U.S. Department of Housing and Urban Development Washington, D.C. 20410-3000 June 26, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR ADMINISTRATION Ethics Letter 91-3 Special Attention of: PRINCIPAL STAFF ALL REGIONAL ADMINISTRATORS ALL REGIONAL DIRECTORS OF ADMINISTRATION ALL FIELD OFFICE MANAGERS ALL FIELD OFFICE ADMINISTRATIVE OFFICERS Subject: Implementation of "Section 112 of the Department of Housing and Urban Development Reform Act of 1989," regarding the requirements governing the lobbying of HUD personnel. PART I -- INTRODUCTION A. PURPOSE. This Letter provides guidance on new legislation establishing the standards under which persons who make expenditures to influence a HUD officer or employee in the award of financial assistance or the taking of a management action by the Department must keep records, and report to HUD, on the expenditures; and persons who are retained to influence a HUD officer or employee in the award of financial assistance or the taking of a management action by the Department must register with HUD, and report to HUD on their lobbying activities. Section 112 also places limitations on the fees that may be paid to consultants who are engaged to influence the award or allocation of the Department's financial assistance. The rule is designed to improve the Department's ability to ensure that the process by which the Department awards financial assistance and takes management actions is conducted in a manner that is fair and open, and free from improper influence. Part II of this Letter contains an overview of the substantive provisions of the new legislation. Part III describes the procedures for implementing these requirements. These procedures include the disbursement, collection and maintenance of the forms that the new law requires to be filed with the Department. B. BACKGROUND. The Department of Housing and Urban Development Reform Act of 1989, Pub. L. 101-235, was ___________________________________________________________________________ AE: Distribution: W-1, W-2, W-3, W-4, R-1, R-3-1, R-6, R-7, R-8, R-9, O-16 _____________________________________________________________________ approved by Congress December 15, 1989. Section 112 added a new section 13 to the Department of Housing and Urban Development Act, 42 U.S.C. 3537b, et seq. HUD published in the Federal Register a proposed rule "Requirements Governing Lobbying of HUD Personnel," June 1, 1990 (55 FR 22722). The final rule was published on May 17, 1991 and became effective on June 17, 1991. A copy of the final rule is attached to this Letter. See Attachment I However, no sanctions or penalties, under this rule or otherwise, may be imposed by the Department for any failure to meet the requirements of this rule during the period ending August 14, 1991. C. IMPLEMENTATION. The regulation governing Section 112, as supplemented by the guidance contained in this Letter, is to be implemented immediately in accordance with the procedural requirements set forth in Part III. PART II -- OVERVIEW OF SUBSTANTIVE REQUIREMENTS This Part provides an overview of Section 112. The Final Rule Attachment I should be consulted for further information on each point. The new provision contains two principal features. The first establishes the standards under which: - Persons that make expenditures to influence a HUD officer or employee in the award of financial assistance or the taking of a management action by the Department must keep records, and report to HUD, on the expenditures; and - Persons that are engaged to influence a HUD officer or employee in the award of financial assistance or the taking of a management action by the Department must register with HUD, and report to HUD on their lobbying activities. The second feature imposes limitations on the fees that may be paid to consultants who are engaged to influence the award or allocation of the Department's financial assistance. It should be noted that except for limitations on fees to consultants, Section 112 contains procedural requirements only. It neither expands nor limits the circumstances in which communications designed to influence the Department's decisions may be made. ___________________________________________________________________________ Office of Ethics Page 2 Ethics Letter 91-3 _____________________________________________________________________ A. APPLICABILITY. Section 112 deals with the two players that are typically involved in efforts to influence the Department with respect to the award of financial assistance or the taking of management actions: those who obtain the services of another for this purpose and those who provide the services. Specific features include the following: 1. Persons Making Expenditures to Obtain Lobbying Services Section 86.20 a. Coverage. (1.) This section applies to each person: - That makes, or that enters into an agreement to make, an expenditure to a person; - That makes, or that enters into an agreement to make, an expenditure to a person on behalf of another person; or - On whose behalf an expenditure is made to a person, or an agreement to make an expenditure to a person is entered into; if the expenditure is intended to influence, or should reasonably be expected to have the effect of