Public and Indian Housing Amendments to the Comprehensive Grant Program; Proposed Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This rule proposes amendments to existing regulations to

simplify and expedite the Comprehensive Grant Program (CGP) planning

and funding process for public housing agencies (PHAs) and Indian

housing authorities (IHAs) that own or operate 250 or more public or

Indian housing units.

DATES: Comments due date: April 22, 1994.

ADDRESSES: Interested persons are invited to submit comments regarding

this proposed rule to the Rules Docket Clerk, Office of the General

Counsel, room 10276, Department of Housing and Urban Development, 451

Seventh Street, SW., Washington, DC 20410-0500. Communications should

refer to the above docket number and title. Facsimile (FAX) comments

are not acceptable. A copy of each communication submitted will be

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

p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: For questions concerning public

housing agencies contact Janice D. Rattley, Director, Office of

Construction, Rehabilitation and Maintenance, Public and Indian

Housing, room 4138, telephone (202) 708-1800, or (202) 708-0850 (voice/

TDD).

For questions concerning Indian housing authorities contact Dominic

Nessi, Director, Office of Native American Programs, Public and Indian

Housing, room 4140, telephone (202) 708-1015, or (202) 708-0850.

The address for all the above-listed persons is: Department of

Housing and Urban Development, 451 Seventh Street SW., Washington, DC

20410. (The telephone numbers listed above are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

The information collection requirements contained in this proposed

rule have been approved by the Office of Management and Budget, under

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

OMB control number 2577-0157.

II. Background

Section 14 of the United States Housing Act of 1937 (42 U.S.C.

14371) (``the Act''), as amended by section 119 of the Housing and

Community Development Act of 1987 (the ``1987 Act'') and Cranston-

Gonzalez National Affordable Housing Act of 1990 (``NAHA''),

established the Comprehensive Grant Program (CGP), which was designed

to govern the modernization needs of PHAs and IHAs that own and operate

250 or more public or Indian housing units. PHAs and IHAs that own and

operate fewer than 250 public or Indian housing units are governed by

the Comprehensive Improvement Assistance Program (CIAP).

(The reader should note that, hereafter, for ease of discussion,

the preamble to this proposed rule uses the terms ``public housing'' to

refer to both public and Indian housing, and ``HAs'' or ``housing

agency,'' to refer to both PHAs and IHAs, unless otherwise stated. In

addition, the term ``development'' is used to refer to ``low-income

projects,'' as defined at section 3(b)(1) of the Act.)

The Department promulgated regulations for the CGP and CIAP at 24

CFR parts 905 and 968, and these regulations have governed the

modernization of public and Indian housing assisted under the Act. On

February 14, 1992, the Department published the final rule for the CGP

at 57 FR 5514. The February 14, 1992 rule amended the CIAP at 24 CFR

part 968, subpart B, to limit its applicability to HAs that own or

operate fewer than 500 public housing units (fewer than 250 units

beginning in Federal Fiscal Year (FFY) 1993); added a new subpart C to

part 968, which sets forth the new CGP for HAs that own or operate a

total of 500 or more public housing units (250 or more units beginning

in FFY 1993); and revised both the CIAP and CGP programs for purposes

of implementing various technical and substantive program amendments

contained in sections 509 (b) through (f) of the NAHA.

On March 15, 1993, the Department published an interim rule for

CIAP at 58 FR 13916 for HAs with less than 250 units in FFY 1993 and

minor technical corrections for CGP. The CIAP interim rule was

published in response to public comment requesting both streamlining

and simplification and was also based on experience gained through

program review/audit and monitoring.

III. Simplification of CGP

A. Administrative Actions

The primary goal for CGP is to provide greater discretion and

responsibility to HAs in carrying out their modernization programs,

thereby returning it to local control. The published CGP rule and the

CGP Handbook 7485.3 were designed to meet this objective. Following

their publication, the Department has explored additional measures to

simplify the program and to increase the flexibility, responsibility

and authority at the HA level beyond that provided for in the

regulation and Handbook. It is the Department's intent that this be an

on-going process that will result in simplifying the program and

providing maximum flexibility to HAs. It is expected that this

increased flexibility to HAs will foster increased accountability by

the HAs to residents and the local government thereby ensuring local

control of the program. HAs will then demonstrate this local control

and involvement with their submission of materials for the partnership

process.

Additionally, the Department is concerned about the need to

accelerate the obligation of CGP funds. In order to contribute to the

economic recovery of this Nation, the Secretary has established, as an

initiative, the acceleration of the obligation and expenditure of CGP

funds.

Unless there are very substantial reasons to the contrary

(including but not limited to litigation, strikes, necessity to

redesign work already bid, and toxic substances), HUD expects that

CIAP/CGP funds will be obligated within two years of receipt (i.e.,

within two years from the execution of the ACC amendment) and expended

in three years from the execution of the ACC amendment. Some HAs have

suggested that the timeframe for tracking an HA's obligation/

expenditure of funds should begin with the date the HA has access to

LOCCS/VRS (Line of Credit Control System/Voice Response System). HUD

has made provisions for fast tracking the ACC execution and Field

Offices are advised to put the required information into LOCCS/VRS as

soon as the documents are executed.

HUD has attempted to streamline the ACC amendment process. As noted

in notice PIH 93-10 (entitled Expediting Fiscal Year (FY) 1993

Comprehensive Grant Program (CGP) Funding for Public and Indian Housing

Authorities (HA) that had an Approved Comprehensive Plan in FY 1992),

issued March 10, 1993, the ACC amendment is prepared by the HUD Field

Office program staff, reviewed by the HUD Field Counsel and forwarded

to the HA for signature. Unless required by State or local law or the

HA by-laws, the Executive Director is permitted to sign and return the

ACC amendment without a Board Resolution. HAs are encouraged to

consider amending their by-laws (where permitted under law) so that a

Board Resolution is not required or, if a Board Meeting is not

imminent, the HA may consider conducting a telephone Board Meeting to

authorize the signing of the ACC amendment.

HAs are also required to execute and file for record a Declaration

of Trust as provided under the ACC to protect the rights and interests

of HUD throughout the 20-year period during which HAs are obligated to

operate its developments in accordance with the ACC, the Act, and HUD

regulations and requirements. HUD is proposing to eliminate the

requirement for Declarations of Trust for Mutual Help units. Because of

the nature of the Mutual Help program (homeownership) and the burden

which this requirement places on Field Counsel and IHAs (e.g., locating

legal descriptions or surveys for trust land when the IHA's and HUD's

interest is only a leasehold), HUD has reviewed and discussed this

issue with Field Counsel and finds that HUD's interest is sufficiently

protected without the further requirement of a Declaration of Trust.

HUD is also aware of several problems which HAs have encountered

during the first year of operation of LOCCS/VRS and will meet with HAs

and industry groups to work out any remaining problems with LOCCS/VRS.

Currently, LOCCS/VRS is not set up to accommodate fungibility between

budget line items. Modifications will be made to the LOCCS/VRS software

to allow fungibility.

The HA estimated time frames (target dates) for obligation and

expenditures are reflected in its implementation schedule. The

Department proposes in this rule at 24 CFR 905.669(d) and 24 CFR

968.315(d) that all formula funding should be obligated within two

years of allocation unless a longer period is originally approved by

HUD. HAs may self-execute a time extension because of HUD delay or for

other reasons outside of the HA's control. The time periods for

obligation and expenditure of modernization funds are also proposed to

be taken into account in HUD's determination of an HA's continuing

capacity and reasonable progress. See Secs. 905.687 and 968.345.

If the HA fails to obligate funds within this period, they may be

subject to an alternative management strategy which may involve third-

party oversight of the modernization function. Before HUD would invoke

this remedy, HUD would provide technical assistance to the HA and work

with the HA to correct deficiencies. Furthermore, HUD would only

require such action after a corrective action order had been issued and

the HA failed to comply with the order. HUD could then issue a

corrective action order for an alternative management strategy. The HA

may appeal in writing the corrective action order imposing an

alternative management strategy within 60 days of that decision. HUD

Headquarters shall render a written decision on an HA's appeal within

60 calendar days of the date of its receipt of the HA's appeal.

HUD's role in expediting the allocation of modernization funds is

to reduce its time for review and approval of the CGP annual

submission. This will enable HAs to have funding earlier in the FFY.

HUD issued its first guidance on expedited review and submission on

February 4, 1993 in Notice PIH 93-5 which was provided to HAs. The

notice also indicated that HUD would be developing additional time

saving measures. The notice provided for accelerated submission by HAs

in advance of originally established dates and accelerated review and

approval by HUD of the documents required for FFY 1993 CGP funding.

Notwithstanding the statutory 75-day review period, HUD would review

and approve documents as soon as possible. It was anticipated that this

approach would be continued in FY 1994 as part of HUD's ongoing efforts

to expedite use of available modernization funds.

The Department issued additional guidance on expediting FFY 1993

CGP funding in notice PIH 93-10, issued March 10, 1993. This Notice

provided that if large HAs (with 500 or more units) meet specified

criteria, HUD will reduce the time for its review and approval of the

FFY 1993 Annual Submission from a maximum of 75 days to 14 days

wherever possible. The expedited review by HUD and subsequent prompt

signing of the Annual Contribution Contract (ACC) Amendment by the HA

would result in HAs having access to FFY 1993 CGP funds two to five

months sooner than anticipated. In turn, these funds would be available

to HAs to engage in modernization activities that will spur local

economies and provide needed improvements for low-income developments.

The basis for the Department's expedited review for large HAs (with

500 or more units) was the HAs' Comprehensive Plan (including the Five-

Year Action Plan) which was reviewed and approved by HUD in FFY 1992

and which is the basis of the FFY 1993 Annual Statement.

B. Regulatory Actions

Based on extensive review of CGP regulations and procedures and

comments from HAs and their interest groups, it was determined that

revisions to the CGP regulations were necessary to further simplify and

improve the CGP process so HAs could more readily expedite CGP funding.

To expedite the CGP review and approval process, as well as provide

HAs with additional flexibility in implementing the program, changes

are needed in the following areas: Fungibility of work-items within the

Five-Year Action Plan, notification of formula amounts, timing of

meetings with residents and the annual public hearing, and appeals of

formula amounts. This section will discuss each of these issues and the

specific regulatory amendments. The Department requests comments on

these issues and amendments within 45 days. The Department has

shortened this time period to ensure that needed changes can be

effective as soon as possible while providing an opportunity for notice

and comment before these changes become effective.

The major change being proposed in this rule is the concept of full

fungibility of work items identified in an HA's Five-Year Action Plan.

Full fungibility permits the HA to substitute any work item in the

approved Five-Year Action Plan using the current FFY funds, without any

further HUD approval. For example, if an HA has proposed kitchens at

Development A in the first year of the Plan, and for some reason, the

HA cannot do that work item, the HA may substitute roofs at Development

B which appears in year four of the Five-Year Action Plan.

Under current rules, HAs have rolling Five-Year Action Plans, but

only spend CGP funds for work items in their one or two year Annual

Statements. Major changes (i.e., additions, deletions or modifications

of work items cumulatively totaling 10 percent or more of a HA's annual

grant allocation, excluding emergencies) require prior HUD approval.

Any changes with respect to work items cumulatively totaling less than

10 percent of an HA's annual grant, excluding emergencies, do not

require prior HUD approval, so long as the work is covered under the

HA's Five-Year Action Plan. See Secs. 905.102 and 968.305.

In this proposed rule, HUD intends to continue the rolling base of

the Five-Year Action Plan, but allow full fungibility of work items

(i.e., interchangeability) in any of the five years. HUD also intends

to eliminate the concept of ``major change'' and major change reviews.

In order to permit full fungibility of work items in the Five-Year

Action Plan, the level of detail with regard to the work items must be

consistent. Currently, work items are described as major work

categories (e.g., kitchens at $100,000) in the out years of the Five-

Year Action Plan and in greater detail in the Annual Statement (e.g.,

kitchen cabinets in 100 units at $75,000 and kitchen floors in 100

units at $25,000). This proposed rule would eliminate the requirement

for two separate documents (Annual Statement and Five-Year Action Plan)

and incorporate the required information in one document, which is a

modified version of the current Five-Year Action Plan and submitted

with the Annual Submission. The work to be accomplished in each of the

five years will be identified on an individual Work Statement for that

year. The work items will be identified as major work categories, and

include only quantity and total cost (e.g., 100 kitchens at $100,000).

This is more detail than currently required for the out years

(quantity) but less than for the current Annual Statement (no detail on

individual work items).

Requiring HAs to only describe a major work category with quantity

and cost without specifying work items is in keeping with the statutory

intent of granting more flexibility to HAs and eases the transition to

full five year fungibility. Additionally, this approach will ease the

level of effort with regard to the HAs' submissions to HUD, and reduce

HUD's upfront review of the HAs' proposed activities. However, HAs must

plan in detail and maintain documentation in their files to support the

work activities proposed. The level of detail in the Five-Year Action

Plan for administrative and management improvement costs would have to

be sufficient enough for HUD to make a determination of eligibility.

For example, only mentioning ``training'' is insufficient. The HA must

describe the training and how it relates to physical improvements or

identified management needs. When the HA completes its Performance and

Evaluation Report, it will describe the work activities completed in

more detail (e.g., the Five-Year Action Plan's description of 100

kitchens totaling $100,000 would be described in the Performance and

Evaluation Report as kitchen cabinets--$50,000, kitchen floors--$20,000

and kitchen windows--$30,000). Since the level of detail in the Five-

Year Action Plan is such that HUD will not be able to determine if the

work that will be performed as a part of the major work category (e.g.,

kitchens) is an eligible item, HAs would have to repay ineligible costs

discovered during review of the Performance and Evaluation Report.

These revised procedures result in a minimal level of detail in the

HAs' submission to HUD. The HA should be cognizant that additional

detail will be necessary for meaningful local government and resident

participation. The Department proposes that HAs simply summarize their

progress and uses of previous year funds for resident review in their

public notice of advance meeting for residents (no particular format is

prescribed and HAs are not required to describe by development or work

item). A greater level of detail should be supplied to residents at the

advance meetings and public hearings or upon request to enable them to

understand the HA's plans or progress on past activities.

