Finance

CHIP FAQs - Eligible Costs

CHIP funding can only be used for certain project and administrative costs that meet program rules. Knowing which expenses are eligible can help municipalities and developers plan projects, prepare budgets, and avoid delays during the application process. The information below explains the types of costs that may qualify for CHIP support and which expenses may not be covered.

VEPC's CHIP webpage may have additional FAQs related to this topic.

What are examples of items that would be considered "improvements"?

Improvements may include, but are not limited to, the following:

Utilities, such as power distribution and transmission lines and conduit, telecommunications lines and conduit, telecommunications towers, digital infrastructure, and power or telecommunications equipment; drinking water, wastewater, and storm water, infrastructure including: water sources; green and gray stormwater practices; distribution/collection and conveyance piping and pump stations; and treatment systems, facilities, and regulatory required pertinent equipment.
Thermal energy networks, waste heat recovery, and community-scale geothermal.
Transportation improvements such as publicly accessible roads, streets, bridges, parking lots, facilities, garages, and structures, multimodal facilities, public transit stop equipment and amenities, street and sidewalk lighting, roundabouts, crosswalks and/or other pedestrian crossing treatments, traffic calming features, sidewalks, streetscapes, way-finding signs and kiosks; traffic signals, medians, turn lanes, and property acquired or used for right of way such as hiking and biking trails, pathways to facilitate multimodal transportation, bicycle and pedestrian lanes, paths, and bridges, street furnishings.
Site preparation for development or redevelopment including acquisition, demolition, environmental remediation of contaminated property, and mitigation of a flood-prone area.
“Soft costs” such as consulting, design, architects, engineering, accounting, legal, project management, associated application fees, or other professional services directly related to the implementation and construction of eligible site improvements.

If a proposed housing development project would require the municipality to install infrastructure that serves more than the CHIP Housing Development Site, is the full cost of the project CHIP eligible?

No, CHIP does not include a proportionality component. Eligible improvements under CHIP are not required to be prorated to the housing development’s use of the infrastructure. However, a de-facto proration will be applied based on the potential increment the site could generate. The maximum that site could contribute to the improvement is the amount of new tax revenue the housing development will generate over the increment retention period. The critical piece is that the applicant must demonstrate the improvement is necessary to enable the CHIP housing development, regardless of how many other homes/businesses the improvement may support.

(Answer provided by VEPC staff)

Are municipal employee and staff costs directly related to the administration and implementation of the CHIP Site considered an "Eligible Related Cost"?

Yes. However, these costs may only be paid with the municipal tax increment.

Is the cost of the CHIP-related independent municipal audit an "Eligible Related Cost"?

Yes.

Are the costs of providing notification about, and obtaining public approval for, a CHIP Plan, a Finance Plan and CHIP debt, CHIP application, or CHIP amendment "Eligible Related Costs"?

Yes.

Are public and community spaces, such as parks, community centers, and community spaces in buildings, eligible CHIP costs?

No. These spaces are outside the Legislative intent of CHIP.

Can CHIP be used for speculative development, such as identifying potential housing development sites within the community?

No. A developer and housing development plan is required to prove housing benefit.

How does a municipality fund the administrative piece of CHIP?

Municipalities must track and pay these costs when they are incurred and then seek reimbursement through CHIP. However, CHIP will only reimburse municipal costs related to a specific housing site. General CHIP activities, such as learning about the program, setting up the municipal team, creating policies, etc. aren’t reimbursable.

Grants, such as the Vermont Municipal Planning Grant program and Vermont’s Community Development Block Grant Program, also might be a source of funding for municipal administrative costs.

Publication Date

05/20/2026

CHIP FAQ - Tax Increment & Tax Increment Financing

Tax increment financing, often called TIF, is a tool that helps communities support public improvement projects and economic growth. CHIP projects may use tax increment financing to help pay for eligible infrastructure costs that enable housing development. Understanding how tax increment works for CHIP can help communities better plan projects, manage funding, and meet program requirements.

VEPC's CHIP webpage may have additional FAQs related to this topic.

What percentage of the education property tax increment may be retained for a standard (market rate) housing infrastructure project?

75 percent (75%)

If a project meets certain affordability criteria is the percentage of the education property tax increment that may be retained different?

Projects meeting certain affordability criteria are eligible to retain an additional 10 percent (10%) for a total of 85 percent (85%).

What is the duration for which tax increment may be retained?

Tax increment may be retained for a period of up to twenty (20) years from the year in which debt is first incurred.

Will the tax increment be sufficient to pay for all eligible infrastructure costs?

It depends on both the cost of the infrastructure and the amount of tax increment that will be generated by a housing development project. CHIP financing is used to close gaps in funding. The municipality and developer will need to determine what the gap is and whether the anticipated tax increment will close the gap fully.

How is tax increment calculated?

The tax increment is calculated by subtracting the taxable value of the property on April 1 from the Original Taxable Value of the property.

Current Taxable Value – Original Taxable Value = Tax Increment

What must a tax increment financing plan include?

