Construction draws, retainage, the ICPA cost certification, and DSHA's own 8609 process — Delaware

The placed-in-service deadline: two paths, both federal-law floors, not a fixed months-from-award clock

DSHA's QAP states the Placed in Service Requirements plainly: "All developments receiving a Preliminary Reservation of credits must be placed in service either by November 1st of the year in which they receive Reservation or must receive a Carryover Allocation of credit prior to the end of the year in which they have received the Preliminary Reservation" (2025-2026 QAP, p.55). Choosing the Carryover path buys time but adds a progress test: the owner must incur more than 10% of reasonably anticipated development costs no more than twelve months after the Carryover Allocation is issued, and "all projects must be placed in service by the end of the second calendar year following the year of allocation" — a direct restatement of the federal floor at IRC §42(h)(1)(E), not a Delaware-specific extension of it.

The QAP requires written CPA certification of the 10% Test "by the close of the calendar year of the allocation or twelve (12) months from the date of the carryover allocation" (p.55) — the QAP's own text gives both reference points rather than a single unambiguous date, so confirm the operative deadline for a specific award with DSHA's Housing Development Section rather than assuming either figure controls. Separately, 4% Credit/tax-exempt bond deals must clear the 50% Test (a minimum of 50% of Aggregate Basis financed by bond proceeds) before permanent closing; DSHA's Guidelines note that failing the 50% Test reduces the eligible basis rather than triggering automatic disqualification.

Missing the deadline isn't automatically fatal: DSHA's Forward Reservation process, at a price

If circumstances beyond the applicant's control threaten the placed-in-service deadline, the QAP gives DSHA sole discretion to allow a return-and-forward-reservation of the same credit amount rather than an outright loss of the allocation. The applicant must notify DSHA within 30 days of learning of the delay, and — if DSHA agrees the delay is outside the applicant's control — must submit written documentation between September 16 and November 1 of the applicable year explaining the due diligence performed, the specific cause of the delay, and the mitigation steps attempted. This path is capped: DSHA will permit a return of credits under this provision "up to two times," at its sole discretion, and any re-application must comply with whatever QAP is current at the time of re-application — not the QAP the deal was originally awarded under.

Construction-period oversight: monthly meetings, a sliding retainage scale, and DSHA's own punch-list process

DSHA's Cost Certification and Draw Guide ("the Guide") — not the QAP itself — carries the operational detail. A preconstruction kick-off meeting is held at DSHA's offices within 10 days of construction closing, and DSHA requires "one progress and one draw meeting be held on-site each month" for the life of construction. Draw requests may be submitted monthly, either as a complete package or a pencil copy followed by the complete package within one week; draws submitted later than that window must roll into the following month's draw. The most recently posted edition of the Guide on DSHA's own site is labeled "2020 – 2022 Allocations, Effective as of July 1, 2020" — it is the only Draw and Cost Certification Guide currently linked from DSHA's LIHTC page, but its own title suggests it may predate the 2025-2026 QAP cycle; treat its procedural mechanics (meeting cadence, retainage, punch-list process) as the best available evidence of DSHA's practice, and confirm current fee amounts separately against the 2025-2026 Guidelines.

DSHA's own inspection process runs through a punch-list-and-re-walk mechanic rather than fixed quarterly visits: "When work is completed on a building or designated area, DSHA will perform a punch list inspection and will compile a written list of corrections to be completed by the contractor. The second inspection (re-walk) of a given area must be completed within thirty (30) days of the initial walk." A building cannot be occupied until DSHA issues its own letter confirming readiness, independent of any other government approvals. A one-year warranty inspection follows roughly a year after substantial completion; a General Contractor that fails to resolve warranty items within 45 days of that inspection becomes ineligible to bid on future DSHA-financed work until the items are corrected.

Cost certification: an ICPA GAAS audit under DSHA's own Guide, and a genuine fee conflict worth flagging

Delaware runs its own cost-certification framework rather than borrowing another federal program's standard by reference. The QAP requires "cost certification by the owner (mortgagor) and the general contractor," with the certification covering "all sources and uses of funds including all syndication fees" (2025-2026 QAP, p.57). The Guide fills in the audit standard: an Independent Certified Public Accountant (ICPA) — who cannot have an Identity-of-Interest relationship with the mortgagor or contractor, and who is barred from having provided the project's bookkeeping or accounting services in the prior five years — must render "an unqualified opinion addressed to DSHA in a form acceptable to DSHA," prepared "in accordance with generally-accepted auditing standards." A qualified or adverse opinion, or a disclaimer, is not acceptable to DSHA unless fully explained and separately satisfactory to the agency. Notably, the Guide states that "[w]here Government Auditing Standards apply, the ICPA must meet the auditor qualifications of Auditing Standards" — phrasing that makes the federal Yellow Book standard conditional on some triggering fact (most likely a federal-funding threshold under the Single Audit Act) rather than universal to every Delaware Housing Credit cost certification. This research could not confirm exactly what triggers that condition; confirm directly with DSHA before assuming a Yellow Book-level audit is or is not required for a specific deal.

The mortgagor and contractor certify separately, on DSHA Form CC-100 (Mortgagor's Certificate of Actual Cost) and CC-101 (Contractor's Certificate of Actual Cost) respectively, each supported by the ICPA's opinion. Once a completed cost certification is submitted, "no additional costs may be submitted to increase eligible basis," and DSHA will not accept increased costs after that point absent its own request for clarification.

8609 issuance: building-by-building at placed-in-service, with a 60-day review window

Delaware's Final Closing and 8609 Requirements section states that DSHA "will prepare and issue IRS Form(s) 8609 certifying the final amount of LIHTC allocated to each building in a project at the time the buildings are placed in service" — a building-by-building issuance model, not a single consolidated release held back until every building in a multi-building project reaches completion. DSHA advises that its own review "may take as long as sixty (60) days to complete," and for any project carrying DSHA financing, "Form(s) 8609 will not be issued until permanent closing," regardless of individual buildings' placed-in-service dates. Required submissions include the final DSHA-approved Cost Certification, a Certificate of Occupancy for each building (or, for rehab projects where the municipality doesn't issue COs, substantial-completion documentation), evidence of DSHA loan-closing compliance where applicable, registration on www.destatehousingsearch.org, and confirmation that tenant data has been uploaded to DSHA's database system — DSHA notes this list "is subject to change" and directs owners to confirm the current requirements for each project.

The processing costs behind this are easy to underbudget. Beyond the disputed compliance monitoring fee (above), the QAP-cited Guidelines list a "9% and 4% Tax Credit LIHTC Allocation Fee" of 1.50% of the carryover allocation multiplied by 10 years, due no later than construction closing — a materially different fee mechanic from a flat annual percentage-of-credit charge. A Cost Certification Penalty Fee of $2,500 (charged separately to both the mortgagor and the contractor) applies if cost certification isn't submitted within the Guide's required timeframe, plus an additional $500 for every week it remains outstanding, and a $1,000 fee applies to each additional required review.