1. (a) Authority and Purpose. The Executive Award and Review Advisory Committee (EARAC) is established by Tex. Gov't Code §2306.1112 to make recommendations to the Board regarding funding and allocation decisions related to Low Income Housing Tax Credits and federal housing funds provided to the state under the Cranston Gonzalez National Affordable Housing Act. Per Tex. Gov't Code §2306.1112(c), EARAC is not subject to Tex. Gov't Code, Chapter 2110. The Department also utilizes EARAC as the body to consider funding and allocation recommendations to the Board related to other programs, and to consider an awardee under the requirements of 2 CFR §200.331(b) and (c), and UGMS, which requires that the Department evaluate an applicant's risk of noncompliance and consider imposing conditions if appropriate prior to awarding funds for certain applicable programs and as described in §1.403 of Subchapter D of this chapter. It is also the purpose of this rule to provide for the operation of the EARAC, to provide for considerations and processes of EARAC, and to address actions of the Board relating to EARAC recommendations.
2. (b) EARAC may meet to discuss matters within its statutory scope and as noted in Subsection (a) of this section, including (without limitation) recommendations on awards, deficiencies in needed information to make a recommendation, proposed or recommended conditions on awards, and addressing inquiries by Applicants or responses to a negative recommendation.

3. (c) EARAC Recommendation Process.

   1. (1) A positive recommendation by EARAC represents a determination that, at the time of the recommendation and based on available information, each of the applicable and required members has not identified a rule or statutory-based impediment (within their area of expertise) that would prohibit the Board from making an award.
   2. (2) A positive recommendation by EARAC may have conditions placed on it. Conditions placed on an award by EARAC will be limited to those conditions noted in Subsection (e) of this section, or as suggested by the Applicant and agreed upon by the Department.
   3. (3) The Applicant will be notified of all such conditions proposed by EARAC. If the Applicant does not concur with the applicability of one or more of the conditions, it will be provided an opportunity to dispute the conditions as described in Subsection (g) of this section, regarding EARAC Disputes.
   4. (4) A negative recommendation by EARAC will result if one of the applicable required members has determined that an Applicant has not satisfied a material requirement of TDHCA rule or federal or state statute relevant to the award sought and the material requirement cannot be cured through one of the conditions proposed by the Applicant or listed in Subsection (e) of this section. When a negative recommendation is made, the Applicant will be notified and the specific rule or statutory-based requirement will be identified, along with notification of the Applicant's right to dispute the negative EARAC recommendation as described in Subsection (g) of this section, regarding EARAC Disputes.

4. (d) Conditions to an award may be placed on a single property, a portfolio of properties, or a portion of a portfolio of properties if applicable (e.g., one region of a management company is having issues, while other areas are not). The conditions listed in Subsection (e) of this section may be customized to provide specificity regarding affected properties, Persons or dates for meeting conditions.

   1. (1) Applications made and reviewed under §1.301 of this subchapter that are considered a Category 2 or Category 3 because of any of the following Events of Noncompliance may be awarded with the imposition of one or more of the conditions listed in Subsection (e)(1) through (19) of this section:

      1. (A) Noncompliance related to Affirmative Marketing;
      2. (B) Development is not available to the general public because of leasing issues;
      3. (C) Project Failed to meet minimum set aside;
      4. (D) No evidence of or failure to certify to the material participation of a non-profit or HUB;
      5. (E) Development failed to meet additional state required rent and occupancy restrictions;
      6. (F) Noncompliance with social service requirements;
      7. (G) Development failed to provide housing to the elderly as promised at application;
      8. (H) Failure to provide special needs housing as required by LURA;
      9. (I) Changes in Eligible Basis or Applicable percentage;
      10. (J) Failure to submit all or parts of the Annual Owner's Compliance Report;
      11. (K) Failure to submit quarterly reports;
      12. (L) Noncompliance with utility allowance requirements;
      13. (M) Noncompliance with lease requirements;
      14. (N) Noncompliance with tenant selection requirements;
      15. (O) Program Unit not leased to Low-Income household;
      16. (P) Program unit occupied by nonqualified full-time students;
      17. (Q) Gross rent exceeds the highest rent allowed under the LURA or other deed restriction;
      18. (R) Failure to provide Tenant Income Certification and documentation;
      19. (S) Failure to collect required tenant data;
      20. (T) Development evicted or terminated the tenancy of a low-income tenant for other than good cause;
      21. (U) Household income increased above 80% at recertification and Owner failed to properly calculate rent (HOME and MFDL only); and
      22. (V) Noncompliance with 10 TAC Chapter 8.