A tax increment financing plan must include:

a statement of costs and sources of revenue;
estimates of assessed values within the housing development site;
the portion of those assessed values to be applied to the Housing Infrastructure Project;
the resulting tax increments in each year of the financial plan and the lifetime education property tax increment retention;
the amount of bonded indebtedness or other financing to be incurred;
estimates of necessary principal, interest, costs of improvements, and related costs and in the event of municipal financing the amount anticipated to be approved by voters;
other sources of financing and anticipated revenues; and
the duration of the financial plan.

Can other forms of public funding be used in combination with CHIP?

Yes. Grants, loans, and other funding can be used in combination with CHIP tax increment. However, if a grant is used to pay some or all of the cost of an eligible CHIP infrastructure improvement, the portion of the cost paid by the grant cannot be reimbursed through CHIP (no double dipping).

When is the Original Taxable Value (OTV) of a CHIP Housing Development Site determined?

The OTV of a CHIP Housing Development Site is set on April 1 of the year the Site is approved by VEPC.

This means:

If VEPC approves an application on 12/31/26, the OTV is the assessed value on 04/01/26.
If VEPC approves an application on 01/01/27, the OTV is the assessed value on 04/01/27.

When must the lister or assessor certify the Original Taxable Value of a CHIP Housing Development Site?

The municipality must certify the Original Taxable Value of a CHIP Housing Development Site after VEPC approves the CHIP application.

Who does the lister or assessor report the Original Taxable Value of a CHIP Housing Development Site to?

The municipal Legislative Body.

Can we use a tax stabilization agreement for a CHIP site?

Yes. However, municipalities should consider this carefully.

A tax stabilization agreement can help make a project financially feasible, especially for challenging or high-cost developments. In some cases, it may help a project move forward that otherwise would not happen.

At the same time, a tax stabilization agreement may reduce or delay the increase in property tax revenue that CHIP relies on to fund infrastructure improvements. This can affect project financing and make administration of the CHIP district more complicated.

Communities also should consider public perception issues, such as fairness, transparency, and the long-term impact on the tax base.

A key question to ask is: Would a smaller or delayed tax increment with a stabilization agreement be better than no project (and no increment) at all?

Is the lister required to do a projection of future development value for a prospective CHIP site?

No. This is not a statutory duty of listers.

Depending on the project’s complexity, projections may be developed or reviewed by:

A municipal assessor (if they have the necessary experience).
A contracted assessor or appraisal professional.
A financial or economic consultant with TIF experience.
A real estate market consultant.
The project developer, subject to municipal review and verification.

Although a developer may prepare an initial projection, the municipality should independently evaluate the assumptions before relying on them. Because projected future development value affects tax increment estimates, bonding decisions, and the overall financial feasibility of the CHIP project, municipalities should be comfortable that the assumptions are reasonable and supported by evidence.

VLCT recommends conservative forecasting of the future development value. It also can be helpful to forecast expected and optimistic scenarios for comparison.

Publication Date

05/20/2026

CHIP FAQs - Debt

Many CHIP projects involve borrowing funds to pay for important infrastructure improvements. Understanding how debt works can help municipalities make informed financial decisions and plan for future costs. The information below explains how debt may be used in CHIP projects and what municipalities should consider before taking on financial obligations.

VEPC's CHIP webpage may have additional FAQs related to this topic.

What is the timeline for incurring CHIP eligible debt?

Sponsors may incur debt eligible for tax increment financing for a period of up to five years following creation of the housing development site. VEPC may extend this for up to three years.

Is the 5 years for incurring debt based on a calendar year or the municipality's fiscal year?

Calendar year.

For example, if the CHIP starts 04/01/26, the municipality has until 03/30/31 to incur debt.

Can a municipality incur debt for the Housing Infrastructure Project prior to CHIP application approval from VEPC?

No. Debt eligible for tax increment financing cannot be incurred until the Housing Development Site is approved by VEPC.

Is voter approval required before a municipality incurs debt for a Housing Infrastructure Project?

Yes, municipal voters must approve each instance of municipal borrowing in a warned vote.

What information must be provided to the public before the CHIP indebtedness vote?

Information that must be provided to the public includes:

The amount and type of debt and related costs to be incurred including, principal, interest, and fees,
The term of the debt,
The Housing Infrastructure Project to be financed,
The Housing Development Project that will occur due to the Housing Infrastructure Project,
A public notice that if the tax increment received is insufficient to pay debt costs in any year, the municipality remains liable for the debt, and
If interfund loans within the municipality are used, the information must include the terms and condition of the loan.

When must a municipality incur debt for the Housing Infrastructure Project?

In the event of municipal financing, the first issuance of debt must be incurred within five years of CHIP site creation (April 1 in the year the application was approved by VEPC). VEPC may issue an extension for up to three years (for a total of eight years).

What instruments can be used for municipal CHIP debt?

Allowed instruments include bonds, loans, interfund loans (interest-free), and bond anticipation notes.

Bond anticipation notes or other forms of temporary financing may not be used as a first incurrence of debt.

What guidance can help a municipality assess whether a CHIP-financed infrastructure project is ready for bonding?

