16. How does the RACP reimbursement process work?
Once all special conditions to the Grant Agreement have been satisfied and compliance met, commonwealth grant funds will become available for reimbursement. The RACP grant program operates on a proportional reimbursement basis. As the Grantee incurs and pays construction expenses, the commonwealth will reimburse – contingent upon the corresponding expenditure of matching funds. Sufficient documentation regarding reimbursable expenditures and matching expenditures should be provided with any request for reimbursement.
17. When may I start my drawdown?
Grantees may start submitting their Payment Requests for reimbursement as soon as they have started construction and paid eligible costs. Reimbursements are subject to compliance with the RACP Grant Agreement and the satisfaction of all the special conditions listed in Appendix B to the contract. The monthly drawdown amount is subject to the limitations shown in Appendix C to the Grant Agreement.
18. Will I receive RACP Grant funds up front just by asking for them?
During construction activities, the project is monitored for compliance by the consultant assigned to the project during the application process. The Office of the Budget is required to reimburse the RACP grant on a proportional basis based on the corresponding expenditure of matching funds. It is important to know that the entire scope of the project must: (1) be in compliance with all RACP requirements listed in the Grant Agreement, such as those governing bidding, adherence to the Prevailing Wage Act and use of domestic steel and (2) satisfy all of the special conditions identified in the agreement between the Office of the Budget and the grant recipient before access to the RACP funding is granted. After the project reaches 100% completion, a portion of the grant may be retained pending satisfactory compliance of all RACP program requirements.
19. Our commissioners have a sales agreement in place with a developer and would like to purchase a parcel of land. May we use the RACP grant to buy the property while we decide what to build on it?
The statutes governing the RACP grant program permit the use of RACP proceeds for land acquisition; however, this cannot be the entire scope of the RACP grant. Some of the grant funding must be used for construction activities. The Office of the Budget cannot reimburse on land only, without any construction work.
20. Where may I download the Payment Request forms?
All reimbursement materials can be downloaded from the Reimbursement Procedures or RACP Handbook & Forms sections on the RACP section of the Office of the Budget Web site.
21. Is anyone from the Office of the Budget available to meet with me to go over the RACP process and explain how to prepare the payment request forms?
Yes, the Grantee/Sub-grantee (or their designated representatives) may request, at no cost to them, a facilitation meeting with an Office of the Budget employee involved in the RACP program. It is strongly suggested that meetings be held at the beginning of construction to go over the process and the preparation of the Payment Request forms. Requests for meetings should be made to the Office of the Budget Facilitation Manager at 717-214-5815. Past experience has shown that these meetings are very beneficial to the successful culmination of the grant process.
22. I have just received my grant agreement with the special conditions listed. I have already incurred construction costs for reimbursement. May I submit a Payment Request before my special conditions are satisfied?
You may submit your Payment Request forms while you are still submitting documentation and waiting for special conditions to be approved by the Office of the Budget. We can begin to process both items simultaneously. Please keep in mind, however, that no grant payment can be released until the special conditions have been satisfied, the compliance requirements have been met, and the Payment Request has been reviewed and accepted by the Office of the Budget.
23. My special conditions have been satisfied, and I submitted my first Payment Request. Now what happens?
When reviewing a Payment Request, Office of the Budget looks at the Payment Request forms (PR1, PR1A, and PR1B’s), the verifying documentation for appropriate categories, and the latest construction monitoring report from the commonwealth assigned consultant, and documentation for special conditions (if it is the first Payment Request). No funds can be released until all special conditions are satisfied and the project is in compliance. Once the review process is completed by the Office of the Budget, the Payment Request is then sent to the Comptroller’s Office, who then sends it to the Treasury Department. For this reason, adequate interim financing should be in place to bridge the gap between the time a Payment Request is submitted and the time a payment is actually disbursed. Please see the compliance section below for more information on interim financing.
