Rural Cooperative Development Grants

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1901, 1951, and 4284

RIN 0570-AA20

Rural Cooperative Development Grants

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

Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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

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

regulations published previously under Rural Technology and Cooperative

Development Grants (RTCDG). This action is necessary to comply with the

Federal Agriculture Improvement and Reform Act of 1996 (the 1996 Act)

(Pub. L. 104-127), which removed ``technology'' from RTCDG, thereby

directing the focus of the program specifically to cooperative

development. The 1996 Act also clarified that public bodies were not

eligible applicants, and modified application requirements and

applicant selection criteria. This action will comply with legislation

which authorizes grants for establishing and operating centers for

rural cooperative development. Exhibit A will be removed since it

contains administrative material. The intended effect of this action is

to improve the economic condition of rural areas through cooperative

development.

EFFECTIVE DATE: August 7, 1997.

FOR FURTHER INFORMATION CONTACT: James E. Haskell, Assistant Deputy

Administrator, Cooperative Services, Rural Business-Cooperative

Service, U.S. Department of Agriculture, Stop 3250, Room 4016, South

Agriculture Building, 1400 Independence Avenue, SW., Washington, DC

20250. Telephone (202) 720-8460.

SUPPLEMENTARY INFORMATION:

Classification

We are issuing this final rule in conformance with Executive Order

12866. The Office of Management and Budget has determined that it is

not a ``significant regulatory action.''

Environmental Impact Statement

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

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

action does not constitute a major federal action significantly

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

the National Environmental Policy Act of 1969, Public Law 91-190, an

Environmental Impact Statement is not required.

Executive Order 12988

This final rule has been reviewed under Executive Order 12988,

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

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

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

(3) administrative proceedings in accordance with the regulations of

the Agency at 7 CFR part 11, must be exhausted before bringing suit in

court challenging action taken under this rule unless these regulations

specifically allow bringing suit at an earlier time.

Intergovernmental Review

This program is listed in the Catalog of Federal Domestic

Assistance under number 10.771 and is subject to the provisions of

Executive Order 12372, which requires intergovernmental consultation

with state and local officials. RBS has conducted intergovernmental

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

National Performance Review

This regulatory action is being taken as part of the National

Performance Review program to eliminate unnecessary regulations and

improve those that remain in force.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public

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

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

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

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

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

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

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

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

the UMRA generally requires RBS to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, more

cost-effective or least burdensome alternative that achieves the

objectives of the rule. This rule contains no Federal mandates (under

the regulatory provisions of Title II of the UMRA) for State, local,

and tribal governments or the private sector. Thus this rule is not

subject to the requirements of sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

The undersigned has determined and certified by signature of this

document that this rule will not have a significant economic impact on

a substantial number of small entities since this rulemaking action

does not involve a new or expanded program. The removal of

``technology'' from RTCDG substantially narrows the scope of this

program. No provision of this rule requires action on the part of small

businesses not required of large businesses. This rule requires no

action on the part of any applicant not previously required by an

applicant. Therefore, a Regulatory Impact Analysis was not completed.

Paperwork Reduction Act

The information collection and recordkeeping requirements contained

in this regulation were previously approved by the Office of Management

and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and were

assigned OMB control number 0570-0006, in accordance with the Paperwork

Reduction Act of 1995. Under the Paperwork Reduction Act of 1995, no

[[Page 42386]]

persons are required to respond to a collection of information unless

it displays a valid OMB control number. The valid OMB control number

assigned to the collection of information in these final regulations is

displayed at the end of the affected section of the regulations. This

final rule does not impose any new information or recordkeeping

requirements from those approved by OMB.

Background

The RTCDG program was established by rule on August 12, 1994, (59

FR 41386-98) and was authorized by section 310B(f) through (h) of the

Consolidated Farm and Rural Development Act (7 U.S.C. Sec. 1932). The

1996 Act removed ``technology'' from RTCDG, thereby directing the focus

of the program specifically to cooperative development. The 1996 Act

also clarified that public bodies were not eligible applicants, and

modified application requirements and applicant selection criteria. The

primary objective of the Rural Cooperative Development Grant (RCDG)

program is to improve the economic condition of rural areas through

cooperative development. The program is administered through Rural

Development State Offices acting on behalf of RBS. RBS is one of the

successors of the Rural Development Administration pursuant to the

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

Discussion of Public Comments

RBS published a proposed rule in the Federal Register on March 26,

1997, (62 FR 14354) and asked for comments on or before April 25, 1997.