The underwriter for the bonds will specify the conditions that must be met to sell bonds for the project, accounting for prevailing market conditions. Vermont municipalities are encouraged to reach out to Ken Linge at the Vermont Bond Bank to identify what specific requirements might apply in their case. His email address is ken@vtbondagency.org.

Publication Date

05/20/2026

CHIP FAQs - Application & Application Requirements

Applying for CHIP involves providing information about the project and how the project meets program requirements. Careful planning and complete applications can help the review process move more smoothly. The questions below explain what is needed when applying for CHIP assistance and what communities should expect during the application process.

VEPC's CHIP webpage may have additional FAQs related to this topic.

Is a developer required for a municipality to submit a CHIP application?

Yes, unless the municipality will be the entity developing the housing development site.

What must a municipality do as part of the CHIP application process?

To pursue a housing infrastructure project, a municipality must:

develop and adopt a housing development plan,
designate the housing development site on which housing development will occur,
provide voter notice of a proposed housing infrastructure agreement,
execute a housing infrastructure agreement,
hold an indebtedness vote if the municipality will incur debt,
submit a CHIP Interest Form, and
apply to VEPC to use tax increment financing for the housing infrastructure project.

What is the first step a municipality should take before developing a CHIP application?

Municipalities must complete a CHIP Interest Form and submit it to VEPC staff for review prior to submitting a full application to VEPC.

When should a municipality submit a CHIP Interest Form?

There is no deadline to submit the interest form; however, municipalities should submit the form within a year of the CHIP project being "shovel ready".

See VEPC FAQs.

How does a municipality submit a CHIP application?

VEPC uses the State of Vermont Grant Electronic Application and Reporting System (GEARS) online portal for CHIP applications and reporting.

Can municipalities see the CHIP application in advance of applying?

Yes. Municipalities can register for an account in GEARS - or use their existing account - to access and explore the CHIP application at any time. VEPC also published a CHIP Application Portal User Guide to help municipalities navigate GEARS and the CHIP application.

Does the Legislative Body need to approve the CHIP application?

Yes.

What project requirements must be satisfied to obtain approval for a CHIP application?

Projects must satisfy the “But-For” Test, certain process requirements, and the housing development either dedicates at least 60 percent of its floor area to housing or meaningfully addresses the purpose of CHIP.

How long will it take for our CHIP to be approved after we submit an application to VEPC?

It depends. VEPC staff must determine that an application is complete and schedule a site visit. Once the site visit has occurred, VEPC has no more than 90 days to approve or disapprove a CHIP site.

Can a municipality request approval of more than one CHIP site?

Yes.

Does approval of one CHIP site decrease the likelihood that another CHIP site will be approved?

Generally, no. VEPC can approve multiple CHIP sites in a community.

As VEPC nears the maximum CHIP allocation for a year, it may elect to prioritize approval of CHIP sites in communities with no or fewer approved CHIP sites.

Is there a maximum amount – a cap – on the amount of CHIP projects that VEPC can approve each year?

Yes. VEPC may annually approve not more than $200,000,000.00 in aggregate lifetime education property tax increment retention.

What if a municipality’s CHIP application is denied?

If VEPC denies a municipality’s CHIP application, VEPC will provide the reason for the denial to the municipality. If resolvable, the municipality may file a new application for VEPC’s consideration.

Publication Date

05/20/2026

CHIP FAQs - CHIP Basics

CHIP helps communities pay for important local projects like clean water, safe roads, and other infrastructure improvements that enable housing development. The information below explains the purpose of CHIP and how the program helps communities plan for the future.

What is CHIP?

CHIP = Community and Housing Infrastructure Program created in Act 69.

CHIP utilizes tax increment financing (TIF) for infrastructure improvements that support the development of new housing, with the preferential consideration of affordable and moderate-income housing. It is a targeted use of the tool (a.k.a. project-based TIF), allowing municipalities to retain a portion of the property tax revenue resulting from increased values within a defined Housing Development Site (project). These funds may be used to repay the debt incurred for or pay for eligible infrastructure improvements.

CHIP is designed to complement local and state planning priorities and foster coordinated public-private partnerships. Projects must meet statutory criteria and be approved by the Vermont Economic Progress Council (VEPC) before municipal debt is incurred or a municipality is obligated to reimburse eligible infrastructure costs.

Why was CHIP created?

CHIP was created to “encourage the development of new primary residences for households of low and moderate income across both rural and urban areas of all Vermont counties that would not be created but for the infrastructure improvements funded by the Program.”

Vermont Act 69 (S. 127, 2025)

How does CHIP work?

CHIP authorizes a Sponsor - a municipality, a developer, or an independent agency that meets State lending standards - to finance the costs of infrastructural improvements using future property tax revenues from the parcel or parcels on which a housing development is constructed, subject to Vermont Economic Progress Council (VEPC) approval and the terms of a housing infrastructure agreement that governs the relationship among the municipality, the developer constructing the housing development, and the Sponsor.

Is a municipality required to participate in CHIP?

