# Streamlining the Rural Utilities Service Water and Waste Program Regulations > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A97-13445 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** June 19, 1997 - **Citation:** 62 FR 33462 ## Text DEPARTMENT OF AGRICULTURE Rural Utilities Service 7 CFR Parts 1775, 1777, 1778, 1780, and 1781 Rural Housing Service Rural Business-Cooperative Service Rural Utilities Service Farm Service Agency 7 CFR Parts 1901, 1940, 1942, 1951, and 1956 Rural Business-Cooperative Service Rural Utilities Service 7 CFR Part 4284 RIN 0572-AB20 Streamlining the Rural Utilities Service Water and Waste Program Regulations AGENCIES: Rural Housing Service, Rural Business-Cooperative Service, Rural Utilities Service, and Farm Service Agency; USDA. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Rural Utilities Service (RUS) hereby amends the regulations utilized to administer the water and waste loan and grant programs. The final rule will combine the water and waste loan and grant regulations into one regulation. Unnecessary and burdensome requirements for entities seeking water and waste loan and grant financial assistance under the program are eliminated. The streamlining of the water and waste loan and grant regulation will allow RUS to provide better service to rural entities needing assistance in correcting and alleviating health and sanitary problems in their communities, and in general improve the quality of life in rural areas. This rule incorporates changes in the water and waste loan and grant program, the emergency community water assistance grant program, and the resource conversation and watershed loan programs mandated by the 1996 Farm Bill. This rule also amends the regulations originally published by the former Farmers Home Administration (FmHA) and the former Rural Development Administration (RDA). These amendments implement legislation directing the Secretary of Agriculture to establish the Rural Utilities Service (RUS) with responsibility for the water and waste programs formerly administered by FmHA and RDA. The amendments published in this document consist solely of nomenclature changes required by law and of amendments necessary to conform to these nomenclature changes. The substance of the regulations is not affected by these amendments. This rule could impact the amount of water and waste loan and grant funds an applicant could receive. Therefore, RUS will honor all written commitments of water and waste loan and grant amounts issued prior to the effective date of this rule. EFFECTIVE DATE: June 19, 1997. FOR FURTHER INFORMATION CONTACT: Jerry W. Cooper, Loan Specialist, Water and Waste Division, Rural Utilities Service, USDA, South Agriculture Building, Room 2229, STOP 1570, Washington, DC 20250, telephone: (202) 720-9589. SUPPLEMENTARY INFORMATION: Classification We are issuing this final rule in conformance with Executive Order 12866 and the Office of Management and Budget has determined that it is a ``significant regulatory action''. Intergovernmental Review These programs are listed in the Catalog of Federal Domestic Assistance under numbers 10.760, Water and Waste Disposal Systems For Rural Communities; 10.763, Emergency Community Water Assistance Grants; 10.764, Resource Conversation and Development Loans; 10.765, Watershed Protection and Flood Preventation Loans; and 10.770, Water and Waste Disposal Loans and Grants (Section 306C) and are subject to the provisions of Executive Order 12372 which requires intergovernmental consultation with State and local officials. Environmental Impact Statement This action has been reviewed in accordance with 7 CFR part 1940, subpart G, ``Environmental Program.'' It has been determined that the action does not constitute a major Federal action significantly affecting the quality of the human environment, and in accordance with the National Environmental Policy Act of 1969, Pub. L. 91-190, an Environmental Impact Statement is not required. Compliance With Executive Order 12778 The regulation has been reviewed in light of Executive Order 12778 and meets the applicable standards provided in sections 2(a) and (2)(b)(2) of that Order. Provisions within this part which are inconsistent with State law are controlling. All administrative remedies pursuant to 7 CFR part 11 must be exhausted prior to filing suit. Information Collection and Paperwork Requirements The recordkeeping and reporting burden in this rule, under OMB control number 0575-0015, is not fully effective until approved by OMB. For further information contact Jerry W. Cooper, Loan Specialist, Water and Waste Division, Rural Utilities Service, U.S. Department of Agriculture, 1400 Independence Ave., SW., STOP 1570, Washington, DC 20250-1548, telephone: (202) 720-9589. National Performance Review This regulatory action is being taken as part of the National Performance Review program to eliminate unnecessary regulations and improve those that remain in force. Unfunded Mandate Reform Act This rule contains no Federal mandates (under the regulatory provisions of Title II of the Unfunded Mandate Reform Act of 1995) for State, local, and tribal governments or the private sector. Thus today's rule is not subject to the requirements of sections 202 and 205 of the Unfunded Mandate Reform Act of 1995. Cross References of Regulations The Rural Utilities Service is an Agency resulting from a reorganization of programs administered by the former Farmers Home Administration, the former Rural Development Administration, and the former Rural Electrification Administration. Dual-references or cross- references to former Farmers Home Administration regulations and forms are provided for by the Department of Agriculture Reorganization Act of 1994. Regulatory Flexibility Act Certification The Administrator of RUS has determined that the Regulatory Flexibility Act (5. U.S.C. 601 et seq.) does not apply to this rule. Background The water and waste loan and grant programs are authorized by various sections of the Consolidated Farm and Rural Development Act, (7 U.S.C. 1921 et seq.), as amended. The regulations for these programs, particularly the loan program, have not been completely reviewed for many years. The recent streamlining and reorganization of the Department of Agriculture provided an opportunity to review and rewrite the [[Page 33463]] water and waste loan and grant regulations. A task force was formed to review and rewrite the regulations. The aim of the task force was to make the regulations easier to understand, eliminate unnecessary requirements, and continue to protect the interest of the U.S. taxpayer. The program provides loan and grant funds for water and waste disposal projects serving the most financially needy rural communities. Financial assistance should result in reasonable user costs for rural residents, rural businesses, and other rural users. The program is limited to rural areas and small towns with a population of 10,000 or less. The final rule will divide the regulation into four subparts: A, B, C, and D. Subpart A contains the general policies and requirements of the loan and grant program. Subpart B contains the loan and grant application processing requirements. Subpart C contains all the requirements for planning, designing, bidding, contracting, constructing, and inspections. Subpart D has information required in the preparation of notes or bonds and bond transcript documents for public body applicants. Major changes are: 1. Redirects additional grant funds to communities that truly need the assistance in order to construct a project. Communities with incomes over 100 percent of the State nonmetropolitan median household income will not qualify for any grant funds as in the current regulations. 2. Stretches the grant dollars appropriated by Congress to help more communities by changing the maximum percentage of grant funds that a higher income community can receive from 55 percent to 45 percent of RUS's share of the project costs. This change could have an indirect effect of having an incentive for development of regional projects. 3. The process used to select projects for funding has been revised to direct funds to low income, small communities that need to correct health problems. Also, the priority points awarded for regional systems have been increased. 4. The application process has been streamlined to reduce unnecessary paperwork and improve service to the rural communities. There will be less regulations and the number of pages will be greatly reduced. 5. The application process has been shortened by eliminating the preapplication process. However, an applicant will have the option of requesting an Agency eligibility review before submitting a complete application. 6. A preliminary engineering report (PER) must be submitted earlier in the application process. The requirement of submitting a PER earlier in the process will assist the staff in making better decisions. Also, applicants have to have this type of document to help them determine what, where, and how they are going to build needed facilities. This change will force applicants to have a clear picture of what they want to construct prior to applying for assistance. A majority of applicants have a PER at the preapplication stage now, therefore the change will tend to put all applicants on a level field. 7. The functions of former Farmers Home Administration (FmHA) and the Rural Development Administration (RDA) relating to the water and waste loan and grant programs authorized by various sections of the Consolidated Farm and Rural Development Act, (7 U.S.C. 1926(a)), as amended have been transferred to RUS. Therefore in order to enhance the delivery of customer services and better assist the public, RUS is amending regulations originally published by FmHA and RDA. These amendments will replace references to FmHA and RDA and its officials with references to RUS and to appropriate officials. This action will also separate the regulation now utilized by RUS and Rural Housing Service (RHS) to administering the water and waste loan and community facilities loan programs, respectively. All parts pertaining to the water and waste loan program will be moved into 7 CFR part 1780. This action will have no effect on RHS's community facilities loan program as this action makes no changes in the regulation. The following programs are affected by these amendments: (1) Water and Waste Loans and Grants, (2) Technical Assistance and Planning Grants, (3) Emergency Community Water Assistance Grants, (4) Section 306C WWD Loans and Grants, and (5) Resource Conservation and Development Loans and Watershed Loans and Advances. 8. The criteria utilized to allocate water and waste program funds has been moved from 7 CFR part 1940, subpart L to 7 CFR part 1780. The major 1996 Farm Bill changes are: 1. Funds made available for these programs may be made available for a water system that is making significant progress toward meeting the Safe Drinking Water Act standards. 2. Funds made available for water treatment discharge or waste disposal system must meet applicable Federal and State water pollution control standards. 3. Within 60 days of filing an application for loan or grant assistance, a notice of intent shall be published in a general circulation newspaper. 4. When applicants hire outside engineers, the applicant shall publicly announce all requirements for engineering and architectural services, and negotiate contracts for such services on the basis of demonstrated competence and qualifications for the type professional service required and at a fair and reasonable price. When project design services are procured separately, the selection of the engineer or architect shall be done by a request for proposal. 5. Assistance under any rural development program administered by the Secretary or any agency of the Department of Agriculture shall not be conditioned on any requirement that the recipient of the assistance accept or receive electric service from any particular utility, supplier, or cooperative. This is being implemented for the water and waste loan and grant programs. 6. Section 306B of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926b) was repealed. References to section 306B were deleted from the regulations and the amendments to section 306A are included. 7. The interest rate formula for Resource Conversation and Development Loans, and Watershed Protection and Flood Preventation Loans was amended to establish the interest rate on these loans based on current market yield for outstanding municipal obligations with remaining periods to maturity comparable to the average maturity for the loan, adjusted to the nearest 1/8 of 1 percent. Comments on the Proposed Rule RUS published a proposed rule in the Federal Register on September 12, 1996, (61 FR 48075) and asked for written comments on or before October 15, 1996. The Agency received seventy-nine comments from the public review process. All comments were considered when preparing the final rule; however, all comments have not been addressed separately since many could be addressed collectively. Responses to comments received are grouped according to corresponding sections of the rule and are as follows: [[Page 33464]] Subpart A--General Policies and Requirements Sec. 1780.1 General. 1. Sec. 1780.1(k)--Include the Brooks Architect-Engineer Act, Title 40 of the U.S. Code subchapter VI, Sections 541, 542, 543, and 544 as the federal statute applicants should be aware of and comply with relative to the procurement of engineering services. Agency response: The Agency has not implemented this suggested change. The Brooks Architect-Engineer Act only applies to Federal procurement and would not be applicable to non-profit organizations and units of local and State government who are the recipients of the financial assistance. 1780.3 Definitions and grammatical rules of construction. 1. Add a definition of Agency Identified Target Areas referred to in Sec. 1780.17. Agency response: The Agency agrees and has added a definition. 2. Sec. 1780.3(a)--Similar System Cost--Recommend establishment of similar system cost based on a comparison of rate structure for the same amount of water usage. Agency response: The Agency does not agree with this recommendation. While this might be possible for a water system, the Agency funds other types of projects where this type information would not be available. The proposed language would be broad enough to cover all types of projects funded by the Agency, including similar usage levels. 