It has been suggested by the New York City Housing Authority that

they could provide greater detail in all years of the Five-Year Action

Plan so that the information would mirror the Performance and

Evaluation Report. The Department is concerned that this would be

administratively burdensome for all HAs. If an HA wants to submit a

Five-Year Action Plan in a different format, a waiver would be needed.

Section 14 of the Act does not differentiate between types of

submissions to be made by HAs participating in the CGP, irrespective of

their size. Nevertheless, HUD believes that larger HAs will be

benefitted, along with all other HAs participating in the CGP, as a

result of the simplified program submission requirements contained in

this proposed rule.

It is the Department's intent that HAs use fungibility in a prudent

manner to make changes where necessary. It is anticipated that HAs will

plan realistically for a five-year period in consultation with

residents and the local government. HUD expects HAs to generally

conform their work to items in the current year's Work Statement and to

use fungibility only if necessary to substitute items in year one to

efficiently and effectively expend its funding. However, fungibility of

the work items (not dollars) in the plan should be used by the HA to

make necessary changes without further HUD approval so as not to impede

HA efforts to timely obligate and expend funds. Fungibility of work

items but not dollars means that HAs may move items from one year to

another but will receive no increase in funding if they do so. The

grant amount for a particular FY is set forth in the ACC amendment and

remains unchanged by shifts in work items.

Except for emergencies, the HA must consult with residents to the

extent practicable, on significant changes (such as changes in scope of

work) or whenever it moves work items within the approved Five-Year

Action Plan. The HA must retain documentation of that consultation in

its files. The Department requests comments on the level of

consultation with residents regarding ``significant changes.'' In this

proposed rule, the Department has left this matter to the discretion of

the HA. The Department has eliminated the concept of major change

wherein the HA must obtain prior HUD approval when changes are made

above an established threshold. The Department is requesting comment on

the establishment of a threshold based on dollar amount, percentage of

grant or type of work involved.

As a result of allowing full fungibility of work items, the

following changes have been made:

(1) Eliminate major change reviews (An HA can expend the funds on

any work item in the Five-Year Action Plan without HUD approval. If the

HA plans to expend funds on a work item that is not in the Five-Year

Action Plan, even though it appears in the Physical or Management Needs

Assessment, prior HUD approval is required. However, emergency work

would not require amendment to the Work Statement for year one, but

must be reflected on the year-end Performance and Evaluation Report.);

(2) Require HAs to amend annual work statements to reflect changes

resulting from fungibility;

(3) Eliminate the optional two-year Annual Statement;

(4) Require HAs to identify changes in current year Five-Year

Action Plan from the previous year Five-Year Action Plan when making

annual submissions; and

(5) Require the same level of detail for each year of the Five-Year

Action Plan in order to allow full fungibility with the Work Statement

for year one of the Five-Year Action Plan (the Work Statement for year

one is being substituted for what is currently referred to in the CGP

rule and statute as the Annual Statement).

The Department is proposing to increase the percentage limitation

on management improvements from 10 to 20 percent of the annual grant

for all HAs. The Department believes that HA needs to provide adequate

security, undertake various resident initiatives activities, and

sustain completed physical improvements, warrant this increase.

However, the Department is interested in knowing from commenters what

other management improvement needs are pressing and whether the

increased percentage limitation is sufficient or warranted based on HA

experience. In addition, the Department strongly encourages that HAs

use at least 5% of their management improvement funds to train

residents in carrying out activities related to the modernization-

funded physical and management improvements. Other eligible items could

include coordination of delivery of social services and youth

apprenticeship programs directly related to carrying out the

modernization work. HAs will not be permitted without prior HUD

approval to exceed the 20 percent cost limitation for management

improvements in any year unless they are high PHA performers or IHAs

that are determined by the Field Office to be high performing. PHAs

that have been designated as high performers overall (not only high

performers in modernization) by the Public Housing Management

Assessment Program (PHMAP) or IHAs determined by the Field Office to be

high performing and which have administrative capability under

Sec. 905.135 may exceed the cost limitation on management improvements

only, without prior HUD approval. See Secs. 905.666(m) and 968.310(m).

This provision reflects HUD's intent to provide incentives and relief

from HUD oversight to HAs that are consistently well-managed. Guidance

on determining high performing IHAs will be provided in the revised CGP

Handbook. The Department requests suggestions regarding criteria that

can be used to determine high performing IHAs.

The Department has retained the 7% limit on administrative costs,

but has excluded in-house asbestos testing efforts from the 7% limit.

The Department suggests that its position on asbestos should be the

same as that for lead-based paint. The proposed regulation has been

modified to exclude such in-house testing from the 7% cost limitation.

Further, it has been clarified that general administrative costs

associated with the administration of Field Office-approved force

account work are included in the cost limitations for administrative

costs (account 1410). The actual force account labor costs including

direct supervision are charged to the appropriate account for the work

being performed, e.g., dwelling structures (account 1460). In addition,

it should be noted that Field Offices continue to have the authority to

permit administrative costs higher than 7% for justifiable reasons such

as high administrative costs resulting from a large percentage of force

account work. The Department requests comments on the advisability of

higher administrative cost caps and examples of where they would be

warranted.

HAs currently delay holding annual advance meetings with residents

and the public hearing until the presumptive estimate is provided by

HUD. This has resulted in delaying the submission of documents required

for access to the funding until later into the FFY. This proposed rule

would permit the separation of the planning process and the funding

process. HAs, residents, local government officials and others may work

on the plan early in the fiscal year, preferably in conjunction with

other planning related to the operating budget or other activities

affecting residents. Planning is to be an ongoing process, and not

necessarily a part of the funding cycle process.

To expedite the funding process, the Department will offer HAs the

option to hold the required annual advance meeting for residents and

the required annual public hearing for the next year's grant using the

formula amount for the current FFY as the planning level for the coming

year. See Secs. 905.672 and 968.320. In recognition of the possibility

that funding levels may change, HAs are encouraged to use the last

year's level with variations around that level as planning targets

(e.g., if last year's funding is 10% more or less, some developments

will be rehabilitated, but others will not). This would allow HAs to

start the planning process five months earlier (July rather than

December) and the reservation and use of FFY 1995 funds could be made

earlier in the FFY. At the resident meeting and public hearing, the HA

would discuss any changes to the Five-Year Action Plan, including the

new fifth year and a discussion of HA progress in prior approved

programs. The draft Performance and Evaluation Report should also be

discussed at that time if available. HAs would also explain that the

funding level shown is not the actual amount for the coming year, but

has been used for planning purposes, and that the Five-Year Action Plan

will be adjusted when the formula amount is known. Additionally, the HA

will explain which items or developments will be added or deleted to

adjust for the next year's formula amount and that any added items will

come from the Five-Year Action Plan. This will enable HAs to quickly

make necessary adjustments to the plan when the formula amount is

known. HAs must also assure that all work items are reflected in the

Physical Needs Assessments and Management Needs Assessments. HAs not

pursuing advance planning would be permitted to wait until after

receipt of their formula amount for FFY 1995, i.e., the beginning of

the next fiscal year, and then hold the advance meeting and public

hearing. However, this would delay the annual submission, and as a

result, the FFY 1995 funds would not be available until much later in

the FFY.

The current regulation requires HAs, within 30 calendar days of the

date of HUD's notice of estimated funding level, to provide written

notice to each of the democratically elected presidents of resident

organizations of the developments covered by the comprehensive plan.

HAs have encountered problems in making distinctions regarding who is

to be notified (e.g., determining whether presidents of resident

organizations have been democratically elected and assuring that all

affected resident organizations have been notified). The Department

wants to promote full and adequate notice of this funding to all

interested parties (e.g., residents, duly elected resident

organizations, local government officials and other interested

parties). It is proposed that public notice (which would effectively

include all interested parties, especially duly elected resident

organizations) should be provided, and the method of notification would

be determined by the HA.

The public notice can take various formats based upon local

circumstances and resources. The CGP Handbook will provide examples of

ways to provide effective public notice (e.g., newspaper announcements,

resident cable TV programs, posted notices or written announcements).

The public notice would provide notice of the advance meeting to be

held with the residents, notice of the public hearing, and the

following information: summary of activities of the previous year (uses

of past funding) and progress update, estimated funding level (i.e.,

current year funding or formula amount whichever the HA elects); a

summary of the CGP requirements; the estimated time frames for

completion of the required CGP documents; and the requirement for

resident participation in the planning, development and monitoring of

modernization activities under CGP.

Additionally, HUD will no longer prescribe by regulation that there

must be three weeks between the advance meeting and the public hearing,

but will require that the meeting should be sufficiently in advance of

the public hearing to allow for appropriate feed-back. See

Secs. 905.672(b)(4) and 968.320(b)(4). The resident partnership process

provides a vehicle for an on-going dialogue between HAs and residents

throughout the planning process. HUD has made this change in response

to concerns that the timing and frequency of these meetings should be

determined by local conditions and left up to local judgement, rather

than determined by an arbitrary time limit. Rather than have the

Department state the number of meetings required before the public

hearing, HUD believes that in order to achieve maximum resident

involvement in the process, the number of meetings should be determined

by the HAs and residents of those authorities.

In order to reduce the HAs' and HUD's administrative burden and to

streamline the process, HUD has eliminated the requirement to provide a

presumptive formula estimate. See existing Secs. 905.669(b) and

968.315(b). As a result, HAs will not be required to amend the Five-

Year Action Plan and/or Work Statement during a FFY because of

differences in the presumptive estimate and final formula amount. HUD

intends to provide only one formula amount in a FFY, and this will

eliminate burdens for both HAs and HUD. This change would also

encourage HAs to make Annual Submissions as soon as they receive their

formula amount for the FFY. See proposed Secs. 905.669 and 968.315.

A related change to the notification of formula funding is the

timing of the submission of appeals and the adjustment from successful

appeals and a change to the appeals based on the formula amount.

Currently, HAs may appeal the presumptive formula estimates based upon

unique circumstances or error. Any adjustments to the formula

allocation resulting from such successful appeals are made from the

subsequent years' appropriation of funds, except for appeals based upon

error where there are no issues in dispute (such appeals will result in

adjustments made from the current year's allocation of funds).

Currently, HAs may also appeal HUD's determination of final formula

amounts. Any adjustments resulting from such successful appeals are

made from the current year's allocation of funds to the greatest extent

feasible. Currently, mod troubled PHAs may appeal their reduced formula

allocations and any adjustment resulting from such successful appeals

are made in the current year's allocation of funds. See Secs. 905.669

and 968.315.

Since HUD does not plan to provide a presumptive formula notice,

there is no need for an appeal based on a presumptive formula amount.

HAs would not lose any of their current procedural rights to appeal.

However, for purposes of consistency, all appeals must be submitted

within 60 days after notification of the formula award. HAs may appeal

the formula amount on the basis of error or unique circumstances or the

reduced formula amount (applies to mod troubled PHAs only). Adjustments

resulting from successful appeals based on error or unique

circumstances will be made in subsequent FFYs. A mod troubled PHA will

be advised of its full formula and its reduced formula amount. If it

successfully appeals the reduced amount, it will get full funding in

the same FFY. If it does not appeal or its appeal is unsuccessful, the

difference between its full funding and its reduced funding will be

redistributed to other HAs in the following FFY. However, such PHAs are

entitled to credits for this temporary loss of funding.

Currently, the Executive Summary encompasses four components, each

a separate document: (1) Summary of Preliminary Estimated Costs; (2)

Strategy Statement; (3) Statement of Developments with Comprehensive

Modernization in Progress; and (4) Description of Resident Partnership

and Summary of General Issues. The Executive Summary is submitted to

HUD with the original Comprehensive Plan and resubmitted every sixth

year when the Plan is updated. This rule proposes to eliminate the

requirement for an Executive Summary with four components. Instead, the

HA would submit the following: (1) Summary of Preliminary Estimated

Costs and (2) Description of Resident Partnership and Summary of

General Issues with each submission of the Comprehensive Plan (initial

year and every sixth year). The Department suggests that the Strategy

Statement and the Statement of Developments with Comprehensive

Modernization in Progress provided information that was essential for

the initial implementation of the program but will not be needed when

the Plan is updated in year six. Also, the provision for a Summary of

General Issues with each annual submission is retained.

The Department is proposing two incentives for PHAs and IHAs. As

previously mentioned, PHAs that are high performers under PHMAP and

IHAs that are determined to be high performing by the Field Office

would not have a cap on management improvements. The second incentive

is the elimination of prior HUD approval for force account labor. The

Department recognizes that the basis for being entitled to the force

account labor incentive is different for IHAs than for PHAs. IHAs have,

by necessity, developed significant expertise in the use of force

account labor, due to the remoteness of some Indian housing units as

well as the shortage of available contract labor. In acknowledgment of

IHAs' successful experience with force account labor, the Department is

proposing that prior HUD approval be required only of PHAs that are not

high performers under PHMAP and IHAs which are designated high risk

under Sec. 905.135 or for all HAs where stipulated by a notice of

deficiency or corrective action order.

HAs, which are required to obtain prior approval, will continue to

indicate the use of force account on their annual submission and it may

be approved as part of the funding process, or HAs may request HUD

approval for force account labor at any time. HUD will be eliminating

the Handbook requirement and modifying section 107(d) of the Annual

Contributions Contract that requires HUD approval of force account work

for high performers under PHMAP or IHAs that are not designated as

``high risk''.

Another concern of many HAs is the use of total development cost

(TDC) in Sec. 905.672(d)(4) and Sec. 968.320(d)(4). For demolition and

new construction, TDCs are currently used to assess whether

modernization is more expensive than new development. Since few HAs are

performing comprehensive modernization (i.e., total modernization), the

cost of such modernization will rarely if ever exceed TDC. If it does,

the HA must justify reasons for desiring to modernize the development.

