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  <AMDDATE>Apr. 3, 2007</AMDDATE>
  <FMTR>
    <TITLEPG>
      <CODE>CODE OF FEDERAL REGULATIONS</CODE>
      <PRTPAGE P="1"/>
      <TITLENUM>24</TITLENUM>
      <PARTS>Parts 500 to 699</PARTS>
      <REVISED>Revised as of April 1, 2007</REVISED>
      <SUBJECT>Housing and Urban Development</SUBJECT>
      <CONTAINS>Containing a codification of documents of general applicability andfuture effect</CONTAINS>
      <DATE>As of April 1, 2007</DATE>
      <ANCIL>With Ancillaries</ANCIL>
      <PUB>
        <P>Published by</P>
        <P>Office of the Federal Register</P>
        <P>National Archives and Records</P>
        <P>Administration</P>
      </PUB>
      <SPECED>A Special Edition of the Federal Register</SPECED>
    </TITLEPG>
    <BTITLE>
      <PRTPAGE P="?ii"/>
      <HD SOURCE="HED">U.S. GOVERNMENT OFFICIAL EDITION NOTICE</HD>
      <HD SOURCE="HED">Legal Status and Use of Seals and Logos</HD>
      <GPH DEEP="54" HTYPE="LEFT" SPAN="1">
        <GID>e:\seals\archives.ai</GID>
      </GPH>
      <P>The seal of the National Archives and Records Administration (NARA)authenticates the Code of Federal Regulations (CFR) as the official codificationof Federal regulations established under the Federal Register Act. Under theprovisions of 44 U.S.C. 1507, the contents of the CFR, a special edition of theFederal Register, shall be judicially noticed. The CFR is prima facie evidenceof the original documents published in the Federal Register (44 U.S.C. 1510).</P>
      <P>It is prohibited to use NARA's official seal and the stylized Code of FederalRegulations logo on any republication of this material without the express,written permission of the Archivist of the United States or the Archivist'sdesignee. Any person using NARA's official seals and logos in a mannerinconsistent with the provisions of 36 CFR part 1200 is subject to the penaltiesspecified in 18 U.S.C. 506, 701, and 1017.</P>
      <HD SOURCE="HED">Use of ISBN Prefix</HD>
      <P>This is the Official U.S. Government edition of this publication and isherein identified to certify its authenticity. Use of the 0-16 ISBN prefixis for U.S. Government Printing Office Official Editions only. TheSuperintendent of Documents of the U.S. Government Printing Office requests thatany reprinted edition clearly be labeled as a copy of the authentic work with anew ISBN.</P>
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    </BTITLE>
    <TOC>
      <PRTPAGE P="iii"/>
      <HD SOURCE="HED">Table of Contents</HD>
      <PGHD>Page</PGHD>
      <EXPL>
        <SUBJECT>Explanation</SUBJECT>
        <PG>v</PG>
      </EXPL>
      <TITLENO>
        <HD SOURCE="HED">Title 24:</HD>
        <SUBTI>
          <HD SOURCE="HED">Subtitle B—Regulations Relating to Housing and UrbanDevelopment (Continued)</HD>
        </SUBTI>
        <CHAPTI>
          <SUBJECT>Chapter V—Office of Assistant Secretary for Community Planningand Development, Department of Housing and Urban Development</SUBJECT>
          <PG>5</PG>
        </CHAPTI>
        <CHAPTI>
          <RESERVED>Chapter VI—Office of Assistant Secretary for Community Planningand Development, Department of Housing and Urban Development [Reserved]</RESERVED>
        </CHAPTI>
      </TITLENO>
      <FAIDS>
        <HD SOURCE="HED">Finding Aids:</HD>
        <SUBJECT>Table of CFR Titles and Chapters</SUBJECT>
        <PG>337</PG>
        <SUBJECT>Alphabetical List of Agencies Appearing in the CFR</SUBJECT>
        <PG>355</PG>
        <SUBJECT>List of CFR Sections Affected</SUBJECT>
        <PG>365</PG>
      </FAIDS>
    </TOC>
    <CITE>
      <PRTPAGE P="iv"/>
      <P>Cite this Code:<E T="01">CFR</E>
      </P>

      <CITEP>To cite the regulations in this volume use title, part and sectionnumber. Thus, <E T="01">24 CFR 510.1</E> refers to title 24, part 510, section1.</CITEP>
    </CITE>
    <EXPLA>
      <PRTPAGE P="v"/>
      <HD SOURCE="HED">Explanation</HD>
      <P>The Code of Federal Regulations is a codification of the general andpermanent rules published in the Federal Register by the Executive departmentsand agencies of the Federal Government. The Code is divided into 50 titles whichrepresent broad areas subject to Federal regulation. Each title is divided intochapters which usually bear the name of the issuing agency. Each chapter isfurther subdivided into parts covering specific regulatory areas.</P>
      <P>Each volume of the Code is revised at least once each calendar year andissued on a quarterly basis approximately as follows:</P>
      <IPAR>
        <P SOURCE="P1">Title 1 through Title 16</P>
        <STUB>as of January 1</STUB>
        <P SOURCE="P1">Title 17 through Title 27</P>
        <STUB>as of April 1</STUB>
        <P SOURCE="P1">Title 28 through Title 41</P>
        <STUB>as of July 1</STUB>
        <P SOURCE="P1">Title 42 through Title 50</P>
        <STUB>as of October 1</STUB>
      </IPAR>
      <P>The appropriate revision date is printed on the cover of each volume.</P>
      <SIDEHED>
        <HD SOURCE="HED">LEGAL STATUS</HD>
        <P>The contents of the Federal Register are required to be judicially noticed(44 U.S.C. 1507). The Code of Federal Regulations is prima facie evidence of thetext of the original documents (44 U.S.C. 1510).</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">HOW TO USE THE CODE OF FEDERAL REGULATIONS</HD>
        <P>The Code of Federal Regulations is kept up to date by the individual issuesof the Federal Register. These two publications must be used together todetermine the latest version of any given rule.</P>
        <P>To determine whether a Code volume has been amended since its revision date(in this case, April 1, 2007), consult the “List of CFR Sections Affected(LSA),” which is issued monthly, and the “Cumulative List of PartsAffected,” which appears in the Reader Aids section of the daily FederalRegister. These two lists will identify the Federal Register page number of thelatest amendment of any given rule.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">EFFECTIVE AND EXPIRATION DATES</HD>
        <P>Each volume of the Code contains amendments published in the Federal Registersince the last revision of that volume of the Code. Source citations for theregulations are referred to by volume number and page number of the FederalRegister and date of publication. Publication dates and effective dates areusually not the same and care must be exercised by the user in determining theactual effective date. In instances where the effective date is beyond the cut-off date for the Code a note has been inserted to reflect the future effectivedate. In those instances where a regulation published in the Federal Registerstates a date certain for expiration, an appropriate note will be insertedfollowing the text.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">OMB CONTROL NUMBERS</HD>

        <P>The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires Federalagencies to display an OMB control number with their information collectionrequest. <PRTPAGE P="vi"/>Many agencies have begun publishing numerous OMB control numbers asamendments to existing regulations in the CFR. These OMB numbers are placed asclose as possible to the applicable recordkeeping or reporting requirements.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">OBSOLETE PROVISIONS</HD>
        <P>Provisions that become obsolete before the revision date stated on the coverof each volume are not carried. Code users may find the text of provisions ineffect on a given date in the past by using the appropriate numerical list ofsections affected. For the period before January 1, 2001, consult either theList of CFR Sections Affected, 1949-1963, 1964-1972,1973-1985, or 1986-2000, published in 11 separate volumes. For theperiod beginning January 1, 2001, a “List of CFR Sections Affected”is published at the end of each CFR volume.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">CFR INDEXES AND TABULAR GUIDES</HD>

        <P>A subject index to the Code of Federal Regulations is contained in a separatevolume, revised annually as of January 1, entitled CFR <E T="04">Index andFinding Aids.</E> This volume contains the Parallel Table of StatutoryAuthorities and Agency Rules (Table I). A list of CFR titles, chapters, andparts and an alphabetical list of agencies publishing in the CFR are alsoincluded in this volume.</P>
        <P>An index to the text of “Title 3—The President” is carriedwithin that volume.</P>
        <P>The Federal Register Index is issued monthly in cumulative form. This indexis based on a consolidation of the “Contents” entries in the dailyFederal Register.</P>
        <P>A List of CFR Sections Affected (LSA) is published monthly, keyed to therevision dates of the 50 CFR titles.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">REPUBLICATION OF MATERIAL</HD>
        <P>There are no restrictions on the republication of textual material appearingin the Code of Federal Regulations.</P>
      </SIDEHED>
      <SIDEHED>
        <HD SOURCE="HED">INQUIRIES</HD>
        <P>For a legal interpretation or explanation of any regulation in this volume,contact the issuing agency. The issuing agency's name appears at the top of odd-numbered pages.</P>
        <P>For inquiries concerning CFR reference assistance, call 202-741-6000 or writeto the Director, Office of the Federal Register, National Archives and RecordsAdministration, Washington, DC 20408 or e-mail fedreg.info@nara.gov.</P>
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        <HD SOURCE="HED">SALES</HD>
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      <SIDEHED>
        <HD SOURCE="HED">ELECTRONIC SERVICES</HD>

        <P>The full text of the Code of Federal Regulations, the LSA (List of CFRSections Affected), The United States Government Manual, the Federal Register,Public Laws, Public Papers, Weekly Compilation of Presidential Documents and thePrivacy Act Compilation are available in electronic format at <E T="03">www.gpoaccess.gov/nara</E> (“GPO Access”). For moreinformation, contact Electronic Information Dissemination Services, U.S.Government Printing Office. Phone 202-512-1530, or 888-293-6498 (toll-free). E-mail, <E T="03">gpoaccess@gpo.gov.</E>
          <PRTPAGE P="vii"/>
        </P>

        <P>The Office of the Federal Register also offers a free service on the NationalArchives and Records Administration's (NARA) World Wide Web site for public lawnumbers, Federal Register finding aids, and related information. Connect toNARA's web site at <E T="03">www.archives.gov/federal-register.</E> The NARAsite also contains links to GPO Access.</P>
      </SIDEHED>
      <SIG>
        <NAME>Raymond A. Mosley,</NAME>
        <POSITION>Director,</POSITION>
        <OFFICE>Office of the Federal Register.</OFFICE>
      </SIG>
      <DATE>April 1, 2007.</DATE>
    </EXPLA>
    <THISTITL>
      <PRTPAGE P="ix"/>
      <HD SOURCE="HED">THIS TITLE</HD>
      <P>Title 24—<E T="04">Housing and Urban Development</E> is composed offive volumes. The first four volumes containing parts 0-199, parts200-499, parts 500-699, parts 700-1699, represent theregulations of the Department of Housing and Urban Development. The fifthvolume, containing part 1700 to end continues with regulations of the Departmentof Housing and Urban Development and also includes regulations of theNeighborhood Reinvestment Corporation. The contents of these volumes representall current regulations codified under this title of the CFR as of April 1,2007.</P>
      <P>For this volume, Elmer Barksdale was Chief Editor. The Code of FederalRegulations publication program is under the direction of Frances D. McDonald,assisted by Ann Worley.</P>
    </THISTITL>
  </FMTR>
  <TITLE>
    <LRH>24 CFR Ch. V (4-1-07 Edition)</LRH>
    <RRH>Ofc. of Asst. Secy., Comm. Planning, Develop., HUD</RRH>
    <CFRTITLE>
      <TITLEHD>
        <PRTPAGE P="1"/>
        <HD SOURCE="HED">Title 24—Housing and Urban Development</HD>
        <P>(This book contains parts 500 to 699)</P>
      </TITLEHD>
      <CFRTOC>
        <PTHD>Part</PTHD>
        <SUBTI>
          <HD SOURCE="HED">SUBTITLE B—Regulations Relating to Housing and UrbanDevelopment (Continued)</HD>
        </SUBTI>
        <CHAPTI>
          <SUBJECT>
            <E T="04">chapter v</E>—Office of Assistant Secretary forCommunity Planning and Development, Department of Housing and Urban Development</SUBJECT>
          <PG>510</PG>
          <RESERVED>
            <E T="04">chapter vi</E>—Office of Assistant Secretary forCommunity Planning and Development, Department of Housing and Urban Development[Reserved]</RESERVED>
        </CHAPTI>
      </CFRTOC>
    </CFRTITLE>
    <SUBTITLE>
      <PRTPAGE P="3"/>
      <HD SOURCE="HED">Subtitle B—Regulations Relating to Housing and UrbanDevelopment (Continued)</HD>
      <CHAPTER>
        <TOC>
          <TOCHD>
            <PRTPAGE P="5"/>
            <HD SOURCE="HED">CHAPTER V—OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNINGAND DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT</HD>
          </TOCHD>
          <SUBCHAP>
            <HD SOURCE="HED">SUBCHAPTER A—SLUM CLEARANCE AND URBAN RENEWAL</HD>
          </SUBCHAP>
          <PTHD>Part</PTHD>
          <PGHD>Page</PGHD>
          <CHAPTI>
            <PT>500-509</PT>
            <RESERVED>[Reserved]</RESERVED>
            <PT>510</PT>
            <SUBJECT>Section 312 Rehabilitation Loan Program</SUBJECT>
            <PG>7</PG>
            <PT>511</PT>
            <SUBJECT>Rental Rehabilitation Grant Program</SUBJECT>
            <PG>7</PG>
          </CHAPTI>
          <SUBCHAP>
            <RESERVED>SUBCHAPTER B [RESERVED]</RESERVED>
          </SUBCHAP>
          <SUBCHAP>
            <HD SOURCE="HED">SUBCHAPTER C—COMMUNITY FACILITIES</HD>
          </SUBCHAP>
          <CHAPTI>
            <PT>570</PT>
            <SUBJECT>Community development block grants</SUBJECT>
            <PG>31</PG>
            <PT>572</PT>
            <SUBJECT>Hope for homeownership of single family homes program (HOPE 3)</SUBJECT>
            <PG>179</PG>
            <PT>573</PT>
            <SUBJECT>Loan guarantee recovery fund</SUBJECT>
            <PG>200</PG>
            <PT>574</PT>
            <SUBJECT>Housing opportunities for persons with AIDS</SUBJECT>
            <PG>205</PG>
            <PT>576</PT>
            <SUBJECT>Emergency Shelter Grants Program: Stewart B. McKinney HomelessAssistance Act</SUBJECT>
            <PG>220</PG>
            <PT>581</PT>
            <SUBJECT>Use of Federal real property to assist the homeless</SUBJECT>
            <PG>232</PG>
            <PT>582</PT>
            <SUBJECT>Shelter Plus Care</SUBJECT>
            <PG>241</PG>
            <PT>583</PT>
            <SUBJECT>Supportive Housing Program</SUBJECT>
            <PG>254</PG>
            <PT>585</PT>
            <SUBJECT>Youthbuild Program</SUBJECT>
            <PG>269</PG>
            <PT>586</PT>
            <SUBJECT>Revitalizing base closure communities and communityassistance—community redevelopment and homeless assistance</SUBJECT>
            <PG>285</PG>
            <PT>590</PT>
            <SUBJECT>Urban homesteading</SUBJECT>
            <PG>294</PG>
            <PT>594</PT>
            <SUBJECT>John Heinz Neighborhood Development Program</SUBJECT>
            <PG>298</PG>
            <PT>597</PT>
            <SUBJECT>Urban empowerment zones and enterprise communities: Round onedesignations</SUBJECT>
            <PG>302</PG>
            <PT>598</PT>
            <SUBJECT>Urban Empowerment Zones: Round two and three designations</SUBJECT>
            <PG>313</PG>
            <PT>599</PT>
            <SUBJECT>Renewal communities</SUBJECT>
            <PG>322</PG>
          </CHAPTI>
        </TOC>
        <SUBCHAP TYPE="N">
          <PRTPAGE P="7"/>
          <HD SOURCE="HED">SUBCHAPTER A—SLUM CLEARANCE AND URBAN RENEWAL</HD>
          <PART>
            <RESERVED>PARTS 500-509 [RESERVED]</RESERVED>
          </PART>
          <PART>
            <EAR>Pt. 510</EAR>
            <HD SOURCE="HED">PART 510—SECTION 312 REHABILITATION LOAN PROGRAM</HD>
            <AUTH>
              <HD SOURCE="HED">Authority:</HD>
              <P>42 U.S.C. 1452b and 3535(d).</P>
            </AUTH>
            <SECTION>
              <SECTNO>§ 510.1</SECTNO>
              <SUBJECT>Multi-family property loans.</SUBJECT>
              <P>(a) In cases in which a corporation is a borrower on a section 312 loan, theAssistant Secretary for CPD or his designee may require an officer of thecorporation or a principal stockholder to personally guarantee the section 312loan or to cosign the loan note as a borrower, where necessary to make thefinding of acceptable risk required for assumption of the loan.</P>
              <P>(b) All partners of any partnership which is a borrower on a section 312 loanshall be personally liable for repayment of the section 312 loan. Limitedpartners shall assume personal liability by co-signing the loan note as aborrower or by personally guaranteeing the loan.</P>
              <P>(c) Any personal guarantee or endorsement shall not relieve the partnershipor corporate borrower from securing the section 312 loan by a mortgage or deedof trust on the property to be rehabilitated.</P>
              <CITA>[44 FR 21751, Apr. 11, 1979, as amended at 44 FR 47513, Aug. 13, 1979; 44FR 55562, Sept. 27, 1979. Redesignated and amended at 61 FR 7061, Feb. 23, 1996]</CITA>
            </SECTION>
          </PART>
          <PART>
            <EAR>Pt. 511</EAR>
            <HD SOURCE="HED">PART 511—RENTAL REHABILITATON GRANT PROGRAM</HD>
            <CONTENTS>
              <SUBPART>
                <HD SOURCE="HED">Subpart A—General</HD>
                <SECHD>Sec.</SECHD>
                <SECTNO>511.1</SECTNO>
                <SUBJECT>Applicability and purpose.</SUBJECT>
                <SECTNO>511.2</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <SECTNO>511.3-511.5</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart B—Program Requirements</HD>
                <SECTNO>511.10</SECTNO>
                <SUBJECT>Grant requirements.</SUBJECT>
                <SECTNO>511.11</SECTNO>
                <SUBJECT>Project requirements.</SUBJECT>
                <SECTNO>511.12</SECTNO>
                <SUBJECT>Conflicts of interest.</SUBJECT>
                <SECTNO>511.13</SECTNO>
                <SUBJECT>Nondiscrimination, equal opportunity, and affirmativemarketing requirements.</SUBJECT>
                <SECTNO>511.14</SECTNO>
                <SUBJECT>Tenant assistance, displacement, relocation, andacquisition.</SUBJECT>
                <SECTNO>511.15</SECTNO>
                <SUBJECT>Lead-based paint.</SUBJECT>
                <SECTNO>511.16</SECTNO>
                <SUBJECT>Other Federal requirements.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart C [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart D—Allocation Formula and Reallocations</HD>
                <SECTNO>511.30-511.31</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
                <SECTNO>511.33</SECTNO>
                <SUBJECT>Deobligation of rental rehabilitation grant amounts.</SUBJECT>
                <SECTNO>511.34</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart E [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart F—State Program</HD>
                <SECTNO>511.50</SECTNO>
                <SUBJECT>State election to administer a rental rehabilitationprogram.</SUBJECT>
                <SECTNO>511.51</SECTNO>
                <SUBJECT>State-administered program.</SUBJECT>
                <SECTNO>511.52</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart G [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart H—Grant Administration</HD>
                <SECTNO>511.70</SECTNO>
                <SUBJECT>Responsibility for grant administration.</SUBJECT>
                <SECTNO>511.71</SECTNO>
                <SUBJECT>Administrative costs.</SUBJECT>
                <SECTNO>511.72</SECTNO>
                <SUBJECT>Applicability of uniform Federal administrativerequirements.</SUBJECT>
                <SECTNO>511.73</SECTNO>
                <SUBJECT>Grantee records.</SUBJECT>
                <SECTNO>511.74</SECTNO>
                <SUBJECT>Audit.</SUBJECT>
                <SECTNO>511.75</SECTNO>
                <SUBJECT>Disbursement of rental rehabilitation grant amounts: Cashand Management Information System.</SUBJECT>
                <SECTNO>511.76</SECTNO>
                <SUBJECT>Program income.</SUBJECT>
                <SECTNO>511.77</SECTNO>
                <SUBJECT>Grant closeout.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart I—Grantee Performance: Review, Reporting andCorrective or Remedial Actions</HD>
                <SECTNO>511.80</SECTNO>
                <SUBJECT>Performance review.</SUBJECT>
                <SECTNO>511.81</SECTNO>
                <SUBJECT>Grantee reports to HUD.</SUBJECT>
                <SECTNO>511.82</SECTNO>
                <SUBJECT>Corrective and remedial actions.</SUBJECT>
              </SUBPART>
            </CONTENTS>
            <AUTH>
              <HD SOURCE="HED">Authority:</HD>
              <P>42 U.S.C. 1437o and 3535(d).</P>
            </AUTH>
            <SOURCE>
              <HD SOURCE="HED">Source:</HD>
              <P>55 FR 20050, May 14, 1990, unless otherwise noted.</P>
            </SOURCE>
            <SUBPART>
              <HD SOURCE="HED">Subpart A—General</HD>
              <SECTION>
                <SECTNO>§ 511.1</SECTNO>
                <SUBJECT>Applicability and purpose.</SUBJECT>

