Rural Technology and Cooperative Development Grants

[Federal Register Volume 61, Number 23 (Friday, February 2, 1996)]

[Rules and Regulations]

[Pages 3779-3787]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 96-1578]

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Rules and Regulations

Federal Register

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having general applicability and legal effect, most of which are keyed

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Federal Register / Vol. 61, No. 23 / Friday, February 2, 1996 / Rules

and Regulations

[[Page 3779]]

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business--Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1901, 1940, 1951, and 2003

Rural Business--Cooperative Service

Rural Utilities Service

7 CFR Chapter XLII and Part 4284

RIN 0570-AA02

Rural Technology and Cooperative Development Grants

AGENCY: Rural Housing Service, Rural Business-Cooperative Service,

Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) revises its

regulations for Rural Technology and Cooperative Development Grants

(RTCDG) and amends other regulations utilized by RBS in administering

its grant programs. This action is necessary to comply with legislation

which authorizes grants for establishing and operating centers for

rural technology or cooperative development. The intended effect of

this action is to implement this grant program.

EFFECTIVE DATE: February 2, 1996.

FOR FURTHER INFORMATION CONTACT: Joseph R. Binder, Director, Specialty

Lenders Division, Rural Business-Cooperative Service, US Department of

Agriculture, Room 2245, South Agriculture Building, 14th and

Independence Ave. SW, Washington, D.C. 20250. Telephone (202) 720-1400.

SUPPLEMENTARY INFORMATION:

Classification

We are issuing this final rule in conformance with Executive Order

12866, and the Office of Management and Budget has determined that it

is not a ``significant regulatory action.''

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940,

subpart G, ``Environmental Program.'' RBS has determined that this

action does not constitute a major federal action significantly

affecting the quality of the human environment, and in accordance with

the National Environmental Policy Act of 1969, Pub. L. 91-190, an

Environmental Impact Statement is not required.

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. In accordance with this rule: (1) all state and

local laws and regulations that are in conflict with this rule will be

preempted; (2) no retroactive effect will be given to this rule and;

(3) administrative proceedings in accordance with the regulations of

the Agency at 7 CFR, part 1900, subpart B, or those regulations

published by the Department of Agriculture to implement the provisions

of the National Appeals Division as mandated by the Department of

Agriculture Reorganization Act of 1994, whichever is applicable, must

be exhausted before bringing suit in court challenging action taken

under this rule unless those regulations specifically allow bringing

suit at an earlier time.

Intergovernmental Review

This program is listed in the Catalog of Federal Domestic

Assistance under number 10.771 and is subject to the provisions of

Executive Order 12372 which requires intergovernmental consultation

with state and local officials. RBS has conducted intergovernmental

consultation in the manner delineated in FmHA Instruction 1940-J.

National Performance Review

This regulatory action is being taken as part of the National

Performance Review program to eliminate unnecessary regulations and

improve those that remain in force.

Unfunded Mandate Reform Act of 1995

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.

104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. Under section 202 of the UMRA, RBS

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with ``Federal mandates'' that

may result in expenditures to State, local, or tribal governments, in

the aggregate, or to the private sector, of $100 million or more in any

one year. When such a statement is needed for a rule, section 205 of

the UMRA generally requires RBS to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, more

cost-effective or least burdensome alternative that achieves the

objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, and tribal

governments or the private sector. Thus today's rule is not subject to

the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

The information collection and record keeping requirements

contained in these regulations were previously approved by the Office

of Management and Budget (OMB) under the provisions of 44 U.S. C.

Chapter 35 and have been assigned OMB control numbers 0575-0018, 0575-

0066, and 0570-0006, in accordance with the Paperwork Reduction Act of

1980. This final rule does not impose any new information or record

keeping requirements from those approved by OMB.

Background

The RTCDG program was established by interim rule on August 12,

1994 (59 Fed. Reg. 41386-98). The public comment period ended October

11, 1994. The RTCDG program is authorized by section 310B(f) through

(h) of the Consolidated Farm and Rural Development Act (7 U.S.C.

Sec. 1932 Act). The primary objective of the program is to improve the

economic condition of rural areas. The RTCDG program will achieve this

objective by supporting the creation or enhancement of institutions

including cooperatives capable of

[[Page 3780]]

promoting the development and commercialization of new services,

products, processes, and enterprises. The program is administered

through Rural Economic and Community Development (RECD) State Offices

acting on behalf of RBS. RBS, formerly known as the Rural Business and

Cooperative Development Service, is the successor of the Rural

Development Administration as to the RTCDG program pursuant to the

Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354).

Discussion of Public Comments

A total of 14 commenters offered comments to the interim rule. The

commenters represented the federal agencies, Arkansas Enterprise

Groups, National Rural Cooperative Development Task Force, New York

Department of City & Regional Planning, Winrock International in

Arkansas, Southwest Grain of North Dakota, The Maine Ambulatory Care

Coalition, and The North Dakota Associations of Rural Electric and

Telephone Cooperatives.

Several respondents objected to the kinds of demographic data

required because they believe it was not available, did not accurately

represent, or only partially represented the distressed economic

conditions of rural areas. The Agency agrees and, therefore, amends the

regulation to allow applicants to use their choice of data as long as

they reflect the intent of serving economically distressed communities

and the data are from established official independent sources. This

change will give applicants flexibility to use available data that best

describe the conditions impacted by their proposal. The Agency,

however, still will give preference in selecting those projects

demonstrating their ability to effectively serve rural areas with few

rural industries and agribusinesses, high levels of unemployment or

underemployment, high rates of outmigration of people, businesses, and

industries, or low levels of per capita income. This preferential

treatment is required by Conact Sec. 310B (f) (3).

