Specifically, UFRS requires that financial
   data are: 1) prepared in accordance with Generally Accepted Accounting Principles (GAAP)
   as further defined by HUD in supplementary guidance; 2) submitted electronically to HUD
   through the internet; and 3) submitted in such form and substance as prescribed by HUD.

   Because GAAP does not normally address accounting and reporting issues that are specific
   to PHA and PIH programs, HUD issues supplementary guidance. REAC has issued
   Accounting Brief 26 “Financial Reporting for the Family Self-Sufficiency (FSS) Program
   dated July 20, 2022) to address conforming reporting guidance on the financial data schedule
   as a result of the new FSS regulation. The revised accounting brief can be found on the
   FASS-PH website
   https://www.hud.gov/program_offices/public_indian_housing/reac/products/fass/pha_briefs
   or through the following link Accounting Brief 26: Financial Reporting for the Family Self-
   Sufficiency (FSS) Program. Accounting Brief 26 supersedes Accounting Brief 23, which
   was the previous accounting brief on FDS reporting of the FSS program.




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5.   Record Retention
     The OMB regulation at 2 CFR § 200.334 provides general record retention requirements.
     Most notably, OMB requires that records pertinent to a federal award must be retained for
     a period of at least three years from the date of submission of the final expenditure report.

     2 CFR § 200.334(b) allows Federal agencies to extend the record-retention period for non-
     Federal entities (e.g., PHAs) if the extension is made in writing. HUD reserves the right to
     extend the record-retention period beyond three fiscal years and will notify PHAs in
     writing if and when such an extension is warranted.

6.   Further Information
     Questions concerning this Notice should be submitted by email to the following HUD
     mailbox: FSS@hud.gov. For specific FDS reporting questions, PHAs should contact their
     FASS-PH analyst and/or manager for further information and answers.

7.   Paperwork Reduction Act
     The information collection requirements contained in this Notice have been approved by
     the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA)
     of 1995 (44 U.S.C § 3520). In accordance with the PRA, HUD may not conduct or
     sponsor, and a person is not required to respond to, a collection of information unless the
     collection displays a currently valid OMB control number.
         FDS. The Public Housing Financial Management template is assigned OMB approval
           number 2535-0107.

8.   Penalty for False Claims and Statements
     HUD will seek civil, criminal, or administrative action against individual and entities who
     either make, present, submit, or cause to be submitted a false, fictitious, or fraudulent
     statement, representation, or certification. 18 U.S.C. §§ 287, 1001, 1010, 1012, 1014 and
     31 U.S.C. §§ 3729, 3802.




                                                                             /s/

                                                      Dominique Blom
                                                      General Deputy Assistant Secretary for
                                                      Public and Indian Housing




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