The Agency received a total of eight comments. The commenters

represented the National Cooperative Business Association, Rocky

Mountain Farmers Union, North Dakota Association of Rural Electric

Cooperatives and North Dakota Association of Telephone Cooperatives,

the Federation of Southern Cooperatives/Land Assistance Fund (two

commenters), North Dakota State University, Washington State

University, and the North Dakota Farmers Union. One respondent did not

comment directly on the proposed rule but, instead strongly supported

the comments submitted by another commenter.

Six respondents were concerned about the definition of

``cooperative development'' under Sec. 4284.504 which includes the

language ``* * * promote the development of new services and products *

* * new processes * * * or new enterprises * * *'' The respondents felt

this definition should be clarified to indicate that the activities

undertaken by a cooperative need not be completely different from those

undertaken by other cooperatives. They also felt this definition should

more clearly define activities involved in cooperative development,

including technical assistance and development of business plans. The

agency agrees with these comments and has changed the definition of

``cooperative development'' accordingly.

Several respondents suggested that under Sec. 4284.516, which

provides that grant funds may not be used to duplicate current services

or replace or substitute support previously provided, may preclude

centers from working on projects already underway. The agency

understands and appreciates this concern and the fact that cooperative

development is a long term process. The intent of the wording in this

section is not to preclude centers from working on projects already

underway. The agency did not modify this section, but will remain

cognizant of the respondents' concern.

Most of the respondents felt the definition of ``project'' under

Sec. 4284.504 was ambiguous in drawing a distinction between what a

center is and what a project is. A few of these respondents suggested

that the definition should clarify that a center does projects and uses

federal funds to engage in those projects. The agency agrees, and has

modified the definition of ``project'' to provide that clarity. The

clarification is also used under Sec. 4284.527(e) to change from grant

to project.

Five respondents suggested that the provisions addressing grant

purposes under Sec. 4284.515 should be clarified to indicate that

eligible activities of centers assisted under the program must be

linked to the development of cooperatives. Four of these respondents

further suggested that each provision (a through e) should end with the

words ``for the purpose of cooperative development'' after the word

``center.'' While the agency feels the proposed rule is adequate in

focusing the program on cooperative development, it has modified

Sec. 4284.515 in the manner suggested.

The provision requiring applicants to file a ``Request for

Environmental Information'' under Sec. 4284.527(b)(3) for each project

identified in their plans that involve grants to provide financial

assistance to third-party recipients drew comments from six

respondents. They felt the provision was unduly burdensome for

applicants because cooperative development projects have potential

impacts in many areas so the cost of gathering such information to

complete this form would greatly exceed any possible benefits. The

agency feels the information contained in the ``Request for

Environmental Information'' is legally required and therefore

Sec. 4284.527(b)(3) has been retained in the final rule.

Six respondents felt the provision requiring applicants to collect

evidence of support from each affected governmental unit under the

preapplications portion of Sec. 4284.528(a)(2)(v) is unduly burdensome

for applicants. This rule was not amended because all affected

governmental bodies should be on record as supporting the project. The

time spent documenting this support will be worth the time spent in

order to avoid misunderstandings later.

Two respondents thought the selection criteria under Sec. 4284.540

were satisfactory. Other respondents did not comment on this section.

One respondent did not comment on any of the provisions in the

proposed rule, but instead requested information about the program.

The provision addressing subsequent grants under Sec. 4284.574

received comments from five respondents. Each suggested the provision

be clarified to state that a second application need not be filed for

assistance under the program to be awarded for the following year. The

agency did not modify this provision since it currently states that,

``If it is determined to be in the best interests of the program,

preference may be given to a project or projects for an additional

grant in the immediately succeeding year.''

A definition for ``regionally operated'' has been added and

definitions for ``Urbanized area'' and ``Urbanizing area'' have been

slightly modified to make them consistent with ``Rural and rural

area.''

Internal management procedures have been removed from the

regulations but will appear in internal agency instructions.

Pursuant to the Administrative Procedure Act, 5 U.S.C. 553, good

cause is found for making this final rule effective less than 30 days

after publication of this document in the Federal Register because the

appropriations allocated to the program must be expended before the end

of Fiscal Year 1997, and there is a critical need--recognized by both

the Executive and Legislative Branches--to immediately assist rural

America through the development of self-help cooperative organizations.

