Community Development Block Grants for Indian Tribes and Alaska Native Villages

SUMMARY: This rule makes final the requirements for the Community

Development Block Grant Program for Indian tribes and Alaska native

villages. Several revisions have been made to the previously published

interim rule by this final rule. These revisions have been made in

response to public comments, to correct errors and unintentional

omissions in the interim rule, and to include in this part those

applicable sections of subparts C, J, and K of part 570 which were

included by reference in the interim rule.

EFFECTIVE DATE: August 30, 1996.

FOR FURTHER INFORMATION CONTACT: Robert Barth, Office of Native

American Programs, Room 6728, Department of Housing and Urban

Development, 450 Golden Gate Avenue, San Francisco, CA 94102. (415)

436-8121. TTY (415) 436-6594. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The information collection requirements contained in this rule have

been approved by the Office of Management and Budget (OMB) in

accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-

3520), and assigned OMB control number 2577-0191. An agency may not

conduct or sponsor, and a person is not required to respond to, a

collection of information unless the collection displays a valid

control number.

Background

This final rule represents the culmination of a process which

commenced with the publication of a proposed rule on June 21, 1991 (56

FR 28666). This was followed by the first interim rule on April 7, 1992

and the second and last interim rule which was published in the Federal

Register of July 27, 1994 (59 FR 38326). The last interim rule became

effective on October 1, 1994, and invited public comments for a five

month period ending December 27, 1994. The principal impetus for this

rule making process was the need to implement various statutory

mandates included in Section 105 of the Department of Housing and Urban

Development Reform Act (Pub. L. 101-235) as amended by the National

Affordable Housing Act of 1990. In addition, the transfer of the

authority for the Community Development Block Grant Program for Indian

Tribes and Alaska Native Villages to the Office of Public and Indian

Housing, and specifically the Office of Native American Programs within

that office, occasioned a re-evaluation of various policy

determinations reflected or embodied in previously issued program

regulations.

Public Comments

The Department of Housing and Urban Development (HUD) received 18

individual comments from 5 sources on the interim rule published on

July 27, 1994. HUD received 3 letters from tribes and 2 from

representative associations. General comments are discussed below and

are followed by specific comments. The specific comments and the

Department's responses are discussed under ``Specific Comments,''

according to the section where they appear in the interim rule.

General Comments

Comment: One comment was received which stated that the 1994

revision of the 1992 rule is a ``long step in the wrong direction'' in

that the entire thrust of this rule is the centralization of decision

making in the HUD Central Office to the ultimate detriment of the

Indian tribes. This perception is apparently based upon the removal of

specific application procedures and detailed selection criteria from

the rule. As stated in the rule, this information would be included in

the Notices of Funding Availability (NOFAs) published for specific

funding cycles. The commenter is of the opinion that this change would

significantly, if not completely, remove the opportunity for public

comment on these items. The commenter also states that the application

kits provided by HUD for the last two funding rounds (presumably FY

1993 and FY 1994) contained requirements which went beyond NOFA

requirements. This statement is apparently provided as additional

support for the commenter's opinion that the centralization of decision

making with little or no opportunity for public comment is the intent

of this rule.

Response: It is the position of the Department that centralizing

decision making and restricting opportunity for public comment on this

process certainly is not the intent nor the result of this rule. The

inclusion of the specifics of application procedures and the detailed

selection criteria in the NOFA rather than in the rule does not

increase the centralization of decision making; application review and

funding decisions will continue to be made at the Area ONAPs. With

respect to the effect of these changes on the opportunity for public

comment, at best such opportunity would be increased by moving in this

direction and in no conceivable circumstance would such opportunity be

diminished as compared to that afforded under the previous interim

rule. The implementing regulations (24 CFR part 4) for section 103 of

the HUD Reform Act provide a significant window of opportunity for

public comment on the content of a NOFA. The Department encourages

tribes and other interested parties to take advantage of the

opportunity to impact the process during this period. It is

considerably easier to change the content of a NOFA from one funding

cycle to the next as compared with the process required to amend

program regulations.

Regarding the relationship between the NOFA and the application kit

issued by the Department, the purpose of the kit is to assist the

applicant in understanding NOFA and regulatory requirements and, if

necessary, to supplement NOFA instructions regarding form use and

completion. The purpose of the kit is not to impose additional

requirements on the applicant. The application kit issued for the FY

1995 ICDBG funding cycle was very closely reviewed to ensure that none

of the information provided established requirements beyond the NOFA or

Program Regulations.

Comment: One comment was received which stated that renaming the

Phoenix Office of Native American Programs as the Southwest Office of

Native American Programs works to the detriment of the tribes in the

jurisdiction of that office. The commenter also questions the source of

the funds necessary to raise the base allocation to each Area ONAP from

Sec. 500,000 to Sec. 1,000,000.

Response: The Department does not believe that changing the name of

the Area ONAP located in Phoenix will work to the detriment of any

tribes; the name change does not signify anything other than a change

in the name so that it better reflects the jurisdiction of this office;

the names of all other Area ONAPs have also been changed for the same

reason. With respect to the source of funds necessary to increase the

base

[[Page 40085]]

allocation to each Area ONAP, it is to be noted that the change from

$500,000 to $1,000,000 in the base allocation represents the second

such change since the inception of the ICDBG program in 1978; the

original base allocation was $250,000. In making these changes it has

been the intent of the Department to increase the nation-wide equitable

availability of ICDBG funds.

Comment: One commenter raised an objection to moving the imminent

threat program from the Area ONAPs to Headquarters. It is the

observation of the commenter that Headquarters staff could not be as

knowledgeable about imminent threats in a specific area of the country

as the Area ONAP staff would be for that area.

Response: The Department agrees with the observation of the

commenter. However, the objection appears to be based on a misreading

of the changes made to subpart E--Imminent Threat Grants. These changes

were not intended to move the decision making process for such grants

from the Area ONAP to the Headquarters level nor is there such a

resultant effect. A clarifying memorandum was issued by ONAP on

February 9, 1995, to all Area ONAPs to make certain that this is

understood by all ONAP staff involved in this program. The changes were

to ensure that any eligible applicant would have potential access to

imminent threat funds. Before these changes, the establishment of an

Imminent Threat Set Aside was left to the determination of each Area

ONAP; some offices established such set asides and others did not.

Under this rule, all eligible applicants have the same potential access

to funds.

Comment: One commenter raised a strong objection to the elimination

of the provisions for correcting procedural errors. This commenter is

also of the opinion that HUD should have a uniform appeal procedure for

all competitive programs which would allow the redress of errors by the

raters in mathematical calculations or in the interpretation of program

requirements.

Response: Although the provisions for correcting procedural errors

have been removed from the rule, it was not the intent of the

Department to eliminate such a process; language identical to that in

the previous rule was published as part of the FY 1995 ICDBG NOFA.

Unless changed through a subsequent process of consultation, it will be

published as part of all subsequent NOFAs.

The argument made by the commenter for a uniform appeals process is

not related to the need to change the subject rule; it will, however,

be taken under advisement. It should however be noted that the

interpretation of program requirements is within the purview and

responsibility of the Department and, therefore, any appeals process

would be limited, as it always has been limited, to perceived errors of

compliance with procedural requirements.

Comment: One commenter (representing an association of housing

authorities) supports the resolution passed at the National American

Indian Housing Council's 1994 annual meeting that 1.5 percent of the

national appropriation for CDBG be reserved for the ICDBG.

Response: Increasing the percentage of the national CDBG

appropriation that is provided for the ICDBG program to 1.5 percent

from the current 1 percent would require a statutory change and it is,

therefore, outside the scope of rule making.

Comment: One commenter (representing an association of housing

authorities) strongly urges the allowance of comprehensive planning as

an eligible activity under the ICDBG program.

Response: Comprehensive planning is an eligible activity under the

ICDBG program (Sec. 953.205(a)). Funding for such activities could

however be affected by the statutory limitation (reiterated at

Secs. 953.205(c) and 953.206) which provides that no more than 20

percent of the funds of any ICDBG program may be used for planning and

administrative activities.

Specific Comments

Section 953.6--Technical Assistance

Comment: One commenter recommends that expanded technical

assistance should be made available to tribes/villages and that the

Department should provide in-depth regulations regarding the technical

assistance role of the field staff.

Response: On January 5, 1994, HUD's General Counsel issued a

memorandum to all HUD staff in which he clearly describes the type and

form of technical assistance which may be provided by HUD staff to

potential applicants for assistance under the restrictions imposed by

Section 102 of the HUD Reform Act. As it is described in this

memorandum, permissible technical assistance activities include

explaining and responding to questions concerning program regulations,

defining terms in an application package, and providing other forms of

technical guidance that may be described in the NOFA. In addition,

before the deadline for the submission of applications, HUD employees

may assist applicants by reviewing draft applications and identifying

those parts of the applications that need substantive improvement. HUD

employees may not, however, advise applicants on how to make the

improvements. The provision of technical assistance of a type and in a

manner inconsistent with that described by the General Counsel would

not be allowed by the Reform Act and, therefore, would require a

statutory change to be possible.

The Department encourages potential applicants to take advantage of

the extensive technical assistance available from the staff of the

various Area ONAPs. One of the principal reasons behind the recent

reorganization of the Area ONAPs was to improve the ability of the

organization to meet the technical assistance needs of its customers

within the parameters established by the HUD Reform Act.

Section 953.100(b)(1)--Ceilings

Comment: Two comments were made regarding the establishment of

grant ceilings. One commenter stated that the method of setting grant

ceilings is inequitable because in certain Area ONAP jurisdictions,

smaller tribes are allowed to compete for the same amount as larger

tribes. The other commenter stated that there should not be a policy of

allowing Area ONAPs to establish different ceilings for different size

tribes/villages as is done by certain of these offices.

Response: Each Area ONAP has the ability to recommend the ceiling

or ceilings for its jurisdiction. The Assistant Secretary for Public

and Indian Housing has the final authority to determine these ceilings.

The Department has determined that the present procedure for

establishing ceilings is the most appropriate method and, therefore,

has made no change to this section other than to eliminate a sentence

which was merely descriptive of one option available to Area ONAPs.

Section 953.101--Allocation of Funds

Comment: One commenter supports the increase in the base amount

allocation to each Area ONAP but strongly disagrees with the formula

for allocating the remaining funds and contends that it is unfair and

detrimental to the Alaska native villages. It is the position of the

commenter that using the total eligible Native American population in

an Area ONAP's jurisdiction as a factor in this allocation process is

not equitable. The commenter provides three suggestions for changing

the formula, all of which are based upon using the number of eligible

applicants in an Area ONAP's

[[Page 40086]]

jurisdiction rather than the eligible Native American population in

each jurisdiction.

Response: It is the position of the Department that the present

procedure used to allocate funds to each Area ONAP after the base

amount is allocated is the most appropriate method to use to ensure

that the allocations reflect the relative community development needs

of eligible applicants in each area. The number of eligible applicants

in each area is not an accurate measure of the relative community

development needs of the eligible applicants in that area compared to

another area.

Comment: One commenter states that the U.S. Census population data

is not a true and accurate count of Native populations and that HUD

should therefore allow each Area ONAP to request and use more accurate

data from the tribes/villages in its area.

Response: The Department recognizes that census data on Indian and

Alaska Native populations may be incomplete or inaccurate. Census data

is, however, the only such information which is consistently available

and which is reasonably accurate when aggregated by Area ONAP

jurisdiction. It has been the experience of the Department that census

data inaccuracies tend to affect each area equally and, therefore, do

not impact the relative distribution of Native American population

characteristics such as poverty and substandard housing conditions.

Based on these considerations, the Department will continue to use U.S.

census data in the formula for allocating funds to the Area ONAPs.

In order to eliminate any possible confusion or misunderstanding

regarding the source of data used to allocate funds to the Area ONAPs,

paragraph (a)(2) of this section has been revised to include explicit

reference to the U.S. Bureau of the Census. A corresponding clarifying

revision has been made to the definition of eligible Indian population

in Sec. 953.4.

These revisions are not substantial changes to the rule since data

provided by the U. S. Bureau of the Census has been used to allocate

funds to field offices since the inception of the ICDBG program in

1978.

Please be advised, however, that the Department intends to schedule

a series of consultation sessions throughout the country. During these

sessions, the type and source of data used by the Department for funds

allocation and other purposes will be agenda items. The hope is that an

identification and discussion of the availability and applicability of

other sources of data which could more accurately reflect the relative

and absolute community development needs in Native American communities

will occur.

Section 953.300--Application Requirements

Comment: One commenter states that this section is agreeable in

that it does not allow multiple project applications.

Response: The commenter has misread this section since it does not

address the issue of multiple project applications. However, it is to

be noted that an applicant could include as many projects as it wishes

in an application as long as the total ICDBG cost for all projects does

not exceed the applicable grant ceiling. Given the apparent

misunderstanding of this policy, it will be clearly stated in the NOFA

published for this program.

Comment: One comment was received which indicates that paragraphs

(b) and (c) of this section (953.300) are in direct contradiction.

Response: These two paragraphs do not contradict each other.

Paragraph (b) addresses the recognition and reimbursement of costs

incurred by an applicant before the submission of an application.

Paragraph (c) addresses the recognition and reimbursement of costs

incurred by an applicant after the submission of an application but

before HUD approval. To eliminate any possible misunderstanding, these

two paragraphs have been rewritten.

Section 953.302--Selection Process

Comment: One commenter expresses concerns over the meaning of the

language in Sec. 953.302(b) (Application rating system) and

Sec. 953.302(c) (Periodic NOFAs) and asks for clarification of the

phrases ``rated competitively within each field office's jurisdiction''

and ``will rate applications on the basis of their responsiveness.''

The commenter supports allowing each Area ONAP to establish its own

rating system for the NOFAs based upon the responses of the tribes in

its jurisdiction, but does not support the establishment of a generic

rating system for all tribes.

Response: The first phrase for which clarification is requested

should be construed to mean that all applications submitted for funding

consideration by applicants in the jurisdiction of a specific Area ONAP

are in competition for the ICDBG funds allocated to that Area ONAP. The

second phrase means that the Area ONAPs will rate applications on the

basis of their responsiveness to the criteria identified in the Program

Regulations and further detailed in the NOFA. In all of the ICDBG

funding cycles that have taken place since the implementation of the

HUD Reform Act, a NOFA has been published which contains the detailed

rating criteria and the specifics of the application procedures to be

used; the interim rule does not change this process. Each of these

NOFAs has contained items which vary from one Area ONAP jurisdiction to

another, e.g., rehabilitation grant limits, tie breaking

considerations, etc. These variations were included to reflect real

differences between the circumstances found in the various

jurisdictions. It is important that eligible applicants provide

specific feedback to their Area ONAPs so that the need for additional

jurisdictional variations can be analyzed and, if supported,

incorporated into the NOFA.

Comment: Another commenter believes that Sec. 953.302(b) is too

wide open in that each Area ONAP is afforded too much judgmental

discretion, i.e., one office could determine a project to have

unreasonable costs and be inappropriate for the intended use and reject

it from further consideration. Another office could determine that a

similar project does not fail these threshold requirements and proceed

to rate and rank the project. The commenter recommends that the

selection process be made consistent nationally so that each applicant

has an equal chance of funding.