Three respondents objected to the use of the terms, ``industry''

and ``agribusiness'' because there were no definitions provided and

there is no consistent source of comprehensive data available. These

terms also did not explain how to consider other points such as

temporary businesses, and small vs. large businesses. These comments

were adopted to allow applicants to use their choice of data with

regard to industries and agribusinesses as long as they provided an

accurate, comprehensive description of the economic conditions of their

community and their data are secured from established official

independent sources.

Three respondents recommended that a higher score or priority be

given to applicants who collaborate with others. The comment was not

adopted because collaboration will strengthen the preapplication in all

or most of the listed selection criteria so that it would not be a

distinguishing factor. One respondent suggested that a higher priority

be given to regional and multistate projects. The rule was not amended

to adopt this comment because it would work unfairly against those

organizations which do not have multistate responsibilities. Under the

final rule there is no prohibition against multistate projects. In

fact, applicants who propose multistate projects may get more points

because of their project's ability to demonstrate national

applicability of innovations developed under the program. One of the

preferential selection criteria is the transferability or demonstration

value of the project in helping rural areas outside the project area.

One respondent suggested that a higher priority be given to

applicants in states who have not received RTCDG grants. This comment

was not adopted because it would work unfairly against organizations

which produce multiple quality applications.

One respondent suggested that a higher priority be given to

organizations which administer multiple projects through several

organizations. Another respondent suggested that fewer points be given

to organizations which administer multiple projects. These comments

were not adopted because the Agency sees no clear advantages or

disadvantages to funding organizations who administer multiple

projects. The possibility exists that organizations which administer

multiple projects would have a broader perspective, a better ability to

disseminate their innovations nationally, and a stronger capacity to

manage projects effectively; however, the possibility also exists that

this organization would increase overhead costs and provide fewer

resources to benefit rural communities. Thus, the Agency finds no basis

for treating multiple project applicants differently than single

project applicants.

Two respondents suggested that a higher priority be given to

organizations with demonstrated ability to administer effective

projects. The Agency agrees and has adopted the comment as part of the

criteria for scoring. Specifically, the Agency will consider the

experience, organizational skills, and background needed to

successfully carry out the project.

One respondent suggested that the requirement for 25 percent

matching funds be limited to administrative costs. The rule was not

amended because program funds are limited and it is believed that

organizations need to match some of the funding to demonstrate local

support for the application.

One respondent suggested that all projects must be exclusively

rural. The comment was not adopted. The projects will serve rural

areas; however, there is nothing wrong with indirect benefits

supporting urban interests as well as rural.

Two respondents recommended that the requirement to secure

``evidence of support'' for the project from all of the affected local

governmental bodies be dropped. The rule was not amended because all

affected governmental bodies should be on record as supporting the

project. The time spent documenting this support will be worth the time

spent in order to avoid misunderstandings later.

One respondent recommended that projects be selected in all major

rural areas of the United States. The comment was not adopted in order

to allow for the highest quality preapplications to be selected.

One respondent recommended that a different theme be selected each

year. The Agency agrees that this is a desirable policy and plans to

adopt it to the extent possible in keeping with rule-making

requirements of the Administrative Procedures Act.

One respondent recommended that the preapplications be sent to the

RECD State Office for initial processing to determine eligibility and

to ensure that all necessary forms were in place before sending the

preapplications to the RBS National Office for scoring and selection.

The RBS National Office will follow this process. This is a better

process because the RECD State Office employees know the area,

applicants, and conditions of the communities better and can advise the

National Office. Organizations who prepare multistate preapplications

are to submit their preapplications through the state where the

organization's headquarters are located.

One respondent commented that using RTCDG funds for revolving loans

should be given a low priority. The Agency agrees that the RTCDG

program should emphasize those statutory factors that will benefit

economically distressed communities. However, Conact Sec. 310B (f) (2)

(C) specifically

[[Page 3781]]

provides that an acceptable center activity is a program providing

loans and grants to individuals, small businesses, and cooperatives in

rural areas served by the center for purposes of generating,

evaluating, developing, and commercializing new products, processes, or

services. The Agency will continue to carry out this mandate in its

review and selection process.

In addition to the changes made in response to public comments, the

Agency has made some administrative revisions. The Agency has revised

its selection criteria to provide for Administrator's points. The

Administrator may give emphasis to geographical distribution,

interagency cooperation, or other appropriate factors. This change will

allow the Administrator the flexibility to choose the best applicants

for limited grant funds.

The Agency has added definitions for ``center'' and ``subcenter''

for clarity.

The Agency also has added references to the applicability of

recently adopted departmental regulations to RTCDG grants made to

nonprofit institutions. The Uniform Administrative Requirements For

Grants and Agreements with Institutions of Higher Education, Hospitals,

and Other Non-profit Organizations, 7 CFR part 3019, were adopted by

interim final rule (60 Fed. Reg. 44122-39) on August 24, 1995.

The final rule removes the points from the selection criteria. The

points assigned to each of the selection criteria will be given in the

Federal Register notice to be published in advance each year. This will

allow the Agency to adjust the priorities given to each of the

preferential factors on a yearly basis to best meet the objectives set

forth in the regulations.

All references to Farmers Home Administration in the organization

procedures of 7 CFR part 2003 will be left in place but will be revised

in the near future. At that time they will be changed to reflect the

current names of the new agencies which were formed as a result of the

reorganization.

Internal management procedures have been removed from the

regulations but will appear in internal agency instructions.

List of Subjects

7 CFR Part 1901

Civil rights, Compliance reviews, Fair housing, Minority groups.

7 CFR Part 1940

Allocations, Administrative practice and procedure, Agriculture,

Grant programs--Housing and community development, Loan programs--

Agriculture, Rural areas.

7 CFR Part 1951

Account servicing, Grant programs--Housing and community

development, Reporting requirements, Rural areas.

