Public and Indian Housing Amendment to the Tenant Participation and Tenant Opportunities in Public and Indian Housing; Final Rule

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905, 913, 964 and 990

[Docket No. R-94-1707; FR-3568-F-03]

RIN 2577-AB36

Public and Indian Housing Amendment to the Tenant Participation

and Tenant Opportunities in Public and Indian Housing

AGENCY: Office of the Assistant Secretary for Public and Indian

Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations on tenant participation

in public and Indian housing to provide a comprehensive framework for

tenant opportunities programs which includes new policies, procedures

and guidelines for tenant participation; revision of the Resident

Management Program to the Tenant Opportunities Program; and the

addition of regulations to govern the Family Investment Centers (FIC)

Program. These changes are being made to provide for new resident

programs, as well as to address several weaknesses in the existing

regulations which have interfered with successful program

implementation.

EFFECTIVE DATE: September 23, 1994.

FOR FURTHER INFORMATION CONTACT: For questions concerning the Public

Housing rule contact Dorothy Walker or Marcia Martin, Office of

Resident Initiatives, Room 4112, telephone (202) 708-3611, or 708-0850.

For Indian Housing, contact Ed Fagan, Office of Native American

Programs, Room 4144, telephone (202) 708-2980 (these are not toll-free

numbers). Hearing- or speech-impaired persons may use the

Telecommunications Devices for the Deaf (TDD) by contacting the Federal

Information Relay Service on 1-800-877-TDDY (1-800-877-8339) or 202-

708-9300 (not a toll free number) for information on the program. (The

telephone numbers listed above are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Information Collections

The information collection requirements contained in this rule have

been submitted to the Office of Management and Budget (OMB) for review

under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520) and

have been approved and assigned OMB number 2577-0127.

II. Background

Section 20 of the United States Housing Act of 1937, as amended,

(42 U.S.C. 1437r) (the ``1937 Act'') was enacted to encourage increased

resident management of public housing projects * * * ``to promote

formation and development of resident management entities.'' The

Department implemented section 20 by regulations (24 CFR 964 for Public

Housing, and 24 CFR Part 905, subpart O for Indian Housing), that

governed tenant participation and resident management in public/Indian

housing under Section 20 of the 1937 Act.

Section 20 also authorizes funds for technical assistance and

training to resident councils (RCs)/resident management corporations

(RMCs) to promote increased resident management of public housing.

HUD's experience in providing grants to RCs/RMCs under the Public

Housing Resident Management Program has revealed that major changes

were needed in the provisions of the program. RCs/RMCs and PHAs/IHAs

(hereinafter referred to as ``HAs'') across the country overwhelmingly

requested revamping of the program to assist in meeting their

residents' need for economic development, education, job training and

development, social services, and opportunities for other self-help

initiatives.

III. Overview of Public and Indian Housing Changes

Several weaknesses in the regulations have interfered with

successful program implementation. The current regulations fail to

establish clear and detailed policy on resident participation and

guidance on the structure for public housing resident organizations.

Additionally, the current regulations fail to establish specific

requirements for resident involvement in public/Indian housing

management, and to encourage a strong partnership between HAs and

resident councils. [Note that references to resident councils in this

overview affect resident organizations in IHAs.]

Internal conflicts between competing resident councils in a

development pose serious problems to HUD with respect to program

eligibility and participation, as well as with respect to HA

recognition. The Department is concerned about the need to provide more

details on how resident councils/resident management corporations

should be structured and how to broaden tenant involvement in public

housing.

The Department recognizes the need to increase the amount of cash

contributions for resident council activities (presently limited at

three (3) dollars per unit per year) and to compensate resident council

officers who are serving as volunteers in the public housing community.

The Secretary established an Interim Resident Advisory Committee

consisting of representatives of regional and state resident public

housing organizations who developed a Policy Paper on resident

involvement in public housing. Public Housing Advocacy Groups [Public

Housing Authorities Directors Association (PHADA), Council of Large

Public Housing Authorities (CLPHA) and National Association of Housing

and Redevelopment Officials (NAHRO)] were given an opportunity to

review and comment on the Policy Paper.

Recommendations from the Interim Resident Advisory Committee on

Tenant Involvement in Public Housing and requests for changes in the

Resident Management Technical Assistance Program are the basis for the

comprehensive revision of 24 CFR Part 964.

The major changes in this rule allow for broader, more flexible

programs aimed at increasing the capacity of resident entities to

participate significantly in all aspects of public housing operations

while simultaneously permitting further economic uplift opportunities,

to the extent permitted under section 20 of the 1937 Act. Section 20

requires that all activities funded under it be related to improved

living conditions and public housing operations. (See Secs. 905.967 and

964.205.) The Department has proposed amendments to section 20, as a

part of HUD's legislative proposal, to permit funding of a broader

range of resident initiative activities to include activities that are

not necessarily related to resident management or housing authority

operations.

The current regulation on the Tenant Participation and Resident

Management Program (24 CFR Part 964) is renamed by this final rule as

the ``Tenant Participation and Tenant Opportunities in the Public

Housing Program'' for public housing. This final rule replaces the

Resident Management Program under subpart C with the Tenant

Opportunities Program (TOP). For Indian housing, the program is named

``Resident Participation and Opportunities for Indian Housing.'' (24

CFR part 905, subpart O).

The revised program (TOP) is designed to (1) Prepare residents to

experience the dignity of meaningful work, to own and operate resident

businesses, and to move toward financial independence; (2) enable them

to choose where they want to live; and (3) assure meaningful

participation in the management of their housing developments. The

authority for the TOP program comes from Section 20 of the 1937 Act.

Also under Section 20, technical assistance grants are available for

``the development of resident-managed entities (including the formation

of such entities), the development of the management capability of

newly formed or existing entities, the identification of the social

support needs of residents of public housing projects, and the securing

of such support.'' ``TOP technical assistance grants'' can enable

residents to manage their developments or portions of their

developments. The results are significant and multifaceted. For

example, resident managed activities have resulted in economic

development, resident self-sufficiency, improved living conditions, and

enhanced social services for residents (e.g., child care and other

youth programs).

The Resident Management Program will continue to be an option to

resident councils/resident management corporations who are interested

in performing management functions in one or more projects of a HA.

None of the requirements for the resident management program will be

changed. However, some of the provisions are being moved to other HUD

regulations or issuances. For example, the requirements under subpart C

(Sec. 964.39) governing the operating subsidy, budget, operating

reserves, etc. are being moved to 24 CFR Part 990--Annual Contributions

for Operating Subsidy. The Department believes these provisions of

Sec. 964.39 are more appropriately placed in that regulation. Also, the

requirements for the RMC management contract contents are being removed

from subpart C and are contained in HUD Notice PIH 93-56 (HA), which

also includes the model management contract.

Subpart A of part 964 is being expanded to add policies on

partnerships between HAs and residents. For example, HAs are required

to provide office space and meeting facilities to a duly elected

resident council, free of charge, for the purposes of conducting

resident activities.

Also, the section on definitions (Sec. 964.7) is being amended by

removing terms such as ``resident council'', ``project'', and ``tenant

participation''. The eligibility requirements for a voting member of a

resident council have been expanded and clarified. The frequency of

elections for resident management corporations has been established.

Subpart B of part 964 is being expanded substantially to establish

policies and procedures for HAs with respect to resident participation

activities. For example, HAs shall provide any funds they receive for

resident participation activities to the duly elected resident council.

Parts 990 and 905, subpart J, are being amended to require an addition

of $25 per unit per year to the HA's operating subsidy calculation for

units represented by a duly elected resident council, which will be

paid to the HA only if appropriations are available for that purpose.

Fifteen dollars of the $25 will fund the duly elected resident

councils, the jurisdiction-wide councils and stipends, as discussed

further in this preamble. The remaining ten dollars is for the HAs to

cover resident-related responsibilities, including but not limited to

third party supervision of elections, recalls and arbitrations. The HUD

Circular HM 7475.9, dated February 10, 1972, authorized cash

contributions for resident council activities for three ($3) dollars

per unit per year. The Department believes that an increase of $12 per

unit per year is reasonable and, if available, will provide more

resources necessary to create a bona fide partnership among the duly

elected resident council and the HA. Therefore, this rule replaces any

existing guidance or authority including HM 7475.9. Strong partnerships

are critical for achieving mutual goals contained in this subpart.

Also, HUD is encouraging HAs to provide stipends in an amount up to

$200 per month/per officer to resident council officers who serve as

volunteers in the public housing development to carry out these duties

and functions as officers of the resident council. The Department

believes that such a stipend will enable these volunteers to defray the

costs associated with volunteer efforts, such as child care,

transportation, special equipment, clothing, etc.

The current Part 964 regulations lack specificity regarding

resident elections and organizational policies, and have made it

difficult to determine what is a ``duly elected resident council,'' and

that has caused conflicts among the residents.

This final rule adds new policies and procedures for resident

councils by (1) Defining what is a ``duly elected resident council,''

(2) detailing minimum standards for elections of resident councils, and

(3) specifying the relationship between the resident councils and

resident management corporations. Resident councils are required to

meet HUD's election standards in order to receive official recognition

from the HA and HUD and to receive funds in conjunction with the

conduct of resident council business. The role of the jurisdiction-wide

resident council is established under this rule. The rule also contains

provisions that expand the resident participation requirements to

strongly support resident participation in all aspects of a HA's

management operations, and these requirements give rights to residents

to freely organize and represent their interests.

The rule adds a new subpart D to part 964 to establish the Family

Investment Center (FIC) Program, as provided for under section 22 of

the 1937 Act (42 U.S.C. 1437t) (added by section 515 of the National

Affordable Housing Act, Pub. L. 101-625). The Indian Housing FIC

Program is found in 24 CFR 905.980. The FIC program provides families

living in public housing with better access to educational and

employment opportunities. This new subpart is being added to Part 964

to include FIC because it complements the Department's resident

participation and self-sufficiency initiatives. The program was

proposed by a national association on behalf of numerous housing

authorities. Representatives from public/Indian housing authorities,

resident councils/resident management corporations and nonprofit

housing agencies were convened at the Department to discuss program

provisions and provide policy recommendations during the initial

program planning stage. Some HAs will combine their FIC and Family

Self-Sufficiency (FSS) programs. This final rule provides that Section

8 FSS Program participants are eligible to participate in the FIC

program when it is combined with FSS, but that income exclusions that

are provided to public housing residents participating in employment

training and supportive service programs do not apply to Section 8 FSS

families. If a public housing family under FSS is currently putting

their funds in an escrow account, they cannot also be eligible for the

income exclusion.

Sections 905.985 and 964.320 provide HUD policy on training,

employment and contracting of public/Indian housing residents under

Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C.

1701u). Section 915 of the Housing and Community Development Act of

1992 (Pub. L. 102-550) made significant changes to Section 3. HUD

published an interim rule implementing those changes on June 30, 1994.

Section 3, as amended, requires that HAs make their best efforts,

consistent with existing Federal, State, and local laws and

regulations, to award contracts for work to be performed in connection

with development, operation and modernization assistance provided

pursuant to Sections 5, 9 and 14 of the U.S. Housing Act of 1937, to

business concerns which provide economic opportunities to low income

persons. As amended, Section 3 establishes an order of priority to

which the HA's efforts must be directed. Thus, the first level of

priority is to residents of the housing development for which the

assistance is provided. This rule includes provisions consistent with

the interim Section 3 rule.

The reader should note that combination terms such as ``tenant and

resident,'' ``tenant council'' and ``resident council,'' and ``tenant

management corporation'' and ``resident management corporation'' are

similar terms and may be used interchangeably. Hereafter, for ease of

discussion, the rule will use the terms resident, resident council and

resident management corporation, as appropriate.

IV. Public Comments

On April 19, 1994, at 59 FR 18666, the Department published a

proposed rule and allowed 30 days for the public to comment. The

Department received 31 comments in response to the proposed regulation:

20 from housing authorities, two from housing authority advocacy

groups, six from resident councils/resident organizations, two from

residents, one from a HUD field office, and three from private

organizations. Following the general comments discussed below, there is

a listing of the specific issues raised in the comments and the

Department's responses to the issues.

While this final rule applies both to public and Indian housing

communities, there are separate regulations for each: Part 964 for

Public Housing and Part 905, subpart O for Indian Housing. General and

specific comments and responses are grouped by the source of the

comment (public housing commenters or Indian housing commenters). In

many cases, the comments and responses below are applicable to both.

General Public Housing Comments

Overall, there was widespread support for the concept of resident

participation as well as for the new Tenant Opportunities Program (TOP)

and the Family Investment Centers (FIC) Programs contained in the

proposed rule. Seven commenters stated that the 30-day comment period

was too short. However, because consultation took place while the

policy was being developed, and comments were submitted by various

interested parties, the Department believes that a longer period was

unnecessary.

There was also at least one comment on the proliferation on new

specialized programs. Because of the rapid growth of new programs, this

comprehensive regulation provides a common policy and definition for

administering these programs.

There were several comments from housing authorities on the

rationale for HUD requiring resident participation with duly-elected

resident groups rather than any residents in the public housing

community. The Department believes that a clear-cut policy of

accountability through the elected resident leaders will assure

adequate representation and mitigate criticism of housing authority

favoritism. In order to provide time for the public housing community

to implement elections, etc. to comply with this duly elected resident

council requirement, the Department has determined the date for

compliance with this regulation will be April 3, 1995.

There were also concerns that the Department may be providing

prescriptive policies on resident participation. The Department has

developed policies for the basic resident participation requirements to

minimize ambiguity--on resident membership, election frequency and the

residents' partnership with the housing authority. However, the

regulation provides significant flexibility for the method of

implementation. For example, with respect to election standards, the

regulation discusses standards but leaves it up to the public housing

community regarding the specifics.

Specific Public Housing Comments

Comment. Funding Issues: (Secs. 964.115, 964.105, 964.150) One

commenter requested more clarity between the Resident Council and the

Jurisdiction-Wide Resident Council with respect to which organization

would be eligible to receive the $15.00 per unit/per year for resident

services. Concern was raised that the operating subsidy funding for

resident council activities may be required to provide the funds for

resident activities. One commenter requested that ``subject to

appropriations'' be added to Sec. 990.108. Two PHAs expressed concern

that the provision of stipends to resident council officers should also

be an add-on to the PFS. One tenant organization expressed concern

about the impact of withholding for Social Security and income tax on

the residents receiving the stipends. One PHA requested clarification

on the demand for HAs to provide tenant services funding regardless of

the HA financial status.

Response. Section 964.150 has been revised to clarify for whom the

funding is intended. The duly elected Resident Councils at each

development and/or jurisdiction-wide councils are eligible to receive

the resident portion of the Tenant Services Account, i.e., $15 per unit

per year. Where both organizations exist, the distribution will be

agreed upon by the HA and the respective organizations. Dispute

resolution procedures are added at Sec. 964.150(c). The resident

officer stipends (up to $200 per month/per officer to be determined

jointly by the resident council and HA) are also included in the $15

per unit per year funding. The $15 per unit per year is a 500% increase

from the current guideline of $3 per unit per year. In addition, the

$10 per unit per year--as a new policy--is for the housing authority to

cover resident-related responsibilities, including but not limited to

third party supervision of elections, recalls and use of mediation/

arbitration services.