Response: It is expected and required of each Area ONAP that

reasonable and responsible judgement be exercised in implementing all

aspects of the selection system. The specific aspects of the selection

process referenced by commenter are two of the community development

appropriateness thresholds which have been in the Program Regulations

since the March 18, 1983 interim rule was published for effect.

Guidance has been provided and will continue to be provided to the Area

ONAPs by the Headquarters ONAP to ensure equitable and consistent

implementation of these threshold requirements. It is the position of

the Department that no change is necessary in this section.

Section 953.303--Housing Rating Category

Comment: It is the position of one commenter that the threshold

requirement that an applicant shall assure that it will use project

funds to rehabilitate units only when the homeowner's payments are

current may raise issues of confidentiality.

Response: It is necessary to note that this specific threshold

applies to homeownership and not rental situations. As such, this

specific requirement for a homeowner who

[[Page 40087]]

wishes to participate in an ICDBG funded rehabilitation project should

be viewed as a reasonable condition for participation. It is also to be

noted that in all single family housing rehabilitation funded with

ICDBG funds, the households to be assisted must be of low or moderate

income status. The requirement that the household document this status

could also be viewed by some as raising issues of confidentiality, but

it is the position of the Department that it is also a reasonable

prerequisite for assistance.

Section 953.304--Community Facilities Rating Category

Comment: One commenter notes that the definition of the ``neediest

segment of the population'' has been removed from the interim rule and

asks what replaces it.

Response: Included among the details of the rating criterion of

project need which are now found in the NOFA is the definition of

``neediest segment of the population''.

Section 953.400--Criteria for Funding (Imminent Threat Grants)

Comment: One commenter states that the requirement that these funds

may only be used for imminent threats which impact an entire service

area is too restrictive.

Response: The ICDBG program was enacted by Congress to address

community development needs and was not enacted to provide assistance

grants to individuals. Therefore, it is the position of the Department

that the requirement that a threat to health or safety must impact an

entire service area and not just an individual or household is

consistent with congressional mandate and intent. The rule has not been

changed. It is to be noted, however, that the specific language of the

comment indicates that the commenter may be defining ``service area''

in a manner which is more restrictive than the definition provided in

Sec. 953.4 and the commenter is urged to review that definition.

Subpart F--Grant Administration

Comment: One commenter requests that income generated by economic

development activities funded with ICDBG funds should be able to be

retained and used at the grantee's discretion. It is the opinion of the

commenter that the requirements in the previous interim rule at

Sec. 571.505 (c) were more flexible in this regard.

Response: When the current interim rule was developed, the language

of Sec. 953.505 was written to incorporate the language of 24 CFR

570.504 which had previously only been referenced in the previous

interim rule in Sec. 571.504. However, the current and previous interim

rules were both in error. Section 913 of the National Affordable

Housing Act of 1990 included a number of technical corrections and

clarifications regarding the applicability of various sections of Title

I of the Act of 1974, as amended, to the CDBG program for Indian

tribes. Among the clarifications listed in this section was a statement

regarding the applicability of the various subsections of Section 104

of Title I of the 1974 Act. It is stated that only subsections (f),

(g), and (k) of that section apply to the ICDBG program. The

significance of this statement is that the statutory basis in the 1974

Act for the regulatory program income requirements and restrictions

specified in Sec. 570.504 is subsection (j) of Section 104. Given the

inapplicability of this subsection to the ICDBG program, the Department

has determined that 24 CFR 85.25--Program income (with the

modifications stated in a revised Sec. 953.503), will apply to the

ICDBG program. Specifically with respect to the commenter's concerns,

it is to be noted that as defined in Sec. 85.25 (b), program income

does not include income generated by the grant supported activity after

grant close-out. Given the nature of economic development activities

funded with ICDBG funds, it is most likely that any income generated by

these types of projects would occur after the grant period and

therefore its use would not be subject to regulatory restrictions.

Other Changes Made by This Rule

Subpart A--General Provisions

Section 953.1--Applicability and scope. The term ``Indian tribes

and Alaska native villages'' has been changed to ``applicants'' since,

as defined in Sec. 953.5, eligible applicants include entities, i.e.,

certain tribal organizations, other than Indian tribes and Alaska

native villages.

Section 953.4--Definitions. Six new definitions have been added--a

definition of Area ONAP, Assistant Secretary, Buildings for the General

Conduct of Government, Imminent treat, Microenterprise, and Small

Business. Please note that the definition of Area ONAP replaces that of

Field office.

The definition of Tribal government, Tribal governing body or

Tribal council has been modified to clarify that the Federal entity

providing recognition is the Bureau of Indian Affairs.

The definition of Subrecipient has been included in this section

rather than in subpart F--Grant Administration. In the interim rule

this definition was included in that subpart by virtue of the inclusion

(by reference) of subpart J of 24 CFR part 570 in that subpart.

Section 953.6--Technical assistance. This section has been deleted

since it did not address a matter or issue of program regulation; it

was a statement of Departmental policy. The deletion of this section in

no way diminishes the commitment of the Department to the provision of

technical assistance to eligible applicants. The response to the

comment submitted on this section reflects Departmental policy on this

matter.

Section 953.6--Waivers. This section (formerly Sec. 953.7) has been

revised to better state the policy of the Department regarding a waiver

of a regulatory requirement. The revised language also describes

procedural requirements for such waivers.

Subpart B--Allocation of Funds

Section 953.101--Field Office allocation of funds. This section has

been re-titled Area ONAP allocation of funds and has been changed to

clearly state that any amount retained by Headquarters to fund imminent

threat grants pursuant to Sec. 953.402 of this part will not be

available for allocation to the Area ONAPs.

Section 953.102--Use of recaptured and unawarded funds. The title

of this section has been changed so that it more accurately reflects

its content. The language of the section has also been revised so that

it more clearly states the requirements for the use of funds recaptured

or those which may remain unawarded after the completion of a funding

competition by an Area ONAP. The term ``unawarded'' replaces the term

``undistributed'' which was used in the interim rule; the term

``undistributed'' is not a term which satisfactorily describes

allocated funds which may remain with an Area ONAP after the completion

of a funding competition.

Subpart C--Eligible Activities

To improve the ease of use of the ICDBG rule for program applicants

and grantees, subpart C of part 570 has been incorporated in this

subpart with the exception of those provisions which apply only to the

Entitlement Cities or HUD-administered Small Cities programs and with

the additional exceptions or modifications discussed below. In the

interim rule, subpart C of part 570 was incorporated by reference.

Those sections of subpart C in the interim rule which were listed

as modifications to subpart C of part 570 (Sec. 953.201 through

Sec. 953.203) have been

[[Page 40088]]

incorporated in the appropriate sections of the revised subpart C.

In the process of reviewing the various sections of subpart C of

part 570 prior to their incorporation into subpart C of part 953, it

was determined that certain of these sections either included language

which was duplicative of language contained in other sections of the

rule or which was excessively descriptive or, that certain sections

included paragraphs which should be relocated to other sections or

subparts to facilitate ease of use and understanding of the rule.

Based on these determinations, the following modifications or

revisions have been made:

Section 570.200--General policies. 1. The language contained in

paragraph (a)(3)--Compliance with the primary objective (as modified to

meet the requirements of the ICDBG program) has been incorporated in

Sec. 953.208.

2. Paragraph (a)(4) Compliance with environmental review procedures

has not been incorporated since it duplicated the requirements included

in Sec. 953.605--Environment.

3. The language of paragraph (a)(5)--Cost principles was made part

of Sec. 953.501 which has been titled Applicability of uniform

administrative requirements and cost principles.

4. The language of paragraphs (b)--Special policies governing

facilities and paragraph (c)--Special assessments under the CDBG

program has been incorporated in Sec. 953.201(c)--Public facilities.

5. The introductory language of paragraph (d)--Consultant

activities has been eliminated since it was determined to be

superfluous.

6. The language of paragraph (d)(1) regarding the limitation on the

rate of compensation in employer-employee relationships has been

incorporated in the revised Sec. 953.501 as paragraph (c)(2) of that

section.

7. Both paragraph (e)--Recipient determinations required as a

condition of eligibility and (f)--Means of carrying out eligible

activities have not been included in the rule since it was determined

that the language in these paragraphs was either duplicated in other

sections of the rule or it was exemplary and not expository and did not

address a matter or issue of program regulation.

8. The language of paragraph (g)--Limitation on planning and

administrative costs has been incorporated in Sec. 953.206--Program

administration costs.

9. The language in paragraph (h)--Constitutional prohibition was

incorporated into subpart G--Other Program Requirements as

Sec. 953.600-- Constitutional prohibition.

Section 570.205--Eligible planning, urban environmental design and

policy-planning-management capacity building activities. The review of

subpart C of part 570 discussed above revealed that much of the

language included in this section was more exemplary or descriptive of

the types of activities possibly eligible under this section and did

not address a matter or issue of program regulation. The resultant

Sec. 953.205 is, therefore, more concise than Sec. 570.205, but it

affords the same degree of flexibility in the use of ICDBG funds for

planning and management capacity improvement types of activities

authorized by section 105(a)(12) of the 1974 Act, as amended.

Subpart D--Single Purpose Grant Application and Selection Process

Section 953.301--Screening and review of applications. This section

has been removed from the rule since it was determined to be

superfluous. All subsequent sections in this subpart have been re-

numbered.

Section 953.301--Selection process.

This section (formerly numbered 953.302) has been re-formatted to

clarify threshold requirements and the role of the NOFA with respect to

this process. No substantive changes have been made in the

requirements.

Section 953.303--Housing rating category, section 953.304--

Community. facilities rating category, and section 953.305--Economic

development rating category. These three sections have been

consolidated into two new sections Sec. 953.303-- Project specific

threshold requirements and Sec. 953.304--Project rating categories.

This consolidation process did not involve or include any substantial

changes in requirements. It however is to be noted that independent of

this consolidation, changes were made which affect project specific

threshold requirements for economic development projects. The threshold

requirement that ``an applicant shall demonstrate the need for grant

assistance by providing documentation to support a determination that

the assistance is appropriate to implement an economic development

project'' has been deleted. This requirement has proven to be an

unnecessary complication for potential applicants for assistance.

One of the two remaining threshold requirements for economic

development projects, i.e., that an analysis demonstrates that public

benefit commensurate with the assistance requested can reasonably be

expected, has been expanded in scope and revised. The expansion/

revision of this threshold was done to state this requirement in a

manner consistent with the objectives for the evaluation and selection

of economic development projects which were set forth in Section 806 of

the Housing and Community Development Act of 1992. As was indicated in

the Supplementary Information section of the January 5, 1995 Final Rule

and guidelines (24 CFR part 570), that rule would not apply to the

ICDBG Program; necessary compliance with the requirements of the 1992

Act would be established as part of a future rule. The Department has

reviewed the need to establish such compliance as part of a future rule

and has determined that the rating criteria for economic development

projects set forth in this rule, as explained and reified in all future

NOFAs, will be adequate to achieve general compliance with the

guidelines set forth in the 1992 Act.

The rating requirements for economic development projects have also

been changed to include a rating criterion ``additional

considerations'' which was inadvertently left out of the interim rule.

Section 953.304--Funding process. The language of

Sec. 953.304(b)(2) [formerly Sec. 953.307(b)(2)] has been changed to

delete an incorrect reference to 24 CFR part 58 made in the interim

rule and to more concisely state the applicable requirements of part

58.

Section 953.305--Program amendments. The language of this section

(formerly Sec. 953.308) has been changed since paragraph (b) of this

section in the interim rule referenced application component

requirements which were no longer specified anywhere in the rule. This

paragraph now references application component requirements now

specified in the NOFA. In addition, this paragraph has been revised to

raise the dollar amount of a program amendment request which must be

rated from $25,000 to $100,000. This change is consistent with the

Departmental policy of increasing program flexibility for clients and

customers while ensuring compliance with statutory requirements and

congressional intent.

Section 953.306--Public services. This section has been deleted

since it duplicates the language in Sec. 953.201(e) --Public services.

Subpart E--Imminent Threat Grants

Section 953.401--Application process. Paragraph (b) of this section

has been changed since the interim rule referenced application

requirements which were no longer specified anywhere in the rule. This

paragraph

[[Page 40089]]

now indicates that the form and content requirements for imminent

threat grant applications will be specified in the NOFA.

Section 953.402--Environmental review. This section has been

eliminated and the language of the section has been relocated to

Sec. 953.605 (b).

Section 953.402--Availability of Funds. This section (formerly

Sec. 953.403) has been changed to indicate that the amount which may be

retained by HUD for imminent threat grants will be determined by the

Assistant Secretary. It is the determination of the Department that

this discretion will provide for necessary flexibility. The amount to

be retained will be published in the NOFA and will be based upon an

anticipated level of demand which will take into consideration historic

funding levels and other relevant factors.

Subpart F--Grant Administration

To improve the ease of use of the ICDBG rule by program applicants

and grantees, those applicable sections of subpart J of part 570--

Program Administration--have been incorporated into subpart F of the

ICDBG rule; the interim rule incorporated these sections by reference.

Section 570.508--Public access to program records and Section 570.509--

Grant closeout procedures have been incorporated without substantial

modification as Sec. 953.507 and Sec. 953.508, respectively.

The following sections or provisions were either not incorporated

or they were incorporated but modified as discussed below.

Section 570.500--Definitions. This section has not been

incorporated. The definition of program income applicable to the ICDBG

program is set forth in Sec. 953.503. As discussed above, the

definition of subrecipient is set forth in Sec. 953.4.

Section 570.501--Responsibility for grant administration. This

section, with appropriate modifications to meet the requirements of the

ICDBG program, has been incorporated as Sec. 953.500.

Section 570.502--Applicability of uniform administrative

requirements. This section, with the following modifications, has been

incorporated into Sec. 953.501.

1. Reference to the program income requirements of 24 CFR 85.25 (as

modified by Sec. 953.503) is included in Sec. 953.501 as paragraph (7).

Reference to this section of part 85 is not included in Sec. 570.501

since there are different statutory program income requirements for the

CDBG program, as discussed above in the response to the comment

submitted regarding these requirements. Given the inclusion of a

paragraph referencing Sec. 85.25, the number of paragraphs in

Sec. 953.501 is 21 as compared to 20 in Sec. 570.502.

2. The language of paragraph (a)(12) has been incorporated in

Sec. 953.501(a)(13) and additional language has been added so that the

alternatives to the payment and performance bonding requirements of

Sec. 85.36(b) which are acceptable to HUD for the ICDBG program are

stated. These acceptable alternatives will allow grantees increased

flexibility to adequately ensure performance and payment by a

contractor while at the same time allowing the grantee to more easily

meet its other obligations and responsibilities under the rule.

3. The language of paragraph (a)(16) has been incorporated in

Sec. 953.501(a)(17) and has been added to by stating the starting date

for record retention requirements.

Section 570.504--Program income. This section has not been

incorporated in Sec. 953.501.

Section 570.505--Records to be maintained. This section has been

incorporated, in a highly modified form, in Sec. 953.505. Section

953.505 merely states that each grantee shall establish and maintain

sufficient records to enable HUD to determine whether or not it has met

the requirements of this part. A grantee guidance document which will

recommend specific records to be maintained will be issued by HUD in

the near future.

Section 570.507--Reports. This section has been incorporated, in a

modified form, as Sec. 953.506. The modifications include the deletion

of inapplicable performance reporting requirements and the relocation

to this section of the requirements of Sec. 953.700--Reports to be

submitted of the interim rule. In addition to this relocation, specific

timing requirements for the submission of the status and evaluation

reports has been added.