influencing, a decision of the Department with respect to the award of any financial assistance or the taking of any management action, through direct communication with any officer or employee of the Department. (2.) Exceptions: - This section only applies to expenditures that are made to another person: a person that makes covered expenditures on its own behalf, without retaining another person, is not subject to this section; and - The person that makes, or that enters into an agreement to make, an expenditure to a person on behalf of another person is subject to the requirements of this part only if the person has an interest, financial or otherwise, in the lobbying activity. b. Record keeping. Except as provided by paragraphs 1.d., 1.e., and 1.f., each person subject to ___________________________________________________________________________ Office of Ethics Page 3 Ethics Letter 91-3 _____________________________________________________________________ paragraph 1.a. of this Part I above must keep detailed records of all agreements, and all expenditures see Sections 86.20 (b) (1), (2), and (3) of the final rule , referred to in paragraph 1.a. c. Reporting. (1.) Annual report. - Except as provided by subparagraphs l.c. (3.) and (4.) below, and by paragraphs 1.d., 1.e., and 1.f. below each person subject to paragraph 1.a. must file with the Office of Ethics (OE) in Headquarters, between the first and 10th day of January of each year, a report form HUD-2883, see Attachment II specifying all the information required to be retained under paragraph 1.b. see Section 86.20 (b) (1) with respect to the preceding calendar year. (2.) Filing reports. - A form HUD-2883 is considered properly filed when it is deposited in a post office within the prescribed time, and is sent by certified or registered mail, postage prepaid and return receipt requested, to OE. If OE does not receive a properly filed report, the person must promptly file a duplicate report upon notification by OE that the original report has not been received. (3.) Exception for compensation to regularly employed personnel. - The reporting requirements for this part do not apply to the payment of reasonable compensation to a regularly employed officer or employee of the person that requests or receives financial assistance, or that is involved in any management action; and - Any person asserting the exception in this part must demonstrate, upon OE's request and to OE's satisfaction, that it qualifies for the exception, including that it paid reasonable compensation to a regularly employed officer or employee, as those terms are ___________________________________________________________________________ Office of Ethics Page 4 Ethics Letter 91-3 _____________________________________________________________________ defined in Section 86.15 of the final rule. (4.) Minimum dollar requirement. - The reporting requirements of this part do not apply if the sum of the amounts involved in all the agreements to make an expenditure entered into, and of all the expenditures made, by or on behalf of a person under subparagraph 1.a.(1.) above during the year covered by the report, is less than $10,000. d. Exception for compliance with HUD requirements. The record keeping requirements of paragraph 1.b., and the reporting requirements of paragraph 1.c. above, do not apply to: - Any part of an agreement that is wholly and expressly limited to making an expenditure to comply with conditions, requirements, or procedures imposed by the Department in connection with any financial assistance or management action; or - Any expenditure that is limited to complying with conditions, requirements, or procedures imposed by the Department in connection with any financial assistance or management action; but only if: -- The conditions, requirements, or procedures are imposed, or are reasonably believed by the person to be imposed, by law, regulation, directive, or other written instruction (such as a Notice of Fund Availability, an application document, or a mortgagee letter); or -- The conditions, requirements, or procedures are imposed by an officer or employee of the Department, other than as provided above. e. Exception for litigation. The record keeping requirements of paragraph 1.b., and the reporting requirements of paragraph 1.c. above, do not apply to any agreement to make an expenditure, or any expenditure made, in connection with litigation to which the person is a party. ___________________________________________________________________________ Office of Ethics Page 5 Ethics Letter 91-3 _____________________________________________________________________ f. Exception for elected State and local government officials. The record keeping requirements of paragraph 1.b., and the reporting requirements of paragraph 1.c., do not apply to: - The elected officials of a State or local government; - The political appointees who serve on the personal staffs of the elected officials of a State or local government; and - Full-time, appointed officials of a State or local government who serve in policy-level positions. The exception to this paragraph 1.f. only applies to the extent that the individual claiming it is engaged in the official business of the State