Pre-Application Best Practices Training Prepared by NCALL Research, Inc. Updated February 2009
Throughout this slide presentation, NCALL’s recommended “best practices” will be denoted with a *BP.
What’s the Difference Between a Pre-Application and a Final Application? • Pre-Application’s purpose, to demonstrate: • Need for the self-help program in an area(s) • Organizational capability • Organizational eligibility • If approved, organization can begin working on the 523 Application • Preparing the 523 Pre-Application can take up to one year • *BP RD does not reimburse for funds expended before the grant period begins!
Organizations must pay for: • The cost of developing the 523 Pre-Application • Feasibility study • Program and organizational development • Preparing the 523 Pre-Application *BP Seek other funds or raise funds from other sources
Rural Development • Four office levels • National Office • Develops policy, interacts with Congress, approves applications • State Office • Allocates 502 funds based on a state formula, approves smaller grants • Area Office • Responsible for the 523 grant • Local Office • Makes and monitors the 502 loans, co-signer for checking accounts, construction inspections
RD provides administrative and loan funds • Expects grantees to carry out grant agreement • *BP A grantees working relationship with RD is critical to the success of the program
NCALL and You • NCALL is available throughout the application process and in administering the self-help program • *BP Use us as a resource anytime assistance is needed
Required Format • The pre-application: • Format is very important • Is required by RD to be in a specified order • Must be submitted in a three-ring binder with table of contents and tabbed sections • *BP Use NCALL’s Pre-App checklist as your guide
1a. Standard Form 424, “Application for Federal Assistance, Version 2” • First form that the reviewer of your application will see • It should provide RD with: • How many homes to be built • During what period of time • In what areas • With what funds
These blank forms can be obtained from: • State or Area RD office • NCALL Research, Inc. • Whitehouse.gov/omb/grants/sf424.pdf • *BP Want it fillable? Go to www.hudclips.org
1b. Survey on Ensuring Equal Opportunity for Applicants • This survey helps to ensure that the government is fairly distributing grant funds • See Guide for sample
2. Intergovernmental Review Submittal • Intergovernmental Review, State Point of Contact (SPOC) List fosters intergovernmental partnership and strengthens federalism • For list of appropriate contacts, see Guide or visit www.whitehouse.gov/omb/grants/spoc.pdf.
3. Previous Experience • RD requires that the organization have the financial, legal, and administrative capacity to carry out the responsibilities of the Grant Agreement vs.
*BP A narrative statement about the organization’s previous experience and capacity to carry out the Grant Agreement is required. It may include: • Summaries of previous and current RD funded programs • Summaries of previous and current other programs • Description of current capabilities • Experience or capability of relevant staff and Board members • Objectives of the organization • One must be “Production of affordable housing”
4. Evidence of Organization • A copy of the provisions of state law under which the corporation was organized, or an accurate reference to the provisions organized under • Articles of Incorporation (certified, signed and dated) • Bylaws (certified, signed and dated) • Board list (5+, names, addresses, titles) • Certificate of Incorporation • 501(c)(3) certificate • Evidence of good standing from Secretary of State • If another organization is a member of your organization – its name, address and principal business • If not formally organized, submit proposed documents
5. Authorized Representative of Applicant • Provide the name, address and official position of the applicant’s representative that is authorized to act for the applicant and work with RD
6. Information About Sponsor • A sponsor is an organization that must have the background, experience and financial ability to help your organization in applying for the 523 Grant and in carrying out the responsibilities of the Grant Agreement • A written agreement must be shown to RD • A narrative of sponsor’s experience and capabilities is required (same organizational information as required in Section 3) • If no sponsor, indicate “Not Applicable”
7. Current Financial Statement • A financial statement is required and should be prepared by an accountant (or sponsor’s accountant), and must be no more than 12 months old • It must be dated and signed by the Executive Director or Board President • Specific nature of assets and liabilities must be identified • An audit may be used in lieu of financial statement
8. Narrative Statement • The narrative statement should begin with a short paragraph that summarizes: • How many homes are being planned • What area they will be built • How much grant funds are being requested • What time period is planned (usually 24 months but can be less) NARRATIVE STATEMENT
A description of the area to be served is needed • *BP Include maps, population and housing statistics • *BP Collect current data, include only what supports the need • Sources: U.S. Census, State Housing Finance Authority, local government housing plan, area housing authorities, area Board of Realtors
Include housing conditions and why families need self-help housing • *BP Analyze your data for comprehension. What does it show? Growth? Substandard housing? Income qualifications? Vacant rentals? Cost of housing? • A need occurs when very low and low income families want their own homes but adequate, affordable housing is not available to them!