   2. (2) Applications made and reviewed under §1.301 of this subchapter that are considered a Category 2 because of any of the following Events of Noncompliance may be awarded with the imposition of one or more of the conditions listed in Subsection (e)(10) through (12) of this section:

      1. (A) Violations of the Uniform Physical Condition Standards;
      2. (B) TDHCA has referred an unresolved Fair Housing Design and Construction issue to the Texas Workforce Commission Civil Rights Division;
      3. (C) Failure to provide amenity as required by LURA;
      4. (D) Unit not available for ren;t
      5. (E) Failure to resolve final construction deficiencies within the Corrective Action Period;
      6. (F) Noncompliance with the accessibility requirements of §504 of the Rehabilitation Act of 1973 and 10 TAC Chapter 1, Subchapter B.
   3. (3) For Applications with subrecipient monitoring Findings, Concerns, or Deficiencies or Single Audit information that indicates a risk to Department, funds may be awarded with the imposition of one or more of the conditions listed in Subsection (e)(1), (3), (9), (13), (14), (15), (16), or (19) of this section.
   4. (4) Applications made and reviewed under §1.301 of this subchapter that are considered a Category 2 because of non-responsiveness may be awarded with the imposition of one or more of the conditions listed in Subsection (e)(5), (6), or (7).

5. (e) Possible Conditions.

   1. (1) Applicant/Owner is required to ensure that each Person subject to previous participation review for the Combined Portfolio will correct all applicable issues of non-compliance identified by the previous participation review on or before a specified date and provide the Department with evidence of such correction within 30 calendar days of that date.
   2. (2) Owner is required to have qualified personnel or a qualified third party perform a onetime review of an agreed upon percentage of files and complete the recommended actions of the reviewer on or before a specified deadline for an agreed upon list of Developments. Evidence of reviews and corrections must be submitted to the Department upon request.
   3. (3) The Applicant or the management company contracted by the Applicant is required to prepare or update its internal procedures to improve compliance outcomes and to provide copies of such new or updated procedures to the Department upon request or by a specified date.
   4. (4) Owner agrees to hire a third party to perform reviews of an agreed upon percentage of their resident files on a quarterly basis, and complete the recommended actions of the reviewer for an agreed upon list of Developments. Evidence of reviews and corrections must be submitted to the Department upon request.
   5. (5) Owner is required to designate a person or persons to receive Compliance correspondence and ensure that this person or persons will provide timely responses to the Department for and on behalf of the proposed Development and all other Development subject to TDHCA LURAs over which the Owner has the power to exercise Control.
   6. (6) Owner agrees to replace the existing management company, consultant, or management personnel, with another of its choosing.
   7. (7) Owner agrees to establish an email distribution group in CMTS, to be kept in place until no later than a given date, and include agreed upon employee positions and/or designated Applicant members.
   8. (8) Owner is required to revise or develop policies regarding the way that it will handle situations where persons under its control engage in falsification of documents. This policy must be submitted to TDHCA on or before a specified date and revised as required by the Department.

   9. (9) Owner or Subrecipient is required to ensure that agreed upon persons attend and/or review the trainings listed in (A), (B), (C) and/or (D) of this subsection (only for applications made and reviewed under §1.301 of this subchapter) and/or (E) for applications made and reviewed under §1.302 of this subchapter and provide TDHCA with certification of attendance or completion no later than a given date.

      1. (A) Housing Tax Credit Training sponsored by the Texas Apartment Association;
      2. (B) 1st Thursday Income Eligibility Training conducted by TDHCA staff;

      3. (C) Review one or more of the TDHCA Compliance Training webinars:

         1. (i) 2012 Income and Rent Limits Webinar Video;
         2. (ii) How to properly use the Income and Rent Tool;
         3. (iii) 2012 Supportive Services Webinar Video;
         4. (iv) How to identify and properly implement Supportive Services;
         5. (v) Income Eligibility Presentation Video;
         6. (vi) 2013 Annual Owner's Compliance Report (AOCR) Webinar Video;
         7. (vii) 2015 Tenant Selection Criteria Webinar Video;
         8. (viii) 2015 Tenant Selection Criteria Presentation;
         9. (ix) 2015 Tenant Selection Criteria- Q and A's;
         10. (x) §10.610 - Tenant Selection Criteria;
         11. (xi) 2015 Affirmative Marketing Requirements Webinar Video;
         12. (xii) 2015 Affirmative Marketing Requirements Presentation;
         13. (xiii) 2015 Affirmative Marketing Requirements-Q and A's;
         14. (xiv) Fair Housing Webinars (including but not limited to the 2017 FH webinars);
      4. (D) Training for Certified Occupancy Specialist or Blended Occupancy Specialist; or
      5. (E) Any other training deemed applicable and appropriate by the Department, which may include but is not limited to, weatherization related specific trainings such as OSHA, Lead Renovator, or Building Analyst training.
   10. (10) Owner is required to submit the written policies and procedures for all Developments subject to a TDHCA LURA for review and will correct them as directed by the Department.
   11. (11) Owner is required to have qualified personnel or a qualified third party perform Uniform Physical Condition Standards inspections of 5% of their units on a quarterly basis for a period of one year, and promptly repair any deficiencies. Evidence of inspections and corrections must be submitted to the Department upon request.
   12. (12) Within 60 days of the condition issuance date the Owner will contract for a third party Property Needs Assessment and will submit to the Department a plan for addressing noted issues along with a budget and timeframe for completion.
   13. (13) Owner agrees to have a third party accessibility review of the Development completed at a time to be determined by the Applicant but no later than prior to requesting a TDHCA final construction inspection. Evidence of review must be submitted to the Department upon request.
   14. (14) Applicant/Owner is required to ensure that each entity it controls and each individual with whom it is related by virtue of their being an officer, director, partner, manager, controlling owner, or other similar relationship, however designated, and each entity they control that is subject to any TDHCA contract will cause such entities to provide all such documentation relating to the Single Audit on or before a specified date.
   15. (15) Any of the conditions identified in 2 CFR §200.207 which may include but are not limited to requiring additional, more detailed financial reports; requiring additional project monitoring; or establishing additional prior approvals. If such conditions are utilized, the Department will adhere to the notification requirements noted in 2 CFR §200.207(b).
   16. (16) Applicant is required to have qualified personnel or a qualified third party perform an assessment of its operations and/or processes and complete the recommended actions of the reviewer on or before a specified deadline.
   17. (17) Applicant is required to have qualified personnel or a qualified third party performs DOE required Quality Control Inspections of 5% of its units on a quarterly basis for a period of one year, and promptly repair any deficiencies. Evidence of inspections and corrections must be submitted upon request.
   18. (18) Applicant is required to provide evidence that reserves for physical repairs are fully funded as required by §10.302(d)(2)(I) of this title (relating to Replacement Reserves).
   19. (19) In the case of a Development being funded with direct loan funds, Applicant is required to provide evidence of invoices and a lien waiver from the contractor, subcontractor, materials supplier, equipment lessor or other party to the construction project stating they have received payment and waive any future lien rights to the property for the amount paid at the time of every draw request submitted.

6. (f) Failure to meet conditions.

   1. (1) The Executive Director may, for good cause and as limited by federal commitment, expenditure, or other deadlines, grant one extension to a deadline specified in a condition, with no fee required, for up to six months, if requested prior to the deadline. Any subsequent extension, or extensions requested after the deadline, must be approved by the Board.
   2. (2) With the exception of awards considered for CSBG funds required to be distributed to Eligible Entities by formula, if any condition agreed upon by the Applicant and imposed by the Board is not met as determined by the evidence submitted (or lack thereof) when requested, the Applicant may be referred to the Enforcement Committee for assessment of an administrative penalty or recommended for debarment.

7. (g) Dispute of EARAC Recommendations.

   1. (1) The purpose of EARAC is to make recommendations to the Board on certain awards and approvals. As such, the Appeal provisions in §1.7 of this title relating to the appeals of a staff decision to the Executive Director, are not applicable.

   2. (2) If an Applicant does not agree with any of the following items, an Applicant or potential Subrecipient of an award may file a dispute consistent with Paragraph (3) of this subsection.

      1. (A) Their category as determined under §1.301(f) of this subchapter;
      2. (B) Any conditions proposed by EARAC; or
      3. (C) A negative recommendation by EARAC.