or local government that the individual serves. g. Counting expenditures. (1.) Expenditures pursuant to agreements. - In the case of an agreement to make an expenditure, the full amount of the agreement must be taken into account in reporting under subparagraph 1.c. (1.) above, or in determining the dollar threshold under paragraph 1.c. (4.) above, even if not all the expenditures pursuant to the agreement are made at that time or within the reporting year. Subsequent expenditures pursuant to the agreement must be taken into account for those purposes only to the extent that the expenditures exceed the consideration specified in the agreement see Section 86.20 (g) (1) of the final rule . (2.) Contingent liability. - The amount of any contingent liability assumed by a person equals the expenditure that the person would have had to make, if the contingency had been realized. h. Form and manner of record keeping and reporting. The Department will be publishing in the Federal Register in the form of a Notice the requirement that persons complying with paragraph 1.c. above ___________________________________________________________________________ Office of Ethics Page 6 Ethics Letter 91-3 _____________________________________________________________________ must report required information on form HUD-2883. 2. Persons engaged to provide lobbying services. a. Coverage. (1.) This part applies to: - Each person that is retained by a person to influence a decision of the Department with respect to the award of any financial assistance or the taking of any management action through direct communication with any officer or employee of the Department. (2.) Exception: - It does not apply to a person that attempts to influence the Department on its own behalf, without being retained by another person. b. Registration. (1.) General requirement. - Except as provided in paragraphs 2.d., 2.e., and 2.f. below, each person subject to paragraph 2.a. above must register with the Office of Ethics (OE). The registration must be received by OE not later than 14 days after the date on which the person is retained, as provided by paragraph 2.a. above. (2.) Form and content. - The registration referred to above must be in writing see Section 86.25 (b) of the final rule for specific details . Form HUD-2881-A see Attachment III is requested from individuals and form HUD-2881-B see Attachment IV is required from entities complying with subparagraph 2.b.(1.) above. c. Annual reporting. (1.) In general. - Except as provided by subparagraphs 2.c. (2.) and (3.), and in paragraphs 2.d., ___________________________________________________________________________ Office of Ethics Page 7 Ethics Letter 91-3 _____________________________________________________________________ 2.e., and 2.f. below, each registrant under paragraph 2.b. above must, between the first and 10th day of January of each year, file with OE a detailed report, form HUD-2882-B see Attachment V , of all money or other thing of value received, and of all money or other thing of value expended, by the registrant during the preceding year in carrying out activities pursuant to an agreement subject to paragraph 2.a. above. (2.) Minimum dollar requirement. - The reporting requirements in subparagraph 2.c.(1.) above do not apply if the sum of all the money or other things of value received by the person for activities under paragraph 2.a. is less than $10,000 in that year. (3.) Exception for compensation to regularly employed personnel. - The reporting requirements of subparagraph 2.c.(1.) above do not apply to receipt of reasonable compensation by a regularly employed officer or employee of the person that requests or receives financial assistance, or that is involved in any management action. - Any officer or employee asserting the exception under subparagraph 2.c.(3.) must demonstrate, upon OE's request and to OE's satisfaction, that it qualifies for the exception, including that it received reasonable compensation and that it was a regularly employed officer or employee, as those terms are defined in Section 86.15 of the final rule. d. Exception for compliance with HUD requirements. The registration requirements of paragraph 2.b., and the reporting requirements of subparagraph 2.c.(l.), do not apply to: (1.) Any agreement that is wholly and expressly limited to complying with conditions, requirements, or procedures imposed by the Department in connection with any financial assistance or management action; or ___________________________________________________________________________ Office of Ethics Page 8 Ethics Letter 91-3 _____________________________________________________________________ (2.) The receipt of any money or other thing of value that is limited to complying with conditions, requirements, or procedures in connection with any financial assistance or management action; but only if: - The conditions, requirements, or procedures are imposed, or are reasonably believed by the person to be imposed, by law, regulation, directive, or other written instruction (such as a Notice of Fund Availability or application document or a mortgagee letter); or - The conditions, requirements, or procedures are imposed by an officer or employee of the Department, other than as provided above. e. Exception for litigation. The registration requirements of paragraph 2.b., and the reporting requirements of subparagraph 2.c.