In addition, existing regulations require a new evaluation every sixth

year when the Five-Year Action Plan is updated. This evaluation does

not capture all past modernization as was done in comprehensive

modernization, but it is rather a single point in time assessment.

Rather than imposing an arbitrary measurement of costs (i.e., hard

costs of 90 percent or less of TDC), the Department proposes to

eliminate TDC for reasonable cost and replace it with the HA's

determination of reasonable cost determined on a major work-item basis.

HAs would be required to keep documentation in its file to support its

reasonable cost determinations. It is suggested that the HA use a

National Guideline adjusted to reflect local conditions (or if

applicable, regional versions of National Guidelines) such as R.S.

Means Index, the Dodge Report and Marshall and Swift. All work items

must meet cost reasonableness which will also be accomplished by using

part 85 procurement procedures and OMB Circular A-87. An HA is also

allowed to substitute estimates of cost reasonableness based upon

recent past bidding experience for the National Guidelines mentioned

above. In its annual review of HA performance, HUD will review the HA's

cost reasonableness determinations. The Department specifically

requests comments on this proposal.

It should also be noted that many IHA's with large numbers of

homeownership (Mutual Help) units are performing comprehensive

modernization on a widespread basis. The Department is considering

retaining the TDC limitations as the basis for establishing reasonable

costs for IHAs. Comments are specifically requested on applying these

limits only to IHAs.

The Department is often asked about the extent to which CGP funds

may be expended on non-viable units (e.g., units scheduled for

demolition) to maintain the habitability until residents can be

relocated. The current regulation provides that where an HA's analysis

of a development, establishes that completion of the identified

improvements and replacements will not result in the long-term physical

and social viability of the development at a reasonable cost, the HA

shall not expend CGP funds for the development, except for emergencies.

See Secs. 905.672(d)(4)(ii) and 968.320(d)(4)(ii). This proposed rule

adds an additional exception for ``essential non-routine maintenance

necessary to maintain habitability until residents can be relocated.''

The HA must specify in its Comprehensive Plan the actions it proposes

to take with respect to the non-viable development (e.g., demolition or

disposition under 24 CFR part 970). Any routine maintenance work must

be performed using operating subsidy. The CGP Handbook will provide

additional guidance in this area.

The Department is also proposing to lift its limitation on the $75

million reserve for emergencies and natural disasters. Currently, the

Department limits the use of this reserve to HAs participating in the

CGP (see Secs. 905.601(b), 905.667, 968.103(b) and 968.312). The

Department proposes to permit smaller HAs (participating in the CIAP)

(with less than 250 units) to also apply for emergency and natural

disaster funds from this reserve. HAs under the CIAP may also continue

to receive assistance for emergencies and disasters in accordance with

the existing CIAP requirements and procedures. HAs participating in CGP

must first use their annual formula allocation of CGP funds, any other

unobligated CIAP or CGP funds, or replacement reserve, for emergencies

before they can apply for funds from the $75 million reserve. HAs

participating in CIAP must use all other funds available, including

residual receipts and unobligated CIAP (and there must be no

moderization funds available for the remainder of the fiscal year) for

emergencies before they can apply for funds from the $75 million

reserve. In addition, HAs participating in CIAP must also have the

emergency modernization work under contract within 6 months after

receiving HUD's approval of emergency reserve funds. Although funding

for repair and replacement needs which arise from natural and other

disaster is not required to be repaid, HAs are required to repay

funding for emergencies, from future allocations, where available. The

provisions for repayment by HAs participating in CGP have not been

changed. HAs participating in CIAP would also be required to repay

funding for emergencies, if funds become available; however, they would

not be required to apply for a future CIAP grant to repay the reserve

account.

C. Miscellaneous Technical Proposed Changes

Numerous incorrect regulatory references would be corrected. The

method for counting new development units (in order to determine the

HA's program size) would be clarified to reflect actual development

procedures (i.e., count the increase in units reaching DOFA (date of

full availability) and under ACC amendment). See Secs. 905.601(k)(2)(i)

and 968.103(k)(2)(i). The annual submission of activities and

expenditures would consist of the Five-Year Action Plan with a Work

Statement for each of the five years, local government statement and

other miscellaneous documents outlined in Secs. 905.678 and 968.330.

Annual resident and local government participation would be clarified

by noting that annual advance meetings with residents and annual public

hearings are required. See Secs. 905.678(d) (2) and (3) and 968.330(d)

(2) and (3).

D. Handbook Changes and Clarifications to Existing Procedures

HUD plans to prepare handbook page changes that will provide

guidance on the revised procedures and examples of the types of

documentation that would be acceptable to HUD and provide a revised

Five-Year Action Plan form (sample completed document will be

provided). The Handbook will also provide guidance on the required

interrelationship between management improvements and identified

management needs. In addition, it will clarify that even HAs that are

high performers under PHMAP will have management needs.

The CGP Handbook will also revise the environmental review

procedures to require that HUD must conduct an environmental review in

accordance with 24 CFR part 50 of all proposed actions identified in

the Five-Year Action Plan. This change is required because of the

proposed full fungibility of work items. In addition, the level of

detail in the annual work statements must be sufficient for HUD to

perform environmental reviews, as applicable, with respect to the

various work items.

The level of Field Office review will also be discussed in the

Handbook with an emphasis on ways to improve and reduce unnecessary

areas for review. Handbook guidance will also include the following:

(1) Ways to achieve more effective resident participation/

consultation;

(2) Discussion of limits on modernization after a decision has been

made that certain buildings should be demolished or disposed of

(keeping buildings habitable as long as they are occupied);

(3) How to receive HUD approval for amendments to annual

submission;

(4) Examples of valid delays outside HA control which may extend

the time for performance;

(5) The exemption from the continuing capacity review for delays

caused by LOCCS/VRS;

(6) Ways to enhance fungibility by expending the oldest money first

and closing out older programs; and

(7) Discussion of emergency work items.

Several questions regarding existing requirements would not be

affected by this proposed rule and have been raised by program

participants. Although the purpose of this preamble is to discuss

changes proposed, some of the following issues are significant and may

interfere with successful program implementation. Many of these issues

involve procurement. HAs should refer to the new Procurement Handbook

for Public Housing Agencies and Indian Housing Authorities, 7460.8 REV-

1. HUD has also issued PIH notice 93-50 on expediting procurement and

contracting in Public and Indian Housing.

It should be noted that procurement thresholds cannot be imposed

without appropriate procedure (notice of deficiency and/or correction

action order). Advance procurement planning is one of the most

important actions that an HA can take to speed up the procurement

process. For example, an HA is encouraged to prepare solicitations for

services prior to ACC execution even though contracts cannot be awarded

until funds are available. HAs may also solicit for an indefinite

quantity contract where separate orders are issued to the selected

architect/engineer firm for each service as the need arises or an HA

can issue a solicitation for several architect/engineer firms to

provide services on an as required basis rather than merely one firm.

HAs may also join in intergovernmental agreements. HAs that possess the

capability may continue to perform in-house A & E.

In addition to the sealed bid method, HAs may use the competitive

proposals method to perform modernization work. This method has been

successfully used in public housing development (known as ``turnkey'')

for many years. The competitive proposals method may, particularly for

larger contracts, speed up the modernization process. This can be

accomplished by developing a Request for Proposals (RFP) that places a

substantial amount of the responsibility for modernization work with a

contractor/developer. Using the turnkey method as a model, the HA would

execute a fixed price contract in which the developer would be

responsible for all designs of specific work items identified in the

RFP, soliciting and contracting (in the developer's name) for

construction work, contract administration and construction inspection.

The contract could either provide for progress payments, as in the

sealed bid method, or a lump sum payment after successful completion of

all work, as in the turnkey method. The advantages to the two payment

systems are: (1) With progress payments the developer does not have to

obtain large amounts of outside financing and the overall costs should,

therefore, be less; or (2) with the lump sum payment upon completion of

construction, the developer has a significant incentive (financing

costs) to complete construction quickly. The HA should hire an

inspecting architect or engineer to inspect the developer's work to

ensure that it complies with the contract documents and to otherwise

protect the HAs interests.

E. Other HUD Initiatives

Many HAs and Field Office have difficulties with the 2530 Previous

Participation. This process assures the Department that persons

debarred, suspended, determined to be ineligible or voluntarily

excluded are not participating in this program. This process is part of

a larger system at HUD and Government-wide. See 24 CFR part 24, subpart

E. The Department is taking steps to improve this system and expedite

access to the system for all HAs. The Department has also budgeted in

FY 1994 for the development of an automated system which would allow

HAs to directly access HUD's 2530 system.

HUD also plans to work with HA interest groups in updating the

maximum space guidelines for administrative, maintenance and community

space.

Users of LOCCS/VRS have requested that HUD eliminate the percent

limitation on monthly drawdowns for standard performers. HUD has been

working with the Comptroller, Inspector General and Treasury on ways to

improve this system and will consider this and other users'

recommendations. As a result of this proposed rulemaking, HUD will also

be incorporating into the system the ability for five-year fungibility.

HAs and their interest groups have requested clarification and

expansion of eligible and ineligible work items. HUD currently provides

examples of ineligible physical and management improvement work items

in the CGP Handbook at paragraph 4-19. HUD will consider additional

recommendations from HAs and their interest groups.

The PHMAP rule has received many public comments which are now

being reviewed. The modernization indicator is being revised to cover

CGP. The CGP Audit Guide is under review by OMB.

F. Economic Opportunities for Low- and Very Low-Income Persons

Section 3 of the Housing and Urban Development Act of 1968 (section

3) requires that to the ``greatest extent feasible,'' opportunities for

training and employment arising in connection with HUD programs be

given to lower income persons residing within the unit of local

government or the metropolitan area as determined by the Secretary. It

also requires that to the ``greatest extent feasible,'' contracts for

work to be performed in connection with any such project'' be awarded

to business concerns, including but not limited to individuals or firms

doing business in the field of planning, consulting, design,

architecture, building construction, rehabilitation, maintenance, or

repair, which are located in or owned in substantial part by persons

residing in the same metropolitan area (or nonmetropolitan county) as

the project.'' Existing regulations implementing these requirements

appear at 24 CFR part 135. PHAs participating in the CGP program are

required to comply with section 3. See 24 CFR Sec. 968.110(a).

Section 3 was amended by section 915 of the Housing and Community

Development Act of 1992, to require that HAs and their contractors and

subcontractors, make their ``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 development assistance (section 5 of the Act), operating assistance

(section 9 of the Act), and modernization grants (section 14 of the

Act). Section 3, as amended, also requires that HAs and their

contractors and subcontractors, 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

assistance, operating assistance and modernization grants, to business

concerns that provide economic opportunities for low- and very low-

income persons.

HUD has published a proposed rule to implement the amendments to

section 3 by the Housing and Community Development Act of 1992. See 58

FR 52534, dated October 8, 1993. The Secretary is committed to

furthering economic opportunities to low- and very low-income persons

covered by section 3. Until section 3 as amended, is implemented by

regulations, HUD intends to advance the current requirements of section

3 as provided in 24 CFR part 135. For CGP, HUD intends to require

through the letter transmitting the FY 1994 presumptive estimate, that

each HA use good faith efforts and provide anticipated projections of

the contracts, jobs and training to section 3 residents as a result of

the FY 1994 funding.

By FY 1995, HUD expects to have an effective final rule

implementing the amended section 3. For CGP, this proposed rule

proposes that HAs certify as to compliance with section 3 and provide

anticipated projections based on best efforts of the contracts, jobs

and training to section 3 residents with their annual submissions. See

Secs. 905.672(d)(7)(xviii) and 968.320(d)(7)(xviii). The Department

also plans to require that HAs report their section 3 results annually

(in one report covering all affected HUD programs administered by the

HA). HAs would be required to keep files to support their annual

submissions and annual reports along with their section 3 program plan.

HUD would monitor each HA's section 3 efforts (not merely numbers of

contracts, jobs or training) as part of the annual HUD review. HA

comments on these proposed CGP provisions or alternative actions to

support section 3 in CGP are requested.

EO 12866 Statement

This proposed rule was reviewed and approved by the Office of

Management and Budget under Executive Order 12866, Regulatory Planning

and Review, which was signed by the President on September 30, 1993.

Any changes made to the proposed rule as a result of that review

process are clearly identified in the docket file, which is open for

public inspection in the office of the Rules Docket Clerk, room 10276,

Department of Housing and Urban Development, 451 Seventh Street, SW.,

Washington, DC 20410.

Regulatory Flexibility Act

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

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

by approving it certifies that this proposed rule does not have a

significant economic impact on a substantial number of small entities.

The proposed rule provides revisions to the existing CGP under which

HAs receive modernization assistance from HUD on the basis of a

formula. HUD does not anticipate a significant economic impact on small

entities since HAs will continue to carry out their modernization

activities by entering into contracts for the work as they now do.

Finding of No Significant Impact

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations at 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 and copying during regular business hours (7:30

a.m. to 5 p.m. weekdays) in the Office of the Rules Docket Clerk, room

10272, 451 Seventh Street, SW., Washington, DC 20410.

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 proposed 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 proposed rule is not subject to review under the

order. The revised CGP is consistent with federalism principles since

it reduces unnecessary burdens on HAs. While the program is revised,

the primary change is only in the way that HUD processes and reviews HA

modernization activities, and not the modernization activities. Since

participation by HAs is discretionary, this proposed rule lacks the

direct and substantial effects on HAs 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 proposed rule does

not have potential for significant impact on family formation,

maintenance, and general well-being, and, thus, is not subject to

review under the order. No significant change in existing HUD policies

or programs will result from promulgation of this proposed rule, as

those policies and programs relate to family concerns. The proposed

rule does not have the potential for significant impact on family

formation, maintenance, or general well-being, since its effect is

limited to revising program procedures for HAs applying for

discretionary grants.

Regulatory Agenda

This proposed rule was listed as item 1647 under the Office of

Public and Indian Housing in the Department's Semiannual Regulatory

Agenda published on October 25, 1993 (58 FR 56402, 56451) in accordance

with Executive Order 12291 and the Regulatory Flexibility Act.

