Federally Assisted Low Income Housing Drug Elimination Program

SUMMARY: This final rule implements the Assisted Housing Drug

Elimination Program, as authorized by the National Affordable Housing

Act and the Housing and Community Development Act of 1992. This program

authorizes HUD to make drug elimination grants to owners of federally

assisted low-income housing, while previously these grants were only

available for public housing agencies and Indian housing authorities.

HUD will award these grants for use in eliminating drug-related crime

and the problems associated with it.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Lessley Wiles, Office of Multifamily

Housing Management, Operations Division, Room 6176, Department of

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

20410; telephone (202) 708-2654, or (202) 708-3938 (TDD for speech- or

hearing-impaired). (These are not toll free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act Statement

The information collection requirements contained in this rule have

been approved by the Office of Management and Budget, under section

3504(h) of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520),

and assigned OMB control number 2502-0476.

I. Background

On August 9, 1994 (59 FR 40764), HUD published a proposed rule that

would implement the Assisted Housing Drug Elimination Program, as

authorized by section 581 of the National Affordable Housing Act (42

U.S.C. 11901-11909) (NAHA), and as amended by section 161 of the

Housing and Community Development Act of 1992 (Pub. L. 102-550,

approved October 18, 1992) (HCDA 1992). The preamble to the proposed

rule contains a detailed explanation of the ways in which NAHA amended

the Public Housing Drug Elimination Program, including the addition of

authorization to make grants to private, for-profit and nonprofit

owners of federally assisted low-income housing for use in eliminating

drug-related crime. Section 581 of NAHA also permits HUD to establish

other criteria, in addition to those applicable to the Public Housing

Drug Elimination Program, for the evaluation of funding applications

submitted by owners of federally assisted low-income housing.

HUD solicited public comments on the proposed rule. By the

expiration of the public comment period on October 11, 1994, HUD

received six comments. HUD carefully considered all the public comments

received, and has decided to make no changes from the proposed rule.

The following section of the preamble presents a summary of the

comments received and HUD's responses to those comments.

II. Public Comment on Proposed Rule

1. Two commenters suggested changes in the selection criteria

(Sec. 261.15(a)). One commenter suggested that HUD should specifically

target the elderly and disabled as priority populations due to their

special vulnerability. This commenter would change Sec. 261.15(a)(1) of

the rule to include the vulnerability of the populations at risk due to

the drug-related crimes, as well as the extent of the substance abuse

in the applicant's development.

Another commenter suggested that the order of the criteria should

be changed to reflect different priorities. This commenter suggested

that the first criterion should be the capability of the applicant to

carry out the plan, rather than the extent of the drug-related crime

problem in the applicant's development. The commenter explained that

this would be more effective; while ``there (are) no shortage of

serious (drug-related crime) problems, * * * there are too few able

organizations with effective plans to make the best use of the meager

resources available to combat drugs.'' According to this commenter, the

second criterion should be the quality of the plan, the third criterion

should be the extent of local participation and involvement, and the

fourth criterion should be the extent of the drug-related crime

problem.

HUD Response: In the preamble to the proposed rule, HUD

specifically invited comments on additional criteria for selecting

grant recipients. Section 581 of NAHA requires, however, that

additional criteria shall be designed only to reflect--(1) relevant

differences between the financial resources and other characteristics

of public housing authorities and owners of federally assisted low-

income housing, or (2) relevant differences between the problem of

drug-related crime in public housing and the problem of drug-related

crime in federally assisted low-income housing. The suggestions by the

commenters, while having merit, do not reflect these differences as

outlined in the statute.

With regard to the priority of the criteria, section 5125(b) of the

Anti-Drug Abuse Act of 1988 (42 U.S.C. 11904(b)), which is the

authorizing statute for this drug elimination program, specifies the

primary selection criteria for grants under this drug elimination

program. This rule reflects the criteria in the statute in the order

stated.

2. One commenter objected to the fact that alcohol abuse programs

will not be eligible for funding under this drug elimination program,

due to the specific exclusion of alcohol from the definition of

controlled substance in Sec. 261.5. This commenter asserted that

``alcohol is increasingly the prime reason for abuse and other domestic

problems encountered in housing developments,'' and that a drug

elimination program cannot be effective unless it addresses the problem

of alcohol abuse.

HUD Response: HUD cannot include alcohol in the definition of

controlled substance in Sec. 261.5 because this definition is

statutorily prescribed. Section 5126(1) of the Anti-Drug Abuse Act of

1988 (42 U.S.C. 11905(1)) incorporates the definition of controlled

substance as provided in section 102 of the Controlled Substances Act

(21 U.S.C. 802). This definition specifically excludes alcohol.

Therefore, alcohol abuse programs are not eligible for funding under

this drug elimination program.