With respect to funding for resident services, section 964.150

states that 24 CFR part 990 would provide an addition to the operating

subsidy eligibility in the amount of $25 per unit per year for units

represented by a duly elected resident council and the provision of

these funds is subject to availability of appropriations. The HA and

resident council should collaborate on the appropriate use of these

funds. The Department is aware that even with this increase, there may

be insufficient funds for resident council expenses plus stipends. The

provision of stipends is not a requirement and will be decided by the

local resident council officers and the HA. If Congress does not

appropriate funds, the HA and duly-elected resident council may

negotiate funds for tenant services based on the availability of funds.

With respect to how stipends are counted for income tax purposes,

the stipends are not a salary but reimbursement for expenses incurred.

Under this definition, stipends will not be treated as income by HUD in

its programs. The treatment of stipends as income for social security

and income tax purposes cannot be addressed by HUD; this issue must be

discussed with Social Security Administration and IRS. However, HUD can

assure that stipends shall not be treated as income for rent purposes.

Comment. Funding Issue: (Sec. 964.150) Five HA comments agreed with

proposed increase of funding for resident participation. Four HA

comments and two housing advocacy organizations expressed concern that

funding for resident activities may not be sufficient for required

activities under the regulation. However, three PHAs oppose an increase

in funding for resident participation from $3.00 per unit/per year to

$25.00 per unit/per year because resident councils are already

receiving substantial funding under the Tenant Opportunities Program/

Technical Assistance Grant, and the Comprehensive Grant Program. One

commenter recommended an increase in the $10 per unit/per month for

housing authority activities.

Response. The Department believes that an increase in support for

resident participation activities from $3.00 per unit/per year to

$25.00 per unit/per year (of this amount $15.00 will be provided to the

duly elected resident council) is reasonable and long overdue to

support the increasing activities and community involvement of these

organizations. While TOP funds are available for such activities, those

funds can only be obtained on a competitive basis, and the availability

of CGP Management Improvement Program funds is contingent upon the

Public Housing Authorities' priorities to improve management

operations. The Department believes that the portion for the PHAs is

equitable in light of the functions to be provided under each and the

funding available to PHAs.

Comment. Audit Issue: (Secs. 905.972(a) and 964.230(a)(2)) One

commenter requested change to a reference in Sec. 905.972(a) from

``audit of books and records'' to ``audits of financial statements;''

and change to a reference in Sec. 964.230(a)(2) from ``* * * activities

and expenditures * * *'' to ``* * * financial statements * * *.''

Response. The above-mentioned provisions will be changed to state

review of financial statements. Such a review of the financial

statements would include scrutiny of expenditures related to the

workplan as well as compliance with the HUD grant agreement.

Comment. Conflict of Interest Issue: (Sec. 964.145) Three tenant

organizations objected to the Conflict of Interest policy because it

would deplete the executive board of the Resident Council/Advisory

Board. It was also noted that over 50 percent of resident leaders are

employed by HAs. Two HAs observed that resident employment encourages

participation in resident governance and should be encouraged when

residents are not employed in supervisory capacities.

Response. The conflict of interest policy has been revised to state

that ``Resident council officers cannot serve as employees in a policy

making position at the HA or as a contractor to the HA. However,

seasonal, part time or non-supervisory positions at the HA or their

contractors which are not involved in policy making work are exempt

from the conflict of interest policy.''

Comment. FIC Issue: (Sec. 964.305) One PHA objected to the small

amount of 15 percent allowed for supportive services and recommends an

increase to 25 percent.

Response. The cap on supportive services (15 percent) is stipulated

in the law. The Department agrees that the current statutory policy is

too restrictive and has included in its legislative proposal raising

the limit to 30 percent.

Comment. Threshold Issue: (Sec. 964.18) Two HAs suggested that the

threshold for applicability of this regulation--i.e., HAs of 100

units--was too low and should be increased to HAs of 250 or even 1250

units.

Response. The Department agrees with the commenter that the

threshold should be increased to 250 units. This would make the

threshold comparable with that of the Comprehensive Grant Program. HAs

with fewer than 250 units cannot deny residents the opportunity to

organize. This regulation is intended to provide all resident groups

with the opportunities available under this regulation.

Comment. Office Space Issue: (Sec. 964.18) One HA objected to the

provision of office space for the duly elected resident council

especially at smaller complexes and said it should only be required at

public housing developments of 250 units and over. Two other commenters

felt that there would not be space for resident councils--even at

larger authorities--especially when there was a long waiting list.

Commenters felt that office space should be covered by operating

subsidy.

One housing advocacy organization recommended that flexibility

should be granted to the HA and that assistance with alternative

locations might be sufficient for small HAs. Another housing advocacy

organization suggested that office space be required only in projects

above 250 units.

Response. The Department agrees with the first commenter that

providing office space to resident councils may not be feasible in

small HAs without any community space options and few units. In such

cases, the HA should make every effort to assist RCs in obtaining space

when units are not available. If there is no community or rental space

available, a request to approve a vacant rental unit for this non-

dwelling use will be considered on a case-by-case basis. Subject to

appropriations, these units will be eligible for operating subsidy.

Comment. Elections Issue: (Sec. 964.130) One HA objected to a third

party supervision for resident council elections especially in cases

where the HA and resident organization are in agreement. Opposition was

expressed to three (3) year terms, with two HAs suggesting that shorter

terms will solve problems of effective resident representation and the

filling of vacancies. Four commenters expressed concern about the

requirement in Sec. 964.115 for approval of 51 percent of ``voting

membership'' instead of \2/3\ of voters to recall a resident board.

Response. A third party supervision, even in cases where the HA and

resident organization are in agreement, provides for a neutral monitor

to oversee elections and recall procedures. Holding elections at least

every three (3) years provides for continuity and allows time for each

resident council board to plan and implement any new activities.

Resident Council By-Laws must include provisions for recall elections

of representatives, including officers. These provisions shall allow

for a petition or other means of expression of the voting membership

for such a recall vote to be taken. The local resident council voting

membership shall determine the threshold for recall. This threshold

shall not be less than 10 percent of the voting membership.

Comment. HA Operations Issue: (Sec. 964.135) Two HAs opposed

resident participation in all issues and facets of a PHA's operations.

Response. Resident participation in all issues and facets provides

support to the HA for improved living conditions and resident

satisfaction in public housing communities. Residents can provide

valuable input regarding the conditions of the property and the

performance of employees and contractors.

Comment. Policy Issue: (Sec. 964.12) One interest group opposed

changing Resident Management to TOP; however, one commenter supported

the new TOP. One RMC objected to the requirement imposed by the

regulation for adopting the model contract for RMCs entering into a

contract with a HA, and the removal of sections governing the operating

subsidy and comprehensive improvement assistance program.

Response. Resident councils, resident management corporations, and

HAs across the country requested that HUD revamp the Resident

Management Technical Assistant Grant Program (RM TAG) to meet the

residents' needs for economic development, education, job training and

development, social services and other self-help opportunities. The

residents still have the option to undertake property management, if

they desire. The expanded range of activities provided by TOP will meet

the residents needs. The language in the proposed rule stated that the

model contract in HUD Notice PIH 93-56 must be followed unless HUD

approves a requested change. It should be noted that there are minimum

statutory and regulatory requirements in the model contract which must

be used and any other provisions would be considered voluntary or

advisory. The section on operating subsidy is being moved to Part 990

so that all procedures covering operating subsidy are contained in the

same regulation. Information on CIAP/CGP has been inserted in the

resident management requirements section of this final regulation in

Sec. 964.225.

Comment. Voting Issue: (Sec. 964.115(c)) Two HAs requested

clarification on the voting membership.

Response. The voting membership is limited to designated heads of

households (any age) and other members of a household who are 18 years

or older whose name appears on the lease of a unit in the public

housing development represented by the resident council.

Comment. RC/RMC Clarification Issue: (Sec. 964.120(f)) One HA

requested clarification on RMC recognition in the instance where a

resident organization (RO) is formed after an RMC is established. For

example, must the new RO and the voting membership or all of the

residents approve the establishment of such an organization.

Response. The newly formed duly elected resident council and the

RMC should work together to establish a method of documenting, i.e.,

through a resident council board resolution, the approval of the duly

elected representative body for resident management.

Comment. Resident Training Issue: (Sec. 964.140) One resident

organization, one advocacy organization, and one HA each expressed

concern that there is insufficient funding to adequately train

interested residents in overall policy development and direction of HA

operations.

Response. The Department is requesting $85 million for the TOP

Program for FY 1995, which represents a three-fold increase from FY

1994 funding to provide additional training for residents. The option

also exists to use several other resources available to train the

residents, such as: (1) the HA staff, (2) CGP/CIAP, (3) operating

subsidies, (4) TOP TAG and (5) Section 8 administrative fees. In

addition, the RC/RMC together with the HA could form a partnership with

other local and community organizations to provide the support for

training.

Comment. Partnerships Issue: (Sec. 964.14) One HA supports

partnerships but is concerned that outside partnerships may become the

governing entity. The commenter believes that the primary partnerships

should be fostered between RCs and HAs.

Response. HUD promotes partnerships between residents and HAs which

are an essential component to building, strengthening and improving

public housing. However, strong partnerships with other organizations

are also critical for creating positive changes in lifestyles thus

improving the quality of life for public housing residents, and the

surrounding community. However, these outside partners cannot be

recognized or assume the role of the duly-elected governing entity.

Comment. Expanding Resident Council Issue: (Sec. 964.105) One HA

comment requested clarification about whether an HA with an existing

jurisdiction-wide resident council can help establish new resident

councils in scattered sites or separate groups of buildings.

Response. The Department encourages the development of new resident

councils, or revival of inactive resident councils, at all housing

developments including scattered sites.

General Indian Housing Comments

The Department received 18 comments specifically related to 24 CFR

Part 905, Subpart O--Resident Participation and Opportunities for

Indian housing. Eleven were from Field Offices of Native American

Programs, four from an Indian housing authority, one from a public

housing authority, one from an advocacy group and one from a private

organization.

Comment. Replace the term ``tenant'' with ``resident'' since it can

be applied appropriately to all program participants, rental and

homeownership. In Indian housing, resident implies a sense of ownership

and permanence which are important attitudes to convey in order to

accomplish the mission of the Office of Native American Programs

(ONAP).

Response. The Department agrees with the comment for the Indian

housing program. The only reference to tenant will remain in the title

of the Tenant Opportunities Program. This new title reflects the

revised program created to provide more program flexibility to address

the needs in communities to improve living conditions and housing

operations.

Specific Indian Housing Comments

Section 905.102(2)(viii)(D) Stipends

Comment: One commenter stated: Currently there is no limit to the

number of officers of a resident organization or the number of

organizations. Some large IHAs have over 50 resident organizations. The

cost involved for stipends could be substantial if each RO has 5

officers who receive $200 per month, with 50 ROs the cost equals

$600,000. It could be very difficult to determine who should receive

funding and IHAs could be forced to use operating reserves. For

instance, an IHA with 14,000 units will receive $140,000 although

stipends amount to $600,000. The inability to pay stipends could cause

potential problems between the IHA and RO.

Several commenters requested clarification on how the stipend is to

be paid. Is it paid from the $25 per unit per year? Is it from the IHA

$10 per unit per year or the RO $15 per unit per year?

Another commenter recommended that the words ``excluding training

costs'' should be added to the end of the eligible activities for

stipend use. The commenter felt that the maximum stipend amount should

not limit training that ONAP and the IHA determine is important for

resident leaders to attend.

One commenter supported the stipend stating it was extremely

important because it recognizes the economic position of many resident

leaders and the need to avoid out of pocket expenses from resident

leaders.

Response: It is intended that the $15 per unit per year for

resident participation activities of the resident organization will be

used to fund stipends. Section 905.965 is revised to clarify questions

raised regarding the funding for stipends. Also, the Department is

aware that even with this increase, there may be insufficient funds for

resident organization expenses plus stipends. The provision of stipends

is not a requirement and will be decided by the local resident

organization and the IHA. If there is no appropriation for this

additional cost item under the operating subsidy, the IHA and resident

organizations must determine how to use existing funds to accomplish

priority resident activities.

Regarding the third comment, the stipend is intended to cover costs

related to officer volunteer efforts. It does not limit funding to

resident organizations for training. These costs can be covered under

905.965 which would provide $15 per unit per year for resident

participation activities of the RO. IHAs may use other resources for

resident participation activities.

Section 905.720 Other Costs

Comment: A commenter expressed concerns about the cost of stipends

to the IHA. Also, will stipends be eligible even if there are no

appropriations to fund the cost? Another commenter suggested that

consideration must be given for higher cost areas, especially in Alaska

where village travel is by airplane.

Response: If there are no appropriations to fund resident

participation, stipends will still be an eligible cost; however, the

IHA and RO must determine if resources are available. The issue of

higher travel costs in Alaska can be resolved by waiver requests since

the provision is regulatory, not statutory.

Section 905.962 Definition of RO

Comment: One commenter recommended that HUD require each IHA to

adopt a policy and procedure to formally recognize resident

organizations based on the referenced definition.

Response: Only one comment was received requesting that recognition

of an RO be mandatory. The Department does not believe this is

sufficient to change the current regulatory requirements which provide

for local decision making between the IHA and RO.

Section 905.963 HUD's Role in Activities Under This Subpart

Comment: The form and extent of resident participation or resident

management are local decisions to be made jointly by ROs and IHAs. The

regulation discusses the duty to bargain, but if either party does not,

there is no consequence for not doing so. If an RO isn't organized, it

is not eligible for the $15 per unit funding. Therefore, control of

whatever negotiation there might be is in the hands of the IHA. This is

an unfair advantage for the IHA.

Response: A resident organization can organize without IHA

involvement and can also be eligible for funding if it meets the

requirements in accordance with Sec. 905.962. However, HUD strongly

recommends a partnership between the resident organization and the IHA.

The IHA and the duly elected resident organization shall collaborate on

how funds will be distributed. A mechanism to address disputes on

funding decisions is provided for in the rule. The payment of stipends

to resident organization officers will be funded from the $15 per unit

per year for resident participation activities.

Section 905.964 Resident Participation Requirements

Comment: Section 905.964 (a)(1) should be revised to state that an

IHA must provide residents with current information concerning the

IHA's policies on resident participation in management, ``development

and modernization'' in order to cover all aspects of the IHA's

programs.

Response: Subpart O only deals with resident participation in

management. Both the subparts on development and modernization contain

specific regulatory requirements regarding resident participation. This

language is consistent with subpart O and, therefore, we are keeping

the language as currently stated.