                <P>(a) This part implements the Rental Rehabilitation Program (RRP) contained insection 17 of the United States Housing Act of 1937, as amended (the“Act”). As more fully described in this part, the Act authorizes theSecetary of Housing and Urban Development to make rental rehabilitation <PRTPAGE P="8"/>grantsto help support the rehabilitation of eligible real property to be used forprimarily residential rental purposes, and to pay for eligible administrativecosts of grantees (not to exceed 10 percent of a grantee's initial grantobligation for Fiscal Year 1988 and later years). Grants are made on a formulabasis to cities having populations of 50,000 or more, urban counties, States,and qualifying consortia of geographically proximate units of general localgovernment. States may use all or part of their grants to carry out their ownrental rehabilitation programs or to distribute them to eligible units ofgeneral local government. HUD will administer a State's grant if the Statechooses not to do so.</P>
                <P>(b) The purpose of the Program is to help provide affordable, standardpermanent housing for low-income families and to increase the availability ofhousing units for use by housing voucher and certificate holders under section 8of the United States Housing Act of 1937. Subject to rules for the tenant-basedCertificate Program (24 CFR part 882) and for the Housing Voucher Program (24CFR part 887), certificates and housing vouchers must be allocated to ensurethat sufficient resources are available for families in Rental Rehabilitationprojects who are required to move out of their units because of the physicalrehabilitation activities or because of overcrowding; and at the PHA'sdiscretion, to assist eligible families whose post-rehabilitation rents would begreater than 30 percent of their adjusted incomes.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.2</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <P>The terms <E T="03">HUD</E> and <E T="03">Public Housing Agency (PHA)</E> aredefined in 24 CFR part 5.</P>
                <P>
                  <E T="03">Administrative costs</E> means eligible administrative costs asdescribed in § 511.71.</P>
                <P>
                  <E T="03">C/MI System</E> means the Cash and Management Information Systemfor drawdown of Rental Rehabilitation grant amounts and collection of programinformation described in § 511.75.</P>
                <P>
                  <E T="03">Certificate</E> means the document issued by a PHA to a familyeligible for participation in the tenant-based Section 8 Certificate Programunder 24 CFR part 882.</P>
                <P>
                  <E T="03">Chief executive officer</E> of a governmental entity means theelected official, or the legally designated official, who has the primaryresponsibility for the conduct of that entity's governmental affairs. Examplesof the “chief executive officer” are: The elected mayor of amunicipality; the elected county executive of a county; the chairperson of acounty commission or board in a county that has no elected county executive; theofficial designated under law by the governing body of the unit of general localgovernment; and the Governor of a State.</P>
                <P>
                  <E T="03">City</E> means a unit of general local government that wasclassified as a city under section 102(a)(5) of the Housing and CommunityDevelopment Act of 1974 for purposes of the Community Development Block Grant(CDBG) Entitlement Program for the fiscal year immediately preceding the fiscalyear for which rental rehabilitation grant amounts are made available.</P>
                <P>
                  <E T="03">Commit to a specific local project</E> or <E T="03">commitment</E>means:</P>
                <P>(a) For a project which is privately owned when the commitment is made, awritten legally binding agreement between a grantee (or in the case of a Statedistributing rental rehabilitation grant amounts to units of general localgovernment, a State recipient) and the project owner under which the grantee orState recipient agrees to provide rental rehabilitation grant amounts to theowner for an identifiable rehabilitation project that can reasonably be expectedto start construction within 90 days of the agreement and in which the owneragrees to start construction within that period; or</P>
                <P>(b) For a project that is publicly owned when the commitment is made, thePre-Rehabilitation Report submitted under the C/MI System which identifies aspecific rehabilitation project that will start rehabilitation within 90 days ofreceipt of the Pre-Rehabilitation Report. Under both paragraphs (a) and (b) ofthis definition, the date HUD enters into the C/MI System an acceptable Pre-Rehabilitation Report for a project is deemed to be the date of projectcommitment.</P>
                <P>
                  <E T="03">Completion of rehabilitation</E> means all necessary rehabilitationwork has been performed and the project in HUD's <PRTPAGE P="9"/>judgment complies with therequirements of this part (including the rehabilitation standards adopted under§ 511.10(e)); the final drawdown has been disbursed for the project;for projects that were publicly owned when commitment occurred, the project hasbeen legally transferred to a private owner; and a Project Completion Report hasbeen submitted and processed in the C/MI System as prescribed by HUD.</P>
                <P>
                  <E T="03">Family</E> means a “family” as defined at 24 CFR 812.2.</P>
                <P>
                  <E T="03">Grantee</E> means—</P>
                <P>(a) Any city, urban county, or approved consortium receiving a grant on thebasis of the formula contained in subpart D of this part;</P>
                <P>(b) Any State administering a rental rehabilitation program, as provided in§ 511.51; and</P>
                <P>(c) Any unit of general local government receiving a rental rehabilitationgrant from HUD, as provided in § 511.52.</P>
                <P>
                  <E T="03">Housing voucher</E> means the document issued by a PHA to a familyeligible for participation in the Section 8 Housing Voucher Program under 24 CFRpart 887.</P>
                <P>
                  <E T="03">Low-income family</E> means a low-income family, as defined in 24CFR 813.102.</P>
                <P>
                  <E T="03">Manufactured housing</E> means a dwelling unit which meets therequirements of § 511.11(c)(4).</P>
                <P>
                  <E T="03">Owner</E> means one or more individuals, corporations,partnerships, or other privately-controlled legal entities that hold valid legaltitle to the project to be rehabilitated.</P>
                <P>
                  <E T="03">Project</E> means an entire building (including a manufacturedhousing unit), or two or more contiguous buildings under common ownership andmanagement, to be rehabilitated with a rental rehabilitation grant, under acommitment by the owner, as a single undertaking under this part.</P>
                <P>
                  <E T="03">Rents affordable to low-income families</E> means that the sum ofthe utility allowance and the rent payable monthly to the owner with respect toa unit is at or below the applicable fair market rent published under 24 CFRpart 888 for the Section 8 Certificate Program (24 CFR part 882) or at or belowsuch higher maximum Gross Rent as approved by HUD for units of a given size ortype under 24 CFR 882.106(a)(3). In the case of cooperative or mutual housing,rent means the occupancy charges under the occupancy agreement between themembers and the cooperative.</P>
                <P>
                  <E T="03">State</E> includes any of the 50 States and the Commonwealth ofPuerto Rico.</P>
                <P>
                  <E T="03">State recipient</E> means any unit of general local government towhich a State distributes rental rehabilitation grant amounts, as provided in§ 511.51 (a)(2) and (a)(3).</P>
                <P>
                  <E T="03">Unit</E> or <E T="03">dwelling unit</E> means a residential spacethat qualifies under the laws of the State and locality and under this part as aplace of permanent habitation or abode for a family, including an apartment orhouse that contains a living room, kitchen area, sleeping area, and bathroom(s),or such other definition as may be proposed by a grantee and approved by HUDunder this part. The HUD Field Office may approve congregate housing unitsmeeting the requirements of 24 CFR 882.109(m) or single room occupancy unitsmeeting the requirements of 24 CFR 882.109(p) as zero bedroom units for purposesof this part.</P>
                <P>
                  <E T="03">Unit of general local government</E> means any city, county, town,township, parish, village, or other general purpose political subdivision of aState.</P>
                <P>
                  <E T="03">Urban county</E> means a county that was classified as an urbancounty under section 102(a)(6) of the Housing and Community Development Act of1974, as amended, for the fiscal year immediately preceding the fiscal year forwhich rental rehabilitation grant amounts are made available.</P>
                <P>
                  <E T="03">Utility allowance</E> means the amount determined by a PHA under 24CFR part 882 for the cost of utilities (except telephones) and other housingservices that is not included in the rent payable to the owner, but is theresponsibility of the family occupying the unit.</P>
                <P>
                  <E T="03">Very low income family</E> means a very low income family, asdefined in 24 CFR 813.102.</P>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]</CITA>
              </SECTION>
              <SECTION>
                <PRTPAGE P="10"/>
                <SECTNO>§ 511.3-511.5</SECTNO>
                <RESERVED>[Reserved]</RESERVED>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <HD SOURCE="HED">Subpart B—Program Requirements</HD>
              <SECTION>
                <SECTNO>§ 511.10</SECTNO>
                <SUBJECT>Grant requirements.</SUBJECT>
                <P>A rental rehabilitation program shall comply with the following requirements:</P>
                <P>(a) <E T="03">Lower income benefit</E>—(1) <E T="03">100 percentbenefit standard.</E> Except as provided in paragraphs (a)(2) and (a)(3) of thissection, all rental rehabilitation grant amounts must be used for the benefit oflow-income families.</P>
                <P>(2) <E T="03">Reduction to 70 percent benefit standard.</E> The 100 percentbenefit standard will be reduced to 70 percent if the grantee certifies in itsProgram Description under § 511.20 (or thereafter in a writtenamendment to its grant agreement) that:</P>
                <P>(i) The reduction is necessary to meet one or both of the followingobjectives:</P>
                <P>(A) To minimize the displacement of tenants in projects to be rehabilitated;or</P>
                <P>(B) To provide a reasonable margin for error due to unforeseen, suddenchanges in neighborhood rent or for other reasonable contingencies;</P>
                <P>(ii) A rental rehabilitation program that meets the 100 percent benefitstandard cannot be developed; and</P>
                <P>(iii) The public has been consulted regarding this inability.</P>
                <P>(3) <E T="03">Reduction to 50 percent benefit standard.</E> The benefitstandard will be reduced to not less than 50 percent only in extraordinarycircumstances approved by HUD. Approval may be granted at the request of thegrantee before undertaking any project that will have the effect of reducing thebenefit for low-income families for the grantee's program below 70 percent, onlywhere HUD determines that a reduction is necessary to meet an importantcommunity need and that the net program impact will strongly favor low-incomefamilies. Approval may be granted thereafter only where HUD determines that thegrantee made reasonable efforts to meet the higher benefit standard, but wasunable to do so because of circumstances beyond its control.</P>
                <P>(4) <E T="03">Definition of benefit.</E> For purposes of this paragraph (a),benefit for low-income families will be considered to occur only where dwellingunits in projects rehabilitated with rental rehabilitation grants are initiallyoccupied by such families after rehabilitation.</P>
                <P>(b) <E T="03">Use of rental rehabilitation grants for housing forfamilies.</E> (1) Each grantee shall ensure that an equitable share of rentalrehabilitation grant amounts will be used to assist in the provision of housingdesigned for occupancy by families with children, particularly familiesrequiring three or more bedrooms. HUD will assure that on a national basis atleast 15 percent of each year's rental rehabilitation grant amounts (excludingthose grant amounts expended for administrative costs under § 511.71)are used to rehabilitate units containing three or more bedrooms. HUD reservesthe right prospectively to establish three or more bedroom unit targets forindividual grantees if the national goal is in danger of not being met, or ifHUD finds that a grantee's production of three or more bedroom units issignificantly below that of grantees in similar circumstances. In addition, atleast 70 percent of each grantee's annual rental rehabilitation grant must beused to rehabilitate units containing two or more bedrooms. HUD may approve alower percentage standard submitted by the grantee in its Program Descriptionunder § 511.20, or thereafter, based on HUD's determination that thelower standard is justified by factors such as a short waiting list of largefamilies requiring assistance or the nature of the housing stock available forrehabilitation.</P>

                <P>(2) If a unit of general local government has an ordinance which requiresrehabilitation to meet seismic standards, the grantee may use up to the fullamount of its annual rental rehabilitation grant for Federal Fiscal Year 1988and later years (including reallocations under § 511.33(b) of fundsfor the same fiscal year) without regard to the requirements of paragraph (b)(1)of this section, but only to the extent it uses such grant amounts torehabilitate projects to meet the seismic standards required by the localordinance and to the extent these units in the rehabilitated project areinitially occupied after rehabilitation by very low income <PRTPAGE P="11"/>families. The granteeor State recipient shall identify as prescribed by HUD in reports required underthe C/MI System projects which have been rehabilitated to meet the requirementsof a local seismic standards ordinance and contain units which are initiallyoccupied by very low income families after rehabilitation. In determiningcompliance with paragraph (b)(1) of this section for annual grants under whichone or more projects have been rehabilitated to meet the requirements of a localseismic standards ordinance, based on the grantee's or State recipient'sreports, HUD will:</P>
                <P>(i) Calculate the maximum rental rehabilitation grant amount permissibleunder § 511.11(e)(2)(i) for the project(s) rehabilitated to meetseismic standards;</P>
                <P>(ii) Calculate the maximum permissible rental rehabilitation grant amount forthe 0 to 1 bedroom units in such project(s) initially occupied by very lowincome families after rehabilitation;</P>
                <P>(iii) Divide the amount calculated in § 511.10(b)(2)(ii) by theamount calculated in § 511.10(b)(2)(i);</P>
                <P>(iv) Multiply the quotient in § 511.10(b)(2)(iii) by the actualrental rehabilitation grant amount expended for the project; and</P>
                <P>(v) Deduct the product in § 511.10(b)(iv) from the amount of thegrantee's annual rental rehabilitation grant. The grantee will be required tomeet the 70 percent, or other approved level, under this § 511.10(b)only as to the amount of its annual grant remaining after making the foregoingdeduction.</P>
                <P>(c) <E T="03">Selection of neighborhoods</E>—(1) <E T="03">Neighborhoodmedian income and area.</E> Rental rehabilitation grants shall only be used toassist the rehabilitation of projects located in neighborhoods where the medianfamily income does not exceed 80 percent of the median family income for thearea. For purposes of paragraph (c) of this section, <E T="03">neighborhood</E>means an area (as determined by the grantee or, as appropriate, the Staterecipient) that surrounds a project and tends to determine, along with thecondition and quality of the project and the dwelling units therein, the rentsthat are charged for such units. A neighborhood must have a median family incomethat does not exceed 80 percent of the median family income for the MetropolitanStatistical Area (MSA) in which it is located, or, in the case of a neighborhoodnot within an MSA, a median family income that does not exceed 80 percent of themedian family income for the State's non-metropolitan areas, or at the grantee'soption, the non-metropolitan county in which the neighborhood is located.</P>
                <P>(2) <E T="03">Neighborhood rent affordability.</E> Rental rehabilitationgrant amounts shall only be used to assist the rehabilitation of projectslocated in neighborhoods in which—</P>
                <P>(i) The rents for standard units are generally affordable to low-incomefamilies at the time of the selection of the neighborhood; and</P>
                <P>(ii) The character of the neighborhood indicates that the rents are notlikely to increase at a rate significantly greater than the rate for rentincreases that can reasonably be anticipated to occur in the market area for the5-year period following the selection of the neighborhood.</P>
                <P>(d) [Reserved]</P>
                <P>(e) <E T="03">Rehabilitation standards.</E> Each grantee or State recipientshall adopt written rehabilitation standards with which each assisted projectmust comply after rehabilitation. At a minimum, such standards shall requirethat after rehabilitation each unit in the entire project must meet the Section8 Housing Quality Standards for Existing Housing contained at 24 CFR 882.109.</P>
                <P>(f) <E T="03">Eligible project costs.</E> Eligible project costs includeonly:</P>
                <P>(1) The actual rehabilitation costs necessary to:</P>
                <P>(i) Correct substandard conditions, as reasonably defined by the grantee inits rehabilitation standards adopted under § 511.10(e);</P>

                <P>(ii) Make essential improvements, as reasonably defined by the grantee orState recipient in its rehabilitation standards adopted under§ 511.10(e), including energy-related repairs, improvements necessaryto permit the use of rehabilitated projects by handicapped persons, andactivities of lead <PRTPAGE P="12"/>based paint hazards, as required by part 35 of this title;</P>
                <P>(iii) Repair major housing systems in danger of failure, as reasonablydefined by the grantee or State recipient in its rehabilitation standards under§ 511.10(e); and</P>
                <P>(2) Other costs (soft costs) that are associated with the rehabilitation orrehabilitation financing; are not for services provided or costs incurred by thegrantee, State recipient, or the PHA; and are not paid for as administrativecosts under § 511.71. Such costs may include (but are not limitedto):</P>
                <P>(i) Architectural, engineering or related professional services required inthe preparation of rehabilitation plans and drawings or writeups;</P>
                <P>(ii) Costs of processing and settling the financing for a project, such asprivate lender origination fees, credit reports, fees for title evidence, feesfor recordation and filing of legal documents, building permits, attorneys'fees, private appraisal fees and fees for an independent rehabilitation costestimate;</P>
                <P>(iii) Relocation payments made to tenants who are displaced by therehabilitation activities; and</P>
                <P>(iv) Costs for the owner to provide information services to tenants asrequired by §§ 511.13(b), 511.14 (a)(3) and (a)(4), and511.15(b).</P>
                <P>(3)(i) Rehabilitation eligible under § 511.10(f)(1) is limited towork done after the commitment to the project (as defined in § 511.2)is made, except to the extent that such costs also meet all of the followingconditions:</P>
                <P>(A) Prior to undertaking any rehabilitation before the project is committedin the C/MI System (hereafter called “precommitmentrehabilitation”), the owner and grantee or State recipient agree inwriting to include such rehabilitation costs in the project cost, if and whenthe payment is approved for assistance under this part;</P>
                <P>(B) The precommitment rehabilitation costs meet all other requirements ofthis part, including compliance with the other Federal requirements cited in§ 511.16, where applicable. In particular, HUD approval of thegrantee's certification of completion of environmental responsibilities, whenrequired under 24 CFR part 58, must occur prior to execution of the writtenagreements to include the costs; and</P>
                <P>(C) The precommitment rehabilitation costs were incurred by the owner afterthe date of the Appropriation Act which made available the grant amounts for theproject in question.</P>
                <P>(ii) Other project-related costs eligible under § 511.10(f)(2) arealso limited to those costs incurred after the commitment to the project is madeby the grantee or State recipient and the project is set up in the C/MI System,except to the extent such costs also meet all of the following conditions:</P>
                <P>(A) The grantee or State recipient and the owner agreed in writing before thecosts were incurred that such costs could be included in the project cost, ifand when the project was approved for assistance under this part, or the granteespecifically agrees in writing to include such costs in the project cost on orbefore the date the project is set up in the C/MI System;</P>
                <P>(B) The costs also meet the conditions stated in§ 511.10(f)(3)(i)(B) and § 511.10(f)(3)(i)(C).</P>
                <P>(4) For projects where the owner or other individuals are performing some orall of the rehabilitation work without compensation (to the extent permitted by§ 511.16(a)):</P>
                <P>(i) If the owner is not a practicing, licensed contractor, rehabilitationcosts eligible under § 511.10(f)(1) are limited to the cost ofmaterials purchased by the owner and used on the project and the cost of othereligible work performed by practicing, licensed contractors, subcontractors ortradesmen on the project.</P>
                <P>(ii) If the owner is a practicing, licensed contractor, then eligible projectcosts may include an amount, in addition to that permitted under paragraph(f)(4)(i) of this section, for the contractor's paid labor, overhead and profit,similar in amount to what these items would be if the work were being performedon a project that was not owned by the contractor.</P>
                <P>(iii) Under either paragraph (f)(4)(i) or (f)(4)(ii) of this section, donatedlabor or work is not part of eligible project cost.</P>
                <P>(g) <E T="03">Project selection priorities</E>—(1) <E T="03">Projectswith units occupied by very low income families.</E> While the program can <PRTPAGE P="13"/>beused for rehabilitating both occupied and vacant units, the grantee shall assurethat priority is given to the selection of projects containing units that do notmeet the rehabilitation standards adopted under § 511.10(e) and whichare occupied by very low income families before rehabilitation.</P>
                <P>(2) <E T="03">Units that are accessible to the handicapped.</E> As stated in24 CFR 8.30, the grantee shall, subject to the priority in§ 511.10(g)(1) and in accordance with other requirements in thispart, give priority to the selection of projects that will result in dwellingunits being made readily accessible to and usable by individuals with handicaps.</P>
                <APPRO>(Approved by the Office of Management and Budget under control numbers2506-0110, 2506-0078, 2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61FR 7061, Feb. 23, 1996; 64 FR 50225, Sept. 15, 1999]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.11</SECTNO>
                <SUBJECT>Project requirements.</SUBJECT>
                <P>(a) <E T="03">Rehabilitation.</E> To receive assistance under this part, aproject must require rehabilitation, measured by whether the project before theassisted rehabilitation does not meet the rehabilitation standards under§ 511.10(e). If a project is terminated before completion ofrehabilitation (as defined in § 511.2), whether voluntarily by thegrantee or otherwise, amounts equal to the rental rehabilitation grant amountsalready dispersed for the project under the C/MI System are not eligible projectcosts, whether or not the grantee has already expended such grant amounts to payfor project costs. If such amount is not repaid, the grantee may be subject tocorrective and remedial actions under § 511.82.</P>
                <P>(b) <E T="03">Primarily residential rental use.</E> Rental rehabilitationgrants shall only be used to rehabilitate projects to be used for“primarily residential rental” use. For purposes of this part, aproject is used for primarily residential rental purposes if at least 51 percentof the rentable floor space of the project is used for residential rentalpurposes after rehabilitation, except that in the case of a two-unit building,at least 50 percent of the rentable floor space after rehabilitation must beused for residential rental purposes after rehabilitation. “Primarilyresidential rental” use also includes cooperative or mutual housing thathas a resale structure that enables the cooperative to maintain rents affordableto low-income families.</P>
                <P>(c) <E T="03">Privately owned real property</E>—(1) <E T="03">General.</E> Rental rehabilitation grant amounts shall only be used foreligible costs of projects that are in private ownership at the time thecommitment is made to a specific local project, as defined in§ 511.2, or projects that are publicly owned at commitment which meetthe requirements in § 511.11(c)(2).</P>
                <P>(2) <E T="03">Publicly owned project at the time of commitment.</E> Rentalrehabilitation grant amounts may be used to assist publicly owned projects underthe following conditions:</P>
                <P>(i)(A) For a publicly owned project where the commitment to a specific localproject occurs on or after December 22, 1989, the grantee or Staterecipient—taking into consideration: the size of the project; thecomplexity of the rehabilitation; the anticipated time necessary to identify,and transfer to, an eligible private owner; and other relevantfactors—must determine that it will commence rehabilitation within 90 daysof commitment under the C/MI System, and that rehabilitation will be completedand the project transferred to an eligible private owner within the two yearsand 90 days from the date of commitment in the C/MI system or the time remainingunder § 511.33(c) for expenditure of the rental rehabilitation grantamounts committed to the project, whichever is shorter. The Project CompletionReport under the C/MI system identifying the private entity to which ownershiphas been transferred shall be submitted within 90 days of the final draw, butnot later than two years and 90 days after the date of commitment.</P>

                <P>(B) For a publicly owned project where the commitment to a specific localproject occurred before December 22, 1989, the grantee or Staterecipient—taking into consideration: the size of the project; thecomplexity of the rehabilitation; the anticipated time necessary to identify,and transfer to, an eligible private owner; and other relevantfactors—must determine that the rehabilitation will be completed <PRTPAGE P="14"/>and theproject transferred to an eligible private owner within the time remaining forexpenditure of the rental rehabilitation fiscal year grant amounts proposed tobe used for the project in accordance with § 511.33(c) before drawingdown rental rehabilitation grant amounts for the project. The Project CompletionReport identifying the private entity to which ownership has been transferredshall be submitted within 90 days of the final draw.</P>
                <P>(ii) If the grants or State recipient fails to complete the rehabilitation,transfer the property to an eligible private owner (which includes obtaining theagreements from the new owner required by this part, including§ 511.11(d)), and submit the Project Completion Report within theallowable period, then HUD will suspend the grantee's and/or the Staterecipient's authority to set up any new projects in the C/MI System and mayrequire the grantee to repay to its grant account in the C/MI System all rentalrehabilitation grant amounts drawn down with respect to the project. If paymentis not received, HUD may proceed to deobligate up to the full amount of thegrantee's remaining uncommitted rental rehabilitation grant amounts, whether ornot such grant amounts otherwise are available for deobligation under§ 511.33(c). A suspension of set-up authority shall terminate whenthe grantee or State recipient has transferred the project to private ownership,as required by this part, and has submitted a Project Completion Report underthe C/MI System identifying the private owner, or repays its grant account asrequired by this paragraph, or HUD lifts the suspension at its discretion.</P>
                <P>(iii) After the grantee has repaid the grant amounts to its grant account asprovided in § 511.11(c)(2)(ii), the grant amounts may be committedand expended by the grantee for new projects within the periods originallyallowed for these grant amounts, or deobligated by HUD under § 511.33or § 511.82 to the same extent as any other grant amounts subject tothis part.</P>
                <P>(3) <E T="03">Private, non-profit organizations.</E> Non-profit organizationsthat are privately controlled are eligible to receive rental rehabilitationgrant amounts under the same terms and conditions as any other private projectowner under this part. For purposes of this requirement, non-profitorganizations must have governing bodies which are controlled 51 percent or moreby private individuals who are acting in a private capacity. For purposes ofthis provision, an individual is deemed to be acting in a private capacity if heor she is not legally bound to act on behalf of a public body (including thegrantee), and is not being paid by a public body (including the grantee) whileperforming functions in connection with the non-profit organization.</P>
                <P>(4) <E T="03">Manufactured housing units.</E> Notwithstanding whether theyare classified as real or personal property under applicable State law,manufactured housing units may be assisted under this part under the followingconditions:</P>
                <P>(i) The unit is on a permanent foundation;</P>
                <P>(ii) The utility hook-ups are permanent;</P>
                <P>(iii) The unit is designed for use as a permanent residence;</P>
                <P>(iv) The unit also meets the Section 8 Housing Quality Standards forManufactured Homes set forth in 24 CFR 882.109(o).</P>
                <P>(5) <E T="03">Religious organizations.</E> Rental Rehabilitation grantamounts may be used to assist the rehabilitation of properties formerly owned byreligious organizations, such as churches, provided that both of the followingconditions are met:</P>
                <P>(i) Title to the property to be rehabilitated must be transferred to a whollysecular entity prior to commitment, and this entity shall comply with allobligations of a project owner under this part. The entity may be an existing ornewly established entity (which may be an entity established, but notcontrolled, by the religious organization); and</P>

                <P>(ii) The completed project must be used exclusively by the owner entity forsecular purposes, available to all persons regardless of religion, for theperiod and subject to the obligations described in § 511.11(d). Inparticular, there must be no religious or membership criteria for tenants of theproperty.<PRTPAGE P="15"/>
                </P>
                <P>(d) <E T="03">Long-term owner obligations.</E> (1) Each project assistedunder this part is subject to the following specific obligations for a period ofat least ten years after completion of the rehabilitation:</P>
                <P>(i) The project shall remain in private ownership and in primarilyresidential rental use for the required period, unless the project is sold toanother private owner who agrees to continue to manage the property inaccordance with Rental Rehabilitation Program requirements for the remainder ofthe required period, or a hardship exception is approved by the grantee forreasons that occur after completion of the rehabilitation.</P>
                <P>(ii) The owner shall not convert the units in the project to condominiumownership or any form of cooperative ownership not eligible for assistance underthis part for the required period.</P>
                <P>(iii) The owner shall not discriminate against prospective tenants on thebasis of their receipt of, or eligibility for, housing assistance under anyFederal, State or local housing assistance program or, except for a housingproject for elderly persons, on the basis that the tenants have a minor child orchildren who will be residing with them, for the required period.</P>
                <P>(iv) The owner shall comply with the nondiscrimination and equal opportunityrequirements and with the affirmative marketing requirements and proceduresadopted under § 511.13, for the required period.</P>
                <P>(2)(i) With respect to projects which are privately owned when the commitmentto a specific local project is made, the obligations required under§ 511.10 (d)(1) and (d)(3) shall be included in the written, legallybinding commitment or project agreement between the owner and the grantee orState recipient which is executed on or before the date the project iscommitted.</P>
                <P>(ii) With respect to projects which are publicly owned when the commitment ismade, these obligations shall be included in a written agreement between thegrantee or State recipient and the private owner, executed on or beforecompletion of rehabilitation.</P>
                <P>(iii) By drawing down rental rehabilitation grant amounts for a project whichis publicly owned when the commitment is made, the public owner itself acceptsthe obligations of this part, including § 511.11(d)(1)(i) (except forprivate ownership before completion of rehabilitation), (d)(1)(ii), (d)(1)(iii)and (d)(1)((iv) and agrees to include these obligations in the agreement withthe private owner required by § 511.11(d)(2)(ii).</P>
                <P>(3) The grantee or State recipient shall ensure that the written agreementswith private owners required by § 511.11 (d)(1) and (d)(2) arelegally enforceable, are recorded against the project in the local land records(or in the case of a manufactured housing unit, against the unit in the mannerappropriate for such real or personal property under State and local law), andthat the agreements contain remedies adequate to enforce their provisions. Aremedy will be deemed adequate for purposes of this paragraph if it requires theentire amount of the rental rehabilitation grant assistance for the project tobe a secondary lien secured by the property, repayable by the owner, or anysubsequent transferee, upon a prohibited conversion, sale or use in an amountequal to the entire amount of such assistance, less 10 percent for each fullyear after completion of the project up to the time the prohibited conversion,sale or use occurs, except in the case of projects of 25 units or more. Forprojects of 25 units or more the entire amount of such assistance shall berepaid if the project is converted, sold or used in violation of this sectionduring the 10-year period. Such lien may not be subordinate to a lien in favorof the grantee, State recipient or any person with whom the owner has businessor family ties, except as may be necessary to secure federally tax exemptfinancing for the project.</P>
                <P>(e) <E T="03">Maximum rental rehabilitation grant amounts for projects.</E>(1) Rental rehabilitation grant amounts used for any project shall not exceed 50percent of the total eligible project costs, as defined in§ 511.10(f). However, where refinancing of existing indebtedness isinvolved, the grantee may approve a higher amount for a project where itdetermines, and documents in its records, that:</P>

                <P>(i)(A) Rehabilitation of the project is important to the overall stability of <PRTPAGE P="16"/>the neighborhood (as defined at § 511.10(c)(2)) and for the provisionof housing at rents affordable to low-income families, or</P>
                <P>(B) The project has special costs to facilitate use by the elderly orhandicapped; and</P>
                <P>(ii) The refinancing and the higher grant amount are necessary to make theproject feasible.</P>
                <FP>This higher grant amount may not exceed the lesser of 75 percent of theeligible project costs or 50 percent of the sum of the eligible project costsand the amount necessary to refinance the existing indebtedness.</FP>
                <P>(2) <E T="03">Per unit.</E> (i) Except as provided in paragraph (e)(2)(ii) ofthis section, the rental rehabilitation grant amounts used for any project maynot exceed the sum of the following dollar amounts for dwelling units in theproject:</P>
                <P>(A) $5,000 per unit for units with no bedrooms;</P>
                <P>(B) $6,500 per unit for units with one bedroom;</P>
                <P>(C) $7,500 per unit for units with two bedrooms; and</P>
                <P>(D) $8,500 per unit for units with three or more bedrooms.</P>
                <P>(ii) HUD may approve higher rental rehabilitation grant amounts for projectsin areas of high material and labor costs where the grantee demonstrates toHUD's satisfaction that a higher amount is necessary to conduct a rentalrehabilitation program in the area and that it has taken every appropriate stepto contain the amount of the rental rehabilitation grant within the dollarlimits specified in paragraph (e)(2)(i) of this section. These higher amountswill be determined as follows:</P>
                <P>(A) HUD may approve higher per unit amounts for a unit of general localgovernment's entire rental rehabilitation program up to, but not to exceed, anamount derived by applying the HUD-approved High Cost Percentage for Base Citiesfor the area to the applicable per unit dollar limits;</P>
                <P>(B) HUD may, on a project-by-project basis, increase the level permittedunder § 511.11(e)(2)(i) by multiplying the original limits by up to amaximum of 140 percent and then adding the product to the original limits.Therefore, the maximum high cost grant amount per project that may be approvedis 240 percent of the original per unit limits.</P>
                <P>(f) <E T="03">Rent or occupancy restrictions.</E> (1) A project rehabilitatedwith rental rehabilitation grant amounts under this part is not subject to Stateor local rent control unless the rent control requirements or agreements:</P>
                <P>(i) Were entered into under a State law or local ordinance of generalapplicability that was enacted and in effect in the jurisdiction before November30, 1983 and</P>
                <P>(ii) Apply generally to projects not assisted under the Rental RehabilitationProgram.</P>
                <P>(2) State and local rent controls expressly preempted by paragraph (f) ofthis section include, but are not limited to, rent laws or ordinances, rentregulating agreements, rent regulations, low income occupancy agreementsextending beyond one year from the date of completion of rehabilitation of aproject, financial penalties for failure to achieve certain low income occupancyor rent projections, or restrictions on return on investment or other similarpolicies that prevent an owner, whether for-profit or non-profit, frommaximizing return or setting rent levels as the owner chooses. Grantees or Staterecipients shall not include any preempted rent or occupancy restrictions in anycommitments or project agreements with the owners of Rental Rehabilitationprojects.</P>
                <P>(g) [Reserved]</P>
                <APPRO>(Information collection requirements contained in this section have beenapproved by the Office of Management and Budget under control numbers2506-0080 and 2506-0110)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 7061, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.12</SECTNO>
                <SUBJECT>Conflicts of interest.</SUBJECT>