7 CFR Part 2003

Organization and functions (Government agencies).

7 CFR Part 4284

Business and Industry, Grant programs--Housing and community

development, Rural areas.

Accordingly, chapters XVIII and XLII, title 7, Code of Federal

Regulations, are amended as follows:

CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS COOPERATIVE

SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY

PART 1901--PROGRAM-RELATED INSTRUCTIONS

1. The authority citation for part 1901, subpart E, is revised as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 40 U.S.C. 442; 42 U.S.C.

1480, 2942.

Subpart E--Civil Rights Compliance Requirements *C*

2. Section 1901.204 is amended by revising paragraph (a)(27) to

read as follows:

Sec. 1901.204 Compliance reviews.

(a) * * *

(27) Rural Technology and Cooperative Development Grants in subpart

F of part 4284 of this title.

* * * * *

PART 1940--GENERAL

3. The authority citation for part 1940 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart L--Methodology and Formulas for Allocation of Loan and

Grant Program Funds

Sec. 1940.590 [Removed and Reserved]

4. Section 1940.590 is removed and reserved.

PART 1951--SERVICING AND COLLECTIONS

5. The authority citation for part 1951 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart E--Servicing of Community and Insured Business Programs

Loans and Grants

6. Section 1951.201 is revised to read as follows:

Sec. 1951.201 Purpose.

This subpart prescribes the Rural Economic and Community

Development (RECD) mission area policies, authorizations, and

procedures for servicing Water and Waste Disposal System loans and

grants; Community Facility loans; Rural Business Enterprise/Television

Demonstration grants; loans for Grazing and other shift-in-land-use

projects; Association Recreation loans; Association Irrigation and

Drainage loans; Watershed loans and advances; Resource Conservation and

Development loans; Insured Business loans; Economic Opportunity

Cooperative loans; loans to Indian Tribes and Tribal Corporations;

Rural Renewal loans; Energy Impacted Area Development Assistance

program grants; National Nonprofit Corporation grants; Water and Waste

Disposal Technical Assistance and Training grants; Emergency Community

Water Assistance grants; System for Delivery of Certain Rural

Development Programs panel grants; section 306C WWD loans and grants in

subpart E of part 4284 of this title; and Rural Technology and

Cooperative Development Grants in subpart F of part 4284 of this title.

RECD State Offices act on behalf of the Rural Housing Service, the

Rural Business-Cooperative Service and the Rural Utilities Service as

to loan and grant programs formerly administered by the Farmers Home

Administration, the Rural Development Administration, and the Rural

Electrification Administration. Loans sold without insurance to the

private sector will be serviced in the private sector and will not be

serviced under this subpart. The provisions of this subpart are not

applicable to such loans. Future changes to this subpart will not be

made applicable to such loans.

* * * * *

PART 2003--ORGANIZATION

7. The authority citation for part 2003 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; Public

Law 100-82, 101 Stat. 545.

[[Page 3782]]

Subpart A--Functional Organization of the Farmers Home

Administration or its Successor Agency Under Public Law 103-354

Exhibit A to part 2003 [Amended]

8. In part 2003, Exhibit A of subpart A, paragraph 2, under the

heading of Assistant Administrator--Community and Business Programs is

amended by revising ``rural technology development grants'' to read

``rural technology and cooperative development grants.''

9. The heading of 7 CFR chapter XLII is revised to read as follows:

CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES

SERVICE, DEPARTMENT OF AGRICULTURE

Chapter XLII (Parts 4284 and 4285) [Amended]

10. In 7 CFR chapter XLII (consisting of parts 4284 and 4285),

everywhere ``Farmers Home Administration'', ``FmHA'', ``Rural

Development Administration'', or ``RDA'' appear, except ``FmHA

Instruction'' and ``Form FmHA'' references, add the phrase ``or its

successor agency'' immediately thereafter.

PART 4284--GRANTS

11. The authority citation for part 4284 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.

12-13. Subpart F of part 4284 is revised to read as follows:

Subpart F--Rural Technology and Cooperative Development Grants

Sec.

4284.501 Purpose.

4284.502 Policy.

4284.503 [Reserved]

4284.504 Definitions.

4284.505 Applicant eligibility.

4284.506-4284.514 [Reserved]

4284.515 Grant purposes.

4284.516 Ineligible grant purposes.

4284.517-4284.526 [Reserved]

4284.527 Other considerations.

4284.528 Application processing.

4284.529-4284.539 [Reserved]

4284.540 Grant selection criteria.

4284.541 Grant approval, fund obligation, grant closing, and third-

party financial assistance.

4284.542-4284.556 [Reserved]

4284.557 Fund disbursement.

4284.558 Reporting.

4284.559-4284.570 [Reserved]

4284.571 Audit requirements.

4284.572 Grant servicing.

4284.573 Programmatic changes.

4284.574 Subsequent grants.

4284.575 Grant suspension, termination, and cancellation.

4284.576-4284.586 [Reserved]

4284.587 Exception authority.

4284.588-4284.599 [Reserved]

4284.600 OMB control number.

Subpart F-Rural Technology and Cooperative Development Grants

Sec. 4284.501 Purpose.

(a) This subpart outlines the Rural Business-Cooperative Service's

(RBS) policies and authorizations and sets forth procedures to provide

grants for technology and cooperative development in rural areas.

(b) Grants for establishing and operating centers for rural

technology or cooperative development will be for the primary purpose

of improving the economic condition of rural areas by promoting the

development (through technological innovation, cooperative development,

and adaptation of existing technology) and commercialization of new

services and products that can be produced or provided in rural areas;

new processes that can be utilized in the production of products in

rural areas; and new enterprises or cooperatives that can add value to

on-farm production through processing or marketing.