3. Sec. 1780.3(a)--Equivalent Dwelling Unit--Add after ``typical rural residential dwelling'' add the following, ``or users whose total water needs could be met by a single residential sized water meter.'' A property with a permanent residence and a stop gap housing structure should only be considered as one connection. Agency response: The Agency made no change in the definition. Number of individual meters or residential dwellings are not what determines an equivalent dwelling unit (EDU). An EDU is based on the average consumption of a typical rural residential household. 4. Sec. 1780.3(a)--Rural and rural areas--Should be written as broadly as possible to avoid defining a rural area as a local government unit. Agency response: The Agency made no change in the definition of rural and rural areas. The Agency does not define a rural area outside a city or town by the type of local governmental unit. 1780.7 Eligibility. 1. Sec. 1780.7(c)(2)--Delete last sentence. The capacity for fire protection is repeated in Sec. 1780.57(d) and should not be in this section. Agency response: The Agency agrees and made the change. 2. Sec. 1780.7(d)--Place a period after the word ``terms'' and delete ``or other funding sources.'' Agency response: The Agency agreed and made the change. 3. Sec. 1780.7(e)--What is meant by ``reasonable rates and terms?'' Agency response: The words ``and terms'' should have not been included in that sentence. The applicant would be responsible for providing continued availability and use of the proposed facility at reasonable rates. The Agency has made the change. 1780.9 Eligible loan and grant purposes. 1. Sec. 1780.9(e)(1)(iv)--Change to specify that only ``hired'' applicant labor be reimbursable and not for people already on payroll. Agency response: The Agency agrees and limited the use of funds to ``additional'' applicant labor necessary to install and extend service. 2. Sec. 1780.9(f)(1)--After the word ``obligations for'' add ``engineering and other services used to prepare the application or.'' Agency response: The Agency agrees and changed the word ``construction'' to ``eligible project costs.'' This would cover all project costs incurred before loan or grant approval. 3. Sec. 1780.9(e)(1)(v)--2 commenters--Should provide clearer guidance on what circumstances may warrant using funds for connecting users to the system. Agency response: The Agency made no change. The wording ``unusual cases'' means that using loan and grant funds to connect users to the main service line would be the exception rather than the rule. This should only be considered in situations where the users cannot pay the cost or from an engineering standpoint that it is the logical thing to do. 4. Sec. 1780.9(e)(1)(i)--Revise to include training as an eligible cost. Would assure that equipment and processes will function as intended. The lack of technical expertise to properly operate and maintain new equipment or treatment processes can be a major problem with small systems. Agency response: The Agency made no change. The proposed language is broad enough to allow the use of funds to provide necessary training to operators to assure proper operation and maintenance of equipment. 1780.10 Limitations. 1. Sec. 1780.10(c)(2)--13 commenters--Do not change the formula from 55 percent grant to 45 percent grant. Agency response: The Agency made no change. The Agency has a limited amount of grant funds available for rural communities. The Agency is directing these funds to the communities that have the greatest need for these funds. The reduction from 55 percent to 45 percent will make additional grant funds available to low income communities that have the greatest need for the limited grant funds. 2. Sec. 1780.10(c)--2 commenters--Revise the requirement that restricts the amount of grant to RUS's share of project costs. Change the wording ``RUS funded project development costs'' to ``RUS eligible project development costs.'' Agency response: The Agency agrees and has made the change. 3. Sec. 1780.10(c)(2)--Allow grants up to 75 percent to all existing borrowers where funding is considered servicing action. Agency response: The Agency does not agree with this recommendation. The amount of grant funds an applicant can receive should be based on eligibility and not if they are an existing RUS borrower. 4. Sec. 1780.10(a)(6)--Recommend that the limitation on allowing rental of applicant owned equipment be deleted. Should allow for community owned equipment to be rented for the project if it is the most cost effective option. Agency response: This recommendation was not adopted. Program funds should not be used to rent equipment an applicant owns. Program funds should be used to cover services and equipment not available to the applicant. 5. Sec. 1780.10(c)(1)--2 commenters--Recommend removing the requirement regarding health or sanitary problem. If not removed, need to clarify that if there is no health or sanitary problem, the amount of grant that could be obtained is based on income only. Agency response: The Agency made no change. The eligibility for the maximum 75 percent grant should be based on need as well as income. The addition of health or sanitary problems makes eligibility for the 75 percent grant consistent with the eligibility for the poverty interest rate. 6. Sec. 1780.10(c)(2)--Recommend changing 45 percent grant to 50 percent grant. [[Page 33465]] Agency response: The Agency made no change. The 45 percent grant amount will make more grant funds available to communities with a median household income of less than 80 percent of the nonmetropolitian median household income of the State. This will allow the Agency to target grant funds to more low income communities. 7. Sec. 1780.10(c)(1)--Recommend increasing maximum grant percentage to 85 percent. Agency response: Agency made no change. The maximum grant is limited by law to 75 percent. 8. Sec. 1780.10(b)(3)--As written, this section is confusing. Should rephrase to read: ``Pay project costs when other loan funding for the project is available at reasonable rates and terms.'' Agency response: The Agency made no change. This is a limitation on when grant funds can be used. The proposed language would prohibit a grant being made when the interest rate or length of repayment are not in line with those received by other communities with similar economic conditions. 1780.11 Service area requirements. 1. Sec. 1780.11(a)(2)--Recommend that this paragraph be deleted. System officials should make decisions regarding areas to serve based on financial, environmental, and design factors. Agency response: The Agency made no change. The Agency agrees that in installing a facility the decisions regarding areas to be served should be based on financial, environmental, and design factors. This paragraph allows the decisions regarding areas to be served to be based on these factors. 1780.13 Rates and terms. 1. Sec. 1780.13(d)--There are currently four weekly Bond Buyer indices used to measure interest rates. This section needs to specifically identify which index is used. Agency response: The Agency agrees and has made the change. 2. Sec. 1780.13(e) Add a new paragraph (4) to read as follows: ``Principal and interest may be deferred in whole or in part for a period not to exceed 36 months prior to the date of the first installment due. This would be only in those cases where the development of the water source and treatment facility or sanitary treatment facilities are needed prior to the water or sewer being available to the rural users.'' Agency response: The Agency has not made this change. The regulations allow for deferment of principal and loan funds can be used to pay interest. By putting these together the same purpose can be accomplished as the suggested change. 1780.14 Security. 1. Sec. 1780.14(c)--Recommend that the parity security requirement be deleted. Agency response: The Agency did not make this change. Eliminating the parity security requirement would not adequately protect the security interest of the Government. The Agency should be in a ``parity'' security position with other lenders when jointly financing a project. If the project is financially sound, there is no problem with the parity requirement. The government should not guarantee other lenders loans by taking junior lien positions when jointly funded projects are developed. 1780.17 Selection priorities and process. 1. Sec. 1780.17(a)(1)--Reduce population from 1,000 to 500 and add 5 points. Agency response: The Agency agrees to make part of the suggested change. The Agency agrees to change the population points for communities with a population not in excess of 1,000 to 25 points. The Agency did not reduce the population to 500. Leaving the breaking point at 1,000 or less will give balance between financial feasibility and population priority. 2. Sec. 1780.17(b)--The points for ``health'' should equal those for ``income.'' Recommend increasing points in Sec. 1780.17(b) (1) and (2) to 30 points and increasing points in Sec. 1780.17(b)(3) to 20. Agency response: The Agency did not make this change. The Agency agrees that the protection of public health is a high priority. However, low income communities can least afford to construct the infrastructure that is needed to improve their health. By giving more priority to income and equal priority to small populations and health, funds can be directed to communities with the greatest need. 3. Sec. 1780.17(b)--Recommends that there be a gradation within the 25 points allowed for health priorities for severity of health hazard. This would give more points to the greatest health hazards and less points to ``lesser'' health issues. Agency response: The Agency did not make this change. The health priority pertaining to a water system are required by the Federal statute that authorizes the program. This would make it difficult to develop an equitable graduation scale within the health priority points for each category. 4. Sec. 1780.17(b)--Should there be health priority points for storm drainage? Agency response: The Agency did not make a change. There could be measurable health problems associated with a storm drainage project, the majority are safety related. Storm drainage would receive priority points under other categories, but would not rank as high as a drinking water or sewer project that directly corrects a health problem. 5. Sec. 1780.17(c)--Change heading to ``Median Household Income.'' Also, word ``household'' should be in (c)(1). Agency response: Agency made the change. 6. Sec. 1780.17(f)--Delete the phase ``exceeding 20% of the development cost at time of loan or grant approval or.'' Placing an arbitrary limit would further compound the problem at hand and would hinder the resolution of the funding problem. Agency response: The Agency made no change. Project cost overruns that exceed 20 percent should not be given priority for receiving additional funding from the Agency. The Agency is trying to reduce funds that go into project cost overruns and by reducing the funding priority is one way this can be accomplished. 1780.18 Public information. 1. Sec. 1780.18(a)--The publishing of a notice of intent to file an application is nothing but extra cost to the applicant. Agency response: The Agency made no change. This is a requirement of the 1996 Farm Bill. 2. Sec. 1780.18(a)--Should increase the notice of intent from 60 days to 180 days. Agency response: The Agency made no change. This 60 day requirement was part of the 1996 Farm Bill. 3. Sec. 1780.18(a)--Recommend allowing alternative means of notifying public such as fliers or mailers in small communities. Agency response: The Agency has not made the changed. The 1996 Farm Bill requires that the notice of intent to file a application be published in a general circulation newspaper. 4. Sec. 1780.18(b)--Recommend giving applicant's the option to hold the public meeting prior to the application submittal. Delete ``after the application is filed and'' add ``The public meeting must be held not later than loan or grant approval.'' Agency response: The Agency agrees to this change. 5. Sec. 1780.18(b)--2 commenters--Eliminate the requirement for a public meeting. Agency response: The Agency made no change. It is extremely important that applicants keep the general public [[Page 33466]] informed about the development of a proposed project. Support from the general public for a water or waste project is one of the most important ingredients for success. Subpart B--Loan and Grant Application Processing 1780.31 General. 1. Sec. 1780.31(d)--Change ``State Environmental Coordinator'' to State Environmental Coordinator or designee.'' Agency response: The Agency made no change. The State Environmental Coordinator should be involved in the application process to assure that important environmental issues are properly addressed. 1780.32 Timeframes for application processing. 1. Sec. 1780.32(a)--2 commenters--Revise to 15 working days or delete the 15 day requirement for notifying applicants that application is incomplete. Agency response: The Agency agrees and has made this change. 1780.33 Application requirements. 1. Should continue with preapplication process--14 commenters--The preapplication allows determination if a project is workable in RUS's view before spending time and money on formal application. This makes the overall funding process more workable and gives time needed to explore options before an application is formally filed. Agency response: The Agency has considered this recommendation and has given communities another option. If a community wishes to know if they are eligible for financial assistance they can make a written request to the Agency. 2. Eliminate requiring a PER and 1940-20 at initial stage of application process. Agency response: The Agency did not make this change. The Preliminary Engineering Report contains information on the proposed project that the Agency must have at this stage of the application process. Form RD 1940-20 provides the information necessary for the Agency to start the environmental review process and is needed at this stage of the application process. 3. Sec. 1780.33(c)--2 commenters--Should delete last sentence as the completion of a PER is covered in Sec. 1780.55 or insert ``PER guidelines for water, sanitary sewer, solid waste, and storm drainage are available from the agency.'' Agency response: The Agency agrees and has deleted the sentence. 