Section 570.510--Transferring projects from urban counties to

metropolitan cities. Section 570.513--Lump sum drawdown for financing

of property rehabilitation. These two sections have not been

incorporated. It is to be noted that lump sum drawdowns are authorized

under subsection (h) of section 104 of Title I of the 1974 Act. This

subsection was not stated in section 913 of the National Affordable

Housing Act of 1990 as being applicable to the CDBG Program for Indian

tribes.

The provisions of the following sections of subpart F of the

interim rule (with modifications discussed below) have been

incorporated into the final rule as follows.

------------------------------------------------------------------------

Interim rule Final rule

------------------------------------------------------------------------

Sec. 953.502--Force account construction.................. Sec. 953.5

09

Sec. 953.503--Indian preference........................... Sec. 953.5

10

Sec. 953.505--Program income.............................. Sec. 953.5

03

------------------------------------------------------------------------

The following modifications have been made to these sections.

Force account construction--The last sentence in paragraph (e)

regarding the approval of alternative requirements in lieu of bonding

has been deleted. As discussed above, acceptable alternatives to

performance and payment bonding are set forth in Sec. 953.501(a)(13).

Indian preference--This section has been revised in the following

ways.

1. Inaccuracies in certain referenced definitions in the interim

rule have been corrected.

2. A definition of ``Indian'' as this word is defined in the Indian

Self-Determination and Education Assistance Act (25 U.S.C. 450 b) has

been included.

3. Paragraph (e), Additional Indian preference requirements is

being deleted since its provisions have never been used and, upon

analysis, it did not appear to be meaningful or necessary.

4. A new paragraph (e) Complaint procedures in which the specific

process to be followed is clarified and in which the grantee is

identified as the final arbiter has been added.

Program income--The basis for the changes to this section and the

changes themselves are addressed above in the section Specific

Comments.

Subpart G--Other Program Requirements

In Sec. 953.600 of the interim rule it is stated that the following

requirements of 24 CFR Part 570, subpart K apply to grants under the

ICDBG Program:

Sec. 570.605--National Flood Insurance Program

Sec. 570.608--Lead-based paint

Sec. 570.609--Use of debarred, suspended or ineligible contractors

or subrecipients

Sec. 570.610--Uniform administrative cost principles

A review of these requirements with the intent of incorporating

them in their entirety into the ICDBG rule resulted in the following

determinations.

Section 570.605--National flood insurance program. This section was

not incorporated into the final rule since it duplicates the

requirements of 24 CFR 58.6(a) in which grantee responsibilities under

the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001--4128) are

set forth.

[[Page 40090]]

Section 570.608--Lead-based paint. The language of this section was

modified prior to incorporation to reflect the current policies of the

Department. The modifications were based on recommendations from HUD's

Office of Lead-Based Paint Abatement and Poisoning Prevention. These

requirements are set forth in Sec. 953.607. The Department, however,

has published a proposed regulation to implement the Residential Lead-

Based Paint Hazard Reduction Act of 1992, Title X of the Housing and

Community Development Act of 1992 (Pub. L. 102-550). The June 7, 1996

regulation will substantially alter the lead-based paint requirements

for all HUD programs including the CDBG Program for Indian Tribes and

Alaska Native Villages.

Section 570.609--Use of debarred, suspended or ineligible

contractors or subrecipients. It was determined that the incorporation

of this section would not be completely appropriate without significant

modifications. Instead of modifying this section so that its provisions

better fit the ICDBG Program, the provisions and requirements from the

Indian HOME Program regulations which address these responsibilities

will be incorporated into the final rule since the requirements for

both programs are the same. Therefore, the requirements which govern

the use of debarred, suspended or ineligible contractors or

subrecipients in the final rule (now Sec. 953.608) are the same as

those for the Indian HOME Program.

Section 570.610--Uniform administrative cost principles. This

section was not incorporated into the final rule. It was determined

that it duplicated the requirements set forth in Sec. 953.501--

Applicability of uniform administrative requirements and cost

principles.

Section 953.602--Relocation and real property acquisition. The

language of this section was revised to reflect current policies and

terminology used by the Department with respect to relocation and real

property acquisition activities related to or funded by programs under

the Act.

Section 953.605--Environment. This section was revised to

explicitly reference the flood insurance, coastal barrier resource and

airport clear zone requirements found at 24 CFR 58.6 and to correctly

identify the title of 24 CFR part 58.

Section 953.606--Conflict of interest. The references in subsection

(a) to the applicability of OMB Circular A-110 have been deleted and

replaced with a reference to 24 CFR 84.42; part 84 has superseded OMB

Circular A-110.

Subpart H--Program Performance

Section 953.700--Reports to be submitted by grantee. As stated

above, reporting requirements for ICDBG grantees have been consolidated

under Sec. 953.507. With the deletion of this section, all subsequent

sections in this subpart have been re-numbered.

Section 953.701--Corrective and remedial actions. Paragraph (b)(3)

of this section (formerly Sec. 953.702) has been deleted since

certifications of compliance are no longer used in the ICDBG program.

Other Matters

Executive Order 12866

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

(OMB) under Executive Order 12866 on Regulatory Planning and Review,

issued by the President on September 30, 1993. Any changes made in this

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

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

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

SW., Washington, DC.

National Environmental Policy Act

A Finding of No Significant Impact with respect to the environment

was made in accordance with HUD regulations at 24 CFR Part 50, which

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

1969, when the July 27, 1994 interim rule was issued. Because no

significant changes have been made that would pertain to the

environment, that finding applies to this final rule. The Finding of No

Significant Impact is available for public inspection between 7:30 a.m.

and 5:30 p.m. weekdays in the Office of the Rules Docket Clerk at the

above address.

Regulatory Flexibility

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

establishes criteria for funding eligible grantees among Indian Tribes/

Villages and has no impact on small entities.

Executive Order 12612, Federalism

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

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

contained in this rule would 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. While the rule has

some direct effects on States and political subdivisions, those effects

are limited to direct implementation of instructions contained in

statutes governing the grant program. Given the lack of discretion in

the Department to refrain from implementing these statutory

instructions, further analysis of federalism concerns would serve no

useful purpose.

Executive Order 12606, The Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule would not have

potential for significant impact on family formation, maintenance, and

general well-being, and, thus, is not subject to review under the

Order.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number is

14.862.

List of Subjects in 24 CFR Part 953

Alaska, Community development block grants, Grant programs--housing

and community development, Indians, Reporting and recordkeeping

requirements.

Accordingly, 24 CFR Part 953 is revised to read as follows:

PART 953--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND

ALASKA NATIVE VILLAGES

Subpart A--General Provisions

Sec.

953.1 Applicability and scope.

953.2 Program objective.

953.3 Nature of program.

953.4 Definitions.

953.5 Eligible applicants.

953.6 Waivers.

Subpart B--Allocation of Funds

953.100 General.

953.101 Area ONAP allocation of funds.

953.102 Use of recaptured and unawarded funds.

Subpart C--Eligible Activities

953.200 General policies.

953.201 Basic eligible activities.

953.202 Eligible rehabilitation and preservation activities.

953.203 Special economic development activities.

953.204 Special activities by Community-Based Development

Organizations (CBDOs).

[[Page 40091]]

953.205 Eligible planning, urban environmental design and policy-

planning-management-capacity building activities.

953.206 Program administration costs.

953.207 Ineligible activities.

953.208 Criteria for compliance with the primary objective.

Subpart D--Single Purpose Grant Application and Selection Process

953.300 Application requirements.

953.301 Selection process.

953.302 Project specific threshold requirements.

953.303 Project rating categories.

953.304 Funding process.

953.305 Program amendments.

Subpart E--Imminent Threat Grants

953.400 Criteria for funding.

953.401 Application process.

953.402 Availability of funds.

Subpart F--Grant Administration

953.500 Responsibility for grant administration.

953.501 Applicability of uniform administrative requirements and

cost principles.

953.502 Agreements with subrecipients.

953.503 Program income.

953.504 Use of real property.

953.505 Records to be maintained.

953.506 Reports.

953.507 Public access to program records.

953.508 Grant closeout procedures.

953.509 Force account construction.

953.510 Indian preference requirements.

953.511 Use of escrow accounts for rehabilitation of privately

owned residential property.

Subpart G--Other Program Requirements

953.600 Constitutional prohibition.

953.601 Nondiscrimination.

953.602 Relocation and real property acquisition.

953.603 Labor standards.

953.604 Citizen participation.

953.605 Environment.

953.606 Conflict of interest.

953.607 Lead-based paint.

953.608 Debarment and suspension.

Subpart H--Program Performance

953.700 Review of grantee's performance.

953.701 Corrective and remedial actions.

953.702 Reduction or withdrawal of grant.

953.703 Other remedies for noncompliance.

Authority: 42 U.S.C. 3535(d) and 5301 et seq.

Subpart A--General Provisions

Sec. 953.1 Applicability and scope.

The policies and procedures described in this part apply to grants

to eligible applicants under the Community Development Block Grant

(CDBG) program for Indian tribes and Alaska native villages.

Sec. 953.2 Program objective.

The primary objective of the Indian CDBG (ICDBG) Program and of the

community development program of each grantee covered under the Act is

the development of viable Indian and Alaska native communities,

including decent housing, a suitable living environment, and economic

opportunities, principally for persons of low and moderate income. The

Federal assistance provided in this part is not to be used to reduce

substantially the amount of tribal financial support for community

development activities below the level of such support before the

availability of this assistance.

Sec. 953.3 Nature of program.

The selection of single purpose grantees under subpart B of this

part is competitive in nature. Therefore, selection of grantees for

funds will reflect consideration of the relative adequacy of

applications in addressing tribally determined need. The selection of

grantees of imminent threat grants under the provisions of subpart B of

this part is not competitive in nature. However, applicants for funding

under either subpart must have the administrative capacity to undertake

the community development activities proposed, including the systems of

internal control necessary to administer these activities effectively

without fraud, waste, or mismanagement.

Sec. 953.4 Definitions.

Act means Title I of the Housing and Community Development Act of

1974, as amended (42 U.S.C. 5301 et seq.)

Area ONAPs mean the HUD Offices of Native American Programs having

field office responsibility for the ICDBG Program.

Assistant Secretary means the Assistant Secretary for Public and

Indian Housing.

Buildings for the general conduct of government mean office

buildings and other facilities in which the legislative, judicial or

general administrative affairs of the government are conducted. This

term does not include such facilities as neighborhood service centers

or special purpose buildings located in low and moderate income areas

that house various non-legislative functions or services provided by

the government at decentralized locations.

Chief executive officer means the elected official or legally

designated official who has the prime responsibility for the conduct of

the affairs of an Indian tribe or Alaska native village.

Eligible Indian population means the most accurate and uniform

population data available from data compiled and published by the

United States Bureau of the Census available from the latest census

referable to the same point or period of time for Indian tribes and

Alaska native villages eligible under this part.

Extent of overcrowded housing means the number of housing units

with 1.01 or more persons per room, based on data compiled and

published by the United States Bureau of the Census available from the

latest census referable to the same point or period of time.

Extent of poverty means the number of persons whose incomes are

below the poverty level, based on data compiled and published by the

United States Bureau of the Census referable to the same point or

period in time and the latest reports from the Office of Management and

Budget.

HUD means the Department of Housing and Urban Development.

ICDBG Program means the Indian Community Development Block Grant

Program.

Identified service area means:

(1) A geographic location within the jurisdiction of a tribe (but

not the entire jurisdiction) designated in comprehensive plans,

ordinances, or other tribal documents as a service area;

(2) The Bureau of Indian Affairs (BIA) service area, including

residents of areas outside the geographic jurisdiction of the tribe; or

(3) The entire area under the jurisdiction of a tribe which has a

population of members of under 10,000.

Imminent threat means a problem which if unresolved or not

addressed will have an immediate negative impact on public health or

safety.

Low and moderate income beneficiary means a family, household, or

individual whose income does not exceed 80 percent of the median income

for the area, as determined by HUD, with adjustments for smaller and

larger households or families. However, HUD may establish income

ceilings higher or lower than 80 percent of the median for the area on

the basis of HUD's findings that such variations are necessary because

of unusually high or low household or family incomes. In reporting

income levels to HUD, the applicant must include and identify the

distributions of tribal or village income to families, households, or

individuals.

Microenterprise means a business that has five or fewer employees,

one or more of whom owns the enterprise.

Secretary means the Secretary of HUD.

Small business means a business that meets the criteria set forth

in section 3(a) of the Small Business Act (15 U.S.C. 631, 636, and

637).

Subrecipient means a public or private nonprofit agency, authority

or organization, or a for-profit entity

[[Page 40092]]

described in Sec. 953.201(o), receiving ICDBG funds from the grantee or

another subrecipient to undertake activities eligible for assistance

under subpart C of this part. The term excludes a CBDO receiving ICDBG

funds from the grantee under the authority of Sec. 953.204, unless the

grantee explicitly designates it as a subrecipient. The term does not

include contractors providing supplies, equipment, construction or

services subject to the procurement requirements in 24 CFR 85.36 or in

24 CFR Part 84, as applicable.

Tribal government, Tribal governing body or Tribal council means

the governing body of an Indian tribe or Alaska native village as

recognized by the Bureau of Indian Affairs.

Tribal resolution means the formal manner in which the tribal

government expresses its legislative will in accordance with its

organic documents. In the absence of such organic documents, a written

expression adopted pursuant to tribal practices will be acceptable.

URA means the Uniform Relocation and Real Property Acquisition

Policies Act of 1970, as amended (42 U.S.C. 4601 et. seq.).

Sec. 953.5 Eligible applicants.

(a) Eligible applicants are any Indian tribe, band, group, or

nation, including Alaska Indians, Aleuts, and Eskimos, and any Alaska

native village of the United States which is considered an eligible

recipient under Title I of the Indian Self-Determination and Education

Assistance Act (25 U.S.C. 450) or which had been an eligible recipient

under the State and Local Fiscal Assistance Act of 1972 (31 U.S.C.

1221). Eligible recipients under the Indian Self-Determination and

Education Assistance Act will be determined by the Bureau of Indian

Affairs and eligible recipients under the State and Local Fiscal

Assistance Act of 1972 are those that have been determined eligible by

the Department of Treasury, Office of Revenue Sharing.

(b) Tribal organizations which are eligible under Title I of the

Indian Self-Determination and Education Assistance Act may apply on

behalf of any Indian tribe, band, group, nation, or Alaska native

village eligible under that act for funds under this part when one or

more of these entities have authorized the tribal organization to do so

through concurring resolutions. Such resolutions must accompany the

application for funding. Eligible tribal organizations under Title I of

the Indian Self-Determination and Education Assistance Act will be

determined by the Bureau of Indian Affairs or the Indian Health

Service, as appropriate.

(c) To apply for funding in a given fiscal year, an applicant must

be eligible as an Indian tribe or Alaska native village, as provided in

paragraph (a) of this section, or as a Tribal organization, as provided

in paragraph (b) of this section, by the application submission date.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.6 Waivers.

Upon determination of good cause, HUD may waive any provision of

this part not required by statute. Each waiver must be in writing and

must be supported by documentation of the pertinent facts and grounds.

Subpart B--Allocation of Funds

Sec. 953.100 General.