Section 905.969 Resident Management Requirements

Comment: Several resident organizations in the State of Alaska have

questioned whether or not a recognized Tribal government in the

community may act in the capacity of the resident organization. In most

of the Alaskan Native communities, the tribal government represents the

Native residents. Most tribal organizations already have mechanisms in

place that would allow greater resident participation, which could lead

to expedience in communities becoming self-sufficient. Where the

majority of residents in a community request that the Tribal Government

act in the capacity as the RO with the IHA, a Memorandum of Agreement

might be executed to establish such a relationship.

Response: If a tribal government wishes to assume the

responsibilities of an RO or RMC, an entity must be created that meets

the requirements of 24 CFR 905.962. The tribal government may not act

as an RO or RMC without complying with those requirements. This does

not prevent the tribal government from authorizing or creating such an

entity under tribal law.

Section 905.972(b) TOP Audit

Comment: The references to ``audit of books and records'' in the

title of proposed sections 905.972(a) and 905.972(b) should be changed

to ``audit of financial statements'' because independent auditors audit

financial statements, not ``books and records.''

The proposed rule should specify the basis of accounting to be used

in preparing the financial statements. We recommend that the financial

statements be prepared in accordance with generally accepted accounting

principles (GAAP).

The final rule should state that an audit conducted in accordance

with the Single Audit Act or OMB Circular A-133, if applicable, would

satisfy the audit requirement.

Response: The sections have been changed to reflect the comment on

review of financial statements. Such a review of the financial

statements would include scrutiny of expenditures related to the

workplan as well as compliance with the HUD grant agreement.

Section 905.980 FIC General

Comment: Remove the following language from the responsibilities of

a FIC Coordinator, ``mobilizing public and private resources to ensure

that the supportive services identified can be funded over the five-

year period, at least, following the initial receipt of funding.''

Response: This language is statutory (Section 515 of National

Affordable Housing Act) and therefore cannot be removed without

legislative change.

Comment: There is no reference to determine eligibility for program

participants.

Response: The only eligible applicants are IHAs based on the

statute. Eligibility is documented in 905.982. IHA is defined in

905.102 of 24 CFR part 905.

Section 905.982 FIC Eligibility

Comment: Under this program and any other programs that are created

to directly associate with residents, eligible applicants should be

extended to include the Tribal governments. Recommend using the word

``improved'' in place of ``Better'' since ``improved'' is used in other

parts of this document. Also, add the word ``support'' in reference to

services being provided.

Response: The provision that eligible applicants are public or

Indian housing authorities is statutory and cannot be changed without

legislation.

Section 905.983 FIC Activities

Comment: The new activities such as new construction or acquisition

have not been added yet as indicated in the NOFA.

Response: The Public and Indian Housing regulation is changed to

reflect eligibility for new construction and acquisition.

V. Section-By-Section Changes Made By This Final Rule

A. Public Housing Changes--Part 964

1. Subpart A is amended as follows:

a. Section 964.1 Purpose is streamlined.

b. Section 964.3 Applicability and scope remains unchanged.

c. Section 964.7 Definitions is amended by removing several

definitions such as project and tenant participation; by moving terms

such as Resident Council and Resident Management Corporation to a more

appropriate section under subpart B, and by expanding definitions; and

by adding new terms which relate to the FIC program.

d. Section 964.11 HUD policy on tenant participation is amended to

strongly support tenant participation in all the functions of an HA's

management operations and give rights to residents to freely organize

and represent their interests.

e. Section 964.12 HUD policy on Tenant Opportunities Program (TOP)

provides HUD's policy on the Tenant Opportunities Program. Subpart C of

the current regulation is changed from ``Resident Management Program''

to ``Tenant Opportunities Program'' (TOP). The name is being changed to

TOP because it reflects the evolution of the program over time, to

enhance resident capacity in a variety of ways, including job training,

economic development, and self-sufficiency activities carried out by

resident councils/resident management corporations in public housing.

Resident management is a component of TOP and resident councils/

resident management corporations may continue to engage in activities

relative to public housing management. Tenant opportunities programs

are proven to be effective in facilitating economic uplift as well as

in improving the overall conditions in public housing.

f. Section 964.14 HUD policy on partnerships is added to provide

HUD policy on partnerships between HAs and residents. Strong

partnerships between HAs and resident councils/resident management

corporations are key to the success of program objectives, and critical

for achieving specific and mutual goals and creating positive change

for residents in public housing.

g. Section 964.15 HUD policy on resident management remains

unchanged. This section states HUD's support for resident councils/

resident management corporations who are interested in managing various

businesses in the public housing community; e.g., lawn service

maintenance or day care.

h. Section 964.16 HUD role in activities under this part--

Monitoring is added to describe HUD's proactive responsibility for

promoting tenant participation and tenant opportunities in public

housing. It provides that HUD will monitor program progress to ensure

efficient and effective operations pursuant to this rule.

i. Section 964.18 HA role in activities under subparts B&C

establishes a stronger HA role under this subpart. HAs shall, upon

request, provide office space to a duly elected resident council and

shall negotiate in good faith usage of community space for meetings and

other activities for residents. HAs have a responsibility to negotiate

such usage of space with the duly elected resident council.

j. Section 964.24 HUD policy on FIC program provides HUD's policy

and support for the FIC program.

k. Section 964.30 Other program requirements provides Civil Rights

compliance requirements and all other Federal laws, executive orders,

regulations and policies for programs conducted and administered under

this rule.

2. Subpart B is amended as follows:

a. Section 964.100 Role of resident council which establishes the

role of a resident council and Sec. 964.105 Role of the jurisdiction-

wide resident council which establishes the role of a jurisdiction-wide

resident council are added to the rule.

b. Section 964.110 Resident membership on HA Board of

Commissioners encourages resident membership on HA Board of

Commissioners.

c. Section 964.115 Resident council requirements describes the

provisions necessary for the Resident Council to receive official

recognition from the HA and HUD. In the previous rule, this provision

was included in the definitions section, and in this rule it becomes a

separate section.

d. Section 964.117 Resident council partnerships is added to

encourage and promote partnerships between the resident councils and

public/private organizations. While the Department encourages

partnerships to complement council activities, such organizations must

not become the governing entity of the resident council.

e. Section 964.120 Resident management corporation requirements

establishes characteristics in order to receive formal recognition by

the HA and HUD. In the previous rule, this was included in the

definitions section and in this rule, it becomes a separate section.

f. Section 964.125 Eligibility for resident council membership is

added to provide guidance on eligibility for council membership. This

section establishes that any member of a household, whose name is on

the lease, may be a member of a resident council. However, in order to

be a voting member of the resident council, a person's name must appear

on the lease of a unit in the public housing development, and he/she

must be: (1) a legal head of household (means the member of the family

who is the head of the household for purposes of determining income

eligibility and rent), or (2) 18 years of age or older.

g. Section 964.130 Election procedures and standards is added to

provide minimum standards for resident council elections including the

requirement for supervision by an independent third party. HAs shall

monitor the resident council's elections to ensure compliance with

HUD's minimum standards.

h. Section 964.135 Resident involvement in HA management is added

to provide policy on resident involvement in HA management operations.

Residents shall participate fully in the overall policy development, as

well as in operations of an HA.

i. Section 964.140 Resident training is added to encourage HAs to

take the lead in providing training opportunities for public housing

residents. If residents are willing, they may receive training from the

HA and become involved in implementing various Federal programs.

j. Section 964.145 Conflict of interest is added to provide policy

on resident council officers serving as contractors or as employees of

an HA.

k. Section 964.150 Funding tenant participation is added to

establish policy on funding duly elected resident councils. Subject to

appropriations, HAs shall provide funds to the duly elected resident

council for tenant participation activities. This rule also makes an

amendment to 24 CFR Part 990 for tenant services to include up to $25

per unit per year, subject to the availability of appropriations, as an

add-on to the Performance Funding System (PFS).

3. Subpart C is amended as follows:

a. Section 964.200 General is added to provide information on the

provisions of the TOP.

b. Section 964.205 Eligibility is added to define who is eligible

to apply and receive a technical assistance grant, and to outline

eligible activities under TOP.

c. Section 964.210 Announcement of funding availability is added

to describe notification of funding availability for obtaining funds to

participate in TOP.

d. Section 964.215 Grant agreement provides the terms of the grant

agreement for the proposed activities under the TOP program.

e. Section 964.220 Technical assistance describes HUD's commitment

to fund TOP activities.

f. Section 964.225 Resident management requirements provides

minimal guidelines for HAs and residents for the performance of

management functions.

g. Section 964.230 Audit and administrative requirements provides

audit and administrative guidelines for recipients of TOP grant funds

and resident management corporations contracting with an HA for

management responsibilities.

4. Subpart D is added to the Part 964 as follows:

a. Section 964.300 General provides the purpose and program

provisions of the FIC program. FIC provides families living in public

housing with better access to educational and employment opportunities

to achieve self-sufficiency and independence.

b. Section 964.305 Eligibility for FIC provides eligible

activities and requirements under the FIC program.

c. Section 964.308 Supportive services requirements for FIC

provides supportive services requirements essential for families living

with children in public housing.

d. Section 964.310 Audit/Compliance Requirements for FIC provides

audit and compliance requirements governing the program.

e. Section 964.315 HAs role in FIC activities under this part

provides the process required to assure that HA residents are informed

about FIC.

f. Section 964.320 HUD policy on training, employment, contracting

and subcontracting of public/Indian housing residents under FIC states

HUD's policy on resident training, employment and contracting under

FIC.

g. Section 964.325 Announcement of funding availability for FIC

indicates that the Notice of Funding Availability (NOFA) will be

published periodically and contain specific information regarding

eligibility, funding criteria, etc.

h. Section 964.330 Grant set-aside assistance for FIC states HUD's

policy of permitting up to five percent (5%) of amounts available in

any fiscal year to augment grants previously awarded under this

program.

i. Section 964.335 Grant agreement for FIC provides the grant

agreement term.

j. Section 964.340 Resident compensation for FIC provides

guidelines governing employment compensation under this program.

k. Section 964.45 Treatment of income provides provisions for

income exclusions for any resident participating in the FIC program.

l. Section 964.350 Administrative Requirements for FIC provides

administrative and reporting requirements governing the FIC program.

B. Indian Housing Changes--Part 905

The rule also revises 24 CFR 905, subpart O, ``Resident

Participation and Opportunities.'' The Indian housing section is

similar to its public housing counterpart, but does not contain some of

the provisions in 24 CFR Part 964 in an effort to tailor them

specifically to the generally smaller size of most Indian Housing

Authorities (IHA). However, all activities, functions and benefits

permitted under any public housing resident programs will remain

eligible activities, functions and benefits for Indian housing resident

programs.

The major changes in the rule allow for broader, more flexible

programs aimed at increasing the capacity of Indian housing resident

organizations and resident management corporations to carry out their

organizational functions in a more structured manner while

simultaneously permitting further economic uplift opportunities.

Within the subpart there is a general section; a Tenant

Opportunities Program (TOP) section; and a Family Investment Centers

Program section. The current Indian Housing Resident Management Program

under existing regulations is viable and remains an option under TOP.

None of the requirements for the resident management program are

changed; however, some sections are being moved to other sections of

the 905 regulations or HUD handbooks.

C. Miscellaneous Conforming Changes

Changes that have been made to other parts are (1) the exclusion

from income of stipends to RC officers and of training grants under the

FIC program that are added to 905 and 913; (2) the provision for

payments to duly elected resident organization officers, and the

inclusion of requirements governing the RMC Operating subsidy, budget,

operating reserves, etc., that are made to 990; and 3) changes for the

resident participation subpart that are made in part 905 to parallel

changes in part 964.

Other Matters

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this rule before publication and by

approving it certifies that this rule does not have a significant

economic impact on a substantial number of small entities. The rule

provides substantial revisions to the regulations concerning Tenant

Participation and Management in Public Housing under which resident

councils/resident management corporations receive funding on a

competitive basis. HUD does not anticipate a significant economic

impact on small entities since resident councils/resident management

corporations will continue to obtain by contract technical assistance

to carry out program activities.

Environmental Impact

A finding of no significant impact with respect to the environment

has been made in accordance with HUD regulations in 24 CFR part 50 that

implement section 102(2)(C) of the National Environmental Policy Act of

1969 (42 U.S.C. 4332). The Finding of No Significant Impact is

available for public inspection between 7:30 a.m. and 5:30 p.m.

weekdays in the office of the Rules Docket Clerk at the above address.

Executive Order 12866

This rule was reviewed by the Office of Management and Budget under

Executive Order 12866, Regulatory Planning and Review. Any changes made

to the rule as a result of that review are clearly identified in the

docket file which is available for public inspection in the office of

the Department's Rules Docket Clerk, room 10276, 451 Seventh Street,

SW, Washington, DC.

Executive Order 12612, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that the policies

contained in this rule will not have substantial direct effects on

states or their political subdivisions, or the relationship between the

federal government and the states, or on the distribution of power and

responsibilities among the various levels of government. As a result,

the rule is not subject to review under the order. The revised rule is

consistent with federalism principles since it reduces unnecessary

burdens on resident organizations. Since participation by resident

organizations is discretionary, this rule lacks the direct and

substantial effects on resident organizations required for a policy

with federalism implications under the Order.

Executive Order 12606, the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule has a beneficial

effect on the family, and thus, does not require further review. No

significant change in existing HUD policies or programs will result

from promulgation of this rule, as those policies and programs relate

to family concerns.

Regulatory Agenda

This rule was listed as Item No. 1685 in the Department's

Semiannual Agenda of Regulations published on April 25, 1994, (59 FR

20424, 20469) in accordance with Executive Order 12866 and the

Regulatory Flexibility Act.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number is 14.853.

List of Subjects

24 CFR Part 905

Aged, Energy conservation, Grant programs--housing and community

development, Grant programs--Indians, Homeownership, Indians,

Individuals with disabilities, Lead poisoning, Loan programs--housing

and community development, Loan programs--Indians, Low and moderate

income housing, Public housing, Reporting and recordkeeping

requirements.

24 CFR Part 913

Grant programs--housing and community development, Public housing,

Reporting and recordkeeping requirements.

24 CFR Part 964

Grant programs--housing and community development, Public housing,

Reporting and recordkeeping requirements.

24 CFR Part 990

Grant programs--housing and community development, Public housing,

Reporting and recordkeeping requirements.

Accordingly, parts 905, 913, 964, and 990 of title 24 of the Code

of Federal Regulations are amended as follows:

PART 905--INDIAN HOUSING PROGRAMS

1. The authority citation for part 905 is revised to read as

follows:

Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa, 1437bb, 1437c,

1437cc, 1437d(c)(4)(D), 1437ee and 3535(d).

2. In Sec. 905.102, the definition of Annual income is amended by:

a. Removing the word ``or'' at the end of paragraph (2)(viii)(B);

b. Adding the word ``or'' at the end of paragraph (2)(viii)(C);

c. Adding a new paragraph (2)(viii)(D);

d. Removing the word ``or'' at the end of paragraph (2)(x);

e. Redesignating paragraph (2)(xi) as paragraph (2)(xii); and

f. Adding a new paragraph (2)(xi), to read as follows:

Sec. 905.102. Definitions.

* * * * *

Annual income.