(1.), do not apply to any agreement, or to the receipt or expenditure of money or any other thing of value in connection with litigation to which the person is a party. f. Exception for elected State and local government officials. The registration requirements of paragraph 2.b., and the reporting requirements of subparagraph 2.c.(1.), do not apply to: - The elected officials of a State or local government; - The political appointees who serve on the personal staffs of the elected officials of a State or local government; and - Full-time, appointed officials of a State or local government who serve in policy-level positions. The exception to this paragraph 2.f. only applies to the extent that the individual claiming it is engaged in the official business of the State or local government that the individual serves. g. Updates for changes in registration. Each person that makes a change to the information in a registration form previously submitted, must ___________________________________________________________________________ Office of Ethics Page 9 Ethics Letter 91-3 _____________________________________________________________________ comply with all applicable registration requirements within 14 days of any change. h. Form and manner of record keeping and reporting. The Department will be publishing in the Federal Register in the form of a Notice that: - Form HUD-2881-A see Attachment III is required from individuals and form HUD-2881-B see Attachment IV is required from entities complying with the registration requirements under paragraph 2.b. above; and - Form HUD-2882-B see Attachment V is required from persons complying with the annual reporting requirements under paragraph 2.c. above. 3. Public inspection and publication requirements. a. Public inspection. Each report on an agreement or an expenditure that is filed with the Office of Ethics (OE) will: - Be kept by OE for at least the two-year period beginning on the date of filing; - Constitute part of the public records of the Department; and - Be open to public inspection. The Department will publish a Notice in the Federal Register informing the public when and how public inspection under paragraph 3.a. may be conducted. b. Federal Register publication. The Department will compile all information submitted to the OE under paragraph 1.c., and paragraphs 2.b. and 2.c., as soon as practicable after the close of the calendar year with respect to which the information is filed. - The Department will publish this information annually in a Notice in the Federal Register. B. LIMITATIONS ON CONSULTING FEES Section 13 contains limitations on the fees that may be paid to consultants engaged to influence the award or allocation of the Department's financial assistance. Specific features include the following: ___________________________________________________________________________ Office of Ethics Page 10 Ethics Letter 91-3 _____________________________________________________________________ 1. General rule. Except as provided by paragraph 2. below, no person that is engaged for pay or any other consideration to influence a decision of the Department with respect to the award or allocation of any financial assistance, through direct communication with any officer or employee of the Department, may seek or receive any fee or remuneration of any kind that: - Is based on the amount of the assistance or the number of units that may be provided by the Department; or - Is contingent in any way on an award of assistance by the Department, except where: -- Services are provided to a public or private nonprofit entity applying for the award or allocation of assistance; and -- All or part of the professional services related to a project are donated to the nonprofit entity in the event assistance for a project is not awarded. --- Professional services includes (but is not limited to) legal and other advice concerning the financial assistance involved, the preparation of application and other documents with respect to the financial assistance, and any professional activities subject to the requirements for persons engaged to provide lobbying services with respect to the award or allocation of the financial assistance; --- Part of the professional services means at least 33 1/3 percent of the total professional services provided to the nonprofit entity; --- Engaged for pay, or for any other consideration includes, in the case of an entity, the employment relationship between the entity and its partners, associates, or other officers and employees; and --- Award or allocation of any financial assistance means the provision of any financial assistance including assistance involving the amendment, extension, or renewal of an assisted housing contract. ___________________________________________________________________________ Office of Ethics Page 11 Ethics Letter 91-3 _____________________________________________________________________ 2. Exception for compliance with HUD requirements. The provisions of paragraph 1. above do not apply to: - Any agreement that is wholly and expressly