4. Sec. 1780.33(c)--Recommend that RUS provide up front funds in form of a loan to cover cost of preliminary engineering report for poorest communities. Agency response: The Agency made no change. The Agency has a limited amount of loan funds available and uses these funds toward the total project costs rather than partial up front costs. The Agency believes that it is important to utilize its limited funds to build projects, rather than funding a preliminary engineering report for a project that may never be built. 5. Sec. 1780.33(f)--Delete reference to Form RD 1940-20, insert ``The applicant will consult with the processing office to determine the appropriate environmental information that should be provided.'' Agency response: The Agency revised to allow applicant to provide comparable information without using Form RD 1940-20. 6. Sec. 1780.33(h)--2 commenters--Combine all certifications into one form called ``General Borrower Certification.'' or include a statement and check off on the application indicating that these requirements will apply and allowing the applicant to complete such certificates if and when the loan actually closes. Agency response: The Agency made no change. However, this is a issue that will be reviewed in the future to determine what can be done in this area. 1780.35 Processing office review. 1. Sec. 1780.35(b)(2)--Recommends that a actual monthly rate ceilings for the poverty and intermediate categories be established. Agency response: The Agency made no change. While an actual monthly rate ceiling might work for a small geographic area it would be impossible to establish one for the entire United States that would be fair to all areas. When the debt service portion of the annual user costs exceeds the appropriate percentage of median household income, the Agency can determine the grant amount based on similar system cost. 2. Sec. 1780.35(b)(2)--Recommend that the relationship to total debt service and the project O&M cost be considered in determining grant eligibility. Agency response: The Agency made no change. The relationship between median household income and debt service is used because grant funds can only be used to reduce the debt. However, the similar system cost method used in (b)(3) does take into consideration other user costs in determining the grant amount. 1780.39 Application processing. 1. Sec. 1780.39(a)--In first sentence remove ``and after the applicant selects its professional and technical representative.'' Agency response: The Agency agrees and made the change. 2. Sec. 1780.39(b)(1)--27 commenters--Request for proposals should be deleted. Could cause potential conflicts and drive cost up. Applicants should be allowed to choose the engineer based on knowledge and experience. Agency response: The Agency has not deleted this requirement. This is a requirement of the 1996 Farm Bill and must be complied with. However, the Agency has revised to make it clear that the selection of the engineer to develop the preliminary engineering report is not subject to this requirement. Also, clarified is that the selection of engineering services should be on the basis of all relevant factors. 3. Sec. 1780.39(b)(1)--4 commenters--When applicants hire outside engineers, the selection of an engineer for a project design shall be conducted pursuant to state procurement laws or in the absence thereof, pursuant to the Federal Brooks Act, Public Law 92-582. Agency response: The Agency revised the paragraph to reflect state statutes or local requirements. The Brooks Act only applies to Federal procurement and construction. This act would not apply because the Federal government is not selecting the engineer. Revised rule to reflect that the owner may procure engineering services in accordance with applicable state laws providing the procurement meets the intent of this section. 4. Sec. 1780.39(b)(1)--4 commenters--Request for proposals should be required for all engineering services not only project design. Delete phase ``for project design.'' Agency response: The Agency revised to make this optional, but not a requirement. It should be left up to the applicant to make this decision and not made mandatory by the Agency. 5. Sec. 1780.39(b)(1)--Change all references to request for proposal to ``Request For Qualifications and/or Request for Proposal or add a definition for Request For Proposal that includes qualification and request for engineering services. Agency response: The Agency has revised the selection of engineering services to reflect all relevant factors. 6. Sec. 1780.39(b)(1)--Consider moving to Sec. 1780.54 and clarify how engineers are to be selected in (1). [[Page 33467]] Agency response: The Agency did not make this change. The section was revised to clarify how engineers are to be selected. This section pertains to all professional services and contracts related to the facility and the Agency believes that this is the best place to address engineering services. 7. Sec. 1780.39(b)(1)--Suggest that the regulation make provision to allow an ``ongoing'' contract or relationship with a community to continue without a new selection procedure. Agency response: The Agency made no change. The 1996 Farm Bill requires that when project design is procured separately, the selection of the engineer shall be done by a request for proposal. 8. Sec. 1780.39(b)(1)--The rule is silent on the procurement of engineering services for the planning phase of a project. Agency response: The Agency has revised the rule to require applicants to publicly announce all requirements for engineering services. 9. Sec. 1780.39(b)(1)--2 commenters--Should be made clear that if engineer has already been selected through an RFP then the process does not have to be repeated for design phase. Agency response: The Agency agrees that only one public announcement covering requirements for engineering services is necessary for a project. The revision will allow for this situation. 10. Sec. 1780.39(b)(1)--If a project is funded in phases, would an RFP have to be done for each phase? When can noncompetitive negotiations be utilized for engineering services? Agency response: If a project has been divided into phases and the procurement of engineering services covering all phases has been done in accordance with Agency requirements, the process would not have to be repeated as each phase is constructed. Noncompetitive negotiations could be utilized for the planning and preliminary engineering work done on a project after the applicant publicly announces all requirements for engineering services. 11. Sec. 1780.39(b)(1)--Honor agreements for engineering services entered into prior to submitting an application. Agency response: The Agency made no change. If engineering services were selected in accordance with Agency requirements, then the process would not have to be repeated. 12. Sec. 1780.39(c)(2)--What is ``meaningful user cash contributions?'' Agency response: To clarify the intent of this paragraph, the Agency has changed the word ``meaningful'' to ``new.'' This should make it clear that only users not presently receiving service will be required to make an up front cash payment to indicate interest in receiving service when it becomes available. 13. Sec. 1780.39(e)(2)--Divide into two paragraphs by adding a (e)(3) to read as follows and deleting reference to maintenance, extensions, etc. in (e)(2): Facility Maintenance Reserve. Additional reserves will need to be established for emergency maintenance, improvements to facilities, replacement of short-lived assets and other restricted reserves as deemed necessary by the governing body and lender. Agency response: The Agency made no change. The rule would allow for the establishment of debt service reserve and a facility maintenance reserve. The amount of funds that would be placed in the reserve accounts would be determined by the applicant and the Agency. The one-tenth of an average annual loan installment is the minimum requirement and the requirement could be larger. 14. Sec. 1780.39(e)(2)--2 commenters--Recommend that the reserve be fully funded over the first 10 years of the loan and not over the life of the loan. Agency response: Agency made no change. It is important that borrowers maintain adequate reserves to cover unexpected short-falls of revenue and to adequately maintain their systems. 15. Sec. 1780.39(f)--Delete last sentence in (f), and all of (1) and (2). Agency response: The Agency has made a revision to clarify, but did not delete the sentence. 16. Sec. 1780.39(g)(3)--Should require fidelity bond coverage be specifically for RUS funded project. Agency response: It is not necessary that a fidelity or employee dishonesty bond cover only the RUS funded project. However, the amount of fidelity or employee dishonesty bond coverage must be enough to cover not only RUS requirements, but other claims that could be made on the bond. 17. Sec. 1780.39(i)--Should be allowed to issue a Letter of Conditions when funds are not available or at least some percentage. Agency response: The Agency made no change. Letter of Conditions are taken by the general public to mean a commitment has been made by the Agency to fund a project. By not issuing a Letter of Conditions until funds are available for a project, problems associated with an applicant thinking that funds are available when in fact they are not can be avoided. 1780.44 Actions prior to loan or grant closing or start of construction, whichever occurs first. 1. Sec. 1780.44(e)--Allow deobligation of funds in the same percentage as funds were obligated. Agency response: The Agency did not make this change. The amount of deobligated funds is based on an reassessment of the need for grant funds to achieve a reasonable user rate. Deobligation of funds based on percentage of funds obligated could result in an applicant receiving more grant funds than needed to have reasonable user rates. With the limited amount of grant funds that the Agency has available, the funds must be stretched as far as possible in order to serve the maximum number of communities who need funds to construct projects. 2. Sec. 1780.44(e)--Provide an incentive for communities to save money by applying savings against the loan first rather than grant. Agency response: The Agency made no change. The Agency believes that the best approach is to work with communities early in the process to reduce the project costs. Once the Agency has committed funds to a community to construct a project, both parties have agreed on an amount of loan that can be repaid. Any reduction in the loan amount at this point could result in the community receiving more grant funds than needed in order to have reasonable user rates. 3. Sec. 1780.44(e)--Recommend waiting until completion of construction before deobligating any unused funds. Agency response: The Agency made no change. All construction projects have contingency funds set aside to cover unanticipated expenses during construction. Therefore, funds that are not needed for project costs should be deobligated and made available to another community. 1780.45 Loan and grant closing and delivery of funds. 1. Sec. 1780.45(f)(1)--Revise to allow remaining funds to be used by a community to improve its existing system. Agency response: The Agency made a change. The language was broadened to allow use of Agency funds not needed for the project to be used for the facility being financed. Any improvements must not result in major changes to the applicant's facility. For example, if RUS funds were used to construct a water project, then RUS funds that remain after completion could be used for any RUS eligible purpose on the applicant's whole water system. [[Page 33468]] 2. Sec. 1780.45(f)(3)--Delete the requirement to notify the attorney and engineer when funds are deobligated. Agency response: The Agency did not make this change. Many of the engineer's or attorney's are helping the applicant with completion of a project. It is important that all interested parties be notified before funds are canceled. 1780.49 Rural or Native Alaskan villages. 1. Sec. 1780.49(c)(4)--Revise to allow use of federal and non- federal sources of funds. Agency response: The Agency made no change. The law that authorizes the funds for rural or native Alaskan villages requires that the matching funds be non-federal funds. 2. Sec. 1780.49(f)(1)--Revise to authorize projects of Alaska Area Native Health Service. Agency response: The Agency made no change. In order to assure that the projects are properly constructed the Agency will continue to restrict the waiver of construction requirements contained in this subpart to projects that are jointly funded with the State of Alaska. 3. Should contain a specific reference that solid waste disposal projects are eligible grant purposes. Agency Response: The Agency made no change. The Agency considers solid waste disposal to be included in waste disposal services authorized by this paragraph. Subpart C--Planning, Designing, Bidding, Contracting, Constructing and Inspections 1780.54 Technical services. 1. Consider including Architects in this section as they are sometimes involved in water and waste projects. Agency response: The Agency agrees and made change. 2. Does ``in house'' mean one on the applicant's staff or one under previous contract with applicant or both? Agency response: ``in house'' means one on the applicant's staff. 1780.57 Design policies. 1. Sec. 1780.57(c)--Recommend encouraging the procurement of environmentally preferable products and services. Agency response: The Agency revised to reflect both energy- efficient and environmentally-sound products and services. 2. Sec. 1780.57(b)--Delete words ``or reside.'' Do not construct occupied dwellings. Agency response: The Agency made the change. 3. Sec. 1780.57(h)--Delete the wording ``Agency determines.'' Agency response: The Agency made no change. This language is required by the 1996 Farm Bill. 1780.67 Performing construction. 1. Recommend design build and construction management that is in existing regulations be added as an option. Agency response: Agency has made no change. The proposed language would not exclude design build and construction management. 2. Strengthen language by inserting ``using their own personnel or designated, qualified, and supervised volunteers.'' Agency response: The Agency did not make this change. This section does not prohibit use of volunteers in addition to an applicant's own personnel. 1780.70 Owner's procurement regulations. 1. Sec. 1780.70(b)--Recommend deleting the word ``comprehensive'' or the entire last two sentences. Agency response: The Agency made no change. The Agency cannot make this change as it is required by law. 1780.72 Procurement methods. 