No. Municipalities are not required to participate in CHIP. Using CHIP and choosing to dedicate tax increment to a housing site are local decisions that communities can make to support their housing goals.

Does a municipality need to hire outside assistance for CHIP?

Some larger municipalities may have staff who can help prepare or review a CHIP plan. However, many municipalities may benefit from hiring outside consultants for certain types of work, such as:

reviewing financial feasibility and future tax increment estimates;
completing “But For” analyses for market-rate housing;
studying fiscal impacts;
reviewing infrastructure and capital costs;
analyzing the local housing market;
ensuring legal and statutory compliance, such as bond counsel review; and
reviewing project risks and helping negotiate a Housing Infrastructure Agreement.

A municipality may also need help from its municipal attorney to make sure all legal procedures are followed correctly.

For VEPC-approved CHIP sites, these costs may be reimbursed through CHIP.

What if the municipality does not have the resources to hire outside consultants?

A municipality may apply for grants or loans to help pay consultant costs. It may also ask the developer of the CHIP Housing Development Site to cover the costs needed to:

prepare or review housing and infrastructure projects;
negotiate a CHIP Housing Infrastructure Agreement; and
prepare a strong CHIP application.

If the developer is asked to pay these costs upfront, best practices include:

explaining this process in the municipality’s CHIP policy;
having a written funding agreement for each CHIP project; and
requiring the developer to provide a cash deposit so the municipality can pay consultant bills as they come due. The developer should keep a minimum amount of money in the deposit while the CHIP plan and agreement are being reviewed and negotiated.

Municipalities should not rely only on consultants or attorneys hired by the developer. Those professionals work for the developer and may have conflicts of interest.

Can CHIP fund our new wastewater system?

Maybe. CHIP funds infrastructure projects, like wastewater, when there is a specific housing development. A developer and housing development plan is required to prove housing benefit. If the housing project is other than affordable housing, you’ll also have to demonstrate that the housing project and the infrastructure improvement would not have occurred as proposed or would have occurred in a significantly different and less desirable manner than as proposed in the application but for the proposed utilization of the incremental tax revenues.

If use of CHIP is justified for the wastewater system, CHIP can only pay an amount up to the tax increment revenue generated by the specific housing project. Most wastewater systems are built using multiple funding sources (a.k.a. a funding stack).

Publication Date

05/20/2026

CHIP FAQs - Definitions

CHIP uses certain words and phrases that have special meanings within the program. Understanding these terms can make it easier to follow program requirements, complete applications, and plan projects. The definitions below are from the State's CHIP Guidelines.

VEPC's CHIP webpage may have additional FAQs related to this topic.

Affordable Housing

See 24 V.S.A. Chapter 117 § 4303.

Owner-occupied housing for which the total annual cost of ownership, including principal, interest, taxes, insurance, and condominium association fees, does not exceed 30 percent of the gross annual income of a household at 120 percent of the highest of the following:
- the county median income, as defined by the U.S. Department of Housing and Urban Development;
- the standard metropolitan statistical area median income if the municipality is located in such an area, as defined by the U.S. Department of Housing and Urban Development; or
- the statewide median income, as defined by the U.S. Department of Housing and Urban Development.
Rental housing for which the total annual cost of renting, including rent, utilities, and condominium association fees, does not exceed 30 percent of the gross annual income of a household at 80 percent of the highest of the following:
- the county median income, as defined by the U.S. Department of Housing and Urban Development;
- the standard metropolitan statistical area median income if the municipality is located in such an area, as defined by the U.S. Department of Housing and Urban Development; or
- the statewide median income, as defined by the U.S. Department of Housing and Urban Development.

Affordable Housing Development

A housing development where at least 15% of the units are designated as affordable housing with a recorded covenant or deed restriction ensuring affordability until the Final Repayment Date. Units must be used as the tenant’s or owner’s primary residence during such time. An application serving an affordable housing development does not have to meet the “but-for” test. The municipality may retain up to 85% education tax increment and must retain at least 85% of the new municipal tax increment.

Committed

Committed means pledged and appropriated for the purpose of the current and future payment of financing and related costs.

Developer

The person or entity responsible for undertaking to construct the housing development. Developers must enter into a binding Housing Infrastructure Agreement with the municipality.

Final Repayment Date

In the event of municipal financing of CHIP debt, the date on which the municipal debt is fully repaid, or in the event of non-municipal financing of CHIP debt, the date on which the municipality’s obligation to reimburse eligible infrastructure costs ends.

Financing

Financing means debt, including principal, interest, and any fees or charges directly related to that debt, incurred by a Sponsor, or other instruments or borrowing used by a Sponsor, to pay for a housing infrastructure project and, in the case of a Sponsor that is a municipality, authorized by the municipality pursuant to the law.

Housing Development

The construction, rehabilitation, or renovation of any building on an approved Housing Development Site. In connection with an approved Housing Development that is not an Affordable Housing Development or Moderate-Income Housing Development. A municipality may retain up to 75% of the education tax increment and must retain at least 85% of new municipal tax increment.