(c) Copies of all forms and Instructions referenced in this subpart

are available in the RBS National Office or any RECD State Office.

Sec. 4284.502 Policy.

(a) The grant program will be used to assist in the economic

development of rural areas.

(b) Funds allocated for use in accordance with this subpart are

also to be considered for use by Native American tribes within the

state regardless of whether state development strategies include Indian

reservations within the state's boundaries. Native American tribes

residing on such reservations must have equal opportunity along with

other rural residents to participate in the benefits of these programs.

This includes equal application of outreach activities of RECD

servicing offices.

Sec. 4284.503 [Reserved]

Sec. 4284.504 Definitions.

Approval official--Any authorized agency official.

Center--The place established and operated by the grantee for rural

technology or cooperative development.

Cooperative--An association organized to provide a specific service

with open membership, equality in ownership and control, limited return

on members' capital, and equitable methods to distribute any excess

earnings back to its members.

Cooperative development--The startup, expansion, or operational

improvement of a cooperative which will promote the development of new

services and products that can be produced or provided in rural areas,

new processes that can be utilized in the production of products in

rural areas, or new enterprises that can add value to on-farm

production through processing or marketing. Operational improvement

includes making the cooperative more efficient, better managed, etc.

Economic development--The growth of an area as evidenced by

increases in total income, employment opportunities, decreased

outmigration of populations, value of production, increased

diversification of industry, higher labor force participation rates,

increased duration of employment, higher wage levels, or gains in other

measurements of economic activity, such as land values.

Nonprofit institution--Any organization or entity, including an

accredited institution of higher education, no part of the net earnings

of which inures, or may lawfully inure, to the benefit of any private

shareholder or individual.

Project--The undertaking for which funds will be used to develop or

operate a technology or cooperative development center.

Public body--Any state, county, city, township, incorporated town

or village, borough, authority, district, economic development

authority, or Indian tribe on federal and state reservation or other

federally recognized Indian tribe in rural areas.

RBS--The Rural Business-Cooperative Service, an agency of the

United States Department of Agriculture, or a successor agency.

RECD--Rural Economic and Community Development mission area.

Rural and rural area--Includes all territory of a state that is not

within the outer boundary of any city having a population of 50,000 or

more and its immediately adjacent urbanized and urbanizing areas with a

population density of more than 100 persons per square mile, as

determined by the Secretary of Agriculture according to the latest

decennial census of the United States.

Servicing office. Any RECD State Office or successor office.

Small business--A business which does not exceed the maximum number

of employees or annual receipts allowed for a concern (including its

affiliates) to be considered small according to the established size

standards for Small Business Administration (SBA) assistance as set

forth in Sec. 121.601, 13 CFR, part 121. The business may be operated

on a profit or nonprofit basis but must rely primarily on revenues of

the business for operation rather than outside support.

[[Page 3783]]

State--Any of the 50 States, the Commonwealth of Puerto Rico, the

Virgin Islands of the United States, Guam, American Samoa, the

Commonwealth of the Northern Mariana Islands, the Republic of Palau,

the Federated States of Micronesia, and the Republic of the Marshall

Islands.

Subcenter--A unit of a center acting under the same direction as

and having a purpose consistent with that of the center.

Technology--The application of science to industrial or commercial

objectives. The entire body of methods and material used to achieve

such objectives.

Technology development--The creation of new technology or the use

and application of existing technology to promote the development and

commercialization of new products, new processes, and new services that

can be produced or provided in rural areas.

Urbanized area--An area immediately adjacent to a city having a

population of 50,000 or more which, for general social and economic

purposes, constitutes a single community and has a boundary contiguous

with that of the city. Such community may be incorporated or

unincorporated to extend from the contiguous boundaries to recognizable

open country, less densely settled areas, or natural boundaries such as

forests or water. Minor open spaces such as airports, industrial sites,

recreational facilities, or public parks shall be disregarded. Outer

boundaries of an incorporated community extend at least to its legal

boundaries. Cities which may have a contiguous border with another

city, but are located across a river from such city, are recognized as

a separate community and are not otherwise considered a part of an

urbanized or urbanizing area, as defined in this section, are not in a

nonrural area.

Urbanizing area--A community which is not now, or within the

foreseeable future not likely to be, clearly separate from and

independent of a city of 50,000 or more population and its immediately

adjacent urbanized areas. A community is considered ``separate from''

when it is separated from the city and its immediately adjacent

urbanized area by open country, less densely settled areas, or natural

barriers such as forests or water. Minor open spaces such as airports,

industrial sites, recreational facilities, or public parks shall be

disregarded. A community is considered ``independent of'' when its

social and economic structure (e.g. government; educational, health,

and recreational facilities; and business, industry, tax base, and

employment opportunities) is not primarily dependent on the city and

its immediately adjacent urbanized areas.

Sec. 4284.505 Applicant eligibility.

(a) Grants may be made to public bodies or nonprofit institutions.

(b) Grants may be made for technology and cooperative development

in ``rural areas.'' In determining whether an area is rural, the Agency

will determine whether the area is urbanized or urbanizing and then the

population density per square mile. All such density determinations

will be made on the basis of minor civil division or census county

division as used by the Bureau of the Census. In making the density

calculations, large nonresidential tracts devoted to urban land uses

such as railroad yards, airports, industrial sites, parks, golf

courses, and cemeteries or land set aside for such purposes will be

excluded.

(c) An outstanding judgement obtained against an applicant by the

United States in a Federal Court (other than in the United States Tax

Court), which has been recorded, shall cause the applicant to be

ineligible to receive any grant or loan until the judgement is paid in

full or otherwise satisfied. RBS grant funds may not be used to satisfy

the judgement.

Secs. 4284.506-4284.514 [Reserved]

Sec. 4284.515 Grant purposes.