3. One commenter stated that HUD should not encourage voluntary

tenant patrols as an eligible activity (Sec. 261.10(b)(5)), because

they pose an unacceptable risk of harm to residents where drug-related

crime is at very serious levels. This commenter explained that while

tenant patrols may be appropriate in areas with mild crime problems,

these areas are less likely to receive grant awards under this program.

HUD Response: HUD does not encourage the use of tenant patrols. The

inclusion of tenant patrols as an eligible activity, however, is

statutorily prescribed in section 5124(5) of the Anti-Drug Abuse Act of

1988 (42 U.S.C. 11903(5)). [[Page 5281]]

4. One commenter proposed that, in keeping with HUD's comprehensive

approach to solving drug-related crime problems, HUD should include the

provision of new community space as an eligible activity in

Sec. 261.10(b) of the rule. This commenter suggested that to be

eligible for funding, the applicant would have to meet the following

conditions: (1) Absence of space on-site; (2) Absence of alternative

space off-site; (3) HUD concurs to either the creation of new space or

taking a unit off-line for this purpose; (4) The space must be provided

in turn-key condition within three months of the first drawdown of

funds; and (5) The applicant must specify a social program, whether

existing or fundable through the grant, to accompany the request for

new space. This commenter noted that previous grants have been used to

refurbish existing community space.

HUD Response: Given the costs of construction and the limited

amount of funds available under this drug elimination program, HUD is

not encouraging the construction of new buildings. Rental or leasing of

space near the property, where activities such as classes and

counseling sessions can take place, would be a preferred option.

However, HUD has permitted the retrofitting of existing available space

as an eligible physical improvement, provided no units are taken off-

line. HUD also permitted the siting of a surplussed mobile classroom to

provide the needed space, since this involved minimal cost.

5. One commenter raised two concerns about the selection process

for the drug elimination grant proposals. First, the commenter asserted

that proposals are not judged on the basis of need, but on the quantity

of information provided by the applicant. Specifically, this commenter

asserted that applications from areas of high drug-related crime have

lost points for ``lack of crime statistics.'' The commenter stated that

the lack of such data should not be a hindrance in determining

eligibility for a grant, and that other support documentation should be

considered if such data is not available.

Second, this commenter expressed concern about unintentional

geographic bias in awarding grants under drug elimination programs. The

commenter suggested that the panel reviewing the grant applications

should consist of individuals from geographically diverse areas in

order to avoid this bias.

HUD Response: In response to the first concern, there have been

allegations in the past that HUD awarded drug grants to public housing

projects with no evidence of drug-related criminal activity. Therefore,

obtaining specific statistics on the extent of this activity is

necessary to assure that the problems to be addressed by this program

do, in fact, exist.

In response to the second concern about geographical bias, local

HUD offices will review and score applications for the Federal fiscal

year (FY) 1995 drug elimination grants. The funding, based on scores

received, will take place at geographically disbursed sites. This

should reduce the possibility of bias in project funding selections.

6. Two commenters expressed concern with the way the rule would

apply to an applicant seeking funding for a multi-year project. One

commenter encouraged HUD to streamline the application process for

applicants seeking funds for a continuing program activity. The rule

provides that applicants for grants to continue current program

activities may apply on the same basis as other applicants

(Sec. 261.10(b)(7)). This commenter remarked that this process is

burdensome, and that ``HUD offices will effectively be discouraged from

awarding continuation funds.'' In the alternative, this commenter

suggested that HUD make funding for subsequent years conditional upon:

(1) the property's first year score being sufficient to earn an award

in the following year; and (2) confirmation from the HUD drug grant

coordinator that the property is in compliance with the requirements of

previously received grant funds.

The other commenter suggested changing the grant term provisions in

Sec. 261.26(b) to allow for initial one-year terms, with second- and

third-year extensions. This would allow the grantee to undertake

``ambitious plans without the additional concern of searching for

additional funding'' early in the program. This commenter further

argued that a longer term would encourage outside funding, since the

potential funder would have more of a performance record on which to

base its determination.

HUD Response: HUD's Office of Housing has no assurance that it will

receive funds for more than one year. Consequently, the program can

only permit funding for one year. In addition, due to the limitation on

the amount of funds available in any given year, HUD's goal is to

spread the funds as far as possible and give all eligible applicants a

fair chance of receiving funding. Therefore, each grant application

must stand alone, without any assumption of additional funding, as both

commenters suggested.

7. One commenter argued that the maximum grant amount would have to

be increased. This commenter remarked that while security personnel are

eligible for funding under this drug elimination program, the only

effective approach would be to hire off-duty police. According to the

commenter, an off-duty police patrol would cost approximately $200,000

per year (two patrol officers at $15 per hour; two 8-hour shifts per

weekday, three 8-hour shifts on weekends), which may exceed the maximum

grant amount.