1. Sec. 1780.72--2 commenters--Recommend that design/build be added to section as an option for procurement. Agency response: The Agency made no change. The proposed language would allow design build as a construction option. 2. Sec. 1780.72(a)--The requirements in 1780.75(b) and (d) should be included for any small purchase over $10,000. Agency response: The Agency made no change. The provision for termination and equal employment opportunity would apply to any contract exceeding $10,000. The type of procurement would not influence this requirement. 3. Sec. 1780.72(a)--What does the phrase ``costing in the aggregate not more than $100,000'' mean? Agency response: The phrase ``costing in the aggregate not more than $100,000'' means the total dollar amount of an item or product that is being purchased for a project. For example, a water system could utilize the small purchase procedures to procure $90,000 for water meters and $20,000 for equipment. In this example, each item procured was under $100,000, but the total was over $100,000. 4. Sec. 1780.72(a) and Sec. 1780.72(d)(6)--Recommend deleting small purchase and using noncompetitive negotiation in its place. Agency response: The Agency did not make this change. While these two procurement methods are similar each has its place in the construction of water and waste projects. 5. Sec. 1780.72(c)--6 commenters--Delete the competitive negotiation for engineering services. Agency response: The Agency has not deleted this requirement. This is a requirement of the 1996 Farm Bill and must be complied with. The requirement has been clarified to reflect that the selection of engineering services should be on the basis of all relative factors. The Agency moved the selection of engineering services to Sec. 1780.39(b)(1). 6. Sec. 1780.72(c)--2 commenters--Certain States have enacted legislation that specifically prohibits State and Local Agencies from seeking formal or informal submission of verbal or written estimates of costs or price proposals. The rule should be amended to delete any and all provisions that require or allow the use of cost or price as a consideration in the selection of a design professional. Agency response: The Agency made a change by revising Sec. 1780.39(b)(1) and deleting engineering procurement from this section. 7. Sec. 1780.72(c)--2 commenters--Should revise to require only one competitive negotiation procedure which should be at the ``Step I'' phase and not wait until the design phase. Allow credit to those applicants that can properly document that their engineer selection in Step I of a project was in conformance with competitive negotiation and would not have to be repeated at the ``design phase.'' Agency response: The Agency agrees that only one public announcement covering requirements for engineering services is necessary for a project. The revision to Sec. 1780.39(b)(1) will allow for this situation. 8. Sec. 1780.72(c)--Revise by removing reference to obtaining proposals from other sources. Agency response: Agency made no change. The procurement of engineering services was moved to Sec. 1780.39(b)(1). 9. Sec. 1780.72(c)--Delete reference to engineering services, implies competitive negotiations can only be used for engineering services. Agency response: Agency made the change. The procurement of engineering services was moved to Sec. 1780.39(b)(1). 10. Sec. 1780.72(c)--Should clarify that the applicant could select an engineer through the noncompetitive process to perform the PER and assist in the production of the application. [[Page 33469]] Agency response: Agency revised the procurement of engineering services in Sec. 1780.39(b)(1) to clarify this issue. 11. Sec. 1780.72(c)(2)--3 commenters--Modify by deleting references to price or cost for obtaining engineering services. The significant evaluation factors to be based on a firm's professional qualifications, specialized experience, technical competence and so forth. Agency response: The Agency made a change by removing reference to cost or price as a consideration in Sec. 1780.39(b)(1). 12. Sec. 1780.72(c)(5)--Delete the word ``other'' before ``professional services.'' This will clarify that competitive negotiations is an acceptable method of procurement for any professional service. Agency response: Agency removed all references to procurement of professional service from Sec. 1780.72(c) and moved to Sec. 1780.39(b)(1). Sec. 1780.39(b)(1) contains all procurement requirements for engineering and architectural services. 13. Sec. 1780.72(d)(5)--Delete word ``design'' so that it covers all engineering services. Agency response: Agency removed all references to procurement of professional service from Sec. 1780.72(c) and moved to Sec. 1780.39(b)(1). Sec. 1780.39(b)(1) contains all procurement requirements for engineering and architectural services. 1780.75 Contract provisions. 1. Sec. 1780.75(a)--Should be made clear that liquidated damages only applies to construction contracts. Agency response: The Agency made the change. 2. Sec. 1780.75(c)--Change ``be legally doing business in the State where the facility is located'' to ``the surety must be listed in the Treasury Circular 570 as amended as having a license to do business in the State where the facility is located.'' Agency response: The Agency made the change. 3. Sec. 1780.75 (b) and (f)--Recommend raising the $10,000 to $100,000. Agency response: The Agency did not make this change. It is important to have a termination clause in contracts. The $10,000 cut off point for this requirement is as high as it should be to adequately protect the owner. The equal employment provision is required by other Federal regulations. 4. Sec. 1780.75(c)--Recommend retaining U.S. Government as co- obligee on payment and performance bonds. Agency response: The Agency made no change. The Agency is not a party to the contract and should not be included on any payment or performance bond. 5. Sec. 1780.75(j)--Recommend adding the ability to modify the retainage amount to match other funding source requirements on jointly funded projects. Agency response: The Agency made no change. Five percent retainage is the minimum amount that should be withheld to assure that construction is completed in a satisfactorily and timely manner. The regulations would allow for more than 5 percent, if required by other funding sources. 6. Sec. 1780.75(j)--Five percent retainage on approved partial pay estimates is too low. Leave at 10 percent. Agency response: The Agency made no change. The 5 percent retainage is in line with the industry standard. Also, the funds retained will be held until the project is substantially completed and accepted by the owner. 1780.76 Contract administration. 1. Sec. 1780.76(c)--Should be clearly stated that the Agency, not the project engineer, have sole authority to grant or refuse the owner's request for a particular independent resident inspector. Agency response: The Agency agrees and has revised. 2. Sec. 1780.76(d)--Add at end of last sentence ``or similar form approved by the Agency.'' Agency response: The Agency made the change. List of Subjects 7 CFR Parts 1775, 1777, 1778, 1780 and 1781 Business and industry, Community development, Community facilities, Grant programs--housing and community development, Reporting and recordkeeping requirements, Rural areas, Waste treatment and disposal, Water supply, Watersheds. 7 CFR Part 1901 Civil rights, Fair housing, Rural areas. 7 CFR Part 1940 Agriculture, Grant programs--housing and community development, Loan programs--agriculture, Rural areas. 7 CFR Parts 1942 and 4284 Business and industry, Community development, Community facilities, Grant programs--housing and community development, Loan programs-- housing and community development, Reporting and recordkeeping requirements, Rural areas, Soil conservation, Waste treatment and disposal, Water supply. 7 CFR Part 1951 Accounting, Grant programs--housing and community development, Reporting and recordkeeping requirements, Rural areas. 7 CFR Part 1956 Accounting, Loan programs--agriculture, Rural areas. Therefore, RUS amends chapters XVII, XVIII and XLII, title 7, Code of Federal Regulations as follows: Part 1942, Subpart J--[Redesignated as Part 1775 and Revised] 1. Subpart J of 7 CFR part 1942 is redesignated as 7 CFR part 1775 and is revised to read as follows: PART 1775--TECHNICAL ASSISTANCE AND TRAINING GRANTS Sec. 1775.1 General. 1775.2 [Reserved] 1775.3 Objectives. 1775.4 Definitions. 1775.5 Source of funds. 1775.6 Allocation of funds. 1775.7 Eligibility. 1775.8 Purpose. 1775.9 [Reserved] 1775.10 Limitations. 1775.11 Equal opportunity requirements. 1775.12 Environmental requirements. 1775.13 Preapplications. 1775.14 Priority. 1775.15 [Reserved] 1775.16 Application processing. 1775.17 [Reserved] 1775.18 Grant approval and obligation of funds. 1775.19 Fidelity bond. 1775.20-11775.21 [Reserved] 1775.22 Fund disbursement. 1775.23 Grant cancellation or major changes. 1775.24 Reporting. 1775.25 Audit. 1775.26 Grant Agreement. 1775.27 Grant servicing. 1775.28 Delegation of authority. 1775.29-1775.99 [Reserved] 1775.100 OMB control number. Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005. Sec. 1775.1 General. This part sets forth the policies and procedures for making Technical Assistance grants. Grants for technical assistance and training for water and waste disposal facilities are authorized under section 306(a)(16)(A) of the Consolidated Farm and Rural Development Act, (CONACT), (7 U.S.C. 1926(a)), as amended. Grants for solid waste management are authorized under Section 310B of the CONACT, (7 U.S.C. 1932), as amended. Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Agency employees, members of their [[Page 33470]] families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for this assistance are required to identify any known relationship or association with an Agency employee. Sec. 1775.2 [Reserved] Sec. 1775.3 Objectives. (a) The objectives of the Technical Assistance and Training Grant Program are to: (1) Identify and evaluate solutions to water and waste disposal problems in rural areas. (2) Assist applicants in preparing applications for water and waste grants made in accordance with part 1780 of this chapter. (3) Improve operation and maintenance of existing water and waste disposal facilities in rural areas. (b) The objectives of the Solid Waste Management Grant Program are to: (1) Reduce or eliminate pollution of water resources. (2) Improve planning and management of solid waste sites. Sec. 1775.4 Definitions. Association. An entity, including a small city or town, that is eligible for Rural Utilities Service (RUS) water and waste financial assistance in accordance with Sec. 1780.7 of this chapter. Grantee. An entity with whom The Agency has entered into a grant agreement under this program to provide technical assistance and/or training to associations as defined in this section. Low income. Median household income below the poverty line for a family of four as defined in Section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)), or below 80 percent of the Statewide nonmetropolitan median household income. Regional. For purposes of the Solid Waste Management grant program, as implemented through this part, regional is defined as any multi- jurisdictional area including multi-State or any multi-jurisdictional area within a State. Rural area. For water and waste disposal facilities the terms ``rural'' or ``rural area'' will not include any area in a city or town with population in excess of 10,000 inhabitants according to the latest decennial census of the United States. State. Any of the fifty States, the Commonwealth of Puerto Rico, the Western Pacific Territories, Marshall Islands, Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands. Sec. 1775.5 Source of funds. Technical Assistance and Training grants awarded will be made from not less than one (1) percent or, at the discretion of the Agency Administrator, not more than three (3) percent of any appropriations for grants under Section 306(a)(2) of the CONACT, (7 U.S.C. 1926(a)). Technical Assistance and Training grant funds not obligated by September 1 of each fiscal year will be used for water and waste grants made in accordance with part 1780 of this chapter. This section does not apply to Solid Waste Management grants. Sec. 1775.6 Allocation of funds. Control of Technical Assistance and Training grant and Solid Waste Management grant funds will be retained in the National office and allocated on a project case basis. These funds are not available for obligation by States. Sec. 1775.7 Eligibility. (a) Entities eligible for Technical Assistance and Training (TAT) grants are private nonprofit organizations that have been granted tax exempt status by the Internal Revenue Service (IRS) of the United States. (b) Entities eligible for Solid Waste Management (SWM) grants are nonprofit organizations, including: (1) Private nonprofit organizations that have been granted tax exempt status by the IRS; and (2) Public bodies including local governmental-based multi- jurisdictional organizations. (c) Applicants for either TAT or SWM grants must also have the proven ability, background, experience, legal authority, and actual capacity to provide technical assistance and/or training on a regional basis to associations as provided in Sec. 1775.3. Sec. 1775.8 Purpose. (a) Technical Assistance and/or Training Grants may be used to: (1) Identify and evaluate solutions to water problems of associations in rural areas relating to: (i) Source. (ii) Storage. (iii) Treatment. (iv) Distribution. (2) Identify and evaluate solutions to waste problems of associations in rural areas relating to: (i) Collection. (ii) Treatment. (iii) Disposal. (3) Assist associations that have filed a preapplication with the Agency in the preparation of water and/or waste loan and/or grant applications. (4) Provide training to association personnel that will improve the management, operation and maintenance of water and waste disposal facilities. (5) To pay the expenses associated with providing the technical assistance and/or training authorized in paragraphs (a) (1) through (4) of this section. (b) Solid Waste Management grants may be used to: (1) Evaluate current landfill conditions to determine threats to water resources. (2) Provide technical assistance and/or training to enhance operator skills in the maintenance and operation of active landfills. (3) Provide technical assistance and/or training to help communities reduce the solid waste stream. (4) Provide technical assistance and/or training