24. May I receive my payment directly into my checking account?
All grantees are encouraged to sign up to receive payment from the commonwealth through the Automated Clearing House (ACH) Network. In most cases these payments are received faster than paper check payments. Additional Information surrounding commonwealth vendor registration procedures, including enrollment forms, can be found at http://www.comptrolleroperations.state.pa.us by selecting Vendor Resources. Furthermore, you can direct questions by phone to the Payable Services Call Center at 717-346-2676 (local) or 877-435-7363 (toll free), or via email at mailto:RA-OSCPaymentInquire@pa.gov.
25. Does the Office of the Budget hold a certain percentage of the payment? If so, how much does it hold?
Our retainage procedure differs from the typical procedure in the construction industry. The Office of the Budget reserves the right to retain up to 10% of the total grant amount. The retainage is calculated and applied after the Grantee submits the final Payment Request for reimbursement. The retained amount will be withheld from any amount due in the final Payment Request(s). The Grantees will be contacted and the retainage will be released after the close-out audit has been successfully completed.
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26. Is compliance with the grant agreement monitored during the project’s construction?
One of the commonwealth’s consultants will contact you to go over the construction monitoring phase review procedures. Usually, some type of monitoring begins when the application review report is submitted. Periodic construction monitoring reports will be prepared by the consultant and submitted to the Office of the Budget and to the Grantee/Sub-grantee once construction has begun. These reports are the basis for the Payment Request review procedures performed to determine ongoing compliance before commonwealth funds are released. The project must be in full compliance to receive and continue to receive any RACP funds.
27. My construction plans have changed since I submitted my application. What do I need to do?
It is not necessary to forward the plans and specifications to us. The Office of the Budget will have a consultant review your project on site. Updates to the application may be submitted and reviewed at any time. The application you submit is recognized as a "point-in-time" document that may need to be revised as you move through the design, bidding and construction phases.
28. What can be used as match costs?
Typically, match costs include administration, legal, financing/accounting, architectural/engineering, land, furniture, fixtures, equipment and relocation costs. Expenses paid before the authorization date are not eligible RACP costs (excluding using land as match ONLY.)
29. May we use our mortgage as a match funding source?
Generally, the Office of the Budget allows mortgages to be used as match funding as long as adequate supporting documents are available. The adequacy of any document is at the discretion of the Office of the Budget. We would be looking for terms of at least 20 years on any financing instruments.
30. What are the requirements for having the match funding secured?
One-half of the match funding must be secured at the time of application and before the grant agreement is drafted. After the grant agreement has been drafted, the Applicant/Grantee must document that 100% of the match funding is readily available before the Office of the Budget will start the reimbursement process. Signed pledges that are not yet received may count as the secured match only before the grant agreement is drafted. After that, evidence of the availability of the match (a cash receipt) must be demonstrated. As discussed below in Question 31, loans intended for match funding must be in the form of a long-term financing instrument.
31. Why must loans intended for match funding be in the form of a long-term financing instrument?
The Capital Facilities Debt Enabling Act requires that RACP projects be funded from proceeds of Commonwealth of Pennsylvania General Obligation (GO) bonds. GO bonds issued to finance the RACP grant program have a publicized maturity term of 20 years. Consequently, when a RACP Grantee uses loans as match funding, they must have a maturity cycle that demonstrates the long-term viability of the project. Past experiences have shown that RACP projects that use loans as match funds are in a better position to withstand economic downturns when those loans are in the form of a long-term financing instrument.
32. May we use a six-month line of credit as a match funding source?
A six-month line of credit is not viewed as long-term financing; therefore, it would be ineligible for RACP matching purposes. As discussed in Question 31 above, loans used as match funding should be in the form of a long-term financing instrument.
33. We have a shortfall. May I use my line of credit as a secured financing instrument for the match portion of the project?
Asking the Office of the Budget to recognize lines of credit or a business line as secured financing for the shortfall on a project is not satisfactory. The Office of the Budget accepts lines of credit as sources of interim financing but not as secured match funding. Please refer to Question 31.
34. What is the purpose of interim financing?
All RACP projects are required to have permanent match funding in place for the match costs associated with that particular project. RACP is a reimbursement-based program. Consequently, a project will need to have interim financing in place to pay for monthly construction expenses before it can receive the RACP grant. Interim financing is also needed to bridge the gap between the time a Payment Request is submitted and the time a payment is disbursed. Please refer to the Grant Agreement and Drawdown section above for more information on the payment processing time.