(a) Types of grants. Two types of grants are available under the

Indian CDBG Program.

(1) Single purpose grants provide funds for one or more single

purpose projects consisting of an activity or set of activities

designed to meet a specific community development need. This type of

grant is awarded through competition with other single purpose

projects.

(2) Imminent threat grants alleviate an imminent threat to public

health or safety that requires immediate resolution. This type of grant

is awarded only after an Area ONAP determines that such conditions

exist and if funds are available for such grants.

(b) Size of grants.--(1) Ceilings. Each Area ONAP may recommend

grant ceilings for single purpose grant applications. Single purpose

grant ceilings for each Area ONAP shall be established in the NOFA

(Notice of Funding Availability).

(2) Individual grant amounts. An Area ONAP may approve a grant

amount less than the amount requested. In doing so, the Area ONAP may

take into account the size of the applicant, the level of demand, the

scale of the activity proposed relative to need and operational

capacity, the number of persons to be served, the amount of funds

required to achieve project objectives and the administrative capacity

of the applicant to complete the activities in a timely manner.

Sec. 953.101 Area ONAP allocation of funds.

(a) Except as provided in paragraph (b) of this section, funds will

be allocated to the Area ONAPs responsible for the program on the

following basis:

(1) Each Area ONAP will be allocated $1,000,000 as a base amount,

to which will be added a formula share of the balance of the ICDBG

Program funds, as provided in paragraph (a)(2) of this section.

(2) The amount remaining after the base amount is allocated and any

amount retained by the Headquarters ONAP to fund imminent threat grants

pursuant to the provisions of Sec. 953.402 is subtracted, will be

allocated to each Area ONAP based on the most recent data complied and

published by the United States Bureau of the Census referable to the

same point or period in time, as follows:

(i) Forty percent (40%) of the funds will be allocated based upon

each Area ONAP's share of the total eligible Indian population;

(ii) Forty percent (40%) of the funds will be allocated based upon

each Area ONAP's share of the total extent of poverty among the

eligible Indian population; and

(iii) Twenty percent (20%) of the funds will be allocated based

upon each Area ONAP's share of the total extent of overcrowded housing

among the eligible Indian population.

(b) HUD will use other criteria to determine an allocation formula

for distributing funds to the Area ONAPs if funds are set aside by

statute for a specific purpose in any fiscal year if it is determined

that the formula in paragraph (a) of this section is inappropriate to

accomplish the purpose. HUD will use other criteria if it is determined

that, based on a limited appropriation of funds, the use of the formula

in paragraph (a) of this section is inappropriate to obtain an

equitable allocation of funds.

(c) Data used for the allocation of funds will be based upon the

Indian population of those tribes and villages that are determined to

be eligible ninety (90) days before the beginning of each fiscal year.

Sec. 953.102 Use of recaptured and unawarded funds.

(a) The Assistant Secretary will determine on a case-by-case basis

the use of grant funds which are:

(1) Recaptured by HUD under the provisions of Sec. 953.703 or

Sec. 953.704;

(2) Recaptured by HUD at the time of the closeout of a program; or

(3) Unawarded after the completion by an Area ONAP of a funding

competition.

(b) The recaptured or unawarded funds will remain with the Area

ONAP to which they were originally allocated unless the Assistant

Secretary determines that there is an overriding

[[Page 40093]]

reason to redistribute these funds outside of the Area ONAP's

jurisdiction. The recaptured funds may be used to fund the highest

ranking unfunded project from the most recent funding competition, an

imminent threat, or other uses. Unawarded funds may be used to fund an

imminent threat or other uses.

Subpart C--Eligible Activities

Sec. 953.200 General policies.

An activity may be assisted in whole or in part with ICDBG funds

only if the activity meets the eligibility requirements of section 105

of the Act as further defined in this subpart and if the criteria for

compliance with the primary objective of the Act set forth under

Sec. 953.208 have been met. The requirements for compliance with the

primary objective of the Act do not apply to imminent threat grants

funded under subpart E of this part.

Sec. 953.201 Basic eligible activities.

ICDBG funds may be used for the following activities:

(a) Acquisition. Acquisition in whole or in part by the grantee, or

other public or private nonprofit entity, by purchase, long-term lease,

donation, or otherwise, of real property (including air rights, water

rights, rights-of-way, easements, and other interests therein) for any

public purpose, subject to the limitations of Sec. 953.207.

(b) Disposition. Disposition, through sale, lease, donation, or

otherwise, of any real property acquired with ICDBG funds or its

retention for public purposes, including reasonable costs of

temporarily managing such property or property acquired under urban

renewal, provided that the proceeds from any such disposition shall be

program income subject to the requirements set forth in Sec. 953.503.

(c) Public facilities and improvements. Acquisition, construction,

reconstruction, rehabilitation or installation of public facilities and

improvements, except as provided in Sec. 953.207(a), carried out by the

grantee or other public or private nonprofit entities. In undertaking

such activities, design features and improvements which promote energy

efficiency may be included. [However, activities under this paragraph

may be directed to the removal of material and architectural barriers

that restrict the mobility and accessibility of elderly or severely

disabled persons to publicly owned and privately owned buildings,

facilities, and improvements including those provided for in

Sec. 953.207(a)(1).] Such activities may also include the execution of

architectural design features, and similar treatments intended to

enhance the aesthetic quality of facilities and improvements receiving

ICDBG assistance. Facilities designed for use in providing shelter for

persons having special needs are considered public facilities and not

subject to the prohibition of new housing construction described in

Sec. 953.207(b)(3). Such facilities include shelters for the homeless;

convalescent homes; hospitals, nursing homes; battered spouse shelters;

halfway houses for run-away children, drug offenders or parolees; group

homes for mentally retarded persons and temporary housing for disaster

victims. In certain cases, nonprofit entities and subrecipients

including those specified in Sec. 953.204 may acquire title to public

facilities. When such facilities are owned by nonprofit entities or

subrecipients, they shall be operated so as to be open for use by the

general public during all normal hours of operation. Public facilities

and improvements eligible for assistance under this paragraph (c) are

subject to the following policies in paragraphs (c)(1) through (c)(3)

of this section:

(1) Special policies governing facilities. The following special

policies apply to:

(i) Facilities containing both eligible and ineligible uses. A

public facility otherwise eligible for assistance under the ICDBG

program may be provided with ICDBG funds even if it is part of a

multiple use building containing ineligible uses, if:

(A) The facility which is otherwise eligible and proposed for

assistance will occupy a designated and discrete area within the larger

facility; and

(B) The grantee can determine the costs attributable to the

facility proposed for assistance as separate and distinct from the

overall costs of the multiple-use building and/or facility. Allowable

costs are limited to those attributable to the eligible portion of the

building or facility.

(ii) Equipment purchase. As stated in Sec. 953.207(b)(1), the

purchase of equipment with ICDBG funds is generally ineligible.

However, the purchase of construction equipment for use as part of a

solid waste facility is eligible. In addition, the purchase of fire

protection equipment is considered to be an integral part of a public

facility, and, therefore, the purchase of such equipment is also

eligible.

(2) Fees for use of facilities. Reasonable fees may be charged for

the use of the facilities assisted with ICDBG funds, but charges such

as excessive membership fees, which will have the effect of precluding

low and moderate income persons from using the facilities, are not

permitted.

(3) Special assessments under the ICDBG program. The following

policies relate to special assessments under the ICDBG program:

(i) Definition of special assessment. The term special assessment

means the recovery of the capital costs of a public improvement, such

as streets, water or sewer lines, curbs, and gutters, through a fee or

charge levied or filed as a lien against a parcel of real estate as a

direct result of benefit derived from the installation of a public

improvement, or a one-time charge made as a condition of access to a

public improvement. This term does not relate to taxes, or the

establishment of the value of real estate for the purpose of levying

real estate, property, or ad valorem taxes, and does not include

periodic charges based on the use of a public improvement, such as

water or sewer user charges, even if such charges include the recovery

of all or some portion of the capital costs of the public improvement.

(ii) Special assessments to recover capital costs. Where ICDBG

funds are used to pay all or part of the cost of a public improvement,

special assessments may be imposed as follows:

(A) Special assessments to recover the ICDBG funds may be made only

against properties owned and occupied by persons not of low and

moderate income. Such assessments constitute program income.

(B) Special assessments to recover the non-ICDBG portion may be

made provided that ICDBG funds are used to pay the special assessment

on behalf of all properties owned and occupied by low and moderate

income persons; except that ICDBG funds need not be used to pay the

special assessments on behalf of properties owned and occupied by

moderate income persons if the grantee certifies that it does not have

sufficient ICDBG funds to pay the assessments in behalf of all of the

low and moderate income owner-occupant persons. Funds collected through

such special assessments are not program income.

(iii) Public improvements not initially assisted with ICDBG funds.

The payment of special assessments with ICDBG funds constitutes ICDBG

assistance to the public improvement. Therefore, ICDBG funds may be

used to pay special assessments provided:

(A) The installation of the public improvements was carried out in

compliance with requirements applicable to activities assisted under

this part including environmental and citizen participation

requirements; and

[[Page 40094]]

(B) The installation of the public improvement meets a criterion

for the primary objective in Sec. 953.208; and,

(C) The requirements of Sec. 953.201(c)(3)(ii))(B) are met.

(d) Clearance activities. Clearance, demolition, and removal of

buildings and improvements, including movement of structures to other

sites. Demolition of HUD-assisted housing units may be undertaken only

with the prior approval of HUD.

(e) Public services. Provision of public services (including labor,

supplies, materials, and the purchase of personal property and

furnishings) which are directed toward improving the community's public

services and facilities, including but not limited to those concerned

with employment, crime prevention, child care, health, drug abuse,

education, fair housing counseling, energy conservation, welfare (but

excluding the provision of income payments identified under

Sec. 953.207(b)(4)), homebuyer downpayment assistance or recreational

needs. To be eligible for ICDBG assistance, a public service must be

either a new service, or a quantifiable increase in the level of an

existing service above that which has been provided by or on behalf of

the grantee through funds raised by the grantee, or received by the

grantee from the Federal government in the twelve calendar months

before the submission of the application for ICDBG assistance. (An

exception to this requirement may be made if HUD determines that any

decrease in the level of a service was the result of events not within

the control of the grantee.) The amount of ICDBG funds used for public

services shall not exceed 15 percent of the grant. Such projects must

therefore be submitted with one or more other projects, which must

comprise at least 85 percent of the total requested ICDBG grant amount.

(f) Interim assistance. (1) The following activities may be

undertaken on an interim basis in areas exhibiting objectively

determinable signs of physical deterioration where the grantee has

determined that immediate action is necessary to arrest the

deterioration and that permanent improvements will be carried out as

soon as practicable:

(i) The repairing of streets, sidewalks, parks, playgrounds,

publicly owned utilities, and public buildings; and

(ii) The execution of special garbage, trash, and debris removal,

including neighborhood cleanup campaigns, but not the regular curbside

collection of garbage or trash in an area.

(2) In order to alleviate emergency conditions threatening the

public health and safety in areas where the chief executive officer of

the grantee determines that such an emergency condition exists and

requires immediate resolution, ICDBG funds may be used for:

(i) The activities specified in paragraph (f)(1) of this section,

except for the repair of parks and playgrounds;

(ii) The clearance of streets, including snow removal and similar

activities; and

(iii) The improvement of private properties.

(3) All activities authorized under paragraph (f)(2) of this

section are limited to the extent necessary to alleviate emergency

conditions.

(g) Payment of non-Federal share. Payment of the non-Federal share

required in connection with a Federal grant-in-aid program undertaken

as part of ICDBG activities, provided, that such payment shall be

limited to activities otherwise eligible and in compliance with

applicable requirements under this subpart.

(h) Relocation. Relocation payments and other assistance for

permanently and temporarily relocated individuals families, businesses,

nonprofit organizations, and farm operations where the assistance is:

(1) Required under the provisions of Sec. 953.602 (b) or (c); or

(2) Determined by the grantee to be appropriate under the

provisions of Sec. 953.602(d).

(i) Loss of rental income. Payments to housing owners for losses of

rental income incurred in holding, for temporary periods, housing units

to be used for the relocation of individuals and families displaced by

program activities assisted under this part.

(j) Housing services. Housing services, as provided in section

105(a)(21) of the Housing and Community Development Act of 1974 [42

U.S.C. 5305(a)(21)].

(k) Privately owned utilities. ICDBG funds may be used to acquire,

construct, reconstruct, rehabilitate, or install the distribution lines

and facilities of privately owned utilities, including the placing

underground of new or existing distribution facilities and lines.

(l) The provision of assistance to facilitate economic development.

(1) The provision of assistance either through the grantee directly or

through public and private organizations, agencies, and other

subrecipients (including nonprofit and for-profit subrecipients) to

facilitate economic development by:

(i) Providing credit, including, but not limited to, grants, loans,

loan guarantees, and other forms of financial support, for the

establishment, stabilization, and expansion of microenterprises;

(ii) Providing technical assistance, advice, and business support

services to owners of microenterprises and persons developing

microenterprises; and

(iii) Providing general support, including, but not limited to,

peer support programs, counseling, child care, transportation, and

other similar services, to owners of microenterprises and persons

developing microenterprises.

(2) Services provided under paragraph (l)(1) of this section shall

not be subject to the restrictions on public services contained in

Sec. 953.201(e).

(3) For purposes of this paragraph (l), persons developing

microenterprises means such persons who have expressed interest and who

are, or after an initial screening process are expected to be, actively

working toward developing businesses, each of which is expected to be a

microenterprise at the time it is formed.

(m) Technical assistance. Provision of technical assistance to

public or nonprofit entities to increase the capacity of such entities

to carry out eligible neighborhood revitalization or economic

development activities. Capacity building for private or public

entities (including grantees) for other purposes may be eligible as a

planning cost under Sec. 953.205.

(n) Assistance to institutions of higher education. Provision of

assistance by the grantee to institutions of higher education where the

grantee determines that such an institution has demonstrated a capacity

to carry out eligible activities under this subpart.

(o) Homeownership assistance. ICDBG funds may be used to provide

direct homeownership assistance to low- and moderate-income households

to:

(1) Subsidize interest rates and mortgage principal amounts for

low-and moderate-income homebuyers;

(2) Finance the acquisition by low-and moderate-income homebuyers

of housing that is occupied by the homebuyers;

(3) Acquire guarantees for mortgage financing obtained by low-and

moderate-income homebuyers form private lenders (except that ICDBG

funds may not be used to guarantee such mortgage financing directly,

and grantees may not provide such guarantees directly);

(4) Provide up to 50 percent of any downpayment required from a

low-and moderate-income homebuyer; or

(5) Pay reasonable closing costs (normally associated with the

purchase of a home) incurred by a low-or moderate-income homebuyer.

[[Page 40095]]

Sec. 953.202 Eligible rehabilitation and preservation activities.