   3. (3) Prior to the Board meeting at which the EARAC recommendation is scheduled to be made, an Applicant or potential Subrecipient may submit to the Department (to the attention of the Chair of EARAC), as provided herein, a letter (the Dispute) setting forth:

      1. (A) The condition or determination with which the Applicant or potential Subrecipient disagrees;
      2. (B) The reason(s) why the Applicant/potential Subrecipient disagrees with EARAC's recommendation or conditions;
      3. (C) If the dispute relates to conditions, any suggested alternate condition language;
      4. (D) If the dispute relates to a negative recommendation, any suggested conditions that the Applicant believes would allow a positive recommendation to be made; and
      5. (E) Any supporting documentation not already submitted to EARAC.
   4. (4) An Applicant must file a written Dispute not later than the seventh calendar day after notice has been provided of EARAC's recommendation. The Dispute must include a hard copy and pdf version of all materials, if any, that the Applicant wishes to have provided to the EARAC and the Board in connection with its consideration of the matter, if heard by the Board. An Applicant should note if it is requesting to be present at EARAC meeting at which the dispute is considered.
   5. (5) EARAC is not required to reconsider a Disputed matter prior to making its recommendation to the Board.
   6. (6) EARAC will not recommend to an Applicant conditions other than those set forth in this subchapter. However, if an Applicant proposes alternative conditions EARAC may provide the Board with a recommendation to accept, reject, or modify such proposed alternative conditions.
   7. (7) A Dispute will be included on the Board agenda if received at least five Department business days prior to the required posting of that agenda. If the Applicant desires to submit additional materials for Board consideration, it may provide the secretary of EARAC with such materials, provided in pdf form, to be included in the presentation of the matter to the Board if those materials are provided not later than close of business of the fifth Department business day before the date on which notice of the relevant Board meeting materials must be posted, allowing staff sufficient time to review the Applicant's materials and prepare a presentation to the Board reflecting staff's assessment and recommendation. The agenda item will include the materials provided by the Applicant and may include a staff response to the dispute and/or materials. It is within the board chair's discretion whether or not to allow an applicant to supplement its response. An Applicant who wishes to provide supplemental materials at the time of the Board meeting must comply with the requirements of §1.10 of this chapter (relating to Public Comment Procedures). There is no assurance the board chair will permit the submission, inclusion, or consideration of any such supplemental materials.
   8. (8) The Board and EARAC will make reasonable efforts to accommodate properly and timely filed Disputes under this subsection, but there may be unanticipated circumstances in which the continuity of assistance or other exigent circumstances dictate proceeding with a decision notwithstanding the fact that an Applicant disagrees with an EARAC finding or recommendation. These situations, should they arise, will be addressed on an ad hoc basis.
8. (h) In the event that this subchapter does not adequately address specific facts and circumstances which may arise, nothing herein shall serve to limit the ability of staff to bring to the Board as information or to seek guidance or interpretation through a properly posted item on any manner relating to the administration of the previous participation review process in general or as it may relate to any one or more specific applications, awards, or other matters.
9. (i) Board Discretion. Subject to limitations in federal statute or regulation or in UGMS, the Board has the discretion to accept, reject, or modify any EARAC recommendations in response to a recommendation for an award or in response to a Dispute. The Board may impose other conditions not noted or contemplated in this rule as recommended by EARAC, or as requested by the Applicant; in such cases the conditions noted will have the force and effect of an order of the Board.
10. (j) In the event that the Board adopts a treatment of any matter subject to this subchapter that varies from the prescribed manner in which the strict application of this subchapter would have treated it, the Board's adopted outcome shall automatically and without need of any further request or action by Applicant or staff constitute a waiver to the extent required.
11. (k) Treatment of Previous Participation Reviews for Ownership Transfers. By statute responsibility to approve or deny ownership transfers is vested in the Executive Director. He or she may consider whether the results of a previous participation review constitute "good cause" to withhold approval of the requested transfer. If the Executive Director determines that the results of the previous participation review constitute good cause to withhold approval, he or she shall so notify the parties requesting the transfer and give them an opportunity to propose conditions to address the Executive Director's concerns. Any agreed conditions are not limited to the conditions specified under Subsection (e) of this section although any or all of them may be utilized if appropriate. Any agreement to effectuate the addressing of such concerns shall take effect only upon acceptance by the Board. If no agreement can be reached and the Executive Director believes there is no good cause basis to grant the transfer approval, the matter may be appealed to the Board under §1.7 of this title (relating to Appeals).

Source Note:The provisions of this §1.303 adopted to be effective December 30, 2018, 43 TexReg 8283.