Housing Development Site

The whole parcel or parcels where the housing development will occur. If the development is to occur over multiple parcels, the parcels must be contiguous (i.e., a parcel may be separated by a road). Only parcels where the housing development is to occur can be included in the Housing Development Site, unless contiguous parcels are under common ownership and share a School Property Account Number (SPAN), in which case they must also be included. Housing Development Sites must be formally designated by the municipality (24 V.S.A. § 1908) and approved by VEPC. Housing Development Site boundaries define the area within which the original taxable value is established, and tax increment is generated. Once established, the boundaries of the Housing Development Site shall not change.

Housing Infrastructure Agreement

A homestead is the principal dwelling and parcel of land surrounding the dwelling, owned and occupied by the resident as the person’s domicile as defined by the Vermont Department of Taxes. Or, if the unit is a rental unit, the lease agreement stipulates that the tenant occupies the unit as their primary residence. Both owner-occupied and rental units must remain a primary residence until the Final Repayment Date.

Housing Infrastructure Project

A set of infrastructure improvements that support a specific CHIP housing development. These improvements must be directly tied to enabling the housing development. These improvements may or may not be located on the Housing Development Site.

Improvements

The installation, construction, or reconstruction of infrastructure that will serve a public good and fulfill the purpose of the program; and the funding of debt service interest payments, or other financing, for a period of up to four years, beginning on the date on which the debt or other financing is first incurred. Improvements do not need to be within the Housing Development Site, but the applicant must demonstrate that the proposed improvements enable the proposed housing development.

Legislative Body

For CHIP, “Legislative Body” means the mayor and alderboard, the city council, the selectboard, and the president and trustees of an incorporated village, as appropriate. (24 V.S.A. § 1906(12)

Moderate-Income Housing Development

A housing development in which at least 25% of the units are for households earning 150% or less of area median income (AMI) and also subject to affordability restrictions until the Final Repayment Date. Units must be used as the tenant’s or owner’s primary residence during such time. A municipality with an application serving a moderate-income housing development may retain up to 85% of the education tax increment and must retain at least 85% of the new municipal tax increment.

Original Taxable Value (OTV)

The assessed value of taxable real property within the Housing Development Site on April 1 of the year the site is approved by VEPC.

Primary Residence

Public Good

The public good will be considered met for improvements that directly support the housing development and are:

publicly owned and publicly accessible; or
privately owned and publicly accessible; or
privately owned and privately accessible improvements may be eligible so long as they can demonstrate a community benefit from the CHIP-supported infrastructure project. The municipality shall articulate with evidence how the community needs or desires the planned improvements and that they are mutually beneficial for the municipality and developer. (i.e., private septic systems for a development in a community that does not have a municipal wastewater system, and/or the cost of connecting the development to an existing system would be cost-prohibitive for the developer and town.

Related Costs

Expenses incurred and paid by a municipality or Sponsor that are directly related to the creation, implementation, and administration of the Housing Infrastructure Project, including reimbursement of sums previously advanced for those purposes.

Sixty Percent (60%) Floor Area

60% of the indoor floor area must qualify as housing. The housing must primarily serve residential uses. Floor area to be considered housing includes all housing units dedicated to primary residences, shared spaces that are accessible to residents or exist solely to serve residential units, including but not limited to hallways, elevators, stairwells, common rooms, or mechanical and utility spaces directly serving residential units. Space that does not count toward the 60% includes, but is not limited to: commercial space, or space operated by the municipality or another entity for uses not directly serving residential units. For further clarification for the purpose of calculating the eligible floor area, refer to the current International Building Code as adopted by the Vermont Department of Fire Safety.

Soft Costs

Soft costs in construction are indirect, non-physical expenses essential for a project's completion, covering services like architectural/engineering fees, permits/inspections, legal, accounting, financing, insurance, and project management, unlike hard costs which pay for tangible materials and labor. The majority of soft costs typically occur prior to the start of the construction phase of a project.

Examples of soft costs may include:

Permits and licenses
Legal fees
Insurance premiums
Taxes
Architectural and engineering fees
Environmental evaluations
Feasibility studies
Surveys and assessments
Construction loan interest
Loan origination fees
Project management fees
Consultancy fees (ex. environmental, historic preservation, etc.)
Marketing and sales expenses

Sponsor

The person or entity undertaking to finance the Housing Infrastructure Project. This may be the municipality, a developer, or an independent agency that meets State lending standards.

Tax Increment

The difference in property tax revenue generated by the increase in assessed value over the OTV. A portion of the increment may be retained by the municipality to service debt on eligible infrastructure costs, pay for eligible related costs, reimburse a non-municipal Sponsor or developer for eligible costs of the Housing Infrastructure Project, and/or pay for eligible direct costs associated with the eligible infrastructure project. Municipalities whose infrastructure projects will result in an affordable or moderate-income housing development are eligible to retain up to 85% of the education tax increment. Municipalities whose infrastructure projects will result in any other type of housing development are eligible to retain up to 75% of the education tax increment. All projects must retain at least 85% of the municipal tax increment.