Anti-Lobbying

On February 26, 1990, the Department published an interim rule (24

CFR part 87) advising recipients and subrecipients of Federal

contracts, grants, cooperative agreements and loans of a prohibition

mandated by Congress. Section 319 of the Department of the Interior

Appropriations Act (Pub. L. 101-121, approved October 23, 1989)

generally prohibits recipients of Federal contracts, grants, and loans

from using appropriated funds for lobbying the Executive or Legislative

branches of the Federal Government in connection with a specific

contract, grant, or loan. The interim rule generally prohibits the

awarding of contracts, grants, cooperative agreements, or loans unless

the recipient has made an acceptable certification regarding lobbying.

In addition, the recipient must also file a disclosure if it has made

or has agreed to make any payment with nonappropriated funds that would

be prohibited, if paid with appropriated funds. IHAs established by an

Indian Tribe as a result of the exercise of the tribe's sovereign power

are excluded from coverage of the Byrd Amendment, but IHAs established

under State law are not excluded from the statute's coverage.

The certification and disclosure requirements apply to all grants

in excess of $100,000. All potential grantees are required to submit

the certification, and to make the required disclosure if the grant

amount exceeds $100,000. Potential grantees should refer to 24 CFR part

87 for the language for the certification and disclosure. The law

provides substantial monetary penalties for failure to file the

required certification or disclosure.

The Catalog of Domestic Assistance numbers for the programs

affected by this proposed rule are 14.146, 14.147, 14.850, 14.851,

14.852, and 15.141.

List of Subjects

24 CFR Part 905

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

development, Grant programs--Indians, 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 968

Grant programs--housing and community development, Indians, Loan

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

and recordkeeping requirements.

Accordingly, the Department proposes to amend 24 CFR parts 905 and

968 as set forth below:

PART 905--INDIAN HOUSING PROGRAMS

1. The authority citation for 24 CFR part 905 would be revised to

read as follows:

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

1437cc, 1437ee, and 3535(d).

Sec. 905.102 [Amended]

2. Section 905.102 would be amended by removing the definitions for

Annual statement and for Major changes.

3. Section 905.601 would be amended by revising paragraph (b); by

removing the reference to ``Sec. 905.669(b)(2)'' in paragraph (h) and

inserting in its place ``Sec. 905.669(b)''; by adding three sentences

to the end of paragraph (j); and by revising paragraph (k)(2)(i), to

read as follows:

Sec. 905.601 Allocation of funds under section 14.

* * * * *

(b) Set-aside for emergencies and disasters. For each FFY, HUD

shall reserve from amounts approved in the appropriation act for grants

under this part and part 968 of this title, $75 million (which shall

include unused reserve amounts carried over from previous FFYs), which

shall be made available to IHAs and PHAs for modernization needs

resulting from natural and other disasters, and from emergencies. HUD

shall replenish this reserve at the beginning of each FFY so that it

always begins with a $75 million balance. Any unused funds from

previous years will remain in the reserve until allocated. The

requirements governing the reserve for disasters and emergencies and

the procedures by which an IHA may request such funds, are set forth in

Sec. 905.667.

* * * * *

(j) Calculation of number of units. * * * New development units

that are added to an IHA's or PHA's inventory will be added to the

overall unit count so long as they are under ACC amendment and have

reached DOFA by the first day in the FFY in which the formula is being

run. Any increase in units (reaching DOFA and under ACC amendment) as

of the beginning of the FFY shall result in an adjustment upwards in

the number of units under the formula. New units reaching DOFA after

this date will be counted for formula purposes as of the following FFY.

(k) * * *

(2) * * *

(i) Increases in the number of units resulting from the conversion

of existing units will be added to the overall unit count so long as

they are under ACC amendment by the first day in the FFY in which the

formula is being run;

* * * * *

4. Section 905.666 would be amended by revising paragraphs (a)(1)

through (a)(3), (f)(1)(iii), and (m) to read as follows:

Sec. 905.666 Eligible costs.

(a) * * *

(1) Undertaking activities described in its approved Five-Year

Action Plan under Sec. 905.672(d)(5);

(2) Carrying out emergency work, whether or not the need is

indicated in the IHA's approved Comprehensive Plan (including Five-Year

Action Plan) or Annual Submission;

(3) Funding a replacement reserve to carry out eligible activities

in future years, subject to the restrictions set forth in paragraph (f)

of this section;

* * * * *

(f) * * *

(1) * * *

(iii) A management improvement requires more funds than the IHA may

use under its 20% limit for management improvements, and the IHA needs

to save a portion of subsequent year(s) grants, to fund the work item;

* * * * *

(m) Cost limitation. (1) Notwithstanding the full fungibility of

work items in Sec. 905.675(c), an IHA shall not use more than a total

of 20 percent of its annual grant for management improvement costs in

account 1408, unless specifically approved by HUD, or unless the IHA is

determined by the Field Office to be high performing and have

administrative capacity under Sec. 905.135. To the maximum extent

feasible, HAs should use management improvement funds to train

residents in carrying out activities related to the modernization-

funded physical and management improvements.

(2) Notwithstanding the full fungibility of work items in

Sec. 905.675(c), an IHA shall not use more than a total of 7 percent of

its annual grant on administrative costs in account 1410, excluding any

costs related to in-house lead-based paint or asbestos testing, in-

house architectural/engineering (A/E) work, or other special

administrative costs required by state, tribal or local law, unless

specifically approved by HUD. In the case of an IHA whose jurisdiction

covers an unusually large geographic area, an additional two percent of

the annual grant may be spent on costs related to travelling to the

IHA's developments for CGP-related business, as specifically approved

by HUD. (For purposes of this paragraph, ``an unusually large

geographic area'' means an area served by an IHA whose offices are

physically separated from the majority of its developments by distances

that require overnight travel and/or travel by air or other commercial

carriers, e.g., a statewide IHA with developments in multiple

localities; a regional IHA with developments in multiple counties or

states; or an Alaska IHA with developments in multiple villages.);

* * * * *

5. Section 905.667 would be amended by revising paragraphs (a)(1)

and (a)(3) to read as follows:

Sec. 905.667 Reserve for emergencies and disasters.

(a) Emergencies--(1) Eligibility for assistance. An IHA (including

an IHA that is not considered to be administratively capable under

Sec. 905.135) may obtain funds at any time, for any eligible emergency

work item as defined in Sec. 905.102 (for IHAs participating in CGP) or

for any eligible emergency work item (described as emergency

modernization in Sec. 905.102) (for IHAs participating in CIAP), from

the reserve established under Sec. 905.601(b). However, emergency

reserve funds may not be provided to an IHA participating in CGP that

has the necessary funds available from any other source, including its

annual formula allocation under Sec. 905.601(e) and (f), other

unobligated modernization funds, and its replacement reserves under

Sec. 905.666. Emergency reserve funds may not be provided to an IHA

partipating in CIAP that has the necessary funds available from any

other source, including unobligated CIAP (and no CIAP modernization is

available for the remainder of the fiscal year) and residual receipts.

IHAs participating in CIAP must also have the emergency modernization

work under contract within 6 months after receiving HUD's approval of

emergency reserve funds. An IHA is not required to have an approved

comprehensive plan under Sec. 905.672 before it can request emergency

assistance from this reserve.

* * * * *

(3) Repayment. An IHA that receives assistance for its emergency

needs from the reserve under Sec. 905.601(b) must repay such assistance

from its future allocations of assistance, where available. For HAs

participating in the CGP, HUD shall deduct up to 50 percent of an IHA's

succeeding year's formula allocation under Sec. 905.601 (e) and (f) to

repay emergency funds previously provided by HUD to the IHA. The

remaining balance, if any, shall be deducted from an IHA's succeeding

years' formula allocations.

* * * * *

6. Section 905.669 would be amended by adding three sentences to

the end of paragraph (a)(1); by revising paragraphs (b) and (c); by

adding a new paragraph (d); and by adding the OMB control number to the

end of the section, to read as follows:

Sec. 905.669 Allocation of assistance.

(a) * * *

(1) * * * On an annual basis, HUD will transmit to the IHA the

formula characteristics report which reflects the data that will be

used to determine the IHA's formula share. The IHA will have 30 days to

review and advise HUD of errors in this HUD report. Necessary

adjustments will be made to the IHA's data before the formula is run

for the current FFY.

* * * * *

(b) HUD notification of formula amount; appeal rights. (1) Formula

amounts notification. After HUD determines an IHA's formula allocation

under Sec. 905.601 (e) and (f) based upon the IHA, development, and

community characteristics, it shall notify the IHA of its formula

amount and provide instruction on annual submission in accordance with

Secs. 905.672(a) and 905.678;

(2) Appeal based upon unique circumstances. An IHA may appeal in

writing HUD's determination of its formula amount within 60 calendar

days of the date of HUD's determination on the basis of ``unique

circumstances.'' The IHA must indicate what is unique, and specify the

manner in which it is different from all other IHAs participating in

the CGP, and provide any necessary supporting documentation. HUD shall

render a written decision on an IHA's appeal under this paragraph

within 60 calendar days of the date of its receipt of the IHA's request

for an appeal. HUD shall publish in the Federal Register a description

of the facts supporting any successful appeals based upon ``unique

circumstances.'' Any adjustments resulting from successful appeals in a

particular FFY under this paragraph shall be made from the subsequent

years' allocation of funds under this part;

(3) Appeal based upon error. An IHA may appeal in writing HUD's

determination of its formula amount within 60 calendar days of the date

of HUD's determination on the basis of an error. The IHA may appeal on

the basis of error the correctness of data in the formula

characteristics report. The IHA must describe the nature of the error,

and provide any necessary supporting documentation. HUD shall respond

to the IHA's request within 60 calendar days of the date of its receipt

of the IHA's request for an appeal. Any adjustment resulting from

successful appeals in a particular FFY under this paragraph shall be

made from subsequent years' allocation of funds under this part;

(c) IHAs determined to be high risk. If an IHA is determined to

have serious deficiencies in accordance with Sec. 905.135, or if the

IHA fails to meet, or to make reasonable progress toward meeting, the

goals previously established in its management improvement plan under

Sec. 905.135, HUD may designate the IHA high risk. If the IHA is

designated high risk with respect to modernization, HUD may withhold

some or all of the IHA's annual grant; HUD may declare a breach of the

grant agreement with respect to all or some of the IHA's functions so

that the IHA or a particular function of the IHA may be administered by

another entity; or HUD may take other sanctions authorized by law or

regulation.

(d) Obligation of formula funding. All formula funding should be

obligated within two years of allocation or such longer period approved

by HUD. If the IHA fails to obligate funds within this period, they may

be subject to an alternative management strategy which may involve

third-party oversight or administration of the modernization function.

HUD would only require such action after a corrective action order had

been issued under Sec. 905.687 and the IHA failed to comply with the

order. HUD could then issue an alternative management strategy in a

correction action order. An IHA may appeal in writing the corrective

action order imposing an alternative management strategy within 60 days

of that order. HUD Headquarters shall render a written decision on an

IHA's appeal within 60 calendar days of the date of its receipt of the

IHA's appeal.

(Approved by the Office of Management and Budget under control

number 2577-0157)

7. Section 905.672 would be amended by revising paragraphs (a),

(b)(2)(i), (b)(3) through (b)(5), (c)(2), (d)(1), (d)(2)(i)(E), (d)(4),

(d)(5)(i), (d)(5)(iii), (d)(6)(i), (d)(6)(ii), (d)(7)(v), (d)(7)(viii),

and (d)(7)(xv); by adding a new paragraph (d)(7)(xviii); and by

revising paragraphs (e)(2) through (e)(4), to read as follows:

Sec. 905.672 Comprehensive Plan (including Five-Year Action Plan).

(a) Submission. HUD shall notify IHAs of the requested date for

submitting or updating a Comprehensive Plan. For planning purposes,

IHAs may use the amount they received under CGP in the prior year in

developing their Comprehensive Plan or they may wait for the annual HUD

notification of formula amount under Sec. 905.669(b)(1).

(b) * * *

(2) * * *

(i) To assure that residents are fully briefed and involved in

developing the content of, and monitoring the implementation of, the

Comprehensive Plan including, but not limited to, the physical and

management needs assessments, viability analysis, Five-Year Action

Plan, and Work Statements for each year. If necessary, the IHA shall

develop and implement capacity building strategies to ensure meaningful

resident participation in CGP. Such technical assistance efforts for

residents are eligible management improvement costs under CGP;

* * * * *

(3) Public notice. Within a reasonable amount of time before the

advance meeting for duly elected resident organizations under paragraph

(b)(4) of this section, and the public hearing under paragraph (b)(5)

of this section, the IHA shall provide public notice of the advance

meeting and the public hearing in a manner determined by the IHA and

which ensures notice to all duly elected resident organizations. The

public notice shall also include a summary of activities of the

previous year (uses of past funding) and progress update, estimated

funding level (i.e., current year funding or formula amount, whichever

the IHA elects); a summary of the CGP requirements; the estimated time

frames for completion of the required CGP documents; and the

requirement for resident participation in the planning, development and

monitoring of modernization activities under the CGP;

(4) Advance meeting for duly elected resident organizations. The

IHA shall hold, within a reasonable amount of time before the public

hearing under paragraph (b)(5) of the section, a meeting for residents

and duly elected resident organizations at which the IHA shall explain

the components of the Comprehensive Plan. The meeting shall be open to

all residents and duly elected resident organizations;

(5) Public Hearing. The IHA shall hold at least one public hearing,

and any appropriate number of additional hearings, to ensure ample

opportunity for residents, duly elected resident organizations, local

government officials, and other interested parties, to express their

priorities and concerns. The IHA shall give full consideration to the

comments and concerns of residents, local government officials, and

other interested parties.

(c) * * *

(2) A copy of the summary of total preliminary estimated costs to

address physical needs by each development and management/operations

needs IHA-wide and a specific description of the IHA's process for

maximizing the level of participation by residents.