[[Page 42387]]

List of Subjects

7 CFR Part 1901

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

7 CFR Part 1951

Account servicing, Grant programs--Housing and community

development, Reporting requirements, Rural areas.

7 CFR Part 4284

Business and industry, Grant programs--Housing and community

development, Rural areas.

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

Regulations, are amended as follows:

PART 1901--PROGRAM-RELATED INSTRUCTIONS

1. The authority citation for part 1901, subpart E, continues to

read as follows:

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

1480, 42 U.S.C. 2942.

Subpart E--Civil Rights Compliance Requirements *C*

Sec. 1901.204 [Amended]

2. Section 1901.204 is amended in paragraph (a)(27) by removing the

words ``Technology and.''

PART 1951--SERVICING AND COLLECTIONS

3. The authority citation for part 1951 continues to read as

follows:

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

Subpart E--[Revised]

4. The title of subpart E is amended by revising the word

``Insured'' to read ``Direct.''

Sec. 1951.201 [Amended]

5. Section 1951.201 is amended in the first sentence by revising

the word ``Insured'' to read ``Direct'' and by revising the words

``Rural Technology and'' to read ``Rural.''

PART 4284--GRANTS

6. The authority citation for part 4284 continues to read as

follows:

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

Subpart F--Rural Cooperative Development Grants

7. Part 4284, subpart F is revised to read as follows:

Subpart F--Rural Cooperative Development Grants

Table of Contents

Sec.

4284.501 Purpose.

4284.502 Policy.

4284.503 [Reserved]

4284.504 Definitions.

4284.505 Applicant eligibility.

4284.506--4284.514 [Reserved]

4284.515 Grant purposes.

4284.516 Ineligible grant purposes.

4284.517--4284.526 [Reserved]

4284.527 Other considerations.

4284.528 Application processing.

4284.529--4284.539 [Reserved]

4284.540 Grant selection criteria.

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

party financial assistance.

4284.542--4284.556 [Reserved]

4284.557 Fund disbursement.

4284.558 Reporting.

4284.559--4284.570 [Reserved]

4284.571 Audit requirements.

4284.572 Grant servicing.

4284.573 Programmatic changes.

4284.574 Subsequent grants.

4284.575 Grant suspension, termination, and cancellation.

4284.576--4284.586 [Reserved]

4284.587 Exception authority.

4284.588--4284.599 [Reserved]

4284.600 OMB control number.

Subpart F--Rural Cooperative Development Grants

Sec. 4284.501 Purpose.

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

(RBS) policies and authorizations and contains procedures to provide

grants for cooperative development in rural areas.

(b) Grants will be made available to nonprofit corporations and

institutions of higher education for the purpose of establishing and

operating centers for rural cooperative development.

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

are available in the RBS National Office or any Rural Development State

Office.

Sec. 4284.502 Policy.

The grant program will be used to facilitate the creation or

retention of jobs in rural areas through the development of new rural

cooperatives, value-added processing, and rural businesses.

Sec. 4284.503 [Reserved]

Sec. 4284.504 Definitions.

Agency--Rural Business-Cooperative Service (RBS) or a successor

agency.

Approval official--Any authorized agency official.

Center--The entity established or operated by the grantee for rural

cooperative development.

Cooperative--A user-owned and controlled business from which

benefits are derived and distributed equitably on the basis of use.

Cooperative development--The startup, expansion, or operational

improvement of a cooperative to promote development in rural areas of

services and products, processes that can be used in the production of

products, or enterprises that can add value to on-farm production

through processing or marketing activities. Development activities may

include, but are not limited to, technical assistance, research

services, educational services, and advisory services. Operational

improvement includes making the cooperative more efficient or better

managed.

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

increases in total income, employment opportunities, decreased

outmigration of populations, value of production, increased

diversification of industry, higher labor force participation rates,

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

measurements of economic activity, such as land values.

Nonprofit institution--Any organization or institution, including

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

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

private shareholder or individual.

Project--A planned undertaking by a center which utilizes the funds

provided to it to promote economic development in rural areas through

the creation and enhancement of cooperatives.