for operators of landfills which are closed or will be closed in the near future with the development/implementation of closure plans, future land use plans, safety and maintenance planning, and closure scheduling within permit requirements. Sec. 1775.9 [Reserved] Sec. 1775.10 Limitations. Grant funds may not be used to: (a) Recruit applications for the Agency's water and waste loan and/ or any loan and/or grant program. (b) Duplicate current services, replacement or substitution of support previously provided such as those performed by an association's consultant in developing a project. (c) Fund political activities. (d) Pay for capital assets, the purchase of real estate or vehicles, improve and renovate office space, or repair and maintain privately-owned property. (e) Pay for construction or operation and maintenance costs. (f) Pay costs incurred prior to the effective date of grants made under this part. (g) Pay for technical assistance as defined in this part which duplicates assistance provided to implement an action plan funded by Forest Service (FS) under the National Forest-Dependent Rural Communities Economic Diversification Act (7 U.S.C. 6601 note) for 5 continuous years from the date of grant approval by the FS. To avoid duplicate assistance, the grantee shall coordinate with the FS and RUS to ascertain if a grant has been made in a substantially similar geographical or defined local area in a State for technical assistance under the above program. The grantee will provide [[Page 33471]] documentation to FS and RUS regarding the contact with each agency. Under its program, the FS assists rural communities dependent upon national forest resources by establishing rural forestry and economic diversification action teams which prepare action plans. Action plans are intended to provide opportunities to promote economic diversification and enhance local economies dependent upon national forest resources. Sec. 1775.11 Equal opportunity requirements. The policies and regulations contained in subpart E of part 1901 of this title apply to grants made under this part. Sec. 1775.12 Environmental requirements. The policies and regulations contained in subpart G of part 1940 of this title apply to grants made for the purposes in Sec. 1775.8. Sec. 1775.13 Preapplications. (a) Applicants will file an original and one copy of SF-424.1, ``Application for Federal Assistance (For Non-construction),'' with the appropriate Agency office between October 1 and December 31 each fiscal year. This form is available in all Agency offices. Applicants proposing to provide technical assistance and/or training in only one State will apply through the appropriate State Office. The State Office will review and forward preapplications, with their recommendations, within seven working days to the National Office, Attention: Water and Waste Disposal. Applicants providing technical assistance and/or training in more than one State will forward the preapplication to the Assistant Administrator, Water and Waste, Rural Utilities Service, Washington, DC 20250. Preapplications for Solid Waste Management grants that cannot be funded in the fiscal year received will not be retained for consideration for funding in the following fiscal year and will be handled as outlined in paragraph (g) of this section. (b) All preapplications shall be accompanied by: (1) Evidence of applicant's legal existence and authority in the form of certified copies of organizational documents and a certified list of directors and officers with their respective terms. (2) Evidence tax exempt status from the Internal Revenue Service. (3) Brief written narrative which includes items such as: (i) The proposed service(s) to be provided, including the benefits of the technical assistance and/or training. (ii) Area to be served. (iii) Name of association(s) or type of association(s) that will be served. (iv) Median household income of the population to be served by each association(s). (v) Grantee's experience, including experience of key staff members and person(s) providing the technical assistance and/or training. (vi) The number of months duration of the project or service and the estimated time it will take from grant approval to beginning of service. (vii) Method used to select the association(s) that will receive the service. (viii) Brief description of how the service will be provided, such as, through currently employed personnel or some other method. (ix) Method to be used for delivery of the service, including personnel to be utilized and tasks to be contracted, if any. (4) Latest financial information to show the organization's financial capacity to carry out the proposed work. As a minimum, the information should include a balance sheet and an income statement. A current audit report is preferred. (5) Estimated breakdown of costs including those to be funded by grantee as well as other sources. (6) Budget and accounting system in place or proposed. (7) Evaluation method to determine if objective(s) of the proposed activity is being accomplished. (c) Upon receipt of a preapplication, the National Office will: (1) Review and evaluate the preapplication and accompanying documents; (2) Request from the Office of General Counsel (OGC), a legal determination of applicant's legal existence and authority to provide technical assistance and/or training. The legal opinion will be obtained from the Regional Attorney servicing the area where the applicant's headquarters is located; and (3) Normally, respond to the applicant within 45 days after December 31 of each year using Form AD-622, ``Notice of Preapplication Review Action,'' indicating the action taken on the preapplication. (d) Applicants whose preapplications are found to be ineligible will be given notice by use of Form AD-622 and advised of their appeal rights under subpart B of part 1900 of this title. (e) Applicants who are eligible, but do not have the priority necessary for further consideration will be notified with Form AD-622, which includes the following statements: ``Your proposal cannot be funded within the available funds.'' ``You are advised against incurring obligations which cannot be fulfilled without Agency funds.'' (f) Applicants that are eligible for funding within the available funds will be provided forms and instructions for filing a complete application. Applicants should be advised against incurring obligations which cannot be fulfilled without Agency funds. (g) Applicants who have filed preapplications for solid waste management grant funds that cannot be funded within the available funds will be notified, using Form AD-622, that their preapplication will not be retained. They will also be notified that they may file a new preapplication when funds again become available using the following statement: ``If the Agency receives funding for the program in FY __, you may file a new preapplication on or after October 1, 19__.'' Sec. 1775.14 Priority. (a) The preapplication and supporting information will be used to determine the applicant's priority for available funds for the Technical Assistance and Training Grant program. The following specific criteria will be considered in the competitive selection of Technical Assistance and Training Grant recipients: (1) Applicant's demonstrated capability and past performance in providing technical assistance and/or training to rural associations. (2) The extent to which the population of the associations served have low income. (3) Applicant's financial and if applicable, in-kind resource that will maximize use of technical assistance and/or training funds for direct staffing of activities that are delivered to the associations. (4) The extent to which the project will be cost effective, including but not limited to the ratio of proposed personnel to the cost of the project, the cost per associations served by the project, and the expected benefits from the project. (5) How well the proposal coincides with the objectives of the Agency's Water and Waste Disposal program authorized in part 1780 of this chapter. (6) Applicants proposing to serve multi-state, regional, or nationwide areas. (7) Applicants whose timeframe for completion of the technical assistance and/or training grant project is 12 months or less. (b) Preapplications received from local governmental-based, multi- [[Page 33472]] jurisdictional organizations for the SWM grant program will be given priority within the available funds. Sec. 1775.15 [Reserved] Sec. 1775.16 Application processing. (a) Upon notification on Form AD-622 that the applicant is eligible for funding, the following will be submitted to the National Office by the applicant: (1) SF-424.1. (2) Proposed scope of work detailing the training and/or technical assistance to be accomplished and timeframes for completion of each task. (3) Proposed budget. (4) Other requested information needed by the Agency to make a grant award determination. (b) The following forms and documents will be part of the grant docket: (1) Form RD 400-1, ``Equal Opportunity Agreement.'' (2) Form RD 400-4, ``Assurance Agreement.'' (3) Grant Agreement signed by the applicant. (4) Scope of work prepared by the applicant. (5) Form RD 1940-1, ``Request for Obligation of Funds.'' (c) If the applicant fails to submit the application and related material by the date shown on Form AD-622 (normally 30 days from the date of Form AD-622), the Agency may discontinue consideration of the application. Sec. 1775.17 [Reserved] Sec. 1775.18 Grant approval and obligation of funds. (a) The National Office will review the application and other documents to determine whether the proposal complies with this part. (b) All grants made under this part will be approved and obligated by the Agency Administrator or designee. (c) The obligation of funds will be handled in accordance with part 1780 of this chapter. (d) An executed copy of the Grant Agreement and scope of work will be sent to the applicant on the obligation date, along with a copy of Form RD 1940-1. The Agency will retain the executed original of the Grant Agreement. The grant will be considered closed on the obligation date. (e) If the grant is not approved, the applicant will be notified in writing of the reason(s) for rejection. The notification to the applicant will state that a review of this decision by the Agency may be requested by the applicant under subpart B of part 1900 of this title. Sec. 1775.19 Fidelity bond. Prior to the advancing of funds, the grantee will provide fidelity bond coverage for the positions of persons entrusted with the receipt and disbursement of its funds and the custody of valuable property. The amount of the bond will be at least equal to the maximum amount of monies that the grantee will have on hand at any one time for technical assistance and/or training provided in accordance with the Grant Agreement. Unless prohibited by State Law, the United States, acting through the Agency, will be named as co-obligee in the bond. The bond must be obtained from a company listed in Department of Treasury Circular 570, as amended. Form RD 440-24, ``Position Fidelity Schedule Bond Declarations,'' may be used. A certified power-of-attorney with effective date will be attached to the bond. Secs. 1775.20-1775.21 [Reserved] Sec. 1775.22 Fund disbursement. Grantees will be reimbursed as follows: (a) Standard Form (SF) 270, ``Request for Advance or Reimbursement,'' will be completed by the applicant and submitted to the National Office not more frequently than monthly. (b) Upon receipt of a properly completed SF 270, the funds will be requested through the field office terminal system. Ordinarily, payment will be made within 30 days after receipt of a proper request for reimbursement. (c) Grantees are encouraged to use minority banks (a bank which is owned by at least 50 percent minority group members) for the deposit and disbursement of funds. A list of minority owned banks can be obtained from the Office of Minority Business Enterprise, Department of Commerce, Washington, DC 20230. Sec. 1775.23 Grant cancellation or major changes. If it is determined that a project will not be funded or if major changes in the scope of the project are made after release of the approval announcement, the Administrator will notify the Director of Legislative Affairs and Public Information Staff (LAPIS) giving the reasons for such action. In the case of a grant cancellation, Form RD 1940-10, ``Cancellation of U.S. Treasury Check and/or Obligation,'' will not be submitted to the Finance Office until 5 working days after notifying the Director of LAPIS, and grant obligation cancellations will not be submitted to the National Office until 5 working days after notifying the Director of LAPIS. Sec. 1775.24 Reporting. Standard Form (SF) 269, ``Financial Status Report,'' SF 272, ``Federal Cash Transactions Report,'' and a project performance activity report will be required of all grantees on a quarterly basis. A final project performance report will be required with the last SF 269. The final report may serve as the last quarterly report. Grantees shall constantly monitor performance to ensure that time schedules are being met, projected work by time periods is being accomplished, and other performance objectives are being achieved. All multi-state, regional, and nationwide grantees are to submit an original of each report to the National Office. Grantees serving only one State are to submit an original of each report to the State Program Official. The State Program Official will review and forward to the National Office the report with comments. The project performance reports shall include, but not be limited to, the following: (a) A comparison of actual accomplishments to the objectives established for that period; (b) Reasons why established objectives were not met; (c) Problems, delays, or adverse conditions which will affect attainment of overall project objectives, prevent meeting time schedules or objectives, or preclude the attainment of particular project work elements during established time periods. This disclosure shall be accompanied by a statement of the action taken or planned to resolve the situation; and (d) Objectives and timetable established for the next reporting period. Sec. 1775.25 Audit. The grantee will provide an audit report prepared in accordance with Sec. 1780.47 of this chapter within 90 days after project completion. Sec. 1775.26 Grant Agreement. RUS Bulletin 1775-1 is a Grant Agreement which sets forth the procedures for making and servicing grants made under this part. Bulletins, instructions and forms referenced are for use in administering grants made under this part and are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, D.C. 20250-1500. Sec. 1775.27 Grant servicing. Grants will be serviced in accordance with the grant agreement and subpart E [[Page 33473]] of part 1951 of this title. Subpart B of part 1900 of this title will be followed when grants are terminated for cause. Sec. 1775.28 Delegation of authority. The authority under this part is redelegated to the Assistant Administrator, Water and Waste, except for the discretionary authority contained in Sec. 1775.5. The Assistant Administrator, Water and Waste may redelegate the authority in this section. Secs. 1775.29-1775.99 [Reserved] Sec. 1775.100 OMB control number. The collection of information requirements contained in this part have been approved by the Office of Management and Budget and have been assigned OMB control number 0575-0123. Public reporting for this collection of information is estimated to vary from 15 minutes to 4 hours per response, with an average of 1 hour per response including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of Management and Budget, Paperwork Reduction Project (OMB 0575-0123), Washington, DC 20503. Part 4284, Subpart E [Redesignated as Part 1777 and Revised] 2. Subpart E of 7 CFR part 4284 is redesignated as 7 CFR part 1777 and is revised to read as follows: PART 1777--SECTION 306C WWD LOANS AND GRANTS Sec. 1777.1 General. 