* * * * *

(d) * * *

(1) Summaries. An IHA shall include as part of its Comprehensive

Plan the following summaries:

(i) A summary of total preliminary estimated costs to address

physical needs by each development and management needs IHA-wide; and

(ii) A specific description of the IHA's process for maximizing the

level of participation by residents during the development,

implementation and monitoring of the comprehensive plan, a summary of

the general issues raised on the plan by residents and others during

the public comment process and the IHA's response to the general issue.

IHA records, such as minutes of planning meetings or resident surveys,

shall be maintained in the IHA's files and made available to residents,

duly elected resident organizations, and other interested parties, upon

request.

(2) * * *

(i) * * *

(E) In addition, the IHA shall provide with respect to vacant or

non-homebuyer-occupied Turnkey III units, the estimated number of units

that the IHA is proposing for substantial rehabilitation and subsequent

sale, in accordance with Sec. 905.666(d)(3).

* * * * *

(4) Demonstration of long-term physical and social viability--(i)

General. The plan shall include, on a development-by-development basis,

an analysis of whether completion of the improvements and replacements

identified under paragraphs (d)(2) and (d)(3) of this section will

reasonably ensure the long-term physical and social viability of the

development at a reasonable cost. The IHA shall keep documentation in

its files to support its reasonable cost determinations of each major

work item (e.g., kitchen cabinets, exterior doors). HUD will review

cost reasonableness as part of its review of the Annual Submission and

the Performance and Evaluation Report. Where necessary, HUD will review

the IHA's documentation in support of its cost reasonableness;

(ii) Determination of non-viability. Where an IHA's analysis of a

development, under paragraph (d) of this section, establishes that

completion of the identified improvements and replacements will not

result in the long-term physical and social viability of the

development at a reasonable cost, the IHA shall not expend CGP funds

for the development, except for emergencies and essential non-routine

maintenance necessary to maintain habitability until residents can be

relocated. The IHA shall specify in its Comprehensive Plan the actions

it proposes to take with respect to the non-viable development (e.g.,

demolition or disposition under 24 CFR part 905, subpart M).

(5) Five-Year Action Plan--(i) General. The Comprehensive Plan

shall include a rolling Five-Year Action Plan to carry out the

improvements and replacements (or a portion thereof) identified under

paragraphs (d)(2) and (d)(3) of this section. In developing its Five-

Year Action Plan, the IHA shall assume that the current year funding or

formula amount will be available for each year of its Five-Year Action

Plan, whichever the IHA is using for planning purposes, plus the IHA's

estimate of the funds that will be available from other sources, such

as State, local and tribal governments. All activities specified in an

IHA's Five Year Action Plan are contingent upon the availability of

funds, and the work items are fungible, i.e., interchangeable;

* * * * *

(iii) Procedure for maintaining current Five-Year Action Plan. The

IHA shall maintain a current Five-Year Action Plan by annually amending

its Five-Year Action Plan, in conjunction with the Annual Submission;

(6) * * *

(i) The IHA developed the Comprehensive Plan/Five-Year Action Plan

or amendments thereto in consultation with officials of the appropriate

governing body and with development residents covered by the

Comprehensive Plan/Five-Year Action Plan, in accordance with the

requirements of Sec. 905.672 (b) and (c);

(ii) The Comprehensive Plan/Five-Year Action Plan or amendments

thereto are consistent with the appropriate governing body's assessment

of its low-income housing needs and that the appropriate governing body

will cooperate in providing resident programs and services; and

* * * * *

(7) * * *

(v) The proposed activities, obligations and expenditures in the

Five-Year Action Plan/Annual Submission are consistent with the

proposed or approved Comprehensive Plan of the IHA;

* * * * *

(viii) The IHA has provided to HUD any documentation that the

Department has requested to carry out its review under the National

Environmental Policy Act (NEPA) and other related authorities in

accordance with 24 CFR 905.120 (a) and (b), and will not obligate, in

any manner, the expenditure of CGP funds, or otherwise undertake the

activities identified in its Comprehensive Plan/Annual Submission,

until the IHA receives written notification from HUD indicating that

the Department has complied with its responsibilities under NEPA and

other related authorities;

* * * * *

(xv) The IHA has complied with the requirements governing tribal

government and resident participation in accordance with 24 CFR

905.672(b), 905.678(d), and 905.684, and has given full consideration

to the priorities and concerns of tribal government and residents,

including comments which were ultimately not adopted, in preparing the

Comprehensive Plan/Five-Year Action Plan and any amendments thereto;

* * * * *

(xviii) The IHA will comply with section 3 of the Housing and Urban

Development Act of 1968, as amended, and make best efforts, consistent

with existing Federal, State, and local laws and regulations, to give

low- and very low-income persons, training and employment opportunities

generated by CGP assistance, and to make best efforts, consistent with

existing Federal, State, and local laws and regulations, to award

contracts for work to be performed in connection with CGP assistance to

business concerns that provide economic opportunities for low- and very

low-income persons.

(e) * * *

(2) Amendments to needs assessments. The IHA must amend its plan by

revising its needs assessments whenever it proposes to carry out

activities in its Five-Year Action Plan or Annual Submission, that are

not reflected in its current needs assessments (except in the case of

emergencies). If the bases for the needs assessment have changed

substantially, an IHA may propose an amendment to its needs

assessments, in connection with the submission of its Annual Submission

(see Sec. 905.678(b), or at any other time. These amendments shall be

reviewed by HUD in accordance with Sec. 905.675;

(3) Six-year revision of Comprehensive Plan. The physical and

management needs assessments, and the summaries listed in

Sec. 905.672(d)(1) are required to be revised only every sixth year,

although the IHA may elect to revise some or all of these more

frequently. Every sixth year, an IHA must submit to HUD, as a part of

its Annual Submission, a complete revision of its Comprehensive Plan.

(4) Annual revision of Five-Year Action Plan. Annually, the IHA

shall submit to HUD, with its Annual Submission, an update of its Five-

Year Action Plan. Notwithstanding the new fifth year, the IHA shall

identify changes in work categories from the previous year Five-Year

Action Plan when making this annual submission.

* * * * *

8. In Sec. 905.675, paragraph (b)(1) would be amended by inserting

``and Sec. 968.103'' after the reference to ``Sec. 905.601'' and before

the period; by revising paragraph (c); and by adding the OMB approval

number to the end of the section, to read as follows:

Sec. 905.675 HUD review and approval of comprehensive plan (including

action plan).

* * * * *

(c) Effect of HUD approval of Comprehensive Plan. After HUD

approves the Comprehensive Plan (including the Five-Year Action Plan),

or any amendments to the plan, it shall be binding upon HUD and the

IHA, until such time as the IHA submits, and HUD approves, an amendment

to its plan. The IHA shall have full fungibility of work items (may

undertake any of the work items) identified in any of the five years of

the approved Five-Year Action Plan without further HUD approval. Actual

uses of the funds are to be reflected in the IHA annual Performance and

Evaluation Report for each grant. See Sec. 905.684. Except for

emergencies, the IHA shall consult, to the extent practicable, the

residents on significant changes (such as changes in scope of work)

whenever it moves work items within the approved Five-Year Action Plan.

Documentation of that consultation is to be retained in IHA files. If

HUD determines as a result of an audit or monitoring findings that an

IHA has provided false or substantially inaccurate data in its

Comprehensive Plan/Annual Submission or has circumvented the intent of

the program, HUD may condition the receipt of assistance, in accordance

with Sec. 950.687. Moreover, in accordance with 18 U.S.C. 1001, any

individual or entity who knowingly and willingly makes or uses a

document or writing containing any false, fictitious or fraudulent

statement or entry, in any matter within the jurisdiction of any

department or agency of the United States, shall be fined not more than

$10,000 or imprisoned for not more than five years, or both.

(Approved by the Office of Management and Budget under control

number 2577-0157)

9. Section 905.678 would be revised to read as follows:

Sec. 905.678 Annual submission of activities and expenditures.

(a) General. The Annual Submission consists of a Five-Year Action

Plan with a Work Statement for each of the five years and an

implementation schedule for the current year, local government

statement, materials demonstrating the partnership process, and other

miscellaneous documents outlined in this section. For planning

purposes, an IHA may use either the amount of funding received in the

current year or the formula amount provided in HUD's notification under

Sec. 905.669(b)(1) in developing the Five-Year Action Plan for

presentation at the resident meetings and public hearing. The Work

Statement for the first year of the Five-Year Action Plan is intended

to provide a statement of the activities and costs that the IHA plans

to undertake, in whole or in part, with the assistance to be provided

by HUD in that year. The Work Statements for all five years will be at

the same level of detail so that the IHA may interchange work items as

discussed in Sec. 905.672(d)(5)(i).

(b) Submission. After considering the amount of HUD assistance

under paragraph (a) of this section, and estimating how much funding

will be available from other sources, such as State and tribal

governments, and determining its activities and costs based on the

current FFY formula amount, the IHA shall submit its Annual Submission

in accordance with instructions provided by HUD.

(c) Acceptance for review. (1) Upon receipt of an Annual Submission

from an IHA, HUD shall determine whether:

(i) It is complete in all significant matters; and

(ii) The IHA has submitted any additional information or assurances

required as a result of HUD monitoring, findings of inadequate IHA

performance, audit findings, and civil rights compliance finding.

(2) The IHA has submitted any additional information or assurances

required as a result of HUD monitoring findings of inadequate IHA

performance, audit findings, and civil rights compliance findings. If

the IHA has submitted a complete Annual Submission and all required

information and assurances, HUD will accept the submission for review,

as of the date of receipt. If the IHA has not submitted all required

material, HUD will promptly notify the IHA that it has disapproved the

submission, indicating the reasons for disapproval, the modifications

required to qualify the Annual Submission for HUD review, and the date

by which such modifications must be received by HUD.

(d) Resident and local government participation. An IHA is required

to develop its Annual Submission, including any proposed amendments to

its Comprehensive Plan as provided in Sec. 905.672(e), in consultation

with officials of the appropriate governing body (or, in the case of an

IHA with developments in multiple jurisdictions, in consultation with

the CEO of each such jurisdiction or with an advisory group

representative of all jurisdictions) and with residents and especially

duly elected resident organizations of the developments covered by the

Comprehensive Plan, as follows:

(1) Public notice. Within a reasonable amount of time before the

advance meeting for residents under paragraph (d)(2) of this section,

and the public hearing under paragraph (d)(3) of this section, the IHA

shall provide public notice of the advance meeting and the public

hearing in a manner determined by the IHA and which ensures notice to

all duly elected resident organizations. The public notice shall also

include a summary of activities of the previous year (uses of past

funding) and progress update, estimated funding level (i.e., current

year funding or formula amount, whichever the IHA elects); a summary of

the CGP requirements; the estimated time frames for completion of the

required CGP documents; and the requirement for resident participation

in the planning, development and monitoring of modernization activities

under the CGP;

(2) Advance meeting with residents. The IHA shall at least annually

hold a meeting open to all residents and duly elected resident

organizations. The advance meeting shall be held within a reasonable

amount of time before the public hearing under paragraph (d)(3) of this

section. The IHA will provide residents with information concerning the

contents of the IHA's Five-Year Action Plan (and any proposed

amendments to the IHA's Comprehensive Plan to be submitted with the

Annual Submission) so that residents can comment adequately at the

public hearing on the contents of the Five-Year Action Plan and any

proposed amendments to the Comprehensive Plan.

(3) Public hearing. The IHA shall annually hold at least one public

hearing, and any appropriate number of additional hearings, to ensure

ample opportunity for residents of the developments covered by the

Comprehensive Plan, officials of the appropriate governing body, and

other interested parties, to express their priorities and concerns and

discuss the current status of prior approved programs. The IHA shall

give full consideration to the comments and concerns of residents,

local government officials, and other interested parties in developing

its Five-Year Action Plan, or any amendments to its Comprehensive Plan.

(4) Expedited scheduling. IHAs are encouraged to hold the meeting

with residents and duly elected resident organizations under paragraph

(d)(2) of this section, and the public hearing under paragraph (d)(3)

of this section between July 1 (i.e., after the end of the program

year--June 30) and September 30, using the formula amount for the

current FFY. If an IHA elects to use such expedited scheduling, it must

explain at the meeting with residents and duly elected resident

organizations and at the public hearing that the current FFY amount is

not the actual grant amount for the subsequent year, but is rather the

amount used for planning purposes and preparing the draft Performance

and Evaluation Report. It must also explain that the Five-Year Action

Plan will be adjusted when HUD provides notification of the actual

formula amount, and explain which items may be added or deleted to

adjust for the formula amount and that any added items will come from

the Five-Year Action Plan.

(e) Contents of Work Statement. The Work Statement for each year

must include, for each development or on an IHA-wide basis for

management improvements for which work is to be funded out of that

year's grant:

(1) A list of development accounts with a general description of

work items;

(2) The cost for each work item, as well as a summary of cost by

development account;

(3) The IHA-wide or development-specific management improvements to

be undertaken during the year;

(4) For each development and for or any management improvements not

covered by a HUD-approved management improvement plan, a schedule for

the use of current year funds, including target dates for the

obligation and expenditure of the funds. In general, HUD expects that

an IHA will obligate its current year's allocation of CGP funds (except

for its funded replacement reserves) within two years, and expend such

funds within three years, of the date of HUD approval, unless longer

time-frames are approved by HUD due to local differences;

(5) A summary description of the actions to be taken with non-CGP

funds to meet physical and management improvement needs which have been

identified by the IHA in its needs assessments;

(6) Any documentation that HUD needs to assist it in carrying out

its responsibilities under the National Environmental Policy Act and

other related authorities in accordance with Sec. 905.120 (a) and (b);

(7) Other information, as specified by HUD; and

(8) An IHA resolution approving the Annual Submission or any

amendments thereto, as set forth in Sec. 905.672(d)(7).

(f) Additional submissions with Annual Submission. An IHA must

submit with the Annual Submission any amendments to the Comprehensive

Plan, as set forth in Sec. 905.672(e), and such additional information

as may be prescribed by HUD. HUD shall review any proposed amendments

to the Comprehensive Plan in accordance with review standards under

Sec. 905.675(b).

