Any proceeds generated from a CDBG activity, including repayment of funds, will fall into one of two categories:
- program income, or
- miscellaneous revenue.
Different rules apply for each of these categories. This section defines each of these types of funds and the rules that will apply.
Under the CDBG Program, funds received by the Grantee as a result of a CDBG-funded activity are generally referred to as program income. Program income funds retain their federal identity in perpetuity and are subject to all federal requirements.
Program income is defined in detail below. Funds not considered program income will be covered in the next section.
It is important to note that accounting for program income is conducted on a Grantee basis rather than a project basis because a Grantee has the ability to generate income from more than a single project or over more than one grant year.
What Is Program Income?
Program income is defined as gross income received by a Grantee or a subrecipient of a Grantee that was generated from the use of CDBG funds regardless of whether or not the activity has been closed out. Program income includes, but is not limited to the following:
- Proceeds from the sale or long-term lease of real property purchased or improved with CDBG funds;
- Proceeds from the disposition of equipment purchased with CDBG funds;
- Gross income from the use or rental of property acquired or improved by the Grantee or subrecipient with CDBG funds, minus any incidental costs necessary for maintenance of the property;
- Gross income from the use or rental of real property owned by the unit of general local government or a subrecipient of a unit of general local government, that was constructed or improved with CDBG funds, less the costs incidental to the generation of the income;
- Payments of principal and interest on loans made using CDBG funds;
- Proceeds from the sale of loans made with CDBG funds;
- Proceeds from the sale of obligations secured by loans made with CDBG funds;
- All principal and interest received by a Revolving Loan Fund (RLF) account (this would include any past or present Housing Rehabilitation Program);
- Interest earned on program income pending disposition of the income;
- Funds collected through special assessments made against non-residential properties and properties owned and occupied by households that are not low and moderate income if the special assessments are used to recover all or part of the CDBG portion of public improvements; and
- Gross income paid to a unit of general local government or subrecipient from the ownership interest in a for-profit entity acquired in return for the provision of CDBG assistance.
The following are exceptions to the definition of Program income:
- Gross income of $35,000 or less received in a single year from all activities (excluding revenue generated by a Revolving Loan Fund) that is retained by the Grantee and its subrecipients;
- Amounts generated by activities eligible under Section 105(a)(15) of the HCDA and carried out by an entity under the authority of Section 105(a)(15) of the HCDA (non-profit organizations and local development organizations, when undertaking community economic development, neighborhood revitalization, or energy conservation projects);
- Certain types of interest income as outlined in 24 CFR 570.489(e)(2)(iv);
- Proceeds from the sale of real property purchased or improved with CDBG funds if the proceeds are received more than five years after expiration of the grant agreement between the state and the Grantee.
Funds not considered program income will be identified as miscellaneous revenue (e.g. receipts totaling less than $35,000 in any given DOLA Program Year). These funds do not retain their federal identity, and federal requirements, such as environmental review, procurement, and labor standards, do not apply to the reuse of these funds. However, DOLA requires grantees and subrecipients generating miscellaneous revenue track and report on all revenue generated by the CDBG activity.
Use of Program Income
Program income must be used for eligible CDBG activities as listed in Section 105(a) of the HCDA. Program income is subject to all of the rules and regulations governing CDBG funds including, but not limited to, compliance with: national objective, procurement, equal opportunity, environmental, labor standards, lead-based paint hazard treatment, etc.