* * * * *

(2) * * *

(viii) * * *

(D) A resident stipend, but only if the resident stipend does not

exceed $200 per month per officer to resident organization officers.

Stipends are intended to cover costs related to officers' volunteer

efforts and include but are not limited to the following items: child

care, transportation, special equipment and special clothing.

* * * * *

(xi) The earnings and benefits to any resident resulting from the

participation in a program providing employment training and supportive

services in accordance with the Family Support Act of 1988, section 22

of the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.), or any

comparable Federal, State, Tribal or local law during the exclusion

period. For purposes of this paragraph (2)(xi), the following

definitions apply:

(A) Comparable Federal, State, Tribal or Local law means a program

providing employment training and supportive services that--

(1) Is authorized by a Federal, State, Tribal or local law;

(2) Is funded by Federal, State, Tribal or local government;

(3) Is operated or administered by a public agency; and

(4) Has as its objective to assist participants in acquiring job

skills.

(B) Exclusion period means the period during which the resident

participates in a program described in this section, plus 18 months

from the date the resident begins the first job acquired by the

resident after completion of such program that is not funded by public

housing assistance under the U.S. Housing Act of 1937. If the resident

is terminated from employment without good cause, the exclusion period

shall end.

(C) Earnings and Benefits means the incremental earnings and

benefits resulting from a qualifying employment training program or

subsequent job; or

* * * * *

3. In Sec. 905.434, a new paragraph (b)(7) is added, to read as

follows:

Sec. 905.434 Operating subsidy.

* * * * *

(b) * * *

(7) Subject to appropriations, in accordance with the provisions of

subpart O of this part and procedures determined by HUD, each IHA shall

receive $25 per unit per year for units represented by a duly elected

resident organization for resident participation activities. Of this

amount, $15 per unit per year shall fund resident participation

activities of the duly elected ROs including but not limited to

stipends. Ten dollars per unit per year shall fund IHA costs incurred

in carrying out resident participation activities.

* * * * *

4. In Sec. 905.720, a new paragraph (g) is added, to read as

follows:

Sec. 905.720 Other costs.

* * * * *

(g) Funding for resident organization expenses. In accordance with

the provisions of 24 CFR Part 905, subpart O and procedures determined

by HUD, each IHA with a duly elected resident organization shall

include in the operating subsidy eligibility calculation, $25 per unit

per year (subject to appropriations) for each unit represented by a

duly-elected resident organization in support of the duly elected

resident organization's activities.

* * * * *

5. Subpart O of Part 905 is revised to read as follows:

Subpart O--Resident Participation and Opportunities General Provisions

Sec.

905.960 Purpose.

905.961 Applicability and scope.

905.962 Definitions.

905.963 HUD's role in activities under this subpart.

905.964 Resident participation requirements.

905.965 Funding Resident Participation.

Tenant Opportunities Program

905.966 General.

905.967 Eligible TOP Activities.

905.968 Technical assistance.

905.969 Resident management requirements.

905.970 Management specialist.

905.971 Operating subsidy, preparation of operating budget,

operating reserves and retention of excess revenues.

905.972 TOP Audit and administrative requirements.

Family Investment Centers (FIC) Program

905.980 General.

905.982 Eligibility.

905.983 FIC Activities.

905.984 IHA role in activities under this part.

905.985 HUD Policy on training, employment, contracting and

subcontracting of Indian housing residents.

905.986 Grant Set-Aside Assistance.

905.987 Resident compensation.

905.988 Administrative requirements.

Subpart O--Resident Participation and Opportunities General

Provisions

Sec. 905.960 Purpose.

The purpose of this subpart is to recognize the importance of

involving residents in creating a positive living environment and in

contributing to the successful operation of Indian housing.

Sec. 905.961 Applicability and scope.

(a) This subpart applies to any Indian housing authority (IHA) that

has an Annual Contributions Contract (ACC) with the Department. This

subpart does not apply to housing assistance payments under section 8

of the U.S. Housing Act of 1937.

(b) This subpart contains HUD's policies, procedures, and

requirements for the participation of Indian housing residents in

Indian housing management.

(c) This subpart is designed to encourage increased resident

participation in Indian housing.

(d) This subpart is not intended to negate any pre-existing

arrangements for resident management in Indian housing between an IHA

and a resident management corporation.

(e) This subpart includes requirements for the Family Investment

Centers (FIC) Program, which was established by Section 515 of the

National Affordable Housing Act, which created a new Section 22 of the

Act. The FIC program is designed to provide families living in Indian

housing with better access to educational and employment opportunities.

Sec. 905.962 Definitions.

Family Investment Center. A facility in or near Indian housing

which provides families living in Indian housing with better access to

educational and employment opportunities to achieve self sufficiency

and independence.

Management. All activities for which the IHA is responsible to HUD

under the ACC, within the definition of ``operation'' under the Act and

the ACC, including the development of resident programs and services.

Management contract. A written agreement between a resident

management corporation and an IHA, as provided by Sec. 905.969.

Project. For purposes of this subpart, any of the following could

be the subject of a management contract:

(1) One or more contiguous buildings.

(2) An area of contiguous row houses.

(3) Scattered site buildings.

(4) Scattered site single-family units.

Resident management. The performance of one or more management

activities for one or more projects by a resident management

corporation under a management contract with the IHA.

Resident Management Corporation (RMC). A Resident Management

Corporation is an entity that proposes to enter into, or enters into, a

contract to manage IHA property. The corporation must have each of the

following characteristics:

(1) It must be a nonprofit organization that is incorporated under

the laws of the State or Indian tribe in which it is located.

(2) It may be established by more than one resident organization,

so long as each such organization both approves the establishment of

the corporation and has representation on the Board of Directors of the

corporation.

(3) It must have an elected Board of Directors.

(4) Its by-laws must require the Board of Directors to include

representatives of each resident organization involved in establishing

the corporation.

(5) Its voting members are required to be residents of the project

or projects it manages.

(6) It must be approved by the resident organization. If there is

no organization, a majority of the households of the project or

projects must approve the establishment of such an organization.

Resident Organization (RO). A Resident Organization (or ``Resident

Council'' as defined in section 20 of the Act) is an incorporated or

unincorporated nonprofit organization or association that meets each of

the following criteria:

(1) It must consist of residents only, and only residents may vote.

(2) If it represents residents in more than one development or in

all of the developments of an IHA, it must fairly represent residents

from each development that it represents.

(3) It must adopt written procedures providing for the election of

specific officers on a regular basis.

(4) It must have a democratically elected governing board. The

voting membership of the board shall consist solely of the residents of

the development or developments that the RO represents.

Resident-owned business. Any business concern which is owned and

controlled by public housing residents. (The term ``resident-owned

business'' includes sole proprietorships.) For purposes of this part,

``owned and controlled'' means a business:

(1) Which is at least 51 percent owned by one or more public

housing residents; and

(2) Whose management and daily business operations are controlled

by one or more such individuals.

Resident participation. A process of consultation between residents

and the IHA concerning matters affecting the management of Indian

housing.

Sec. 905.963 HUD's role in activities under this subpart.

(a) General. Subject to the requirements of this part and other

requirements imposed on IHAs by the ACC, statute or regulation, the

form and extent of resident participation or resident management are

local decisions to be made jointly by ROs and the IHAs.

(b) Duty to bargain in good faith. If an IHA refuses to negotiate

with a RMC in good faith or, after negotiations, refuses to enter into

a contract, the corporation may file an informal appeal with HUD,

setting out the circumstances and providing copies of relevant

materials evidencing the corporation's efforts to negotiate a contract.

HUD shall require the IHA to respond with a report stating the IHA's

reasons for rejecting the corporation's contract offer or for refusing

to negotiate. Thereafter, HUD shall require the parties (with or

without direct HUD participation) to undertake or to resume

negotiations on a contract providing for resident management, and shall

take such other actions as are necessary to resolve the conflicts

between the parties. If no resolution is achieved within 90 days from

the date HUD required the parties to undertake or resume such

negotiations, HUD shall serve notice on both parties that

administrative remedies have been exhausted (except that, pursuant to

mutual agreement of the parties, the time for negotiations may be

extended by no more than an additional 30 days).

Sec. 905.964 Resident participation requirements.

(a) IHA responsibilities. (1) An IHA must provide the residents or

any resident organization with current information concerning the IHA's

policies on resident participation in management, including guidance on

information and recognition of a RO, and, where appropriate, a RMC.

(2) An IHA must consult with residents or resident organizations

(if they exist), to determine the extent to which residents desire to

participate in the management of their housing and the specific methods

that may be mutually agreeable to the IHA and the residents.

(3) When requested by residents, an IHA must provide appropriate

guidance to residents to assist them in establishing and maintaining a

RO, and, where appropriate, a RMC.

(b) Recognition. A resident organization may request that it be

recognized as the official organization representing the residents in

meetings with the IHA or with other entities.

(c) Written understanding. At a minimum, the IHA and the RO shall

put in writing their understanding concerning the elements of their

relationship.

(d) Conflict of interest. Resident council officers cannot serve as

contractors or employees if they are in policy making or supervisory

positions at the IHA.

Sec. 905.965 Funding resident participation.

Funding will be provided under subpart J of this part, for the

following:

(a) Resident Organizations. (1) Subject to appropriations, the IHA

shall provide funds to ROs for resident participation activities.

Eligibility to receive operating subsidy for duly elected RO activities

at $25 per unit per year is an additional category of subsidy

eligibility for units represented by a duly elected resident

organization under the Performance Funding System. Of this amount, $15

per unit per year shall fund resident participation activities of the

duly elected ROs. Ten dollars per unit per year shall fund IHA costs

incurred in carrying out resident participation activities.

(2) The IHA and the duly elected resident organization at each

development shall collaborate on how the funds will be distributed for

resident participation activities. If disputes regarding funding

decisions arise between the parties, the matter shall be referred to

the HUD Headquarters for intervention. HUD Headquarters may require the

parties to undertake further negotiations to resolve the dispute. If no

resolution is achieved within 90 days from the date of renegotiation,

Headquarters shall take appropriate actions to settle the dispute in a

fair and equitable manner.

(b) Stipends. (1) IHAs may provide stipends to officers of the duly

elected RO. The stipend, which may be up to $200 per month per officer,

shall be decided locally by the ROs and the IHA. Subject to

appropriations, the stipends will be funded from the portion of the

operating subsidy funding for RO expenses ($15.00 per unit per year).

(See definition of annual income in Sec. 905.102 for exclusion for

these stipends.)

(2) Funding provided by an IHA to a duly elected RO may be made

only under a written agreement between the IHA and a RO, which includes

a RO budget and assurance that all RO expenditures will not contravene

provisions of law and will promote serviceability, efficiency, economy

and stability in the operation of the local development. The agreement

must require the local RO to account to the IHA for the use of the

funds and permit the IHA to inspect and audit the resident council's

financial records related to the agreement.

Tenant Opportunities Program

Sec. 905.966 General.

The Indian Tenant Opportunities Program (TOP) (which is the program

similar to the public housing TOP for public housing residents)

provides technical assistance for various activities including resident

management for ROs/RMCs as authorized by Section 20 of the Act. The TOP

provides opportunities for RO/RMCs to improve living conditions and

resident satisfaction in Indian housing communities.

Sec. 905.967 Eligible TOP activities.

Activities to be funded and carried out by an eligible RO or

resident management corporation, as defined in subpart B of this part,

must improve the living conditions and Indian housing operations and

may include any combination of, but are not limited to, the following:

(a) Resident Capacity Building. (1) Training Board members in

community organizing, Board development, and leadership training;

(2) Determining the feasibility of resident management enablement

for a specific project or projects; and

(3) Assisting in the actual creation of a RMC, such as consulting

and legal assistance to incorporate, preparing by-laws and drafting a

corporate charter.

(b) Resident Management. (1) Training residents, as potential

employees of a RMC, in skills directly related to the operation,

management, maintenance and financial systems of a project;

(2) Training of residents with respect to fair housing

requirements; and

(3) Gaining assistance in negotiating management contracts, and

designing a long-range planning system.

(c) Resident Management Business Development. (1) Training related

to resident-owned business development and technical assistance for job

training and placement in RMC developments;

(2) Technical assistance and training in resident managed business

development through:

(i) Feasibility and market studies;

(ii) Development of business plans;

(iii) Outreach activities; and

(iv) Innovative financing methods including revolving loan funds.

(3) Legal advice in establishing a resident managed business

entity.

(d) Social Support Needs (such as self-sufficiency and youth

initiatives). (1) Feasibility studies to determine training and social

services needs;

(2) Training in management-related trade skills, computer skills,

etc;

(3) Management-related employment training and counseling;

(4) Coordination of support services;

(5) Training for programs such as child care, early childhood

development, parent involvement, volunteer services, parenting skills,

before and after school programs; and

(6) Training programs on health, nutrition and safety.

(7) Training in the development of strategies to successfully

implement a youth program. For example, assessing the needs and

problems of the youth, improving youth initiatives that are currently

active, and training youth, housing authority staff, resident

management corporations and resident organizations on youth initiatives

and program activities.

(8) Workshops for youth services, child abuse and neglect

prevention, tutorial services, in partnership with community-based

organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl

Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs

such as the Youth Sports Program and the Public Housing Drug

Elimination Programs also provide funding in these areas; and

(e) Homeownership Opportunity. Determining feasibility for

homeownership by residents, including assessing the feasibility of

other housing (including HUD owned or held single or multi-family)

affordable for purchase by residents.

(f) General. (1) Required training on HUD regulations and policies

governing the operation of low-income public and Indian housing

including contracting/procurement regulations, financial management,

capacity building to develop the necessary skills to assume management

responsibilities at the development and property management;

(2) Purchasing hardware, i.e., computers and software, office

furnishings and supplies, in connection with business development.

Every effort must be made to acquire donated or discounted hardware;

(3) Training in accessing other funding sources; and

(4) Hiring trainers or other experts. RO/RMCs must ensure that this

training is provided by a qualified housing management specialist, a

community organizer, the IHA, or other sources knowledgeable about the

program.

Sec. 905.968 Technical assistance.

To the extent that grant authority is available, HUD shall provide

financial assistance to ROs or RMCs that obtain, by contract or

otherwise, technical assistance for the development of resident

management entities, including the formation of these entities; the

development of the management capabilities of newly formed or existing

entities; the identification of the social support needs of residents

of projects, and the securing of this support; and a wide range of

activities to further the purposes of this subpart.

Sec. 905.969 Resident management requirements.

The following requirements apply when an IHA and its residents are

interested in providing for resident performance of management

functions in one or more projects under this subpart.

(a) Resident management corporation. Residents interested in

contracting with an IHA must establish a RMC that meets the

requirements for such a corporation, as specified in this subpart.

(b) Management Contract. (1) A management contract between the IHA

and a RMC is required for resident management. The IHA and the

corporation may agree to the performance by the corporation of any or

all management functions for which the IHA is responsible to HUD under

the ACC, and any other functions not inconsistent with the ACC and

applicable laws and regulations. The management contract must be in

conformance with the minimum requirements established by HUD.