HUD Response: HUD does not encourage hiring off-duty police;

rather, it hopes to find other solutions to drug-related criminal

problems that are more cost-effective. As mentioned above, the limited

amount of money available forces HUD and the applicants to seek maximum

benefit from limited funds.

III. Other Matters

Environmental Impact

At the time of the development of the proposed rule, a Finding of

No Significant Impact with respect to the environment was made in

accordance with HUD's regulations at 24 CFR part 50, which implement

section 102(2)(C) of the National Environmental Policy Act of 1969 (42

U.S.C. 4332). The Finding of No Significant Impact remains applicable

to this final rule and is available for public inspection between 7:30

a.m. and 5:30 p.m. weekdays 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 rule before publication and by

approving it certifies that this rule does not have a significant

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

provides grants to eliminate drug-related crime in federally assisted

low-income housing. Although small entities in the form of owners of

federally assisted low-income housing could participate in the program,

the rule is not intended to and would not have a significant economic

impact on them.

Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule has the

potential for a positive, although indirect, impact on family

formation, maintenance, and general well-being. [[Page 5282]] The rule

implements a program that encourages owners of federally assisted low-

income housing to develop a plan for addressing the problem of drug-

related crime, and makes available grants to carry out this plan. As

such, the program is intended to improve the quality of life of

federally assisted low-income housing residents, including families, by

reducing the incidence of drug-related crime. Accordingly, since any

impact on the family from the rule will be positive, no further review

is considered necessary.

Federalism

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

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

contained in this rule will not have substantial direct effects on

States or their political subdivisions, or the relationship between the

Federal government and the States, or on the distribution of power and

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

the rule is not subject to review under the Order. The program helps

combat serious drug-related crime problems in federally assisted low-

income housing. The rule generally tracks the statute and involves

little implementing discretion.

Regulatory Agenda

The rule was listed as Item No. 1765 in HUD's Semiannual Agenda of

Regulations published on November 14, 1994 (59 FR 57632, 57634) in

accordance with Executive Order 12866 and the Regulatory Flexibility

Act.

Catalog of Federal Domestic Assistance

The program number for this Assisted Housing Drug Elimination

Program is 14.854.

List of Subjects in 24 CFR Part 261

Drug abuse, Drug traffic control, Grant programs--housing and

community development, Grant programs--low and moderate income housing,

Reporting and recordkeeping requirements.

Accordingly, part 261, consisting of Secs. 261.1 through 261.29, is

added to 24 CFR chapter II, as follows:

PART 261--ASSISTED HOUSING DRUG ELIMINATION PROGRAM

Subpart A--General

Sec.

261.1 Purpose and scope.

261.5 Definitions.

Subpart B--Use of Grant Funds

261.10 Applicants and activities.

Subpart C--Application and Selection

261.15 Application selection and requirements.

261.18 Resident comments on grant application.

Subpart D--Grant Administration

261.26 Grant administration.

261.28 Grantee reports.

261.29 Other federal requirements.

Authority: 42 U.S.C. 3535(d) and 11901 et seq.

Subpart A--General

Sec. 261.1 Purpose and scope.

The purposes of the Assisted Housing Drug Elimination Program are

to:

(a) Eliminate drug-related crime and the problems associated with

it in and around the premises of federally assisted low-income housing;

(b) Encourage owners of federally assisted low-income housing to

develop a plan that includes initiatives that can be sustained over a

period of several years for addressing drug-related crime and the

problems associated with it in and around the premises of assisted

housing proposed for funding under this part; and

(c) Make available federal grants to help owners of federally

assisted low-income housing carry out their plans.

Sec. 261.5 Definitions.

Act means The United States Housing Act of 1937 (42 U.S.C. 1437 et

seq.).

Chief executive officer of a State or a unit of general local

government means the elected official, or the legally designated

official, who has the primary responsibility for the conduct of that

entity's governmental affairs. Examples of the ``chief executive

officer'' of a unit of general local government are: The elected mayor

of a municipality; the elected county executive of a county; the

chairperson of a county commission or board in a county that has no

elected county executive; or the official designated pursuant to law by

the governing body of the unit of general local government. The chief

executive officer of an Indian tribe is the tribal governing official.

Controlled substance means a drug or other substance or immediate

precursor included in schedule I, II, III, IV, or V of section 102 of

the Controlled Substances Act (21 U.S.C. 802). The term does not

include distilled spirits, wine, malt beverages, or tobacco as those

terms are defined in Subtitle E of the Internal Revenue Code of 1954.