Publication Date

05/20/2026

CHIP FAQs - The "But For" Test

The “But For” test is an important part of the CHIP program. It helps determine whether a project truly needs CHIP support in order to move forward. Municipalities and VEPC use this test to show that the project would likely not happen “but for” the help provided through CHIP. The questions below explain what the test means and how it is used.

VEPC's CHIP webpage may have additional FAQs related to this topic.

What is the "But For" Test, and who determines if it has been met?

VEPC will review each application - other than those for which the housing development is an affordable housing development - to determine whether the infrastructure improvements proposed to serve the Housing Development Site and the proposed housing development would not have occurred as proposed in the application or would have occurred in a significantly different and less desirable manner than as proposed in the application but for the proposed utilization of the incremental tax revenues.

A non-exhaustive list of factors VEPC may consider around the question of what is a “significantly different and less desirable manner” may include, but is not limited to:

a housing development occurring significantly later than it could occur with CHIP financing,
a housing development that would include fewer units without CHIP financing,
a housing development that is significantly less affordable than could occur with CHIP financing.

What types of housing must meet the "But For" Test?

Moderate-Income - A housing development in which at least 25% of the units are for households earning 150% or less of area median income (AMI).
Market Rate – A housing development in which there are no income restrictions on any of the units.

What does "Area Median Income" (AMI) mean?

Area Median Income (AMI) is the midpoint household income for a specific geographic region, meaning half of families earn more and half earn less, used primarily to determine eligibility for affordable housing and other federal/state programs. Calculated annually by the U.S. Department of Housing and Urban Development (HUD), AMI adjusts for household size, with various income levels (like 30%, 50%, 80% AMI) defining different tiers of affordability.

Where can I find out what the Area Median Income (AMI) is for an "affordable housing development" or a "moderate-income housing development" in my municipality?

The Vermont Housing Data website, also known as HousingData.org, provides Vermonters with tools for making more informed decisions about affordable housing. This website is loaded with valuable data and information.

Area Median Income can be found by following this path: Home>> Vermont Community Data Profiles>>Income & employment>> Area Median Income (AMI). You also can use this simple table for quick reference: Home Purchase Price & Rental Affordability Thresholds by Income Level and Household Size.

In the But-For justification, what is being justified – the housing project or the infrastructure project?

Both. The CHIP Guidelines note that VEPC will review each application other than those for which the housing development is an affordable housing development to determine whether the infrastructure improvements proposed to serve the Housing Development Site and the proposed housing development would not have occurred as proposed in the application or would have occurred in a significantly different and less desirable manner than as proposed in the application but for the proposed utilization of the incremental tax revenues.

How can I demonstrate that infrastructure improvements and proposed housing development “would have occurred in a significantly different and less desirable manner?”

A non-exhaustive list of factors VEPC may consider around the question of what is a “significantly different and less desirable manner” may include, but is not limited to:

a housing development occurring significantly later than it could occur with CHIP financing,
a housing development that would include fewer units without CHIP financing,
a housing development that is significantly less affordable than could occur with CHIP financing.

Publication Date

05/20/2026

Single Audits

Federal single audits can feel complicated, especially for organizations managing federal grants and reporting requirements. This resource center is designed to help municipalities better understand the single audit process and prepare with confidence.

Whether you are getting ready for your first single audit or looking to improve your current process, the resources below have practical guidance in a format that's clear and easy to understand.

Good planning, clear communication, and strong recordkeeping can help make the single audit process smoother and more successful.

What is a Single Audit?

If your organization receives federal grant money, you may need a federal single audit. A single audit is a special type of audit that looks at both your financial statements and how federal funds were used.

The goal is to make sure federal money is spent correctly and that your organization follows the rules tied to those funds.

When is a Single Audit required?

A single audit is required when an organization spends $1 million or more in federal funds during its fiscal year.

Federal funds may come directly from a federal agency or pass through another organization, such as a state agency. The funding agreement should indicate whether the funds your municipality receives are federal in origin.

The most common federal funds Vermont municipalities receive are:

FEMA disaster grants,
Highway and transportation grants,
Community development grants,
Drinking water and wastewater loans and grants,
Housing assistance programs, and
Policing grants.

Occasionally, municipalities receive special purpose federal funds, such as ARPA funds.

Why do Single Audits matter?

Single audits help:

Protect public funds
Improve financial management
Strengthen internal controls
Reduce the risk of fraud or misuse of funds
Build trust with grant agencies and the public

A successful audit can also make future grant applications and funding opportunities easier.

Preparing for Success

With the right preparation and a clear understanding of the process, your community can approach the Single Audit with greater confidence. We hope these resources provide useful guidance, help reduce surprises, and support a smoother audit experience from start to finish.

Disclaimer: This resource was created by Municipal Operations Support (MOS) staff of non-legal professionals with expertise of the subject matter. It is only intended to provide information and does NOT constitute legal advice. Readers with legal questions are encouraged to contact an attorney. The use or downloading of this resource does NOT create an attorney-client relationship and will not be treated in a confidential manner. Non-legal questions about this resource can be directed to MOS staff at mos@vlct.org.