(g) HUD review and approval of Annual Submission--(1) General. An

Annual Submission accepted in accordance with paragraph (a) of this

section shall be considered to be approved, unless HUD notifies the IHA

in writing, postmarked within 75 calendar days of the date that HUD

receives the Annual Submission for review under paragraph (c) of this

section, that HUD has disapproved the Annual Submission, indicating the

reasons for disapproval, the modifications required to make the Annual

Submission approvable, and the date by which such modifications must be

received by HUD. HUD shall not disapprove an Annual Submission on the

basis that the Department cannot complete its review under this section

within the 75-day deadline;

(2) Bases for disapproval for Annual Submission. HUD shall approve

the Annual Submission, except where:

(i) Plainly inconsistent with Comprehensive Plan. HUD determines

that the activities and expenditures proposed in the Annual Submission

are plainly inconsistent with the IHA's approved Comprehensive Plan;

(ii) Contradiction of IHA resolution. HUD has evidence which tends

to challenge, in a substantial manner, the certifications contained in

the board resolution, as required by Sec. 905.672(d)(7).

(h) Amendments to Annual Submission. The IHA shall advise HUD of

all changes to the IHA's approved Work Statement for year one in its

Performance and Evaluation Report submitted under Sec. 905.684. Any

additional work items (changes which add work items), except for

emergency work, must be within the IHA's approved Five-Year Action Plan

or receive prior HUD approval.

(i) Extension of time for performance. An IHA may revise the target

dates for fund obligation and expenditure in the approved Annual

Submission whenever any valid delay outside the IHA's control occurs,

as specified by HUD. Such revision is subject to HUD review under

Sec. 905.687(a)(2) as to the IHA's continuing capacity. HUD shall not

review as to an IHA's continuing capacity any revisions to an IHA's

Comprehensive Plan and related statements where the basis for the

revision is that HUD has not provided the amount of assistance set

forth in the Annual Submission, or has not provided such assistance in

a timely manner.

(j) ACC Amendment. After HUD approval of each year's Annual

Submission, HUD and the IHA shall enter into an ACC amendment to obtain

modernization funds. The ACC amendment shall require low-income use of

housing for not less than 20 years from the date of the ACC amendment

(subject to sale of homeownership units in accordance with the terms of

the ACC).

(k) Declaration of Trust. An IHA shall execute and file for record

a Declaration of Trust as provided under the ACC to protect the rights

and interests of HUD throughout the 20-year period during which the IHA

is obligated to operate its developments in accordance with the ACC,

the Act, and HUD regulations and requirements. A Declaration of Trust

is not required for Mutual Help units.

(Information collections requirements have been approved by the

Office of Management and Budget under control number 2577-0157)

10. Section 905.681 would be amended by revising paragraph (a)

introductory text and paragraph (b), to read as follows:

Sec. 905.681 Conduct of modernization activities.

(a) Initiation of activities. After HUD has approved a Five-Year

Action Plan and entered into an ACC amendment or grant agreement with

the IHA for year one of the Plan, the IHA shall undertake the

modernization activities and expenditures set forth in its approved

Work Statement for year one or substitute work items from within the

approved Five-Year Action Plan, subject to the following requirements:

* * * * *

(b) Fund requisitions. To request modernization funds against the

approved Work Statement for year one, the IHA shall comply with

requirements prescribed by HUD.

* * * * *

11. Section 905.684 would be amended by revising the section

heading and paragraphs (a) and (b)(2); by removing paragraph (b)(3); by

redesignating paragraphs (b)(4) through (b)(7) as paragraphs (b)(3)

through (b)(6), respectively; and by revising newly designated

paragraphs (b)(4) and (b)(6), to read as follows:

Sec. 905.684 IHA Performance and Evaluation Report.

(a) Submission. For any FFY in which an IHA has received assistance

under this subpart, the IHA shall submit a Performance and Evaluation

Report, in a form and at a time to be prescribed by HUD, describing its

use of assistance in accordance with the approved Five-Year Action

Plan. The IHA must make reasonable efforts to notify residents and

officials of the appropriate governing body of the availability of the

draft report, make copies available to residents in the development

office, and provide residents with at least 30 calendar days in which

to comment on the report.

(b) * * *

(2) An explanation of how the IHA has used the CGP funds to address

the needs identified in its Comprehensive Plan and to carry out the

activities identified in its approved Five-Year Action Plan, and shall

specifically address:

(i) Any funds used for emergency needs not set forth in its Five-

Year Action Plan; and

(ii) Any changes to the Annual Submission under Sec. 905.678(h);

* * * * *

(4) The current status of the IHA's obligations and expenditures

and specifying how the IHA is performing with respect to its

implementation schedules, and an explanation of any necessary revision

to the planned target dates;

* * * * *

(6) A resolution by the IHA Board of Commissioners approving the

Performance and Evaluation Report and containing a certification that

the IHA has made reasonable efforts to notify residents in the

development(s) and local government officials of the opportunity to

review the draft report and to comment on it before its submission to

HUD, and that copies of the report were provided to residents in the

development office, to local government officials, or furnished upon

their request.

* * * * *

12. Section 905.687 would be amended as follows: by revising

paragraphs (a)(1)(i), (a)(2)(i)(A), and (a)(3)(ii); by adding a new

paragraph (a)(3)(iii); by revising paragraph (e)(2); by redesignating

paragraph (e)(6) as (e)(8); by redesignating paragraphs (e)(4) and

(e)(5) as (e)(5) and (e)(6); by revising redesignated paragraph (e)(5);

by redesignating the second paragraph (e)(3) as (e)(4); and by adding a

new paragraph (e)(7) to read as follows:

Sec. 905.687 HUD review of IHA performance.

(a) * * *

(1) * * *

(i) In making this determination, HUD will review the IHA's

performance to determine whether the modernization activities

undertaken during the period under review conform substantially to the

activities specified in the approved Five-Year Action Plan. HUD will

also review an IHA's schedules which are provided with its Annual

Submission for purposes of determining whether the IHA has carried out

its modernization activities in a timely manner;

* * * * *

(2) * * *

(i) * * *

(A) Carried out its activities under the CGP program, as well as

the CIAP, in a timely manner, taking into account the level of funding

available and whether the IHA obligates its modernization funds within

two years from the execution of the ACC amendment and expends such

modernization funds within three years of ACC amendment execution, or

such longer period if agreed to by HUD in an implementation schedule,

except in circumstances beyond the IHA's reasonable control.

* * * * *

(3) * * *

(ii) With respect to the management condition of the IHA, whether

the IHA is making reasonable progress in implementing, the work items

(specified in its annual submission and Five-Year Action Plan),

necessary to eliminate the deficiencies identified in its management

needs assessment; and

(iii) In determining whether the IHA has made reasonable progress,

HUD will take into account the level of funding available and whether

the IHA obligates its modernization funds within two years from the

execution of the ACC amendment and expends such modernization funds

within three years of ACC amendment execution, or such longer period if

agreed to by HUD in an implementation schedule. The IHA must

demonstrate to HUD's satisfaction that any lack of timeliness (beyond

the time periods specified in this paragraph or date specified in a HUD

approved implementation schedule) has resulted from factors beyond the

IHA's reasonable control.

* * * * *

(e) * * *

(2) Submit schedules for completing the work identified in its Work

Statements and report periodically on its progress on meeting the

schedules;

* * * * *

(5) Submit additional material in support of one or more of the

statements, resolutions, and certifications submitted as part of the

IHA's Comprehensive Plan, Five-Year Action Plan, or Performance and

Evaluation Report;

* * * * *

(7) Submit to an alternative management strategy which may involve

third-party oversight or administration of the modernization function

(see Sec. 905.669(d)); and

* * * * *

PART 968--PUBLIC HOUSING MODERNIZATION

13. The authority citation for 24 CFR part 968 would continue to

read as follows:

Authority: 42 U.S.C. 1437d, 1437l; 42 U.S.C. 3535(d).

14. Section 968.103 would be amended by revising paragraph (b); by

adding three sentences to the end of paragraph (j); and by revising

paragraph (k)(2)(i), to read as follows:

Sec. 968.103 Allocation of funds under section 14.

* * * * *

(b) Set-aside for emergencies and disasters. For each FFY, HUD

shall reserve from amounts approved in the appropriation act for grants

under part 905 of this title and part 968, $75 million (which shall

include unused reserve amounts carried over from previous FFYs), which

shall be made available to PHAs and IHAs for modernization needs

resulting from natural and other disasters, and from emergencies. HUD

shall replenish this reserve at the beginning of each FFY so that it

always begins with a $75 million balance. Any unused funds from

previous years will remain in the reserve until allocated. The

requirements governing the reserve for disasters and emergencies and

the procedures by which a PHA may request such funds, are set forth in

Sec. 968.312.

* * * * *

(j) Calculation of number of units. * * * New development units

that are added to an PHA's or IHA's inventory will be added to the

overall unit count so long as they are under ACC amendment and have

reached DOFA by the first day in the FFY in which the formula is being

run. Any increase in units (reaching DOFA and under ACC amendment) as

of the beginning of the FFY shall result in an adjustment upwards in

the number of units under the formula. New units reaching DOFA after

this date will be counted for formula purposes as of the following FFY.

(k) * * *

(2) * * *

(i) Increases in the number of units resulting from the conversion

of existing units will be added to the overall unit count so long as

they are under ACC amendment by the first day in the FFY in which the

formula is being run;

* * * * *

Sec. 968.305 [Amended]

15. Section 968.305 would be amended by removing the definitions

for Annual statement and for Major changes.

16. Section 968.310 would be amended by revising paragraphs (a)(1),

(a)(2), (f)(1)(iii), and (m); and by removing the reference to

``paragraph (g)'' in paragraph (a)(3) and inserting in its place

``paragraph (f)'', to read as follows:

Sec. 968.310 Eligible costs.

(a) * * *

(1) Undertaking activities described in its approved Five-Year

Action Plan under Sec. 968.320(d)(5);

(2) Carrying out emergency work, whether or not the need is

indicated in the PHA's approved Comprehensive Plan (including Five-Year

Action Plan) or Annual Submission;

* * * * *

(f) * * *

(1) * * *

(iii) A management improvement requires more funds than the PHA may

use under its 20% limit for management improvements, and the PHA needs

to save a portion of subsequent year(s) grants, to fund the work item;

* * * * *

(m) Cost limitation. (1) Notwithstanding the full fungibility of

work items in Sec. 968.325(c), a PHA shall not use more than a total of

20 percent of its annual grant for management improvement costs in

account 1408, unless specifically approved by HUD or the PHA has been

designated as a high performer under PHMAP. To the maximum extent

feasible, HAs should use management improvement funds to train

residents in carrying out activities related to the modernization-

funded physical and management improvements.

(2) Notwithstanding the full fungibility of work items in

Sec. 968.325(c), a PHA shall not use more than a total of 7 percent of

its annual grant on administrative costs in account 1410, excluding any

costs related to in-house lead-based paint or asbestos testing, in-

house architectural/engineering (A/E) work, or other special

administrative costs required by state or local law, unless

specifically approved by HUD. In the case of a PHA whose jurisdiction

covers an unusually large geographic area, an additional two percent of

the annual grant may be spent on costs related to travelling to the

PHA's developments for CGP-related business, as specifically approved

by HUD. (For purposes of this paragraph, ``an unusually large

geographic area'' means an area served by a PHA whose offices are

physically separated from the majority of its developments by distances

that require overnight travel and/or travel by air or other commercial

carriers, e.g., a statewide PHA with developments in multiple

localities; a regional PHA with developments in multiple counties or

states; or an Alaska IHA with developments in multiple villages.);

* * * * *

17. Section 968.312 would be amended by revising paragraphs (a)(1)

and (a)(3) to read as follows:

Sec. 968.312 Reserve for emergencies and disasters.

(a) Emergencies--(1) Eligibility for assistance. A PHA (including a

PHA that has been designated as mod troubled under PHMAP) may obtain

funds at any time, for any eligible emergency work item as defined in

Sec. 968.305 (for PHAs participating in CGP) or for any eligible

emergency work item (described as emergency modernization in

Sec. 968.205) (for PHAs participating in CIAP), from the reserve

established under Sec. 968.103(b). However, emergency reserve funds may

not be provided to a PHA participating in CGP that has the necessary

funds available from any other source, including its annual formula

allocation under Sec. 968.103 (e) and (f), other unobligated

modernization funds, and its replacement reserves under

Sec. 968.310(a)(3). Emergency reserve funds may not be provided to a

PHA participating in CIAP that has the necessary funds available from

any other source, including unobligated CIAP (and no CIAP modernization

is available for the remainder of the fiscal year) and residual

receipts. PHAs participating in CIAP must also have the modernization

work under contract within 6 months after receiving HUD's approval of

emergency reserve funds. A PHA is not required to have an approved

comprehensive plan under Sec. 968.320 before it can request emergency

assistance from this reserve.

* * * * *

(3) Repayment. A PHA that receives assistance for its emergency

needs from the reserve under Sec. 968.103(b) must repay such assistance

from its future allocations of assistance, where available. For PHAs

participating in the CGP, HUD shall deduct up to 50 percent of a PHA's

succeeding year's formula allocation under Sec. 968.103 (e) and (f) to

repay emergency funds previously provided by HUD to the PHA. The

remaining balance, if any, shall be deducted from a PHA's succeeding

years' formula allocations.

* * * * *

18. Section 968.315 would be amended by revising the section

heading; by adding three sentences to the end of paragraph (a)(1); by

revising paragraphs (b), (c)(1) and (c)(5); by adding a new paragraph

(d); and by adding the OMB control number to the end of the section, to

read as follows:

Sec. 968.315 Allocation of assistance.

(a) * * *

(1) * * * On an annual basis, HUD will transmit to the PHA, the

formula characteristics report which reflects the data that will be

used to determine the PHA's formula share. The PHA will have 30 days to

review and advise HUD of errors in this HUD report. Necessary

adjustments will be made to the PHA's data before the formula is run

for the current FFY.