Drug intervention means a process to identify assisted housing

resident drug users and assist them in modifying their behavior and/or

refer them to drug treatment to eliminate drug abuse.

Drug prevention means a process to provide goods and services

designed to alter factors, including activities, environmental

influences, risks, and expectations, that lead to drug abuse.

Drug-related crime means the illegal manufacture, sale,

distribution, use, or possession with intent to manufacture, sell,

distribute, or use, a controlled substance.

Drug treatment means a program for the residents of an applicant's

development that strives to end drug abuse and to eliminate its

negative effects through rehabilitation and relapse prevention.

Federally assisted low-income housing (includes the term ``assisted

housing'' as used in this rule) means housing assisted under:

(1) Section 221(d)(3), section 221(d)(4) or 236 of the National

Housing Act (12 U.S.C. 1701 et seq.) (Note: However, section 221(d)(4)

and section 221(d)(3) market rate projects without project-based

assistance contracts are not considered federally assisted low-income

housing. Therefore, section 221(d)(4) and section 221(d)(3) market rate

projects with tenant-based assistance contracts are not considered

federally assisted low-income housing and are not eligible for

funding.);

(2) Section 101 of the Housing and Urban Development Act of 1965

(12 U.S.C. 1701s); or

(3) Section 8 of the United States Housing Act of 1937 (42 U.S.C.

1437f note) (not including tenant-based assistance).

Governmental jurisdiction means the unit of general local

government, State, or area of operation of an Indian tribe in which the

housing development administered by the applicant is located.

HUD or Department means the United States Department of Housing and

Urban Development.

In and around means within, or adjacent to, the physical boundaries

of a housing development.

Local law enforcement agency means a police department, sheriff's

office, or other entity of the governmental jurisdiction that has law

enforcement responsibilities for the community at large, including the

housing developments owned by the applicant.

Problems associated with drug-related crime means the negative

physical, social, educational and economic impact of drug-related crime

on assisted housing residents, and the deterioration of the assisted

housing environment because of drug-related crime. [[Page 5283]]

Resident Organization (RO) means an incorporated or unincorporated

nonprofit organization or association that meets each of the following

requirements:

(1) It must be representative of the residents it purports to

represent;

(2) It may represent residents in more than one housing

development, but it must fairly represent residents from each

development that it represents;

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

specific officers on a regular basis (but at least once every three

years); and

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

voting membership of the board must consist of residents of the

development or developments that the resident organization represents.

Single State Agency means an agency responsible for licensing and

monitoring State or tribal drug abuse programs.

State means any of the several States of the United States, the

District of Columbia, the Commonwealth of Puerto Rico, any territory or

possession of the United States, or any agency or instrumentality of a

State exclusive of local governments. The term does not include any

public or Indian housing agency under the United States Housing Act of

1937.

Unit of general local government means any city, county, town,

municipality, township, parish, village, local public authority or

other general purpose political subdivision of a State.

Subpart B--Use of Grant Funds

Sec. 261.10 Applicants and activities.

Applicants and activities eligible for funding under the Assisted

Housing Drug Elimination Program are listed in this section. The

applicants and activities eligible under any particular funding round

may be limited in a Notice of Funding Availability (NOFA) published in

the Federal Register. Additional details concerning eligible and

ineligible applicants and activities will also be published in the

NOFAs for this program.

(a) Eligible applicants. The applicant must be the owner of a

federally assisted low-income housing project under:

(1) Section 221(d)(3), section 221(d)(4) or 236 of the National

Housing Act (Note: However, section 221(d)(4) and section 221(d)(3)

market rate projects without project-based assistance contracts are not

considered federally assisted low-income housing. Therefore, section

221(d)(4) and section 221(d)(3) market rate projects with tenant-based

assistance contracts are not considered federally assisted low-income

housing and are not eligible for funding.);

(2) Section 101 of the Housing and Urban Development Act of 1965;

or

(3) Section 8 of the United States Housing Act of 1937 (not

including tenant-based assistance).

(b) Eligible activities. An application for funding under this

program may be for one or more of the following eligible activities, as

further specified in program NOFAs:

(1) Employment of security personnel.

(2) Reimbursement of local law enforcement agencies for additional

security and protective services.

(3) Physical improvements to enhance security.

(4) Employment of one or more individuals:

(i) To investigate drug-related crime, and the problems associated

with it, on or about the real property comprising any federally

assisted low-income housing project; and

(ii) To provide evidence relating to such crime in any

administrative or judicial proceeding.

(5) The provision of training, communications equipment, and other

related equipment for use by voluntary tenant patrols acting in

cooperation with local law enforcement officials.

(6) Drug-abuse prevention, intervention and treatment programs to

reduce the use of drugs.