(a) Types of buildings and improvements eligible for rehabilitation

or reconstruction assistance. ICDBG funds may be used to finance the

rehabilitation of:

(1) Privately owned buildings and improvements for residential

purposes; improvements to a single-family residential property which is

also used as a place of business, which are required in order to

operate the business, need not be considered to be rehabilitation of a

commercial or industrial building, if the improvements also provide

general benefit to the residential occupants of the building;

(2) Low-income public housing and other publicly owned residential

buildings and improvements;

(3) Publicly or privately owned commercial or industrial buildings,

except that the rehabilitation of such buildings owned by a private

for-profit business is limited to improvements to the exterior of the

building and the correction of code violations (further improvements to

such buildings may be undertaken pursuant to Sec. 953.203(b)); and

(4) Nonprofit-owned nonresidential buildings and improvements not

eligible under Sec. 953.201(c);

(5) Manufactured housing when such housing constitutes part of the

community's permanent housing stock.

(b) Types of assistance. ICDBG funds may be used to finance the

following types of rehabilitation or reconstruction activities, and

related costs, either singly, or in combination, through the use of

grants, loans, loan guarantees, interest supplements, or other means

for buildings and improvements described in paragraph (a) of this

section, except that rehabilitation of commercial or industrial

buildings is limited as described in paragraph (a)(3) of this section.

(1) Assistance to private individuals and entities, including

profit making and nonprofit organizations, to acquire for the purpose

of rehabilitation, and to rehabilitate properties, for use or resale

for residential purposes;

(2) Labor, materials, and other costs of rehabilitation of

properties, including repair directed toward an accumulation of

deferred maintenance, replacement of principal fixtures and components

of existing structures, installation of security devices, including

smoke detectors and dead bolt locks, and renovation through

alterations, additions to, or enhancement of existing structures, which

may be undertaken singly, or in combination;

(3) Loans for refinancing existing indebtedness secured by a

property being rehabilitated with ICDBG funds if such financing is

determined by the grantee to be necessary or appropriate to achieve the

grantee's community development objectives;

(4) Improvements to increase the efficient use of energy in

structures through such means as installation of storm windows and

doors, siding, wall and attic insulation, and conversion, modification,

or replacement of heating and cooling equipment, including the use of

solar energy equipment;

(5) Improvements to increase the efficient use of water through

such means as water saving faucets and shower heads and repair of water

leaks;

(6) Connection of residential structures to water distribution

lines or local sewer collection lines;

(7) For rehabilitation carried out with ICDBG funds, costs of:

(i) Initial homeowner warranty premiums;

(ii) Hazard insurance premiums, except where assistance is provided

in the form of a grant; and

(iii) Flood insurance premiums for properties covered by the Flood

Disaster Protection Act of 1973, pursuant to 24 CFR 58.6(a).

(iv) Procedures concerning inspection and testing for and treatment

and abatement of defective paint surfaces and lead-based paint,

pursuant to Sec. 953.607.

(8) Costs of acquiring tools to be lent to owners, tenants, and

others who will use such tools to carry out rehabilitation;

(9) Rehabilitation services, such as rehabilitation counseling,

energy auditing, preparation of work specifications, loan processing,

inspections, and other services related to assisting owners, tenants,

contractors, and other entities, participating or seeking to

participate in rehabilitation activities authorized under this section;

(10) Improvements designed to remove material and architectural

barriers that restrict the mobility and accessibility of elderly or

severely disabled persons to buildings and improvements eligible for

assistance under paragraph (a) of this section.

(c) Code enforcement. Code enforcement in deteriorating or

deteriorated areas where such enforcement together with public or

private improvements, rehabilitation, or services to be provided, may

be expected to arrest the decline of the area.

(d) Historic preservation. ICDBG funds may be used for the

rehabilitation, preservation or restoration of historic properties,

whether publicly or privately owned. Historic properties are those

sites or structures that are either listed in or eligible to be listed

in the National Register of Historic Places, listed in a State or local

inventory of historic places, or designated as a State or local

landmark or historic district by appropriate law or ordinance. Historic

preservation, however, is not authorized for buildings for the general

conduct of government.

(e) Renovation of closed buildings. ICDBG funds may be used to

renovate closed buildings, such as closed school buildings, for use as

an eligible public facility or to rehabilitate such buildings for

housing.

Sec. 953.203 Special economic development activities.

A grantee may use ICDBG funds for special economic development

activities in addition to other activities authorized in this subpart

which may be carried out as part of an economic development project.

Special activities authorized under this section do not include

assistance for the construction of new housing. Special economic

development activities include:

(a) The acquisition, construction, reconstruction, rehabilitation

or installation of commercial or industrial buildings, structures, and

other real property equipment and improvements, including railroad

spurs or similar extensions. Such activities may be carried out by the

grantee or public or private nonprofit subrecipients.

(b) The provision of assistance to a private for-profit business,

including, but not limited to, grants, loans, loan guarantees, interest

supplements, technical assistance, and other forms of support, for any

activity where the assistance is necessary or appropriate to carry out

an economic development project, excluding those described as

ineligible in Sec. 953.207(a). In order to ensure that any such

assistance does not unduly enrich the for-profit business, the grantee

shall conduct an analysis to determine that the amount of any financial

assistance to be provided is not excessive, taking into account the

actual needs of the business in making the project financially feasible

and the extent of public benefit expected to be derived from the

economic development project. The grantee shall document the analysis

as well as any factors it considered in making its determination that

the assistance is necessary or appropriate to carry out the project.

The requirement for making such a determination applies whether the

business is to receive assistance from the grantee or through a

subrecipient.

[[Page 40096]]

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.204 Special activities by Community-Based Development

Organizations (CBDOs).

(a) Eligible activities. The grantee may provide ICDBG funds as

grants or loans to any CBDO qualified under this section to carry out a

neighborhood revitalization, community economic development, or energy

conservation project. The funded project activities may include those

listed as eligible under this subpart, and, except as described in

paragraph (b) of this section, activities not otherwise listed as

eligible under this subpart. For purposes of qualifying as a project

under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded

activity or activities may be considered either alone or in concert

with other project activities either being carried out or for which

funding has been committed. For purposes of this section:

(1) Neighborhood revitalization project includes activities of

sufficient size and scope to have an impact on the decline of a

geographic location within the jurisdiction of a grantee (but not the

entire jurisdiction) designated in comprehensive plans, ordinances, or

other local documents as a neighborhood, village, or similar

geographical designation; or the entire jurisdiction of a grantee which

is under 25,000 population;

(2) Community economic development project includes activities that

increase economic opportunity, principally for persons of low- and

moderate-income, or that stimulate or retain businesses or permanent

jobs, including projects that include one or more such activities that

are clearly needed to address a lack of affordable housing accessible

to existing or planned jobs;

(3) Energy conservation project includes activities that address

energy conservation, principally for the benefit of the residents of

the grantee's jurisdiction; and

(4) To carry out a project means that the CBDO undertakes the

funded activities directly or through contract with an entity other

than the grantee, or through the provision of financial assistance for

activities in which it retains a direct and controlling involvement and

responsibilities.

(b) Ineligible activities. Notwithstanding that CBDOs may carry out

activities that are not otherwise eligible under this subpart, this

section does not authorize:

(1) Carrying out an activity described as ineligible in

Sec. 953.207(a);

(2) Carrying out public services that do not meet the requirements

of Sec. 953.201(e), except services carried out under this section that

are specifically designed to increase economic opportunities through

job training and placement and other employment support services,

including, but not limited to, peer support programs, counseling, child

care, transportation, and other similar services;

(3) Carrying out an activity that would otherwise be eligible under

Sec. 953.205 or Sec. 953.206, but that would result in the grantee's

exceeding the spending limitation in Sec. 953.206.

(c) Eligible CBDOs. (1) A CBDO qualifying under this section is an

organization which has the following characteristics:

(i) Is an association or corporation organized under State or local

law to engage in community development activities (which may include

housing and economic development activities) primarily within an

identified geographic area of operation within the jurisdiction of the

grantee; and

(ii) Has as its primary purpose the improvement of the physical,

economic or social environment of its geographic area of operation by

addressing one or more critical problems of the area, with particular

attention to the needs of persons of low and moderate income; and

(iii) May be either non-profit or for-profit, provided any monetary

profits to its shareholders or members must be only incidental to its

operations; and

(iv) Maintains at least 51 percent of its governing body's

membership for low- and moderate-income residents of its geographic

area of operation, owners or senior officers of private establishments

and other institutions located in and serving its geographic area of

operation, or representatives of low- and moderate-income neighborhood

organizations located in its geographic area of operation; and

(v) Is not an agency or instrumentality of the grantee and does not

permit more than one-third of the membership of its governing body to

be appointed by, or to consist of, elected or other public officials or

employees or officials of an ineligible entity (even though such

persons may be otherwise qualified under paragraph (c)(1)(iv) of this

section); and

(vi) Except as otherwise authorized in paragraph (c)(1)(v) of this

section, requires the members of its governing body to be nominated and

approved by the general membership of the organization, or by its

permanent governing body; and

(vii) Is not subject to requirements under which its assets revert

to the grantee upon dissolution; and

(viii) Is free to contract for goods and services from vendors of

its own choosing.

(2) A CBDO that does not meet the criteria in paragraph (c)(1) of

this section may also qualify as an eligible entity under this section

if it meets one of the following requirements:

(i) Is an entity organized pursuant to section 301(d) of the Small

Business Investment Act of 1958 (15 U.S.C. 681(d)), including those

which are profit making; or

(ii) Is an SBA-approved Section 501 State Development Company or

Section 502 Local Development Company, or an SBA Certified Section 503

Company under the Small Business Investment Act of 1958, as amended; or

(iii) Is a Community Housing Development Organization (CHDO) under

24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships

program participating jurisdiction, with a geographic area of operation

of no more than one neighborhood, and has received HOME funds under 24

CFR 92.300 or is expected to receive HOME funds as described in and

documented in accordance with 24 CFR 92.300(e); or

(iv) Is a tribal-based nonprofit organization. Such organizations

are associations or corporations duly organized to promote and

undertake community development activities on a not-for-profit basis

within an identified service area.

(3) A CBDO that does not qualify under paragraphs (c)(1) or (2) of

this section may also be determined to qualify as an eligible entity

under this section if the grantee demonstrates to the satisfaction of

HUD, through the provision of information regarding the organization's

charter and by-laws, that the organization is sufficiently similar in

purpose, function, and scope to those entities qualifying under

paragraphs (c)(1) or (2) of this section.

Sec. 953.205 Eligible planning, urban environmental design and

policy-planning-management capacity building activities.

(a) Planning activities which consist of all costs of data

gathering, studies, analysis, and preparation of plans and the

identification of actions that will implement such plans, including,

but not limited to comprehensive plans, community development plans and

functional plans in areas such as housing and economic development. In

addition, other plans and studies such as capital improvements

programs, individual project plans, general

[[Page 40097]]

environmental studies, and strategies and action programs to implement

plans, including the development of codes and ordinances are also

eligible activities. With respect to the costs of individual project

plans, engineering and design costs related to a specific activity are

eligible as part of the cost of such activity under Secs. 953.201

through 953.204 and are not considered planning costs. Also, costs

necessary to comply with the requirements of 24 CFR part 58, including

project specific environmental assessments and clearances for

activities eligible under this part are eligible as part of the cost of

such activities under Secs. 953.201 through 953.204.

(b) Policy--planning--management--capacity building activities

including those which will enable the grantee to determine its needs,

set long term goals and short term objectives, devise programs to meet

these goals and objectives, evaluate the progress being made in

accomplishing the goals and objectives. In addition, actions necessary

to carry out management, coordination and monitoring of activities

necessary for effective planning implementation are eligible planning

activities, however the costs necessary to implement the plans are not.

Sec. 953.206 Program administration costs.

ICDBG funds may be used for the payment of reasonable

administrative costs and carrying charges related to the planning and

execution of community development activities assisted in whole or in

part with funds provided under this part. No more than 20 percent of

the sum of any grant plus program income received shall be expended for

activities described in this section and in Sec. 953.205--Eligible

planning, urban environmental design and policy-planning-management

capacity building activities. This does not include staff and overhead

costs directly related to carrying out activities eligible under

Secs. 953.201 through 953.204, since those costs are eligible as part

of such activities. In addition, technical assistance costs associated

with developing the capacity to undertake a specific funded activity

are also not considered program administration costs. These costs must

not, however, exceed 10% of the total grant award.

(a) General management, oversight and coordination. Reasonable

costs of overall program management, coordination, monitoring, and

evaluation. Such costs include, but are not necessarily limited to,

necessary expenditures for the following:

(1) Salaries, wages, and related costs of the grantee's staff, the

staff of local public agencies, or other staff engaged in program

administration. In charging costs to this category the grantee may

either include the entire salary, wages, and related costs allocable to

the program of each person whose primary responsibilities with regard

to the program involve program administration assignments, or the pro

rata share of the salary, wages, and related costs of each person whose

job includes any program administration assignments. The grantee may

use only one of these methods during the grant period. Program

administration includes the following types of assignments:

(i) Providing tribal officials and citizens with information about

the program;

(ii) Preparing program budgets and schedules, and amendments

thereto;

(iii) Developing systems for assuring compliance with program

requirements;

(iv) Developing interagency agreements and agreements with

subrecipients and contractors to carry out program activities;

(v) Monitoring program activities for progress and compliance with

program requirements;

(vi) Preparing reports and other documents related to the program

for submission to HUD;

(vii) Coordinating the resolution of audit and monitoring findings;

(viii) Evaluating program results against stated objectives; and

(ix) Managing or supervising persons whose primary responsibilities

with regard to the program include such assignments as those described

in paragraph (a)(1) (i) through (viii) of this section.

(2) Travel costs incurred for official business in carrying out the

program;

(3) Administrative services performed under third party contracts

or agreements, including such services as general legal services,

accounting services, and audit services; and

(4) Other costs for goods and services required for administration

of the program, including such goods and services as rental or purchase

of equipment, furnishings, or other personal property (or the payment

of depreciation or use allowances for such items in accordance with OMB

Circulars A-21, A-87 or A-122, as applicable), insurance, utilities,

office supplies, and rental and maintenance (but not purchase) of

office space. (OMB Circulars are available from the Executive Office of

the President, Publication Service, 725 17th Street, N.W., Suite G-

2200, Washington, DC 20503, Telephone, 202-395-7332.)

(b) Public information. The provisions of information and other

resources to residents and citizen organizations participating in the

planning, implementation, or assessment of activities being assisted

with ICDBG funds.

(c) Indirect costs. Indirect costs may be charged to the ICDBG

program under a cost allocation plan prepared in accordance with OMB

Circular A-21, A-87, or A-122 as applicable.

(d) Submission of applications for Federal programs. Preparation of

documents required for submission to HUD to receive funds under the

ICDBG program. In addition, ICDBG funds may be used to prepare

applications for other Federal programs where the grantee determines

that such activities are necessary or appropriate to achieve its

community development objectives.

Sec. 953.207 Ineligible activities.

The general rule is that any activity that is not authorized under

the provisions of Secs. 953.201 through 953.206 is ineligible to be

assisted with ICDBG funds. This section identifies specific activities

that are ineligible and provides guidance in determining the

eligibility of other activities frequently associated with housing and

community development.

(a) The following activities may not be assisted with ICDBG funds:

(1) Buildings or portions thereof used for the general conduct of

government as defined at Sec. 953.4 cannot be assisted with ICDBG

funds. This does not include, however, the removal of architectural

barriers under Sec. 953.201(c) involving any such building. Also, where

acquisition of real property includes an existing improvement which is

to be used in the provision of a building for the general conduct of

government, the portion of the acquisition cost attributable to the

land is eligible, provided such acquisition meets the primary objective

described in Sec. 953.208.