(2) The management contract may include specific provisions

governing management personnel; compensation for maintenance laborers

and mechanics and administrative employees employed in the operation of

the project, except that the amount of this compensation must meet

applicable labor standard requirements of Federal law; rent collection

procedures; resident income verification; resident eligibility

determinations; resident eviction; the acquisition of supplies and

materials; and such other matters as the IHA and the corporation

determine to be appropriate, and as HUD may specify in administrative

instructions.

(3) The management contract shall be treated as a contracting out

of services, and must be subject to any provision of a collective

bargaining agreement regarding the contracting out of services to which

the IHA is subject.

(4) Provisions on competitive bidding and requirements of prior

written HUD approval of contracts contained in the ACC do not apply to

the decision of an IHA to contract with a RMC.

(c) Prohibited activities. An IHA may not contract for assumption

by the RMC of the IHA's underlying responsibilities to HUD under the

ACC.

(d) Bonding and insurance. Before assuming any management

responsibility under its contract, the RMC must provide fidelity

bonding and insurance, or equivalent protection that is adequate (as

determined by HUD and the IHA) to protect HUD and the IHA against loss,

theft, embezzlement, or fraudulent acts on the part of the corporation

or its employees.

Sec. 905.970 Management specialist.

The RO must select, in consultation with the IHA, a qualified

Indian housing management specialist to assist in determining the

feasibility of, and to help establish, a RMC and to provide training

and other duties in connection with operating the TOP project. The

Housing Management Specialist (Trainer) can be a non-profit

organization, the IHA or a consultant.

Sec. 905.971 Operating subsidy, preparation of operating budget,

operating reserves and retention of excess revenues.

(a) Calculation of operating subsidy. Operating subsidy will be

calculated separately for any project managed by a resident management

corporation. This subsidy computation will be the same as the separate

computation made for the balance of the projects in the IHA in

accordance with subpart J of this part, with the following exceptions:

(1) The project managed by a resident management corporation will

have an Allowable Expense Level based on the actual expenses for the

project in the fiscal year immediately preceding management under this

subpart. These expenditures will include the project's share of any

expenses which are overhead or centralized IHA expenditures. The

expenses must represent a normal year's expenditures for the project,

and must exclude all expenditures which are not normal fiscal year

expenditures as to amount or as to the purpose for which expended.

Documentation of this expense level must be presented with the project

budget and approved by HUD. Any project expenditures funded from a

source of income other than operating subsidies or income generated by

the locally owned Indian housing program will be excluded from the

subsidy calculation. For budget years after the first budget year under

management by the resident management corporation, the Allowable

Expense Level will be calculated as it is for all other projects, in

accordance with subpart J of this part.

(2) The resident management corporation project will estimate

dwelling rental income based on the rent roll of the project

immediately preceding the assumption of management responsibility under

this subpart, increased by the estimate of inflation of resident income

used in calculating PFS subsidy.

(3) The resident management corporation will exclude, from its

estimate of other income, any increased income directly generated by

activities of the corporation or facilities operated by the

corporation.

(4) Any reduction in the subsidy of an IHA that occurs as a result

of fraud, waste, or mismanagement by the IHA shall not affect the

subsidy calculation for the resident management corporation project.

(b) Calculation of total income and preparation of operating

budget. No reduction. (1) Subject to paragraph (c) of this section, the

amount of funds provided by an IHA to a project managed by a resident

management corporation under this subpart may not be reduced during the

three-year period beginning on the date a resident management

corporation first assumes management responsibility for the project.

(2) Treatment of technical assistance. For purposes of determining

the amount of funds provided to a project under paragraph (b)(1) of

this section, the provision of technical assistance by the IHA to the

resident management corporation will not be included.

(3) Operating budget. The resident management corporation and the

IHA shall submit a separate operating budget, including the calculation

of operating subsidy eligibility in accordance with paragraph (a) of

this section, for the project managed by a resident management

corporation to HUD for approval. This budget will reflect all project

expenditures and will identify which expenditures are related to the

responsibilities of the resident management corporation and which are

related to functions which will continue to be performed by the IHA.

(4) Operating reserves. (i) Each project or part of a project that

is operating in accordance with the ACC amendment relating to this

subpart and in accordance with a contract vesting maintenance

responsibilities in the resident management corporation will have

transferred, into a sub-account of the operating reserve of the host

IHA, an operating reserve. Where all maintenance responsibilities for

the resident-managed project are the responsibility of the corporation,

the amount of the reserve made available to projects under this subpart

will be the per unit cost amount available in the IHA operating

reserve, exclusive of all inventories, prepaids and receivables (at the

end of the IHA fiscal year preceding implementation), multiplied by the

number of units in the project operated in accordance with the

provisions of this subpart. Where some, but not all, maintenance

responsibilities are vested in the resident management corporation, the

contract may provide for an appropriately reduced portion of the

operating reserve to be transferred into the corporation's sub-account.

(ii) The use of the reserve will be subject to all administrative

procedures generally applicable to the Indian housing program. Any

expenditure of funds from the reserve will be for eligible expenditures

which are incorporated into an operating budget subject to approval by

HUD.

(iii) Investment of funds held in the reserve will be in accordance

with the provisions of chapter 4 of the Financial Management Handbook,

7475.1 REV, and interest generated will be included in the calculation

of operating subsidy in accordance with subpart J of this part.

(c) Adjustments to total income. (1) Operating subsidy will reflect

changes in inflation, utility rates and consumption, and changes in the

number of units in the project.

(2) In addition to the amount of income derived from the project

(from sources such as rents and charges) and the operating subsidy

calculated in accordance with paragraph (a) of this section, the

contract may specify that income be provided to the project from other

sources of income of the IHA.

(3) The following conditions may not affect the amounts to be

provided to a project managed by a resident management corporation

under this subpart:

(i) Any reduction in the total income of an IHA that occurs as a

result of fraud, waste, or mismanagement by the IHA; or

(ii) Any change in the total income of an IHA that occurs as a

result of project-specific characteristics that are not shared by the

project managed by the corporation under this subpart.

(d) Retention of excess revenues. Any income generated by a

resident management corporation that exceeds the income estimated for

the income category involved must be excluded in subsequent years in

calculating:

(1) The operating subsidy provided to an IHA under subpart J of

this part; and

(2) The funds provided by the IHA to the resident management

corporation.

(e) Use of retained revenues. Any revenues retained by a resident

management corporation under paragraph (d) of this section may only be

used for purposes of improving the maintenance and operation of the

project, establishing business enterprises that employ residents of

Indian housing, or acquiring additional dwelling units for low-income

families. Units acquired by the resident management corporation will

not be eligible for payment of operating subsidy.

Sec. 905.972 TOP audit and administrative requirements.

(a) Annual audit of financial statements. The financial statements

of a RMC managing a project under this subpart must be audited annually

by a licensed certified public accountant, designated by the RMC, in

accordance with generally accepted government audit standards. A

written report of each audit must be forwarded to HUD and the IHA

within 30 days of issuance.

(b) Relationship to other authorities. The requirements of

paragraph (a) of this section are in addition to any other Federal law

or other requirement that would apply to the availability and audit of

financial statements of RMCs under this part.

(c) General administrative requirements. Except as modified by this

part, RMCs must comply with the requirements of OMB Circulars A-110 and

A-122, as applicable.

Family Investment Centers (FIC) Program

Sec. 905.980 General.

(a) The Family Investment Centers (FIC) Program. This program

provides families living in Indian housing with better access to

educational and employment opportunities by:

(1) Developing facilities in or near Indian housing for training

and support services;

(2) Mobilizing public and private resources to expand and improve

the delivery of such services;

(3) Providing funding for such essential training and support

services that cannot otherwise be funded; and

(4) Improving the capacity of management to assess the training and

service needs of families, coordinating the provision of training and

services that meet such needs, and ensuring the long-term provision of

such training and services.

(b) Supportive Services. New or significantly expanded services

essential to providing families in Indian housing with better access to

educational and employment opportunities to achieve self-sufficiency

and independence. IHAs applying for funds to provide supportive

services must demonstrate that the services will be provided at a

higher level than currently provided. Supportive services may include:

(1) Child care;

(2) Employment training and counseling;

(3) Computer skills training;

(4) Education including remedial education; literacy training;

completion of secondary or post secondary education and assistance in

the attainment of certificates of high school equivalency;

(5) Business, entrepreneurial training and counseling;

(6) Transportation necessary to enable any participating family

member to receive available services or to commute to his/her place of

employment;

(7) Personal welfare (e.g. substance/alcohol abuse treatment and

counseling, self-development counseling, etc.);

(8) Supportive Health Care Services (e.g., outreach and referral

services); and

(9) Any other services and resources, including case management,

determined to be appropriate in assisting eligible residents.

(c) FIC Service Coordinator. Any person who is responsible for:

(1) Determining the eligibility and assessing needs of families to

be serviced by the FIC;

(2) Assessing training and service needs of eligible residents;

(3) Working with service providers to coordinate the provision of

services and to tailor the services to the needs and characteristics of

eligible residents;

(4) Mobilizing public and private resources to ensure that the

supportive services identified can be funded over the five-year period,

at least, following the initial receipt of funding;

(5) Monitoring and evaluating the delivery, impact and

effectiveness of any supportive service funded with capital or

operating assistance under the FIC program.

(6) Coordinating the development and implementation of the FIC

Program with other self-sufficiency, educational and employment

programs; and

(7) Performing other duties and functions that are appropriate for

providing eligible residents with better access to educational and

employment opportunities.

Sec. 905.982 Eligibility.

An IHA may apply to establish one or more FICs for more than one

Indian housing development. An IHA must demonstrate a firm commitment

of assistance from one or more sources ensuring that supportive

services will be provided for not less than one year following the

completion of activities.

Sec. 905.983 FIC activities.

Activities that may be funded and carried out by an eligible IHA

may include:

(a) The renovation, conversion, or combination of vacant dwelling

units to create common areas to accommodate the provision of supportive

services;

(b) The renovation of existing common areas to accommodate the

provision of supportive services;

(c) The acquisition, construction, or renovation of facilities

located near the premises of one or more IHA developments to

accommodate the provision of supportive services;

(d) The provision of not more than 15 percent of the total cost of

supportive services (which may be provided directly to eligible

residents by the IHA or by contract or lease through other appropriate

agencies or providers), but only if the IHA demonstrates that:

(1) The supportive services are appropriate to improve the access

of eligible residents to employment and educational opportunities; and

(2) The IHA has made diligent efforts to use or obtain other

available resources to fund or provide such services; and

(e) The employment of service coordinators.

Sec. 905.984 IHA role in activities under this part.

An IHA shall develop a process that ensures that RO/RMC

representatives and residents are fully informed of, and have an

opportunity to comment on, the contents of the application and

activities at all stages of the application and grant award process.

The IHA shall give full and fair consideration to the comments and

concerns of the residents.

Sec. 905.985 HUD policy on training, employment, contracting and

subcontracting of Indian housing residents.

In accordance with Section 3 of the Housing and Urban Development

Act of 1968 and the implementing regulations at 24 CFR part 135, IHAs,

their contractors and subcontractors shall use best efforts, consistent

with existing Federal, State, Tribal and local laws and regulations

(including Section 7(b) of the Indian Self-Determination and Education

Assistance Act), to give low and very low-income persons the training

and employment opportunities generated by Section 3 covered assistance

(as this term is defined in 24 CFR 135.7) and to give Section 3

business concerns the contracting opportunities generated by Section 3

covered assistance.

Sec. 905.986 Grant Set-Aside Assistance.

HUD may set-aside five percent of any amounts available in each

fiscal year (subsequent to the first funding cycle) to supplement

grants previously awarded under this program. These supplemental grants

would be awarded to IHAs that demonstrate that funds cannot otherwise

be obtained and are needed to provide adequate service levels to

residents.

Sec. 905.987 Resident compensation.

Residents employed pursuant to a FIC grant shall be paid at a rate

not less than the highest of:

(a) The minimum wage that would be applicable to the employee under

the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1) of the

FLSA applied to the resident and if the resident was not exempt under

section 13 of the FLSA;

(b) The State, local or Tribal minimum wage for the most nearly

comparable covered employment; or

(c) The prevailing rate of pay for persons employed in similar

public occupations by the same employer.

Sec. 905.988 Administrative requirements.

Each IHA receiving a grant shall submit to the HUD Field Office an

annual progress report describing and evaluating the use of grant

amounts received under this program.

PART 913--DEFINITION OF INCOME, INCOME LIMITS, RENT AND

REEXAMINATION OF FAMILY INCOME FOR THE PUBLIC HOUSING PROGRAM

6. The authority citation for part 913 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437d, 1437n and 3535(d).

7. In Sec. 913.106, paragraph (c) is amended by:

a. Removing the word ``or'' from the end of paragraph (c)(8)(ii);

b. Adding the word ``or'' at the end of paragraph (c)(8)(iii);

c. Adding a new paragraph (c)(8)(iv);

d. Removing the word ``or'' from the end of paragraph (c)(10);

e. Redesignating paragraph (c)(11) as paragraph (c)(12); and

f. Adding a new paragraph (c)(11), to read as follows:

Sec. 913.106 Annual income.

* * * * *

(c) * * *

(8) * * *

(iv) A resident service stipend, but only if the resident service

stipend does not exceed $200 per month/per officer to resident council

officers. Stipends are intended to cover costs related to officers'

volunteer efforts and include but are not limited to the following

items: child care, transportation, special equipment and special

clothing.

* * * * *

(11) The earnings and benefits to any resident resulting from the

participation in a program providing employment training and supportive

services in accordance with the Family Support Act of 1988, section 22

of the U.S. Housing Act of 1937, or any comparable Federal, State, or

local law during the exclusion period. For purposes of this paragraph,

the following definitions apply.

(i) Comparable Federal, State or Local law means a program

providing employment training and supportive services that--

(A) Is authorized by a federal, state or local law;

(B) Is funded by federal, state or local government;

(C) Is operated or administered by a public agency; and

(D) Has as its objective to assist participants in acquiring job

skills.

(ii) Exclusion period means the period during which the resident

participates in a program described in this section, plus 18 months

from the date the resident begins the first job acquired by the

resident after completion of such program that is not funded by public

housing assistance under the U.S. Housing Act of 1937. If the resident

is terminated from employment without good cause, the exclusion period

shall end.

(iii) Earnings and Benefits means the incremental earnings and

benefits resulting from a qualifying employment training program or

subsequent job. (This provision does not apply to residents

participating in the Family Self-Sufficiency Program who are utilizing

the escrow account.)

* * * * *

8. Part 964, consisting of Secs. 964.1 through 964.350, is revised

in its entirety, to read as follows:

PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC

HOUSING

Subpart A--General Provisions

Sec.