(7) Continuation of current program activities. Current or previous

Assisted Housing Drug Elimination Program grant recipients who are

eligible under Sec. 261.10(a) of this subpart may apply, on the same

basis as other applicants, for grants to continue their grant

activities or implement other program activities. The Department will

evaluate an applicant's performance under any previous Drug Elimination

Program grants within the past five years. Subject to evaluation and

review are the applicant's financial and program performance; reporting

and special condition compliance; accomplishment of stated goals and

objectives under the previous grant; and program adjustments made in

response to previous ineffective performance. If the evaluation

discloses a pattern under past grants of ineffective performances with

no corrective measures attempted, it will result in a deduction of

points from the current application. Since this is a competitive

program, HUD does not guarantee continued funding of any previously

funded Drug Elimination Program grant.

Subpart C--Application and Selection

Sec. 261.15 Application selection and requirements.

(a) Selection criteria. HUD will review each application that it

determines meets the requirements of this part and assign points in

accordance with the selection criteria. The number of points that an

application receives will depend on the extent to which the application

is responsive to the information requested in Notices of Funding

Availability (NOFAs) published for this program. Each application

submitted for a grant under this part will be evaluated on the basis of

the following selection criteria:

(1) First criterion: The extent of the drug-related crime problem

in the applicant's development or developments proposed for assistance.

(2) Second criterion: The quality of the plan to address the crime

problem in the developments proposed for assistance, including the

extent to which the plan includes initiatives that can be sustained

over a period of several years.

(3) Third criterion: The capability of the applicant to carry out

the plan.

(4) Fourth criterion: The extent to which tenants, the local

government and the local community support and participate in the

design and implementation of the activities proposed to be funded under

the application.

(b) Plan requirement. Each application must include a plan for

addressing the problem of drug-related crime and the problems

associated with drug-related crime on the premises of the housing for

which the application is being submitted. For applications that cover

more than one housing development, the plan does not have to address

each development separately if the same activities will apply to each

development. Only where program activities will differ from one

development to another must the plan address each development

separately.

(c) Notice of Funding Availability. HUD will publish Notices of

Funding Availability (NOFAs) in the Federal Register, as appropriate,

to inform the public of the availability of grant amounts under this

part. NOFAs will provide specific guidance with respect to the grant

process, including the deadlines for the submission of grant

applications; the limits (if any) on maximum grant amounts; the

eligible applicants and activities; the information that must be

submitted to permit HUD to score each of the selection criteria; the

maximum number of points to be awarded for each [[Page 5284]] selection

criterion; the contents of the plan for addressing the problem of drug-

related crime that must be included with the application; the listing

of any certifications and assurances that must be submitted with the

application; and the process for ranking and selecting applicants.

NOFAs will also include any additional information, factors, and

requirements that the Department has determined to be necessary and

appropriate to provide for the implementation and administration of the

program under this part.

(Approved by the Office of Management and Budget under control

number 2502-0476.)

(d) Environmental review. Grants under this part are categorically

excluded from review under the National Environmental Policy Act of

1969 (NEPA)(42 U.S.C. 4321), in accordance with 24 CFR 50.20(p).

However, prior to an award of grant funds under this part, HUD will

perform an environmental review to the extent required by HUD's

environmental regulations at 24 CFR part 50, including the applicable

related authorities at 24 CFR 50.4.

Sec. 261.18 Resident comments on grant application.

The applicant must provide the residents of developments proposed

for funding under this part, as well as any resident organizations that

represent those residents, with a reasonable opportunity to comment on

its application for funding under this program. The applicant must give

these comments careful consideration in developing its plan and

application as well as in the implementation of funded programs. Copies

of all written comments submitted must be maintained by the grantee for

three years.

Subpart D--Grant Administration

Sec. 261.26 Grant administration.

(a) General. Each grantee is responsible for ensuring that grant

funds are administered in accordance with the requirements of this

part, any Notice of Funding Availability (NOFA) issued for this

program, 24 CFR part 85, applicable laws and regulations, applicable

OMB circulars, HUD fiscal and audit controls, grant agreements, grant

special conditions, the grantee's approved budget (SF-424A), budget

narrative, plan, and activity timetable.

(b) Grant term extensions.--(1) Grant term. Terms of the grant

agreement may not exceed 12 months, unless an extension is approved by

the local HUD Office. The maximum extension allowable for any grant is

6 months. Any funds not expended at the end of the grant term shall be

remitted to HUD.

(2) Extension. Grantees may be granted an extension of the grant

term in response to a written request for an extension stating the need

for the extension and indicating the additional time required.

(3) Receipt. The request must be received by the local HUD Office

before the termination of the grant, and requires approval by the local

HUD Office with jurisdiction over the grantee.