1777.2 [Reserved] 1777.3 Objective. 1777.4 Definitions. 1777.5-1777.10 [Reserved] 1777.11 Making, processing, and servicing loans and grants. 1777.12 Eligibility. 1777.13 Project priority. 1777.14-1777.20 [Reserved] 1777.21 Use of funds. 1777.22-1777.30 [Reserved] 1777.31 Rates. 1777.32-1777.40 [Reserved] 1777.41 Individual loans and grants. 1777.42 Delegation of authority. 1777.43 Bulletins. 1777.44-1777.99 [Reserved] 1777.100 OMB control number. Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005. Sec. 1777.1 General. (a) This part outlines Rural Utilities Service (RUS) policies and procedures for making Water and Waste Disposal (WWD) loans and grants authorized under section 306C of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926(c)), as amended. (b) Agency officials will maintain liaison with officials of other Federal, State, regional, and local development agencies to coordinate related programs to achieve rural development objectives. (c) Agency officials shall cooperate with appropriate State agencies in making loans and/or grants that support State strategies for rural area development. (d) Funds allocated in accordance with this part will be considered for use by Indian tribes within the State regardless of whether State development strategies include Indian reservations within the State's boundaries. Indians residing on such reservations must have an equal opportunity to participate in this program. (e) Federal statutes provide for extending the Agency's financial programs without regard to race, color, religion, sex, national origin, marital status, age, or physical/mental handicap (provided the participant possesses the capacity to enter into legal contracts). Sec. 1777.2 [Reserved] Sec. 1777.3 Objective. The objective of the Section 306C WWD Loans and Grants program is to provide water and waste disposal facilities and services to low- income rural communities whose residents face significant health risks. Sec. 1777.4 Definitions. Applicant. Entity that receives the Agency loan or grant under this part. The entities can be public bodies such as municipalities, counties, districts, authorities, or other political subdivisions of a State, and organizations operated on a not-for-profit basis such as associations, cooperatives, private corporations, or Indian tribes on Federal and State reservations, and other Federally recognized Indian tribes. Colonia. Any identifiable community designated in writing by the State or county in which it is located; determined to be a colonia on the basis of objective criteria including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing, inadequate roads and drainage; and existed and was generally recognized as a colonia before October 1, 1989. Cooperative. A cooperative formed specifically for the purpose of the installation, expansion, improvement, or operation of water supply or waste disposal facilities or systems. Individual. Recipient of a loan or grant through the applicant to facilitate use of the applicant's water and/or waste disposal system. Rural areas. Includes unincorporated areas and any city or town with a population not in excess of 10,000 inhabitants according to the most recent decennial census of the United States. They can be located in any of the 50 States, the Commonwealth of Puerto Rico, the Western Pacific Territories, Marshall Islands, Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands. Secs. 1777.5-1777.10 [Reserved] Sec. 1777.11 Making, processing, and servicing loans and grants. Unless specifically modified by this part, loans and/or grants will be made, processed, and serviced in accordance with part 1780 of this chapter. Sec. 1777.12 Eligibility. (a) The provisions of paragraphs (a) (1) and (2) of this section do not apply to a rural area recognized as a colonia. Otherwise, the facility financed under this part must provide water and/or waste disposal services to rural areas of a county where, on the date preapplication is received by the Agency, the: (1) Per capita income of the residents is not more than 70 percent of the most recent national average per capita income, as determined by the Department of Commerce; and (2) Unemployment rate of the residents is not less than 125 percent of the most recent national average unemployment rate, as determined by the Bureau of Labor Statistics. (b) Residents of the rural area to be served must face significant health risks due to the fact that a significant proportion of the community's residents do not have access to, or are not served by, adequate, affordable, water and/or waste disposal systems. The file should contain documentation to support this determination. Sec. 1777.13 Project priority. Paragraphs (a) through (d) of this section indicate items and conditions which must be considered in selecting preapplications for further development. When ranking eligible preapplications for consideration for limited funds, Agency officials must consider the priority items met by each [[Page 33474]] preapplication and the degree to which those priorities are met. (a) Preapplications. The preapplication and supporting information submitted with it will be used to determine applicant eligibility and the proposed project's priority for available funds. Applicants determined ineligible will be advised of their appeal rights in accordance with 7 CFR part 11. (b) State Office review. All preapplications will be reviewed and scored for funding priority at each State Office using RUS Bulletin 1777-2. Funds will be requested from the National Office, Attention: Water and Waste Processing, using RUS Bulletin 1777-3. Eligible applicants that cannot be funded should be advised that funds are not available and advised of their appeal rights as set forth in 7 CFR part 11. (c) National Office. The National Office will allocate funds on a project-by-project basis as requests are received. If the amount of funds requested exceeds the amount of funds available, the total project score will be used to select projects for funding. The RUS Administrator may assign up to 35 additional points that will be considered in the total points for items such as geographic distribution of funds, severity of health risks, etc. (d) Selection priorities. The priorities described below will be used to rate preapplications and in selecting projects for funding. Points will be distributed as indicated in paragraphs (d)(1) through (d)(5) of this section and will be used in selecting projects for funding. A copy of RUS Bulletin 1777-2, used to rate applications, should be placed in the case file for future reference. (1) Population. The proposed project will serve an area with a rural population: (i) Not in excess of 1,500--30 points. (ii) More than 1,500 and not in excess of 3,000--20 points. (iii) More than 3,000 and not in excess of 5,500--10 points. (2) Income. The median household income of population to be served by the proposed project is: (i) Not in excess of 50 percent of the statewide nonmetropolitan median household income--40 points. (ii) More than 50 percent and not in excess of 60 percent of the statewide nonmetropolitan median household income--20 points. (iii) More than 60 percent and not in excess of 70 percent of the statewide nonmetropolitan median household income--10 points. (3) Joint financing. The amount of joint financing committed to the proposed project is: (i) Twenty percent or more private, local, or State funds except Federal funds channeled through a State agency--10 points. (ii) Five to 19 percent private, local, or State funds except Federal funds channeled through a State agency--5 points. (4) Colonia. (See definition in Sec. 1777.4). The proposed project will provide water and/or waste disposal services to the residents of a colonia--50 points. (5) Discretionary. In certain cases, the State Program Official may assign up to 15 points for items such as natural disaster, to improve compatibility/coordination between the Agency's and other agencies' selection systems, to assist those projects that are the most cost effective, high unemployment rate, severity of health risks, etc. A written justification must be prepared and attached to RUS Bulletin 1777-2 each time these points are assigned. Secs. 1777.14-1777.20 [Reserved] Sec. 1777.21 Use of funds. (a) Applicant. Funds may be used to: (1) Construct, enlarge, extend, or otherwise improve community water and/or waste disposal systems. Otherwise improve would include extending service lines to and/or connecting residence's plumbing to the system. (2) Make loans and grants to individuals for extending service lines to and/or connecting residences to the applicant's system. The approval official must determine that this is a practical and economical method of connecting individuals to the community water and/ or waste disposal system. Loan funds can only be used for loans, and grant funds can only be used for grants. (3) Make improvements to individual's residence when needed to allow use of the water and/or waste disposal system. (4) Grants can be made up to 100 percent of eligible project costs. (b) Individuals. Funds may be used to: (1) Extend service lines to residence. (2) Connect service lines to residence's plumbing. (3) Pay reasonable charges or fees for connecting to a community water and/or waste disposal system. (4) Pay for necessary installation of plumbing and related fixtures within dwellings lacking such facilities. This is limited to one bathtub, sink, commode, kitchen sink, water heater, and outside spigot. (5) Construction and/or partitioning off a portion of dwelling for a bathroom, not to exceed 4.6 square meters (48 square feet) in size. (6) Pay reasonable costs for closing abandoned septic tanks and water wells when necessary to protect the health and safety of recipients of a grant in paragraphs (b)(1) or (b)(2) of this section and is required by local or State law. Secs. 1777.22-1777.30 [Reserved] Sec. 1777.31 Rates. (a) Applicant loans will bear interest at the rate of 5 percent per annum. (b) Individual loans will bear interest at the rate of: (1) Five percent per annum; or (2) The Federal Financing Bank rate for loans of a similar term at the time of Agency loan approval, whichever is less. Secs. 1777.32-1777.40 [Reserved] Sec. 1777.41 Individual loans and grants. (a) The amount of loan and grant funds approved by the Agency will be based on the need shown in the application and an implementation plan submitted by the applicant. The implementation plan will include such things as: purpose, how funds will be used, proposed application process, construction requirements, control and disbursement of funds, etc. The implementation plan will be attached to RUS Bulletin 1777-1. (b) RUS Bulletin 1777-1 is a Memorandum of Agreement which sets forth the procedures and regulations for making and servicing loans and grants made by applicants to individuals. The State Program Official is authorized to enter into a Memorandum of Agreement with any applicant providing loans and/or grants to individuals. The Memorandum of Agreement can be amended to comply with State law and recommendations by the Office of General Counsel. It may also be amended to eliminate references to loans and/or grants if no loan and/or grant is involved. The State Program Official is responsible for: (1) Ensuring that all provisions of the Agreement are understood. (2) Determining that the applicant has the ability to make and service loans and/or grants in the manner outlined in the Agreement. (c) Agency funds remaining after providing individual loans and/or grants will be returned to the Agency. The funds should be disbursed to individuals within 1 year from the date water and/or waste disposal service is available to the individuals. The State Program Official can make an exception to this 1 year requirement if written justification is provided by the applicant. [[Page 33475]] Sec. 1777.42 Delegation of authority. The State Program Official is responsible for the overall implementation of the authorities contained in this part and may redelegate any such authority to appropriate Agency employees. Sec. 1777.43 Bulletins. RUS Bulletin 1780-12 referenced in part 1780 of this chapter and RUS Bulletin 1777-1, 1777-2 and 1777-3 are for use in administering loans and/or grants made under this part. Bulletins, instructions and forms are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500. Secs. 1777.44-1777.99 [Reserved] Sec. 1777.100 OMB control number. The reporting and recordkeeping requirements contained in this part have been approved by the Office of Management and Budget and assigned OMB control number 0570-0001. Public reporting burden for this collection of information is estimated to vary from 5 to 30 hours per response with an average of 17.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to U.S. Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503. Part 1942, Subpart K [Redesignated as Part 1778 and Revised] 3. Subpart K of 7 CFR part 1942 is redesignated as 7 CFR part 1778 and is revised to read as follows: PART 1778--EMERGENCY COMMUNITY WATER ASSISTANCE GRANTS Sec. 1778.1 General. 