35. May the entire match be land?
The appraised value of land and buildings may typically serve as part of the match. The Office of the Budget would need to know the full cost of the project before saying land may be the sole match. Acceptance of land as the entire match would be at the sole discretion of the Office of the Budget. Any time that land is used in part or in total for the match, the grant recipient should own the property that is being listed as the match and would need to supply a copy of the title or deed. No lien is placed on the deed by the Office of the Budget.
36. May federal or municipal funds be used as the match funding source?
Yes, federal and local funds that are specifically earmarked for the project may serve as the match. Certain federal tax credits may also be used as the match. The statutes governing the RACP grant program do not allow the leveraging of other state funds within the confines of the RACP-defined project. Therefore, all other state funds must be removed from the project scope.
37. Our award is for $2 million, but our special conditions state that we need to document secured match funding of $4 million. Why do we need to document a match for more than the $2 million grant amount if the total project amounts to $6 million?
You are required to document any and all of the match funding necessary to complete the project. Your total project cost is $6 million and the grant is $2 million; therefore, you would need to document a match of $4 million, which is the balance of the project cost. The Office of the Budget wants to make sure that you have enough non-state funding to complete the project. In essence, the total project cost minus the RACP grant amount is the amount you need to document for the match.
38. We do not have any matching funds. Can you waive this requirement to facilitate the receipt of the state grant?
The requirement for matching funds cannot be waived. The RACP program requires that one-half of the match funding be secured at the time of application and before the grant agreement is drafted. Therefore, without matching funds, there is no RACP grant. The RACP grant operates on a proportional reimbursement basis. As the Grantee incurs and pays construction expenses, the commonwealth will reimburse – contingent upon the corresponding expenditure of match funding.
39. There is the possibility of in-kind services for our project. For example, one of the contractors agreed to do some work at no charge. May we count the fair value of in-kind gifts toward our match?
While it would clearly be beneficial to an RACP project to have such a donated gift, it cannot count toward the match, since all work must comply with the stated conditions, such as being contracted for and bid out and paying the prevailing wage.
40. I need to let out my bids. What are the bidding requirements?
The sole and exclusive bidding requirement for RACP projects is in the Capital Facilities Debt Enabling Act (Act 67 of 2004), which states, "Notwithstanding any other provision of law, the solicitation of a minimum of three written bids for all contracted construction work on redevelopment assistance capital projects shall be the sole requirement for the composition, solicitation, opening and award of bids on such projects. Notwithstanding the foregoing, the construction work shall be performed subject to the act of March 3, 1978 (P. L. 6, No. 3), known as the Steel Products Procurement Act." This means that all prime contractors, general contractors and subcontractors must be bid. Please note that the bidding requirements would be satisfied if the RACP-defined project is publicly bid. The bidding format is at the discretion of the project representatives.
41. Can the bidding requirement be waived?
Unless the terms of the law change, the Office of the Budget cannot grant waivers for bidding requirements to Grantees.
42. Do I need to bid for each separate trade if my general contactor was bid for the whole contract amount?
RACP projects are not subject to separation of trades. You simply need to solicit three bids for "all generally contracted work," and you do not even need to take the lowest bid. However, you must provide the Office of the Budget with an explanation as to why the lowest bidder was not selected.
43. Does my construction manager position have to be bid?
Construction manager services do not have to be bid. However, if the construction manager is not bid and serves mostly as a project manager/administrator, his or her costs could count only as match. The Office of the Budget will not reimburse any of the construction manager costs if they self-perform any of the construction work, since that work was not bid. Additionally, in order to protect the project/owner, performance and payment bonds must cover 100% of the total value of the construction.
44. May RACP funds be used to complete a design/build project?
You may proceed with a design/build approach and select whomever you want. However, in order to meet the RACP bidding requirement, the Office of the Budget will examine the bidding of the various subcontractors. To the extent the winning design/build contractor self-performs some of the construction work, you will need to demonstrate that you solicited three bids for the design/build approach. In addition, design costs are not reimbursable. Only the following costs are reimbursable: Construction, interest during construction, land (subject to certain restrictions) and permits.