                <P>(a) No person who is an employee, agent, consultant, officer, or elected orappointed official of the grantee or State recipient (or of any public agencythat performs administrative functions in the RRP) that receives rentalrehabilitation grant amounts and who exercises or has exercised any functions orresponsibilities with respect to assisted rehabilitation activities, or who isin a position to participate in a decision-making process or gain inside <PRTPAGE P="17"/>information with regard to such activities, may obtain a personal or financialinterest or benefit from the activity, or have an interest in any contract,subcontract or agreement with respect thereto, or the proceeds thereunder,either for themselves or those with whom they have family or business ties,during their tenure or for one year thereafter.</P>
                <P>(b) The appropriate HUD Field Office may grant an exception to the exclusionin paragraph (a) of the section on a case-by-case basis when it determines thatsuch an exception will serve to further the purposes of the RentalRehabilitation Program and the effective and efficient administration of thelocal rental rehabilitation program or the project. An exception may beconsidered only after the grantee or State recipient has provided a disclosureof the nature of the conflict, accompanied by an assurance that there has beenpublic disclosure of the conflict and a description of how the public disclosurewas made and an opinion of the grantee's or State recipient's attorney that theinterest for which the exception is sought would not violate State or locallaws. In determining whether to grant a requested exception, HUD shall considerthe cumulative effect of the following factors, where applicable:</P>
                <P>(1) Whether the exception would provide a significant cost benefit or anessential degree of expertise to the local rental rehabilitation program or theproject that would otherwise not be available;</P>
                <P>(2) Whether an opportunity was provided for open competitive bidding ornegotiation;</P>
                <P>(3) Whether the person affected is a member of a group or class intended tobe the beneficiaries of the rehabilitation activity, and the exception willpermit such person to receive generally the same interests or benefits as arebeing made available or provided to the group or class;</P>
                <P>(4) Whether the affected person has withdrawn from his or her functions orresponsibilities, or the decisionmaking process, with respect to the specificrehabilitation activity in question;</P>
                <P>(5) Whether the interest or benefit was present before the affected personwas in a position as described in this paragraph;</P>
                <P>(6) Whether undue hardship will result either to the grantee, State recipientor the person affected when weighed against the public interest served byavoiding the prohibited conflict; and</P>
                <P>(7) Any other relevant considerations.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.13</SECTNO>
                <SUBJECT>Nondiscrimination, equal opportunity, and affirmative marketingrequirements.</SUBJECT>
                <P>In addition to the nondiscrimination and equal opportunity requirements setforth in 24 CFR part 5, the following requirements apply:</P>
                <P>(a) <E T="03">Affirmative marketing.</E> The grantee shall adopt appropriateprocedures and requirements for affirmatively marketing units in rehabilitatedrental rehabilitation projects through the provision of information regardingthe availability of units that are vacant after rehabilitation or that laterbecome vacant. Affirmative marketing steps consist of good faith efforts toprovide information and otherwise to attract eligible persons from all racial,ethnic and gender groups in the housing market area to the available housing.(These affirmative marketing procedures will not apply to units rented tofamilies with housing assistance provided by a PHA.) The grantee shall establishprocedures, requirements and assessment criteria for marketing units in theRental Rehabilitation Program that are appropriate to accomplish affirmativemarketing objectives. The grantee shall annually assess the affirmativemarketing program to determine: Good faith efforts that have been made to carryout such procedures and requirements; objectives that have been met; andcorrective actions that are required.</P>
                <P>(1) For each grantee, the affirmative marketing requirements and proceduresadopted must include:</P>

                <P>(i) Methods for how the grantee will inform the public, owners and potentialtenants about Federal fair housing laws and the grantee's affirmative marketingpolicy (such as the use of the Equal Housing Opportunity logotype or <PRTPAGE P="18"/>slogan inpress releases and solicitations for owners, and written communications to fairhousing and other groups);</P>

                <P>(ii) Requirements and practices each owner (including the grantee or anyother public owner) must adhere to in order to carry out the grantee'saffirmative marketing procedures and requirements (<E T="03">e.g.,</E> use ofcommercial media, use of community contacts, use of the Equal HousingOpportunity logotype or slogan, display of fair housing poster);</P>

                <P>(iii) Procedures to be used by owners (including the grantee or any otherpublic owner) to inform and solicit applications from persons in the housingmarket area who are not likely to apply for the housing without special outreach(<E T="03">e.g.,</E> use of community organizations, churches, employmentcenters, fair housing groups or housing counseling agencies);</P>
                <P>(iv) Records that will be kept describing efforts taken by the grantee and bythe owners (including the grantee or any other public owner) to affirmativelymarket units and records to assess the results of these actions;</P>
                <P>(v) A description of how the grantee will assess the affirmative marketingefforts of owners (including the grantee or any other public owner), and theresults of those efforts, and what corrective actions will be taken where anowner fails to follow these affirmative marketing requirements.</P>
                <P>(2) For States distributing rental rehabilitation grant amounts to units ofgeneral local government, the affirmative marketing procedures and requirementsshall also set out the actions that State recipients must take to meet theobjectives set out in § 511.13(b), the record keeping and reportingrequirements such State will require of State recipients, and the proceduresthat such State will follow to determine what action has been taken by Staterecipients to assess the results of these affirmative marketing efforts.</P>
                <P>(3) The grantee or State recipient shall require compliance with theconditions of its affirmative marketing requirements and procedures adoptedunder paragraph (b) of this section by means of an agreement with the owner thatshall be applicable for a period of ten years beginning on the date ofcompletion of rehabilitation, as defined in § 511.2.</P>
                <P>(b) [Reserved]</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.14</SECTNO>
                <SUBJECT>Tenant assistance, displacement, relocation, and acquisition.</SUBJECT>
                <P>(a) <E T="03">General policies.</E> The grantee and any State recipientshall:</P>
                <P>(1) Ensure that the rehabilitation will not cause the displacement of anyvery low income family by a family that is not a very low income family.</P>
                <P>(2) Consistent with the other goals and objectives of this part, minimizedisplacement. To the extent feasible, residential occupants shall be provided areasonable opportunity to lease and occupy a suitable, decent, safe, sanitaryand affordable dwelling unit in the project (see paragraph (g)(1)(iii) of thissection).</P>
                <P>(3) Administer all phases of the RRP, including the selection of units to berehabilitated and the provision of notices, counseling, referrals, otheradvisory services and relocation payments, in a manner that does not result indiscrimination because of race, color, religion, sex, age, handicap, familialstatus or national origin.</P>
                <P>(4) Adopt and make public a written tenant assistance policy (TAP) thatdescribes the assistance that will be provided to tenants who reside in theproject and which includes a statement of nondiscrimination policy consistentwith paragraph (a)(3) of this section. The TAP shall comply with the provisionsof this section. Each tenant in the project shall be provided a copy of the TAPand advised of the impact of the project on him or her. For privately ownedprojects, such notice shall be given immediately after submission of theapplication by the owner of a property, or earlier. For publicly owned projects,such notice shall be given immediately after the commitment (defined in§ 511.2), or earlier.</P>
                <P>(b) <E T="03">Relocation assistance for displaced persons.</E> A displacedperson (defined in paragraph (g) of this section) must be provided relocationassistance at the <PRTPAGE P="19"/>levels described in, and in accordance with the requirementsof, 49 CFR part 24, which contains the government-wide regulations implementingthe Uniform Relocation Assistance and Real Property Acquisition Policies Act of1970 (URA) (42 U.S.C. 4601-4655). Tenants shall be advised of their rightsunder the Fair Housing Act (42 U.S.C. 3601-19) and of replacement housingopportunities in such a manner that, to the extent possible, tenants areprovided a choice between relocating within their own neighborhoods and otherneighborhoods consistent with the grantee's or State recipient's responsibilityto affirmatively further fair housing. As permitted under 49 CFR 24.2(k), forpurposes of making replacement housing payments, the term <E T="03">initiationof negotiations</E> means:</P>
                <P>(1) For a privately owned project, execution of the legally binding agreementbetween the grantee or State recipient and the project owner under which thegrantee or State recipient agrees to provide rental rehabilitation grant amountsfor the project.</P>
                <P>(2) For a publicly owned project, the commitment as defined in§ 511.2 or such earlier notice as the grantee or State recipientdetermines to be appropriate.</P>
                <P>(c) <E T="03">Real property acquisition requirements.</E> The acquisition ofreal property for a project is subject to the URA and the requirements describedin 49 CFR part 24, subpart B.</P>
                <P>(d) <E T="03">Application of Community Development Block Grant (CDBG)requirements.</E> If CDBG funds are used to pay any part of the cost of therehabilitation activities, as described in 24 CFR 570.202(b) or similar eligibleactivities, the project is subject to the requirements of section 104(d) of theHousing and Community Development Act of 1974, as amended, and implementingregulations at 24 CFR 570.606(b) (Entitlement Program and HUD-administered SmallCities Program) and 24 CFR 570.496a(b) (State CDBG Program).</P>
                <P>(e) <E T="03">Appeals.</E> If a person disagrees with the grantee's or Staterecipient's determination concerning the person's eligibility for, or the amountof, relocation assistance, the person may file a written appeal (request forreconsideration) of that determination with the grantee or State recipient. Theappeal procedures to be followed are described in 49 CFR 24.10. A low-incomeperson that has been displaced from a dwelling may submit a further writtenrequest for review of the grantee's decision to the appropriate HUD FieldOffice. However, a low-income person's request for review of a State recipient'sdecision shall be submitted to the State grantee.</P>
                <P>(f) <E T="03">Compliance responsibility.</E> (1) The grantee and any Staterecipient are responsible for ensuring compliance with the URA, the regulationsat 49 CFR part 24, and the requirements of this section, notwithstanding anythird party's contractual obligation to the grantee or State recipient to complywith these provisions.</P>
                <P>(2) The cost of required assistance may be paid from local public funds,funds available under the rules of this part, or funds available from othersources.</P>
                <P>(3) The grantee or State recipient must maintain records in sufficient detailto demonstrate compliance with the provisions of this section.</P>
                <P>(g) <E T="03">Definition of a displaced person.</E> (1) For purposes of thissection, the term <E T="03">displaced person</E> means any person (family,individual, business, nonprofit organization or farm) that moves from realproperty, or moves personal property from real property, permanently andinvoluntarily as a direct result of rehabilitation, demolition or acquisitionfor a project assisted under this part. Permanent, involuntary moves for anassisted project include a permanent move from the project that is made:</P>
                <P>(i) After notice by the property owner, grantee, or State recipient to movepermanently from the property, if the move occurs on or after the followingdate:</P>
                <P>(A) If the notice is provided by the property owner, the date that the owner(or person in control of the site) submits a request for assistance under thispart that is later approved and funded.</P>

                <P>(B) If the notice is provided by the grantee or State recipient, the date ofthe commitment to a specific local project.<PRTPAGE P="20"/>
                </P>
                <P>(ii) Before the date described in paragraph (g)(1)(i) of this section, ifeither the grantee or HUD determines that the displacement resulted directlyfrom rehabilitation, acquisition or demolition for the project;</P>
                <P>(iii) By a tenant-occupant of a dwelling unit after the initiation ofnegotiations, if:</P>
                <P>(A) The tenant has not been provided a reasonable opportunity to lease andoccupy a suitable, decent, safe and sanitary dwelling in the project followingthe completion of the project at a rent, including estimated average utilitycosts, that does not exceed the greater of:</P>
                <P>(<E T="03">1</E>) The tenant's rent and estimated average utility costsbefore the commitment; or</P>
                <P>(<E T="03">2</E>) The total tenant payment, as determined under 24 CFR813.107, if the tenant is low-income, or 30 percent of gross household income ifthe tenant is not low-income; or</P>
                <P>(B) The tenant has been required to relocate temporarily, but:</P>
                <P>(<E T="03">1</E>) The tenant is not offered payment for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation,including the cost of moving to and from the temporarily occupied housing andany increase in rent and utility costs, or other conditions of the temporaryrelocation are not reasonable, and</P>
                <P>(<E T="03">2</E>) The tenant does not return to the project; or</P>
                <P>(C) The tenant is required to move to another unit within the project but isnot offered reimbursement for all reasonable out-of-pocket expenses incurred inconnection with the move or other conditions of the move are not reasonable.</P>
                <P>(2) A person does not qualify as a displaced person, if:</P>
                <P>(i) The person has been evicted for cause based upon a serious or repeatedviolation of material terms of the lease or occupancy agreement, and the granteeor State recipient determines that the eviction was not undertaken for thepurpose of evading the obligation to provide relocation assistance; or</P>
                <P>(ii) The person moved into the property after the owner's submission of therequest for assistance but, before commencing occupancy, received written noticeof the owner's intent to terminate the person's occupancy for the project; or</P>
                <P>(iii) The person is ineligible under 49 CFR 24.2(g)(2); or</P>
                <P>(iv) The grantee or State recipient determines that the person was notdisplaced as a direct result of rehabilitation, acquisition or demolition of theproject, and the HUD Field Office concurs in that determination.</P>
                <P>(3) The grantee may, at any time, ask HUD to determine whether a specificdisplacement is or would be covered by these rules.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.15</SECTNO>
                <SUBJECT>Lead-based paint.</SUBJECT>
                <P>The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846),the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.4851-4856), and implementing regulations at part 35, subparts A, B, J, K,and R of this title apply to activities under these programs.</P>
                <CITA>[64 FR 50225, Sept. 15, 1999]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.16</SECTNO>
                <SUBJECT>Other Federal requirements.</SUBJECT>
                <P>In addition to the Federal requirements set forth in 24 CFR part 5, Granteesand, where applicable, State recipients shall comply with the followingrequirements:</P>
                <P>(a) <E T="03">Labor standards.</E> All laborers and mechanics (exceptlaborers and mechanics employed by a State or local government acting as theprincipal contractor on the project) employed in the rehabilitation of a projectassisted under the Rental Rehabilitation Program that contains 12 or moredwelling units after rehabilitation shall be paid wages at rates not less thanthose prevailing on similar rehabilitation in the locality, if such a ratecategory exists, or other appropriate rate as determined by the Secretary ofLabor in accordance with the Davis-Bacon Act (40 U.S.C.276a—276a-5), and contracts involving their employment shall besubject to the provisions, as applicable, of the Contract Work Hours and SafetyStandards Act (40 U.S.C. 327-333). (If CDBG funds are used to financecertain costs for projects of 8 or more units, these labor standards may apply(see 24 CFR 570.603).) If a project is subject to Federal labor standardsrequirements, <PRTPAGE P="21"/>individuals are not permitted to perform work thereon which iscovered by such requirements without compensation in accordance with suchrequirements, except that persons who own a project in their own name maypersonally perform uncompensated work on their own projects. Grantees, Staterecipients, owners, contractors and subcontractors shall comply with applicableimplementing regulations in 29 CFR parts 1, 3, and 5.</P>
                <P>(b) <E T="03">Environment and historic preservation.</E> Section 104(g) ofthe Housing and Community Development Act of 1974 and 24 CFR part 58, whichprescribe procedures for compliance with the National Environmental Policy Actof 1969 (42 U.S.C. 4321-4361), and the additional laws and authoritieslisted at 24 CFR 58.5.</P>
                <P>(c) <E T="03">Pet ownership in housing for the elderly or handicapped.</E>The provisions of 24 CFR part 243 apply to any project assisted under this partfor which preference in tenant selection is given for all units in the projectto elderly or handicapped persons or elderly or handicapped families, as definedin 24 CFR 812.2.</P>
                <P>(d) <E T="03">Flood insurance.</E> (1) Under the Flood Disaster ProtectionAct of 1973 (42 U.S.C. 4001-4128), a grantee may not approve thecommitment of rental rehabilitation grant amounts to a project located in anarea identified by the Federal Emergency Management Agency (FEMA) as havingspecial flood hazards, unless:</P>
                <P>(i) The community in which the area is situated is participating in theNational Flood Insurance Program (see 44 CFR parts 59 through 79), or less thana year has passed since FEMA notification regarding such hazards; and</P>
                <P>(ii) Flood insurance is obtained as a condition of approval of thecommitment.</P>
                <P>(2) Grantees with projects located in an area identified by FEMA as havingspecial flood hazards are responsible for assuring that flood insurance underthe National Flood Insurance Program is obtained and maintained.</P>
                <P>(3) This paragraph § 511.16(g) does not apply in the case ofallocations administered by a State under § 511.51(a).</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]</CITA>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <RESERVED>Subpart C [Reserved]</RESERVED>
            </SUBPART>
            <SUBPART>
              <HD SOURCE="HED">Subpart D—Allocation Formula and Reallocations</HD>
              <SECTION>
                <SECTNO>§§ 511.30-511.31</SECTNO>
                <RESERVED>[Reserved]</RESERVED>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.33</SECTNO>
                <SUBJECT>Deobligation of rental rehabilitation grant amounts.</SUBJECT>
                <P>(a) Before deobligating grant amounts, HUD will consult with the affectedgrantee and take into account factors such as timing of the grantee's programyear; the timing of State distributions to State recipients, if applicable; thetiming of expected project approvals for projects in the grantee's pipeline;climatic or other considerations affecting rehabilitation work schedules; andother relevant considerations. In addition to any remedial deobligation under§ 511.82, HUD may deobligate any rental rehabilitation grant amountsthat are not:</P>
                <P>(1) Committed to specific local projects within 3 years of the date ofobligation of the grant under § 511.21(d) (4 years in the case of aState that distributes rental rehabilitation grant amounts to State recipients);or</P>
                <P>(2) Expended for eligible costs within 5 years of such date of obligation (6years in the case of a State that distributes rental rehabilitation grantamounts to State recipients).</P>