limited to complying with conditions, requirements, or procedures imposed by the Department in connection with any financial assistance; or - The receipt of any money or other thing of value that is limited to complying with conditions, requirements, or procedures in connection with any financial assistance; but only if: -- The conditions, requirements, or procedures are imposed, or are reasonably believed by the person to be imposed, by law, regulation, directive, or other written instruction (such as a Notice of Fund Availability or application document or a mortgagee letter); or -- The conditions, requirements, or procedures are imposed by an officer or employee of the Department, other than as provided above. C. PENALTIES Section 112 authorizes the imposition of civil money penalties on any person who knowingly fails to comply with the provision's reporting and registration requirements. The penalty is the greater of $10,000 or the total amount received by a person for any lobbying service to which the failure to report or register relates. This civil money penalty is in addition to other available civil remedies, administrative sanctions or criminal penalties which may be available. PART III -- PROCEDURAL REQUIREMENTS This Part describes actions which must be taken by Departmental personnel in connection with requirements of Section 112 of the HUD Reform Act. A. RESPONSIBILITIES OF PRINCIPAL STAFF Principal staff may direct persons with questions or inquiries related to Section 112 to the Office of Ethics. B. RESPONSIBILITIES OF REGIONAL DIRECTORS OF ADMINISTRATION (DOAs) AND FIELD OFFICE ADMINISTRATIVE OFFICERS (FO/AOs) 1. Each DOA and FO/AO shall serve as designated liaison to the Office of Ethics. ___________________________________________________________________________ Office of Ethics Page 12 Ethics Letter 91-3 _____________________________________________________________________ 2. Each DOA and FO/AO will be responsible for providing to persons upon request: a. Form HUD-2883 see Attachment II for persons complying with the annual reporting requirements of Section 86.20 (c); b. Form HUD-2881-A see Attachment III for individuals and form HUD-2881-B see Attachment IV for entities complying with the registrations requirements of Section 86.25 (b); and c. Form HUD-2882-B see Attachment V for persons complying with the annual reporting requirements of Section 86.25 of the final rule. C. FORMS Initially, the Office of Ethics will distribute all forms to the Field. Thereafter, the Regional Offices will have responsibility for replenishing the forms to Field Offices in their Region. Forms will also be available in the Office of Ethics. 1. Filing and Forwarding of Required Information a. All required information must be submitted by applicants directly to the Office of Ethics (Headquarters, Room 2158). b. Required information mailed or deposited at Regional or Field Offices will be returned to applicants and will not be considered properly filed as required by Section 112. Submitters should be clearly advised by DOAs and FO/AOs to resubmit information required under Section 112 to the Office of Ethics. 2. Maintenance of Required Information a. The Office of Ethics will be the central depository for all required information filed with the Department. b. All required information filed will be available for public inspection at the Office of Ethics between 10 a.m. and 2 p.m. c. Any request from a member of the public for a copy of information filed under Section 112 shall be forwarded to the Office of Ethics for handling. D. RECORDKEEPING AND REPORTING REQUIREMENTS The Office of Ethics will maintain accurate records concerning registration and reporting information filed under Section 112. The Office will compile data necessary for preparing ___________________________________________________________________________ Office of Ethics Page 13 Ethics Letter 91-3 _____________________________________________________________________ reports which are required under Section 112 to be filed by the Department. E. NOTICE OF VIOLATIONS Any suspected violation of requirements of Section 112 should be brought to the attention of the Director, Office of Ethics. F. CONTACT Any questions may be addressed to Arnold Haiman in the Office of Ethics, Room 2158, FTS 458-3815. ___________________________________________________________________________ Office of Ethics Page 14 Ethics Letter 91-3 _____________________________________________________________________ Ethics Letter 91-3 Lobbyist & Consultant Activity Annual Report Attachment II of "Persons" making Expenditures for Lobbying Activities __________________________________________________________________________ ******************************************************************** * * * * * * * * * * * * * * * * * * * GRAPHICS MATERIAL IN ORIGINAL DOCUMENT OMITTED * * * * * * * * * * * * * * * * * * * ******************************************************************** __________________________________________________________________________ Page 1 of 3 _____________________________________________________________________ Ethics Letter 91-3 Lobbyist & Consultant Activity Annual Report Attachment 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