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

or village, borough, authority, district, economic development

authority, or Indian tribe on federal or state reservations or other

federally recognized Indian tribe in rural areas.

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

United States Department of Agriculture, or a successor agency.

Regionally operated--A regionally operated program includes

programs that cover or are eligible to cover two or more counties.

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

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

more and its immediately adjacent urbanized and urbanizing areas.

Rural Development--Rural Development mission area.

Servicing office--Any Rural Development State Office.

State--Any of the 50 States, the District of Columbia, the

[[Page 42388]]

Commonwealth of Puerto Rico, the Virgin Islands of the United States,

Guam, American Samoa, the Commonwealth of the Northern Mariana Islands,

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

Republic of the Marshall Islands.

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

and having a purpose consistent with that of the center.

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

population of 50,000 or more with a population density of more than 100

persons per square mile, as determined by the Secretary of Agriculture

according to the latest decennial census of the United States which,

for general social and economic purposes, constitutes a single

community and has a boundary contiguous with that of the city. Such

community may be incorporated or unincorporated to extend from the

contiguous boundaries to recognizable open country, less densely

settled areas, or natural boundaries such as forests or water. Minor

open spaces such as airports, industrial sites, recreational

facilities, or public parks shall be disregarded. Outer boundaries of

an incorporated community extend at least to its legal boundaries.

Cities which may have a contiguous border with another city, but are

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

community.

Urbanizing area--A community with a population density of more than

100 persons per square mile, as determined by the Secretary of

Agriculture according to the latest decennial census of the United

States, which is not now, or within the foreseeable future not likely

to be, clearly separate from and independent of a city of 50,000 or

more population and its immediately adjacent urbanized areas. A

community is considered ``separate'' when it is separated from the city

and its immediately adjacent urbanized area by open country, less

densely settled areas, or natural barriers such as forests or water.

Minor open spaces such as airports, industrial sites, recreational

facilities, or public parks shall not be considered as an area to

determine if a community is separate. A community is considered

``independent'' when its social (e.g., government, educational, health,

and recreational facilities) and economic structure (e.g., business,

industry, tax base, and employment opportunities) are not primarily

dependent on the city and its immediately adjacent urbanized areas.

Sec. 4284.505 Applicant eligibility.

(a) Grants may be made to nonprofit corporations and institutions

of higher education. Grants may not be made to public bodies.

(b) An outstanding judgment obtained against an applicant by the

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

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

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

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

the judgment.

Secs. 4284.506--4284.514 [Reserved]

Sec. 4284.515 Grant purposes.

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

carrying out relevant projects. Applicant's contribution may be in cash

or in-kind contribution in accordance with parts 3015 and 3019 of this

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

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

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

(a) Applied research, feasibility, environmental and other studies

that may be useful to individuals, cooperatives, small businesses, and

other similar entities in rural areas served by the center for the

purpose of cooperative development.

(b) Collection, interpretation, and dissemination of principles,

facts, technical knowledge, or other information that may be useful to

individuals, cooperatives, small businesses, and other similar entities

in rural areas served by the center for the purpose of cooperative

development.

(c) Providing training and instruction for individuals,

cooperatives, small businesses, and other similar entities in rural

areas served by the center for the purpose of cooperative development.

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

businesses, and other similar entities in rural areas served by the

center for the purpose of cooperative development in accordance with

this subpart.

(e) Providing technical assistance, research services, and advisory

services to individuals, cooperatives, small businesses, and other

similar entities in rural areas served by the center for the purpose of

cooperative development.

Sec. 4284.516 Ineligible grant purposes.

Grant funds may not be used to:

(a) Pay more than 75 percent of relevant project or administrative

costs;

(b) Duplicate current services or replace or substitute support

previously provided;

(c) Pay costs of preparing the grant application package;

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

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

vehicles, improving or renovating office space, or the repair or

maintenance of privately-owned property;

(f) Fund political activities; or

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

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

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

being legally admitted for permanent residence.

Secs. 4284.517--4284.526 [Reserved]

Sec. 4284.527 Other considerations.

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

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

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

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

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

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

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

the requirements of the Age Discrimination Act of 1975, which prohibits

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

Disabilities Act, which prohibits discrimination on the basis of

disability by private entities in places of public accommodations.