                <P>(b) After such consultation, the HUD field office may direct the grantee toproceed with program closeout and may deobligate remaining unexpended grantamounts if the field office determines that any uncommitted funds will not becommitted within a reasonable time, only small amounts of funds remainunexpended, or completion of uncompleted projects appears infeasible within areasonable time. None of the time periods referred to in this section areextended by any suspensions of <PRTPAGE P="22"/>project set-ups or other remedial action imposedby HUD under this part.</P>
                <CITA>[61 FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.34</SECTNO>
                <RESERVED>[Reserved]</RESERVED>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <RESERVED>Subpart E [Reserved]</RESERVED>
            </SUBPART>
            <SUBPART>
              <HD SOURCE="HED">Subpart F—State Program</HD>
              <SECTION>
                <SECTNO>§ 511.50</SECTNO>
                <SUBJECT>State election to administer a rental rehabilitation program.</SUBJECT>
                <P>(a) State allocations may be used to carry out eligible rehabilitationactivities in accordance with the requirements of this part in units of generallocal government that do not receive allocations under subpart D and in citiesand urban counties whose allocations are below the minimum amount specified in§ 511.31, but may not be used in areas that are eligible forassistance under title V of the Housing Act of 1949, except as specified inparagraph (b) of this section.</P>
                <P>(b) For Fiscal Years 1988 through 1991, uncommitted prior year funds may beused by State grantees, by units of general local government receiving fundsfrom State grantees and by units of general local government participating in aHUD-administered State Program in areas eligible for assistance under title V ofthe Housing Act of 1949. This authority to enter into commitments with ownersfor projects in title V-eligible areas expires on September 30, 1991.</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.51</SECTNO>
                <SUBJECT>State-administered program.</SUBJECT>
                <P>(a) <E T="03">Type of program.</E> A State may, in its discretion, use all orpart of its rental rehabilitation grant amounts either:</P>
                <P>(1) To carry out its own Rental Rehabilitation Program without the activeparticipation of units of general local government;</P>
                <P>(2) To distribute grant amounts to State recipients which independentlyselect, enter into commitments with owners for, and manage projects; or</P>
                <P>(3) To carry out mixed programs in which both the State and all or some unitsof general local government each perform specified program functions.</P>
                <P>(b) <E T="03">Sharing grant amounts for administration.</E> In programs underparagraphs (a)(2) and (a)(3) of this section, a State must share its grantamounts which are available for administrative costs with units of general localgovernment administering the program with the State, under a written agreementas required by § 511.71.</P>
                <P>(c) <E T="03">State Program requirements.</E> State grantees shall beresponsible for administering their rental rehabilitation grant amounts inaccordance with all requirements of this part and other applicable laws,notwithstanding their use of units of general local governments to performprogram functions under paragraph (a)(2) or (a)(3) of this section. In addition,States that use units of general local government to perform program functionsshall:</P>
                <P>(1) Ensure that units of general local government carry out their RentalRehabilitation Program in accordance with requirements of this part and otherapplicable laws. States shall include in their agreements with their units ofgeneral local government such additional provisions as may be appropriate toensure such compliance and to enable the State to carry out its responsibilitiesunder this part, including the withdrawal and reallocation of rentalrehabilitation grant amounts based on unit of general local governmentnoncompliance (including State recipient failure to meet the schedule submittedby the State under § 511.20(b)(8)); and</P>
                <P>(2) Conduct such reviews and audits of their units of general localgovernment as may be appropriate to determine whether units of general localgovernment, including State recipients, have carried out their programs inaccordance with the requirements of this part, whether they have done so in atimely manner, and whether they have a continuing capacity to do so in a timelymanner.</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <PRTPAGE P="23"/>
                <SECTNO>§ 511.52</SECTNO>
                <RESERVED>[Reserved]</RESERVED>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <RESERVED>Subpart G [Reserved]</RESERVED>
            </SUBPART>
            <SUBPART>
              <HD SOURCE="HED">Subpart H—Grant Administration</HD>
              <SECTION>
                <SECTNO>§ 511.70</SECTNO>
                <SUBJECT>Responsibility for grant administration.</SUBJECT>
                <P>Grantees are responsible for ensuring that rental rehabilitation grants areadministered in accordance with the requirements of this part and otherapplicable laws. A grantee may enter into a written agreement with another unitof State or local government or with a non-governmental entity to administerspecified functions under its Rental Rehabilitation Program to the extent notprohibited by HUD. If the grantee is contracting with a non-governmental entityto administer its program or to provide other services, such as cash managementresponsibilities, the grantee shall follow the procurement standards of 24 CFR85.36. The use of other governmental units or private contractors does notrelieve the grantee of its responsibility for ensuring compliance with this partand other applicable laws.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.71</SECTNO>
                <SUBJECT>Administrative costs.</SUBJECT>
                <P>(a) <E T="03">Maximum amount.</E> Any grantee may use not to exceed 10percent of the grant amount initially obligated to the grantee for FederalFiscal Year 1988 and later fiscal years for administrative costs eligible underparagraphs (b) and (c) of this section. Eligible grantees may draw down funds topay for eligible administrative costs through HUD's C/MI System.</P>
                <P>(b) <E T="03">Eligibility.</E> Eligible administrative costs are reasonableand necessary costs, as described in OMB Circular A-87, incurred by thegrantee itself, or by a unit of general local government pursuant to a writtencost-sharing agreement with a State grantee (see § 511.51(b)), incarrying out the Rental Rehabilitation Program in accordance with this part.Administrative costs do not include costs of rehabilitation which are incurredby and charged to project owners as eligible project costs under§ 511.10(f)(2).</P>
                <P>(c) <E T="03">Written cost-sharing agreement.</E> A State grantee shalldetermine the amount of its rental rehabilitation grant that it will permit tobe used for administrative expenses, not to exceed the maximum permitted by thissection. The State grantee shall share the amount of its rental rehabilitationgrant designated for administrative expenses with units of general localgovernment that incur eligible administrative costs in carrying out the RentalRehabilitation Program, whether the unit of general local government receives adistribution of funds from the State or selects and manages projectsindependently as a State recipient or whether it performs less comprehensivefunctions by agreement with the State. Before any eligible administrativeexpenses are incurred by a unit of general local government under a State'sgrant, the cost-sharing arrangement shall be specified in a written agreementbetween the State grantee and each unit of general local government thatreceives payment from the State for administrative expenses under this part.This agreement shall describe (whether very generally or more specifically) thefunctions that the unit of general local government shall perform and the termsand conditions under which the unit of general local government participates inthe program, including the procedures by which the unit of general localgovernment's compensation for its administrative expenses incurred in performingthe authorized functions is to be calculated and paid. HUD will not review therelative sharing of administrative expenses between the State and affected unitsof general local government, but pursuant to §§ 511.74 and511.80, it will review and audit the State's program on the eligibility ofadministrative expenses paid with program funds.</P>
                <P>(d) <E T="03">Allocation of benefit.</E> Rental rehabilitation grant amountsused for program administration will be deemed to meet program requirementsimposed on a percentage of the annual grant basis, such as lower income benefitand use of rental rehabilitation grants for housing for families with children,in the same proportion as the grant amounts for a grant year which are used foreligible project costs meet the grant requirements. For example, if 70 percentof the grant amounts used for <PRTPAGE P="24"/>project costs for Fiscal Year 1989 benefit low-income families, then 70 percent of the Fiscal Year 1989 grant amounts spent foradministrative costs will be deemed to benefit low-income persons.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.72</SECTNO>
                <SUBJECT>Applicability of uniform Federal administrative requirements.</SUBJECT>
                <P>Grantees, State recipients and their contractors shall comply with therequirements and standards of OMB Circular No. A-87, “Principles forDetermining Costs Applicable to Grants and Contracts with State, Local andFederally recognized Indian Tribal Governments,” <SU>1</SU>
                  <FTREF/>OMB Circular A-128, “Audits of State and Local Governments”(implemented at 24 CFR part 44), and with 24 CFR part 85, “UniformAdministrative Requirements for Grants and Cooperative Agreements to State andLocal Governments,” except for: §§ 85.10, 85.11, 85.25,85.31, 85.40(b), 85.41, and 85.50. In lieu of §§ 85.25 and85.50, HUD has adopted § 511.76 and § 511.77,respectively, of this part.</P>
                <FTNT>
                  <P>
                    <SU>1</SU> OMB Circular No. A-87 is available from HUDField Offices.</P>
                </FTNT>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.73</SECTNO>
                <SUBJECT>Grantee records.</SUBJECT>
                <P>(a) <E T="03">Records to be maintained.</E> Each grantee shall maintainrecords as specified by HUD that clearly document its performance under eachrequirement of this part. States distributing rental rehabilitation grantamounts to State recipients shall also ensure that their recipients maintainsuch records to document each recipient's performance. The records required bythis section shall, at a minimum, include the following:</P>
                <P>(1) Records required to comply with § 511.75;</P>
                <P>(2) Data on the racial, ethnic, gender, and income level characteristics of</P>
                <P>(i) Tenants occupying units before rehabilitation;</P>
                <P>(ii) Tenants moving from and (initially after rehabilitation) into projectsassisted under this part;</P>
                <P>(iii) Applicants for tenancy within 90 days following completion ofrehabilitation assisted under this part; and</P>
                <P>(iv) Owners of the projects rehabilitated; and</P>
                <P>(3) Data indicating the race and ethnicity of households displaced as aresult of program activities, and, if available, the address and census tract ofthe housing units to which each displaced household relocated.</P>
                <P>(b) <E T="03">Retention of records.</E> Records required to be maintainedunder paragraph (a) of this section shall be retained for a period of threeyears from the date of final closeout of the rental rehabilitation grant.</P>
                <P>(c) <E T="03">Public disclosure.</E> Documents relevant to a grantee'sProgram Description shall be made available for public review upon request atthe grantee's office during normal working hours.</P>
                <P>(d) <E T="03">Federal access to records.</E> The Secretary, the InspectorGeneral of HUD, the Comptroller General of the United States, or any of theirduly authorized representatives, shall have access to all books, accounts,reports, files, and other papers or property of grantees, State recipients, andtheir contractors pertaining to rental rehabilitation grant amounts for thepurpose of making surveys, audits, examinations, excerpts, and transcripts.Grantees or, where applicable, State recipients shall ensure that theiragreements with owners require the owners to provide similar access to theirrecords pertaining to the use of rental rehabilitation grant amounts.</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.74</SECTNO>
                <SUBJECT>Audit.</SUBJECT>
                <P>The financial management systems used by grantees and, where applicable,State recipients shall provide for audits in accordance with 24 CFR part 44.</P>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.75</SECTNO>
                <SUBJECT>Disbursement of rental rehabilitation grant amounts: Cash andManagement Information System.</SUBJECT>
                <P>(a) <E T="03">General.</E> Rental Rehabilitation grants are managed throughHUD's C/MI System for the Rental Rehabilitation Program. The C/MI System is acomputerized system which manages program funds, disburses grant amounts, andcollects and reports data on properties and tenants assisted under the Program.</P>
                <P>(b) <E T="03">Project set-up.</E> (1) After the grantee executes the GrantAgreement, complies with the requirements under part <PRTPAGE P="25"/>58 of this title forrelease of funds, and submits the appropriate security documents, the granteemay identify (set-up) specific local projects in the C/MI System. Staterecipients are also granted access to the C/MI System for projects upondesignation by the State and submission of the appropriate security documents.Within 12 calendar days of project set-up, grantees and State recipients arerequired to submit a Pre-Rehabilitation Report to HUD for each project set-up inthe C/MI System. Until an acceptable Pre-Rehabilitation Report is received andentered in the C/MI System, grant amounts for the project are not considered“committed,” as defined in § 511.2, and, therefore, aresubject to deobligation to the extent authorized by 24 CFR 511.33(c).</P>
                <P>(2) Beginning in Fiscal Year 1991, if Pre-Rehabilitation Reports are notreceived within 20 days of the project set-up call, the project will becancelled automatically by the C/MI System. In addition, projects which havebeen committed in the C/MI System for 6 months without an initial disbursementof funds will be automatically cancelled by the C/MI System.</P>
                <P>(c) <E T="03">Disbursement of rental rehabilitation grant amounts.</E> Afteran acceptable Pre-Rehabilitation Report is entered into the C/MI System,obligated grant amounts may be drawn down for the project by the grantee orState recipient by electronic funds transfer to the designated depositoryinstitution of the grantee or State recipient within 48 to 72 hours of thedisbursement request. Grant amounts for eligible administrative costs may besimilarly drawn down by grantees by electronic funds transfer to theirdesignated depository institutions, but State recipients are not permitted todraw down State grant amounts for administrative expenses. Any drawdown isconditioned upon the submission of satisfactory information by the grantee orState recipient about the project or the administrative expenses and compliancewith other procedures specified by HUD in HUD's forms and issuances concerningthe Rental Rehabilitation Program Cash and Management Information System. Copiesof these forms and issuances may be obtained from HUD Field Offices. Drawdownsshall be requested by the grantee or State recipient as closely as possible tothe time they are needed by a grantee or State recipient and the owner to payeligible project costs or by a grantee to pay eligible administrative costs.Drawdowns for project costs shall be requested only for work or services thathave been satisfactorily performed, or materials that are acceptable. Afterreceipt in the grantee or State recipient's depository account, grant amountsfor project costs shall immediately be disbursed by the grantee or Staterecipient and the owner in payment for eligible project costs and shall not bedisbursed at any time, relative to a project's matching funds, in any greaterproportion than the proportion of rental rehabilitation grant amounts tomatching funds for the project.</P>
                <P>(d) <E T="03">Payment vouchers.</E> As post-documentation of each drawdown, agrantee or State recipient must submit to HUD a payment voucher, for eachdrawdown made by HUD, in the form required for the C/MI System. If the drawdownwas for eligible project costs and the payment voucher is not received withinten calendar days of the drawdown, the grantee or State recipient will besuspended from setting up new projects until the required payment voucher isreceived by HUD. If the drawdown was for administrative costs and the paymentvoucher is not received within ten calendar days of the drawdown, the granteewill not be allowed to make another drawdown for administrative costs until thepayment voucher is received.</P>
                <P>(e) <E T="03">Submission of project completion reports.</E> After the finaldraw for a project, a Project Completion Report must be submitted to HUD within90 days of the drawdown request. However, for projects rehabilitated pursuant to§ 511.11(c)(2) (publicly owned project at the time of commitment),the Project Completion Report must be submitted within 90 days of the finaldraw, but not later than 2 years and 90 days after the date of commitment. If asatisfactory Project Completion Report is not submitted by the due date, HUDwill suspend further project set-ups for the grantee or State recipient. Projectset-<PRTPAGE P="26"/>ups will remain suspended until a satisfactory Project Completion Report isreceived and entered into the C/MI System.</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.76</SECTNO>
                <SUBJECT>Program income.</SUBJECT>
                <P>(a) <E T="03">General.</E> Grantees and State recipients are neitherencouraged to earn nor discouraged from earning program income in using rentalrehabilitation grant amounts under this part.</P>
                <P>(b) <E T="03">Definition of program income. Program income</E> means grossincome received by the grantee or State recipient (or by another party at thedirection of the grantee or State recipient) which is directly generated fromthe use of rental rehabilitation grant amounts. Primarily, it includes but isnot limited to, the following:</P>
                <P>(1) Repayments of principal (whether in installments or a lump-sum) and anyinterest or penalty assessment, under the terms of the loan commitment or otherproject assistance agreement between the owner and the grantee or Staterecipient, including repayments, pursuant to § 511.11(d)(3), of therental rehabilitation grant assistance by the owner after completion ofrehabilitation; and</P>
                <P>(2) Interest earned on program income pending its disposition. Grantees orState recipients are not authorized to deduct costs incident to the generationor management of income from gross income for purposes of determining programincome. Governmental fees and taxes, including income taxes, property taxes,special assessments, transfer taxes, recording fees and other normalgovernmental revenues, do not constitute program income if they are imposed bygenerally applicable law, regulation, or ordinance and are not imposed inconsideration of the project's receipt of assistance under this part. Programincome also does not include grant amounts required to be returned to HUD as aresult of cancellation of a project before completion, or interest on thosegrant amounts, or any interest earned by the grantee or State recipient or grantfunds after drawdown and before disbursement for eligible costs. (Fordisposition of such interest, see 24 CFR 85.21(i).)</P>
                <P>(c) <E T="03">Eligible uses.</E> Program income may be used only asprescribed in paragraphs (c)(1) and (c)(2) of this section.</P>
                <P>(1) Program income may be used for any activity which is eligible under thispart, except that program income may not be used to pay for administrativecosts, as described at § 511.71. In particular, the total of rentalrehabilitation grant amounts and Rental Rehabilitation Program income used forany project (except under § 511.76(c)(2)) may not exceed the amountper unit allowed under § 511.11(e)(2) or 50 percent of the totaleligible project costs (except as noted in § 511.11(e)(1)).</P>
                <P>(2) Program income may also be used to provide rental assistance to lowerincome tenants in properties rehabilitated through the RRP. This includes theuse of program income to pay for administrative costs associated with theprovision of rental assistance but not to exceed the amount allowed foradministrative fees in the Housing Voucher Program authorized under section 8(o)of the United States Housing Act of 1937, 42 U.S.C. 1437f. In order to useprogram income for rental assistance, the grantee or State recipient must—</P>
                <P>(i) Use the funds to assist low-income tenants who initially occupyproperties rehabilitated with rental rehabilitation grant amounts or rentalrehabilitation program income;</P>
                <P>(ii) Have a written policy which is available to the public stating thatprogram income will be so used and specifying who is eligible to receive suchassistance; and</P>
                <P>(iii) Have an agreement with the PHA stating that the PHA will utilize theprogram income to provide rental assistance in accordance with the writtenpolicy.</P>
                <P>(d) <E T="03">Timing the use of program income.</E> Grantees and Staterecipients shall not commit available rental rehabilitation grant amounts tospecific local projects if sufficient program income is on hand and available tofund the project, or a substantial portion of the project. In order to avoidpossible over commitment of funds, grantees and State recipients shall notanticipate the receipt of program income and <PRTPAGE P="27"/>enter into binding commitments withowners cumulatively exceeding the total amount of program income on hand plusuncommitted rental rehabilitation grant amounts.</P>
                <P>(e) <E T="03">Accounting for and reporting program income.</E> Program incomeshall be accounted for and reported in the grantee's Annual Performance Reportunder § 511.81(b) and in the Cash and Management Information Systemunder § 511.75, in the manner prescribed by HUD.</P>
                <P>(f) <E T="03">Authority of State grantees.</E> States administering rentalrehabilitation grants have discretion to choose whether program income is to beearned at all or is to be paid to or retained by the State or paid to orretained by the State recipient. The State's determination should be containedin a written agreement between the State and its State recipients. However, onceearned, program income must be used and accounted for in accordance with thissection by the State or by the State recipient, as applicable.</P>
                <P>(g) <E T="03">Authority of urban counties.</E> Because the configuration ofan urban county may change from time to time, particularly at the time ofrequalification of an urban county in the Community Development Block Grantprogram, special provisions must be made for urban county program income. Theurban county may determine whether program income generated by a project locatedin a unit of general local government which, for whatever reason, no longerparticipates in the urban county shall be retained by the urban county for itsRRP or by the unit of general local government. However, urban county programincome must otherwise be used and accounted for by the urban county and the unitof general local government in accordance with this section.</P>
                <P>(h) <E T="03">Program closeout and disposition of program income.</E> Programincome must be accounted for by the grantee when a Rental Rehabilitation Programis completely closed out for all years. Program “closeout” willoccur when the following conditions have been met: All grant funds from allprogram years (excluding program income) have been expended; the grantee and, ifapplicable, its State recipients do not expect (or have elected not) to receiveany additional rental rehabilitation grant amounts, and the annual performancereport covering the last program year has been submitted to HUD. Program incomeshall be treated in the following manner before and after program closeout:</P>
                <P>(1) Before program closeout, program income shall be used for activitieseligible under § 511.76(c); and</P>
                <P>(2) Program income on hand at the time of program closeout or earned afterprogram closeout may be contributed to HOME or HOPE program grantees as a cashmatching contribution in accordance with applicable HOME or HOPE program rules,or may be used for activities that would be eligible under other affordablehousing activities, as determined by the recipient.</P>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61 FR7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.77</SECTNO>
                <SUBJECT>Grant closeout.</SUBJECT>
                <P>(a) Each individual fiscal year rental rehabilitation grant will be closedout when all grant amounts for the grant to be closed out have been drawn downand expended for completed projects and/or administrative costs, or grantamounts not drawn down and expended have been deobligated by HUD.</P>
                <P>(b) Project Completion Reports for all projects utilizing grant amounts fromthe fiscal year grant(s) to be closed out have been submitted and entered intothe C/MI System.</P>
                <P>(c) The required reviews and audits to determine whether grantees havesatisfied the terms of their grant agreement have been made. Closeout iscontingent upon the receipt of the grantee's most recent audit report and auditreports of State recipients, where applicable. For closeout of the grant toproceed, the most recent audit report(s) must be free of any outstandingfindings related to the RRP grant to be closed. The audit(s) of the grantee andState recipients, where applicable, should cover all grant amounts from allfiscal years which are to be closed out except as noted in paragraph (c)(2) ofthis section.</P>

                <P>(1) The Single Audit Act prohibits requiring a grantee or State recipient toobtain an audit at its expense covering <PRTPAGE P="28"/>only the Rental Rehabilitation Program.(HUD still has the authority to conduct an audit or to contract with anindependent public accountant to conduct an audit of the grant. However, HUDmust pay for the audit.)</P>
                <P>(2) When the previous audit(s) fail to cover all grant amounts under theGrant Agreement, the program may still be closed out, provided the granteeagrees in writing to remit to HUD any costs questioned by a subsequent auditthat are disallowed by HUD. This procedure is expected to be used in those caseswhen both the grantee and HUD want to proceed with the closeout before the nextperiodic single audit is conducted covering the remaining grant amounts notalready audited.</P>
                <P>(d) With respect to monitoring the grantee, either:</P>
                <P>(1) The HUD Field Office has conducted an on-site monitoring of the granteeand has determined that the grantee's performance, with respect to any grant tobe closed out, is satisfactory and is in compliance with Rental Rehabilitationprogram statutory and regulatory requirements, including § 511.10(a)and § 511.10(b); or</P>
                <P>(2) A grant may be closed before on-site monitoring has been conducted,provided:</P>
                <P>(i) The Cash and Management Information reports indicate the grantee'sperformance is satisfactory and is in compliance with Rental Rehabilitationprogram statutory and regulatory requirements;</P>
                <P>(ii) There are no outstanding monitoring findings; and</P>
                <P>(iii) The grantee agrees in writing to pay back the amount of any costs thatare later found by HUD to be ineligible based on a subsequent on-site monitoringreview or audit.</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61 FR7062, Feb. 23, 1996]</CITA>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <HD SOURCE="HED">Subpart I—Grantee Performance: Review, Reporting andCorrective or Remedial Actions</HD>
              <SECTION>
                <SECTNO>§ 511.80</SECTNO>
                <SUBJECT>Performance review.</SUBJECT>
                <P>(a) <E T="03">General.</E> HUD will review the performance of grantees incarrying out their responsibilities under this part whenever determinednecessary by HUD, but at least annually. In conducting performance reviews, HUDwill rely primarily on information obtained from the grantee's and, asappropriate, the State recipient's records and reports, findings from on-sitemonitoring, audit reports, and information generated from the C/MI System. Whereapplicable, HUD may also consider relevant information pertaining to a grantee'sor State recipient's performance gained from other sources, including citizencomments, complaint determinations and litigation. Reviews to determinecompliance with specific requirements of this part will be conducted asnecessary, with or without prior notice to the grantee or State recipient.Comprehensive performance reviews under the standards in § 511.80(b)will be conducted after prior notice to the grantee.</P>
                <P>(b) <E T="03">Standards for comprehensive performance review.</E> Granteeperformance shall be comprehensively reviewed periodically, as prescribed byHUD, to determine:</P>
                <P>(1) For grantees that are units of general local government or Statesadministering their own rental rehabilitation grant programs, whether thegrantee:</P>
                <P>(i) Has carried out its activities in a timely manner, including thecommitment of rental rehabilitation grant amounts to specific local projects inaccordance with the schedule contained in its Program Description, as providedin § 511.20(b)(8), and the completion of projects in accordance with§ 511.11(a);</P>
                <P>(ii) Has carried out its activities in accordance with the requirements ofthis part; and</P>
                <P>(iii) Has a continuing capacity to carry out its activities in accordancewith this part and in a timely and cost-effective manner; or</P>

                <P>(2) For grantees that are States distributing rental rehabilitation grant <PRTPAGE P="29"/>amounts to State recipients, whether the State:</P>
                <P>(i) Has distributed these grant amounts in a timely manner and in accordancewith the requirements of this part; and</P>
                <P>(ii) Has made such reviews and audits of its recipients as may be appropriateto determine whether they have satisfied the requirements of paragraph (b)(1)(i)through (b)(1)(iii) of this section.</P>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.81</SECTNO>
                <SUBJECT>Grantee reports to HUD.</SUBJECT>
                <P>(a) <E T="03">Management reports.</E> Grantees shall submit managementreports on their Rental Rehabilitation Program in such format and at such timeas HUD may prescribe.</P>
                <P>(b) [Reserved]</P>
                <APPRO>(Approved by the Office of Management and Budget under control number2506-0080)</APPRO>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 511.82</SECTNO>
                <SUBJECT>Corrective and remedial actions.</SUBJECT>
                <P>(a) <E T="03">General.</E> HUD will use the procedures in this section inconducting the performance review as provided in § 511.80(a) and intaking corrective and remedial actions.</P>
                <P>(b) <E T="03">Performance review.</E> (1) If HUD determines preliminarilythat the grantee has not met the performance review standards in§ 511.80, the grantee will be given notice of this determination andan opportunity to demonstrate, within the time prescribed by HUD and on thebasis of substantial facts and data, that it has done so.</P>
                <P>(2) If the grantee fails to demonstrate to HUD's satisfaction that it has metthe performance review standards in § 511.80, HUD will takeappropriate corrective or remedial action in accordance with this section.</P>
                <P>(c) <E T="03">Corrective and remedial actions.</E> In formulating appropriatecorrective or remedial actions for performance deficiencies, HUD will take oneor more of the actions specified in paragraphs (c)(1), (c)(2), and (c)(3) ofthis section. The action chosen will be designed to prevent a continuation ofthe deficiency; mitigate, to the extent possible, its adverse effects orconsequences; and prevent its recurrence. In addition to these actions, HUD willtake the action specified in paragraph (c)(4) of this section, when paragraph(c)(4) of this section is applicable.</P>
                <P>(1) HUD may request the grantee to submit and comply with proposals foraction to correct, mitigate and prevent performance deficiencies, including:</P>
                <P>(i) Preparing and following a schedule of actions for carrying out theaffected rental rehabilitation activities, consisting of schedules, timetablesand milestones necessary to implement the affected activities;</P>
                <P>(ii) Establishing and following a management plan that assignsresponsibilities for carrying out the remedial actions;</P>
                <P>(iii) Cancelling or revising activities likely to be affected by aperformance deficiency, before expending grant amounts for the activities;</P>
                <P>(iv) Reprogramming rental rehabilitation grant amounts that have not yet beenexpended from affected activities to other eligible activities; and</P>
                <P>(v) Suspending disbursement of grant amounts for affected activities for aperiod of not more than 60 days.</P>
                <P>(2) [Reserved]</P>
                <P>(3) When HUD determines that a grantee has failed to meet one or more of therequirements of this part, HUD may reduce or withdraw rental rehabilitationgrant amounts, or take other action as appropriate, except that rentalrehabilitation grant amounts already expended on eligible activities will not berecaptured from existing grant allocations or obligations or deducted fromfuture grants made available to the grantee. For purposes of paragraph (c)(3) ofthis section—</P>
                <P>(i) <E T="03">Grant amounts already expended on eligible activities</E>includes all grant amounts that have been disbursed under this part for eligibleactivities, and</P>
                <P>(ii) <E T="03">Other action as appropriate</E> means any remedial actionlegally available, including, without limitation, affirmative litigation, suchas suits for declaratory judgment, specific performance, temporary or permanentinjunctions, and any other available remedies other than those for recovery ofmoney.<PRTPAGE P="30"/>
                </P>
                <P>(4) Where HUD makes a final determination that it has a judiciallyenforceable claim for money against the grantee in a situation where rentalrehabilitation grant amounts have been disbursed to the grantee or Staterecipient for ineligible costs under this part, HUD will follow the proceduresdescribed in the Federal Claims Collection Standards (4 CFR parts 101-105)in order to:</P>
                <P>(i) Demand in writing that the grantee or State recipient reimburse HUD inthe amount of the ineligible costs, using funds from non-federally derivedsources; and</P>

