Rural Cooperative Development Grants

SUMMARY: The Rural Business-Cooperative Service (RBS) proposes to

revise its regulations published previously under Rural Technology

Development Grants (RTDG). 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 RTDG, 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. 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.

DATES: Comments must be submitted on or before April 25, 1997.

ADDRESSES: Submit written comments in duplicate to the Director,

Regulations and Paperwork Management Division, Rural Housing Service,

USDA, Stop 0743, 1400 Independence Avenue, SW., Washington, DC 20250-

0743. Comments may also be submitted via the internet by addressing

them to: [email protected] and must contain ``Rural Cooperative

Development Grants'' in the subject. All written comments will be

available for public inspection at the above address during normal

working hours.

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 proposed rule in conformance with Executive

Order 12866, and the Office of Management and Budget has determined

that it is not a ``significant regulatory action.''

Environmental Impact Statement

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

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

action does not constitute a major federal action significantly

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

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

Environmental Impact Statement is not required.

Executive Order 12778

This proposed 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

This proposed rule has been reviewed with regard to the

requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). 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 RTDG 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.

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. This proposed

[[Page 14355]]

rule does not impose any new information or recordkeeping requirements

from those approved by OMB. Public reporting burden for this collection

of information is estimated to vary from 30 minutes to 8 hours per

response, with an average of 1.85 hours per response, including time

for reviewing instructions, searching existing data sources, gathering

and maintaining the data needed, and completing and reviewing the

collection of information. Send comments regarding this burden estimate

or any other aspect of this collection of information, including

suggestions for reducing this burden to the Department of Agriculture,

Clearance Officer, OIRM, Stop 7630, Washington, D.C. 20250.

Background

The RTDG 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. 1932). The 1996

Act removed ``technology'' from RTDG, 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).

Other Regulations Affected

Conforming changes which are necessary as a result of the revisions

proposed to part 4284, subpart F will be done at the Final Rule stage.

List of Subjects 7 CFR Part 4284

Business and industry, Grant programs--Housing and community

development, Rural areas.

Accordingly, chapter XLII, title 7, Code of Federal Regulations, is

proposed to be amended as follows:

PART 4284--GRANTS

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

follows:

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

Subpart F--Rural Cooperative Development Grants

2. 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

policies and authorizations and sets forth 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 which will promote the development of new

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

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

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

production through processing or marketing. Operational improvement

includes making the cooperative more efficient 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--The undertaking for which funds will be used to develop or

operate a cooperative development center.

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

or village, borough, authority, district, economic development

authority, or Indian tribe on federal 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.

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

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

more and its immediately adjacent urbanized and urbanizing areas with a

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

determined by the Secretary of Agriculture according to the latest

decennial census of the United States.

Rural Development--Rural Development mission area.

Servicing office--Any Rural Development State Office or successor

office.

[[Page 14356]]

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

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

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

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

Republic of the Marshall Islands.

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

and having a purpose consistent with that of the center.

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

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

purposes, constitutes a single community and has a boundary contiguous

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

unincorporated to extend from the contiguous boundaries to recognizable

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

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

recreational facilities, or public parks shall be disregarded. Outer

boundaries of an incorporated community extend at least to its legal

boundaries. Cities which may have a contiguous border with another

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

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

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

nonrural area.

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

foreseeable future not likely to be, clearly separate from and

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

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

it is separated from the city and its immediately adjacent urbanized

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

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

industrial sites, recreational facilities, or public parks shall be

disregarded. A community is considered ``independent'' 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 7 CFR 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 and feasibility studies that may be useful to

individuals, cooperatives, small businesses, and other similar entities

in rural areas served by the center.

(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.

(c) Providing training and instruction for individuals,

cooperatives, small businesses, and other similar entities in rural

areas served by the center.

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

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

center.

(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.

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

made under this subpart.

(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.

(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.

