(a) This subpart applies to small rural PHAs as defined in § 902.101 of this chapter.

(b) Small rural PHAs shall be assessed and rated on the indicators and methodology of this subpart and shall not be subject to the SEMAP requirements.

(a) This section describes the performance indicators used to assess a PHA's designation as troubled resulting from the small rural PHA assessment. HUD will use the verification method identified for each indicator. The four indicators are determined on a pass or fail basis.

(b)(1) Inspection standards. This indicator shows whether the PHA applied the correct inspection standards to HCV and PBV unit inspections.

(2) HUD verification method. The PHA's assessment certification and on-site HUD review when applicable.

(3) Rating. The PHA passes the indicator if it applied the correct inspection standards for all unit HCV and PBV unit inspections conducted during the assessment period. If the PHA applied the incorrect inspection standards for any HCV or PBV unit inspection during the assessment period, the PHA fails the indicator.

(c)(1) Initial unit inspections. This indicator determines if the PHA conducted the initial HQS inspections within the required time period.

(2) HUD verification method. HUD systems show percent of newly leased units where the beginning date of the assistance contract is before the date the unit passed the initial unit inspection or, if the PHA employed the PHA initial inspection option for non-life-threatening deficiencies or alternative inspections, the timing requirements for the applicable PHA initial inspection option.

(3) Rating. The PHA passes the indicator if at least 98 percent of units placed under HAP contract during the assessment period passed the initial PHA HQS inspection within the required time period. If fewer than 98 percent of units placed under HAP contract during the assessment period passed the HQS inspection within the required time periods, the PHA fails the indicator.

(d)(1) Frequency of HQS inspections. This indicator shows, for units that have been under HAP contract for at least three years, whether the PHA re-inspected tenant-based units under HAP contract and the required sample of PBV units at least once during the three-year period from the last PHA inspection.

(2) HUD verification method. HUD systems show the percentage of units that have been under HAP contract for at least three years that have been re-inspected within the required three-year period from the last inspection.

(3) Rating. The PHA passes the indicator if at least 98 percent of the units that have been under HAP contract for at least three years have been re-inspected within the required three-year period from the last inspection. The PHA fails the indicator if fewer than 98 percent of these units have been re-inspected within the required three-year period.

(e)(1) Unit condition enforcement. This indicator shows whether, following the inspection of a unit under contract where the unit fails to meet the required standards, any cited life-threatening and non-life-threatening deficiencies are corrected within the required cure period in accordance with §§ 982.404 and 983.103 of this chapter. In addition, if HQS deficiencies are not corrected timely, the indicator shows whether the PHA stops (abates) housing assistance payments beginning no later than the first of the month following the specified correction period or terminates the HAP contract or, for family-caused defects, takes prompt and vigorous action to enforce the family obligations. (§ 982.404 of this chapter)

(2) HUD verification method. The PHA certification and on-site HUD review (if performed), and HUD system data.

(3) Rating. In order to pass the indicator, the applicable verification method, which may include sampling, determines that the PHA took corrective action within the required timeframes for at least 98 percent of inspections with identified life-threatening or other HQS deficiencies.

(f)(1) PHA submission of certifications. The PHA must submit its certifications for the applicable indicators within the designated timeframe required by HUD, and in the form and manner as required by HUD. HUD will issue instructions on the submission of PHA certifications by Federal Register notification, which will be subject to public comment.

(2) Failure to submit. Failure of the PHA to submit any certification in accordance with this paragraph will result in the PHA failing the indicator and being designated as troubled under the small rural PHA assessment.

(a) High performer designation. (1) A PHA is designated a high performer under the small rural PHA assessment if the PHA has passed all four indicators identified in § 985.203 and the PHA:

(i) Has utilized at least 98 percent of its HCV budget authority in the two most recent calendar years, or the percent of HCV units leased by renters or occupied by homeowners in the two most recent calendar years was at least 98 percent;

(ii) Did not end that calendar year with excess HAP reserves; and

(iii) Did not end that calendar year in a funding shortfall or receive shortfall prevention funding from HUD.