Grant funds may be used to pay up to 75 percent of the costs for

establishing or operating centers for rural technology or cooperative

development. Applicant's contribution may be in cash or third party in-

kind contribution in accordance with parts 3015, 3016 and 3019 of this

title and must be from nonfederal funds except that a loan from another

federal source can be used for the applicant's contribution. Grant

funds may be used for, but are not limited to, the following purposes:

(a) Technology research, investigations, and basic feasibility

studies in any field or discipline for the purpose of generating

principles, facts, technical knowledge, new technology, or other

information that may be useful to rural industries, cooperatives,

agribusinesses, and other persons or entities in rural areas served by

such centers in the development and commercialization of new products,

processes, or services.

(b) The collection, interpretation, and dissemination of

principles, facts, technical knowledge, new technology, or other

information that may be useful to rural industries, cooperatives,

agribusinesses, and other persons or entities in rural areas served by

the center in the development and commercialization of new products,

processes, or services.

(c) Providing training and instruction for individuals residing in

rural areas served by the center with respect to the development

(through technological innovation, cooperative development, and

adaptation of existing technology) and commercialization of new

products, processes, or services.

(d) Providing loans and grants to individuals, small businesses and

cooperatives in rural areas for purposes of generating, evaluating,

developing and commercializing new products, processes, or services.

(e) Providing technical assistance and advisory services to

individuals, small businesses, cooperatives, and industries in rural

areas served by the center for purposes of developing and

commercializing new products, processes, or services.

(f) Providing research and support to individuals, small

businesses, cooperatives, and industries in rural areas served by the

center for purposes of developing new agricultural enterprises to add

value to on-farm production through processing or marketing.

(g) Paying up to 75 percent of the administrative costs of the

applicant in carrying out its projects.

(h) Equipment and materials necessary to carry out other eligible

grant purposes under this section.

Sec. 4284.516 Ineligible grant purposes.

Grant funds may not be used to:

(a) Pay more than 75 percent of project costs.

(b) Pay more than 75 percent of administrative costs.

(c) Duplicate current services or replace or substitute support

previously provided.

(d) Pay costs of preparing the application package for funding

under this program.

(e) Pay costs incurred prior to the effective date of the grant

made under this subpart.

(f) Pay for building construction or the purchase of real estate or

vehicles; improving or renovation of office space; or repair or

maintenance of privately-owned property.

(g) Fund political activities.

(h) Pay for assistance to any private business enterprise which

does not have at least 51 percent ownership by those who are either

citizens of the United States or reside in the United States after

being legally admitted for permanent residence.

[[Page 3784]]

Secs. 4284.517-4284.526 [Reserved]

Sec. 4284.527 Other considerations.

(a) Civil rights compliance requirements. All grants made under

this subpart are subject to the requirements of title VI of the Civil

Rights Act of 1964 which prohibits discrimination on the basis of race,

color, and national origin as outlined in subpart E of part 1901 of

this title. In addition, the grants made under this subpart are subject

to the requirements of section 504 of the Rehabilitation Act of 1973,

as amended, which prohibits discrimination on the basis of handicap;

the requirements of the Age Discrimination Act of 1975 which prohibits

discrimination on the basis of age; and title III of the Americans with

Disabilities Act, Pub. L. 101-336, which prohibits discrimination on

the basis of disability by private entities in places of public

accommodations.

(b) Environmental requirements.

(1) General applicability. Unless specifically modified by this

section, the requirements of subpart G of part 1940 of this title apply

to this subpart. For example, the Agency's general and specific

environmental policies contained in Secs. 1940.303 and 1940.304 of

subpart G of part 1940 of this title must be met. Although the purpose

of the grant program established by this subpart is to improve

business, industry, and employment in rural areas, this purpose is to

be achieved, to the extent practicable, without adversely affecting

important environmental resources of rural areas such as important

farmland and forest lands, prime rangelands, wetland, and flood plains.

Prospective recipients of grants, therefore, must consider the

potential environmental impacts of their applications at the earliest

planning stages and develop plans and projects that minimize the

potential to adversely impact on the environment.

(2) Technical assistance. An application for a technical assistance

project is generally excluded from the environmental review process by

Sec. 1940.333 of subpart G of part 1940 of this title. However, as

further specified in that section, the grantee of a technical

assistance grant, in the process of providing technical assistance,

must consider and generally document within their plans the potential

environmental impacts of the plan and recommendations provided to the

recipient of the technical assistance.

(3) Applications for grants to provide financial assistance to

third-party recipients. As part of the preapplication, the applicant

must provide a complete Form FmHA 1940-20, ``Request for Environmental

Information,'' for each project specifically identified in its plan to

provide financial assistance to third parties who will undertake

eligible projects with such assistance. The Agency will review the

preapplication, supporting materials, and any required Forms FmHA 1940-

20 and initiate an appropriate environmental review for the

preapplication. This assessment will focus on the potential cumulative

impacts of the projects as well as any environmental concerns or

problems that are associated with individual projects that can be

identified at this time from the information submitted. Because the

Agency's approval of this type of grant application does not constitute

a commitment to the use of grant funds for any identified third-party

projects (see Sec. 4284.541 of this subpart), no public notification

requirements will apply to the preapplication. After the grant is

approved, each third-party project to be assisted under the grant will

undergo the applicable environmental review and public notification

requirements in subpart G of part 1940 of this title prior to the

Agency providing its consent to the grantee to assist the third-party

project. If the preapplication reflects only one specific project which

is specifically identified as the third-party recipient for financial

assistance, the Agency may perform the appropriate environmental

assessment with no public notification. However, the applicant must be

advised that if the recipient or project changes after the grant is

approved, the project to be assisted under the grant will undergo the

applicable environmental review and public notification requirements .