1778.2 [Reserved] 1778.3 Objective. 1778.4 Definitions. 1778.5 [Reserved] 1778.6 Eligibility. 1778.7 Project priority. 1778.8 [Reserved] 1778.9 Uses. 1778.10 Restrictions. 1778.11 Maximum grants. 1778.12 [Reserved] 1778.13 Set-aside. 1778.14 Other considerations. 1778.15-1778.20 [Reserved] 1778.21 Application processing. 1778.22 Planning development and procurement. 1778.23 Grant closing and disbursement of funds. 1778.24-1778.30 [Reserved]. 1778.31 Performing development. 1778.32 Grant cancellation. 1778.33 [Reserved] 1778.34 Grant servicing. 1778.35 Subsequent grants. 1778.36 [Reserved] 1778.37 Forms, Instructions and Bulletins. 1778.38-1778.99 [Reserved] 1778.100 OMB control number. Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005. Sec. 1778.1 General. (a) This part outlines policies and procedures for making Emergency Community Water Assistance Grants authorized under Section 306A of the Consolidated Farm and Rural Development Act, (7 U.S.C. 1926(a)), as amended. Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Agency employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for this assistance are required to identify any known relationship or association with an Agency employee. (b) Agency officials will maintain liaison with officials of other Federal, State, regional and local development agencies to coordinate related programs to achieve rural development objectives. (c) Agency officials shall cooperate with appropriate State agencies in making grants that support State strategies for rural area development. (d) Funds allocated for use in accordance with this part are also to be considered for use by Indian tribes within the State regardless of whether State development strategies include Indian reservations within the State's boundaries. Indians residing on such reservations must have an equal opportunity along with other rural residents to participate in the benefits of this program. This includes equal application of outreach activities of Field Offices. (e) Federal statutes provide for extending the Agency financial programs without regard to race, color, religion, sex, national origin, marital status, age, or physical/mental handicap (provided the participant possesses the capacity to enter into legal contracts). Sec. 1778.2 [Reserved] Sec. 1778.3 Objective. The objective of the Emergency Community Water Assistance Grant Program is to assist the residents of rural areas that have experienced a significant decline in quantity or quality of water to obtain adequate quantities of water that meet the standards set by the Safe Drinking Water Act (42 U.S.C. 300f et seq.) (SDWA). Sec. 1778.4 Definitions. Emergency. Occurrence of an incident such as, but not limited to, a drought, earthquake, flood, hurricane, disease outbreak, or chemical spill. Rural areas. Includes any area in any city or town with a population not in excess of 10,000 inhabitants according to the most recent decennial census of the United States, located in any of the fifty States, the Commonwealth of Puerto Rico, the Western Pacific Territories, Marshall Islands, Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands. Significant decline in quality. A significant decline in quality of potable water is where the present community source or delivery system does not meet, as a result of an emergency, the current SDWA requirements. For a private source or delivery system a significant decline in quality is where the water is no longer potable as a result of an emergency. Significant decline in quantity. A significant decline in the quantity is caused by a disruption of the potable water supply by an emergency. The disruption in quantity of water prevents the present source or delivery system from supplying potable water needs to rural residents. This would not include a decline in excess water capacity. Sec. 1778.5 [Reserved] Sec. 1778.6 Eligibility. (a) Grants may be made to public bodies and private nonprofit corporations serving rural areas. Public bodies include counties, cities, townships, incorporated towns and villages, boroughs, authorities, districts, and other political subdivisions of a State. Public bodies also includes Indian tribes on Federal and State reservations and other Federally recognized Indian Tribal groups in rural areas. (b) In the case of grants made to alleviate a significant decline in quantity or quality of water available from the water supplies of rural residents, the applicant must demonstrate that the decline occurred within two years of the date the application was filed with the Agency. [[Page 33476]] This would not apply to grants made for repairs, partial replacement, or significant maintenance on an established water system. Sec. 1778.7 Project priority. Paragraphs (a) through (d) of this section indicate items and conditions which must be considered in selecting applications for further development. When ranking eligible applications for consideration for limited funds, Agency officials must consider the priority items met by each application and the degree to which those priorities are met. (a) Applications. The application and supporting information submitted with it will be used to determine the proposed project's priority for available funds. (b) State Office review. All applications will be reviewed and scored for funding priority using RUS Bulletin 1778-1. The State Program Official will request funds from the National Office, Attention: Assistant Administrator, Water and Waste, using RUS Bulletins 1778-1 and 1778-2. If an application cannot be funded, the State Program Official will be notified. Eligible applicants that cannot be funded should be advised that funds are not available. (c) National Office review. Each year all funding requests will be reviewed by the National Office starting November 1 and will continue as long as funds are available except for the first year in which funds are made available for this grant program. A review of funding requests the first year will start 30 days after funds are made available. Projects selected for funding will be considered based on the priority criteria and available funds. Projects must compete on a national basis for available funds, and the National Office will allocate funds to State offices on a project by project basis. (d) Selection priorities. The priorities described below will be used by the State Program Official to rate applications and by the Assistant Administrator of Water and Waste to select projects for funding. Points will be distributed as indicated in paragraphs (d)(1) through (d)(5) of this section and will be considered in selecting projects for funding. A copy of RUS Bulletins 1778-1 and 1778-2 used to rate applications, should be placed in the case file for future reference. (1) Population. The proposed project will serve an area with a rural population: (i) Not in excess of 1,500--30 points. (ii) More than 1,500 and not in excess of 3,000--20 points. (iii) More than 3,000 and not in excess of 5,000--15 points. (2) Income. The median household income of population to be served by the proposed project is: (i) Not in excess of 70% of the statewide nonmetropolitan median household income--30 points. (ii) More than 70% and not in excess of 80% of the statewide nonmetropolitan median household income--20 points. (iii) More than 80% and not in excess of 90% of the statewide nonmetropolitan median household income--10 points. (iv) Over 90% of the statewide nonmetropolitan median household income--0 points. (3) Significant decline. Points will only be assigned for one of the following paragraphs when the primary purpose of the proposed project is to correct a significant decline in the: (i) Quantity of water available from private individually owned wells or other individual sources of water--30 points; or (ii) Quantity of water available from an established system's source of water--20 points; or (iii) Quality of water available from private individually owned wells or other individual sources of water--30 points; or (iv) Quality of water available from an established system's source of water--20 points. (4) Acute shortage. Grants made in accordance with Sec. 1778.11(b) to assist an established water system remedy an acute shortage of quality water or correct a significant decline in the quantity or quality of water that is available--10 points. (5) Discretionary. In certain cases the Administrator may assign up to 30 points for items such as geographic distribution of funds, rural residents hauling water, severe contamination levels, etc. Sec. 1778.8 [Reserved] Sec. 1778.9 Uses. Grant funds may be used for the following purposes: (a) Waterline extensions from existing systems. (b) Construction of new waterlines. (c) Repairs to an existing system. (d) Significant maintenance to an existing system. (e) Construction of new wells, reservoirs, transmission lines, treatment plants, and other sources of water. (f) Equipment replacement. (g) Connection and/or tap fees. (h) Pay costs that were incurred within six months of the date an application was filed with the Agency to correct an emergency situation that would have been eligible for funding under this part. (i) Any other appropriate purpose such as legal fees, engineering fees, recording costs, environmental impact analyses, archaeological surveys, possible salvage or other mitigation measures, planning, establishing or acquiring rights associated with developing sources of, treating, storing, or distributing water. (j) Assist rural water systems to comply with the requirements of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.) (FWPCA) or the SDWA when such failure to comply is directly related to a recent decline in quality of potable water. This would not apply to changes in the requirements of FWPCA or SDWA. Sec. 1778.10 Restrictions. (a) Grant funds may not be used to: (1) Assist any city or town with a population in excess of 10,000 inhabitants according to the most recent decennial census of the United States. (2) Assist a rural area that has a median household income in excess of the statewide nonmetropolitan median household income according to the most recent decennial census of the United States. (3) Finance facilities which are not modest in size, design, cost, and are not directly related to correcting the potable water quantity or quality problem. (4) Pay loan or grant finder's fees. (5) Pay any annual recurring costs that are considered to be operational expenses. (6) Pay rental for the use of equipment or machinery owned by the rural community. (7) Purchase existing systems. (8) Refinance existing indebtedness, except for short-term debt incurred in accordance with Sec. 1778.9(h). (9) Make reimbursement for projects developed with other grant funds. (10) Finance facilities that are not for public use. (b) Nothing in paragraph (a)(1) of this section shall preclude rural areas from submitting joint proposals for assistance under this part. Each entity applying for financial assistance under this part to fund their share of a joint project will be considered individually. Sec. 1778.11 Maximum grants. (a) Grants made to alleviate a significant decline in quantity or quality of water available from the water supplies in rural areas that occurred within two years of filing an application with the Agency cannot exceed $500,000. [[Page 33477]] (b) Grants made for repairs, partial replacement, or significant maintenance on an established system to remedy an acute shortage or significant decline in the quality or quantity of potable water cannot exceed $75,000. (c) Grants under this part, subject to paragraphs (a) and (b) of this section, shall be made for 100 percent of eligible project costs. Sec. 1778.12 [Reserved] Sec. 1778.13 Set-aside. (a) At least 70 percent of all grants made under these grant programs shall be for projects funded in accordance with Sec. 1778.11(a). (b) At least 50 percent of the funds appropriated for this grant program shall be allocated to rural areas with populations not in excess of 3,000 inhabitants according to the most recent decennial census of the United States. Sec. 1778.14 Other considerations. (a) Civil rights compliance requirements. All grants made under this part are subject to Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), as outlined in subpart E of part 1901 of this title. (b) Environmental requirements. All projects must have appropriate environmental reviews in accordance with RUS requirements. (c) Uniform Relocation and Real Property Acquisition Policies Act (42 U.S.C. 4601 et seq.). All projects must comply with the requirements set forth in 7 CFR part 21. (d) Flood and mudslide hazard area precautions. If the project is located in a flood or mudslide area, then flood or mudslide insurance must be provided as required in subpart A of part 1806 of this title (RD Instruction 426.2). (e) Governmentwide debarment and suspension (nonprocurement) and requirements for drug-free work place. All projects must comply with the requirements set forth in the U.S. Department of Agriculture regulations 7 CFR part 3017 and RD Instruction 1940-M. (f) Intergovernmental review. All projects funded under this part are subject to Executive Order 12372 (3 CFR, 1983 Comp., p. 197), which requires intergovernmental consultation with State and local officials. These requirements are set forth in U.S. Department of Agriculture regulations 7 CFR part 3015, subpart V, and RD Instruction 1940-J. Secs. 1778.15-1778.20 [Reserved] Sec. 1778.21 Application processing. (a) To the extent possible, an application under this part will be approved or disapproved within 60 days of the date that a complete application and all related material is submitted to the Agency. (b) The material submitted with the application should include the Preliminary Engineer Report, population and median household income of the area to be served, description of project, and nature of emergency that caused the problem(s) being addressed by the project. The documentation must clearly show that the applicant has had a significant decline in the quantity and/or quality of potable water or an acute shortage of potable water and the proposed project will eliminate the problem. For projects to be funded in accordance with Sec. 1778.11(a), evidence must be furnished that a significant decline in quantity or quality occurred within two years of filing the application with the Agency. (c) The processing office should assist the applicant in application assembly and processing. (d) Appropriate application review and approval procedures outlined in subpart B of part 