The HOME statute requires that within 24 months after HOME funds become available, a PJ must reserve at least 15 percent of its HOME allocation for activities by qualified CHDOs. HOME monitors should review progress reports to track whether this threshold is likely to be met on schedule.

While CHDOs can use HOME funds for any eligible HOME activity, only certain activities count toward the 15 percent minimum set-aside. The monitor must ascertain whether the assistance being reviewed counts as a set-aside activity. Eligible set-aside activities in which a CHDO acts as an owner, sponsor, or developer of the project include:

• The acquisition and/or rehabilitation of rental housing;
• New construction of rental housing;Acquisition and/or rehabilitation of homebuyer properties;
• New construction of homebuyer properties; and
• Direct financial assistance to purchasers of HOME-assisted housing that has
  been sponsored or developed with HOME funds by the CHDO.

All CHDO partners must be monitored annually, and several additional areas must be examined when CHDOs are involved. The monitor must be aware that CHDOs can receive some types of funding not available to owners, developers, sponsors, sub recipients, state recipients, and contractors (e.g., operating expenses and pre-development assistance). If a CHDO receives funds for pre-development costs or operating expenses, the monitor must verify that actual expenditures have not exceeded the approved amount for those activities. The monitor must also verify that the CHDO has spent each type of funds only on eligible costs. Written agreements with all CHDOs should specify the financial records to be kept for each type of expenditure.