procedures & tools for reviewing and preventing
TRANSCRIPT
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 $$.
Courts have said that governments are also subject to DOB requirements
DOB Example Assistance to an individual:
Mr. Brown’s home was damaged by a tornado
Estimated cost to resiliently repair is $100,000.
Mr. Brown receives a total of $150,000 from FEMA,
insurance, SBA, and CBDG-DR.
How much is the likely DOB?
DOB Federal Register 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)
A. Determine Need & Duplicative Benefits
1. Assess need……………………….
Ex. How much will it cost to rehabilitate the damaged home? The CDBG-DR need may differ from an amount identified by another agency.
A. Determine Need & Duplicative Benefits– recap
2. Identify all available assistance……….
Calculate total assistance available to the homeowner– e.g., insurance proceeds, FEMA award, private loan, line of credit, etc.
A. Determine Need & Duplicative Benefits– recap
3. Exclude non-duplicative funds……………
The Notice provides a list of exclusions that will not reduce the CDBG-DR award to the homeowner
Funds for a different purpose or general, non-specific purpose
Funds for same purpose, different (eligible) use Funds not available Private loans Other assets or lines of credit
B. Calculate Award
Assistance not excluded is duplicative. Subtract all assistance found to be duplicative from identified need; reduce award if program cap in place.
Basic framework:
1. Identify Applicant’s Total Need $ 100,000
2. Total All Assistance Received $ 35,000
3. Total 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
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 can be identified during the CDBG-DR award
process or after funds have been provided. Discretion to determine ways to identify and verify
unmet need; physical inspection/professional appraisals are highly recommended
D. Use of CDBG-DR Funds Funds must be used for eligible purposes of the
program or activity for which they have been provided The purpose of the award, and not the use of the funds, is the
DOB determining factor.
In general, CDBG disaster recovery funds should not be used to pay down an SBA loan Possibly some exceptions; HUD headquarters will evaluate on a
case-by-case basis
E. Recapture CDBG-DR grantees that provide duplicative funds
are responsible for recapture. Grantee’s DOB policies and procedures need to
address 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
Treatment of Declined SBA Loans - Grantees must have policies and procedures to guide
assistance that replaces the amount of declined SBA loans: Identify the circumstances under which the applicant
declined the SBA assistance; Establish why CDBG DR assistance is appropriate for
the applicant; and Determine, most commonly through underwriting, the
amount of CDBG DR assistance that is necessary and reasonable to assist the applicant in achieving recovery.
DOB Example - declined SBA loan Assistance to an individual:
Mr. Brown’s home was damaged by a tornado
Estimated cost to repair and elevate is $150,000.
Mr. Brown receives a total of $120,000 from FEMA
and insurance, but declined a $30,000 SBA loan offer.
Can Mr. Brown receive CDBG-DR? How much?
Monitoring for DOB HUD may ask grantee to walk through its DOB analysis
Policies and procedures, data sharing with SBA and FEMA
Review individual files for:
Identification of CDBG-DR need Identification of sources of assistance Verification of sources of assistance Calculation of CDBG-DR award Subrogation agreement (or similar agreement) Treatment of SBA declined loans.
Best Practices Checklist Adopt DOB policies and procedures
Provide Technical Assistance for Subrecipients and
contractors
Know which sources to document in the application
Identify type of documentation required for all sources of funds received
Reimbursement vs. Non-reimbursement
HUD permitted Public Law 113-2 grantees to reimburse applicants for some pre-application costs. Notice CPD-14-017: Guidance for Charging Pre-Award Costs
of Homeowners, Businesses, and Other Qualifying Entities to CDBG Disaster Recovery Grants, as may be amended
If reimbursement is not permitted, grantee assesses need at the time of award
What happens when DOB is found?
Steps to take when potential DOB is identified Re-evaluate need and document remaining DOB
check documentation in file (re-evaluation of need, ensure all
agreements in place, etc.)
Letter to beneficiary requesting reimbursement
debt collection procedures
Collected amounts are CDBG funds
A. Determine Need & Duplicative Benefits
1. Assess need Post-disaster estimated rehab/elevation
cost = $115,000 Estimated cost at time of application =
$85,000 (e.g., grantee assesses need at time of application).
Remaining need depends on whether reimbursement is permitted.