(2) HUD shall publish the calculation for determining excess HAP reserves in the Federal Register, and such calculation shall provide for public comment before becoming effective.

(b) Standard performer designation. A PHA that passed all four indicators but did not meet the funding utilization criteria for a high performer designation in paragraph (a) is designated as a standard performer.

(c) Troubled PHA designation. A PHA that failed any of the four indicators under § 985.201 is designated as a troubled PHA under the small rural PHA assessment.

(a) Frequency of small rural PHA assessments—(1) Initial assessment. The initial small rural PHA assessment will be effective when the PHA's next SEMAP assessment would have been applied. For PHAs that qualify for SEMAP biennial review as a small PHA (less than 250 assisted units), the transition to the small rural PHA assessment will occur when the PHA's next biennial SEMAP assessment is required.

(2) Triennial assessments. HUD shall assess small rural PHAs no more than once every three years, except that a troubled small rural PHA shall be subject to an annual assessment in accordance with § 985.209.

(b) [Reserved]

(a) Appeals—(1) HUD action. HUD must review, consider, and provide a final written determination to a small rural PHA that appeals its designation as a troubled PHA.

(2) Deciding HUD official. The HUD decision on the PHA appeal shall be made by a HUD official who has not been involved in and is not subordinate to any person who has been involved in the original determination to designate the PHA as a troubled PHA under the small rural PHA assessment.

(b) Corrective action agreement. No later than 60 days after the date on which the PHA is designated a troubled PHA, the PHA and HUD will enter into a corrective action agreement (CAA) under which the PHA shall take actions to correct the deficiencies upon which the troubled PHA designation is based. The PHA must comply with HUD requirements for the submission of the CAA, including but not limited to the date by which the CAA must be submitted to HUD. The CAA must:

(1) Have a term of one year, and shall be renewable at the option of HUD;

(2) Specify goals to be achieved;

(3) Identify obstacles to goal achievement and ways to eliminate or avoid them;

(4) Identify resources that will be used or sought to achieve goals;

(5) Provide, where feasible, for technical assistance to assist the PHA in curing its deficiencies;

(6) Identify a PHA staff person with lead responsibility for completing each goal;

(7) Identify key tasks to reach each goal;

(8) Specify time frames for achievement of each goal, including intermediate time frames to complete each key task;

(9) Provide for regular evaluation of progress toward improvement;

(10) Provide for the reconsideration of the PHA's designation as a troubled PHA no less than annually, and provide for the termination of the CAA when HUD determines the PHA is no longer troubled;

(11) Provide that in the event of substantial noncompliance by the PHA under the CAA, HUD may (i) contract with another PHA or a private entity to administer the HCV program; and (ii) withhold funds otherwise distributable to the troubled PHA;

(12) Be signed by the PHA board of commissioners chairperson and by the PHA executive director. If the PHA is a unit of local government or a State, the CAA must be signed by the Section 8 program director and by the chief executive officer of the unit of government or his or her designee.

(c) Monitoring. The PHA and HUD must monitor the PHA's implementation of its CAA to ensure performance targets are met.

(d) Annual small rural assessment. A troubled PHA shall be subject to the small rural assessment on an annual basis.

(e) Use of administrative fee reserve prohibited. Any PHA designated as troubled may not use any part of the administrative fee reserve for other housing purposes (see § 982.155(b) of this chapter).

(f) Upgrading poor performance rating. HUD shall change a PHA's overall performance rating from troubled to standard or high performer if HUD determines that a change in the rating is warranted because of improved PHA performance and a standard or high designation on a subsequent small rural PHA assessment.

(g) Default under the Annual Contributions Contract (ACC). HUD may determine that a PHA's failure to correct identified deficiencies resulting from its small rural PHA assessment or to execute and implement a CAA as required by HUD constitutes a default under the ACC.

HUD shall maintain small rural PHA assessment files, including designations, notifications, appeals, corrective action agreements, and related correspondence for at least 3 years.