HUD Announces Sweeping Changes to PRAC Residual Receipts Accounts

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 As many PRAC providers may already be aware (by direct communication from their local HUD contacts), HUD has issued a memorandum on June 19, 2015, titled “Residual Receipts Authority – Section 202/811 Project Rental Assistance Contracts (PRACs)” which changes the current policy for Residual Receipts for Section 202 and Section 811 Capital Advance projects, essentially sweeping up residual receipts exceeding $250 per unit to be returned to HUD to offset future program appropriations.  

According to HUD, these residual receipts collections will supplement future program appropriations and reduce the amount of new funds that Congress must appropriate. The Department anticipates reducing appropriation needs by approximately $85,000,000 from the issuance of this memo through fiscal year 2016. HUD has informed LeadingAge that funds collected in FY15 will be targeted towards the expansion of the Sec. 811 PRA program, first-time renewals of SPRAC contracts awarded in 2014, as well as other ongoing program activities.   

As written, the guidance currently applies to properties with contract expiration dates from July 19, 2015 and September 30, 2015. HUD has indicated that affected owners will be notified, and that property-level questions should be directed to the field account manager/asset manager assigned to the affected contracts.  (Email notifications to at least some owners began on June 19.) 

According to the memo, the excess balance of any Residual Receipts account above $250 per unit must be remitted to HUD’s Accounting Center upon termination of a PRAC, which occurs upon annual renewal.   This new policy applies to all projects that are subject to a Section 202 or Section 811 PRAC.

Exceptions may be granted, says the memo, under certain specified circumstances where HUD “determines that larger balances are necessary to assure continued successful operation of the project, to include repair plans or other uses approved prior to the publication of this memorandum, to repair Exigent Health and Safety (EHS) deficiencies required to meet HUD Physical Condition Standards; or to liquidate accounts payable that may exist within 120 days of issuance of this memorandum, etc.”

The notice outlines the process and method for submitting excess funds, but the notice has not yet been posted to any publicly access HUD website, so LeadingAge has posted it here. NOTE:  LeadingAge is aware of and shares the many member concerns already expressed. They are actively exploring this issue further with HUD and developing an appropriate response. 

 


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