A. Determine Need & Duplicative Benefits
1. Assess need - Remaining need depends on whether reimbursement is permitted. Here, assume reimbursement is permitted. Therefore, look at need at date of
disaster (i.e., $115,000). DOB analysis must consider costs incurred for repairs prior to the application
$15,000 FEMA, $5,000 loan, and $10,000 in savings
A. Determine Need & Duplicative Benefits
2. Identify total assistance available to the applicant
Total assistance = $122,500
A. Determine Need & Duplicative Benefits
3. Exclude:
a) Funds for a different purpose or general, non-specific purpose
b) Funds for same purpose, different (eligible) use
c) Funds not available d) Private loans e) Other assets or lines of credit
A. Determine Need & Duplicative Benefits
a) Exclude funds for a different purpose or general, non-specific purpose Exclude item (1) Red Cross = $2,500 Item (1) is for a general purpose (disaster
recovery) and so is not considered duplicative to the potential CDBG-DR award for rehabilitation assistance
A. Determine Need & Duplicative Benefits
b) Exclude funds for same purpose, different (eligible) use Exclude item (2) FEMA IA award used for
interim housing eligible use = $10,000 In this case, funds spent on interim housing
constitute a different (eligible) use of funds and do not duplicate assistance provided for rehabilitation
In all cases, look at the FEMA award letter to determine what is eligible IA use.
A. Determine Need & Duplicative Benefits
c) Exclude funds not available Exclude item (4) insurance = $40,000 Funds used for a forced mortgage payoff
are not considered duplicative to rehabilitation assistance; since they can’t be used for repairs, the applicant’s need for safe/suitable housing still exists
A. Determine Need & Duplicative Benefits
d) Exclude private loans Exclude item (6) bank loan = $5,000 Generally exclude private loans when
calculating a DOB In this example, we are permitting
reimbursement If reimbursement is permitted by HUD, a
grantee may reimburse expenses paid for by the applicant if not duplicative.
A. Determine Need & Duplicative Benefits
e) Exclude other assets or lines of credit Exclude item (7) = $30,000 (Savings) Generally exclude other assets or lines of
credit when calculating a DOB When reimbursement is permitted, amounts
from private resources might be able to be reimbursed
A. Determine Need & Duplicative Benefits
Exclude anything else? In a reimbursement situation, FEMA funds already
used for repairs (item 3, $15,000) are NOT excluded because the NEED estimate is the estimate at the time of the disaster - $115,000. Entire FEMA award of $20,000 is considered.
A. Determine Need & Duplicative Benefits
3. Summary of exclusions
Item (1) = $ 2,500 Item (2) = $10,000 Item (4) = $40,000 Item (6) = $ 5,000 Item (7) = $30,000 $ 87,500
A. Determine Need & Duplicative Benefits
3. Need determined duplicative
Total assistance of $ 122,500 - Total exclusions of $ 87,500
Duplicative amount $ 35,000*
A. Determine Need & Duplicative Benefits
3. So what is duplicative?
Item (3) ($20,000)– FEMA funds provided for the purpose of rehabilitation are duplicative.
Item (5) ($15,000)– SBA funds provided for the purpose of rehabilitation
B. Calculate Award
Basic Reimbursement framework: 1. Identify Applicant’s Total Need Prior to Any
Assistance
$115,000
2. Identify All Assistance Provided $122,500
3. Deduct Assistance Determined to be Duplicative $ 35,000
4. Maximum Eligible Award (Item 1 less Item 3) [of this, $15,000 is reimbursement for expenditures prior to point of application]
$ 80,000
5. Program Cap (if applicable) $ 90,000
6. Final Award (lesser of Items 5 and 6) $ 80,000
A. Determine Need & Duplicative Benefits
Does the point at which need is assessed matter? YES. If reimbursement is not permitted, costs incurred prior to application for CDBG-DR funds is not allowable, so need is cost of remaining rehabilitation.
B. Calculate Award
Basic Non-Reimbursement Framework: 1. Identify Applicant’s Total Need Prior to Any
Assistance
$115,000
2. Identify Applicant’s Need at time of Application $ 85,000
3. Identify All Potentially Duplicative Assistance $122,500
4. Deduct Assistance Determined to be Duplicative [excludes $15,000 in FEMA IA assistance expended for eligible costs prior to point at which needs are assessed – must show receipts]
$ 20,000
[$5K FEMA + $15K SBA]
5. Maximum Eligible Award (Item 2 less Item 4) $ 65,000
6. Program Cap (if applicable) $ 90,000
7. Final Award (lesser of Items 5 and 6) $ 65,000