45. Are bid solicitations required for equipment purchases?
Bid solicitation is not required for equipment purchased separately. Please note that if the purchase of equipment also includes installation services, the contract is NOT subject to PA Prevailing Wage Act. However, if the equipment contract does not include the installation, then the labor asssociated with the installation IS subject to PA Prevailing Wage Act. If equipment involves steel, mill certifications or ST forms should be provided. If materials cannot be obtained domestically, justification should be provided for the foreign steel to OB for prior approval.
46. We do not have any certified payrolls to demonstrate compliance with the Pennsylvania Prevailing Wage Act. Can this requirement be waived to facilitate the receipt of the state grant?
The Office of the Budget cannot grant waivers for the Prevailing Wage Act. All Grantees must comply with the act. Grantees that fail to abide by the Prevailing Wage Act do so at their own risk. Additionally, the Grantee/Sub-Grantee must provide a copy of the Department of Labor & Industry’s Pennsylvania Prevailing Wage Determination Letter issued for the specific project to demonstrate compliance with the Prevailing Wage Act. The project should apply to the Department of Labor & Industry for the determination letter before construction begins. If necessary, the Department of Labor & Industry can issue determination letters after construction has begun. Prevailing wage information and forms can be found at: Visit the Labor and Industry website to obtain Prevailing wage information and forms.
47. We do not have any steel certificates to demonstrate compliance with the Pennsylvania Steel Procurement Act. Can you waive this requirement to facilitate the receipt of the state grant?
The Office of the Budget cannot grant waivers for the Pennsylvania Steel Procurement Act unless the terms of the law change. All Grantees must comply with the Steel Procurement Act. Steel certificates noting milled/manufactured in the United States are required to document compliance with the Steel Act and must be supplied for all structural steel. The appropriate ST form will be necessary for non-structural steel to be in compliance. If a Grantee fails to abide by the Pennsylvania Steel Procurement Act in anticipation of a waiver, it does so at its own risk.
48. Our construction contractor cannot obtain the 100% of construction cost bond requirement. Can this be waived?
The requirement for 100% performance and payment bonds is a state law. The Office of the Budget cannot waive that requirement. Some projects have been completed that failed to get the 100% coverage. In those instances, we could not release any RACP reimbursements until the project was completely finished and the owner received all waivers of liens from the various contractors, thereby making the bond coverage moot.
49. Are "eligible costs" those incurred after the legislative authorization date or after receipt of the award letter?
Costs are eligible after the legislative authorization date, assuming the costs meet all RACP requirements (bidding, prevailing wage, etc.). Your award letter included the Itemization Act number and the year your project received legislative approval. Your authorization date by month, day and year is listed in your Grant Agreement in Appendix B.
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50. May I make a complex RACP project simpler?
The Office of the Budget may allow this in instances where certain items can be carefully carved out to make a streamlined project. In doing so, you must remember that the simplified project must obey the spirit of the law, in that construction activities must occur and full compliance with our requirements must be met. All changes in scope need to be sent in writing to OB for review and approval.
REPORTING AND AUDITS
51. I have been contacted by a state auditor to set up a conference for an audit of my RACP project for which I recently sent in my last Payment Request. Is this normal?
Yes. All RACP projects must have a legislatively mandated close-out audit performed to comply with Act 39 of 1993 and in accordance with Article 5 of your grant agreement.
52. The list of documents the auditor sent me to have available for the close-out audit includes documentation previously supplied to the state consultant for my project. Does the same documentation need to be reviewed again?
Yes. Keep in mind that the state consultant is part of the monitoring process. The auditors will need to examine documentation to be able to render an audit opinion. The Grantee/Sub-Grantee must keep all documentation concerning the project costs and RACP compliance and make it available during the close-out audit period. Many times, the list will include documentation previously submitted to the Office of the Budget in order to satisfy special conditions.
53. Who will be performing the audit of my RACP project?
A close-out audit will be performed by the Office of the Budget or its representative for all projects. The Grantee will not be required to pay for this audit.
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