(2) General government expenses. Except as otherwise specifically

authorized in this subpart or under OMB Circular A-87, expenses

required to carry out the regular responsibilities of the grantee are

not eligible for assistance under this part.

(3) Political activities. ICDBG funds shall not be used to finance

the use of facilities or equipment for political purposes or to engage

in other partisan political activities, such as candidate forums, voter

transportation, or voter registration. However, a facility originally

assisted with ICDBG funds may be used on an incidental basis to hold

political meetings, candidate

[[Page 40098]]

forums, or voter registration campaigns, provided that all parties and

organizations have access to the facility on an equal basis, and are

assessed equal rent or use charges, if any.

(b) The following activities may not be assisted with ICDBG funds

unless authorized under provisions of Sec. 953.203 or as otherwise

specifically noted herein, or when carried out by a CBDO under the

provisions of Sec. 953.204.

(1) Purchase of equipment. The purchase of equipment with ICDBG

funds is generally ineligible.

(i) Construction equipment. The purchase of construction equipment

is ineligible, but compensation for the use of such equipment through

leasing, depreciation, or use allowances pursuant to OMB Circular A-21,

A-87 or A-122 as applicable for an otherwise eligible activity is an

eligible use of ICDBG funds.

(ii) Furnishings and personal property. The purchase of equipment,

fixtures, motor vehicles, furnishings, or other personal property not

an integral structural fixture is generally ineligible. Exceptions to

this general prohibition are set forth in Sec. 953.201(o).

(2) Operating and maintenance expenses. The general rule is that

any expense associated with repairing, operating or maintaining public

facilities, improvements and services is ineligible. Specific

exceptions to this general rule are operating and maintenance expenses

associated with public service activities, interim assistance, and

office space for program staff employed in carrying out the ICDBG

program. For example, the use of ICDBG funds to pay the allocable costs

of operating and maintaining a facility used in providing a public

service would be eligible under Sec. 953.201(e), even if no other costs

of providing such a service are assisted with such funds. Examples of

ineligible operating and maintenance expenses are:

(i) Maintenance and repair of streets, parks, playgrounds, water

and sewer facilities, neighborhood facilities, senior centers, centers

for persons with a disability, parking and similar public facilities;

and

(ii) Payment of salaries for staff, utility costs and similar

expenses necessary for the operation of public works and facilities.

(3) New housing construction. ICDBG funds may not be used for the

construction of new permanent residential structures or for any program

to subsidize or assist such new construction, except:

(i) As provided under the last resort housing provisions set forth

in 24 CFR part 42; or

(ii) When carried out by a CBDO pursuant to Sec. 953.204(a);

(4) Income payments. The general rule is that ICDBG funds may not

be used for income payments. For purposes of the ICDBG program, income

payments means a series of subsistence-type grant payments made to an

individual or family for items such as food, clothing, housing (rent or

mortgage) or utilities, but excludes emergency payments made over a

period of up to three months to the provider of such items or services

on behalf of an individual or family.

Sec. 953.208 Criteria for compliance with the primary objective.

The Act establishes as its primary objective the development of

viable communities by providing decent housing and a suitable living

environment and expanding economic opportunities, principally for

persons of low and moderate income. Consistent with this objective, not

less than 70 percent of the expenditures of each single purpose grant

shall be for activities which meet the criteria set forth in paragraphs

(a), (b), (c) and (d) of this section. Activities meeting these

criteria as applicable will be considered to benefit low and moderate

income persons unless there is substantial evidence to the contrary. In

assessing any such evidence, the full range of direct effects of the

assisted activity will be considered. (The grantee shall appropriately

ensure that activities that meet these criteria do not benefit moderate

income persons to the exclusion of low income persons.)

(a) Area benefit activities. (1) An activity, the benefits of which

are available to all the residents in a particular area, where at least

51 percent of the residents are low and moderate income persons. Such

an area need not be coterminous with census tracts or other officially

recognized boundaries but must be the entire area served by the

activity. An activity that serves an area that is not primarily

residential in character shall not qualify under this criterion.

(2) For purposes of determining qualification under this criterion,

activities of the same type that serve different areas will be

considered separately on the basis of their individual service area.

(3) In determining whether there is a sufficiently large percentage

of low and moderate income persons residing in the area served by an

activity to qualify under paragraph (a) (1) or (2) of this section, the

most recently available decennial census information shall be used to

the fullest extent feasible, together with the Section 8 income limits

that would have applied at the time the income information was

collected by the Census Bureau. Grantees that believe that the census

data does not reflect current relative income levels in an area, or

where census boundaries do not coincide sufficiently well with the

service area of an activity, may conduct (or have conducted) a current

survey of the residents of the area to determine the percent of such

persons that are low and moderate income. HUD will accept information

obtained through such surveys, to be used in lieu of the decennial

census data, where it determines that the survey was conducted in such

a manner that the results meet standards of statistical reliability

that are comparable to that of the decennial census data for areas of

similar size. Where there is substantial evidence that provides a clear

basis to believe that the use of the decennial census data would

substantially overstate the proportion of persons residing there that

are low and moderate income, HUD may require that the grantee rebut

such evidence in order to demonstrate compliance with section 105(c)(2)

of the Act.

(b) Limited clientele activities. (1) An activity which benefits a

limited clientele, at least 51 percent of whom are low or moderate

income persons. (The following kinds of activities may not qualify

under paragraph (b) of this section: Activities, the benefits of which

are available to all the residents of an area; activities involving the

acquisition, construction or rehabilitation of property for housing; or

activities where the benefit to low and moderate income persons to be

considered is the creation or retention of jobs except as provided in

paragraph (b)(4) of this section.) To qualify under paragraph (b) of

this section, the activity must meet one of the following tests:

(i) Benefit a clientele who are generally presumed to be

principally low and moderate income persons. Activities that

exclusively serve a group of persons in any one of the following

categories may be presumed to benefit persons, 51 percent of whom are

low-and moderate-income: abused children, battered spouses, elderly

persons, adults meeting the Bureau of the Census' current Population

Reports definition of ``severely disabled'', homeless persons,

illiterate adults, persons living with AIDS, and migrant workers; or

(ii) Require information on family size and income so that it is

evident that at least 51 percent of the clientele are

[[Page 40099]]

persons whose family income does not exceed the low and moderate income

limit; or

(iii) Have income eligibility requirements which limit the activity

exclusively to low and moderate income persons; or

(iv) Be of such nature and be in such location that it may be

concluded that the activity's clientele will primarily be low and

moderate income persons.

(2) An activity that serves to remove material or architectural

barriers to the mobility or accessibility of elderly persons or adults

meeting the Bureau of the Census' Current Population Reports definition

of ``severely disabled'' will be presumed to qualify under this

criterion if it is restricted, to the extent practicable, to the

removal of such barriers by assisting:

(i) The reconstruction of a public facility or improvement, or

portion thereof, that does not qualify under Sec. 953.208(a); or

(ii) The rehabilitation of a privately-owned nonresidential

building or improvement that does not qualify under Sec. 953.208 (a) or

(d); or

(iii) The rehabilitation of the common areas of a residential

structure that contains more than one dwelling unit.

(3) A microenterprise assistance activity carried out in accordance

with the provisions of Sec. 953.201(l) with respect to those owners of

microenterprises and persons developing microenterprises assisted under

the activity during the grant period who are low and moderate income

persons. For purposes of this paragraph, persons determined to be low

and moderate income may be presumed to continue to qualify for up to a

three year period.

(4) An activity designed to provide job training and placement and/

or other employment support services, including but not limited to,

peer support programs, counseling, child care, transportation, and

other similar services, in which the percentage of low and moderate

income persons assisted is less than 51 percent may qualify under this

paragraph in the following limited circumstance:

(i) In such cases where such training or provision of supportive

services assists business(es), the only use of ICDBG assistance for the

project is to provide the job training and/or supportive services; and

(ii) The proportion of the total cost of the project borne by ICDBG

funds is no greater than the proportion of the total number of persons

assisted who are low or moderate income.

(c) Housing activities. An eligible activity carried out for the

purpose of providing or improving permanent residential structures

which, upon completion, will be occupied by low and moderate income

households. This would include, but not necessarily be limited to, the

acquisition or rehabilitation of property, conversion of non-

residential structures, and new housing construction. Funds expended

for activities which qualify under the provisions of this paragraph

shall be counted as benefiting low and moderate income persons but

shall be limited to an amount determined by multiplying the total cost

(including ICDBG and non-ICDBG costs) of the acquisition, construction

or rehabilitation by the percent of units in such housing to be

occupied by low and moderate income persons. If the structure assisted

contains two dwelling units, at least one must be occupied by low and

moderate income households, and if the structure contains more than two

dwelling units, at least 51 percent of the units must be so occupied.

Where two or more rental buildings being assisted are or will be

located on the same or contiguous properties, and the buildings will be

under common ownership and management, the grouped buildings may be

considered for this purpose as a single structure. For rental housing,

occupancy by low and moderate income households must be at affordable

rents to qualify under this criterion. The grantee shall adopt and make

public its standards for determining ``affordable rents'' for this

purpose. The following shall also qualify under this criterion:

(1) When less than 51 percent of the units in a structure will be

occupied by low and moderate income households, ICDBG assistance may be

provided in the following limited circumstances:

(i) The assistance is for an eligible activity to reduce the

development cost of the new construction of a multifamily, non-elderly

rental housing project;

(ii) Not less than 20 percent of the units will be occupied by low

and moderate income households at affordable rents; and

(iii) The proportion of the total cost of developing the project to

be borne by ICDBG funds is no greater than the proportion of units in

the project that will be occupied by low and moderate income

households.

(2) When ICDBG funds are used for housing services eligible under

Sec. 953.201(j), such funds shall be considered to benefit low-and

moderate-income persons if the housing for which the services are

provided is to be occupied by low-and moderate-income households.

(d) Job creation or retention activities. An activity designed to

create or retain permanent jobs where at least 51 percent of the jobs,

computed on a full time equivalent basis, involve the employment of low

and moderate persons. For purposes of determining whether a job is held

by or made available to a low or moderate income person, the person may

be presumed to be a low or moderate income person if: he/she resides

within a census tract (or block numbering area) where not less than 70

percent of the residents have incomes at or below 80 percent of the

area median; or, if he/she resides in a census tract (or block

numbering area) which meets the Federal Empowerment Zone or Enterprise

Community eligibility criteria; or, if the assisted business is located

in and the job under consideration is to be located in such a tract or

area. As a general rule, each assisted business shall be considered to

be a separate activity for purposes of determining whether the activity

qualifies under this paragraph. However, in certain cases such as where

ICDBG funds are used to acquire, develop or improve a real property

(e.g., a business incubator or an industrial park) the requirement may

be met by measuring jobs in the aggregate for all the businesses which

locate on the property, provided such businesses are not otherwise

assisted by ICDBG funds. Where ICDBG funds are used to pay for the

staff and overhead costs of a CBDO under the provisions of Sec. 953.204

making loans to businesses from non-ICDBG funds, this requirement may

be met by aggregating the jobs created by all of the businesses

receiving loans during any one year period. For an activity that

creates jobs, the grantee must document that at least 51 percent of the

jobs will be held by, or will be available to, low and moderate income

persons. For an activity that retains jobs, the grantee must document

that the jobs would actually be lost without the ICDBG assistance and

that either or both of the following conditions apply with respect to

at least 51 percent of the jobs at the time the ICDBG assistance is

provided: The job is known to be held by a low or moderate income

person; or the job can reasonably be expected to turn over within the

following two years and that steps will be taken to ensure that it will

be filled by, or made available to, a low or moderate income person

upon turnover. Jobs will be considered to be available to low and

moderate income persons for these purposes only if:

(1) Special skills that can only be acquired with substantial

training or

[[Page 40100]]

work experience or education beyond high school are not a prerequisite

to fill such jobs, or the business agrees to hire unqualified persons

and provide training; and

(2) The grantee and the assisted business take actions to ensure

that low and moderate income persons receive first consideration for

filling such jobs.

(e) Additional criteria. (1) Where the assisted activity is

acquisition of real property, a preliminary determination of whether

the activity addresses the primary objective may be based on the

planned use of the property after acquisition. A final determination

shall be based on the actual use of the property, excluding any short-

term, temporary use.

(2) Where the assisted activity is relocation assistance that the

grantee is required to provide, such relocation assistance shall be

considered to address the primary objective as addressed by the

displacing activity.

(3) In any case where the activity undertaken for the purpose of

creating or retaining jobs is a public improvement and the area served

is primarily residential, the activity must meet the requirements of

paragraph (a) of this section as well as those of paragraph (d) of this

section in order to qualify as benefiting low and moderate income

persons.

(4) Expenditures for activities meeting the criteria for benefiting

low and moderate income persons shall be used in determining the extent

to which the grantee's overall program benefits such persons. In

determining the percentage of funds expended for such activities:

(i) Costs of administration and planning, eligible under

Sec. 953.205 and Sec. 953.206 respectively, will be assumed to benefit

low and moderate income persons in the same proportion as the remainder

of the ICDBG funds and, accordingly, shall be excluded from the

calculation.

(ii) Funds expended for the acquisition, new construction or

rehabilitation of property for housing those qualified under

Sec. 953.208(c) shall be counted for this purpose, but shall be limited

to an amount determined by multiplying the total cost (including ICDBG

and non-ICDBG costs) of the acquisition, construction, or

rehabilitation by the percent of units in such housing occupied by low

and moderate income persons.

(iii) Funds expended for any other activity which qualifies under

Sec. 953.208 shall be counted for this purpose in their entirety.

Subpart D--Single Purpose Grant Application and Selection Process

Sec. 953.300 Application requirements.

(a) Application information. A Notice of Funding Availability

(NOFA) shall be published in the Federal Register not less than 30 days

before the deadline for application submission. The NOFA will provide

information relating to the date and time for application submission,

the form and content requirements of the application, specific

information regarding the rating and ranking criteria to be used, and

any other information pertinent to the application process.

(b) Costs incurred by applicant. Costs incurred by an applicant

prior to the submission of the single purpose grant application to HUD

will not be recognized by HUD as eligible ICDBG expenses.

(c) HUD will not normally reimburse or recognize costs incurred

before HUD approval of the application for funding. However, under

unusual circumstances, the Area ONAP may consider and approve written

requests to recognize and reimburse costs incurred after submission of

the application where failure to do so would impose undue hardship on

the applicant. Such written authorization will be made only before the

costs are incurred and where the requirements for reimbursement have

been met in accordance with 24 CFR 58.22 and with the understanding

that HUD has no obligation whatsoever to approve the application or to

reimburse the applicant should the application be disapproved.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.301 Selection process.

(a) Threshold requirements. In order for applications that have

passed the initial screening tests listed in the NOFA to be rated and

ranked, Area ONAPs must determine that the following requirements have

been met:

(1) Community development appropriateness. (i) The project costs

are reasonable;

(ii) The project is appropriate for the intended use; and

(iii) The project is usable or achievable (generally within a two-

year period).

If in the judgment of the Area ONAP, available data indicate that

the proposed project does not meet these requirements, the Area ONAP

shall reject the project from further consideration.

(2) Capacity. The applicant possesses, or will acquire, the

managerial, technical, or administrative staff necessary to carry out

the proposed program. If the Area ONAP determines that the applicant

does not have or cannot obtain the capacity to undertake the proposed

program, the application will be rejected from further consideration.