964.1 Purpose.

964.3 Applicability and scope.

964.7 Definitions.

964.11 HUD policy on tenant participation.

964.12 HUD policy on the Tenant Opportunities Program (TOP).

964.14 HUD policy on partnerships.

964.15 HUD policy on resident management.

964.16 HUD role in activities under this part.

964.18 HA role in activities under subparts B & C.

964.24 HUD policy on FIC Program.

964.30 Other Program requirements.

Subpart B--Tenant Participation

964.100 Role of resident council.

964.105 Role of the Jurisdiction-Wide Resident Council.

964.110 Resident membership on HA Board of Commissioners.

964.115 Resident council requirements.

964.117 Resident council partnerships.

964.120 Resident management corporation requirements.

964.125 Eligibility for resident council membership.

964.130 Election procedures and standards.

964.135 Resident involvement in HA management operations.

964.140 Resident training.

964.145 Conflict of interest.

964.150 Funding tenant participation.

Subpart C--Tenant Opportunities Program

964.200 General.

964.205 Eligibility.

964.210 Notice of funding availability.

964.215 Grant agreement.

964.220 Technical assistance.

964.225 Resident management requirements.

964.230 Audit and administrative requirements.

Subpart D--Family Investment Centers (FIC) Program

964.300 General.

964.305 Eligibility.

964.308 Supportive services requirements.

964.310 Audit/compliance requirements.

964.315 HAs role in activities under this part.

964.320 HUD Policy on training, employment, contracting and

subcontracting of public housing residents.

964.325 Notice of funding availability.

964.330 Grant set-aside assistance.

964.335 Grant agreement.

964.340 Resident compensation.

964.345 Treatment of income.

964.350 Administrative requirements.

Authority: 42 U.S.C. 1437d, 1437g, 1437l, 1437r, 1437t, 3535(d).

Subpart A--General Provisions

Sec. 964.1 Purpose.

The purpose of this part is to recognize the importance of resident

involvement in creating a positive living environment and in actively

participating in the overall mission of public housing.

Sec. 964.3 Applicability and scope.

(a) The policies and procedures contained in this part apply to any

HA that has a Public Housing Annual Contributions Contract (ACC) with

HUD. This part does not apply to PHAs with housing assistance payments

contracts with HUD under section 8 of the U.S. Housing Act of 1937.

(b) Subpart B of this part contains HUD policies, procedures, and

requirements for the participation of residents in public housing

operations. These policies, procedures, and requirements apply to all

residents participating under this part.

(c)(1) Subpart C of this part contains HUD policies, procedures,

and requirements for residents participating in the Tenant

Opportunities Program (TOP) (replaces the Resident Management Program

under Section 20 of the United States Housing Act of 1937). Resident

management in public housing is viable and remains an option under TOP.

(2) Subpart C of this part is not intended to negate any pre-

existing arrangements for resident management in public housing between

a PHA and a resident management corporation. On or after September 23,

1994, any new, renewed or renegotiated contracts must meet the

requirements of this part, the ACC and all applicable laws and

regulations.

(d) Subpart D of this part includes requirements for the Family

Investment Centers (FIC) Program which was established by Section 22 of

the United States Housing Act of 1937 (42 U.S.C. 1437t) to provide

families living in public housing and Indian housing with better access

to educational and employment opportunities.

(e) The term ``resident,'' as used throughout this part, is

interchangeable with the term ``tenant,'' to reflect the fact that

local resident organizations have differing preferences for the terms.

Terms such as ``resident council'' and ``tenant council'' and

``resident management'' and ``tenant management'' are interchangeable.

Hereafter, for ease of discussion, the rule will use the terms

resident, resident council and resident management corporation, as

appropriate.

Sec. 964.7 Definitions.

Annual Contributions Contract (ACC). A contract (in the form

prescribed by HUD) under which HUD agrees to provide financial

assistance, and the HA agrees to comply with HUD requirements for the

development and operation of the public housing project.

Eligible residents for FIC. A participating resident of a

participating HA. If the HA is combining FIC with the Family Self-

Sufficiency (FSS) program, the term also means Public Housing FSS and

Section 8 families participating in the FSS program. Although Section 8

FSS families are eligible residents for FIC, they do not qualify for

income exclusions that are provided for public housing residents

participating in employment and supportive service programs.

Family Investment Centers (FIC). A facility on or near public

housing which provides families living in public housing with better

access to educational and employment opportunities to achieve self-

sufficiency and independence.

FIC service coordinator. Any person who is responsible for:

(1) Determining the eligibility and assessing needs of families to

be served by the FIC;

(2) Assessing training and service needs of eligible residents;

(3) Working with service providers to coordinate the provision of

services on a HA-wide or less than HA-wide basis, and to tailor the

services to the needs and characteristics of eligible residents;

(4) Mobilizing public and private resources to ensure that the

supportive services identified can be funded over the five-year period,

at least, following the initial receipt of funding.

(5) Monitoring and evaluating the delivery, impact, and

effectiveness of any supportive service funded with capital or

operating assistance under the FIC program;

(6) Coordinating the development and implementation of the FIC

program with other self-sufficiency programs, and other education and

employment programs; and

(7) Performing other duties and functions that are appropriate for

providing eligible residents with better access to educational and

employment opportunities.

Management. All activities for which the HA is responsible to HUD

under the ACC, within the definition of ``operation'' under the Act and

the ACC, including the development of resident programs and services.

Management contract. A written agreement between a resident

management corporation and a HA, as provided by subpart C.

Public Housing Agency (HA). Any State, county, municipality, or

other governmental entity or public body (or agency or instrumentality

thereof) which is authorized to engage in or assist in the development

and operation of low-income housing.

Public housing development (Development). The term ``development''

has the same meaning as that provided for ``low-income housing

project'' as that term is defined Section 3(b)(1) of the Act.

Resident management. The performance of one or more management

activities for one or more projects by a resident management

corporation under a management contract with the HA.

Resident management corporation. An entity that proposes to enter

into, or enters into, a contract to manage one or more management

activities of a HA.

Resident-owned business. Any business concern which is owned and

controlled by public housing residents. (The term ``resident-owned

business'' includes sole proprietorships.) For purposes of this part,

``owned and controlled'' means a business:

(1) Which is at least 51 percent owned by one or more public

housing residents; and

(2) Whose management and daily business operations are controlled

by one or more such individuals.

Supportive services for FIC. New or significantly expanded services

that are essential to providing families living with children in public

housing with better access to educational and employment opportunities

to achieve self-sufficiency and independence.

Tenant Opportunities Program (TOP). The TOP program is designed to

prepare residents to experience the dignity of meaningful work, to own

and operate resident businesses, to move toward financial independence,

and to enable them to choose where they want to live and engage in

meaningful participation in the management of housing developments in

which they live. Financial assistance in the form of technical

assistance grants is available to RCs/RMCs to prepare to manage

activities in their public housing developments.

Vacant unit under FIC. A dwelling unit that is not under an

effective lease to an eligible family. An effective lease is a lease

under which an eligible family has a right to possession of the unit

and is being charged rent, even if the amount of any utility allowance

equals or exceeds the amount of a total resident payment that is based

on income and, as a result, the amount paid by the family to the HA is

zero.

Sec. 964.11 HUD policy on tenant participation.

HUD promotes resident participation and the active involvement of

residents in all aspects of a HA's overall mission and operation.

Residents have a right to organize and elect a resident council to

represent their interests. As long as proper procedures are followed,

the HA shall recognize the duly elected resident council to participate

fully through a working relationship with the HA. HUD encourages HAs

and residents to work together to determine the most appropriate ways

to foster constructive relationships, particularly through duly-elected

resident councils.

Sec. 964.12 HUD policy on the Tenant Opportunities Program (TOP).

HUD promotes TOP programs to support activities that enable

residents to improve the quality of life and resident satisfaction, and

obtain other social and economic benefits for residents and their

families. Tenant opportunity programs are proven to be effective in

facilitating economic uplift, as well as in improving the overall

conditions of the public housing communities.

Sec. 964.14 HUD policy on partnerships.

HUD promotes partnerships between residents and HAs which are an

essential component to building, strengthening and improving public

housing. Strong partnerships are critical for creating positive changes

in lifestyles thus improving the quality of life for public housing

residents, and the surrounding community.

Sec. 964.15 HUD policy on resident management.

It is HUD's policy to encourage resident management. HUD encourages

HAs, resident councils and resident management corporations to explore

the various functions involved in management to identify appropriate

opportunities for contracting with a resident management corporation.

Potential benefits of resident-managed entities include improved

quality of life, experiencing the dignity of meaningful work, enabling

residents to choose where they want to live, and meaningful

participation in the management of the housing development.

Sec. 964.16 HUD role in activities under this part.

(a) General. Subject to the requirements of this part and other

requirements imposed on HAs by the ACC, statute or regulation, the form

and extent of resident participation including resident management are

local decisions to be made jointly by resident councils/resident

management corporations and their HAs. HUD will promote tenant

participation and tenant opportunities programs, and will provide

additional guidance, as necessary and appropriate. In addition, HUD

will endeavor to provide technical assistance in connection with these

initiatives.

(b) Monitoring. HUD shall ensure that the requirements under this

part are operating efficiently and effectively.

Sec. 964.18 HA role in activities under subparts B & C.

(a) HAs with 250 units or more.

(1) A HA shall officially recognize a duly elected resident council

as the sole representative of the residents it purports to represent,

and support its tenant participation activities.

(2) When requested by residents, a HA shall provide appropriate

guidance to residents to assist them in establishing and maintaining a

resident council.

(3) A HA may consult with residents, or resident councils (if they

exist), to determine the extent to which residents desire to

participate in activities involving their community, including the

management of specific functions of a public housing development that

may be mutually agreeable to the HA and the resident council/resident

management corporation.

(4) A HA shall provide the residents or any resident council with

current information concerning the HA's policies on tenant

participation in management.

(5) If requested, a HA should provide a duly recognized resident

council office space and meeting facilities, free of charge, preferably

within the development it represents. If there is no community or

rental space available, a request to approve a vacant unit for this

non-dwelling use will be considered on a case-by-case basis.

(6) If requested, a HA shall negotiate with the duly elected

resident council on all uses of community space for meetings,

recreation and social services and other resident participation

activities pursuant to HUD guidelines. Such agreements shall be put

into a written document to be signed by the HA and the resident

council. If a HA fails to negotiate with a resident council in good

faith or, after negotiations, refuses to permit such usage of community

space, the resident council may file an informal appeal with HUD,

setting out the circumstances and providing copies of relevant

materials evidencing the resident council's efforts to negotiate a

written agreement. HUD shall require the HA to respond with a report

stating the HA's reasons for rejecting the request or for refusing to

negotiate. HUD shall require the parties (with or without direct HUD

participation) to undertake or to resume negotiations on an agreement.

If no resolution is achieved within 90 days from the date HUD required

the parties to undertake or resume such negotiations, HUD shall serve

notice on both parties that administrative remedies have been exhausted

(except that, pursuant to mutual agreement of the parties, the time for

negotiations may be extended by no more than an additional 30 days).

(7) In no event shall HUD or a HA recognize a competing resident

council once a duly elected resident council has been established. Any

funding of resident activities and resident input into decisions

concerning public housing operations shall be made only through the

officially recognized resident council.

(8) The HA shall ensure open communication and frequent meetings

between HA management and resident councils and shall encourage the

formation of joint HA management-resident committees to work on issues

and planning.

(9) The resident council shall hold frequent meetings with the

residents to ensure that residents have input, and are aware and

actively involved in HA management-resident council decisions and

activities.

(10) The HA and resident council shall put in writing in the form

of a Memorandum of Understanding the elements of their partnership

agreement and it shall be updated at least once every three (3) years.

(11) The HA, in collaboration with the resident councils, shall

assume the lead role for assuring maximum opportunities for skills

training for public housing residents. To the extent possible, the

training resources should be local to ensure maximum benefit and on-

going access.

(b) HAs with fewer than 250 units. (1) HAs with fewer than 250

units of public housing have the option of participating in programs

under this part.

(2) HAs shall not deny residents the opportunity to organize. If

the residents decide to organize and form a resident council, the HA

shall comply with the following:

(i) A HA shall officially recognize a duly elected resident council

as the sole representative of the residents it purports to represent,

and support its tenant participation activities.

(ii) When requested by residents, a HA shall provide appropriate

guidance to residents to assist them in establishing and maintaining a

resident council.

(iii) A HA shall provide the residents or any resident council with

current information concerning the HA's policies on tenant

participation in management.

(iv) In no event shall HUD or a HA officially recognize a competing

resident council once a duly elected resident council has been

established. If a duly elected resident council has been formed, any

input into changes concerning public housing operations shall be made

only through the officially recognized resident council.

Sec. 964.24 HUD policy on FIC Program.

HUD promotes Family Investment Centers which provide better access

to educational and employment opportunities for residents living in

public housing. HUD encourages resident involvement in the FIC Program

and promotes resident-HA partnerships to achieve mutual goals.

Sec. 964.30 Other Program requirements.

All programs under this part must be conducted and administered in

accordance with the Civil Rights requirements cited below and comply

with all other Federal laws, executive orders, regulations and

policies.

(a) Fair Housing Requirements. The requirements of the Fair Housing

Act (42 U.S.C. 3601-19) and regulations pursuant thereto (24 CFR Part

100); Executive Order 11063 (Equal Opportunity in Housing) and

regulations pursuant thereto (24 CFR Part 107); the fair housing poster

regulations (24 CFR Part 110) and the advertising guidelines (24 CFR

Part 109).

(b) Nondiscrimination in Housing. Title VI of the Civil Rights Act

of 1964 (42 U.S.C. 2000d) and regulations pursuant thereto (24 CFR Part

1).

(c) Discrimination on the Basis of Age or Handicap. The

prohibitions against discrimination on the basis of age under the Age

Discrimination Act of 1975 (42 U.S.C. 6101-07) and regulations issued

pursuant thereto (24 CFR Part 146), and the prohibitions against

discrimination against handicapped individuals under Section 504 of the

Rehabilitation Act of 1973 (29 U.S.C. 794) and regulations issued

pursuant thereto (24 CFR Part 8).

(d) Employment Opportunities. The requirements of Section 3 of the

Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) (Employment

Opportunities for Lower Income Persons in Connection with Assisted

Projects).

(e) Minority and Women's Business Enterprises. The requirements of

Executive Orders 11246, 11625 12432, and 12138. Consistent with HUD's

responsibilities under these orders, recipients must make efforts to

encourage the use of minority and women's business enterprises in

connection with funded activities.

(f) Affirmative Outreach. The Affirmative Fair Housing Marketing

Program requirements of 24 CFR Part 200, Subpart M and the implementing

regulations at 24 CFR part 108.

(g) Disability Requirements--Fair Housing Act, Section 504 and the

Americans with Disabilities Act. The recipient must comply with the

reasonable modification and accommodation requirements of the Fair

Housing Act and the accessibility requirements of the Fair Housing Act

and Section 504 of the Rehabilitation Act of 1973, as amended.

Recipient must also comply with Title II of the Americans with

Disabilities Act of 1990 (42 U.S.C. 12131) and implementing regulation

at 28 CFR Part 35.

Subpart B--Tenant Participation

Sec. 964.100 Role of resident council.

The role of a resident council is to improve the quality of life

and resident satisfaction and participate in self-help initiatives to

enable residents to create a positive living environment for families

living in public housing. Resident councils may actively participate

through a working partnership with the HA to advise and assist in all

aspects of public housing operations.