                <P>(ii) Initiate affirmative litigation to recover the amount of the ineligiblecosts, if necessary for collection. HUD's final determination to seek recoveryof grant amounts expended on ineligible costs under paragraph (c)(4) of thissection shall constitute a claim within the meaning of 31 U.S.C. 3711, <E T="03">et seq.,</E> and interest shall be charged on delinquent claims asrequired by the Federal Claims Collection Standards.</P>
                <P>(d) Amounts recovered under paragraph (c)(4) of this section are not rentalrehabilitation grant amounts and shall be deposited in the U.S. Treasury'smiscellaneous receipts account.</P>
                <CITA>[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]</CITA>
              </SECTION>
            </SUBPART>
          </PART>
        </SUBCHAP>
        <SUBCHAP>
          <RESERVED>SUBCHAPTER B [RESERVED]</RESERVED>
        </SUBCHAP>
        <SUBCHAP TYPE="P">
          <PRTPAGE P="31"/>
          <HD SOURCE="HED">SUBCHAPTER C—COMMUNITY FACILITIES</HD>
          <PART>
            <EAR>Pt. 570</EAR>
            <HD SOURCE="HED">PART 570—COMMUNITY DEVELOPMENT BLOCK GRANTS</HD>
            <CONTENTS>
              <SUBPART>
                <HD SOURCE="HED">Subpart A—General Provisions</HD>
                <SECHD>Sec.</SECHD>
                <SECTNO>570.1</SECTNO>
                <SUBJECT>Purpose and primary objective.</SUBJECT>
                <SECTNO>570.3</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <SECTNO>570.4</SECTNO>
                <SUBJECT>Allocation of funds.</SUBJECT>
                <SECTNO>570.5</SECTNO>
                <SUBJECT>Waivers.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart B [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart C—Eligible Activities</HD>
                <SECTNO>570.200</SECTNO>
                <SUBJECT>General policies.</SUBJECT>
                <SECTNO>570.201</SECTNO>
                <SUBJECT>Basic eligible activities.</SUBJECT>
                <SECTNO>570.202</SECTNO>
                <SUBJECT>Eligible rehabilitation and preservation activities.</SUBJECT>
                <SECTNO>570.203</SECTNO>
                <SUBJECT>Special economic development activities.</SUBJECT>
                <SECTNO>570.204</SECTNO>
                <SUBJECT>Special activities by Community-Based DevelopmentOrganizations (CBDOs).</SUBJECT>
                <SECTNO>570.205</SECTNO>
                <SUBJECT>Eligible planning, urban environmental design andpolicy-planning-management-capacity building activities.</SUBJECT>
                <SECTNO>570.206</SECTNO>
                <SUBJECT>Program administrative costs.</SUBJECT>
                <SECTNO>570.207</SECTNO>
                <SUBJECT>Ineligible activities.</SUBJECT>
                <SECTNO>570.208</SECTNO>
                <SUBJECT>Criteria for national objectives.</SUBJECT>
                <SECTNO>570.209</SECTNO>
                <SUBJECT>Guidelines for evaluating and selecting economicdevelopment projects.</SUBJECT>
                <SECTNO>570.210</SECTNO>
                <SUBJECT>Prohibition on use of assistance for employmentrelocation activities.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart D—Entitlement Grants</HD>
                <SECTNO>570.300</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.301</SECTNO>
                <SUBJECT>Activity locations and float-funding.</SUBJECT>
                <SECTNO>570.302</SECTNO>
                <SUBJECT>Submission requirements.</SUBJECT>
                <SECTNO>570.303</SECTNO>
                <SUBJECT>Certifications.</SUBJECT>
                <SECTNO>570.304</SECTNO>
                <SUBJECT>Making of grants.</SUBJECT>
                <SECTNO>570.307</SECTNO>
                <SUBJECT>Urban counties.</SUBJECT>
                <SECTNO>570.308</SECTNO>
                <SUBJECT>Joint requests.</SUBJECT>
                <SECTNO>570.309</SECTNO>
                <SUBJECT>Restriction on location of activities.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart E—Special Purpose Grants</HD>
                <SECTNO>570.400</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.401</SECTNO>
                <SUBJECT>Community adjustment and economic diversificationplanning assistance.</SUBJECT>
                <SECTNO>570.402</SECTNO>
                <SUBJECT>Technical assistance awards.</SUBJECT>
                <SECTNO>570.403</SECTNO>
                <SUBJECT>New Communities.</SUBJECT>
                <SECTNO>570.404</SECTNO>
                <SUBJECT>Historically Black colleges and universities program.</SUBJECT>
                <SECTNO>570.405</SECTNO>
                <SUBJECT>The insular areas.</SUBJECT>
                <SECTNO>570.406</SECTNO>
                <SUBJECT>Formula miscalculation grants.</SUBJECT>
                <SECTNO>570.410</SECTNO>
                <SUBJECT>Special Projects Program.</SUBJECT>
                <SECTNO>570.411</SECTNO>
                <SUBJECT>Joint Community Development Program.</SUBJECT>
                <SECTNO>570.415</SECTNO>
                <SUBJECT>Community Development Work Study Program.</SUBJECT>
                <SECTNO>570.416</SECTNO>
                <SUBJECT>Hispanic-serving institutions work study program.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart F—Small Cities and Insular Areas Programs</HD>
                <SECTNO>570.420</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.421</SECTNO>
                <SUBJECT>New York Small Cities Program design.</SUBJECT>
                <SECTNO>570.422-4.25</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
                <SECTNO>570.426</SECTNO>
                <SUBJECT>Program income.</SUBJECT>
                <SECTNO>570.427</SECTNO>
                <SUBJECT>Program amendments.</SUBJECT>
                <SECTNO>570.428</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
                <SECTNO>570.429</SECTNO>
                <SUBJECT>Hawaii general and grant requirements.</SUBJECT>
                <SECTNO>570.430</SECTNO>
                <SUBJECT>Hawaii program operation requirements.</SUBJECT>
                <SECTNO>570.431</SECTNO>
                <SUBJECT>Citizen participation.</SUBJECT>
                <SECTNO>570.432</SECTNO>
                <SUBJECT>Repayment of section 108 loans.</SUBJECT>
                <SECTNO>570.440</SECTNO>
                <SUBJECT>Application requirements for insular area grants fundedunder section 106.</SUBJECT>
                <SECTNO>570.441</SECTNO>
                <SUBJECT>Citizen participation—insular areas.</SUBJECT>
                <SECTNO>570.442</SECTNO>
                <SUBJECT>Reallocations-Insular Areas.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart G—Urban Development Action Grants</HD>
                <SECTNO>570.450</SECTNO>
                <SUBJECT>Purpose.</SUBJECT>
                <SECTNO>570.456</SECTNO>
                <SUBJECT>Ineligible activities and limitations on eligibleactivities.</SUBJECT>
                <SECTNO>570.457</SECTNO>
                <SUBJECT>Displacement, relocation, acquisition, and replacementof housing.</SUBJECT>
                <SECTNO>570.461</SECTNO>
                <SUBJECT>Post-preliminary approval requirements; lead-basedpaint.</SUBJECT>
                <SECTNO>570.463</SECTNO>
                <SUBJECT>Project amendments and revisions.</SUBJECT>
                <SECTNO>570.464</SECTNO>
                <SUBJECT>Project closeout.</SUBJECT>
                <SECTNO>570.465</SECTNO>
                <SUBJECT>Applicability of rules and regulations.</SUBJECT>
                <SECTNO>570.466</SECTNO>
                <SUBJECT>Additional application submission requirements forPockets of Poverty—employment opportunities.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart H [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart I—State Community Development Block Grant Program</HD>
                <SECTNO>570.480</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.481</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <SECTNO>570.482</SECTNO>
                <SUBJECT>Eligible activities.</SUBJECT>
                <SECTNO>570.483</SECTNO>
                <SUBJECT>Criteria for national objectives.</SUBJECT>
                <SECTNO>570.484</SECTNO>
                <SUBJECT>Overall benefit to low and moderate income persons.</SUBJECT>
                <SECTNO>570.485</SECTNO>
                <SUBJECT>Making of grants.</SUBJECT>
                <SECTNO>570.486</SECTNO>
                <SUBJECT>Local government requirements.</SUBJECT>
                <SECTNO>570.487</SECTNO>
                <SUBJECT>Other applicable laws and related program requirements.</SUBJECT>
                <SECTNO>570.488</SECTNO>
                <SUBJECT>Displacement, relocation, acquisition, and replacementof housing.</SUBJECT>
                <SECTNO>570.489</SECTNO>
                <SUBJECT>Program administrative requirements.</SUBJECT>
                <SECTNO>570.490</SECTNO>
                <SUBJECT>Recordkeeping requirements.</SUBJECT>
                <SECTNO>570.491</SECTNO>
                <SUBJECT>Performance and evaluation report.<PRTPAGE P="32"/>
                </SUBJECT>
                <SECTNO>570.492</SECTNO>
                <SUBJECT>State's reviews and audits.</SUBJECT>
                <SECTNO>570.493</SECTNO>
                <SUBJECT>HUD's reviews and audits.</SUBJECT>
                <SECTNO>570.494</SECTNO>
                <SUBJECT>Timely distribution of funds by states.</SUBJECT>
                <SECTNO>570.495</SECTNO>
                <SUBJECT>Reviews and audits response.</SUBJECT>
                <SECTNO>570.496</SECTNO>
                <SUBJECT>Remedies for noncompliance; opportunity for hearing.</SUBJECT>
                <SECTNO>570.497</SECTNO>
                <SUBJECT>Condition of State election to administer State CDBGProgram.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart J—Grant Administration</HD>
                <SECTNO>570.500</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <SECTNO>570.501</SECTNO>
                <SUBJECT>Responsibility for grant administration.</SUBJECT>
                <SECTNO>570.502</SECTNO>
                <SUBJECT>Applicability of uniform administrative requirements.</SUBJECT>
                <SECTNO>570.503</SECTNO>
                <SUBJECT>Agreements with subrecipients.</SUBJECT>
                <SECTNO>570.504</SECTNO>
                <SUBJECT>Program income.</SUBJECT>
                <SECTNO>570.505</SECTNO>
                <SUBJECT>Use of real property.</SUBJECT>
                <SECTNO>570.506</SECTNO>
                <SUBJECT>Records to be maintained.</SUBJECT>
                <SECTNO>570.507</SECTNO>
                <SUBJECT>Reports.</SUBJECT>
                <SECTNO>570.508</SECTNO>
                <SUBJECT>Public access to program records.</SUBJECT>
                <SECTNO>570.509</SECTNO>
                <SUBJECT>Grant closeout procedures.</SUBJECT>
                <SECTNO>570.510</SECTNO>
                <SUBJECT>Transferring projects from urban counties tometropolitan cities.</SUBJECT>
                <SECTNO>570.511</SECTNO>
                <SUBJECT>Use of escrow accounts for rehabilitation of privatelyowned residential property.</SUBJECT>
                <SECTNO>570.512</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
                <SECTNO>570.513</SECTNO>
                <SUBJECT>Lump sum drawdown for financing of propertyrehabilitation activities.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart K—Other Program Requirements</HD>
                <SECTNO>570.600</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.601</SECTNO>
                <SUBJECT>Public Law 88-352 and Public Law 90-284;affirmatively furthering fair housing; Executive Order 11063.</SUBJECT>
                <SECTNO>570.602</SECTNO>
                <SUBJECT>Section 109 of the Act.</SUBJECT>
                <SECTNO>570.603</SECTNO>
                <SUBJECT>Labor standards.</SUBJECT>
                <SECTNO>570.604</SECTNO>
                <SUBJECT>Environmental standards.</SUBJECT>
                <SECTNO>570.605</SECTNO>
                <SUBJECT>National Flood Insurance Program.</SUBJECT>
                <SECTNO>570.606</SECTNO>
                <SUBJECT>Displacement, relocation, acquisition, and replacementof housing.</SUBJECT>
                <SECTNO>570.607</SECTNO>
                <SUBJECT>Employment and contracting opportunities.</SUBJECT>
                <SECTNO>570.608</SECTNO>
                <SUBJECT>Lead-based paint.</SUBJECT>
                <SECTNO>570.609</SECTNO>
                <SUBJECT>Use of debarred, suspended or ineligible contractors orsubrecipients.</SUBJECT>
                <SECTNO>570.610</SECTNO>
                <SUBJECT>Uniform administrative requirements and cost principles.</SUBJECT>
                <SECTNO>570.611</SECTNO>
                <SUBJECT>Conflict of interest.</SUBJECT>
                <SECTNO>570.612</SECTNO>
                <SUBJECT>Executive Order 12372.</SUBJECT>
                <SECTNO>570.613</SECTNO>
                <SUBJECT>Eligibility restrictions for certain resident aliens.</SUBJECT>
                <SECTNO>570.614</SECTNO>
                <SUBJECT>Architectural Barriers Act and the Americans withDisabilities Act.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <RESERVED>Subpart L [Reserved]</RESERVED>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart M—Loan Guarantees</HD>
                <SECTNO>570.700</SECTNO>
                <SUBJECT>Purpose.</SUBJECT>
                <SECTNO>570.701</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <SECTNO>570.702</SECTNO>
                <SUBJECT>Eligible applicants.</SUBJECT>
                <SECTNO>570.703</SECTNO>
                <SUBJECT>Eligible activities.</SUBJECT>
                <SECTNO>570.704</SECTNO>
                <SUBJECT>Application requirements.</SUBJECT>
                <SECTNO>570.705</SECTNO>
                <SUBJECT>Loan requirements.</SUBJECT>
                <SECTNO>570.706</SECTNO>
                <SUBJECT>Federal guarantee; subrogation.</SUBJECT>
                <SECTNO>570.707</SECTNO>
                <SUBJECT>Applicability of rules and regulations.</SUBJECT>
                <SECTNO>570.708</SECTNO>
                <SUBJECT>Sanctions.</SUBJECT>
                <SECTNO>570.709</SECTNO>
                <SUBJECT>Allocation of loan guarantee assistance.</SUBJECT>
                <SECTNO>570.710</SECTNO>
                <SUBJECT>State responsibilities.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart N—Urban Renewal Provisions</HD>
                <SECTNO>570.800</SECTNO>
                <SUBJECT>Urban renewal regulations.</SUBJECT>
              </SUBPART>
              <SUBPART>
                <HD SOURCE="HED">Subpart O—Performance Reviews</HD>
                <SECTNO>570.900</SECTNO>
                <SUBJECT>General.</SUBJECT>
                <SECTNO>570.901</SECTNO>
                <SUBJECT>Review for compliance with the primary and nationalobjectives and other program requirements.</SUBJECT>
                <SECTNO>570.902</SECTNO>
                <SUBJECT>Review to determine if CDBG funded activities are beingcarried out in a timely manner.</SUBJECT>
                <SECTNO>570.903</SECTNO>
                <SUBJECT>Review to determine if the recipient is meeting itsconsolidated plan responsibilities.</SUBJECT>
                <SECTNO>570.904</SECTNO>
                <SUBJECT>Equal opportunity and fair housing review criteria.</SUBJECT>
                <SECTNO>570.905</SECTNO>
                <SUBJECT>Review of continuing capacity to carry out CDBG fundedactivities in a timely manner.</SUBJECT>
                <SECTNO>570.906</SECTNO>
                <SUBJECT>Review of urban counties.</SUBJECT>
                <SECTNO>570.907-570.909</SECTNO>
                <SUBJECT>[Reserved]</SUBJECT>
                <SECTNO>570.910</SECTNO>
                <SUBJECT>Corrective and remedial actions.</SUBJECT>
                <SECTNO>570.911</SECTNO>
                <SUBJECT>Reduction, withdrawal, or adjustment of a grant or otherappropriate action.</SUBJECT>
                <SECTNO>570.912</SECTNO>
                <SUBJECT>Nondiscrimination compliance.</SUBJECT>
                <SECTNO>570.913</SECTNO>
                <SUBJECT>Other remedies for noncompliance.</SUBJECT>
                <APP>Appendix A to Part 570—Guidelines and Objectives for EvaluatingProject Costs and Financial Requirements</APP>
              </SUBPART>
            </CONTENTS>
            <AUTH>
              <HD SOURCE="HED">Authority:</HD>
              <P>42 U.S.C. 3535(d) and 5301-5320.</P>
            </AUTH>
            <SOURCE>
              <HD SOURCE="HED">Source:</HD>
              <P>40 FR 24693, June 9, 1975, unless otherwise noted.</P>
            </SOURCE>
            <SUBPART>
              <HD SOURCE="HED">Subpart A—General Provisions</HD>
              <SOURCE>
                <HD SOURCE="HED">Source:</HD>
                <P>53 FR 34437, Sept. 6, 1988, unless otherwise noted.</P>
              </SOURCE>
              <SECTION>
                <SECTNO>§ 570.1</SECTNO>
                <SUBJECT>Purpose and primary objective.</SUBJECT>
                <P>(a) This part describes policies and procedures applicable to the followingprograms authorized under title I of the Housing and Community Development Actof 1974, as amended:</P>
                <P>(1) Entitlement grants program (subpart D);</P>

                <P>(2) Nonentitlement Funds: HUD-administered Small Cities and Insular Areaprograms (subpart F);<PRTPAGE P="33"/>
                </P>
                <P>(3) State program: State-administered CDBG nonentitlement funds (subpart I);</P>
                <P>(4) Special Purpose Grants (subpart E);</P>
                <P>(5) Urban Development Action Grant program (subpart G); and</P>
                <P>(6) Loan Guarantees (subpart M).</P>

                <P>(b) Subparts A, C, J, K, and O apply to all programs in paragraph (a) exceptas modified or limited under the provisions of these subparts or the applicableprogram regulations. In the application of the subparts to Special PurposeGrants or the Urban Development Action Grant program, the reference to funds inthe form of grants in the term <E T="03">“CDBG funds”,</E> asdefined in § 570.3, shall mean the grant funds under those programs.The subparts do not apply to the State program (subpart I) except to the extentexpressly referred to.</P>
                <P>(c) The primary objective of the programs authorized under title I of theHousing and Community Development Act of 1974, as amended, is described insection 101(c) of the Act (42 U.S.C. 5301(c)).</P>
                <CITA>[53 FR 34437, Sept. 6, 1988, as amended at 56 FR 56126, Oct. 31, 1991; 61FR 11475, Mar. 20, 1996; 69 FR 32778, June 10, 2004]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.3</SECTNO>
                <SUBJECT>Definitions.</SUBJECT>
                <P>The terms <E T="03">HUD</E> and <E T="03">Secretary</E> are defined in 24 CFRpart 5. All of the following definitions in this section that rely on data fromthe United States Bureau of the Census shall rely upon the data available fromthe latest decennial census.</P>
                <P>
                  <E T="03">Act</E> means title I of the Housing and Community Development Actof 1974 as amended (42 U.S.C. 5301 <E T="03">et seq.</E>).</P>
                <P>
                  <E T="03">Age of housing</E> means the number of year-round housing units, asfurther defined in section 102(a)(11) of the Act.</P>
                <P>
                  <E T="03">Applicant</E> means a State or unit of general local governmentthat makes application pursuant to the provisions of subpart E, F, G or M.</P>
                <P>
                  <E T="03">Buildings for the general conduct of government</E> shall have themeaning provided in section 102(a)(21) of the Act.</P>
                <P>
                  <E T="03">CDBG funds</E> means Community Development Block Grant funds,including funds received in the form of grants under subpart D, F, or§ 570.405 of this part, funds awarded under section 108(q) of theHousing and Community Development Act of 1974, loans guaranteed under subpart Mof this part, urban renewal surplus grant funds, and program income as definedin § 570.500(a).</P>
                <P>
                  <E T="03">Chief executive officer</E> of a State or unit of general localgovernment means the elected official or the legally designated official, whohas the primary responsibility for the conduct of that entity's governmentalaffairs. Examples of the “chief executive officer” of a unit ofgeneral local government are: the elected mayor of a municipality; the electedcounty executive of a county; the chairperson of a county commission or board ina county that has no elected county executive; and the official designatedpursuant to law by the governing body of a unit of general local government.</P>
                <P>
                  <E T="03">City</E> means the following:</P>
                <P>(1) For purposes of Entitlement Community Development Block Grant and UrbanDevelopment Action Grant eligibility:</P>
                <P>(i) Any unit of general local government that is classified as a municipalityby the United States Bureau of the Census, or</P>
                <P>(ii) Any other unit of general local government that is a town or townshipand that, in the determination of the Secretary:</P>
                <P>(A) Possesses powers and performs functions comparable to those associatedwith municipalities;</P>
                <P>(B) Is closely settled (except that the Secretary may reduce or waive thisrequirement on a case by case basis for the purposes of the Action Grantprogram); and</P>

                <P>(C) Contains within its boundaries no incorporated places as defined by theUnited States Bureau of the Census that have not entered into cooperationagreements with the town or township for a period covering at least 3 years toundertake or assist in the undertaking of essential community development andhousing assistance activities. The determination of eligibility of a town ortownship to qualify as a city will be based on information available from theUnited States Bureau of the Census and information provided by the town ortownship and its included units of general local government.<PRTPAGE P="34"/>
                </P>
                <P>(2) For purposes of Urban Development Action Grant eligibility only, Guam,the Virgin Islands, American Samoa, the Commonwealth of the Northern MarianaIslands, the counties of Kauai, Maui, and Hawaii in the State of Hawaii, andIndian tribes that are eligible recipients under the State and Local GovernmentFiscal Assistance Act of 1972 and located on reservations in Oklahoma asdetermined by the Secretary of the Interior or in Alaskan Native Villages.</P>
                <P>
                  <E T="03">Community Development Financial Institution</E> has the samemeaning as used in the Community Development Banking and Financial InstitutionsAct of 1994 (12 U.S.C. 4701 note).</P>
                <P>
                  <E T="03">Consolidated plan.</E> The plan prepared in accordance with 24 CFRpart 91, which describes needs, resources, priorities and proposed activities tobe undertaken with respect to HUD programs, including the CDBG program. Anapproved consolidated plan means a consolidated plan that has been approved byHUD in accordance with 24 CFR part 91.</P>
                <P>
                  <E T="03">Discretionary grant</E> means a grant made from the various SpecialPurpose Grants in accordance with subpart E of this part.</P>
                <P>
                  <E T="03">Entitlement amount</E> means the amount of funds which ametropolitan city is entitled to receive under the Entitlement grant program, asdetermined by formula set forth in section 106 of the Act.</P>
                <P>
                  <E T="03">Extent of growth lag</E> shall have the meaning provided in section102(a)(12) of the Act.</P>
                <P>
                  <E T="03">Extent of housing overcrowding</E> shall have the meaning providedin section 102(a)(10) of the Act.</P>
                <P>
                  <E T="03">Extent of poverty</E> means the number of persons whose incomes arebelow the poverty level based on data compiled and published by the UnitedStates Bureau of the Census available from the latest census referable to thesame point or period in time and the latest reports from the Office ofManagement and Budget. For purposes of this part, the Secretary has determinedthat it is neither feasible nor appropriate to make adjustments at this time inthe computations of “extent of poverty” for regional or areavariations in income and cost of living.</P>
                <P>
                  <E T="03">Family</E> means all persons living in the same household who arerelated by birth, marriage or adoption.</P>
                <P>
                  <E T="03">Household</E> means all the persons who occupy a housing unit. Theoccupants may be a single family, one person living alone, two or more familiesliving together, or any other group of related or unrelated persons who shareliving arrangements.</P>
                <P>
                  <E T="03">Income.</E> For the purpose of determining whether a family orhousehold is low- and moderate-income under subpart C of this part, grantees mayselect any of the three definitions listed below for each activity, except thatintegrally related activities of the same type and qualifying under the sameparagraph of § 570.208(a) shall use the same definition of income.The option to choose a definition does not apply to activities that qualifyunder § 570.208(a)(1) (Area benefit activities), except when therecipient carries out a survey under § 570.208(a)(1)(vi). Activitiesqualifying under § 570.208(a)(1) generally must use the area incomedata supplied to recipients by HUD. The three definitions are as follows:</P>
                <P>(1)(i) “Annual income” as defined under the Section 8 HousingAssistance Payments program at 24 CFR 813.106 (except that if the CDBGassistance being provided is homeowner rehabilitation under§ 570.202, the value of the homeowner's primary residence may beexcluded from any calculation of Net Family Assets); or</P>
                <P>(ii) Annual income as reported under the Census long-form for the most recentavailable decennial Census. This definition includes:</P>
                <P>(A) Wages, salaries, tips, commissions, etc.;</P>
                <P>(B) Self-employment income from own nonfarm business, includingproprietorships and partnerships;</P>
                <P>(C) Farm self-employment income;</P>
                <P>(D) Interest, dividends, net rental income, or income from estates or trusts;</P>
                <P>(E) Social Security or railroad retirement;</P>
                <P>(F) Supplemental Security Income, Aid to Families with Dependent Children, orother public assistance or public welfare programs;</P>

                <P>(G) Retirement, survivor, or disability pensions; and<PRTPAGE P="35"/>
                </P>
                <P>(H) Any other sources of income received regularly, including Veterans' (VA)payments, unemployment compensation, and alimony; or</P>
                <P>(iii) Adjusted gross income as defined for purposes of reporting underInternal Revenue Service (IRS) Form 1040 for individual Federal annual incometax purposes.</P>
                <P>(2) Estimate the annual income of a family or household by projecting theprevailing rate of income of each person at the time assistance is provided forthe individual, family, or household (as applicable). Estimated annual incomeshall include income from all family or household members, as applicable. Incomeor asset enhancement derived from the CDBG-assisted activity shall not beconsidered in calculating estimated annual income.</P>
                <P>
                  <E T="03">Insular area</E> shall have the meaning provided in section102(a)(24) of the Act.</P>
                <P>
                  <E T="03">Low- and moderate-income household</E> means a household having anincome equal to or less than the Section 8 low-income limit established by HUD.</P>
                <P>
                  <E T="03">Low- and moderate-income person</E> means a member of a familyhaving an income equal to or less than the Section 8 low-income limitestablished by HUD. Unrelated individuals will be considered as one-personfamilies for this purpose.</P>
                <P>
                  <E T="03">Low-income household</E> means a household having an income equalto or less than the Section 8 very low-income limit established by HUD.</P>
                <P>
                  <E T="03">Low-income person</E> means a member of a family that has an incomeequal to or less than the Section 8 very low-income limit established by HUD.Unrelated individuals shall be considered as one-person families for thispurpose.</P>
                <P>
                  <E T="03">Metropolitan area</E> shall have the meaning provided in section102(a)(3) of the Act.</P>
                <P>
                  <E T="03">Metropolitan city</E> shall have the meaning provided in section102(a)(4) of the Act except that the term “central city” is replacedby “principal city.”</P>
                <P>
                  <E T="03">Microenterprise</E> shall have the meaning provided in section102(a)(22) of the Act.</P>
                <P>
                  <E T="03">Moderate-income household</E> means a household having an incomeequal to or less than the Section 8 low-income limit and greater than theSection 8 very low-income limit, established by HUD.</P>
                <P>
                  <E T="03">Moderate-income person</E> means a member of a family that has anincome equal to or less than the Section 8 low-income limit and greater than theSection 8 very low-income limit, established by HUD. Unrelated individuals shallbe considered as one-person families for this purpose.</P>
                <P>
                  <E T="03">Nonentitlement amount</E> means the amount of funds which isallocated for use in a State's nonentitlement areas as determined by formula setforth in section 106 of the Act.</P>
                <P>
                  <E T="03">Nonentitlement area</E> shall have the meaning provided in section102(a)(7) of the Act.</P>
                <P>
                  <E T="03">Population</E> means the total resident population based on datacompiled and published by the United States Bureau of the Census available fromthe latest census or which has been upgraded by the Bureau to reflect thechanges resulting from the Boundary and Annexation Survey, new incorporationsand consolidations of governments pursuant to § 570.4, and whichreflects, where applicable, changes resulting from the Bureau's latestpopulation determination through its estimating technique using natural changes(birth and death) and net migration, and is referable to the same point orperiod in time.</P>
                <P>
                  <E T="03">Small business</E> means a business that meets the criteria setforth in section 3(a) of the Small Business Act (15 U.S.C. 631, 636, 637).</P>
                <P>
                  <E T="03">State</E> shall have the meaning provided in section 102(a)(2) ofthe Act.</P>
                <P>
                  <E T="03">Unit of general local government</E> shall have the meaningprovided in section 102(a)(1) of the Act.</P>
                <P>
                  <E T="03">Urban county</E> shall have the meaning provided in section102(a)(6) of the Act. For the purposes of this definition, HUD will determinewhether the county's combined population contains the required percentage oflow- and moderate-income persons by identifying the number of persons thatresided in applicable areas and units of general local government based on datafrom the most recent decennial census, and using income limits that would haveapplied for the year in which that census was taken.</P>
                <P>
                  <E T="03">Urban Development Action Grant</E> (UDAG) means a grant made by the <PRTPAGE P="36"/>Secretary pursuant to section 119 of the Act and subpart G of this part.</P>
                <CITA>[53 FR 34437, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 56FR 56126, Oct. 31, 1991; 60 FR 1915, 1943, Jan. 5, 1995; 60 FR 56909, Nov. 9,1995; 61 FR 5209, Feb. 9, 1996; 61 FR 11475, Mar. 20, 1996; 61 FR 18674, Apr.29, 1996; 68 FR 69582, Dec. 12, 2003; 69 FR 32778, June 10, 2004]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.4</SECTNO>
                <SUBJECT>Allocation of funds.</SUBJECT>
                <P>(a) The determination of eligibility of units of general local government toreceive entitlement grants, the entitlement amounts, the allocation ofappropriated funds to States for use in nonentitlement areas, the reallocationof funds, the allocation of appropriated funds to insular areas, and theallocation of appropriated funds for discretionary grants under the Secretary'sFund shall be governed by the policies and procedures described in sections 106and 107 of the Act, as appropriate.</P>
                <P>(b) The definitions in § 570.3 shall govern in applying thepolicies and procedures described in sections 106 and 107 of the Act.</P>
                <P>(c) In determining eligibility for entitlement and in allocating funds undersection 106 of the Act for any federal fiscal year, HUD will recognize corporatestatus and geographical boundaries and the status of metropolitan areas andprincipal cities effective as of July 1 preceding such federal fiscal year,subject to the following limitations:</P>
                <P>(1) With respect to corporate status as certified by the applicable State andavailable for processing by the Census Bureau as of such date;</P>
                <P>(2) With respect to boundary changes or annexations, as are used by theCensus Bureau in preparing population estimates for all general purposegovernmental units and are available for processing by the Census Bureau as ofsuch date, except that any such boundary changes or annexations which result inthe population of a unit of general local government reaching or exceeding50,000 shall be recognized for this purpose whether or not such changes are usedby the Census Bureau in preparing such population estimates; and</P>
                <P>(3) With respect to the status of Metropolitan Statistical Areas andprincipal cities, as officially designated by the Office of Management andBudget as of such date.</P>
                <P>(d) In determining whether a county qualifies as an urban county, and incomputing entitlement amounts for urban counties, the demographic values ofpopulation, poverty, housing overcrowding, and age of housing of any Indiantribes located within the county shall be excluded. In allocating amounts toStates for use in nonentitlement areas, the demographic values of population,poverty, housing overcrowding and age of housing of all Indian tribes located inall nonentitled areas shall be excluded. It is recognized that all such data onIndian tribes are not generally available from the United States Bureau of theCensus and that missing portions of data will have to be estimated. Inaccomplishing any such estimates the Secretary may use such other relatedinformation available from reputable sources as may seem appropriate, regardlessof the data's point or period of time and shall use the best judgement possiblein adjusting such data to reflect the same point or period of time as theoverall data from which the Indian tribes are being deducted, so that suchdeduction shall not create an imbalance with those overall data.</P>
                <P>(e) Amounts remaining after closeout of a grant which are required to bereturned to HUD under the provisions of § 570.509, Grant closeoutprocedures, shall be considered as funds available for reallocation unless theappropriation under which the funds were provided to the Department has lapsed.</P>
                <CITA>[53 FR 34437, Sept. 6, 1988, as amended at 68 FR 69582, Dec. 12, 2003; 69FR 32778, June 10, 2004]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.5</SECTNO>
                <SUBJECT>Waivers.</SUBJECT>
                <P>HUD's authority for the waiver of regulations and for the suspension ofrequirements to address damage in a Presidentially declared disaster area isdescribed in 24 CFR part 5 and in section 122 of the Act, respectively.</P>
                <CITA>[61 FR 11476, Mar. 20, 1996]</CITA>
              </SECTION>
            </SUBPART>
            <SUBPART>
              <RESERVED>Subpart B [Reserved]</RESERVED>
            </SUBPART>
            <SUBPART>
              <PRTPAGE P="37"/>
              <HD SOURCE="HED">Subpart C—Eligible Activities</HD>
              <SOURCE>
                <HD SOURCE="HED">Source:</HD>
                <P>53 FR 34439, Sept. 6, 1988, unless otherwise noted.</P>
              </SOURCE>
              <SECTION>
                <SECTNO>§ 570.200</SECTNO>
                <SUBJECT>General policies.</SUBJECT>
                <P>(a) <E T="03">Determination of eligibility.</E> An activity may be assistedin whole or in part with CDBG funds only if all of the following requirementsare met:</P>
                <P>(1) <E T="03">Compliance with section 105 of the Act.</E> Each activity mustmeet the eligibility requirements of section 105 of the Act as further definedin this subpart.</P>
                <P>(2) <E T="03">Compliance with national objectives.</E> Grant recipients underthe Entitlement and HUD-administered Small Cities programs and recipients ofinsular area funds under section 106 of the Act must certify that theirprojected use of funds has been developed so as to give maximum feasiblepriority to activities which will carry out one of the national objectives ofbenefit to low- and moderate-income families or aid in the prevention orelimination of slums or blight. The projected use of funds may also includeactivities that the recipient certifies are designed to meet other communitydevelopment needs having a particular urgency because existing conditions pose aserious and immediate threat to the health or welfare of the community whereother financial resources are not available to meet such needs. Consistent withthe foregoing, each recipient under the Entitlement or HUD-administered SmallCities programs, and each recipient of insular area funds under section 106 ofthe Act must ensure and maintain evidence that each of its activities assistedwith CDBG funds meets one of the three national objectives as contained in itscertification. Criteria for determining whether an activity addresses one ormore of these objectives are found in § 570.208.</P>
                <P>(3) <E T="03">Compliance with the primary objective.</E> The primaryobjective of the Act is described in section 101(c) of the Act. Consistent withthis objective, Entitlement recipients, recipients of the HUD-administered SmallCities program in Hawaii, and recipients of insular area funds under section 106of the Act must ensure that over a period of time specified in theircertification not to exceed three years, not less than 70 percent of theaggregate of CDBG fund expenditures shall be for activities meeting the criteriaunder § 570.208(a) or under § 570.208(d)(5) or (6) forbenefiting low- and moderate-income persons. For grants under section 107 of theAct, insular area recipients must meet this requirement for each separate grant.See § 570.420(e)(3) for additional discussion of the primaryobjective requirement for insular areas funded under section 106 of the Act. Therequirements for the HUD-administered Small Cities program in New York are at§ 570.420(e)(2). Additional requirements for the HUD-administeredSmall Cities program in Hawaii are at § 570.430(e). In determiningthe percentage of funds expended for such activities:</P>
                <P>(i) Cost of administration and planning eligible under § 570.205and § 570.206 will be assumed to benefit low and moderate incomepersons in the same proportion as the remainder of the CDBG funds and,accordingly shall be excluded from the calculation;</P>
                <P>(ii) Funds deducted by HUD for repayment of urban renewal temporary loanspursuant to § 570.802(b) shall be excluded;</P>
                <P>(iii) Funds expended for the repayment of loans guaranteed under theprovisions of subpart M shall also be excluded;</P>
                <P>(iv) Funds expended for the acquisition, new construction or rehabilitationof property for housing that qualifies under § 570.208(a)(3) shall becounted for this purpose but shall be limited to an amount determined bymultiplying the total cost (including CDBG and non-CDBG costs) of theacquisition, construction or rehabilitation by the percent of units in suchhousing to be occupied by low and moderate income persons.</P>
                <P>(v) Funds expended for any other activities qualifying under§ 570.208(a) shall be counted for this purpose in their entirety.</P>
                <P>(4) <E T="03">Compliance with environmental review procedures.</E> Theenvironmental review procedures set forth at 24 CFR part 58 must be completedfor each activity (or project as defined in 24 CFR part 58), as applicable.<PRTPAGE P="38"/>
                </P>
                <P>(5) <E T="03">Cost principles.</E> Costs incurred, whether charged on adirect or an indirect basis, must be in conformance with OMB CircularsA-87, “Cost Principles for State, Local and Indian TribalGovernments”; A-122, “Cost Principles for Non-profitOrganizations”; or A-21, “Cost Principles for EducationalInstitutions,” as applicable.<SU>1</SU>
                  <FTREF/> All items of cost listed inAttachment B of these Circulars that require prior Federal agency approval areallowable without prior approval of HUD to the extent they comply with thegeneral policies and principles stated in Attachment A of such circulars and areotherwise eligible under this subpart C, except for the following:</P>
                <FTNT>
                  <P>
                    <SU>1</SU> These circulars are available from the AmericanCommunities Center by calling the following toll-free numbers: (800)998-9999 or (800) 483-2209 (TDD).</P>
                </FTNT>
                <P>(i) Depreciation methods for fixed assets shall not be changed without HUD'sspecific approval or, if charged through a cost allocation plan, the Federalcognizant agency.</P>
                <P>(ii) Fines and penalties (including punitive damages) are unallowable coststo the CDBG program.</P>
                <P>(iii) Pre-award costs are limited to those authorized under paragraph (h) ofthis section.</P>
                <P>(b) <E T="03">Special policies governing facilities.</E> The followingspecial policies apply to:</P>
                <P>(1) <E T="03">Facilities containing both eligible and ineligible uses.</E> Apublic facility otherwise eligible for assistance under the CDBG program may beprovided with CDBG funds even if it is part of a multiple use buildingcontaining ineligible uses, if:</P>
                <P>(i) The facility which is otherwise eligible and proposed for assistance willoccupy a designated and discrete area within the larger facility; and</P>
                <P>(ii) The recipient can determine the costs attributable to the facilityproposed for assistance as separate and distinct from the overall costs of themultiple-use building and/or facility.</P>
                <FP>Allowable costs are limited to those attributable to the eligible portion ofthe building or facility.</FP>
                <P>(2) <E T="03">Fees for use of facilities.</E> Reasonable fees may be chargedfor the use of the facilities assisted with CDBG funds, but charges such asexcessive membership fees, which will have the effect of precluding low andmoderate income persons from using the facilities, are not permitted.</P>
                <P>(c) <E T="03">Special assessments under the CDBG program.</E> The followingpolicies relate to special assessments under the CDBG program:</P>
                <P>(1) <E T="03">Definition of special assessment.</E> The term “specialassessment” means the recovery of the capital costs of a publicimprovement, such as streets, water or sewer lines, curbs, and gutters, througha fee or charge levied or filed as a lien against a parcel of real estate as adirect result of benefit derived from the installation of a public improvement,or a one-time charge made as a condition of access to a public improvement. Thisterm does not relate to taxes, or the establishment of the value of real estatefor the purpose of levying real estate, property, or ad valorem taxes, and doesnot include periodic charges based on the use of a public improvement, such aswater or sewer user charges, even if such charges include the recovery of all orsome portion of the capital costs of the public improvement.</P>
                <P>(2) <E T="03">Special assessments to recover capital costs.</E> Where CDBGfunds are used to pay all or part of the cost of a public improvement, specialassessments may be imposed as follows:</P>
                <P>(i) Special assessments to recover the CDBG funds may be made only againstproperties owned and occupied by persons not of low and moderate income. Suchassessments constitute program income.</P>