Sec. 4284.517-4284.526 [Reserved]

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 handicap; the

requirements of the Age Discrimination Act of 1975 which prohibits

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

Disabilities Act, Public Law 101-336, which prohibits discrimination on

the basis of disability by private entities in places of public

accommodations.

(b) Environmental requirements.

(1) General applicability. Unless specifically modified by this

section, the requirements of 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 part

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

grant program established by this subpart is to improve business,

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

achieved, to the extent practicable, without adversely affecting

important environmental resources of rural areas such as important

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

Prospective recipients of grants, therefore, must consider the

potential environmental impacts of their applications at the earliest

planning stages and develop plans and projects that minimize the

potential to adversely impact on the environment.

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

project is generally excluded from the environmental review process by

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

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

providing technical assistance, must consider and generally document

within their plans the potential environmental impacts of the plan and

recommendations provided to the recipient of the technical assistance.

[[Page 14357]]

(3) Applications for grants to provide financial 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 financial

assistance to third parties who will undertake eligible projects with

such assistance. The Agency will review the preapplication, supporting

materials, and any required ``Request for Environmental Information''

and initiate an appropriate environmental review for the

preapplication. This assessment will focus on the potential cumulative

impacts of the projects as well as any environmental concerns or

problems that are associated with individual projects that can be

identified at this time from the information submitted. Because the

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

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

projects (see Sec. 4284.541), 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. See 7 CFR part 3017 and RD Instruction 1940-M

(available in any Rural Development State Office) for further guidance.

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

lobbying restrictions set forth in 7 CFR part 3018.

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

is for more than $1 million and will increase direct employment by more

than 50 employees, the applicant will be requested to provide written

support for an Agency determination that the proposal will not result

in a project which is calculated to, or likely to, result in 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, 7 CFR parts 3015, 3017, 3019, and 3051, as

appropriate, and established RBS guidelines.

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

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

accordance with part 1901, subpart F of this title.

(h) Uniform Relocation Assistance and Real Property Acquisition

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

in 7 CFR part 21.

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

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

11990, ``Protection of Wetlands.''

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

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

insurance must be provided.

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

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

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

applicable to any new projects thereafter financed from the 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.

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

provisions of Executive Order 12372 which requires intergovernmental

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

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

for the purpose of intergovernmental review as well as the specific

projects funded with grant funds from the 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 (see RD Instruction 1940-J, available in any Rural Development

State Office).

Sec. 4284.528 Application processing.

(a) Preapplications.

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

``Application for Federal Assistance (For Non-construction),'' with the

appropriate Rural Development State Office. This form is available in

any 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) 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) 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 7 CFR parts 3015 and 3019 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) Budget and description of the accounting system to be used.

(v) 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 either a resolution or a written

[[Page 14358]]

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) Method and rationale used to select the areas or businesses

that will receive the service.

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

organizational staff, consultants or contractors will be used.

(xi) 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 that the applicant will

effectively serve rural areas in the United States.

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

to improve the economic condition of rural areas by promoting

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) 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, the preapplication must include

the agreement proposed to be used between the applicant and the

ultimate recipients that includes the following:

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

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

ultimate recipient and the ultimate recipient understands its

responsibilities to comply with the requirements set forth in this

subpart, including 7 CFR parts 3015 and 3019 as applicable.

(B) Provisions that the ultimate recipient will comply with

debarment and suspension requirements contained in 7 CFR part 3017 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 4284.540(a) 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 time frames 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, which will follow the final rulemaking notice, 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; and

(7) evidence transferability or demonstration value to assist rural

areas outside of project area.

(b) Each preapplication for assistance will be carefully reviewed

in accordance with the priorities established in this

[[Page 14359]]

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.

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. The grantee may not

provide its contribution at the end of the grant 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 set forth 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 7

CFR parts 3015 and 3019, 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 U.S. Department of Agriculture 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 0575-0006. You are not

required to respond to this collection of information unless it

displays a valid OMB control number.

Dated: March 17, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97-7743 Filed 3-25-97; 8:45 am]

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