1780 of this chapter. (e) Each application for assistance will be carefully reviewed in accordance with the priorities established in Sec. 1778.7. A priority rating will be assigned to each application by the State Program Official. (f) When the National Office has allocated funds to the State for a project, applicable provisions outlined in subpart B of part 1780 of this chapter will be followed in preparation of the grant docket. This would include development of an operating budget showing that the applicant can meet all its obligations and provide the intended services. (g) When favorable action will not be taken on an application, the applicant will be notified in writing by the State Program Official of the reasons why the request was not favorably considered. Notification to the applicant will state that a review of this decision by the Agency may be requested by the applicant in accordance with 7 CFR part 11. (h) State Program Officials are authorized to approve grants made in accordance with this part and RUS Staff Instruction 1780-1. (i) Funds will be obligated and approval announcement made in accordance with the provisions of subpart B of part 1780 of this chapter. Sec. 1778.22 Planning development and procurement. Planning development and procurement for grants made under this part will be in accordance with subpart C of part 1780 of this chapter. A certification should be obtained from the State agency or the Environmental Protection Agency if the State does not have primacy, stating that the proposed improvements will be in compliance with requirements of the SDWA. Sec. 1778.23 Grant closing and disbursement of funds. (a) Grants will be closed in accordance with Sec. 1780.45 of this chapter. (b) RUS Bulletin 1780-12, ``Water or Waste Grant Agreement,'' will be executed by all applicants. State Program Officials are authorized to execute the agreement on behalf of the Agency. (c) The grant will be considered closed on the date RUS Bulletin 1780-12 is signed by the Agency. The Finance Office will be notified of the grant closing date. The Agency will retain the original of the Grant Agreement. (d) The Agency's policy is not to disburse grant funds from the Treasury until they are actually needed by the applicant. Grant funds will be disbursed by using multiple advances. Secs. 1778.24-1778.30 [Reserved] Sec. 1778.31 Performing development. (a) Applicable provisions of subpart C of part 1780 of this chapter will be followed in performing development for grants made under this part. (b) After filing an application in accordance with Sec. 1778.21 and when immediate action is necessary, the State Program Official may concur in an applicant's request to proceed with construction before funds are obligated provided the RUS environmental requirements are complied with. The applicant must be advised in writing that: (1) Any authorization to proceed or any concurrence in bid awards, contract concurrence, or other project development activity, is not a commitment by the Agency to provide grant funds under this part. (2) The Agency is not liable for any debt incurred by the applicant in the event that funds are not provided under this part. Sec. 1778.32 Grant cancellation. The State Program Official may prepare and execute Form RD 1940-10, ``Cancellation of U.S. Treasury Check and/or Obligation,'' in accordance with the Forms Manual Insert. If the docket has been forwarded to OGC, that office should receive a copy of Form RD 1940-10. The applicant's attorney and engineer may be provided a copy of [[Page 33478]] Form RD 1940-10. A copy should also be sent to the National Office, Attention: Water and Waste Processing. Sec. 1778.33 [Reserved] Sec. 1778.34 Grant servicing. (a) Grants will be serviced in accordance with Sec. 1951.215 of subpart E of part 1951 of this title and subpart O of part 1951 of this title. (b) The grantee will provide an audit report in accordance with Sec. 1780.47 of this chapter. Sec. 1778.35 Subsequent grants. Subsequent grants will be processed in accordance with the requirements set forth in this part. The initial and subsequent grants made to complete a previously approved project must comply with the maximum grant requirements set forth in Sec. 1778.11. Sec. 1778.36 [Reserved] Sec. 1778.37 Forms, Instructions and Bulletins. Bulletins, instructions and forms referenced are for use in administering grants made under this part and are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500. Secs. 1778.38-1778.99 [Reserved] Sec. 1778.100 OMB control number. The reporting and recordkeeping requirements contained in this part have been approved by the Office of Management and Budget and assigned OMB control number 0575-0074. Public reporting burden for this collection of information is estimated to average two hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503. 4. Part 1780, is added to read as follows: PART 1780--WATER AND WASTE LOANS AND GRANTS Subpart A--General Policies and Requirements Sec. 1780.1 General. 1780.2 Purpose. 1780.3 Definitions and grammatical rules of construction. 1780.4 Availability of forms and regulations. 1780.5 [Reserved] 1780.6 Application information. 1780.7 Eligibility. 1780.8 [Reserved] 1780.9 Eligible loan and grant purposes. 1780.10 Limitations. 1780.11 Service area requirements. 1780.12 [Reserved] 1780.13 Rates and terms. 1780.14 Security. 1780.15 Other Federal, State, and local requirements. 1780.16 [Reserved] 1780.17 Selection priorities and process. 1780.18 Allocation of program funds. 1780.19 Public information. 1780.20-1780.23 [Reserved] 1780.24 Approval authorities. 1780.25 Exception authority. 1780.26-1780.30 [Reserved] Subpart B--Loan and Grant Application Processing 1780.31 General. 1780.32 Timeframes for application processing. 1780.33 Application requirements. 1780.34 [Reserved] 1780.35 Processing office review. 1780.36 Approving official review. 1780.37 Applications determined ineligible. 1780.38 [Reserved] 1780.39 Application processing. 1780.40 [Reserved] 1780.41 Loan or grant approval. 1780.42 Transfer of obligations. 1780.43 [Reserved] 1780.44 Actions prior to loan or grant closing or start of construction, whichever occurs first. 1780.45 Loan and grant closing and delivery of funds. 1780.46 [Reserved] 1780.47 Borrower accounting methods, management reporting and audits. 1780.48 Regional commission grants. 1780.49 Rural or Native Alaskan villages. 1780.50-1780.52 [Reserved] Subpart C--Planning, Designing, Bidding, Contracting, Constructing and Inspections 1780.53 General. 1780.54 Technical services. 1780.55 Preliminary engineering reports. 1780.56 [Reserved] 1780.57 Design policies. 1780.58-1780.60 [Reserved] 1780.61 Construction contracts. 1780.62 Utility purchase contracts. 1780.63 Sewage treatment and bulk water sales contracts. 1780.64-1780.66 [Reserved] 1780.67 Performing construction. 1780.68 Owner's contractual responsibility. 1780.69 [Reserved] 1780.70 Owner's procurement regulations. 1780.71 [Reserved] 1780.72 Procurement methods. 1780.73 [Reserved] 1780.74 Contracts awarded prior to applications. 1780.75 Contract provisions. 1780.76 Contract administration. 1780.77-1780.79 [Reserved] Subpart D--Information Pertaining to Preparation of Notes or Bonds and Bond Transcript Documents for Public Body Applicants 1780.80 General. 1780.81 Policies related to use of bond counsel. 1780.82 [Reserved] 1780.83 Bond transcript documents. 1780.84-1780.86 [Reserved] 1780.87 Permanent instruments for Agency loans. 1780.88 [Reserved] 1780.89 Multiple advances of Agency funds using permanent instruments. 1780.90 Multiple advances of Agency funds using temporary debt instruments. 1780.91-1780.93 [Reserved] 1780.94 Minimum bond specifications. 1780.95 Public bidding on bonds. 1780.96-1780.100 [Reserved] Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005. Subpart A--General Policies and Requirements Sec. 1780.1 General. (a) This part outlines the policies and procedures for making and processing direct loans and grants for water and waste projects. The Rural Utilities Service (RUS) shall cooperate fully with State and local agencies in making loans and grants to assure maximum support to the State strategy for rural development. Agency officials and their staffs shall maintain coordination and liaison with State agency and substate planning districts. (b) The income data used in this part to determine median household income must be that which most accurately reflects the income of the service area. The median household income of the service area and the nonmetropolitan median household income of the State will be determined from income data from the most recent decennial census of the United States. If there is reason to believe that the census data is not an accurate representation of the median household income within the area to be served, the reasons will be documented and the applicant may furnish, or the Agency may obtain, additional information regarding such median household income. Information will consist of reliable data from local, regional, State or Federal sources or from a survey conducted by a reliable [[Page 33479]] impartial source. The nonmetropolitan median household income of the State may only be updated on a national basis by the RUS National Office. This will be done only when median household income data for the same year for all Bureau of the Census areas is available from the Bureau of the Census or other reliable sources. Bureau of the Census areas would include areas such as: Counties, County Subdivisions, Cities, Towns, Townships, Boroughs, and other places. (c) RUS debt instruments will require an agreement that if at any time it shall appear to the Government that the borrower is able to refinance the amount of the indebtedness to the Government then outstanding, in whole or in part, by obtaining a loan for such purposes from responsible cooperative or private credit sources, at reasonable rates and terms for loans for similar purposes and periods of time, the borrower will, upon request of the Government, apply for and accept such loan in sufficient amount to repay the Government and will take all such actions as may be required in connection with such loan. (d) Funds allocated for use under this part are also for the use of Indian tribes within the State, regardless of whether State development strategies include Indian reservations within the State's boundaries. Native Americans residing on such reservations must have equal opportunity to participate in the benefits of these programs as compared with other residents of the State. Such tribes might not be subject to State and local laws or jurisdiction. However, any requirements of this part that affect applicant eligibility, the adequacy of RUS's security, or the adequacy of service to users of the facility and all other requirements of this part must be met. (e) RUS financial programs must be extended without regard to race, color, religion, sex, national origin, marital status, age, or physical or mental handicap. (f) Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Agency employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for assistance are required to identify any known relationship or association with a RUS employee. (g) Water and waste facilities will be designed, installed, and operated in accordance with applicable laws which include but are not limited to the Safe Drinking Water Act, Clean Water Act and the Resource Conservation and Recovery Act. (h) RUS financed facilities will be consistent with any current development plans of State, multijurisdictional areas, counties, or municipalities in which the proposed project is located. (i) Each RUS financed facility will be in compliance with appropriate State or Federal agency regulations which have control of the appropriation, diversion, storage and use of water and disposal of excess water. (j) Water and waste applicants must demonstrate that they possess the financial, technical, and managerial capability necessary to consistently comply with pertinent Federal and State laws and requirements. In developing water and waste systems, applicants must consider alternatives of ownership, system design, and the sharing of services. (k) Applicants should be aware of and comply with other Federal statute requirements including but not limited to: (1) Section 504 of the Rehabilitation Act of 1973. Under section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794 et seq.), no handicapped individual in the United States shall, solely by reason of their handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving RUS financial assistance; (2) Civil Rights Act of 1964. All borrowers are subject to, and facilities must be operated in accordance with, title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) and subpart E of part 1901 of this title, particularly as it relates to conducting and reporting of compliance reviews. Instruments of conveyance for loans and/or grants subject to the Act must contain the covenant required by Sec. 1901.202(e) of this title; (3) The Americans with Disabilities Act (ADA) of 1990. This Act (42 U.S.C. 12101 et seq.) prohibits discrimination on the basis of disability in employment, State and local government services, public transportation, public accommodations, facilities, and telecommunications. Title II of the Act applies to facilities operated by State and local public entities which provides services, programs and activities. Title III of the Act applies to facilities owned, leased, or operated by private entities which accommodate the public; and (4) Age Discrimination Act of 1975. This Act (42 U.S.C. 6101 et seq.) provides that no person in the United States shall on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. Sec. 1780.2 Purpose. Provide loan and grant funds for water and waste projects serving the most financially needy communities. Financial assistance should result in reasonable user costs for rural residents, rural businesses, and other rural users. Sec. 1780.3 Definitions and grammatical rules of construction. (a) Definitions. For the purposes of this part: Agency means the Rural Utilities Service and any United States Department of Agriculture (USDA) employee acting on behalf of the Rural Utilities Service in accordance with appropriate delegations of authority. Agency identified target areas means an identified area in the State strategic plan or other plans developed by the Rural Development State Director. Approval official means the US [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-13445. Public record. Not legal advice.