(c) Government wide debarment and suspension (non-procurement) and

requirements for drug-free workplace. Persons who are disbarred or

suspended are excluded from federal assistance and benefits including

grants under this subpart. Grantees must certify that they will provide

a drug free workplace. See part 3017 of this title and FmHA Instruction

1940-M (available in any RECD State Office) for further guidance.

(d) Restrictions on lobbying. All grants must comply with the

lobbying restrictions set forth in part 3018 of this title.

(e) Excess capacity or transfer of employment.

(1) If a proposed grant is for more than $1 million and will

increase direct employment by more than 50 employees, the applicant

will be requested to provide written support for an Agency

determination that the proposal will not result in a project which is

calculated to, or likely to, result in:

(i) The transfer of any employment or business activity from one

area to another (this limitation will not prohibit assistance for the

expansion of an existing business entity through the establishment of a

new branch, affiliate, or subsidiary of such entity if the expansion

will not result in an increase in the unemployment in the area of

original location or in any other area where such entity conducts

business operations, or

(ii) An increase in the production of goods, materials, or

commodities or the availability of services or facilities in the area

when there is not sufficient demand for such goods, materials,

commodities, services, or facilities to employ the efficient capacity

of existing competitive commercial or industrial enterprises, unless

such financial or other assistance will not have an adverse effect upon

existing competitive enterprises in the area. The applicant's written

support will consist of a resolution from the applicant and Form FmHA

449-22, ``Certification of Non-Relocation and Market and Capacity

Information Report,'' from each existing and future occupant of the

site. The applicant may use Guide 2 of subpart G of part 1942 of this

title (available in any RECD State Office) as an example in preparing

the resolution. Future occupants of the site must be certified by the

Department of Labor (DOL) as outlined in paragraph (e)(3) of this

section for a period of 3 years after the initial certification by DOL.

(2) [Reserved]

(3) Grants shall not be made if the Secretary of Labor certifies

within 30 days after the matter has been submitted by the Secretary of

Agriculture that the provisions of paragraph (e) (1) of this section

have not been met. Information for obtaining this certification will be

submitted, in writing, by the applicant to RECD. Grant approval may be

given and funds may be obligated, subject to the DOL certification

being received, provided RBS has made its own separate determinations

of paragraphs (e) (1) (i) and (ii) of this section when applicable.

(f) Management assistance. Grant recipients will be supervised, as

necessary, to ensure that projects are completed in accordance with

approved plans and specifications and that funds are expended for

approved purposes. Grants made under this subpart will be administered

under, and are subject to, parts 3015, 3016, 3017 and 3019 of this

title, as appropriate, and established RBS guidelines.

[[Page 3785]]

(g) National Historic Preservation Act of 1966. All projects will

be in compliance with the National Historic Preservation Act of 1966 in

accordance with subpart F of part 1901 of this title.

(h) Uniform Relocation Assistance and Real Property Acquisition

Policies Act. All projects must comply with the requirements set forth

in part 21 of this title.

(i) Flood plains and wetlands. All projects must comply with

Executive Order 11988, ``Flood Plain Management,'' and Executive Order

11990, ``Protection of Wetlands.''

(j) Flood or mudslide hazard area precautions. If the grantee

financed project is in a flood or mudslide area, flood or mudslide

insurance must be provided.

(k) Termination of Federal requirements. Once the grantee has

provided assistance with project loans in an amount equal to the grant

provided by RBS, the requirements imposed on the grantee shall not be

applicable to any new projects thereafter financed from the RTCDG

funds. Such new projects shall not be considered as being derived from

federal funds. The purposes of such new projects , however, shall be

consistent with these regulations.

(l) Intergovernmental review. Grant projects are subject to the

provisions of Executive Order 12372 which requires intergovernmental

consultation with state and local officials. A loan fund established in

whole, or in part, with grant funds will also be considered a project

for the purpose of intergovernmental review as well as the specific

projects funded with grant funds from the RTCDG funds. For each project

to be assisted with a grant under this subpart and which the state has

elected to review under their intergovernmental review process, the

state point of contact must be notified. Notification, in the form of a

project description, can be initiated by the grantee. Any comments from

the state must be included with the grantee's request to use RBS grant

funds for the specific project. Prior to RBS's decision on the request,

compliance with requirements of intergovernmental consultation must be

demonstrated for each project. These requirements should be completed

in accordance with ``Intergovernmental Review of Department of

Agriculture Programs and Activities,'' subpart V of part 3015 of this

title (see FmHA Instruction 1940-J, available in any RECD State

Office).

Sec. 4284.528 Application processing.

(a) Preapplications.

(1) Applicants will file an original and one copy of Standard Form

(SF)-424.1, ``Application for Federal Assistance (For Non-

construction),'' with the appropriate RECD State Office. This form is

available in any RECD State Office.

(2) All preapplications shall be accompanied by:

(i) Evidence of applicant's legal existence and authority to

perform the proposed activities under the grant.

(ii) Latest financial information to show the organization's

financial capacity to carry out the proposed work. At a minimum, the

information should include a balance sheet and an income statement. A

current audit report is preferred where one is reasonably obtainable.

(iii) Estimated breakdown of total costs, including costs to be

funded by the applicant as well as other sources. Other sources should

be identified. Certification must be provided from the applicant that

its matching share to the project is available and will be used for the

project. The matching share must meet the requirements of parts 3015,

3016 and 3019 of this title. Certifications from an authorized

representative of each source of funds must be provided indicating that

funds are available and will be used for the proposed project.

(iv) Budget and description of the accounting system in place or

proposed.

(v) Area to be served, identifying each government unit, i.e.,

town, county, etc., if affected by the proposed project and evidence of

support and concurrence in the proposed project from the affected local

governmental bodies as evidenced by a resolution or a written statement

from the chief elected local official.

