This proposed rule would better implement Federal financial management requirements within the Operating Fund program and address the HUD Office of Inspector General’s recommendations related to the Central Office Cost Center (COCC). Additionally, it would provide the regulatory framework for public housing agencies (PHAs) to establish a Capital Reserve pursuant to the authorization enumerated in Section 109 of the Housing Opportunity Through Modernization Act of 2016 (HOTMA), as well as provide a regulatory framework for small PHAs to accumulate Capital Funds. Specifically, this rule would clarify the applicability of 2 CFR Part 200 to the Operating Fund grant program. The rule would clarify program income requirements, address the applicability and cadence of reporting for the SF-425, and make other changes to update program financial management, Further, the proposed rule seeks to eliminate the use of a COCC and the payment and receipt of fees between the Public Housing projects and the COCC that is codified in 24 CFR 990. PHAs will replace the COCC and payment / receipt of fee structure with a system of cost allocations that conforms to 2 CFR 200 subpart E Cost Principles”. The HOTMA statute revised the U.S. Housing Act of 1937 to allow PHAs to establish replacement reserves for Capital Fund-eligible purposes. This rule proposes implementing that provision and permitting small PHAs to accumulate capital funds under the statutory provision that allows for starting the 24-month time limit for obligation of funds on the date on which the PHA accumulates adequate funds to undertake capital activities.