* * * * *

(b) HUD notification of formula amount; appeal rights--(1) Formula

amounts notification. After HUD determines a PHA's formula allocation

under Sec. 968.103 (e) and (f) based upon the PHA, development, and

community characteristics, it shall notify the PHA of its formula

amount and provide instruction on annual submission in accordance with

Secs. 968.320 and 968.330;

(2) Appeal based upon unique circumstances. A PHA may appeal in

writing HUD's determination of its formula amount within 60 calendar

days of the date of HUD's determination on the basis of ``unique

circumstances.'' The PHA must indicate what is unique, and specify the

manner in which it is different from all other PHAs participating in

the CGP, and provide any necessary supporting documentation. HUD shall

render a written decision on an PHA's appeal under this paragraph

within 60 calendar days of the date of its receipt of the PHA's request

for an appeal. HUD shall publish in the Federal Register a description

of the facts supporting any successful appeals based upon ``unique

circumstances.'' Any adjustments resulting from successful appeals in a

particular FFY under this paragraph shall be made from subsequent

years' allocation of funds under this part;

(3) Appeal based upon error. A PHA may appeal in writing HUD's

determination of its formula amount within 60 calendar days of the date

of HUD's determination on the basis of an error. The PHA may appeal on

the basis of error the correctness of data in the formula

characteristics report. The PHA must describe the nature of the error,

and provide any necessary supporting documentation. HUD shall respond

to the PHA's request within 60 calendar days of the date of its receipt

of the PHA's request for an appeal. Any adjustment resulting from

successful appeals in a particular FFY under this paragraph shall be

made from subsequent years' allocation of funds under this part;

(c) Reduced formula allocation for PHAs designated as mod troubled

under PHMAP--(1) Notification. After a PHA is designated as a mod

troubled agency under PHMAP (24 CFR part 901), HUD shall inform the PHA

that its funding may be limited under this subpart because of its

designation as a mod troubled PHA. HUD shall also provide the PHA with

information concerning the PHA's funding levels for CGP, CIAP and MROP

for each of the preceding three FFYs for purposes of determining the

PHA's reduced formula allocation, in accordance with paragraph

(c)(2)(ii) of this section. In addition, HUD will provide the PHA with

information on its full formula allocation under Sec. 968.103 (e) and

(f), and the amount which represents 25 percent of the difference

between the average amounts provided to the PHA in each of the

preceding three FFYs and its full formula allocation.

* * * * *

(5) Reallocation of funds withheld from mod troubled PHAs. Any

amounts which are not provided to a PHA under paragraph (c)(1) of this

section because the PHA is designated as a mod troubled agency under

PHMAP, shall be reallocated by HUD to other PHAs under this subpart

which are not designated as either troubled or mod troubled agencies

under PHMAP, and to IHAs under 24 CFR part 905 (subpart I) which have

been determined to be administratively capable, in accordance with

Sec. 905.135 of this chapter, the ACA, and the Field Office Monitoring

of IHAs Handbook. Such funds shall be reallocated in the next FFY based

upon the relative needs of these PHAs and IHAs, as determined under the

formula.

* * * * *

(d) Obligation of formula funding. All formula funding should be

obligated within two years of allocation or such longer period approved

by HUD. If the PHA fails to obligate funds within the approved time

period, they may be subject to an alternative management strategy which

may involve third-party oversight or administration of the

modernization function. HUD would only require such action after a

corrective action order had been issued under Sec. 968.345 and the PHA

failed to comply with the order. HUD could then issue an alternative

management strategy in a corrective action order. A PHA may appeal in

writing the corrective action order imposing an alternative management

strategy within 60 days of that order. HUD Headquarters shall render a

written decision on a PHA's appeal within 60 calendar days of the date

of its receipt of the PHA's appeal.

(Approved by the Office of Management and Budget under control

number 2577-0157)

19. Section 968.320 would be amended by revising the section

heading; by revising paragraphs (a), (b)(2)(i), (b)(3) through (b)(5),

(c)(2), (d)(1)(i), (d)(1)(ii), (d)(2)(i)(E), (d)(4), (d)(5)(i),

(d)(5)(iii), (d)(6)(i), (d)(6)(ii), (d)(7)(v), (d)(7)(viii) and

(d)(7)(xv); by adding a new paragraph (d)(7)(xviii); by revising

paragraphs (e)(2) through (e)(4); and by adding the OMB control number

to the end of the section, to read as follows:

Sec. 968.320 Comprehensive Plan (including Five-Year Action Plan).

(a) Submission. HUD shall notify PHAs of the requested date for

submitting or updating a Comprehensive Plan. For planning purposes,

PHAs may use the amount they received under CGP in the prior year in

developing their Comprehensive Plan or they may wait for the annual HUD

notification of formula amount under Sec. 968.315(b)(1).

(b) * * *

(2) * * *

(i) To assure that residents are fully briefed and involved in

developing the content of, and monitoring the implementation of, the

Comprehensive Plan including, but not limited to, the physical and

management needs assessments, viability analysis, Five-Year Action

Plan, and Work Statements for each year. If necessary, the PHA shall

develop and implement capacity building strategies to ensure meaningful

resident participation in CGP. Such technical assistance efforts for

residents are eligible management improvement costs under CGP;

* * * * *

(3) Public notice. Within a reasonable amount of time before the

advance meeting for residents under paragraph (b)(4) of this section,

and the public hearing under paragraph (b)(5) of this section, the PHA

shall provide public notice of the advance meeting and the public

hearing in a manner determined by the PHA and which ensures notice to

all duly elected resident organizations. The public notice shall also

include a summary of activities of the previous year (uses of past

funding) and progress update, estimated funding level (i.e., current

year funding or formula amount, whichever the PHA elects); a summary of

the CGP requirements; the estimated time frames for completion of the

required CGP documents; and the requirement for resident participation

in the planning, development and monitoring of modernization activities

under the CGP;

(4) Advance meeting for residents. The PHA shall hold, within a

reasonable amount of time before the public hearing under paragraph

(b)(5) of the section, a meeting for residents and duly elected

resident organizations at which the PHA shall explain the components of

the Comprehensive Plan. The meeting shall be open to all residents and

duly elected resident organizations;

(5) Public hearing. The PHA shall hold at least one public hearing,

and any appropriate number of additional hearings, to ensure ample

opportunity for residents, local government officials, and other

interested parties, to express their priorities and concerns. The PHA

shall give full consideration to the comments and concerns of

residents, local government officials, and other interested parties.

(c) * * *

(2) A copy of the summary of total preliminary estimated costs to

address physical needs by each development and management/operations

needs PHA-wide and a specific description of the PHA's process for

maximizing the level of participation by residents.

* * * * *

(d) * * *

(1) Summaries. A PHA shall include as part of its Comprehensive

Plan the following summaries:

(i) A summary of total preliminary estimated costs to address

physical needs by each development and management needs PHA-wide; and

(ii) A specific description of the PHA's process for maximizing the

level of participation by residents during the development,

implementation and monitoring of the comprehensive plan, a summary of

the general issues raised on the plan by residents and others during

the public comment process and the PHA's response to the general

issues. PHA records, such as minutes of planning meetings or resident

surveys, shall be maintained in the PHA's files and made available to

residents, duly elected resident organizations, and other interested

parties, upon request.

* * * * *

(2) * * *

(i) * * *

(E) In addition, the PHA shall provide with respect to vacant or

non-home buyer-occupied Turnkey III units, the estimated number of

units that the PHA is proposing for substantial rehabilitation and

subsequent sale, in accordance with Sec. 968.310(d)(3).

* * * * *

(4) Demonstration of long-term physical and social viability--(i)

General. The plan shall include, on a development-by-development basis,

an analysis of whether completion of the improvements and replacements

identified under paragraphs (d)(2) and (d)(3) of this section will

reasonably ensure the long-term physical and social viability of the

development at a reasonable cost. The PHA shall keep documentation in

its files to support its reasonable cost determinations of each major

work item (e.g., kitchen cabinets, exterior doors). HUD will review

cost reasonableness as part of its review of the Annual Submission and

the Performance and Evaluation Report. Where necessary, HUD will review

the PHA's documentation in support of its cost reasonableness;

(ii) Determination of non-viability. Where a PHA's analysis of a

development, under paragraph (d) of this section, establishes that

completion of the identified improvements and replacements will not

result in the long-term physical and social viability of the

development at a reasonable cost, the PHA shall not expend CGP funds

for the development, except for emergencies and essential non-routine

maintenance necessary to maintain habitability until residents can be

relocated. The PHA shall specify in its Comprehensive Plan the actions

it proposes to take with respect to the non-viable development (e.g.,

demolition or disposition under 24 CFR part 970).

(5) Five-Year Action Plan--(i) General. The Comprehensive Plan

shall include a rolling Five-Year Action Plan to carry out the

improvements and replacements (or a portion thereof) identified under

paragraphs (d)(2) and (d)(3) of this section. In developing its Five-

Year Action Plan, the PHA shall assume that the current year funding or

formula amount will be available for each year of its Five-Year Action

Plan, whichever the PHA is using for planning purposes, plus the PHA's

estimate of the funds that will be available from other sources, such

as State and local governments. All activities specified in an PHA's

Five-Year Action Plan are contingent upon the availability of funds,

and the work items are fungible, i.e., interchangeable;

* * * * *

(iii) Procedure for maintaining current Five-Year Action Plan. The

PHA shall maintain a current Five-Year Action Plan by annually amending

its Five-Year Action Plan, in conjunction with the Annual Submission;

(6) * * *

(i) The PHA developed the Comprehensive Plan/Five-Year Action Plan

or amendments thereto in consultation with officials of the appropriate

governing body and with development residents covered by the

Comprehensive Plan/Five-Year Action Plan, in accordance with the

requirements of Sec. 968.320(b)(1) and (2);

(ii) The Comprehensive Plan/Five-Year Action Plan or amendments

thereto are consistent with the appropriate governing body's assessment

of its low-income housing needs (as evidenced by its Comprehensive

Housing Affordability Strategy under 24 CFR part 91, if applicable),

and that the appropriate governing body will cooperate in providing

resident programs and services; and

* * * * *

(7) * * *

(v) The proposed activities, obligations and expenditures in the

Five-Year Action Plan/Annual Submission are consistent with the

proposed or approved Comprehensive Plan of the PHA;

* * * * *

(viii) The PHA has provided to HUD any documentation that the

Department has requested to carry out its review under the National

Environmental Policy Act (NEPA) and other related authorities in

accordance with 24 CFR 968.110(c), (d) and (m), and will not obligate,

in any manner, the expenditure of CGP funds, or otherwise undertake the

activities identified in its Comprehensive Plan/Annual Submission,

until the PHA receives written notification from HUD indicating that

the Department has complied with its responsibilities under NEPA and

other related authorities;

* * * * *

(xv) The PHA has complied with the requirements governing local

government and resident participation in accordance with 24 CFR

968.320(b) and (c), 968.330(d), and 968.340, and has given full

consideration to the priorities and concerns of local government and

residents, including comments which were ultimately not adopted, in

preparing the Comprehensive Plan/Five-Year Action Plan and any

amendments thereto;

* * * * *

(xviii) The PHA will comply with section 3 of the Housing and Urban

Development Act of 1968, as amended, and make best efforts, consistent

with existing Federal, State, and local laws and regulations, to give

low- and very low-income persons, training and employment opportunities

generated by CGP assistance, and to make best efforts, consistent with

existing Federal, State, and local laws and regulations, to award

contracts for work to be performed in connection with CGP assistance to

business concerns that provide economic opportunities for low- and very

low-income persons.

(e) * * *

(2) Amendments to needs assessments. The PHA must amend its plan by

revising its needs assessments whenever it proposes to carry out

activities in its Five-Year Action Plan or Annual Submission that are

not reflected in its current needs assessments (except in the case of

emergencies). If the bases for the needs assessment have changed

substantially, a PHA may propose an amendment to its needs assessments,

in connection with the submission of its Annual Submission (see

Sec. 968.330(b), or at any other time. These amendments shall be

reviewed by HUD in accordance with Sec. 968.325;

(3) Six-year revision of Comprehensive Plan. The physical and

management needs assessments, and the summaries listed in

Sec. 968.320(d)(1) are required to be revised only every sixth year,

although the PHA may elect to revise some or all of these more

frequently. Every sixth year, a PHA must submit to HUD, as a part of

its annual submission, a complete revision of its Comprehensive Plan.

(4) Annual revision of Five-Year Action Plan. Annually, the PHA

shall submit to HUD, with its Annual Submission, an update of its Five-

Year Action Plan. Notwithstanding the new fifth year, the PHA shall

identify changes in work categories from the previous year Five-Year

Action Plan when making this Annual Submission.

* * * * *

(Approved by the Office of Management and Budget under control

number 2577-0157)

20. Section 968.325 would be amended by revising the section

heading and paragraph (c); and by adding the OMB control number to the

end of the section, to read as follows:

Sec. 968.325 HUD review and approval of Comprehensive Plan (including

Five-Year Action Plan).

* * * * *

(c) Effect of HUD approval of Comprehensive Plan. After HUD

approves the Comprehensive Plan (including the Five-Year Action Plan),

or any amendments to the plan, it shall be binding upon HUD and the

PHA, until such time as the PHA submits, and HUD approves, an amendment

to its plan. The PHA shall have full fungibility of work items (may

undertake any of the work items) identified in any of the five years of

the approved Five-Year Action Plan without further HUD approval. Actual

uses of the funds are to be reflected in the PHA annual Performance and

Evaluation Report for each grant. See Sec. 968.340. Except for

emergencies, the PHA shall consult, to the extent practicable, the

residents on significant changes (such as changes in scope of work) or

whenever it moves work items within the approved Five-Year Action Plan.