(vi) Evidence that the proposed project will serve or have the

potential to serve economically distressed areas supported by

established official independent sources of data which are sufficient

to verify the extent to which economically distressed conditions exist.

(Preference will be given in selecting projects demonstrating their

ability to effectively serve rural areas with few rural industries and

agribusinesses, high levels of unemployment or underemployment, high

rates of outmigration of people, businesses, and industries, or low

levels of per capita income).

(vii) A listing of businesses to be assisted.

(viii) Applicant's experience, including experience of key staff

members and persons who will be providing the proposed services and

managing the project.

(ix) The number of months duration of the project or service and

the estimated time it will take from grant approval to beginning of

service.

(x) Method and rationale used to select the areas or businesses

that will receive the service.

(xi) Brief description of how the work will be performed and

whether organizational staff, consultants or contractors will be used.

(xii) Evaluation method to be used by the applicant to determine if

objectives of the proposed activity are being accomplished.

(xiii) A brief plan which contains the following provisions and

describes how the applicant will meet those provisions:

(A) A provision that substantiates that the applicant will

effectively serve rural areas in the United States.

(B) A provision that the primary objective of the applicant will be

to improve the economic condition of rural areas by promoting the

development (through technological innovation, cooperative development,

and adaptation of existing technology) and commercialization of:

(1) New services and products that can be produced or provided in

rural areas;

(2) New processes that can be utilized in the production of

products in rural areas; and

(3) New enterprises that can add value to on-farm production

through processing or marketing.

(C) Copies of the established official independent sources of data

need to be included in the plan along with any documentation that more

fully explains the date produced, methodology, source, or

interpretation of the data.

(D) A description of the activities that the applicant will carry

out to accomplish such objective.

(E) A description of the proposed activities to be funded under

this subpart.

(F) A description of the contributions that the applicant's

proposed activities are likely to make to the improvement of the

economic conditions of the rural areas served by the applicant.

(G) Provisions that the applicant, in carrying out its activities,

will seek, where appropriate, the advice, participation, expertise, and

assistance

[[Page 3786]]

of representatives of business, industry, educational institutions, the

federal government, and state and local governments.

(H) Provisions that the applicant will consult with any college or

university administering Extension Service programs and cooperate with

such college or university in the coordination of the center's

activities and programs.

(I) Provisions that the applicant will take all practicable steps

to develop continuing sources of financial support for the center,

particularly from sources in the private sector.

(J) Provisions for:

(1) Monitoring and evaluating its activities; and

(2) Accounting for money received and expended by the institution

under this subpart.

(K) Provisions that the applicant will provide for the optimal

application of technology and cooperative development in rural areas,

especially those areas adversely affected by agricultural economic

conditions, through the establishment of demonstration projects and

subcenters for:

(1) Rural technology development where the technology can be

implemented by communities, community colleges, businesses,

cooperatives, and other institutions; or

(2) Cooperative development where such development can be

implemented by cooperatives to improve local economic conditions.

(xiv) If grant funds are to be used for the purpose of making loans

or grants to individuals, small businesses, or cooperatives (ultimate

recipients) in rural areas for eligible purposes under this subpart,

the preapplication must include the agreement proposed to be used

between the applicant and the ultimate recipients which includes the

following:

(A) An assurance that the responsibilities of the grantee, as a

recipient of grant funds under this subpart, are passed on to the

ultimate recipient and the ultimate recipient understands its

responsibilities to comply with the requirements set forth in this

subpart, including parts 3015, 3016, and 3019 of this title.

(B) Provisions that the ultimate recipient will comply with

debarment and suspension requirements contained in part 3017 of this

title and will execute Form AD-1048, ``Certification Regarding

Debarment, Suspension, Ineligibility and Voluntary Exclusion--Lower

Tier Covered Transactions.''

(C) Provisions that the ultimate recipient will execute Forms FmHA

400-1, ``Equal Opportunity Agreement,'' and FmHA 400-4, ``Assurance

Agreement.''

(D) Documentation that the ultimate recipient understands its

responsibilities to the applicant.

(E) Documentation that the applicant understands its

responsibilities in monitoring the ultimate recipient's activities

under the grant and the applicant's plan for such monitoring.

(F) Documentation when other references or sources of information

are used, along with copies if possible, to provide dates, addresses,

page numbers and explanations of how interpretations are made to

substantiate that such things as economically distressed conditions do

exist.

(G) Narrative addressing all items in Sec. 4284.540 (a) of this

subpart regarding grant selection criteria.

(b) Applications. Upon notification that the applicant has been

selected for funding, the following will be submitted to the RECD by

the applicant:

(1) SF 424.1, ``Application for Federal Assistance (for Non-

construction)''.

(2) Proposed scope of work, detailing the proposed activities to be

accomplished and time frames for completion of each activity.

(3) Proposed budget, including source and amount of applicant

contribution and any other funding sources for the proposed project.

(4) Other information requested by RECD to make a grant award

determination.

(c) Applicant response. If the applicant fails to submit the

application and related material by the date shown on the notice, RECD

may discontinue consideration of the preapplication.

Secs. 4284.529-4284.539 [Reserved]

Sec. 4284.540 Grant selection criteria.

Grants will be awarded under this subpart on a competitive basis.

The priorities described in this paragraph will be used by RBS to rate

preapplications. Preference will be given to applicants demonstrating

factors in paragraphs (a) (4) and (5) of this section. RBS' review of

preapplications will include the complete preapplication package

submitted to the RECD State Office. Points will be distributed

according to ranking as compared with other preapplications on hand.