*BP Prove affordability! • Estimate the cost of the self-help homes to the participants • Give estimate of monthly principle, interest, taxes, insurance (PITI) payments and total debt ratios • Compare this figure to the cost of homes in the area
Provide evidence of low-income families willing to contribute labor • Document names, addresses, number in household, total annual incomes and date of contact • *BP NCALL recommends that organizations obtain at least twice as many potential participants and would be needed to complete the grant • *BP Include a statement on the list that the participants have had the program explained to them and are interested in participation and providing required own labor • See sample form in Guide
Evidence of community support is required • Include letters of support from local officials, individuals and community organizations • *BP Develop and distribute brochures or fact sheets. Develop a relationship with the media. Know the benefits and drawbacks of the program. You will be asked!
Benefits of community support: • Help organization with leveraging additional dollars for incorporation and start up • Provide needed political support from town and county governments • Help create a positive self-help housing image
Sources of community support: • Those in need of improved housing • Town and county governments • Churches/religious groups • Civic organizations • Social service agencies • Other nonprofits • General public • Business/industry sectors • Media
9. Outreach Plan for Very Low Income • A plan is required of how you propose to reach the very low income families • It is important to reach families that are living in housing that is deteriorated, dilapidate, over crowded or lacking in adequate plumbing • VLI- Minimum of 40% of total families building in program must be VLI • Develop a marketing strategy that will reach and recruit the families needed for your program Very Low Income (VLI) – 50% of area median income or below Low Income (LI) – Between 51 – 80% of area median income
10. Budget Information – Non Construction • SF – 424A • Budget Narrative • Method of TA Costs
Proposed budget must be on form SF-424A, “Budget Information (Non-Construction Programs)” • Use the example in Guide to complete this form or go to www.hudclips.org • *BP Also include a detailed budget and a budget narrative • This will come in handy when completing the Final Application
Authorized expenses: • Personnel salaries • Reasonable office expenses and supplies • Employment benefit costs • Purchase or lease of power tools • Insurance • Reasonable fees for training • Consultant and legal fees • Annual audits • Prohibited use of funds: • Paying for labor on the houses • Purchasing real estate or building materials for the families • Paying any debts, expenses or costs to the participants • Any lobbying activities prohibited in OMB Circular A-122
See Guide for: • SF 424A (rev. 7/97) and instructions • *BP Preliminary Budget Preparation Guide • *BP Budget Worksheet • *BP Sample Budget Narrative
National Self-Help Housing Directors Association (NSHHDA) • An organization consisting of self-help housing grantees across the nation unified by voice and cause • Annual dues are required to join the association and are allowable under the Section 523 Self-Help Housing Grant • Dues help to lobby Congress for increased funding and improved laws to assist the cause of rural housing
Current annual dues for NSHHDA: 523 Grant AmountDues 0 - $200,000 $200 $200,001 - $500,000 $300 $500,001 - $1,000,000 $400 Over $1 million $500 *BP Don’t forget to add this expense into your budget!