(b) Environmental requirements--(1) General applicability. Unless

specifically modified by this section, the requirements of part 1940,

subpart G of this title apply to this subpart. For example, the

Agency's general and specific environmental policies contained in

Secs. 1940.303 and 1940.304 of this title must be complied with.

Although the purpose of the grant program established by this subpart

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

purpose is to be achieved, to the extent practicable, without adversely

affecting important environmental resources of rural areas such as

important farmland and forest lands, prime rangelands, wetland, and

flood plains. Prospective recipients of grants, therefore, must

consider the potential environmental impacts of their applications at

the earliest planning stages and develop plans and projects that

minimize the potential to adversely impact on the environment.

[[Page 42389]]

(2) Technical assistance. An application for a project exclusively

involving technical assistance is generally excluded from the

environmental review process by Sec. 1940.310(e)(1) of this title.

However, as further specified in Sec. 1940.333 of this title, the

grantee of a technical assistance grant, in the process of providing

technical assistance, must consider and generally document within their

plans the potential environmental impacts of the plan and

recommendations provided to the recipient of the technical assistance.

(3) Applications for grants to provide other than technical

assistance to third-party recipients. As part of the preapplication,

the applicant must provide a complete ``Request for Environmental

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

provide other than technical assistance to third parties who will

undertake eligible projects with such assistance. The Agency will

review the preapplication, supporting materials, and the required

``Request for Environmental Information'' and assess the impact of the

preapplication. This assessment will focus on the potential cumulative

impacts of the projects as well as any environmental concerns or

problems that are associated with individual projects that can be

identified at this time from the information submitted. Because the

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

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

projects (see Sec. 4284.541), no public notification requirements will

apply to the preapplication. After the grant is approved, each third-

party project to be assisted under the grant will undergo the

applicable environmental review and public notification requirements in

part 1940, subpart G of this title prior to the Agency providing its

consent to the grantee to assist the third-party project. If the

preapplication reflects only one project which is specifically

identified as the third-party recipient for financial assistance, the

Agency may proceed directly to the appropriate environmental assessment

for the third-party recipient with public notification as required. The

applicant must be advised that if the recipient or project changes

after the grant is approved, the project to be assisted under the grant

will undergo the applicable environmental review and public

notification requirements.

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

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

suspended are excluded from federal assistance and benefits including

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

a drug-free workplace.

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

lobbying restrictions contained in part 3018 of this title.

(e) Excess capacity or transfer of employment. If a proposed

project has financial assistance from all sources for more than $1

million and will increase direct employment by more than 50 employees,

the applicant will be requested to provide written support for an

Agency determination that the proposal will not result in a project

which is calculated to, or likely to, result in the transfer of any

employment or business activity from one area to another. This

limitation will not prohibit assistance for the expansion of an

existing business entity through the establishment of a new branch,

affiliate, or subsidiary of such entity if the expansion will not

result in an increase in the unemployment in the area of original

location or in any other area where such entity conducts business

operations.

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

necessary, to ensure that projects are completed in accordance with

approved plans and specifications and that funds are expended for

approved purposes. Grants made under this subpart will be administered

under, and are subject to, parts 3015, 3017, 3019, and 3051 of this

title, as appropriate, and established RBS guidelines.

(g) Uniform Relocation Assistance and Real Property Acquisition

Policies Act. All projects must comply with the requirements contained

in part 21 of this title.

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

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

insurance must be obtained through the National Flood Insurance

Program.

(i) Termination of federal requirements. Once the grantee has

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

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

applicable to any new projects thereafter financed from the RCDG funds.

Such new projects shall not be considered as being derived from federal

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

with these regulations.

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

provisions of Executive Order 12372 which requires intergovernmental

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

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

for the purpose of intergovernmental review as well as the specific

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

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

elected to review under their intergovernmental review process, the

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

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

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

funds for the specific project. Prior to the RBS decision on the

request, compliance with requirements of intergovernmental consultation

must be demonstrated for each project. These requirements should be

completed in accordance with ``Intergovernmental Review of Department

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

title.

Sec. 4284.528 Application processing.

(a) Preapplications. (1) Applicants will file an original and one

copy of an ``Application for Federal Assistance (For Non-

construction),'' with the appropriate Rural Development State Office.

(2) All preapplications shall be accompanied by:

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

perform the proposed activities under the grant.