                <P>(ii) Special assessments to recover the non-CDBG portion may be made providedthat CDBG funds are used to pay the special assessment in behalf of allproperties owned and occupied by low and moderate income persons; except thatCDBG funds need not be used to pay the special assessments in behalf ofproperties owned and occupied by moderate income persons if the grant recipientcertifies that it does not have sufficient CDBG funds to pay the assessments inbehalf of all of the low and moderate income owner-occupant persons. Fundscollected through such special assessments are not program income.<PRTPAGE P="39"/>
                </P>
                <P>(3) <E T="03">Public improvements not initially assisted with CDBG funds.</E>The payment of special assessments with CDBG funds constitutes CDBG assistanceto the public improvement. Therefore, CDBG funds may be used to pay specialassessments provided:</P>
                <P>(i) The installation of the public improvements was carried out in compliancewith requirements applicable to activities assisted under this part includingenvironmental, citizen participation and Davis-Bacon requirements;</P>
                <P>(ii) The installation of the public improvement meets a criterion fornational objectives in § 570.208(a)(1), (b), or (c); and</P>
                <P>(iii) The requirements of § 570.200(c)(2)(ii) are met.</P>
                <P>(d) <E T="03">Consultant activities.</E> Consulting services are eligible forassistance under this part for professional assistance in program planning,development of community development objectives, and other general professionalguidance relating to program execution. The use of consultants is governed bythe following:</P>
                <P>(1) <E T="03">Employer-employee type of relationship.</E> No person providingconsultant services in an employer-employee type of relationship shall receivemore than a reasonable rate of compensation for personal services paid with CDBGfunds. In no event, however, shall such compensation exceed the equivalent ofthe daily rate paid for Level IV of the Executive Schedule. Such services shallbe evidenced by written agreements between the parties which detail theresponsibilities, standards, and compensation.</P>
                <P>(2) <E T="03">Independent contractor relationship.</E> Consultant servicesprovided under an independent contractor relationship are governed by theprocurement requirements in 24 CFR 85.36, and are not subject to thecompensation limitation of Level IV of the Executive Schedule.</P>
                <P>(e) <E T="03">Recipient determinations required as a condition ofeligibility.</E> In several instances under this subpart, the eligibility of anactivity depends on a special local determination. Recipients shall maintaindocumentation of all such determinations. A written determination is requiredfor any activity carried out under the authority of§§ 570.201(f), 570.201(i)(2), 570.201(p), 570.201(q),570.202(b)(3), 570.206(f), 570.209, 570.210, and 570.309.</P>
                <P>(f) <E T="03">Means of carrying out eligible activities.</E> (1) Activitieseligible under this subpart, other than those authorized under§ 570.204(a), may be undertaken, subject to local law:</P>
                <P>(i) By the recipient through:</P>
                <P>(A) Its employees, or</P>
                <P>(B) Procurement contracts governed by the requirements of 24 CFR 85.36; or</P>
                <P>(ii) Through loans or grants under agreements with subrecipients, as definedat § 570.500(c); or</P>
                <P>(iii) By one or more public agencies, including existing local publicagencies, that are designated by the chief executive officer of the recipient.</P>
                <P>(2) Activities made eligible under § 570.204(a) may only beundertaken by entities specified in that section.</P>
                <P>(g) <E T="03">Limitation on planning and administrative costs.</E> No morethan 20 percent of the sum of any grant, plus program income, shall be expendedfor planning and program administrative costs, as defined in§§ 570.205 and 507.206, respectively. Recipients of entitlementgrants under subpart D of this part shall conform with this requirement bylimiting the amount of CDBG funds obligated for planning plus administrationduring each program year to an amount no greater than 20 percent of the sum ofits entitlement grant made for that program year (if any) plus the programincome received by the recipient and its subrecipients (if any) during thatprogram year.</P>
                <P>(h) <E T="03">Reimbursement for pre-award costs.</E> The effective date ofthe grant agreement is the program year start date or the date that theconsolidated plan is received by HUD, whichever is later. For a Section 108 loanguarantee, the effective date of the grant agreement is the date of HUDexecution of the grant agreement amendment for the particular loan guaranteecommitment.</P>
                <P>(1) Prior to the effective date of the grant agreement, a recipient may incurcosts or may authorize a subrecipient to incur costs, and then after theeffective date of the grant agreement pay for those costs using its CDBG funds,provided that:</P>

                <P>(i) The activity for which the costs are being incurred is included, prior to <PRTPAGE P="40"/>the costs being incurred, in a consolidated plan action plan, an amendedconsolidated plan action plan, or an application under subpart M of this part,except that a new entitlement grantee preparing to receive its first allocationof CDBG funds may incur costs necessary to develop its consolidated plan andundertake other administrative actions necessary to receive its first grant,prior to the costs being included in its consolidated plan;</P>
                <P>(ii) Citizens are advised of the extent to which these pre-award costs willaffect future grants;</P>
                <P>(iii) The costs and activities funded are in compliance with the requirementsof this part and with the Environmental Review Procedures stated in 24 CFR part58;</P>
                <P>(iv) The activity for which payment is being made complies with the statutoryand regulatory provisions in effect at the time the costs are paid for with CDBGfunds;</P>
                <P>(v) CDBG payment will be made during a time no longer than the next twoprogram years following the effective date of the grant agreement or amendmentin which the activity is first included; and</P>
                <P>(vi) The total amount of pre-award costs to be paid during any program yearpursuant to this provision is no more than the greater of 25 percent of theamount of the grant made for that year or $300,000.</P>
                <P>(2) Upon the written request of the recipient, HUD may authorize payment ofpre-award costs for activities that do not meet the criteria at paragraph(h)(1)(v) or (h)(1)(vi) of this section, if HUD determines, in writing, thatthere is good cause for granting an exception upon consideration of thefollowing factors, as applicable:</P>
                <P>(i) Whether granting the authority would result in a significant contributionto the goals and purposes of the CDBG program;</P>
                <P>(ii) Whether failure to grant the authority would result in undue hardship tothe recipient or beneficiaries of the activity;</P>
                <P>(iii) Whether granting the authority would not result in a violation of astatutory provision or any other regulatory provision;</P>
                <P>(iv) Whether circumstances are clearly beyond the recipient's control; or</P>
                <P>(v) Any other relevant considerations.</P>
                <P>(i) <E T="03">Urban Development Action Grant.</E> Grant assistance may beprovided with Urban Development Action Grant funds, subject to the provisions ofsubpart G, for:</P>
                <P>(1) Activities eligible for assistance under this subpart; and</P>
                <P>(2) Notwithstanding the provisions of § 570.207, such otheractivities as the Secretary may determine to be consistent with the purposes ofthe Urban Development Action Grant program.</P>
                <P>(j) <E T="03">Faith-based activities.</E> (1) Organizations that arereligious or faith-based are eligible, on the same basis as any otherorganization, to participate in the CDBG program. Neither the Federal governmentnor a State or local government receiving funds under CDBG programs shalldiscriminate against an organization on the basis of the organization'sreligious character or affiliation.</P>
                <P>(2) Organizations that are directly funded under the CDBG program may notengage in inherently religious activities, such as worship, religiousinstruction, or proselytization, as part of the programs or services fundedunder this part. If an organization conducts such activities, the activitiesmust be offered separately, in time or location, from the programs or servicesfunded under this part, and participation must be voluntary for thebeneficiaries of the HUD-funded programs or services.</P>

                <P>(3) A religious organization that participates in the CDBG program willretain its independence from Federal, State, and local governments, and maycontinue to carry out its mission, including the definition, practice, andexpression of its religious beliefs, provided that it does not use direct CDBGfunds to support any inherently religious activities, such as worship, religiousinstruction, or proselytization. Among other things, faith-based organizationsmay use space in their facilities to provide CDBG-funded services, withoutremoving religious art, icons, scriptures, or other religious symbols. Inaddition, a CDBG-funded religious organization retains its authority over <PRTPAGE P="41"/>itsinternal governance, and it may retain religious terms in its organization'sname, select its board members on a religious basis, and include religiousreferences in its organization's mission statements and other governingdocuments.</P>
                <P>(4) An organization that participates in the CDBG program shall not, inproviding program assistance, discriminate against a program beneficiary orprospective program beneficiary on the basis of religion or religious belief.</P>

                <P>(5) CDBG funds may not be used for the acquisition, construction, orrehabilitation of structures to the extent that those structures are used forinherently religious activities. CDBG funds may be used for the acquisition,construction, or rehabilitation of structures only to the extent that thosestructures are used for conducting eligible activities under this part. Where astructure is used for both eligible and inherently religious activities, CDBGfunds may not exceed the cost of those portions of the acquisition,construction, or rehabilitation that are attributable to eligible activities inaccordance with the cost accounting requirements applicable to CDBG funds inthis part. Sanctuaries, chapels, or other rooms that a CDBG-funded religiouscongregation uses as its principal place of worship, however, are ineligible forCDBG-funded improvements. Disposition of real property after the term of thegrant, or any change in use of the property during the term of the grant, issubject to government-wide regulations governing real property disposition (<E T="03">see</E> 24 CFR parts 84 and 85).</P>
                <P>(6) If a State or local government voluntarily contributes its own funds tosupplement federally funded activities, the State or local government has theoption to segregate the Federal funds or commingle them. However, if the fundsare commingled, this section applies to all of the commingled funds.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988, as amended at 54 FR 47031, Nov. 8, 1989; 57FR 27119, June 17, 1992; 60 FR 1943, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60FR 56910, Nov. 9, 1995; 61 FR 11476, Mar. 20, 1996; 61 FR 18674, Apr. 29, 1996;65 FR 70215, Nov. 21, 2000; 68 FR 56404, Sept. 30, 2003; 69 FR 32778, June 10,2004; 70 FR 76369, Dec. 23, 2005]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.201</SECTNO>
                <SUBJECT>Basic eligible activities.</SUBJECT>
                <P>CDBG funds may be used for the following activities:</P>
                <P>(a) <E T="03">Acquisition.</E> Acquisition in whole or in part by therecipient, or other public or private nonprofit entity, by purchase, long-termlease, donation, or otherwise, of real property (including air rights, waterrights, rights-of-way, easements, and other interests therein) for any publicpurpose, subject to the limitations of § 570.207.</P>
                <P>(b) <E T="03">Disposition.</E> Disposition, through sale, lease, donation, orotherwise, of any real property acquired with CDBG funds or its retention forpublic purposes, including reasonable costs of temporarily managing suchproperty or property acquired under urban renewal, provided that the proceedsfrom any such disposition shall be program income subject to the requirementsset forth in § 570.504.</P>
                <P>(c) <E T="03">Public facilities and improvements.</E> Acquisition,construction, reconstruction, rehabilitation or installation of publicfacilities and improvements, except as provided in § 570.207(a),carried out by the recipient or other public or private nonprofit entities.(However, activities under this paragraph may be directed to the removal ofmaterial and architectural barriers that restrict the mobility and accessibilityof elderly or severely disabled persons to public facilities and improvements,including those provided for in § 570.207(a)(1).) In undertaking suchactivities, design features and improvements which promote energy efficiency maybe included. Such activities may also include the execution of architecturaldesign features, and similar treatments intended to enhance the aestheticquality of facilities and improvements receiving CDBG assistance, such asdecorative pavements, railings, sculptures, pools of water and fountains, andother works of art. Facilities designed for use in providing shelter for personshaving special needs are considered public facilities and not subject to theprohibition of new housing construction described in § 570.207(b)(3).Such facilities include shelters for the homeless; convalescent homes;hospitals, nursing homes; battered spouse shelters; halfway houses for run-awaychildren, drug offenders or parolees; group homes for <PRTPAGE P="42"/>mentally retarded personsand temporary housing for disaster victims. In certain cases, nonprofit entitiesand subrecipients including those specified in § 570.204 may acquiretitle to public facilities. When such facilities are owned by nonprofit entitiesor subrecipients, they shall be operated so as to be open for use by the generalpublic during all normal hours of operation. Public facilities and improvementseligible for assistance under this paragraph are subject to the policies in§ 570.200(b).</P>
                <P>(d) <E T="03">Clearance and remediation activities.</E> Clearance,demolition, and removal of buildings and improvements, including movement ofstructures to other sites and remediation of known or suspected environmentalcontamination. Demolition of HUD-assisted or HUD-owned housing units may beundertaken only with the prior approval of HUD. Remediation may include project-specific environmental assessment costs not otherwise eligible under§ 570.205.</P>
                <P>(e) <E T="03">Public services.</E> Provision of public services (includinglabor, supplies, and materials) including but not limited to those concernedwith employment, crime prevention, child care, health, drug abuse, education,fair housing counseling, energy conservation, welfare (but excluding theprovision of income payments identified under § 570.207(b)(4)),homebuyer downpayment assistance, or recreational needs. To be eligible for CDBGassistance, a public service must be either a new service or a quantifiableincrease in the level of an existing service above that which has been providedby or on behalf of the unit of general local government (through funds raised bythe unit or received by the unit from the State in which it is located) in the12 calendar months before the submission of the action plan. (An exception tothis requirement may be made if HUD determines that any decrease in the level ofa service was the result of events not within the control of the unit of generallocal government.) The amount of CDBG funds used for public services shall notexceed paragraphs (e) (1) or (2) of this section, as applicable:</P>
                <P>(1) The amount of CDBG funds used for public services shall not exceed 15percent of each grant, except that for entitlement grants made under subpart Dof this part, the amount shall not exceed 15 percent of the grant plus 15percent of program income, as defined in § 570.500(a). Forentitlement grants under subpart D of this part, compliance is based on limitingthe amount of CDBG funds obligated for public service activities in each programyear to an amount no greater than 15 percent of the entitlement grant made forthat program year plus 15 percent of the program income received during thegrantee's immediately preceding program year.</P>
                <P>(2) A recipient which obligated more CDBG funds for public services than 15percent of its grant funded from Federal fiscal year 1982 or 1983 appropriations(excluding program income and any assistance received under Public Law98-8), may obligate more CDBG funds than allowable under paragraph (e)(1)of this section, so long as the total amount obligated in any program year doesnot exceed:</P>
                <P>(i) For an entitlement grantee, 15% of the program income it received duringthe preceding program year; plus</P>
                <P>(ii) A portion of the grant received for the program year which is thehighest of the following amounts:</P>
                <P>(A) The amount determined by applying the percentage of the grant itobligated for public services in the 1982 program year against the grant for itscurrent program year;</P>
                <P>(B) The amount determined by applying the percentage of the grant itobligated for public services in the 1983 program year against the grant for itscurrent program year;</P>
                <P>(C) The amount of funds it obligated for public services in the 1982 programyear; or,</P>
                <P>(D) The amount of funds it obligated for public services in the 1983 programyear.</P>
                <P>(f) <E T="03">Interim assistance.</E> (1) The following activities may beundertaken on an interim basis in areas exhibiting objectively determinablesigns of physical deterioration where the recipient has determined thatimmediate action is necessary to arrest the deterioration and that permanentimprovements will be carried out as soon as practicable:<PRTPAGE P="43"/>
                </P>
                <P>(i) The repairing of streets, sidewalks, parks, playgrounds, publicly ownedutilities, and public buildings; and</P>
                <P>(ii) The execution of special garbage, trash, and debris removal, includingneighborhood cleanup campaigns, but not the regular curbside collection ofgarbage or trash in an area.</P>
                <P>(2) In order to alleviate emergency conditions threatening the public healthand safety in areas where the chief executive officer of the recipientdetermines that such an emergency condition exists and requires immediateresolution, CDBG funds may be used for:</P>
                <P>(i) The activities specified in paragraph (f)(1) of this section, except forthe repair of parks and playgrounds;</P>
                <P>(ii) The clearance of streets, including snow removal and similar activities,and</P>
                <P>(iii) The improvement of private properties.</P>
                <P>(3) All activities authorized under paragraph (f)(2) of this section arelimited to the extent necessary to alleviate emergency conditions.</P>
                <P>(g) <E T="03">Payment of non-Federal share.</E> Payment of the non-Federalshare required in connection with a Federal grant-in-aid program undertaken aspart of CDBG activities, provided, that such payment shall be limited toactivities otherwise eligible and in compliance with applicable requirementsunder this subpart.</P>
                <P>(h) <E T="03">Urban renewal completion.</E> Payment of the cost of completingan urban renewal project funded under title I of the Housing Act of 1949 asamended. Further information regarding the eligibility of such costs is setforth in § 570.801.</P>
                <P>(i) <E T="03">Relocation.</E> Relocation payments and other assistance forpermanently and temporarily relocated individuals families, businesses,nonprofit organizations, and farm operations where the assistance is (1)required under the provisions of § 570.606 (b) or (c); or (2)determined by the grantee to be appropriate under the provisions of§ 570.606(d).</P>
                <P>(j) <E T="03">Loss of rental income.</E> Payments to housing owners forlosses of rental income incurred in holding, for temporary periods, housingunits to be used for the relocation of individuals and families displaced byprogram activities assisted under this part.</P>
                <P>(k) <E T="03">Housing services.</E> Housing services, as provided in section105(a)(21) of the Act (42 U.S.C. 5305(a)(21)).</P>
                <P>(l) <E T="03">Privately owned utilities.</E> CDBG funds may be used toacquire, construct, reconstruct, rehabilitate, or install the distribution linesand facilities of privately owned utilities, including the placing undergroundof new or existing distribution facilities and lines.</P>
                <P>(m) <E T="03">Construction of housing.</E> CDBG funds may be used for theconstruction of housing assisted under section 17 of the United States HousingAct of 1937.</P>
                <P>(n) <E T="03">Homeownership assistance.</E> CDBG funds may be used to providedirect homeownership assistance to low- or moderate-income households inaccordance with section 105(a) of the Act.</P>
                <P>(o)(1) The provision of assistance either through the recipient directly orthrough public and private organizations, agencies, and other subrecipients(including nonprofit and for-profit subrecipients) to facilitate economicdevelopment by:</P>
                <P>(i) Providing credit, including, but not limited to, grants, loans, loanguarantees, and other forms of financial support, for the establishment,stabilization, and expansion of microenterprises;</P>
                <P>(ii) Providing technical assistance, advice, and business support services toowners of microenterprises and persons developing microenterprises; and</P>
                <P>(iii) Providing general support, including, but not limited to, peer supportprograms, counseling, child care, transportation, and other similar services, toowners of microenterprises and persons developing microenterprises.</P>
                <P>(2) Services provided this paragraph (o) shall not be subject to therestrictions on public services contained in paragraph (e) of this section.</P>

                <P>(3) For purposes of this paragraph (o), “persons developingmicroenterprises” means such persons who have expressed interest and whoare, or after an initial screening process are expected to be, actively workingtoward developing businesses, each of which is expected to be a microenterpriseat the time it is formed.<PRTPAGE P="44"/>
                </P>
                <P>(4) Assistance under this paragraph (o) may also include training, technicalassistance, or other support services to increase the capacity of the recipientor subrecipient to carry out the activities under this paragraph (o).</P>
                <P>(p) <E T="03">Technical assistance.</E> Provision of technical assistance topublic or nonprofit entities to increase the capacity of such entities to carryout eligible neighborhood revitalization or economic development activities.(The recipient must determine, prior to the provision of the assistance, thatthe activity for which it is attempting to build capacity would be eligible forassistance under this subpart C, and that the national objective claimed by thegrantee for this assistance can reasonably be expected to be met once the entityhas received the technical assistance and undertakes the activity.) Capacitybuilding for private or public entities (including grantees) for other purposesmay be eligible under § 570.205.</P>
                <P>(q) <E T="03">Assistance to institutions of higher education.</E> Provisionof assistance by the recipient to institutions of higher education when thegrantee determines that such an institution has demonstrated a capacity to carryout eligible activities under this subpart C.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988, as amended at 53 FR 31239, Aug. 17, 1988; 55FR 29308, July 18, 1990; 57 FR 27119, June 17, 1992; 60 FR 1943, Jan. 5, 1995;60 FR 56911, Nov. 9, 1995; 61 FR 18674, Apr. 29, 1996; 65 FR 70215, Nov. 21,2000; 67 FR 47213, July 17, 2002; 71 FR 30034, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.202</SECTNO>
                <SUBJECT>Eligible rehabilitation and preservation activities.</SUBJECT>
                <P>(a) <E T="03">Types of buildings and improvements eligible for rehabilitationassistance.</E> CDBG funds may be used to finance the rehabilitation of:</P>
                <P>(1) Privately owned buildings and improvements for residential purposes;improvements to a single-family residential property which is also used as aplace of business, which are required in order to operate the business, need notbe considered to be rehabilitation of a commercial or industrial building, ifthe improvements also provide general benefit to the residential occupants ofthe building;</P>
                <P>(2) Low-income public housing and other publicly owned residential buildingsand improvements;</P>
                <P>(3) Publicly or privately owned commercial or industrial buildings, exceptthat the rehabilitation of such buildings owned by a private for-profit businessis limited to improvement to the exterior of the building, abatement of asbestoshazards, lead-based paint hazard evaluation and reduction, and the correction ofcode violations;</P>
                <P>(4) Nonprofit-owned nonresidential buildings and improvements not eligibleunder § 570.201(c); and</P>
                <P>(5) Manufactured housing when such housing constitutes part of thecommunity's permanent housing stock.</P>
                <P>(b) <E T="03">Types of assistance.</E> CDBG funds may be used to finance thefollowing types of rehabilitation activities, and related costs, either singly,or in combination, through the use of grants, loans, loan guarantees, interestsupplements, or other means for buildings and improvements described inparagraph (a) of this section, except that rehabilitation of commercial orindustrial buildings is limited as described in paragraph (a)(3) of thissection.</P>
                <P>(1) Assistance to private individuals and entities, including profit makingand nonprofit organizations, to acquire for the purpose of rehabilitation, andto rehabilitate properties, for use or resale for residential purposes;</P>
                <P>(2) Labor, materials, and other costs of rehabilitation of properties,including repair directed toward an accumulation of deferred maintenance,replacement of principal fixtures and components of existing structures,installation of security devices, including smoke detectors and dead bolt locks,and renovation through alterations, additions to, or enhancement of existingstructures and improvements, abatement of asbestos hazards (and othercontaminants) in buildings and improvements that may be undertaken singly, or incombination;</P>