Sec. 964.105 Role of the jurisdiction-wide resident council.

(a) Jurisdiction-wide resident council. Resident councils may come

together to form an organization which can represent the interest of

residents residing in units under a HA's jurisdiction. This can be

accomplished by the presidents of duly elected resident councils

forming an organization, by resident councils electing a representative

to the organization, or through jurisdiction-wide elections. If duly

elected resident councils form such an organization, the HA shall

recognize it as the voice of authority-wide residents for input into

housing authority policy making.

(b) Function. The jurisdiction-wide council may advise the Board of

Commissioners and executive director in all areas of HA operations,

including but not limited to occupancy, general management,

maintenance, security, resident training, resident employment, social

services and modernization priorities.

(c) Cooperation with other groups. There shall be regularly

scheduled meetings between the HA and the local duly elected resident

council, and the jurisdiction-wide resident council to discuss

problems, plan activities and review progress.

Sec. 964.110 Resident membership on HA Board of Commissioners.

HUD encourages to the maximum extent possible resident membership

on HA Board of Commissioners, for the purpose of having maximum input

into HA policy and decision-making on matters concerning public

housing.

Sec. 964.115 Resident council requirements.

A resident council shall consist of persons residing in public

housing and must meet each of the following requirements in order to

receive official recognition from the HA/HUD, and be eligible to

receive funds for resident council activities, and stipends for

officers for their related costs for volunteer work in public housing:

(a) It may represent residents residing:

(1) In scattered site buildings;

(2) In areas of contiguous row houses; or

(3) In one or more contiguous buildings;

(4) In a development; or

(5) In a combination of these buildings or developments;

(b) It must adopt written procedures such as by-laws, or a

constitution which provides for the election of residents to the

governing board by the voting membership of the residents residing in

public housing, described in paragraph (b) of this section, on a

regular basis but at least once every three (3) years. The written

procedures must provide for the recall of the resident board by the

voting membership. These provisions shall allow for a petition or other

expression of the voting membership's desire for a recall election, and

set the number of percentage of voting membership (``threshold'') who

must be in agreement in order to hold a recall election. This threshold

shall not be less than 10 percent of the voting membership.

(c) It must have a democratically elected governing board that is

elected by the voting membership. At a minimum, the governing board

should consist of five (5) elected board members.

The voting membership must consist of heads of households (any age)

and other residents at least 18 years of age or older and whose name

appears on a lease for the unit in the public housing that the resident

council represents.

Sec. 964.117 Resident council partnerships.

A resident council may form partnerships with outside

organizations, provided that such relationships are complementary to

the resident council in its duty to represent the residents, and

provided that such outside organizations do not become the governing

entity of the resident council.

Sec. 964.120 Resident management corporation requirements.

A resident management corporation must consist of residents

residing in public housing and have each of the following

characteristics in order to receive official recognition by the HA and

HUD:

(a) It shall be a non-profit organization that is validly

incorporated under the laws of the State in which it is located;

(b) It may be established by more than one resident council, so

long as each such council:

(1) Approves the establishment of the corporation; and

(2) Has representation on the Board of Directors of the

corporation;

(c) It shall have an elected Board of Directors, and elections must

be held at least once every three (3) years;

(d) Its by-laws shall require the Board of Directors to include

resident representatives of each resident council involved in

establishing the corporation; include qualifications to run for office,

frequency of elections, procedures for recall, and term limits if

desired.

(e) Its voting members shall be heads of households (any age) and

other residents at least 18 years of age and whose name appears on the

lease of a unit in the public housing represented by the resident

management corporation;

(f) Where a resident council already exists for the development, or

a portion of the development, the resident management corporation shall

be approved by the resident council board and a majority of the

residents. If there is no resident council, a majority of the residents

of the public housing development it will represent must approve the

establishment of such a corporation for the purposes of managing the

project; and

(g) It may serve as both the resident management corporation and

the resident council, so long as the corporation meets the requirements

of this part for a resident council.

Sec. 964.125 Eligibility for resident council membership.

(a) Any member of a public housing household whose name is on the

lease of a unit in the public housing development and meets the

requirements of the by-laws is eligible to be a member of a resident

council. The resident council may establish additional criteria that

are non-discriminatory and do not infringe on rights of other residents

in the development. Such criteria must be stated in the by-laws or

constitution as appropriate.

(b) The right to vote for resident council board shall be limited

to designated heads of households (any age) and other members of the

household who are 18 years or older whose name appears on the lease of

a unit in the public housing development represented by the resident

council.

(c) Any qualified voting member of a resident council who meets the

requirements described in the by-laws and is in compliance with the

lease may seek office and serve on the resident council governing

board.

Sec. 964.130 Election procedures and standards.

At a minimum, a resident council may use local election boards/

commissions. The resident council shall use an independent third-party

to oversee elections and recall procedures.

(a) Resident councils shall adhere to the following minimum

standards regarding election procedures:

(1) All procedures must assure fair and frequent elections of

resident council members--at least once every three years for each

member.

(2) Staggered terms for resident council governing board members

and term limits shall be discretionary with the resident council.

(3) Each resident council shall adopt and issue election and recall

procedures in their by-laws.

(4) The election procedures shall include qualifications to run for

office, frequency of elections, procedures for recall, and term limits

if desired.

(5) All voting members of the resident community must be given

sufficient notice (at least 30 days) for nomination and election. The

notice should include a description of election procedures, eligibility

requirements, and dates of nominations and elections.

(b) If a resident council fails to satisfy HUD minimum standards

for fair and frequent elections, or fails to follow its own election

procedures as adopted, HUD shall require the HA to withdraw recognition

of the resident council and to withhold resident services funds as well

as funds provided in conjunction with services rendered for resident

participation in public housing.

(c) HAs shall monitor the resident council election process and

shall establish a procedure to appeal any adverse decision relating to

failure to satisfy HUD minimum standards. Such appeal shall be

submitted to a jointly selected third-party arbitrator at the local

level. If costs are incurred by using a third-party arbitrator, then

such costs should be paid from the HAs resident services funds pursuant

to Sec. 964.150.

Sec. 964.135 Resident involvement in HA management operations.

Residents shall be involved and participate in the overall policy

development and direction of Public Housing operations.

(a) Resident management corporations (RMCs) may contract with HAs

to perform one or more management functions provided the resident

entity has received sufficient training and/or has staff with the

necessary expertise to perform the management functions and provided

the RMC meets bonding and licensing requirements.

(b) Residents shall be actively involved in a HA's decision-making

process and give advice on matters such as modernization, security,

maintenance, resident screening and selection, and recreation.

(c) While a HA has responsibility for management operations, it

shall ensure strong resident participation in all issues and facets of

its operations through the duly elected resident councils at public

housing developments, and with jurisdiction-wide resident councils.

(d) A HA shall work in partnership with the duly elected resident

councils.

(e) HAs, upon request from the duly elected resident council, shall

ensure that the duly elected resident council officers as defined in

subpart B of this part, and other residents in the development are

fully trained and involved in developing and implementing Federal

programs including but not limited to Comprehensive Improvement

Assistance Program (CIAP), Comprehensive Grant Program, Urban

Revitalization Demonstration, Drug Elimination, and FIC.

(f) HAs shall involve resident council officers and other

interested residents at the development through education and direct

participation in all phases of the budgetary process.

(g) Resident council officers shall be encouraged to become

involved in the resident screening and selection process for

prospective residents at the development. Those selected to perform

resident screening and selection functions must be trained by the HA in

resident screening and selection and must sign a legal document

committing to confidentiality.

Sec. 964.140 Resident training.

(a) Resident training opportunities. HUD encourages a partnership

between the residents, the HA and HUD, as well as with the public and

non-profit sectors to provide training opportunities for public housing

residents. The categories in which training could occur include, but

are not limited to:

(1) Community organization and leadership training;

(2) Organizational development training for Resident Management

Corporations and duly elected Resident Councils;

(3) Public housing policies, programs, rights and responsibilities

training; and

(4) Business entrepreneurial training, planning and job skills.

(b) Local training resources. HUD encourages the use of local

training resources to ensure the ongoing accessibility and availability

of persons to provide training and technical assistance. Possible

training resources may include:

(1) Resident organizations;

(2) Housing authorities;

(3) Local community colleges, vocational schools; and

(4) HUD and other Federal agencies and other local public, private

and non-profit organizations.

Sec. 964.145 Conflict of interest.

Resident council officers can not serve as contractors or employees

if they are in policy making or supervisory positions at the HA.

Sec. 964.150 Funding tenant participation.

(a) Funding duly elected resident councils and jurisdiction wide

resident councils. (1) The HA shall provide funds it receives for this

purpose to the duly elected resident council at each development and/or

those jurisdiction-wide councils eligible to receive the resident

portion of the tenant services account to use for resident

participation activities. This shall be an addition to the Performance

Funding System (PFS), as provided by 24 CFR part 990, to permit HAs to

fund $25 per unit per year for units represented by duly elected

resident councils for resident services, subject to the availability of

appropriations. Of this amount, $15 per unit per year would be provided

to fund tenant participation activities under subpart B of this part

for duly elected resident councils and/or jurisdiction-wide councils

and $10 per unit per year would be used by the HA to pay for costs

incurred in carrying out tenant participation activities under subpart

B of this part, including the expenses for conducting elections,

recalls or arbitration required under Sec. 964.130 in subpart B. This

will guarantee the resources necessary to create a bona fide

partnership among the duly elected resident councils, the HA and HUD.

Where both local and jurisdiction-wide councils exist, the distribution

will be agreed upon by the HA and the respective councils.

(2) If funds are available through appropriations, the HA must

provide tenant services funding to the duly elected resident councils

regardless of the HA's financial status. The resident council funds

shall not be impacted or restricted by the HA financial status and all

said funds must be used for the purpose set forth in subparts B and C

of this part.

(3) The HA and the duly elected resident council at each

development and/or those jurisdiction-wide councils shall collaborate

on how the funds will be distributed for tenant participation

activities. If disputes regarding funding decisions arise between the

parties, the matter shall be referred to the Field Office for

intervention. HUD Field Office shall require the parties to undertake

further negotiations to resolve the dispute. If no resolution is

achieved within 90 days from the date of the Field Office intervention,

the Field Office shall refer the matter to HUD Headquarters for final

resolution.

(b) Stipends. (1) HUD encourages HAs to provide stipends to

resident council officers who serve as volunteers in their public

housing developments. The amount of the stipend, up to $200 per month/

per officer, shall be decided locally by the resident council and the

HA. Subject to appropriations, the stipends will be funded from the

resident council's portion of the operating subsidy funding for

resident council expenses ($15.00 per unit per year).

(2) Pursuant to Sec. 913.106, stipends are not to be construed as

salaries and should not be included as income for calculation of rents,

and are not subject to conflict of interest requirements.

(3) Funding provided by a HA to a duly elected resident council may

be made only under a written agreement between the HA and a resident

council, which includes a resident council budget and assurance that

all resident council expenditures will not contravene provisions of law

and will promote serviceability, efficiency, economy and stability in

the operation of the local development. The agreement must require the

local resident council to account to the HA for the use of the funds

and permit the HA to inspect and audit the resident council's financial

records related to the agreement.

Subpart C--Tenant Opportunities Program

Sec. 964.200 General.

(a) The Tenant Opportunities Program (TOP) provides technical

assistance for various activities, including but not limited to

resident management, for resident councils/resident management

corporations as authorized by Section 20 of the U.S. Housing Act of

1937. The TOP provides opportunities for resident organizations to

improve living conditions and resident satisfaction in public housing

communities.

(b) This subpart establishes the policies, procedures and

requirements for participating in the TOP with respect to applications

for funding for programs identified in this subpart.

(c) This subpart contains the policies, procedures and requirements

for the resident management program as authorized by section 20 of the

U.S. Housing Act of 1937.

Sec. 964.205 Eligibility.

(a) Resident councils/resident management corporations. Any

eligible resident council/resident management corporation as defined in

subpart B of this part is eligible to participate in a program

administered under this subpart.

(b) Activities. Activities to be funded and carried out by an

eligible resident council or resident management corporation, as

defined in subpart B of this part, must improve the living conditions

and public housing operations and may include any combination of, but

are not limited to, the following:

(1) Resident capacity building. (i) Training Board members in

community organizing, Board development, and leadership training;

(ii) Determining the feasibility of resident management enablement

for a specific project or projects; and

(iii) Assisting in the actual creation of an RMC, such as

consulting and legal assistance to incorporate, preparing by-laws and

drafting a corporate charter.

(2) Resident management. (i) Training residents, as potential

employees of an RMC, in skills directly related to the operation,

management, maintenance and financial systems of a project;

(ii) Training of residents with respect to fair housing

requirements; and

(iii) Gaining assistance in negotiating management contracts, and

designing a long-range planning system.

(3) Resident management business development. (i) Training related

to resident-owned business development and technical assistance for job

training and placement in RMC developments;

(ii) Technical assistance and training in resident managed business

development through:

(A) Feasibility and market studies;

(B) Development of business plans;

(C) Outreach activities; and

(D) Innovative financing methods including revolving loan funds;

and

(iii) Legal advice in establishing a resident managed business

entity.

(4) Social support needs (such as self-sufficiency and youth

initiatives). (i) Feasibility studies to determine training and social

services needs;

(ii) Training in management-related trade skills, computer skills,

etc;

(iii) Management-related employment training and counseling;

(iv) Coordination of support services;

(v) Training for programs such as child care, early childhood

development, parent involvement, volunteer services, parenting skills,

before and after school programs;

(vi) Training programs on health, nutrition and safety;

(vii) Workshops for youth services, child abuse and neglect

prevention, tutorial services, in partnership with community-based

organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl

Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs

such as the Youth Sports Program and the Public Housing Drug

Elimination Programs also provide funding in these areas;

(viii) Training in the development of strategies to successfully

implement a youth program. For example, assessing the needs and

problems of the youth, improving youth initiatives that are currently

active, and training youth, housing authority staff, resident

management corporations and resident councils on youth initiatives and

program activities; and

(5) Homeownership Opportunity. Determining feasibility for

homeownership by residents, including assessing the feasibility of

other housing (including HUD owned or held single or multi-family)

affordable for purchase by residents.

(6) General. (i) Required training on HUD regulations and policies

governing the operation of low-income public housing including

contracting/procurement regulations, financial management, capacity

building to develop the necessary skills to assume management

responsibilities at the project and property management;

(ii) Purchasing hardware, i.e., computers and software, office

furnishings and supplies, in connection with business development.

Every effort must be made to acquire donated or discounted hardware;

(iii) Training in accessing other funding sources; and

(iv) Hiring trainers or other experts (RCs/RMCs must ensure that

this training is provided by a qualified housing management specialist,

a community organizer, the HA, or other sources knowledgeable about the

program).

Sec. 964.210 Notice of funding availability.

A Notice of Funding Availability shall be published periodically in

the Federal Register containing the amounts of funds available, funding

criteria, where to obtain and submit applications, and the deadline for

submissions.