(4) Term. The maximum extension allowable for any program period is

6 months. Requests for retroactive extension of program periods will

not be considered. Only one extension will be permitted. Extensions

will only be considered if the extension criteria of paragraph (b)(5)

of this section are met by the grantee at the time the request for the

extension of the deadline is submitted for approval.

(5) Extension criteria. The following criteria must be met by the

grantee when submitting a request to extend the expenditure deadline

for a program or set of programs.

(i) Financial status reports. There must be on file with the local

HUD Office current and acceptable Financial Status Reports, SF-269As.

(ii) Grant agreement special conditions. All grant agreement

special conditions must be satisfied except those conditions that must

be fulfilled in the remaining period of the grant. This also includes

the performance and resolution of audit findings in a timely manner.

(iii) Justification. A narrative justification must be submitted

with the program extension request. Complete details must be provided,

including the circumstances which require the proposed extension, and

explanation of the impact of denying the request.

(6) HUD action. The local HUD Office will attempt to take action on

an extension request within 15 working days after receipt of the

request.

(c) Duplication of funds. To prevent duplicate funding of any

activity, the grantee must establish controls to assure that an

activity or program that is funded by other HUD programs, or programs

of other Federal agencies, shall not also be funded by the Drug

Elimination Program. The grantee must establish an auditable system to

provide adequate accountability for funds that it has been awarded. The

grantee is responsible for ensuring that there is no duplication of

funds.

(d) Insurance. Each grantee is required to obtain adequate

insurance coverage to protect itself against any potential liability

arising out of the eligible activities under this part. In particular,

applicants are required to assess their potential liability arising out

of the employment or contracting of security personnel, law enforcement

personnel, investigators, and drug treatment providers, and the

establishment of voluntary tenant patrols; to evaluate the

qualifications and training of the individuals or firms undertaking

these functions; and to consider any limitations on liability under

State or local law. Grantees are required to obtain liability insurance

to protect the members of the voluntary tenant patrol against potential

liability as a result of the patrol's activities under

Sec. 261.10(b)(5). Voluntary tenant patrol liability insurance costs

are eligible program expenses. Subgrantees are required to obtain their

own liability insurance.

(e) Failure to implement program. If the grant plan, approved

budget and timetable, as described in the approved application, are not

operational within 60 days of the grant agreement date, the grantee

must report by letter to the local HUD Office the steps being taken to

initiate the plan and timetable, the reason for the delay, and the

expected starting date. Any timetable revisions which resulted from the

delay must be included. The local HUD Office will determine if the

delay is acceptable, approve/disapprove the revised plan and timetable,

and take any additional appropriate action.

(f) Sanctions. (1) HUD may impose sanctions if the grantee:

(i) Is not complying with the requirements of this part or of other

applicable Federal law;

(ii) Fails to make satisfactory progress toward its drug

elimination goals, as specified in its plan and as reflected in its

performance and financial status reports under Sec. 261.28;

(iii) Does not establish procedures that will minimize the time

elapsing between drawdowns and disbursements;

(iv) Does not adhere to grant agreement requirements or special

conditions;

(v) Proposes substantial plan changes to the extent that, if

originally submitted, would have resulted in the application not being

selected for funding;

(vi) Engages in the improper award or administration of grant

subcontracts;

(vii) Does not submit reports; or

(viii) Files a false certification.

(2) HUD may impose the following sanctions:

(i) Temporarily withhold cash payments pending correction of the

deficiency by the grantee or subgrantee; [[Page 5285]]

(ii) Disallow all or part of the cost of the activity or action not

in compliance;

(iii) Wholly or partly suspend or terminate the current award for

the grantee's or subgrantee's program;

(iv) Require that some or all of the grant amounts be remitted to

HUD;

(v) Condition a future grant and elect not to provide future grant

funds to the grantee until appropriate actions are taken to ensure

compliance;

(vi) Withhold further awards for the program; or

(vii) Take other remedies that may be legally available.

(Approved by the Office of Management and Budget under control

number 2502-0476).

Sec. 261.28 Grantee reports.

Grantees are responsible for managing the day-to-day operations of

grant and subgrant supported activities. Grantees must monitor grant

and subgrant supported activities to assure compliance with applicable

Federal requirements and that performance goals are being achieved.

Grantee monitoring must cover each program, function, or activity of

the grant.

(a) Final performance report--(1) Evaluation. Grantees are required

to provide the local HUD Office with a final cumulative performance

report that evaluates the grantee's overall performance against its

plan. This report shall include in summary form (but is not limited to)

the following: Any change or lack of change in crime statistics or

other indicators drawn from the applicant's plan assessment (such as

vandalism, etc.) and an explanation of any difference; successful

completion of any of the strategy components identified in the

applicant's plan; a discussion of any problems encountered in

implementing the plan and how they were addressed; an evaluation of

whether the rate of progress meets expectations; a discussion of the

grantee's efforts in encouraging resident participation; and a

description of any other programs that may have been initiated,

expanded or deleted as a result of the plan, with an identification of

the resources and the number of people involved in the programs and

their relation to the plan.