Recognizing that a wide variety of individual strategies and approaches

may be used to promote economic development and that specific needs

vary according to geographic region and over time, the Agency has

determined to publish an informational notice annually in the Federal

Register which will contain those objective strategies or approaches,

consistent with this subpart with weighted priorities, that the Agency

wishes to emphasize during that year. The notice will establish the

period of time that the Agency will accept preapplications for

consideration of that fiscal year's funding.

(a) The selection criteria are as follows:

(1) Likelihood of project being effective in achieving one or more

of the following: technological innovation, adaptation of existing

technology, cooperative development, commercialization of new services

and products, and promotion of new processes and enterprises.

(2) Innovativeness or originality of project in addressing

authorized grant purposes.

(3) Experience, organizational skills, and background that are

needed for applicant to successfully carry out project.

(4) Transferability or demonstration value of project to help rural

areas outside of project area.

(5) Ability of project to contribute to the improvement of economic

conditions in rural areas with one or more of the following: few rural

industries and agribusinesses; high levels of unemployment or

underemployment; high rates of outmigration of people, businesses,

industries; and low levels of per capita income.

(6) The Administrator may award discretionary points to focus on

geographical distribution, interagency cooperation or other appropriate

factors.

(b) Each preapplication for assistance will be carefully reviewed

in accordance with the priorities established in this section. A

priority rating will be assigned to each preapplication.

Preapplications selected for funding will be based on the priority

rating assigned each preapplication and the total funds available. All

preapplications submitted for funding should contain sufficient

information to permit RBS to complete a thorough priority rating.

Sec. 4284.541 Grant approval, fund obligation, grant closing, and

third-party financial assistance.

The grantee will execute all documents required by the Agency to

make a grant under this subpart.

Secs. 4284.542-4284.556 [Reserved]

Sec. 4284.557 Fund disbursement.

Grants will be disbursed as follows:

(a) An SF-270, ``Request for Advance or Reimbursement,'' will be

completed by the applicant and submitted to RECD

[[Page 3787]]

not more frequently than monthly. The grantee will only be reimbursed

for allowable costs incurred.

(b) [Reserved]

(c) The grantee's share in the cost of the project will be

disbursed in advance of grant funds or on a pro-rata distribution basis

with grant funds during the disbursement period. The grantee may not

provide its contribution at the end of the grant period.

Sec. 4284.558 Reporting.

An SF-269, ``Financial Status Report,'' and a project performance

activity report will be required of all grantees on a quarterly basis.

A final project performance report will be required with the last SF-

269. The final report may serve as the last quarterly report. The final

report must include a final evaluation of the project. Grantees shall

constantly monitor performance to ensure that time schedules are being

met, projected work by time periods is being accomplished, and other

performance objectives are being achieved. Grantees are to submit an

original of each report to RECD. The project performance reports shall

include, but not be limited to, the following:

(a) A comparison of actual accomplishments to the objectives

established for that period;

(b) Reasons why established objectives (if any) were not met;

(c) Problems, delays, or adverse conditions which will affect

attainment of overall project objectives, prevent meeting time

schedules or objectives, or preclude the attainment of particular

project work elements during established time periods. This disclosure

shall be accompanied by a statement of the action taken or planned to

resolve the situation; and

(d) Objectives and timetable established for the next reporting

period.

Secs. 4284.559-4284.570 [Reserved]

Sec. 4284.571 Audit requirements.

The grantee will provide an audit report in accordance with

Sec. 1942.17 of subpart A of part 1942 of this title. The audit

requirements only apply to the years in which grant funds are received.

Audits must be prepared in accordance with general accounting

principles and standards using the publication, ``Standards for Audit

of Governmental Organizations, Programs, Activities and Functions.''

Sec. 4284.572 Grant servicing.

Grants will be serviced in accordance with subpart E of part 1951

of this title.

Sec. 4284.573 Programmatic changes.

The grantee shall obtain prior approval for any change to the scope

or objectives of the approved project. Failure to obtain prior approval

of changes to the scope or budget can result in suspension or

termination of grant funds.

Sec. 4284.574 Subsequent grants.

Subsequent grants will be processed in accordance with the

requirements set forth in this subpart.

Sec. 4284.575 Grant suspension, termination, and cancellation.

Grants may be canceled by RBS by written notice. Grants may be

suspended or terminated for cause or convenience in accordance with

parts 3015, 3016, and 3019 of this title.

Secs. 4284.576-4284.586 [Reserved]

Sec. 4284.587 Exception authority.

The Administrator may, in individual cases, make an exception to

any requirement or provision of this subpart which is not inconsistent

with the authorizing statute, an applicable law, or a decision of the

Comptroller General, if the Administrator determines that application

of the requirement or provision would adversely affect the Government's

financial interest and shows how the adverse impact will be eliminated

or minimized if the exception is made.

Secs. 4284.588-4284.599 [Reserved]

Sec. 4284.600 OMB control number.

The reporting and record keeping requirements contained in this

regulation have been approved by the Office of Management and Budget

(OMB) and have been assigned OMB control number 0570-0006. Public

reporting burden for this collection of information is estimated to

vary from 30 minutes to 8 hours per response, with an average of 1.85

hours per response, including time for reviewing instructions,

searching existing data sources, gathering and maintaining the data

needed, and completing and reviewing the collection of information.

Send comments regarding this burden estimate or any other aspect of

this collection of information, including suggestions for reducing this

burden, to Department of Agriculture, Clearance Officer, OIRM, AG Box

7630, Washington, DC 20250, and to the Office of Management and Budget,

Paperwork Reduction Project (OMB#0570-0006), Washington, D.C. 20503.

Dated: January 3, 1996.

Jill Long Thompson,

Under Secretary, Rural Economic and Community Development.

[FR Doc. 96-1578 Filed 2-1-96; 8:45 am]

BILLING CODE 3410-32-U