Publication Date

05/19/2026

Single Audit Frequently Asked Questions

When a municipality spends federal funds, it may be required to undergo a “Single Audit.” The audit reviews financial statements, internal controls, and compliance with federal rules, regulations, and award requirements for major programs.

The U.S. Office of Management and Budget (OMB) sets the requirements for Single Audits.

This Frequently Asked Questions section provides answers about the audit process, key requirements, and steps municipalities can take to meet those requirements.

General Information on Single Audits

A Single Audit is a special audit that reviews both your financial statements and how federal funds were used. Its purpose is to help ensure federal funds are spent properly and in line with program requirements.

Single Audits follow federal auditing standards, including Generally Accepted Auditing Standards (GAAS), Generally Accepted Government Auditing Standards (GAGAS), and the Guidance for Federal Financial Assistance (2 CFR Part 200), which sets the rules for managing federal awards.

Single Audits are performed by independent public accounting firms.

A single audit has two main parts:

Financial Statement Audit - Auditors review your financial statements to make sure they are accurate and complete.

Federal Program Compliance Testing - Auditors also test selected federal programs to make sure your organization followed federal rules. This may include reviewing:

Allowable costs
Procurement (purchasing) procedures
Payroll records
Reporting requirements
Grant agreements
Internal controls

What auditors review depends on the federal program. In general, they check key compliance requirements, such as:

activities allowed or disallowed,
allowable costs/cost principles,
cash management,
eligibility,
equipment and real property management,
period of availability,
purchasing,
reporting,
subrecipient monitoring, and
special tests and provisions.

Examples of common Single Audit findings are available at Common Single Audit Findings - and How to Avoid Them | Vermont League of Cities and Towns.

When questions come up about federal grant requirements, it is always best to ask your funder for guidance before acting.

Yes. If your municipality is required to have a Single Audit, a reasonable share of the audit cost may be charged to your federal awards under federal rules (2 CFR § 200.425). The audit must follow federal Single Audit requirements.

If you expect a Single Audit will be required, it is best to include those costs in your project budget from the start. Federal agencies typically do not provide extra funding later to cover audit costs.

An Assistance Listing (AL) number is a five-digit number, XX.XXX. The first two digits represent the funding agency, and the last three represent the assistance listing.

Single Audit Criteria and Submission Requirements

A municipality is required to have a Single Audit if it spends $1 million or more in federal funds during its fiscal year.

For FEMA Public Assistance grants, spending is counted when FEMA approves the funding (i.e., approval of the Award Worksheet), because that is when the funds are officially obligated.

A Single Audit covers your municipality’s entire financial operations and the federal awards managed during the audit period. This includes all departments, agencies, and organizational units that spent or administered federal funds.

Municipalities must submit a data collection form and a reporting package as part of the Single Audit process. Federal requirements for these submissions are listed in 2 CFR §§ 200.512(b-d).

The submission is due within 30 days after receiving the auditor’s report or 9 months after the end of the fiscal year — whichever comes first. If the due date falls on a weekend or federal holiday, the deadline moves to the next business day.

Single Audit reporting packages must be submitted electronically to the General Services Administration’s Federal Audit Clearinghouse (FAC). The FAC provides instructions, submission guidance, and FAQs to help with the process.

Your auditor may submit the Single Audit on your behalf. If you want this service included, be sure to include that information in your audit Request for Proposals and in the contract scope of work.

Yes. Single Audit reports and data collection information are available to the public on The Federal Audit Clearinghouse.

Once a Single Audit has been submitted to the Federal Audit Clearinghouse (FAC), it cannot be changed or removed. The submitted report is the official version available in the FAC system.

If you need help or have questions about a submission, you can contact the FAC Help Center.

Late Audit Submissions and Extensions

Possibly. Your cognizant or oversight audit agency may approve an extension if the 9-month deadline creates a hardship (2 CFR § 200.512(a)(1)). This is typically the federal or state agency that provided the most funding for the audit year.

Extension requests should be made in writing as soon as you expect a delay. The request and the agency’s response must be kept in your grant files.

When reviewing an extension request, the cognizant audit agency looks at whether the delay is a serious and unavoidable problem that prevents timely submission of the audit.

Your explanation should show that the issue:

Could not have been avoided with normal planning or reasonable effort.
Did not only affect the audit, but also other parts of project work or performance.

Be sure your written justification clearly addresses both points.

If you expect your Single Audit will be late, you should notify your federal funders in writing as soon as possible. You should also notify your cognizant federal agency, if you have one.

In your notice, explain why the audit will be late and give your best estimate of when it will be submitted. If you have not secured an auditor, include the steps you have taken or will take to find one. One of these steps should be posting your Request for Proposals to the Vermont Bid Registry.

Keep a copy of your notice and any responses in your grant files.

Yes. If a municipality does not complete a required Single Audit, federal funders must treat this as noncompliance with the terms of the award (2 CFR § 200.505).

Funders may take actions to address noncompliance under 2 CFR § 200.208 and § 200.339. These actions can range from additional requirements to more serious steps, including limits on future funding.