                <P>(3) Loans for refinancing existing indebtedness secured by a property beingrehabilitated with CDBG funds if such financing is determined by the recipientto be necessary or appropriate to achieve the locality's community developmentobjectives;<PRTPAGE P="45"/>
                </P>
                <P>(4) Improvements to increase the efficient use of energy in structuresthrough such means as installation of storm windows and doors, siding, wall andattic insulation, and conversion, modification, or replacement of heating andcooling equipment, including the use of solar energy equipment;</P>
                <P>(5) Improvements to increase the efficient use of water through such means aswater savings faucets and shower heads and repair of water leaks;</P>
                <P>(6) Connection of residential structures to water distribution lines or localsewer collection lines;</P>
                <P>(7) For rehabilitation carried out with CDBG funds, costs of:</P>
                <P>(i) Initial homeowner warranty premiums;</P>
                <P>(ii) Hazard insurance premiums, except where assistance is provided in theform of a grant; and</P>
                <P>(iii) Flood insurance premiums for properties covered by the Flood DisasterProtection Act of 1973, pursuant to § 570.605.</P>
                <P>(8) Costs of acquiring tools to be lent to owners, tenants, and others whowill use such tools to carry out rehabilitation;</P>
                <P>(9) Rehabilitation services, such as rehabilitation counseling, energyauditing, preparation of work specifications, loan processing, inspections, andother services related to assisting owners, tenants, contractors, and otherentities, participating or seeking to participate in rehabilitation activitiesauthorized under this section, under section 312 of the Housing Act of 1964, asamended, under section 810 of the Act, or under section 17 of the United StatesHousing Act of 1937;</P>
                <P>(10) Assistance for the rehabilitation of housing under section 17 of theUnited States Housing Act of 1937; and</P>
                <P>(11) Improvements designed to remove material and architectural barriers thatrestrict the mobility and accessibility of elderly or severely disabled personsto buildings and improvements eligible for assistance under paragraph (a) ofthis section.</P>
                <P>(c) <E T="03">Code enforcement.</E> Costs incurred for inspection for codeviolations and enforcement of codes (e.g., salaries and related expenses of codeenforcement inspectors and legal proceedings, but not including the cost ofcorrecting the violations) in deteriorating or deteriorated areas when suchenforcement together with public or private improvements, rehabilitation, orservices to be provided may be expected to arrest the decline of the area.</P>
                <P>(d) <E T="03">Historic preservation.</E> CDBG funds may be used for therehabilitation, preservation or restoration of historic properties, whetherpublicly or privately owned. Historic properties are those sites or structuresthat are either listed in or eligible to be listed in the National Register ofHistoric Places, listed in a State or local inventory of historic places, ordesignated as a State or local landmark or historic district by appropriate lawor ordinance. Historic preservation, however, is not authorized for buildingsfor the general conduct of government.</P>
                <P>(e) <E T="03">Renovation of closed buildings.</E> CDBG funds may be used torenovate closed buildings, such as closed school buildings, for use as aneligible public facility or to rehabilitate such buildings for housing.</P>
                <P>(f) <E T="03">Lead-based paint activities.</E> Lead-based paint activitiespursuant to § 570.608.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 60FR 1944, Jan. 5, 1995; 60 FR 56911, Nov. 9, 1995; 64 FR 50225, Sept. 15, 1999;71 FR 30035, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.203</SECTNO>
                <SUBJECT>Special economic development activities.</SUBJECT>

                <P>A recipient may use CDBG funds for special economic development activities inaddition to other activities authorized in this subpart that may be carried outas part of an economic development project. Guidelines for selecting activitiesto assist under this paragraph are provided at § 570.209. Therecipient must ensure that the appropriate level of public benefit will bederived pursuant to those guidelines before obligating funds under thisauthority. Special activities authorized under this section do not includeassistance for the construction of new housing. Activities eligible under thissection may include costs associated with project-specific assessment orremediation of known or suspected environmental contamination. Special economicdevelopment activities include:<PRTPAGE P="46"/>
                </P>
                <P>(a) The acquisition, construction, reconstruction, rehabilitation orinstallation of commercial or industrial buildings, structures, and other realproperty equipment and improvements, including railroad spurs or similarextensions. Such activities may be carried out by the recipient or public orprivate nonprofit subrecipients.</P>
                <P>(b) The provision of assistance to a private for-profit business, including,but not limited to, grants, loans, loan guarantees, interest supplements,technical assistance, and other forms of support, for any activity where theassistance is appropriate to carry out an economic development project,excluding those described as ineligible in § 570.207(a). In selectingbusinesses to assist under this authority, the recipient shall minimize, to theextent practicable, displacement of existing businesses and jobs inneighborhoods.</P>
                <P>(c) Economic development services in connection with activities eligibleunder this section, including, but not limited to, outreach efforts to marketavailable forms of assistance; screening of applicants; reviewing andunderwriting applications for assistance; preparation of all necessaryagreements; management of assisted activities; and the screening, referral, andplacement of applicants for employment opportunities generated by CDBG-eligibleeconomic development activities, including the costs of providing necessarytraining for persons filling those positions.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988, as amended at 60 FR 1944, Jan. 5, 1995; 71 FR30035, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.204</SECTNO>
                <SUBJECT>Special activities by Community-Based Development Organizations(CBDOs).</SUBJECT>
                <P>(a) <E T="03">Eligible activities.</E> The recipient may provide CDBG fundsas grants or loans to any CBDO qualified under this section to carry out aneighborhood revitalization, community economic development, or energyconservation project. The funded project activities may include those listed aseligible under this subpart, and, except as described in paragraph (b) of thissection, activities not otherwise listed as eligible under this subpart. Forpurposes of qualifying as a project under paragraphs (a)(1), (a)(2), and (a)(3)of this section, the funded activity or activities may be considered eitheralone or in concert with other project activities either being carried out orfor which funding has been committed. For purposes of this section:</P>
                <P>(1) Neighborhood revitalization project includes activities of sufficientsize and scope to have an impact on the decline of a geographic location withinthe jurisdiction of a unit of general local government (but not the entirejurisdiction) designated in comprehensive plans, ordinances, or other localdocuments as a neighborhood, village, or similar geographical designation; orthe entire jurisdiction of a unit of general local government which is under25,000 population;</P>
                <P>(2) Community economic development project includes activities that increaseeconomic opportunity, principally for persons of low- and moderate-income, orthat stimulate or retain businesses or permanent jobs, including projects thatinclude one or more such activities that are clearly needed to address a lack ofaffordable housing accessible to existing or planned jobs and those activitiesspecified at 24 CFR 91.1(a)(1)(iii); activities under this paragraph may includecosts associated with project-specific assessment or remediation of known orsuspected environmental contamination;</P>
                <P>(3) Energy conservation project includes activities that address energyconservation, principally for the benefit of the residents of the recipient'sjurisdiction; and</P>
                <P>(4) To carry out a project means that the CBDO undertakes the fundedactivities directly or through contract with an entity other than the grantee,or through the provision of financial assistance for activities in which itretains a direct and controlling involvement and responsibilities.</P>
                <P>(b) <E T="03">Ineligible activities.</E> Notwithstanding that CBDOs may carryout activities that are not otherwise eligible under this subpart, this sectiondoes not authorize:</P>
                <P>(1) Carrying out an activity described as ineligible in§ 570.207(a);</P>

                <P>(2) Carrying out public services that do not meet the requirements of§ 570.201(e), except that:<PRTPAGE P="47"/>
                </P>
                <P>(i) Services carried out under this section that are specifically designed toincrease economic opportunities through job training and placement and otheremployment support services, including, but not limited to, peer supportprograms, counseling, child care, transportation, and other similar services;and</P>
                <P>(ii) Services of any type carried out under this section pursuant to astrategy approved by HUD under the provisions of 24 CFR 91.215(e) shall not besubject to the limitations in § 570.201(e)(1) or (2), as applicable;</P>
                <P>(3) Providing assistance to activities that would otherwise be eligible under§ 570.203 that do not meet the requirements of § 570.209;or</P>
                <P>(4) Carrying out an activity that would otherwise be eligible under§ 570.205 or § 570.206, but that would result in therecipient's exceeding the spending limitation in § 570.200(g).</P>
                <P>(c) <E T="03">Eligible CBDOs.</E> (1) A CBDO qualifying under this section isan organization which has the following characteristics:</P>
                <P>(i) Is an association or corporation organized under State or local law toengage in community development activities (which may include housing andeconomic development activities) primarily within an identified geographic areaof operation within the jurisdiction of the recipient, or in the case of anurban county, the jurisdiction of the county; and</P>
                <P>(ii) Has as its primary purpose the improvement of the physical, economic orsocial environment of its geographic area of operation by addressing one or morecritical problems of the area, with particular attention to the needs of personsof low and moderate income; and</P>
                <P>(iii) May be either non-profit or for-profit, provided any monetary profitsto its shareholders or members must be only incidental to its operations; and</P>
                <P>(iv) Maintains at least 51 percent of its governing body's membership forlow- and moderate-income residents of its geographic area of operation, ownersor senior officers of private establishments and other institutions located inand serving its geographic area of operation, or representatives of low- andmoderate-income neighborhood organizations located in its geographic area ofoperation; and</P>
                <P>(v) Is not an agency or instrumentality of the recipient and does not permitmore than one-third of the membership of its governing body to be appointed by,or to consist of, elected or other public officials or employees or officials ofan ineligible entity (even though such persons may be otherwise qualified underparagraph (c)(1)(iv) of this section); and</P>
                <P>(vi) Except as otherwise authorized in paragraph (c)(1)(v) of this section,requires the members of its governing body to be nominated and approved by thegeneral membership of the organization, or by its permanent governing body; and</P>
                <P>(vii) Is not subject to requirements under which its assets revert to therecipient upon dissolution; and</P>
                <P>(viii) Is free to contract for goods and services from vendors of its ownchoosing.</P>
                <P>(2) A CBDO that does not meet the criteria in paragraph (c)(1) of thissection may also qualify as an eligible entity under this section if it meetsone of the following requirements:</P>
                <P>(i) Is an entity organized pursuant to section 301(d) of the Small BusinessInvestment Act of 1958 (15 U.S.C. 681(d)), including those which are profitmaking; or</P>
                <P>(ii) Is an SBA approved Section 501 State Development Company or Section 502Local Development Company, or an SBA Certified Section 503 Company under theSmall Business Investment Act of 1958, as amended; or</P>
                <P>(iii) Is a Community Housing Development Organization (CHDO) under 24 CFR92.2, designated as a CHDO by the HOME Investment Partnerships programparticipating jurisdiction, with a geographic area of operation of no more thanone neighborhood, and has received HOME funds under 24 CFR 92.300 or is expectedto receive HOME funds as described in and documented in accordance with 24 CFR92.300(e).</P>

                <P>(3) A CBDO that does not qualify under paragraph (c)(1) or (2) of thissection may also be determined to qualify as an eligible entity under thissection if the recipient demonstrates to the <PRTPAGE P="48"/>satisfaction of HUD, through theprovision of information regarding the organization's charter and by-laws, thatthe organization is sufficiently similar in purpose, function, and scope tothose entities qualifying under paragraph (c)(1) or (2) of this section.</P>
                <CITA>[60 FR 1944, Jan. 5, 1995, as amended at 71 FR 30035, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.205</SECTNO>
                <SUBJECT>Eligible planning, urban environmental design and policy-planning-management-capacity building activities.</SUBJECT>
                <P>(a) Planning activities which consist of all costs of data gathering,studies, analysis, and preparation of plans and the identification of actionsthat will implement such plans, including, but not limited to:</P>
                <P>(1) Comprehensive plans;</P>
                <P>(2) Community development plans;</P>
                <P>(3) Functional plans, in areas such as:</P>
                <P>(i) Housing, including the development of a consolidated plan;</P>
                <P>(ii) Land use and urban environmental design;</P>
                <P>(iii) Economic development;</P>
                <P>(iv) Open space and recreation;</P>
                <P>(v) Energy use and conservation;</P>
                <P>(vi) Floodplain and wetlands management in accordance with the requirementsof Executive Orders 11988 and 11990;</P>
                <P>(vii) Transportation;</P>
                <P>(viii) Utilities; and</P>
                <P>(ix) Historic preservation.</P>
                <P>(4) Other plans and studies such as:</P>
                <P>(i) Small area and neighborhood plans;</P>
                <P>(ii) Capital improvements programs;</P>
                <P>(iii) Individual project plans (but excluding engineering and design costsrelated to a specific activity which are eligible as part of the cost of suchactivity under §§ 570.201-570.204);</P>
                <P>(iv) The reasonable costs of general environmental, urban environmentaldesign and historic preservation studies; and general environmental assessment-and remediation-oriented planning related to properties with known or suspectedenvironmental contamination. However, costs necessary to comply with 24 CFR part58, including project specific environmental assessments and clearances foractivities eligible for assistance under this part, are eligible as part of thecost of such activities under §§ 570.201-570.204. Costsfor such specific assessments and clearances may also be incurred under thisparagraph but would then be considered planning costs for the purposes of§ 570.200(g);</P>
                <P>(v) Strategies and action programs to implement plans, including thedevelopment of codes, ordinances and regulations;</P>
                <P>(vi) Support of clearinghouse functions, such as those specified in ExecutiveOrder 12372; and</P>
                <P>(vii) Analysis of impediments to fair housing choice.</P>
                <P>(viii) Developing an inventory of properties with known or suspectedenvironmental contamination.</P>
                <P>(6) Policy—planning—management—capacity building activitieswhich will enable the recipient to:</P>
                <P>(1) Determine its needs;</P>
                <P>(2) Set long-term goals and short-term objectives, including those related tourban environmental design;</P>
                <P>(3) Devise programs and activities to meet these goals and objectives;</P>
                <P>(4) Evaluate the progress of such programs and activities in accomplishingthese goals and objectives; and</P>
                <P>(5) Carry out management, coordination and monitoring of activities necessaryfor effective planning implementation, but excluding the costs necessary toimplement such plans.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991; 60FR 1915, Jan. 5, 1995; 71 FR 30035, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.206</SECTNO>
                <SUBJECT>Program administrative costs.</SUBJECT>
                <P>Payment of reasonable administrative costs and carrying charges related tothe planning and execution of community development activities assisted in wholeor in part with funds provided under this part and, where applicable, housingactivities (described in paragraph (g) of this section) covered in therecipient's housing assistance plan. This does not include staff and overheadcosts directly related to carrying out activities eligible under§ 570.201 through § 570.204, since those costs areeligible as part of such activities.</P>
                <P>(a) <E T="03">General management, oversight and coordination.</E> Reasonablecosts of overall program management, coordination, monitoring, and evaluation.Such <PRTPAGE P="49"/>costs include, but are not necessarily limited to, necessary expendituresfor the following:</P>

                <P>(1) Salaries, wages, and related costs of the recipient's staff, the staff oflocal public agencies, or other staff engaged in program administration. Incharging costs to this category the recipient may either include the entiresalary, wages, and related costs allocable to the program of each person whose<E T="03">primary</E> responsibilities with regard to the program involveprogram administration assignments, or the pro rata share of the salary, wages,and related costs of each person whose job includes <E T="03">any</E> programadministration assignments. The recipient may use only one of these methodsduring the program year (or the grant period for grants under subpart F).Program administration includes the following types of assignments:</P>
                <P>(i) Providing local officials and citizens with information about theprogram;</P>
                <P>(ii) Preparing program budgets and schedules, and amendments thereto;</P>
                <P>(iii) Developing systems for assuring compliance with program requirements;</P>
                <P>(iv) Developing interagency agreements and agreements with subrecipients andcontractors to carry out program activities;</P>
                <P>(v) Monitoring program activities for progress and compliance with programrequirements;</P>
                <P>(vi) Preparing reports and other documents related to the program forsubmission to HUD;</P>
                <P>(vii) Coordinating the resolution of audit and monitoring findings;</P>
                <P>(viii) Evaluating program results against stated objectives; and</P>
                <P>(ix) Managing or supervising persons whose primary responsibilities withregard to the program include such assignments as those described in paragraph(a)(1)(i) through (viii) of this section.</P>
                <P>(2) Travel costs incurred for official business in carrying out the program;</P>
                <P>(3) Administrative services performed under third party contracts oragreements, including such services as general legal services, accountingservices, and audit services; and</P>
                <P>(4) Other costs for goods and services required for administration of theprogram, including such goods and services as rental or purchase of equipment,insurance, utilities, office supplies, and rental and maintenance (but notpurchase) of office space.</P>
                <P>(b) <E T="03">Public information.</E> The provisions of information and otherresources to residents and citizen organizations participating in the planning,implementation, or assessment of activities being assisted with CDBG funds.</P>
                <P>(c) <E T="03">Fair housing activities.</E> Provision of fair housing servicesdesigned to further the fair housing objectives of the Fair Housing Act (42U.S.C. 3601-20) by making all persons, without regard to race, color,religion, sex, national origin, familial status or handicap, aware of the rangeof housing opportunities available to them; other fair housing enforcement,education, and outreach activities; and other activities designed to further thehousing objective of avoiding undue concentrations of assisted persons in areascontaining a high proportion of low and moderate income persons.</P>
                <P>(d) [Reserved]</P>
                <P>(e) <E T="03">Indirect costs.</E> Indirect costs may be charged to the CDBGprogram under a cost allocation plan prepared in accordance with OMB CircularA-21, A-87, or A-122 as applicable.</P>
                <P>(f) <E T="03">Submission of applications for federal programs.</E>Preparation of documents required for submission to HUD to receive funds underthe CDBG and UDAG programs. In addition, CDBG funds may be used to prepareapplications for other Federal programs where the recipient determines that suchactivities are necessary or appropriate to achieve its community developmentobjectives.</P>
                <P>(g) <E T="03">Administrative expenses to facilitate housing.</E> CDBG fundsmay be used for necessary administrative expenses in planning or obtainingfinancing for housing as follows: for entitlement recipients, assistanceauthorized by this paragraph is limited to units which are identified in therecipient's HUD approved housing assistance plan; for HUD-administered smallcities recipients, assistance authorized by the paragraph is limited tofacilitating the purchase or occupancy of existing units <PRTPAGE P="50"/>which are to beoccupied by low and moderate income households, or the construction of rental orowner units where at least 20 percent of the units in each project will beoccupied at affordable rents/costs by low and moderate income persons. Examplesof eligible actions are as follows:</P>
                <P>(1) The cost of conducting preliminary surveys and analysis of market needs;</P>
                <P>(2) Site and utility plans, narrative descriptions of the proposedconstruction, preliminary cost estimates, urban design documentation, and“sketch drawings,” but excluding architectural, engineering, andother details ordinarily required for construction purposes, such as structural,electrical, plumbing, and mechanical details;</P>
                <P>(3) Reasonable costs associated with development of applications for mortgageand insured loan commitments, including commitment fees, and of applications andproposals under the Section 8 Housing Assistance Payments Program pursuant to 24CFR parts 880-883;</P>
                <P>(4) Fees associated with processing of applications for mortgage or insuredloan commitments under programs including those administered by HUD, FarmersHome Administration (FmHA), Federal National Mortgage Association (FNMA), andthe Government National Mortgage Association (GNMA);</P>
                <P>(5) The cost of issuance and administration of mortgage revenue bonds used tofinance the acquisition, rehabilitation or construction of housing, butexcluding costs associated with the payment or guarantee of the principal orinterest on such bonds; and</P>
                <P>(6) Special outreach activities which result in greater landlordparticipation in Section 8 Housing Assistance Payments Program-Existing Housingor similar programs for low and moderate income persons.</P>
                <P>(h) <E T="03">Section 17 of the United States Housing Act of 1937.</E>Reasonable costs equivalent to those described in paragraphs (a), (b), (e) and(f) of this section for overall program management of the Rental Rehabilitationand Housing Development programs authorized under section 17 of the UnitedStates Housing Act of 1937, whether or not such activities are otherwiseassisted with funds provided under this part.</P>
                <P>(i) Whether or not such activities are otherwise assisted by funds providedunder this part, reasonable costs equivalent to those described in paragraphs(a), (b), (e), and (f) of this section for overall program management of:</P>
                <P>(1) A Federally designated Empowerment Zone or Enterprise Community; and</P>
                <P>(2) The HOME program under title II of the Cranston-Gonzalez NationalAffordable Housing Act (42 U.S.C. 12701 note).</P>
                <CITA>[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 54FR 37411, Sept. 8, 1989; 60 FR 56912, Nov. 9, 1995; 69 FR 32778, June 10, 2004]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.207</SECTNO>
                <SUBJECT>Ineligible activities.</SUBJECT>
                <P>The general rule is that any activity that is not authorized under theprovisions of §§ 570.201-570.206 is ineligible to beassisted with CDBG funds. This section identifies specific activities that areineligible and provides guidance in determining the eligibility of otheractivities frequently associated with housing and community development.</P>
                <P>(a) The following activities may not be assisted with CDBG funds:</P>
                <P>(1) <E T="03">Buildings or portions thereof, used for the general conduct ofgovernment</E> as defined at § 570.3(d) cannot be assisted with CDBGfunds. This does not include, however, the removal of architectural barriersunder § 570.201(c) involving any such building. Also, whereacquisition of real property includes an existing improvement which is to beused in the provision of a building for the general conduct of government, theportion of the acquisition cost attributable to the land is eligible, providedsuch acquisition meets a national objective described in § 570.208.</P>
                <P>(2) <E T="03">General government expenses.</E> Except as otherwisespecifically authorized in this subpart or under OMB Circular A-87,expenses required to carry out the regular responsibilities of the unit ofgeneral local government are not eligible for assistance under this part.</P>
                <P>(3) <E T="03">Political activities.</E> CDBG funds shall not be used tofinance the use of facilities or equipment for political purposes or to engagein other partisan <PRTPAGE P="51"/>political activities, such as candidate forums, votertransportation, or voter registration. However, a facility originally assistedwith CDBG funds may be used on an incidental basis to hold political meetings,candidate forums, or voter registration campaigns, provided that all parties andorganizations have access to the facility on an equal basis, and are assessedequal rent or use charges, if any.</P>
                <P>(b) The following activities may not be assisted with CDBG funds unlessauthorized under provisions of § 570.203 or as otherwise specificallynoted herein or when carried out by an entity under the provisions of§ 570.204.</P>
                <P>(1) <E T="03">Purchase of equipment.</E> The purchase of equipment with CDBGfunds is generally ineligible.</P>
                <P>(i) <E T="03">Construction equipment.</E> The purchase of constructionequipment is ineligible, but compensation for the use of such equipment throughleasing, depreciation, or use allowances pursuant to OMB Circulars A-21,A-87 or A-122 as applicable for an otherwise eligible activity is aneligible use of CDBG funds. However, the purchase of construction equipment foruse as part of a solid waste disposal facility is eligible under§ 570.201(c).</P>
                <P>(ii) <E T="03">Fire protection equipment.</E> Fire protection equipment isconsidered for this purpose to be an integral part of a public facility andthus, purchase of such equipment would be eligible under§ 570.201(c).</P>
                <P>(iii) <E T="03">Furnishings and personal property.</E> The purchase ofequipment, fixtures, motor vehicles, furnishings, or other personal property notan integral structural fixture is generally ineligible. CDBG funds may be used,however, to purchase or to pay depreciation or use allowances (in accordancewith OMB Circular A-21, A-87 or A-122, as applicable) for suchitems when necessary for use by a recipient or its subrecipients in theadministration of activities assisted with CDBG funds, or when eligible as firefighting equipment, or when such items constitute all or part of a publicservice pursuant to § 570.201(e).</P>
                <P>(2) <E T="03">Operating and maintenance expenses.</E> The general rule isthat any expense associated with repairing, operating or maintaining publicfacilities, improvements and services is ineligible. Specific exceptions to thisgeneral rule are operating and maintenance expenses associated with publicservice activities, interim assistance, and office space for program staffemployed in carrying out the CDBG program. For example, the use of CDBG funds topay the allocable costs of operating and maintaining a facility used inproviding a public service would be eligible under § 570.201(e), evenif no other costs of providing such a service are assisted with such funds.Examples of ineligible operating and maintenance expenses are:</P>
                <P>(i) Maintenance and repair of publicly owned streets, parks, playgrounds,water and sewer facilities, neighborhood facilities, senior centers, centers forpersons with a disabilities, parking and other public facilities andimprovements. Examples of maintenance and repair activities for which CDBG fundsmay not be used include the filling of pot holes in streets, repairing of cracksin sidewalks, the mowing of recreational areas, and the replacement of expendedstreet light bulbs; and</P>
                <P>(ii) Payment of salaries for staff, utility costs and similar expensesnecessary for the operation of public works and facilities.</P>
                <P>(3) <E T="03">New housing construction.</E> For the purpose of thisparagraph, activities in support of the development of low or moderate incomehousing including clearance, site assemblage, provision of site improvements andprovision of public improvements and certain housing pre-construction costs setforth in § 570.206(g), are not considered as activities to subsidizeor assist new residential construction. CDBG funds may not be used for theconstruction of new permanent residential structures or for any program tosubsidize or assist such new construction, except:</P>
                <P>(i) As provided under the last resort housing provisions set forth in 24 CFRpart 42;</P>
                <P>(ii) As authorized under § 570.201(m) or (n);</P>
                <P>(iii) When carried out by an entity pursuant to § 570.204(a);</P>
                <P>(4) <E T="03">Income payments.</E> The general rule is that CDBG funds maynot be used for income payments. For purposes of the <PRTPAGE P="52"/>CDBG program, “incomepayments” means a series of subsistence-type grant payments made to anindividual or family for items such as food, clothing, housing (rent ormortgage), or utilities, but excludes emergency grant payments made over aperiod of up to three consecutive months to the provider of such items orservices on behalf of an individual or family.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 60FR 1945, Jan. 5, 1995; 60 FR 56912, Nov. 9, 1995; 65 FR 70215, Nov. 21, 2000]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.208</SECTNO>
                <SUBJECT>Criteria for national objectives.</SUBJECT>
                <P>The following criteria shall be used to determine whether a CDBG-assistedactivity complies with one or more of the national objectives as required under§ 570.200(a)(2):</P>
                <P>(a) <E T="03">Activities benefiting low- and moderate-income persons.</E>Activities meeting the criteria in paragraph (a) (1), (2), (3), or (4) of thissection as applicable, will be considered to benefit low and moderate incomepersons unless there is substantial evidence to the contrary. In assessing anysuch evidence, the full range of direct effects of the assisted activity will beconsidered. (The recipient shall appropriately ensure that activities that meetthese criteria do not benefit moderate income persons to the exclusion of lowincome persons.)</P>
                <P>(1) <E T="03">Area benefit activities.</E> (i) An activity, the benefits ofwhich are available to all the residents in a particular area, where at least 51percent of the residents are low and moderate income persons. Such an area neednot be coterminous with census tracts or other officially recognized boundariesbut must be the entire area served by the activity. An activity that serves anarea that is not primarily residential in character shall not qualify under thiscriterion.</P>
                <P>(ii) For metropolitan cities and urban counties, an activity that wouldotherwise qualify under § 570.208(a)(1)(i) except that the areaserved contains less than 51 percent low and moderate income residents will alsobe considered to meet the objective of benefiting low and moderate incomepersons where the proportion of low and moderate income persons in the area iswithin the highest quartile of all areas in the recipient's jurisdiction interms of the degree of concentration of such persons. In applying thisexception, HUD will determine the lowest proportion a recipient may use toqualify an area for this purpose as follows:</P>
                <P>(A) All census block groups in the recipient's jurisdiction shall be rankordered from the block group of highest proportion of low and moderate incomepersons to the block group with the lowest. For urban counties, the rankordering shall cover the entire area constituting the urban county and shall notbe done separately for each participating unit of general local government.</P>
                <P>(B) In any case where the total number of a recipient's block groups does notdivide evenly by four, the block group which would be fractionally dividedbetween the highest and second quartiles shall be considered to be part of thehighest quartile.</P>
                <P>(C) The proportion of low and moderate income persons in the last censusblock group in the highest quartile shall be identified. Any service arealocated within the recipient's jurisdiction and having a proportion of low andmoderate income persons at or above this level shall be considered to be withinthe highest quartile.</P>
                <P>(D) If block group data are not available for the entire jurisdiction, otherdata acceptable to the Secretary may be used in the above calculations.</P>
                <P>(iii) An activity to develop, establish, and operate for up to two yearsafter the establishment of, a uniform emergency telephone number system servingan area having less than the percentage of low- and moderate-income residentsrequired under paragraph (a)(1)(i) of this section or (as applicable) paragraph(a)(1)(ii) of this section, provided the recipient obtains prior HUD approval.To obtain such approval, the recipient must:</P>