(2) Reporting period. The final performance report shall cover the

period from the date of the grant agreement to the termination date of

the grant agreement. The report is due to the local HUD Office within

90 days after termination of the grant agreement.

(b) Semi-annual financial status reporting requirements--(1) Form.

The grantee shall provide a semi-annual financial status report. The

grantee shall use the SF-269A, Financial Status Report--Long Form, to

report the status of funds for nonconstruction programs. The grantee

shall use SF-269A, Block 12, ``Remarks,'' to report on the status of

programs, functions, or activities within the program.

(2) Reporting period. Semi-annual financial status reports (SF-

269A) covering the first 180 days of funded activities must be

submitted to the local HUD Office between 190 and 210 days after the

date of the grant agreement. If the SF-269A is not received on or

before the due date (210 days after the date of the grant agreement) by

the local HUD Office, grant funds will not be advanced until the

reports are received.

(c) Final financial status report (SF-269A)--(1) Cumulative

summary. The final report will be a cumulative summary of expenditures

to date and must indicate the exact balance of unexpended funds. The

grantee must remit all Drug Elimination Program funds (including any

unexpended funds) owed to HUD within 90 days after the termination of

the grant agreement.

(2) Reporting period. The final financial status report shall cover

the period from the date of the grant agreement to the termination date

of the grant agreement. The report is due to the local HUD Office

within 90 days after the termination of the grant agreement.

(d) Report submission. The grantee shall submit all required

reports to the local HUD Office.

(Approved by the Office of Management and Budget under control

number 2502-0476).

Sec. 261.29 Other federal requirements.

Use of grant funds requires compliance with the following

additional Federal requirements:

(a) Labor standards. (1) Where grant funds are used to undertake

physical improvements to increase security under Sec. 261.10(b)(3), the

following labor standards apply:

(i) The grantee and its contractors and subcontractors must pay the

following prevailing wage rates, and must comply with all related

rules, regulations and requirements:

(A) For laborers and mechanics employed in the program, the wage

rate determined by the Secretary of Labor pursuant to the Davis-Bacon

Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with

respect to such trades;

(B) For laborers and mechanics employed in carrying out non-routine

maintenance in the program, the HUD-determined prevailing wage rate. As

used in this paragraph (a), non-routine maintenance means work items

that ordinarily would be performed on a regular basis in the course of

upkeep of a property, but have become substantial in scope because they

have been put off, and that involve expenditures that would otherwise

materially distort the level trend of maintenance expenses. Non-routine

maintenance may include replacement of equipment and materials rendered

unsatisfactory because of normal wear and tear by items of

substantially the same kind. Work that constitutes reconstruction, a

substantial improvement in the quality or kind of original equipment

and materials, or remodeling that alters the nature or type of housing

units is not non-routine maintenance.

(ii) The employment of laborers and mechanics is subject to the

provisions of the Contract Work Hours and Safety Standards Act (40

U.S.C. 327-333).

(2) The provisions of paragraph (a)(1) of this section shall not

apply to labor contributed under the following circumstances:

(i) Upon the request of any resident organization, HUD may, subject

to applicable collective bargaining agreements, permit residents to

volunteer a portion of their labor;

(ii) An individual may volunteer to perform services if:

(A) The individual does not receive compensation for the voluntary

services, or is paid expenses, reasonable benefits, or a nominal fee

for voluntary services; and

(B) Is not otherwise employed at any time in the work subject to

paragraph (a)(1)(i) (A) or (B) of this section.

(b) Nondiscrimination and equal opportunity. The following

nondiscrimination and equal opportunity requirements apply to this

program:

(1) The requirements of The Fair Housing Act (42 U.S.C. 3601-19)

and implementing regulations issued at 24 CFR part 100; Executive Order

11063 (Equal Opportunity in Housing) and implementing regulations at 24

CFR part 107; and Title VI of the Civil Rights Act of 1964 (42 U.S.C.

2000d-2000d-4) (Nondiscrimination in Federally Assisted Programs) and

implementing regulations issued at 24 CFR part 1;

(2) The prohibitions against discrimination on the basis of age

under the Age Discrimination Act of 1975 (42 U.S.C. 6101-07) and

implementing regulations at 24 CFR part 146, and the prohibitions

against discrimination against handicapped individuals under section

504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing

regulations at 24 CFR part 8;

(3) The requirements of Executive Order 11246 (Equal Employment

Opportunity) and the regulations issued under the Order at 41 CFR

chapter 60; [[Page 5286]]

(4) The requirements of section 3 of the Housing and Urban

Development Act of 1968 (12 U.S.C. 1701u) (Employment Opportunities for

Lower Income Persons in Connection with Assisted Projects); and

implementing regulations at 24 CFR part 135; and

(5) The requirements of Executive Orders 11625, 12432, and 12138.

