Making Decisions About Property During COVID-19: Why Your Head Start Program Needs to Understand Federal Interest
You may think you don’t have grant-related property questions, but you just might: What facility issues should you consider during the COVID-19 pandemic?
The COVID-19 pandemic places many organizations in the position of making big decisions that might impact federal interest in real property. For example, Head Start agencies may be considering purchases, refinancing, renovating, and using property in new ways. Understandably, many grantees shy away from real property issues, or do not feel confident that they fully understand when a federal interest takes hold, and who “owns” what share of the equitable interest in property.
Before doing anything to an existing property, agencies must first determine whether there is a federal interest in that property. Remember, it is not safe to conclude no federal interest exists just because you have no record that a notice of federal interest was filed. You may have to do some homework by reviewing past agency records and talking to your colleagues to find out more about your facility and property history. If there is a federal interest, specific grant responsibilities will likely be triggered, including seeking prior approval from the federal agency and reporting obligations for Form S-429.
Answer the following questions to see if you need to think more about the federal grant facility responsibilities:
- Are you considering how your facility will accommodate the new world of social distancing?
As Head Start agencies begin the planning process for reopening, they may be wondering how their facilities will meet new health and safety needs. Do you need more space or to reconfigure an existing space? Depending on the scale of the changes, they may be considered major renovations.
- Do you need to obtain a loan to make it through the difficult times?
As community resources dwindle rapidly, your agency may need to obtain a loan to adjust to the changes caused by the pandemic. One common term in many loan agreements is a pledge of collateral. Can you pledge property as collateral if it is subject to a federal interest?
- Have you considered refinancing facility debt?
The pandemic has caused many Head Start agencies to take a closer look at their finances in search of ways to cut costs. If the agency property is titled in its name, one large budget item to consider is mortgage debt, and refinancing may be an option to shrink that line item. This is especially true during a time when resources are tight for everyone, and financial institutions may be more lenient.
What do your responses mean?
If you answered yes to any of these questions, your agency likely needs to consider obligations under the federal property standards. Grantees that make renovations, refinance, or pledge any property with a federal interest as collateral must get approval from the Office of Head Start and comply with Head Start facilities regulations outlined in the Head Start Program Performance Standards and 45 CFR Part 1303 Subpart E. The Head Start Regional Office will want to ensure that Head Start funds are protected in the arrangement.
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Upcoming Webinar: All grantees, including those with no covered real property, are supposed to use and submit standard form Real Property Status Report 429. We can help get you in the best position to avoid any pitfalls and delays this year. Stay ahead of the curve, join us for a webinar on building capacity and practical real property reporting guidance on May 14, 2020 at 3 PM ET. We will break it down and give you practical take-aways for each section:
- SF-429 Cover Page must be submitted annually and accompany all reports and requests
- SF-429-A Submitted annually on the same date the first SF-425 for the budget period is due
- SF-429-B Request to Acquire, Improve, or Furnish
- SF-429-C Disposition or Encumbrance Request
You can learn more or register here.