Sec. 964.215 Grant agreement.

(a) General. HUD shall enter into a grant agreement with the

recipient of a technical assistance grant which defines the legal

framework for the relationship between HUD and a resident council or

resident management corporation for the proposed funding.

(b) Term of grant agreement. A grant shall be for a term of three

to five years (3-5 years), and renewable at the expiration of the term.

Sec. 964.220 Technical assistance.

(a) Financial assistance. HUD will provide financial assistance, to

the extent available, to resident councils or resident management

corporations for technical assistance and training to further the

activities under this subpart.

(b) Requirements for a management specialist. If a resident council

or resident management corporation seeks to manage a development, it

must select, in consultation with the HA, a qualified housing

management specialist to assist in determining the feasibility of, and

to help establish, a resident management corporation and to provide

training and other duties in connection with the daily operations of

the project.

Sec. 964.225 Resident management requirements.

The following requirements apply when a HA and its residents are

interested in providing for resident performance of several management

functions in one or more projects.

(a) Resident management corporation responsibilities. Resident

councils interested in contracting with a HA must establish a resident

management corporation that meets the requirements for such a

corporation, as specified in subpart B. The RMC and its employees must

demonstrate their ability and skill to perform in the particular areas

of management pursuant to the management contract.

(b) HA responsibilities. HAs shall give full and serious

consideration to resident management corporations seeking to enter into

a management contract with the HA. A HA shall enter into good-faith

negotiations with a corporation seeking to contract to provide

management services.

(c) Duty to bargain in good faith. If a HA refuses to negotiate

with a resident management corporation in good faith or, after

negotiations, refuses to enter into a contract, the corporation may

file an informal appeal with HUD, setting out the circumstances and

providing copies of relevant materials evidencing the corporation's

efforts to negotiate a contract. HUD shall require the HA to respond

with a report stating the HA's reasons for rejecting the corporation's

contract offer or for refusing to negotiate. Thereafter, HUD shall

require the parties (with or without direct HUD participation) to

undertake or to resume negotiations on a contract providing for

resident management, and shall take such other actions as are necessary

to resolve the conflicts between the parties. If no resolution is

achieved within 90 days from the date HUD required the parties to

undertake or resume such negotiations, HUD shall serve notice on both

parties that administrative remedies have been exhausted (except that,

pursuant to mutual agreement of the parties, the time for negotiations

may be extended by no more than an additional 30 days).

(d) Management contract. A management contract between the HA and a

resident management corporation is required for property management.

The HA and the resident management corporation may agree to the

performance by the corporation of any or all management functions for

which the HA is responsible to HUD under the ACC and any other

functions not inconsistent with the ACC and applicable state and local

laws, regulations and licensing requirements.

(e) Procurement requirements. The management contract shall be

treated as a contracting out of services, and must be subject to any

provision of a collective bargaining agreement regarding the

contracting out of services to which the HA is subject. Provisions on

competitive bidding and requirements of prior written HUD approval of

contracts contained in the ACC do not apply to the decision of a HA to

contract with a RMC.

(f) Rights of families; operation of project. If a resident

management corporation is approved by the tenant organization

representing one or more buildings or an area of row houses that are

part of a public housing project for purposes of part 941 of this

chapter, the resident management program may not, as determined by the

HA, interfere with the rights of other residents of such project or

harm the efficient operation of such project.

(g) Comprehensive improvement assistance with RMCs. (1) The HA may

enter into a contract with the RMC to provide comprehensive improvement

assistance under part 968 of this chapter to modernize a project

managed by the RMC.

(2) The HA shall not retain, for any administrative or other

reason, any portion of the comprehensive improvement assistance

provided, unless the PHA and the RMC provide otherwise by contract.

(3) In assessing the modernization needs of its projects under 24

CFR part 968, or other grant mechanisms established by the Housing and

Community Development Act of 1987, the HAs must consult with the tenant

management corporation regarding any project managed by the

corporation, in order to determine the modernization needs and

preferences of resident-managed projects. Evidence of this required

consultation must be included with a HA's initial submission to HUD.

(h) Prohibited activities. A HA may not contract for assumption by

the resident management corporation of the HA's underlying

responsibilities to HUD under the ACC.

(i) Bonding and insurance. Before assuming any management

responsibility under its contract, the RMC must provide fidelity

bonding and insurance, or equivalent protection that is adequate (as

determined by HUD and the HA) to protect HUD and the HA against loss,

theft, embezzlement, or fraudulent acts on the part of the resident

management corporation or its employees.

(j) Waiver of HUD requirements. Upon the joint request of a

resident management corporation and the HA, HUD may waive any

requirement that HUD has established and that is not required by law,

if HUD determines, after consultation with the resident management

corporation and the HA, that the requirement unnecessarily increases

the costs to the project or restricts the income of the project; and

that the waiver would be consistent with the management contract and

any applicable collective bargaining agreement. Any waiver granted to a

resident management corporation under this section will apply as well

to the HA to the extent the waiver affects the HA's remaining

responsibilities relating to the resident management corporation's

project.

(k) Monitoring of RMC performance. The HA must review periodically

(but not less than annually) the management corporation's performance

to ensure that it complies with all applicable requirements and meets

agreed-upon standards of performance. (The method of review and

criteria used to judge performance should be specified in the

management contract.)

Sec. 964.230 Audit and administrative requirements.

(a) TOP grant recipients. The HUD Inspector General, the

Comptroller General of the United States, or any duly authorized

representative shall have access to all records required to be retained

by this subpart or by any agreement with HUD for the purpose of audit

or other examinations.

(1) Grant recipients must comply with the requirements of OMB

Circulars A-110 and A-122, as applicable.

(2) A final audit shall be required of the financial statements

made pursuant to this subpart by a Certified Public Accountant (CPA),

in accordance with generally accepted government audit standards. A

written report of the audit must be forwarded to HUD within 60 days of

issuance.

(b) Resident management corporations. Resident management

corporations who have entered into a contract with a HA with respect to

management of a development(s) must comply with the requirements of OMB

Circulars A-110 and A-122, as applicable. Resident management

corporations managing a development(s) must be audited annually by a

licensed certified public accountant, designated by the corporation, in

accordance with generally accepted government audit standards. A

written report of each audit must be forwarded to HUD and the HA within

30 days of issuance. These requirements are in addition to any other

Federal law or other requirement that would apply to the availability

and audit of books and records of resident management corporations

under this part.

Subpart D--Family Investment Centers (FIC) Program

Sec. 964.300 General.

The Family Investment Centers Program provides families living in

public housing with better access to educational and employment

opportunities by:

(a) Developing facilities in or near public housing for training

and support services;

(b) Mobilizing public and private resources to expand and improve

the delivery of such services;

(c) Providing funding for such essential training and support

services that cannot otherwise be funded; and

(d) Improving the capacity of management to assess the training and

service needs of families, coordinate the provision of training and

services that meet such needs, and ensure the long-term provision of

such training and services. FIC provides funding to HAs to access

educational, housing, or other social service programs to assist public

housing residents toward self-sufficiency.

Sec. 964.305 Eligibility.

(a) Public Housing Authorities. HAs may apply to establish one or

more FICs for more than one public housing development.

(b) FIC Activities. Activities that may be funded and carried out

by eligible HAs, as defined in Sec. 964.305(a) and Sec. 964.310(a) may

include:

(1) The renovation, conversion, or combination of vacant dwelling

units in a HA development to create common areas to accommodate the

provision of supportive services;

(2) The renovation of existing common areas in a HA development to

accommodate the provision of supportive services;

(3) The acquisition, construction or renovation of facilities

located near the premises of one or more HA developments to accommodate

the provision of supportive services;

(4) The provision of not more than 15 percent of the total cost of

supportive services (which may be provided directly to eligible

residents by the HA or by contract or lease through other appropriate

agencies or providers), but only if the HA demonstrates that:

(i) The supportive services are appropriate to improve the access

of eligible residents to employment and educational opportunities; and

(ii) The HA has made diligent efforts to use or obtain other

available resources to fund or provide such services; and

(5) The employment of service coordinators.

(c) Follow up. A HA must demonstrate a firm commitment of

assistance from one or more sources ensuring that supportive services

will be provided for not less than one year following the completion of

activities.

(d) Environmental Review. Any environmental impact regarding

eligible activities will be addressed through an environmental review

of that activity as required by 24 CFR part 50, including the

applicable related laws and authorities under Sec. 50.4, to be

completed by HUD, to ensure that any environmental impact will be

addressed before assistance is provided to the HA. Grantees will be

expected to adhere to all assurances applicable to environmental

concerns.

Sec. 964.308 Supportive services requirements.

HAs shall provide new or significantly expanded services essential

to providing families in public housing with better access to

educational and employment opportunities to achieve self-sufficiency

and independence. HAs applying for funds to provide supportive services

must demonstrate that the services will be provided at a higher level

than currently provided. Supportive services may include:

(a) Child care, of a type that provides sufficient hours of

operation and serves appropriate ages as needed to facilitate parental

access to education and job opportunities;

(b) Employment training and counseling (e.g., job training,

preparation and counseling, job development and placement, and follow-

up assistance after job placement);

(c) Computer skills training;

(d) Education (e.g., remedial education, literacy training,

completion of secondary or post-secondary education, and assistance in

the attainment of certificates of high school equivalency);

(e) Business entrepreneurial training and counseling;

(f) Transportation, as necessary to enable any participating family

member to receive available services or to commute to his or her place

of employment;

(g) Personal welfare (e.g., substance/alcohol abuse treatment and

counseling, self-development counseling, etc.);

(h) Supportive Health Care Services (e.g., outreach and referral

services); and

(i) Any other services and resources, including case management,

that are determined to be appropriate in assisting eligible residents.

Sec. 964.310 Audit/compliance requirements.

HAs cannot have serious unaddressed, outstanding Inspector General

audit findings or fair housing and equal opportunity monitoring review

findings or Field Office management review findings. In addition, the

HA must be in compliance with civil rights laws and equal opportunity

requirements. A HA will be considered to be in compliance if:

(a) As a result of formal administrative proceedings, there are no

outstanding findings of noncompliance with civil rights laws unless the

HA is operating in compliance with a HUD-approved compliance agreement

designed to correct the area(s) of noncompliance;

(b) There is no adjudication of a civil rights violation in a civil

action brought against it by a private individual, unless the HA

demonstrates that it is operating in compliance with a court order, or

implementing a HUD-approved resident selection and assignment plan or

compliance agreement, designed to correct the area(s) of noncompliance;

(c) There is no deferral of Federal funding based upon civil rights

violations;

(d) HUD has not deferred application processing by HUD under Title

VI of the Civil Rights Act of 1964, the Attorney General's Guidelines

(28 CFR 50.3) and HUD's Title VI regulations (24 CFR 1.8) and

procedures (HUD Handbook 8040.1) [HAs only] or under Section 504 of the

Rehabilitation Act of 1973 and HUD regulations (24 CFR 8.57) [HAs and

IHAs];

(e) There is no pending civil rights suit brought against the HA by

the Department of Justice; and

(f) There is no unresolved charge of discrimination against the HA

issued by the Secretary under Section 810(g) of the Fair Housing Act,

as implemented by 24 CFR 103.400.

Sec. 964.315 HAs role in activities under this part.

The HAs shall develop a process that assures that RC/RMC

representatives and residents are fully briefed and have an opportunity

to comment on the proposed content of the HA's application for funding.

The HA shall give full and fair consideration to the comments and

concerns of the residents. The process shall include:

(a) Informing residents of the selected developments regarding the

preparation of the application, and providing for residents to assist

in the development of the application.

(b) Once a draft application has been prepared, the HA shall make a

copy available for reading in the management office; provide copies of

the draft to any resident organization representing the residents of

the development(s) involved; and provide adequate opportunity for

comment by the residents of the development and their representative

organizations prior to making the application final.

(c) After HUD approval of a grant, notify the duly elected resident

organization and if none exists, notify the residents of the

development of the approval of the grant; provide notification of the

availability of the HUD-approved implementation schedule in the

management office for reading; and develop a system to facilitate a

regular resident role in all aspects of program implementation.

Sec. 964.320 HUD Policy on training, employment, contracting and

subcontracting of public housing residents.

In accordance with Section 3 of the Housing and Urban Development

Act of 1968 and the implementing regulations at 24 CFR part 135, HAs,

their contractors and subcontractors shall make best efforts,

consistent with existing Federal, State, and local laws and

regulations, to give low and very low-income persons the training and

employment opportunities generated by Section 3 covered assistance (as

this term is defined in 24 CFR 135.7) and to give Section 3 business

concerns the contracting opportunities generated by Section 3 covered

assistance. Training, employment and contracting opportunities

connected with programs funded under the FIC and TOP are covered by

Section 3.

Sec. 964.325 Notice of funding availability.

A Notice of Funding Availability will be published periodically in

the Federal Register containing the amounts of funds available, funding

criteria, where to obtain and submit applications, the deadline for the

submissions, and further explanation of the selection criteria.

Sec. 964.330 Grant set-aside assistance.

The Department may make available five percent (5%) of any amounts

available in each fiscal year (subsequent to the first funding cycle)

available to eligible HAs to supplement grants previously awarded under

this program. These supplemental grants would be awarded if the HA

demonstrates that the funds cannot otherwise be obtained and are needed

to maintain adequate levels of services to residents.

Sec. 964.335 Grant agreement.

(a) General. HUD will enter into a grant agreement with the

recipients of a Family Investment Centers grant which defines the legal

framework for the relationship between HUD and a HA.

(b) Term of grant agreement. A grant will be for a term of three to

five years depending upon the tasks undertaken, as defined under this

subpart.

Sec. 964.340 Resident compensation.

Residents employed to provide services or renovation or conversion

work funded under this program shall be paid at a rate not less than

the highest of:

(a) The minimum wage that would be applicable to the employees

under the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1)

of the FLSA applied to the resident and if the resident were not exempt

under section 13 of the FLSA;

(b) The State or local minimum wage for the most nearly comparable

covered employment; or

(c) The prevailing rate of pay for persons employed in similar

public occupations by the same employer.

Sec. 964.345 Treatment of income.

Program participation shall begin on the first day the resident

enters training or begins to receive services. Furthermore, the

earnings of and benefits to any HA resident resulting from

participation in the FIC program shall not be considered as income in

computing the resident's total annual income that is used to determine

the resident rental payment during:

(a) The period that the resident participates in the program; and

(b) The period that begins with the commencement of employment of

the resident in the first job acquired by the resident after completion

of the program that is not funded by assistance under the 1937 Act, and

ends on the earlier of:

(1) The date the resident ceases to continue employment without

good cause; or

(2) The expiration of the 18-month period beginning on the date of

commencement of employment in the first job not funded by assistance

under this program. (See Sec. 913.106, Annual Income.) This provision

does not apply to residents participating in the Family Self-

Sufficiency Program who are utilizing the escrow account.

Sec. 964.350 Administrative requirements.

The HUD Inspector General, the Comptroller General of the United

States, or any

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