(ii) the latest financial information to show the applicant's

financial capacity to carry out the project. At a minimum, the

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

current audited report is preferred where one is reasonably obtainable.

(iii) an estimated breakdown of total costs, including costs to be

funded by the applicant or other identified sources. Certification must

be provided from the applicant that its matching share to the project

is available and will be used for the project. The matching share must

meet the requirements of parts 3015 and 3019 of this title as

applicable. Certifications from an authorized representative of each

source of funds must be provided indicating that funds are available

and will be used for the proposed project.

(iv) a budget and description of the accounting system to be used.

(v) the area to be served, identifying within that area each

governmental unit (i.e., town, county, etc.) affected by the proposed

project. Evidence of support and concurrence from each affected

governmental unit must be provided by

[[Page 42390]]

either a resolution or a written statement from the chief elected local

official.

(vi) a listing of cooperative businesses to be assisted or created.

(vii) applicant's experience with similar projects, including

experience of key staff members and persons who will be providing the

proposed services and managing the project.

(viii) the number of months duration of the project and the

estimated time it will take from grant approval to beginning of

service.

(ix) the method and rationale used to select the areas or

businesses that will receive the service.

(x) a brief description of how the work will be performed and

whether organizational staff, consultants or contractors will be used.

(xi) an evaluation method to be used by the applicant to determine

if objectives of the proposed activity are being accomplished.

(xii) a brief plan that contains the following provisions and

describes how the applicant will meet these provisions:

(A) A provision that substantiates how the applicant will

effectively serve rural areas in the United States.

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

to improve the economic condition of rural areas by promoting

development of new cooperatives or improvement of existing

cooperatives.

(C) Supporting data from established official independent sources

along with any explanatory documentation.

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

out to accomplish such objective.

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

this subpart.

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

proposed activities are likely to make to the improvement of the

economic conditions of the rural areas served by the applicant.

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

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

assistance of representatives of business, industry, educational

institutions, the federal, state, and local governments.

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

university administering Extension Service programs and cooperate with

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

activities and programs.

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

to develop continuing sources of financial support for the center,

particularly from sources in the private sector.

(J) Provisions for:

(1) monitoring and evaluating its activities; and

(2) accounting for money received and expended by the applicant

under this subpart.

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

application of cooperative development in rural areas, especially those

areas adversely affected by economic conditions, such that local

economic conditions can be improved through cooperative development.

(xiii) the agreement proposed to be used between the applicant and

the ultimate recipients, if grant funds are to be used for the purpose

of making loans or grants to individuals, cooperatives, small

businesses, and other similar entities (ultimate recipients) in rural

areas for eligible purposes under this subpart. This agreement should

include the following:

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

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

ultimate recipient and the ultimate recipient understands its

responsibilities to comply with the requirements contained in this

subpart and parts 3015 and 3019 of this title, as applicable.

(B) Provisions that the ultimate recipient will comply with

debarment and suspension requirements contained in part 3017 of this

title and will execute a ``Certification Regarding Debarment,

Suspension, Ineligibility and Voluntary Exclusion--Lower Tier Covered

Transactions.''

(C) Provisions that the ultimate recipient will execute an ``Equal

Opportunity Agreement,'' and an ``Assurance Agreement.''

(D) Documentation that the ultimate recipient understands its

responsibilities to the applicant.

(E) Documentation that the applicant understands its

responsibilities in monitoring the ultimate recipient's activities

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

(F) Documentation, when other references or sources of information

are used, along with copies, if possible, that provides dates,

addresses, page numbers and explanations of how interpretations are

made to substantiate that such things as economically distressed

conditions do exist.

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

subpart regarding grant selection criteria.

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

selected for funding, the following will be submitted to Rural

Development by the applicant:

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

accomplished and timeframes for completion of each activity.

(2) Other information requested by RBS to make a grant award

determination.

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

application and related material by the date shown on the invitation

for applications, Rural Development may discontinue consideration of

the preapplication.

Secs. 4284.529-4284.539 [Reserved]

Sec. 4284.540 Grant selection criteria.

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

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

preapplications. RBS review of preapplications will include the

complete preapplication package submitted to the Rural Development

State Office. Points will be distributed according to ranking as

compared with other preapplications on hand. All factors will receive

equal weight with points awarded to each factor on a 5, 4, 3, 2, 1

basis depending on the applicant's ranking compared to other

applicants.