(3) Performance.--(i) Community development. Performance

determinations are made through the Area ONAP's assessment process.

Applicants that have been advised in writing of negative findings on

previous grants, for which a schedule of corrective actions has been

established, will not be considered for funding if they are behind

schedule as of the deadline date for filing applications.

(ii) Housing assistance. The applicant must not have been found

taking actions to impede the provision or operation of assisted housing

for the low- and moderate-income members of the tribe or village. If

inadequate performance is found, and the applicant has been notified in

writing, they may be rejected from further consideration. Performance

determinations are made through the Area ONAP's assessment process.

(iii) Audits. An applicant that has an outstanding ICDBG obligation

to HUD that is in arrears, or one that has not agreed to a repayment

schedule, will be disqualified from the current and subsequent

competitions until the obligations are current. An applicant whose

response to an audit finding is overdue or unsatisfactory will be

disqualified from the current and subsequent competitions until the

applicant has taken final action necessary to close the audit

finding(s). The Area ONAP administrator may provide exceptions to this

disqualification requirement in cases where the applicant has made a

good faith effort to clear non-monetary audit findings. In no instance,

however, shall an exception be provided when funds are due HUD, unless

a satisfactory arrangement for repayment of the debt has been made, and

payments are current.

(b) Application rating system. Applications that meet the threshold

requirements established in paragraph (a) of this section will be rated

competitively within each Area ONAP's jurisdiction.

(c) NOFAs will define and establish weights for the selection

criteria for each rating category contained in this subpart, will

specify the maximum points available, and will describe how point

awards will be made. Each Area ONAP will rate applications on the basis

of their responsiveness to the criteria contained in this subpart as

defined in the periodic NOFAs.

[[Page 40101]]

(d) Set-aside selection of projects. If funds have been set aside

by statute for a specific purpose in any fiscal year, other criteria

pertinent to the set-aside may be used to select projects for funding

from the set-aside.

Sec. 953.302 Project specific threshold requirements.

(a) Housing rehabilitation projects. All applicants for housing

rehabilitation projects shall adopt rehabilitation standards and

rehabilitation policies before submitting an application. The applicant

shall assure that it will use project funds to rehabilitate units only

when the homeowner's payments are current or the homeowner is current

in a repayment agreement that is subject to approval by the Area ONAP.

The Area ONAP administrator may grant exceptions to this requirement on

a case-by-case basis.

(b) New housing construction projects. New housing construction can

only be implemented through a nonprofit organization that is eligible

under Sec. 953.204 or is otherwise eligible under Sec. 953.207(b)(3).

All applicants for new housing construction projects shall adopt, by

current tribal resolution, construction standards before submitting an

application. All applications which include new housing construction

projects must document that:

(1) No other housing is available in the immediate reservation area

that is suitable for the household(s) to be assisted; and

(2) No other sources can meet the needs of the household(s) to be

assisted; and

(3) Rehabilitation of the unit occupied by the household(s) to be

assisted is not economically feasible; or

(4) The household(s) to be housed currently is in an overcrowded

housing unit (sharing with another household); or

(5) The household(s) to be assisted has no current residence.

(c) Economic development projects. All applicants for economic

development projects must provide an analysis which shows public

benefit commensurate with the ICDBG assistance requested will result

from the assisted project. This analysis should also establish that to

the extent practicable: reasonable financial support will be committed

from non-Federal sources prior to disbursement of Federal funds; any

grant amount provided will not substantially reduce the amount of non-

Federal financial support for the activity; not more than a reasonable

rate of return on investment is provided to the owner; and, that grant

funds used for the project will be disbursed on a pro rata basis with

amounts from other sources. In addition, it must be established that

the project is financially feasible and that it has a reasonable chance

of success.

Sec. 953.303 Project rating categories.

(a) There are three project rating categories: housing, community

facilities, and economic development. The housing rating category

consists of three components: Housing rehabilitation, land to support

new housing, and new housing construction. The community facility

category consists of two components: Infrastructure and buildings. The

economic development category has only one component. With the

exceptions indicated in paragraph (b) of this section, the following

criteria will be used to rate projects.

(1) Project need and design.

(2) Planning and implementation.

(3) Leverage.

(b) Exceptions. (1) Projects for the acquisition of land to support

new housing will not be rated under the leverage criterion.

(2) Economic development projects will be not be rated under the

project need and design and planning and implementation criteria. These

projects will be rated under the leverage criterion and the following

additional criteria.

(i) Organization.

(ii) Project success.

(iii) Jobs.

(iv) Additional considerations consisting of the following:

(A) Use, improvement, or expansion of tribal members' special

skills.

(B) Provision of spin-off benefits.

(C) Provision of special opportunities for residents of Indian

housing.

(D) Provision of benefits to other businesses owned by Indians or

Alaska natives.

(E) Commitment to loan repayment or reuse of ICDBG funds.

Sec. 953.304 Funding process.

(a) Notification. Area ONAPs will notify applicants of the approval

or disapproval of their applications. Grant amounts offered may reflect

adjustments made by the Area ONAPs in accordance with Sec. 953.100

(b)(2).

(b) Grant award. (1) As soon as the Area ONAP determines that the

applicant has complied with any pre-award requirements and absent

information which would alter the threshold determinations under

Sec. 953.302, the grant will be awarded. The regulations become part of

the grant agreement.

(2) All grants shall be conditioned upon the completion of all

environmental obligations and approval of release of funds by HUD in

accordance with the requirements of part 58 of this title and, in

particular, subpart J of part 58 of this title, except as otherwise

provided in part 58 of this title.

(3) HUD may impose other grant conditions where additional actions

or approvals are required before the use of funds.

(Approved by the Office of Management and Budget under OMB Control

No. 2577-0191.)

Sec. 953.305 Program amendments.

(a) Grantees shall request prior HUD approval for program

amendments which will significantly change the scope, location,

objective, or class of beneficiaries of the approved activities, as

originally described in the application.

(b) Amendment requests of $100,000 or more shall include all

application components required by the NOFA published for the last

application cycle; those requests of less than $100,000 do not have to

include the components which address the selection criteria.

(c) Approval of an amendment request is subject to the following:

(1) A rating equal to or greater than the lowest rating received by

a funded project during the most recent funding competition must be

attained by the amended project if the request is for $100,000 or more;

(2) Demonstration by the grantee of the capacity to promptly

complete the modified or new activities;

(3) Demonstration by the grantee of compliance with the

requirements of Sec. 953.604 for citizen participation; and

(4) The preparation of an amended or new environmental review in

accordance with part 58 of this title, if there is a significant change

in the scope or location of approved activities.

(d) Amendments which address imminent threats to health and safety

shall be reviewed and approved in accordance with the requirements of

subpart E of this part.

(e) If a program amendment fails to be approved and the original

project is no longer feasible, the grant funds proposed for amendment

shall be recaptured by HUD.

Subpart E--Imminent Threat Grants

Sec. 953.400 Criteria for funding.

The following criteria apply to requests for assistance under this

subpart:

(a) In response to requests for assistance, HUD may make funds

[[Page 40102]]

available under this subpart to applicants to alleviate or remove

imminent threats to health or safety. The urgency and immediacy of the

threat shall be independently verified before the approval of an

application. Funds may only be used to deal with imminent threats that

are not of a recurring nature and which represent a unique and unusual

circumstance, and which impact on an entire service area.

(b) Funds to alleviate imminent threats may be granted only if the

applicant can demonstrate to the satisfaction of HUD that other tribal

or Federal funding sources cannot be made available to alleviate the

threat.

(c) HUD will establish grant ceilings for imminent threat

applications.

Sec. 953.401 Application process.

(a) Letter to proceed. The Area ONAP may issue the applicant a

letter to proceed to incur costs to alleviate imminent threats to

health and safety only if the assisted activities do not alter

environmental conditions and are for temporary or permanent

improvements limited to protection, repair, or restoration actions

necessary only to control or arrest the effects of imminent threats or

physical deterioration. Reimbursement of such costs is dependent upon

HUD approval of the application.

(b) Applications. Applications shall include the information

specified in the Notice of Funding Availability (NOFA).

(c) Application approval. Applications which meet the requirement

of this section may be approved by the Area ONAP without competition in

accordance with the applicable requirements of Sec. 953.304.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.402 Availability of funds.

Of the funds made available by the NOFA for the ICDBG program, an

amount to be determined by the Assistant Secretary may be reserved by

HUD for grants under this subpart. The amount of funds reserved for

imminent threat funding during each funding cycle will be stated in the

NOFA. If any of the reserved funds are not used to fund imminent threat

grants during a fiscal year, they will be added to the allocation of

ICDBG funds for the subsequent fiscal year and will be used as if they

were a part of the new allocation.

Subpart F--Grant Administration

Sec. 953.500 Responsibility for grant administration.

(a) One or more tribal departments or authorities, including

existing tribal public agencies, may be designated by the chief

executive officer of the grantee to undertake activities assisted by

this part. A public agency so designated shall be subject to the same

requirements as are applicable to subrecipients.

(b) The grantee is responsible for ensuring that ICDBG funds are

used in accordance with all program requirements. The use of designated

public agencies, subrecipients, or contractors does not relieve the

grantee of this responsibility. The grantee is also responsible for

determining the adequacy of performance under subrecipient agreements

and procurement contracts, and for taking appropriate action when

performance problems arise, such as the actions described in

Sec. 953.701.

Sec. 953.501 Applicability of uniform administrative requirements and

cost principles.

(a) Grantees and subrecipients which are governmental entities

(including public agencies) shall comply with the requirements and

standards of OMB Circular No. A-87, ``Principles for Determining Costs

Applicable to Grants and Contracts with State, Local and Federally

recognized Indian Tribal Governments'', OMB Circular A-128, ``Audits of

State and Local Governments'' (implemented at 24 CFR part 44) and with

the following sections of 24 CFR part 85 ``Uniform Administrative

Requirements for Grants and Cooperative Agreements to State and Local

Governments''.

(1) Section 85.3, ``Definitions''.

(2) Section 85.6, ``Exceptions''.

(3) Section 85.12, ``Special grant or subgrant conditions for

`high-risk' grantees''.

(4) Section 85.20, ``Standards for financial management systems,''

except paragraph (a).

(5) Section 85.21, ``Payment''.

(6) Section 85.22, ``Allowable costs''.

(7) Section 85.25, ``Program income,'' except as modified by

Sec. 953.503.

(8) Section 85.26, ``Non-federal audits''.

(9) Section 85.32, ``Equipment,'' except in all cases in which the

equipment is sold, the proceeds shall be program income.

(10) Section 85.33, ``Supplies''.

(11) Section 85.34, ``Copyrights''.

(12) Section 85.35, ``Subawards to debarred and suspended

parties''.

(13) Section 85.36, ``Procurement,'' except paragraphs (a) States,

(i)(5) Compliance with the Davis Bacon Act (40 U.S.C. 276a to a-7) and

(i)(6) Compliance with sections 103 and 107 of the Contract Work Hours

and Safety Standards Act (40 U.S.C. 327-330). There may be

circumstances under which the bonding requirements of Sec. 85.36(h) are

inconsistent with other responsibilities and obligations of the

grantee. In such circumstances, acceptable methods to provide

performance and payment assurance may include:

(i) Deposit with the grantee of a cash escrow of not less than 20

percent of the total contract price, subject to reduction during the

warranty period, commensurate with potential risk; or

(ii) Letter of credit for 25 percent of the total contract price,

unconditionally payable upon demand of the grantee, subject to

reduction during the warranty period commensurate with potential risk.

(14) Section 85.37, ``Subgrants''.

(15) Section 85.40, ``Monitoring and reporting program

performance,'' except paragraphs (b) through (d) and paragraph (f).

(16) Section 85.41, ``Financial reporting,'' except paragraphs (a),

(b), and (e).

(17) Section 85.42, ``Retention and access requirements for

records''. The retention period referenced in Sec. 85.42(b) pertaining

to individual ICDBG activities starts from the date of the submission

of the final status and evaluation report as prescribed in

Sec. 953.506(a) in which the specific activity is reported.

(18) Section 85.43, ``Enforcement''.

(19) Section 85.44, ``Termination for convenience''.

(20) Section 85.51 ``Later disallowances and adjustments''.

(21) Section 85.52, ``Collection of amounts due''.

(b) Subrecipients, except subrecipients that are governmental

entities, shall comply with the requirements and standards of OMB

Circular No. A-122, ``Cost Principles for Nonprofit Organizations,'' or

OMB Circular No. A-21, ``Cost Principles for Educational

Institutions,'' as applicable, and OMB Circular A-133, ``Audits of

Institutions of Higher Education and Other Nonprofit Institutions''

(implemented at 24 CFR part 45). Audits shall be conducted annually.

Such subrecipients shall also comply with the following provisions of

24 CFR part 84 ``Uniform Administrative Requirements for Grants and

Agreements With Institutions of Higher Education, Hospitals and Other

Non-Profit Organizations'').

(1) Subpart A--``General''.

(2) Subpart B--``Pre-Award Requirements,'' except for Sec. 84.12,

``Forms for Applying for Federal Assistance''.

[[Page 40103]]

(3) Subpart C--``Post-Award Requirements,'' except for Sec. 84.22,

``Payment Requirements,'' grantees shall follow the standards of

Secs. 85.20(7) and 85.21 in making payments to subrecipients.

(4) Section 84.23, ``Cost Sharing and Matching''.

(5) Section 84.24, ``Program Income'', as modified by Sec. 953.503.

(6) Section 84.25, ``Revision of Budget and Program Plans''.

(7) Section 84.32, ``Real Property.'' In lieu of Sec. 84.32, ICDBG

subrecipients shall follow Sec. 953.504 of the ICDBG regulations.

(8) Section 84.34(g) ``Equipment,'' except that in lieu of the

disposition provisions of this paragraph:

(i) In all cases in which equipment is sold during the grant period

as defined in 24 CFR 85.25, the proceeds shall be program income; and

(ii) Equipment not needed by the subrecipient for ICDBG activities

shall be transferred to the grantee for the ICDBG program or shall be

retained after compensating the grantee.

(9) Section 84.51, ``Monitoring and Reporting Program

Performance.'' Only Sec. 84.51(a) applies to ICDBG subrecipients.

(10) Section 84.52, ``Financial Reporting''.

(11) Section 84.53(b), ``Retention and access requirements for

records.'' The retention period referenced in Sec. 84.53(b) pertaining

to individual ICDBG activities starts from the date of the submission

of the final status and evaluation report as prescribed in

Sec. 953.506(a), in which the specific activity is reported.

(12) Section 84.61, ``Termination.'' In lieu of the provisions of

this section, ICDBG subrecipients shall comply with Sec. 953.502 (b)(7)

of the ICDBG regulations.

(13) Subpart D--``After-the-Award Requirements,'' except for

Sec. 84.71, ``Closeout Procedures''.

(c) Cost principles. (1) All items of cost listed in Attachment B

of OMB Circulars A-21, A-87, or A-123, as applicable, which require

prior Federal agency approval are allowable without the prior approval

of HUD to the extent that they comply with the general policies and

principles stated in Attachment A of such circulars and are otherwise

eligible under subpart C of this part, except for the following:

(i) Depreciation methods for fixed assets shall not be changed

without specific approval of HUD or, if charged through a cost

allocation plan, the Federal cognizant agency.