Before taking action, the funder will review factors such as risk, past compliance, performance history, and financial capacity. The funder must also notify you before applying any conditions and will remove them once Single Audit requirements are met.

Findings and Corrective Actions

Audit findings are issues identified during the audit related to financial reporting, compliance, or internal controls. They may point to weaknesses in how financial information is recorded, reviewed, or supported.

Findings are grouped by level of concern:

Material weakness – A serious problem that could cause major errors in financial statements. These must be addressed right away.
Significant deficiency – An important issue that is less severe than a material weakness but still needs attention.
Control weakness – A smaller issue that may increase risk and can often be improved through better processes.

Addressing findings helps strengthen financial management and support future funding opportunities.

If your Single Audit includes findings, review them carefully and make sure you understand the auditor’s comments and recommendations. Ask questions if anything is unclear.

You should provide a written “management response” to each finding. This response should explain how you will correct the issue or reduce the risk going forward. The auditor will include your response in the final report.

You may also need to prepare a corrective action plan and a summary of prior findings, following federal requirements (2 CFR § 200.511). If you disagree with a finding, you should clearly explain why in your corrective action plan.

Management Letters

You are not required to submit management letters unless a federal funder requests them. If requested, you must provide them as part of your Single Audit documentation (2 CFR § 200.512(e)).

If a management letter is updated after submission, you should send the updated version directly to your federal funder.

Audit Documentation Request

If requested, your or your auditor must make audit documentation available to your cognizant or oversight agency and other authorized parties, such as funders. This may be needed for quality reviews, resolving findings, or oversight activities (2 CFR § 200.517(b)).

Yes. If requested, you or your auditor must make audit documentation available to your cognizant or oversight agency and other authorized parties, such as funders. This includes written management representations when they are part of the audit file (2 CFR § 200.517(b)).

Need Additional Help?

The Federal Audit Clearinghouse Helpdesk has a Frequently Asked Questions (FAQ) webpage if you have additional questions. The FAC Helpdesk does not offer phone support. You can submit a request in writing through the webpage or via email to support@fac-gov.zendesk.com.

VLCT's Municipal Operations Support team may be able to assist with questions in some instances. VLCT members can Ask A Question through the Municipal Access Portal.

Publication Date

05/18/2026

Recommended Timeline for Single Audit Prep and the Audit Itself

A Single Audit works best when the municipality follows a steady, year‑round rhythm. Think of it like getting ready for a big project — you don’t want to do everything at the last minute.

Below is an easy-to-follow timeline.

This is the foundation of a smooth audit.

Keep documentation organized
Follow internal controls
Track federal spending clearly
Monitor grant rules

Doing these things all year long prevents surprises later.

This is a good time to:

Identify all federal programs and grants.
Review grant agreements and compliance requirements.
Begin preparing or updating the Schedule of Federal Awards (SEFA) tracking schedule.
Review procurement, payroll, and reporting procedures.
Resolve any known accounting or documentation issues.

This is also when early coordination with the auditors often begins. The auditors may provide:

A planning meeting or kickoff call
A request list of documents needed for the audit
Guidance on timelines and expectations
Information about major programs likely to be tested

In the first month after your fiscal year closes, begin pulling together the Schedule of Federal Awards (SEFA).

List all federal awards
Confirm Assistance Listing Numbers
Match totals to your accounting system

Month 1 to 2 is when communication really begins.

Share your draft SEFA
Provide requested documents
Discuss any new federal programs
Set the audit schedule

Auditors will tell you what they need and when they need it. Start gathering the information as soon as possible.

This is when auditors do the main testing. Ideally, it will be two to three months after your fiscal year closes.

Answer auditor questions
Provide extra documents quickly
Clarify processes when needed

Fieldwork can be done on‑site or remotely, depending on the audit plan.

Good communication during fieldwork is very important. The municipality should respond to requests promptly and let the auditors know if additional time is needed to gather information.

If auditors find issues, they will share them with you. This should occur within a month or two of the auditors completing the field work.

Review draft findings
Prepare management responses and corrective action plans
Discuss corrections

This is your chance to explain or correct anything before the report is final.

Remember, federal grant rules require you to promptly follow up and take corrective action on audit findings. This includes preparing a summary schedule of prior audit findings and a corrective action plan in accordance with 2 CFR § 200.511(b) and (c), respectively.

The auditors issue the final report within two to three weeks after you respond to the draft findings. Either the auditor or the municipality must submit the final report it to the federal clearinghouse. If you want the auditor to do this, be sure to include that task in your Single Audit Request for Proposals.

Submit the Single Audit package to the Federal Audit Clearinghouse.
Submit the Single Audit to any funders that have require it.
Keep records for future audits.

The Single Audit package is due within the earlier of:

30 days after the audit reports are issued, or
9 months after the end of the fiscal year being audited.

A good Single Audit timeline is steady, predictable, and communication‑friendly. If the municipality stays organized during the year, prepares the SEFA early, and works closely with auditors, the process becomes much easier and far less stressful.

Publication Date

05/18/2026

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