(a) Preference will be given to applications that:

(1) demonstrate a proven track record in administering a nationally

coordinated, regionally or State-wide operated project;

(2) demonstrate previous expertise in providing technical

assistance in rural areas;

(3) demonstrate the ability to assist in the retention of business,

facilitate the establishment of cooperatives and new cooperative

approaches, and generate employment opportunities that will improve the

economic conditions of rural areas;

(4) demonstrate the ability to create horizontal linkages among

businesses within and among various sectors in rural areas of the

United States and vertical linkages to domestic and international

markets;

(5) commit to providing technical assistance and other services to

underserved and economically distressed rural areas of the United

States;

(6) commit to providing greater than a 25 percent matching

contribution with private funds and in-kind contributions;

(7) evidence transferability or demonstration value to assist rural

areas outside of project area; and

(8) demonstrate that any cooperative development activity is

consistent with positive environmental stewardship.

(b) Each preapplication for assistance will be carefully reviewed

in accordance

[[Page 42391]]

with the priorities established in this section. A priority rating will

be assigned to each preapplication. Preapplications selected for

funding will be based on the priority rating assigned each

preapplication and the total funds available. All preapplications

submitted for funding should contain sufficient information to permit

RBS to complete a thorough priority rating.

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

third-party financial assistance.

The grantee will execute all documents required by RBS to make a

grant under this subpart. By accepting the grant, the grantee agrees to

comply with parts 3015 and 3019 of this title.

Secs. 4284.542-4284.556 [Reserved]

Sec. 4284.557 Fund disbursement.

Grants will be disbursed as follows:

(a) A ``Request for Advance or Reimbursement,'' will be completed

by the applicant and submitted to Rural Development not more frequently

than monthly. Payments will be made by electronic funds transfer

pursuant to the Debt Collection Improvement Act of 1996 (Pub. L. 104-

134).

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

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

with grant funds during the disbursement period.

Sec. 4284.558 Reporting.

A ``Financial Status Report,'' and a project performance activity

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

A final project performance report will be required with the last

``Financial Status Report.'' The final report may serve as the last

quarterly report. The final report must include a final evaluation of

the project. Grantees must constantly monitor performance to ensure

that time schedules are being met, projected work by time periods is

being accomplished, and other performance objectives are being

achieved. Grantees are to submit an original of each report to Rural

Development. The project performance reports shall include, but not be

limited to, the following:

(a) A comparison of actual accomplishments to the objectives

established for that period;

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

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

attainment of overall project objectives, prevent meeting time

schedules or objectives, or preclude the attainment of particular

project work elements during established time periods. This disclosure

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

resolve the situation; and

(d) Objectives and timetable established for the next reporting

period.

Secs. 4284.559-4284.570 [Reserved]

Sec. 4284.571 Audit requirements.

The grantee will provide an audit report in accordance with

Sec. 1942.17 of this title. Audits must be prepared in accordance with

general accounting principles and standards using the publication,

``Standards for Audit of Governmental Organizations, Programs,

Activities and Functions.''

Sec. 4284.572 Grant servicing.

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

this title.

Sec. 4284.573 Programmatic changes.

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

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

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

termination of grant funds.

Sec. 4284.574 Subsequent grants.

Subsequent grants will be processed in accordance with the

requirements contained in this subpart. Cooperative development

projects receiving assistance under this program will be evaluated one

year after assistance is received. If it is determined to be in the

best interests of the program, preference may be given to a project or

projects for an additional grant in the immediately succeeding year.

Sec. 4284.575 Grant suspension, termination, and cancellation.

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

suspended or terminated for cause or convenience in accordance with

parts 3015 and 3019 of this title, as applicable.

Secs. 4284.576-4284.586 [Reserved]

Sec. 4284.587 Exception authority.

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

any requirement or provision of this subpart, if the Administrator

determines that application of the requirement or provision would

adversely affect the Government's interest.

Secs. 4284.588-4284.599 [Reserved]

Sec. 4284.600 OMB control number.

The information collection requirements contained in this

regulation have been approved by the Office of Management and Budget

(OMB) and have been assigned OMB control number 0570-0006. You are not

required to respond to this collection of information unless it

displays a valid OMB control number.

Dated: July 30, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97-20738 Filed 8-6-97; 8:45 am]

BILLING CODE 3410-XY-U