(ii) Fines and penalties are unallowable costs to the ICDBG

program.

(2) No person providing consultant services in an employer-employee

type of relationship shall receive more than a reasonable rate of

compensation for personal services paid with ICDBG funds. In no event,

however, shall such compensation exceed the equivalent of the daily

rate paid for Level IV of the Executive Schedule.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.502 Agreements with subrecipients.

(a) Before disbursing any ICDBG funds to a subrecipient, the

grantee shall sign a written agreement with the subrecipient. The

agreement shall remain in effect during any period that the

subrecipient has control over ICDBG funds, including program income.

(b) At a minimum, the written agreement with the subrecipient shall

include provisions concerning the following items:

(1) Statement of work. The agreement shall include a description of

the work to be performed, a schedule for completing the work, and a

budget. These items shall be in sufficient detail to provide a sound

basis for the grantee effectively to monitor performance under the

agreement.

(2) Records and reports. The grantee shall specify in the agreement

the particular records the subrecipient must maintain and the

particular reports the subrecipient must submit in order to assist the

grantee in meeting its recordkeeping and reporting requirements.

(3) Program income. The agreement shall include the program income

requirements set forth in Sec. 85.25 as modified by Sec. 953.503.

(4) Uniform administrative requirements. The agreement shall

require the subrecipient to comply with applicable administrative

requirements, as described in Sec. 953.501.

(5) Other program requirements. The agreement shall require the

subrecipient to carry out each activity in compliance with all Federal

laws and regulations described in subpart G of this part, except that

the subrecipient does not assume the grantee's environmental

responsibilities described at Sec. 953.605.

(6) Conditions for religious organizations. Where applicable, the

conditions prescribed by HUD for the use of ICDBG funds by religious

organizations shall be included in the agreement.

(7) Suspension and termination. The agreement shall specify that,

in accordance with 24 CFR 85.43, suspension or termination may occur if

the subrecipient materially fails to comply with any term of the award,

and that the award may be terminated for convenience in accordance with

24 CFR 85.44.

(8) Reversion of assets. The agreement shall specify that upon its

expiration the subrecipient shall transfer to the grantee any ICDBG

funds on hand at the time of expiration and any accounts receivable

attributable to the use of ICDBG funds. It shall also include

provisions designed to ensure that any real property under the

subrecipient's control that was acquired or improved in whole or in

part with ICDBG funds (including ICDBG funds provided to the

subrecipient in the form of a loan) in excess of $25,000 is either:

(i) Used to meet the primary objective as stated in Sec. 953.208

until five years after expiration of the agreement, or for such longer

period of time as determined to be appropriate by the grantee; or

(ii) Not used in accordance with paragraph (b)(8)(i) of this

section, in which event the subrecipient shall pay to the grantee an

amount equal to the current market value of the property less any

portion of the value attributable to expenditures of non-ICDBG funds

for the acquisition of, or improvement to, the property. The payment is

program income to the grantee if it is received during the grant

period. (No payment is required after the period of time specified in

paragraph (b)(8)(i) of this section.)

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.503 Program income.

(a) Program income requirements for ICDBG grantees are set forth in

24 CFR 85.25, as modified by this section.

(b) Program income means gross income received by the grantee or a

subrecipient directly generated from the use of ICDBG funds during the

grant period, except as provided in paragraph (b)(4) of this section.

When program income is generated by an activity that is only partially

assisted with ICDBG funds, the income shall be prorated to reflect the

percentage of ICDBG funds used.

(1) Program income includes, but is not limited to, the following:

(i) Proceeds from the disposition by sale or long-term lease of

real property purchased or improved with ICDBG funds;

(ii) Proceeds from the disposition of equipment purchased with

ICDBG funds;

(iii) Gross income from the use or rental of real or personal

property

[[Page 40104]]

acquired by the grantee or by a subrecipient with ICDBG funds, less

costs incidental to generation of the income;

(iv) Gross income from the use or rental of real property, owned by

the grantee or by a subrecipient, that was constructed or improved with

ICDBG funds, less costs incidental to generation of the income;

(v) Payments of principal and interest on loans made using ICDBG

funds, except as provided in paragraph (b)(3) of this section;

(vi) Proceeds from the sale of loans made with ICDBG funds except

as provided in paragraph (b)(4) of this section;

(vii) Proceeds from sale of obligations secured by loans made with

ICDBG funds;

(viii) Interest earned on funds held in a revolving fund account;

(ix) Interest earned on program income pending its disposition; and

(x) Funds collected through special assessments made against

properties owned and occupied by households not of low and moderate

income, where the assessments are used to recover all or part of the

ICDBG portion of a public improvement.

(2) Program income does not include income earned on grant advances

from the U.S. Treasury. The following items of income earned on grant

advances must be remitted to HUD for transmittal to the U.S. Treasury

and will not be reallocated:

(i) Interest earned from the investment of the initial proceeds of

a grant advance by the U.S. Treasury;

(ii) Income (e.g., interest) earned on loans or other forms of

assistance provided with ICDBG funds that are used for activities

determined by HUD either to be ineligible or that fail substantially to

meet any other requirement of this part.

(3) The calculation of the amount of program income for the

grantee's ICDBG program as a whole (i.e., comprising activities carried

out by a grantee and its subrecipients) shall exclude payments made by

subrecipients of principal and/or interest on loans received from

grantees where such payments are made from program income received by

the subrecipient. (By making such payments, the subrecipient shall be

deemed to have transferred program income to the grantee.) The amount

of program income derived from this calculation shall be used for

reporting purposes and in determining limitations on planning and

administration and public services activities to be paid for with ICDBG

funds.

(4) Program income does not include any income received in a single

year by the grantee and all its subrecipients if the total amount of

such income does not exceed $25,000.

(5) Examples of other receipts that are not considered program

income are proceeds from fundraising activities carried out by

subrecipients receiving ICDBG assistance; funds collected through

special assessments used to recover the non-ICDBG portion of a public

improvement; and proceeds from the disposition of real property

acquired or improved with ICDBG funds when the disposition occurs after

the applicable time period specified in Sec. 953.502(b)(8) for

subrecipient-controlled property, or in Sec. 953.504 for grantee-

controlled property.

(6) For purposes of determining the applicability of the program

income requirements included in this part and in 24 CFR 85.25, the

grant period is the time between the effective date of the grant

agreement and the close-out of the grant pursuant to the requirements

of Sec. 953.508.

(7) As provided for in 24 CFR 85.25(g)(2), program income received

will be added to the funds committed to the grant agreement and shall

be used for purposes and under the conditions of the grant agreement.

(8) Recording program income. The receipt and expenditure of

program income as defined in Sec. 953.503(b) shall be recorded as part

of the financial transactions of the grant program.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.504 Use of real property.

The standards described in this section apply to real property

within the grantee's control which was acquired or improved in whole or

in part using ICDBG funds in excess of $25,000. These standards shall

apply from the date ICDBG funds are first spent for the property until

five years after the closeout of the grant from which the assistance to

the property was provided.

(a) A grantee may not change the use or planned use of any such

property (including the beneficiaries of such use) from that for which

the acquisition or improvement was made unless the grantee provides

affected citizens with reasonable notice of, and opportunity to comment

on, any proposed change, and either:

(1) The new use of such property qualifies as meeting the primary

objective set forth in Sec. 953.208 and is not a building for the

general conduct of government; or

(2) The requirements in paragraph (b) of this section are met.

(b) If the grantee determines, after consultation with affected

citizens, that it is appropriate to change the use of the property to a

use which does not qualify under paragraph (a)(1) of this section, it

may retain or dispose of the property for the changed use if the

grantee's ICDBG program is reimbursed in the amount of the current fair

market value of the property, less any portion of the value

attributable to expenditures of non-ICDBG funds for acquisition of, and

improvements to, the property.

(c) If the change of use occurs after program closeout, the

proceeds from the disposition of the real property shall be used for

activities which meet the eligibility requirements set forth in subpart

C of this part and the primary objective set forth in Sec. 953.208.

(d) Following the reimbursement of the ICDBG program in accordance

with paragraph (b) of this section, the property no longer will be

subject to any ICDBG requirements.

Sec. 953.505 Records to be maintained.

Each grantee shall establish and maintain sufficient records to

enable the Secretary to determine whether the grantee has met the

requirements of this part.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.506 Reports.

(a) Status and evaluation report. Grantees shall submit a status

and evaluation report on previously funded open grants 45 days after

the end of the Federal fiscal year and at the time of grant close-out.

The report shall be in a narrative form addressing these areas.

(1) Progress. The progress made in completing approved activities

should be described. This description should include a listing of work

remaining together with a revised implementation schedule, if

necessary.

(2) Expenditure of funds. A breakdown of funds spent on each major

project activity or category should be provided.

(3) Grantee assessment. If the project has been completed, an

evaluation of the effectiveness of the project in meeting the community

development needs of the grantee should be provided.

(Approved by the Office of Management and Budget under Control No.

2577-0191.)

(b) Minority business enterprise reports. Grantees shall submit to

HUD, by April 10, a report on contract and subcontract activity during

the first half of the fiscal year and by October 10 a report on such

activity during the second half of the year.

[[Page 40105]]

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.507 Public access to program records.

Notwithstanding the provisions of 24 CFR 85.42(f), grantees shall

provide citizens with reasonable access to records regarding the past

use of ICDBG funds, consistent with applicable State and tribal laws

regarding privacy and obligations of confidentiality.

Sec. 953.508 Grant closeout procedures.

(a) Criteria for closeout. A grant will be closed out when the Area

ONAP determines, in consultation with the grantee, that the following

criteria have been met:

(1) All costs to be paid with ICDBG funds have been incurred, with

the exception of closeout costs (e.g., audit costs) and costs resulting

from contingent liabilities described in the closeout agreement

pursuant to paragraph (c) of this section. Contingent liabilities

include, but are not limited to, third-party claims against the

grantee, as well as related administrative costs.

(2) With respect to activities which are financed by means of

escrow accounts, loan guarantees, or similar mechanisms, the work to be

assisted with ICDBG funds has actually been completed.

(3) Other responsibilities of the grantee under the grant agreement

and applicable laws and regulations appear to have been carried out

satisfactorily or there is no further Federal interest in keeping the

grant agreement open for the purpose of securing performance.

(b) Closeout actions. (1) Within 90 days of the date it is

determined that the criteria for closeout have been met, the grantee

shall submit to the Area ONAP a copy of the final status and evaluation

report described in Sec. 953.506(a) and a completed Financial Status

Report (SF-269). If acceptable reports are not submitted, an audit of

the grantee's program activities may be conducted by HUD.

(2) Based on the information provided in the status report and

other relevant information, the grantee, in consultation with the Area

ONAP, will prepare a closeout agreement in accordance with paragraph

(c) of this section.

(3) The Area ONAP will cancel any unused portion of the awarded

grant, as shown in the signed grant closeout agreement. Any unused

grant funds disbursed from the U.S. Treasury which are in the

possession of the grantee shall be refunded to HUD.

(4) Any costs paid with ICDBG funds which were not audited

previously shall be subject to coverage in the grantee's next single

audit performed in accordance with 24 CFR part 44. The grantee may be

required to repay HUD any disallowed costs based on the results of the

audit, or on additional HUD reviews provided for in the closeout

agreement.

(c) Closeout agreement. Any obligations remaining as of the date of

the closeout shall be covered by the terms of a closeout agreement. The

agreement shall be prepared by the grantee in consultation with the

Area ONAP. The agreement shall identify the grant being closed out, and

include provisions with respect to the following:

(1) Identification of any closeout costs or contingent liabilities

subject to payment with ICDBG funds after the closeout agreement is

signed;

(2) Identification of any unused grant funds to be canceled by HUD;

(3) Identification of any program income on deposit in financial

institutions at the time the closeout agreement is signed;

(4) Description of the grantee's responsibility after closeout for:

(i) Compliance with all program requirements, certifications and

assurances in using program income on deposit at the time the closeout

agreement is signed and in using any other remaining ICDBG funds

available for closeout costs and contingent liabilities;

(ii) Use of real property assisted with ICDBG funds in accordance

with the principles described in Sec. 953.504; and

(iii) Ensuring that flood insurance coverage for affected property

owners is maintained for the mandatory period;

(5) Other provisions appropriate to any special circumstances of

the grant closeout, in modification of or in addition to the

obligations in paragraphs (c) (1) through (4) of this section. The

agreement shall authorize monitoring by HUD, and shall provide that

findings of noncompliance may be taken into account by HUD as

unsatisfactory performance of the grantee in the consideration of any

future grant award under this part.

(d) Termination of grant for convenience. Grant assistance provided

under this part may be terminated for convenience in whole or in part

before the completion of the assisted activities, in accordance with

the provisions of 24 CFR 85.44. The grantee shall not incur new

obligations for the terminated portions after the effective date, and

shall cancel as many outstanding obligations as possible. HUD shall

allow full credit to the grantee for those portions of obligations

which could not be canceled and which had been properly incurred by the

grantee in carrying out the activities before the termination. The

closeout policies contained in this section shall apply in such cases,

except where the approved grant is terminated in its entirety.

Responsibility for the environmental review to be performed under 24

CFR part 50 or 24 CFR part 58, as applicable, shall be determined as

part of the closeout process.

(e) Termination for cause. In cases in which HUD terminates the

grantee's grant under the authority of subpart H of this part, or under

the terms of the grant agreement, the closeout policies contained in

this section shall apply, except where the approved grant is canceled

in its entirety. The provisions in 24 CFR 85.43(c) on the effects of

termination shall also apply. HUD shall determine whether an

environmental review is required, and if so, HUD shall perform it in

accordance with 24 CFR part 50.

Sec. 953.509 Force account construction.

(a) The use of tribal work forces for construction or renovation

activities performed as part of the activities funded under this part

shall be approved by the Area ONAP before the start of project

implementation. In reviewing requests for an approval of force account

construction or renovation, the area ONAP may require that the grantee

provide the following:

(1) Documentation to indicate that it has carried out or can carry

out successfully a project of the size and scope of the proposal;

(2) Documentation to indicate that it has obtained or can obtain

adequate supervision for the workers to be used;

(3) Information showing that the workers to be used are, or will

be, listed on the tribal payroll and are employed directly by a unit,

department or other governmental instrumentality of the tribe or

village.

(b) Any and all excess funds derived from the force account

construction or renovation activities shall accrue to the grantee and

shall be reprogrammed for other activities eligible under this part in

accordance with Sec. 953.305 or returned to HUD promptly.

(c) Insurance coverage for force account workers and activities

shall, where applicable, include worker's compensation, public

liability, property damage, builder's risk, and vehicular liability.

(d) The grantee shall specify and apply reasonable labor

performance, construction, or renovation standards to work performed

under the force account.

(e) The contracting and procurement standards set forth in 24 CFR

85.36

[[Page 40106]]

apply to material, equipment, and supply procurement from outside

vendors under this section.

(Approved by the Office of Management and Budget under control

number 2577-0191)

Sec. 953.510 Indian preference requirements.

(a) Applicability. HUD has determined that grants under this part

are subject to Section 7(b) of the Indian Self-Determination and

Education Assistance Act (25 U.S.C. 450b). Section 7(b) provides that

any contract, subcontract, grant or subgrant pursuant to an act

authorizing grants to Indian organizations or for the benefit of

Ind

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