11. Determination of TA Grant Amount • Maximum TA Amount Calculation is required • A letter from RD identifying what the EVMH is for proposed counties • TA Cost is the technical assistance (TA) cost per house and is a guide that RD uses to estimate reasonable cost of a self-help program • TA cost = Total grant amount / # of houses organization proposes to build • Example: $228,000 / 12 homes = $19,000 maximum TA cost per house
Method A: The Equivalent Value of Modest Housing (EVMH) x 15% x Number of Homes Proposed = Maximum TA Budget $________ x .15 x _____ = $_____________ Example: EVMH = $115,500 x .15 = $17,325 (TA per home) x 12 homes = $207,900 (amount of grant request)
Method B: EVMH – Average mortgage - $1,000 = Maximum TA cost per house (This can only be used by experienced grantees or those who know what their mortgages will be.) Example: $128,000-$105,000-$1,000=$22,000 Method C: Amount established by the State Director to accomplish a particular goal • *BP Use worksheet on page 83 to calculate maximum per unit TA amount
*BP Do a realistic budget before determining your TA grant amount to see if your budget is truly realistic and falls within RD’s guidelines • The TA Grant amount depends on organization’s experience and capacity • Maximum amount for any grant period will be limited to a certain TA cost per house
12. Preliminary Land Survey • Proof of available lots • *BPInclude at least the minimum amount of lots for the Pre-Application • Use MLS listings or deeds if the land is already owned • *BPInclude narrative detailing expected cost and anticipated development • Maps showing local and regional area are also required
During Final Application, you will need to show RD proof of control of lots or access to suitable building sites as defined by RD • The more work that you do now, the less that you will have to do later • *BP Land is a scarce resource; suitable land even more scarce. Many programs have failed or gotten off to a rough start due to land delays. Work closely with RD to find possible lots.
*BP Subdivisions are time consuming, come with many delays and have too many unknown variables. If possible, find developed lots for your first grant.
13. Other Applicant Activities & Indirect/Direct Cost • List all of the other activities that the organization is engaged in and expects to continue • Include brief description of the programs and organizations role in them • Indirect cost rate or direct cost allocation plan required • Document the indirect cost rate or the lack thereof • If an organization has never obtained an indirect cost rate, grantee must submit the indirect or direct cost policy with the 523 pre-application • Prepare proposal for submission to DOI for approval • DOI will not review proposal until grant is approved
Indirect Cost • Mechanism used by federal government • Recommended when shared costs become impractical to be charged directly to various funding sources • Direct Cost Allocation • Used by single funded organizations or those which can track costs consistently RD has a contract with Department of Interior’s National Business Center to approve cost policies
Cognizant agency • Usually the largest federal funding source of an organization • Acts on behalf of all other federal agencies in approving an organization’s indirect cost rate or direct cost allocation plan • RD has contracted with the Department of Interior’s National Business Center (DOI) • DOI may help design and will have to approve the cost plan • Indirect cost rate is proposed to the cognizant agency and then an agreement is reached • If the USDA RD 523 grant is the largest federal funding source, the indirect cost rate proposal and/or cost allocation plan needs to be submitted to DOI
*BP When comparing which method to use, consider the time and money required to achieve the greater degree of accuracy, avoiding inconsistent costing • *BP Expedite application processing by: • Including a cover letter stating that your organization currently receives funds from USDA RD • Include the most recent audited financial statements • Need more information or sample forms? Go to: http://www.nbc.gov/icsprep.html
*BP Remember teamwork, if assistance is needed in developing a plan, contact NCALL, RD or the DOI for help • See Guide for Sample Allocation of Shared Costs Using a Direct Cost Allocation System • See Guide for Sample Allocation of Shared Costs Using a Indirect Cost Rate System
14. Pre-Development Grant Assistance Request • Pre-Development Funds • Purpose is to provide funds to develop a 523 final grant application • Available once for a defined area (for existing or potential grantees) • Requesting organization must lack the financial resources necessary to develop the final application • Grants are for up to $10,000 for up to six months
If requesting pre-development funds include: • Brief narrative identifying the need, amount of funds needed and projected time period • Budget • You may request up to $10,000 for up to 6 months • If not requesting pre-developing funds include: • Include a sentence to that effect in the pre-application
If funding is available and the pre-application is reviewed and approved, the RD State Director may approve the request • Pre-development grant is not figured in the TA cost per unit • Detailed accounting records of these funds must be maintained • Authorized and prohibited uses of pre-development funds same as those of 523 grant • *BPSee Guide for sample request