Consistent with HUD's responsibilities under these Orders, recipients

must make efforts to encourage the use of minority and women's business

enterprises in connection with funded activities.

(c) Use of debarred, suspended, or ineligible contractors. Use of

grant funds under this program requires compliance with the provisions

of 24 CFR part 24 relating to the employment, engagement of services,

awarding of contracts, or funding of any contractors or subcontractors

during any period of debarment, suspension, or placement in

ineligibility status.

(d) Flood insurance. Grants will not be awarded for proposed

activities that involve acquisition, construction, reconstruction,

repair, or improvement of a building or mobile home located in an area

that has been identified by the Federal Emergency Management Agency

(FEMA) as having special flood hazards unless:

(1) The community in which the area is situated is participating in

the National Flood Insurance Program in accordance with 44 CFR parts

59-79; or

(2) Less than a year has passed since FEMA notification to the

community regarding such hazards; and

(3) Flood insurance on the structure is obtained in accordance with

section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C.

4001).

(e) Lead-based paint. The provisions of section 302 of the Lead-

Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846) and

implementing regulations at 24 CFR part 965, subpart H (51 FR 27789-

27791, August 1, 1986) apply to activities under this program as set

out below. This section is promulgated pursuant to the authority

granted in 24 CFR 35.24(b)(4) and supersedes, with respect to all

housing to which it applies, the requirements (not including

definitions) prescribed by subpart C of 24 CFR part 35.

(1) Applicability. The provisions of this section shall apply to

all housing constructed or substantially rehabilitated before January

1, 1978, and for which assistance under this part is being used for

physical improvements to enhance security under Sec. 261.10(b)(3).

(2) Definitions. The term applicable surfaces means all intact and

nonintact interior and exterior painted surfaces of a residential

structure.

(3) Exceptions. The following activities are not covered by this

section:

(i) Installation of security devices;

(ii) Other similar types of single-purpose programs that do not

involve physical repairs or remodeling of applicable surfaces of

residential structures; or

(iii) Any non-single purpose rehabilitation that does not involve

applicable surfaces and that does not exceed $3,000 per unit.

(f) Conflicts of interest. No person, as described in paragraphs

(f)(1) and (2) of this section, may obtain a personal or financial

interest or benefit from an activity funded under this program, or have

an interest in any contract, subcontract, or agreement with respect

thereto, or the proceeds thereunder, either for him or herself or for

those with whom he or she has family or business ties, during his or

her tenure, or for one year thereafter:

(1) Who is an employee, agent, consultant, officer, or elected or

appointed official of the grantee that receives assistance under the

program and who exercises or has exercised any functions or

responsibilities with respect to assisted activities; or

(2) Who is in a position to participate in a decision making

process or gain inside information with regard to such activities.

(g) Drug Free Workplace Act of 1988. The requirements of the Drug-

Free Workplace Act of 1988 at 24 CFR part 24, subpart F apply to this

program.

(h) Anti-lobbying provisions under section 319. The use of funds

under this part is subject to the disclosure requirements and

prohibitions of section 319 of the Department of the Interior and

Related Agencies Appropriations Act for Fiscal Year 1990 (31 U.S.C.

1352), and implementing regulations at 24 CFR part 87. These

authorities prohibit recipients and subrecipients of Federal contracts,

grants, cooperative agreements, 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

prohibition also covers the awarding of contracts, grants, cooperative

agreements, or loans unless the recipient has made an acceptable

certification regarding lobbying. Under 24 CFR part 87, applicants,

recipients, and subrecipients of assistance exceeding $100,000 must

certify that no Federal funds have been or will be spent on lobbying

activities in connection with the assistance. However, since grantees

sometimes may expect to receive additional grant funds through

reallocations, all potential grantees are required to submit the

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

exceeds $100,000. The law provides substantial monetary penalties for

failure to file the required certification or disclosure.

(i) Intergovernmental review. The requirements of Executive Order

12372 and the regulations issued under the order at 24 CFR part 52, to

the extent provided by Federal Register notice in accordance with 24

CFR 52.3 apply to this program.

Dated: January 19, 1995.

Nicolas P. Retsinas,

Assistant Secretary for Housing--Federal Housing Commissioner.

[FR Doc. 95-1932 Filed 1-25-95; 8:45 am]

BILLING CODE 4210-27-P