Documentation of that consultation is to be retained in PHA files. If

HUD determines as a result of an audit or monitoring findings that a

PHA has provided false or substantially inaccurate data in its

Comprehensive Plan/Annual Submission or has circumvented the intent of

the program, HUD may condition the receipt of assistance, in accordance

with Sec. 968.345. Moreover, in accordance with 18 U.S.C. 1001, any

individual or entity who knowingly and willingly makes or uses a

document or writing containing any false, fictitious or fraudulent

statement or entry, in any matter within the jurisdiction of any

department or agency of the United States, shall be fined not more than

$10,000 or imprisoned for not more than five years, or both.

(Approved by the Office of Management and Budget under control

number 2577-0157)

21. Section 968.330 would be amended by revising paragraphs (a),

(b), (c) introductory text, (c)(2), (d), (e) introductory text, (e)(1),

(e)(8), (f), (g)(1), (g)(2) introductory text, (g)(2)(i), (h), (i), and

(j); by adding a new paragraph (k); and by adding the OMB control

number to the end of the section, to read as follows:

Sec. 968.330 Annual Submission of activities and expenditures.

(a) General. The Annual Submission consists of a Five-Year Action

Plan with a Work Statement for each of the five years and an

implementation schedule for the current year, local government

statement, materials demonstrating the partnership process, and other

miscellaneous documents outlined in this section. For planning

purposes, a PHA may use either the amount of funding received in the

current year or the formula amount provided in HUD's notification under

Sec. 968.315(b)(1) in developing the Five-Year Action Plan for

presentation at the resident meetings and public hearing. The Work

Statement for the first year of the Five-Year Action Plan is intended

to provide a statement of the activities and costs that the PHA plans

to undertake, in whole or in part, with the assistance to be provided

by HUD in that year. The Work Statement for all five years will be at

the same level of detail so that the PHA may interchange work items as

discussed in Sec. 968.320(d)(5)(i).

(b) Submission. After considering the amount of HUD assistance

under paragraph (a) of this section, and estimating how much funding

will be available from other sources, such as State and local

governments, and determining its activities and costs based on the

current FFY formula amount, the PHA shall submit its Annual Submission

in accordance with instructions provided by HUD.

(c) Acceptance for review. Upon receipt of an Annual Submission

from a PHA, HUD shall determine whether:

* * * * *

(2) The PHA has submitted any additional information or assurances

required as a result of HUD monitoring findings of inadequate PHA

performance, audit findings, and civil rights compliance findings. If

the PHA has submitted a complete Annual Submission and all required

information and assurances, HUD will accept the submission for review,

as of the date of receipt. If the PHA has not submitted all required

material, HUD will promptly notify the PHA that it has disapproved the

submission, indicating the reasons for disapproval, the modifications

required to qualify the Annual Submission for HUD review, and the date

by which such modifications must be received by HUD.

(d) Resident and local government participation. A PHA is required

to develop its Annual Submission, including any proposed amendments to

its Comprehensive Plan as provided in Sec. 968.320 (b) and (c), in

consultation with officials of the appropriate governing body (or, in

the case of a PHA with developments in multiple jurisdictions, in

consultation with the CEO of each such jurisdiction or with an advisory

group representative of all jurisdictions) and with residents and

especially duly elected resident organizations of the developments

covered by the Comprehensive Plan, as follows:

(1) Public notice. Within a reasonable amount of time before the

advance meeting for residents under paragraph (d)(2) of this section,

and the public hearing under paragraph (d)(3) of this section, the PHA

shall provide public notice of the advance meeting and the public

hearing in a manner determined by the PHA and which ensures notice to

all duly elected resident organizations. The public notice shall also

include a summary of activities of the previous year (uses of past

funding) and progress update, estimated funding level (i.e., current

year funding or formula amount, whichever the PHA elects); a summary of

the CGP requirements; the estimated time frames for completion of the

required CGP documents; and the requirement for resident participation

in the planning, development and monitoring of modernization activities

under the CGP;

(2) Advance Meeting with residents. The PHA shall at least annually

hold a meeting open to all residents and duly elected resident

organizations. The advance meeting shall be held within a reasonable

amount of time before the public hearing under paragraph (d)(3) of this

section. The PHA will provide residents with information concerning the

contents of the PHA's Five-Year Action Plan (and any proposed

amendments to the PHA's Comprehensive Plan to be submitted with the

Annual Submission) so that residents can comment adequately at the

public hearing on the contents of the Five-Year Action Plan and any

proposed amendments to the Comprehensive Plan.

(3) Public hearing. The PHA shall annually hold at least one public

hearing, and any appropriate number of additional hearings, to ensure

ample opportunity for residents of the developments covered by the

Comprehensive Plan, officials of the appropriate governing body, and

other interested parties, to express their priorities and concerns and

discuss the current status of prior approved programs. The PHA shall

give full consideration to the comments and concerns of residents,

local government officials, and other interested parties in developing

its Five-Year Action Plan, or any amendments to its Comprehensive Plan.

(4) Expedited scheduling. PHAs are encouraged to hold the meeting

with residents and duly elected resident organizations under paragraph

(d)(2) of this section, and the public hearing under paragraph (d)(3)

of this section between July 1 (i.e., after the end of the program

year--June 30) and September 30, using the formula amount for the

current FFY. If a PHA elects to use such expedited scheduling, it must

explain at the meeting with residents and duly elected resident

organizations and at the public hearing that the current FFY amount is

not the actual grant amount for the subsequent year, but is rather the

amount used for planning purposes and preparing the draft Performance

and Evaluation Report. It must also explain that the Five-Year Action

Plan will be adjusted when HUD provides notification of the actual

formula amount, and explain which items may be added or deleted to

adjust for the formula amount and that any added items will come from

the Five-Year Action Plan.

(e) Contents of Work Statement. The Work Statement for each year

must include, for each development or on a PHA-wide basis for

management improvements for which work is to be funded out of that

year's grant:

(1) A list of development accounts with a general description of

work items;

* * * * *

(8) A PHA resolution approving the Annual Submission or any

amendments thereto, as set forth in Sec. 968.320(d)(7).

(f) Additional submissions with Annual Submission. A PHA must

submit with the Annual Submission any amendments to the Comprehensive

Plan, as set forth in Sec. 968.320(e), and such additional information

as may be prescribed by HUD. HUD shall review any proposed amendments

to the Comprehensive Plan in accordance with review standards under

Sec. 968.325(b).

(g) HUD review and approval of Annual Submission--(1) General. An

Annual Submission accepted in accordance with paragraph (a) of this

section shall be considered to be approved, unless HUD notifies the PHA

in writing, postmarked within 75 calendar days of the date that HUD

receives the Annual Submission for review under paragraph (c) of this

section, that HUD has disapproved the Annual Submission, indicating the

reasons for disapproval, the modifications required to make the Annual

Submission approvable, and the date by which such modifications must be

received by HUD. HUD shall not disapprove an Annual Submission on the

basis that the Department cannot complete its review under this section

within the 75-day deadline;

(2) Bases for disapproval for Annual Submission. HUD shall approve

the Annual Submission, except where:

(i) Plainly inconsistent with Comprehensive Plan. HUD determines

that the activities and expenditures proposed in the Annual Submission

are plainly inconsistent with the PHA's approved Comprehensive Plan;

* * * * *

(h) Amendments to Annual Submission. The PHA shall advise HUD of

all changes to the PHA's approved Work Statement for year one in its

Performance and Evaluation Report submitted under Sec. 968.305. Any

additional work items (changes which add work items), except for

emergency work, must be within the PHA's approved Five-Year Action Plan

or receive prior HUD approval.

(i) Extension of time for performance. A PHA may revise the target

dates for fund obligation and expenditure in the approved Annual

Submission whenever any valid delay outside the PHA's control occurs,

as specified by HUD. Such revision is subject to HUD review under

Sec. 968.345(a)(2) as to the PHA's continuing capacity. HUD shall not

review as to a PHA's continuing capacity any revisions to a PHA's

Comprehensive Plan and related statements where the basis for the

revision is that HUD has not provided the amount of assistance set

forth in the Annual Submission, or has not provided such assistance in

a timely manner.

(j) ACC Amendment. After HUD approval of each year's Annual

Submission, HUD and the PHA shall enter into an ACC amendment to obtain

modernization funds. The ACC amendment shall require low-income use of

housing for not less than 20 years from the date of the ACC amendment

(subject to sale of homeownership units in accordance with the terms of

the ACC).

(k) Declaration of trust. A PHA shall execute and file for record a

Declaration of Trust as provided under the ACC to protect the rights

and interests of HUD throughout the 20-year period during which the PHA

is obligated to operate its developments in accordance with the ACC,

the Act, and HUD regulations and requirements.

(Approved by the Office of Management and Budget under control

number 2577-0157)

22. Section 968.335 would be amended by revising paragraph (a)

introductory text and paragraph (b), to read as follows:

Sec. 968.335 Conduct of modernization activities.

(a) Initiation of activities. After HUD has approved a Five-Year

Action Plan and entered into an ACC amendment or grant agreement with

the PHA for year one of the Plan, the PHA shall undertake the

modernization activities and expenditures set forth in its approved

Work Statement for year one or substitute work items from within the

approved Five-Year Action Plan, subject to the following requirements:

* * * * *

(b) Fund requisitions. To request modernization funds against the

Work Statement, the PHA shall comply with requirements prescribed by

HUD.

* * * * *

23. Section 968.340 would be amended by revising paragraphs (a) and

(b)(2); by removing paragraph (b)(3); by redesignating paragraphs

(b)(4) through (b)(7) to read paragraphs (b)(3) through (b)(6),

respectively; by revising the newly designated paragraphs (b)(4) and

(b)(6); and by adding the OMB control number to the end of the section,

to read as follows:

Sec. 968.340 PHA Performance and Evaluation Report.

(a) Submission. For any FFY in which a PHA has received assistance

under this subpart, the PHA shall submit a Performance and Evaluation

Report, in a form and at a time to be prescribed by HUD, describing its

use of assistance in accordance with the approved Five-Year Action

Plan. The PHA must make reasonable efforts to notify residents and

officials of the appropriate governing body of the availability of the

draft report, make copies available to residents in the development

office, and provide residents with at least 30 calendar days in which

to comment on the report.

(b) * * *

(2) An explanation of how the PHA has used the CGP funds to address

the needs identified in its Comprehensive Plan and to carry out the

activities identified in its approved Five-Year Action Plan, and shall

specifically address:

(i) Any funds used for emergency needs not set forth in its Five-

Year Action Plan; and

(ii) Any changes to the Annual Submission under Sec. 968.330;

* * * * *

(4) The current status of the PHA's obligations and expenditures

and specifying how the PHA is performing with respect to its

implementation schedules, and an explanation of any necessary revision

to the planned target dates;

* * * * *

(6) A resolution by the PHA Board of Commissioners approving the

Performance and Evaluation Report and containing a certification that

the PHA has made reasonable efforts to notify residents in the

development(s) and local government officials of the opportunity to

review the draft report and to comment on it before its submission to

HUD, and that copies of the report were provided to residents in the

development office, to local government officials, or furnished upon

their request.

24. Section 968.345 would be amended by revising paragraphs

(a)(1)(i), (a)(1)(ii), (a)(2)(i)(A), and (a)(3)(ii); by adding a new

paragraph (a)(3)(iii); by revising paragraphs (e)(2) and (e)(4); by

redesignating paragraph (e)(7) to read paragraph (e)(8); by adding a

new paragraph (e)(7); and by adding the OMB control number to the end

of the section, to read as follows:

Sec. 968.345 HUD review of PHA performance.

(a) * * *

(1) * * *

(i) In making this determination, HUD will review the PHA's

performance to determine whether the modernization activities

undertaken during the period under review conform substantially to the

activities specified in the approved Five-Year Action Plan. HUD will

also review a PHA's schedules which are provided with its Annual

Submission for purposes of determining whether the PHA has carried out

its modernization activities in a timely manner;

(ii) HUD will review a PHA's performance to determine whether the

activities carried out comply with the requirements of the Act,

including the requirement that work carried out meets the modernization

and energy conservation standards in Sec. 968.115, this part, and other

applicable laws and regulations. This review should also include a

review of the PHA's section 3 (of the Housing and Urban Development Act

of 1968) past performance.

(2) * * *

(i) * * *

(A) Carried out its activities under the CGP program, as well as

the CIAP, in a timely manner, taking into account the level of funding

available and whether the PHA obligates its modernization funds within

two years from the execution of the ACC amendment and expends such

modernization funds within three years of ACC amendment execution, or

such longer period if agreed to by HUD in an implementation schedule,

except in circumstances beyond the PHA's reasonable control.

* * * * *

(3) * * *

(ii) With respect to the management condition of the PHA, whether

the PHA has achieved, or is making reasonable progress towards

implementing the work items specified in its annual submission and

Five-Year Action Plan which are designed to address deficiencies

identified through PHMAP, audits, or HUD reviews; and

(iii) In determining whether the PHA has made reasonable progress,

HUD will take into account the level of funding available and whether

the PHA obligates its modernization funds within two years from the

execution of the ACC amendment and expends such modernization funds

within three years of ACC amendment execution, or such longer period if

agreed to by HUD in an implementation schedule. The PHA must

demonstrate to HUD's satisfaction that any lack of timeliness (beyond

the time periods specified in this paragraph or date specified in a HUD

approved implementation schedule) has resulted from factors beyond the

PHA's reasonable control.

* * * * *

(e) * * *

(2) Submit schedules for completing the work identified in its Work

Statements and report periodically on its progress on meeting the

schedules;

* * * * *

(4) Submit additional material in support of one or more of the

statements, resolutions, and certifications submitted as part of the

PHA's Comprehensive Plan, Five-Year Action Plan, or Performance and

Evaluation Report;

* * * * *

(7) Submit to an alternative management strategy which may involve

third-party oversight or administration of the modernization function

(see Sec. 968.315(d)); and

* * * * *

(Approved by the Office of Management and Budget under control

number 2577-0157)

Dated: March 2, 1994.

Michael B. Janis,

General Deputy Assistant Secretary for Public and Indian Housing.

[FR Doc. 94-5146 Filed 3-7-94; 8:45 am]

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