                <P>(A) Demonstrate that the system will contribute significantly to the safetyof the residents of the area. The request for approval must include a list ofthe emergency services that will participate in the emergency telephone numbersystem;<PRTPAGE P="53"/>
                </P>
                <P>(B) Submit information that serves as a basis for HUD to determine whether atleast 51 percent of the use of the system will be by low- and moderate-incomepersons. As available, the recipient must provide information that identifiesthe total number of calls actually received over the preceding 12-month periodfor each of the emergency services to be covered by the emergency telephonenumber system and relates those calls to the geographic segment (expressed asnearly as possible in terms of census tracts, block numbering areas, blockgroups, or combinations thereof that are contained within the segment) of theservice area from which the calls were generated. In analyzing this data to meetthe requirements of this section, HUD will assume that the distribution ofincome among the callers generally reflects the income characteristics of thegeneral population residing in the same geographic area where the callersreside. If HUD can conclude that the users have primarily consisted of low- andmoderate-income persons, no further submission is needed by the recipient. If arecipient plans to make other submissions for this purpose, it may request thatHUD review its planned methodology before expending the effort to acquire theinformation it expects to use to make its case;</P>
                <P>(C) Demonstrate that other Federal funds received by the recipient areinsufficient or unavailable for a uniform emergency telephone number system. Forthis purpose, the recipient must submit a statement explaining whether the lackof funds is due to the insufficiency of the amount of the available funds,restrictions on the use of such funds, or the prior commitment of funds by therecipient for other purposes; and</P>
                <P>(D) Demonstrate that the percentage of the total costs of the system paid forby CDBG funds does not exceed the percentage of low- and moderate-income personsin the service area of the system. For this purpose, the recipient must includea description of the boundaries of the service area of the emergency telephonenumber system, the census divisions that fall within the boundaries of theservice area (census tracts or block numbering areas), the total number ofpersons and the total number of low- and moderate-income persons within eachcensus division, the percentage of low- and moderate-income persons within theservice area, and the total cost of the system.</P>
                <P>(iv) An activity for which the assistance to a public improvement thatprovides benefits to all the residents of an area is limited to paying specialassessments (as defined in § 570.200(c)) levied against residentialproperties owned and occupied by persons of low and moderate income.</P>
                <P>(v) For purposes of determining qualification under this criterion,activities of the same type that serve different areas will be consideredseparately on the basis of their individual service area.</P>

                <P>(vi) In determining whether there is a sufficiently large percentage of low-and moderate-income persons residing in the area served by an activity toqualify under paragraph (a)(1) (i), (ii), or (vii) of this section, the mostrecently available decennial census information must be used to the fullestextent feasible, together with the section 8 income limits that would haveapplied at the time the income information was collected by the Census Bureau.Recipients that believe that the census data does not reflect current relativeincome levels in an area, or where census boundaries do not coincidesufficiently well with the service area of an activity, may conduct (or haveconducted) a current survey of the residents of the area to determine thepercent of such persons that are low and moderate income. HUD will acceptinformation obtained through such surveys, to be used in lieu of the decennialcensus data, where it determines that the survey was conducted in such a mannerthat the results meet standards of statistical reliability that are comparableto that of the decennial census data for areas of similar size. Where there issubstantial evidence that provides a clear basis to believe that the use of thedecennial census data would substantially overstate the proportion of personsresiding there that are low and moderate income, HUD may require that therecipient <PRTPAGE P="54"/>rebut such evidence in order to demonstrate compliance with section105(c)(2) of the Act.</P>
                <P>(vii) Activities meeting the requirements of paragraph (d)(5)(i) of thissection may be considered to qualify under this paragraph, provided that thearea covered by the strategy is either a Federally-designated Empowerment Zoneor Enterprise Community or primarily residential and contains a percentage oflow- and moderate-income residents that is no less than the percentage computedby HUD pursuant to paragraph (a)(1)(ii) of this section or 70 percent, whicheveris less, but in no event less than 51 percent. Activities meeting therequirements of paragraph (d)(6)(i) of this section may also be considered toqualify under paragraph (a)(1) of this section.</P>
                <P>(2) <E T="03">Limited clientele activities.</E> (i) An activity whichbenefits a limited clientele, at least 51 percent of whom are low- or moderate-income persons. (The following kinds of activities may not qualify underparagraph (a)(2) of this section: activities, the benefits of which areavailable to all the residents of an area; activities involving the acquisition,construction or rehabilitation of property for housing; or activities where thebenefit to low- and moderate-income persons to be considered is the creation orretention of jobs, except as provided in paragraph (a)(2)(iv) of this section.)To qualify under paragraph (a)(2) of this section, the activity must meet one ofthe following tests:</P>
                <P>(A) Benefit a clientele who are generally presumed to be principally low andmoderate income persons. Activities that exclusively serve a group of persons inany one or a combination of the following categories may be presumed to benefitpersons, 51 percent of whom are low- and moderate-income: abused children,battered spouses, elderly persons, adults meeting the Bureau of the Census'Current Population Reports definition of “severely disabled,”homeless persons, illiterate adults, persons living with AIDS, and migrant farmworkers; or</P>
                <P>(B) Require information on family size and income so that it is evident thatat least 51 percent of the clientele are persons whose family income does notexceed the low and moderate income limit; or</P>
                <P>(C) Have income eligibility requirements which limit the activity exclusivelyto low and moderate income persons; or</P>
                <P>(D) Be of such nature and be in such location that it may be concluded thatthe activity's clientele will primarily be low and moderate income persons.</P>
                <P>(ii) An activity that serves to remove material or architectural barriers tothe mobility or accessibility of elderly persons or of adults meeting the Bureauof the Census' Current Population Reports definition of “severelydisabled” will be presumed to qualify under this criterion if it isrestricted, to the extent practicable, to the removal of such barriers byassisting:</P>
                <P>(A) The reconstruction of a public facility or improvement, or portionthereof, that does not qualify under paragraph (a)(1) of this section;</P>
                <P>(B) The rehabilitation of a privately owned nonresidential building orimprovement that does not qualify under paragraph (a)(1) or (4) of this section;or</P>
                <P>(C) The rehabilitation of the common areas of a residential structure thatcontains more than one dwelling unit and that does not qualify under paragraph(a)(3) of this section.</P>
                <P>(iii) A microenterprise assistance activity carried out in accordance withthe provisions of § 570.201(o) with respect to those owners ofmicroenterprises and persons developing microenterprises assisted under theactivity during each program year who are low- and moderate-income persons. Forpurposes of this paragraph, persons determined to be low and moderate income maybe presumed to continue to qualify as such for up to a three-year period.</P>

                <P>(iv) An activity designed to provide job training and placement and/or otheremployment support services, including, but not limited to, peer supportprograms, counseling, child care, transportation, and other similar services, inwhich the percentage of low- and moderate-income persons assisted is less than51 percent may qualify under this paragraph in the following limitedcircumstance:<PRTPAGE P="55"/>
                </P>
                <P>(A) In such cases where such training or provision of supportive servicesassists business(es), the only use of CDBG assistance for the project is toprovide the job training and/or supportive services; and</P>
                <P>(B) The proportion of the total cost of the project borne by CDBG funds is nogreater than the proportion of the total number of persons assisted who are lowor moderate income.</P>
                <P>(3) <E T="03">Housing activities.</E> An eligible activity carried out forthe purpose of providing or improving permanent residential structures which,upon completion, will be occupied by low- and moderate-income households. Thiswould include, but not necessarily be limited to, the acquisition orrehabilitation of property by the recipient, a subrecipient, a developer, anindividual homebuyer, or an individual homeowner; conversion of nonresidentialstructures; and new housing construction. If the structure contains two dwellingunits, at least one must be so occupied, and if the structure contains more thantwo dwelling units, at least 51 percent of the units must be so occupied. Wheretwo or more rental buildings being assisted are or will be located on the sameor contiguous properties, and the buildings will be under common ownership andmanagement, the grouped buildings may be considered for this purpose as a singlestructure. Where housing activities being assisted meet the requirements ofparagraph § 570.208 (d)(5)(ii) or (d)(6)(ii) of this section, allsuch housing may also be considered for this purpose as a single structure. Forrental housing, occupancy by low and moderate income households must be ataffordable rents to qualify under this criterion. The recipient shall adopt andmake public its standards for determining “affordable rents” forthis purpose. The following shall also qualify under this criterion:</P>
                <P>(i) When less than 51 percent of the units in a structure will be occupied bylow and moderate income households, CDBG assistance may be provided in thefollowing limited circumstances:</P>
                <P>(A) The assistance is for an eligible activity to reduce the development costof the new construction of a multifamily, non-elderly rental housing project;</P>
                <P>(B) Not less than 20 percent of the units will be occupied by low andmoderate income households at affordable rents; and</P>
                <P>(C) The proportion of the total cost of developing the project to be borne byCDBG funds is no greater than the proportion of units in the project that willbe occupied by low and moderate income households.</P>
                <P>(ii) When CDBG funds are used to assist rehabilitation eligible under§ 570.202(b)(9) or (10) in direct support of the recipient's RentalRehabilitation program authorized under 24 CFR part 511, such funds shall beconsidered to benefit low and moderate income persons where not less than 51percent of the units assisted, or to be assisted, by the recipient's RentalRehabilitation program overall are for low and moderate income persons.</P>
                <P>(iii) When CDBG funds are used for housing services eligible under§ 570.201(k), such funds shall be considered to benefit low- andmoderate-income persons if the housing units for which the services are providedare HOME-assisted and the requirements at 24 CFR 92.252 or 92.254 are met.</P>
                <P>(4) <E T="03">Job creation or retention activities.</E> An activity designedto create or retain permanent jobs where at least 51 percent of the jobs,computed on a full time equivalent basis, involve the employment of low- andmoderate-income persons. To qualify under this paragraph, the activity must meetthe following criteria:</P>
                <P>(i) For an activity that creates jobs, the recipient must document that atleast 51 percent of the jobs will be held by, or will be available to, low- andmoderate-income persons.</P>
                <P>(ii) For an activity that retains jobs, the recipient must document that thejobs would actually be lost without the CDBG assistance and that either or bothof the following conditions apply with respect to at least 51 percent of thejobs at the time the CDBG assistance is provided:</P>
                <P>(A) The job is known to be held by a low- or moderate-income person; or</P>

                <P>(B) The job can reasonably be expected to turn over within the following twoyears and that steps will be taken to ensure that it will be filled by, or madeavailable to, a low- or <PRTPAGE P="56"/>moderate-income person upon turnover.</P>
                <P>(iii) Jobs that are not held or filled by a low- or moderate-income personmay be considered to be available to low- and moderate-income persons for thesepurposes only if:</P>
                <P>(A) Special skills that can only be acquired with substantial training orwork experience or education beyond high school are not a prerequisite to fillsuch jobs, or the business agrees to hire unqualified persons and providetraining; and</P>
                <P>(B) The recipient and the assisted business take actions to ensure that low-and moderate-income persons receive first consideration for filling such jobs.</P>
                <P>(iv) For purposes of determining whether a job is held by or made availableto a low- or moderate-income person, the person may be presumed to be a low- ormoderate-income person if:</P>
                <P>(A) He/she resides within a census tract (or block numbering area) thateither:</P>
                <P>(<E T="03">1</E>) Meets the requirements of paragraph (a)(4)(v) of thissection; or</P>
                <P>(<E T="03">2</E>) Has at least 70 percent of its residents who are low- andmoderate-income persons; or</P>
                <P>(B) The assisted business is located within a census tract (or blocknumbering area) that meets the requirements of paragraph (a)(4)(v) of thissection and the job under consideration is to be located within that censustract.</P>

                <P>(v) A census tract (or block numbering area) qualifies for the presumptionspermitted under paragraphs (a)(4)(iv)(A)(<E T="03">1</E>) and (B) of thissection if it is either part of a Federally-designated Empowerment Zone orEnterprise Community or meets the following criteria:</P>
                <P>(A) It has a poverty rate of at least 20 percent as determined by the mostrecently available decennial census information;</P>
                <P>(B) It does not include any portion of a central business district, as thisterm is used in the most recent Census of Retail Trade, unless the tract has apoverty rate of at least 30 percent as determined by the most recently availabledecennial census information; and</P>
                <P>(C) It evidences pervasive poverty and general distress by meeting at leastone of the following standards:</P>
                <P>(<E T="03">1</E>) All block groups in the census tract have poverty rates ofat least 20 percent;</P>
                <P>(<E T="03">2</E>) The specific activity being undertaken is located in ablock group that has a poverty rate of at least 20 percent; or</P>
                <P>(<E T="03">3</E>) Upon the written request of the recipient, HUD determinesthat the census tract exhibits other objectively determinable signs of generaldistress such as high incidence of crime, narcotics use, homelessness, abandonedhousing, and deteriorated infrastructure or substantial population decline.</P>
                <P>(vi) As a general rule, each assisted business shall be considered to be aseparate activity for purposes of determining whether the activity qualifiesunder this paragraph, except:</P>
                <P>(A) In certain cases such as where CDBG funds are used to acquire, develop orimprove a real property (e.g., a business incubator or an industrial park) therequirement may be met by measuring jobs in the aggregate for all the businesseswhich locate on the property, provided such businesses are not otherwiseassisted by CDBG funds.</P>
                <P>(B) Where CDBG funds are used to pay for the staff and overhead costs of anentity making loans to businesses exclusively from non-CDBG funds, thisrequirement may be met by aggregating the jobs created by all of the businessesreceiving loans during each program year.</P>
                <P>(C) Where CDBG funds are used by a recipient or subrecipient to providetechnical assistance to businesses, this requirement may be met by aggregatingthe jobs created or retained by all of the businesses receiving technicalassistance during each program year.</P>

                <P>(D) Where CDBG funds are used for activities meeting the criteria listed at§ 570.209(b)(2)(v), this requirement may be met by aggregating thejobs created or retained by all businesses for which CDBG assistance isobligated for such activities during the program year, except as provided atparagraph (d)(7) of this section.<PRTPAGE P="57"/>
                </P>
                <P>(E) Where CDBG funds are used by a Community Development FinancialInstitution to carry out activities for the purpose of creating or retainingjobs, this requirement may be met by aggregating the jobs created or retained byall businesses for which CDBG assistance is obligated for such activities duringthe program year, except as provided at paragraph (d)(7) of this section.</P>
                <P>(F) Where CDBG funds are used for public facilities or improvements whichwill result in the creation or retention of jobs by more than one business, thisrequirement may be met by aggregating the jobs created or retained by all suchbusinesses as a result of the public facility or improvement.</P>
                <P>(<E T="03">1</E>) Where the public facility or improvement is undertakenprincipally for the benefit of one or more particular businesses, but whereother businesses might also benefit from the assisted activity, the requirementmay be met by aggregating only the jobs created or retained by those businessesfor which the facility/improvement is principally undertaken, provided that thecost (in CDBG funds) for the facility/improvement is less than $10,000 perpermanent full-time equivalent job to be created or retained by thosebusinesses.</P>
                <P>(<E T="03">2</E>) In any case where the cost per job to be created orretained (as determined under paragraph (a)(4)(vi)(F)(<E T="03">1</E>) of thissection) is $10,000 or more, the requirement must be met by aggregating the jobscreated or retained as a result of the public facility or improvement by allbusinesses in the service area of the facility/improvement. This aggregationmust include businesses which, as a result of the public facility/improvement,locate or expand in the service area of the facility/improvement between thedate the recipient identifies the activity in its action plan under part 91 ofthis title and the date one year after the physical completion of thefacility/improvement. In addition, the assisted activity must comply with thepublic benefit standards at § 570.209(b).</P>
                <P>(b) <E T="03">Activities which aid in the prevention or elimination of slumsor blight.</E> Activities meeting one or more of the following criteria, in theabsence of substantial evidence to the contrary, will be considered to aid inthe prevention or elimination of slums or blight:</P>
                <P>(1) <E T="03">Activities to address slums or blight on an area basis.</E> Anactivity will be considered to address prevention or elimination of slums orblight in an area if:</P>
                <P>(i) The area, delineated by the recipient, meets a definition of a slum,blighted, deteriorated or deteriorating area under State or local law;</P>
                <P>(ii) The area also meets the conditions in either paragraph (A) or (B):</P>
                <P>(A) At least 25 percent of properties throughout the area experience one ormore of the following conditions:</P>
                <P>(<E T="03">1</E>) Physical deterioration of buildings or improvements;</P>
                <P>(<E T="03">2</E>) Abandonment of properties;</P>
                <P>(<E T="03">3</E>) Chronic high occupancy turnover rates or chronic highvacancy rates in commercial or industrial buildings;</P>
                <P>(<E T="03">4</E>) Significant declines in property values or abnormally lowproperty values relative to other areas in the community; or</P>
                <P>(<E T="03">5</E>) Known or suspected environmental contamination.</P>
                <P>(B) The public improvements throughout the area are in a general state ofdeterioration.</P>
                <P>(iii) Documentation is to be maintained by the recipient on the boundaries ofthe area and the conditions and standards used that qualified the area at thetime of its designation. The recipient shall establish definitions of theconditions listed at § 570.208(b)(1)(ii)(A), and maintain records tosubstantiate how the area met the slums or blighted criteria. The designation ofan area as slum or blighted under this section is required to be redeterminedevery 10 years for continued qualification. Documentation must be retainedpursuant to the recordkeeping requirements contained at § 570.506(b)(8)(ii).</P>

                <P>(iv) The assisted activity addresses one or more of the conditions whichcontributed to the deterioration of the area. Rehabilitation of residentialbuildings carried out in an area meeting the above requirements will beconsidered to address the area's deterioration only where each such buildingrehabilitated is considered substandard <PRTPAGE P="58"/>under local definition beforerehabilitation, and all deficiencies making a building substandard have beeneliminated if less critical work on the building is undertaken. At a minimum,the local definition for this purpose must be such that buildings that it wouldrender substandard would also fail to meet the housing quality standards for theSection 8 Housing Assistance Payments Program-Existing Housing (24 CFR 882.109).</P>
                <P>(2) <E T="03">Activities to address slums or blight on a spot basis.</E> Thefollowing activities may be undertaken on a spot basis to eliminate specificconditions of blight, physical decay, or environmental contamination that arenot located in a slum or blighted area: acquisition; clearance; relocation;historic preservation; remediation of environmentally contaminated properties;or rehabilitation of buildings or improvements. However, rehabilitation must belimited to eliminating those conditions that are detrimental to public healthand safety. If acquisition or relocation is undertaken, it must be a precursorto another eligible activity (funded with CDBG or other resources) that directlyeliminates the specific conditions of blight or physical decay, or environmentalcontamination.</P>
                <P>(3) <E T="03">Activities to address slums or blight in an urban renewalarea.</E> An activity will be considered to address prevention or elimination ofslums or blight in an urban renewal area if the activity is:</P>
                <P>(i) Located within an urban renewal project area or Neighborhood DevelopmentProgram (NDP) action area; i.e., an area in which funded activities wereauthorized under an urban renewal Loan and Grant Agreement or an annual NDPFunding Agreement, pursuant to title I of the Housing Act of 1949; and</P>

                <P>(ii) Necessary to complete the urban renewal plan, as then in effect,including <E T="03">initial</E> land redevelopment permitted by the plan.</P>
                <NOTE>
                  <HD SOURCE="HED">Note:</HD>
                  <P>Despite the restrictions in (b) (1) and (2) of this section,any rehabilitation activity which benefits low and moderate income personspursuant to paragraph (a)(3) of this section can be undertaken without regard tothe area in which it is located or the extent or nature of rehabilitationassisted.</P>
                </NOTE>
                <P>(c) <E T="03">Activities designed to meet community development needs havinga particular urgency.</E> In the absence of substantial evidence to thecontrary, an activity will be considered to address this objective if therecipient certifies that the activity is designed to alleviate existingconditions which pose a serious and immediate threat to the health or welfare ofthe community which are of recent origin or which recently became urgent, thatthe recipient is unable to finance the activity on its own, and that othersources of funding are not available. A condition will generally be consideredto be of recent origin if it developed or became critical within 18 monthspreceding the certification by the recipient.</P>
                <P>(d) <E T="03">Additional criteria.</E> (1) Where the assisted activity isacquisition of real property, a preliminary determination of whether theactivity addresses a national objective may be based on the planned use of theproperty after acquisition. A final determination shall be based on the actualuse of the property, excluding any short-term, temporary use. Where theacquisition is for the purpose of clearance which will eliminate specificconditions of blight or physical decay, the clearance activity shall beconsidered the actual use of the property. However, any subsequent use ordisposition of the cleared property shall be treated as a “change ofuse” under § 570.505.</P>
                <P>(2) Where the assisted activity is relocation assistance that the recipientis required to provide, such relocation assistance shall be considered toaddress the same national objective as is addressed by the displacing activity.Where the relocation assistance is voluntary on the part of the grantee therecipient may qualify the assistance either on the basis of the nationalobjective addressed by the displacing activity or on the basis that therecipients of the relocation assistance are low and moderate income persons.</P>

                <P>(3) In any case where the activity undertaken for the purpose of creating orretaining jobs is a public improvement and the area served is primarilyresidential, the activity must meet the requirements of paragraph (a)(1) of thissection as well as those of paragraph (a)(4) of this section in order to qualify <PRTPAGE P="59"/>as benefiting low and moderate income persons.</P>
                <P>(4) CDBG funds expended for planning and administrative costs under§ 570.205 and § 570.206 will be considered to address thenational objectives.</P>
                <P>(5) Where the grantee has elected to prepare an area revitalization strategypursuant to the authority of § 91.215(e) of this title and HUD hasapproved the strategy, the grantee may also elect the following options:</P>
                <P>(i) Activities undertaken pursuant to the strategy for the purpose ofcreating or retaining jobs may, at the option of the grantee, be considered tomeet the requirements of this paragraph under the criteria at paragraph(a)(1)(vii) of this section in lieu of the criteria at paragraph (a)(4) of thissection; and</P>
                <P>(ii) All housing activities in the area for which, pursuant to the strategy,CDBG assistance is obligated during the program year may be considered to be asingle structure for purposes of applying the criteria at paragraph (a)(3) ofthis section.</P>
                <P>(6) Where CDBG-assisted activities are carried out by a Community DevelopmentFinancial Institution whose charter limits its investment area to a primarilyresidential area consisting of at least 51 percent low- and moderate-incomepersons, the grantee may also elect the following options:</P>
                <P>(i) Activities carried out by the Community Development Financial Institutionfor the purpose of creating or retaining jobs may, at the option of the grantee,be considered to meet the requirements of this paragraph under the criteria atparagraph (a)(1)(vii) of this section in lieu of the criteria at paragraph(a)(4) of this section; and</P>
                <P>(ii) All housing activities for which the Community Development FinancialInstitution obligates CDBG assistance during the program year may be consideredto be a single structure for purposes of applying the criteria at paragraph(a)(3) of this section.</P>
                <P>(7) Where an activity meeting the criteria at § 570.209(b)(2)(v)may also meet the requirements of either paragraph (d)(5)(i) or (d)(6)(i) ofthis section, the grantee may elect to qualify the activity under either thearea benefit criteria at paragraph (a)(1)(vii) of this section or the jobaggregation criteria at paragraph (a)(4)(vi)(D) of this section, but not both.Where an activity may meet the job aggregation criteria at both paragraphs(a)(4)(vi)(D) and (E) of this section, the grantee may elect to qualify theactivity under either criterion, but not both.</P>
                <CITA>[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 60FR 1945, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56912, Nov. 9, 1995; 61FR 18674, Apr. 29, 1996; 71 FR 30035, May 24, 2006]</CITA>
              </SECTION>
              <SECTION>
                <SECTNO>§ 570.209</SECTNO>
                <SUBJECT>Guidelines for evaluating and selecting economic development projects.</SUBJECT>
                <EXT-XREF HREF="20070315" REFID="39">Link to an amendment published at 72 FR12535, Mar. 15, 2007.</EXT-XREF>

                <P>The following guidelines are provided to assist the recipient to evaluate andselect activities to be carried out for economic development purposes.Specifically, these guidelines are applicable to activities that are eligiblefor CDBG assistance under § 570.203. These guidelines also apply toactivities carried out under the authority of § 570.204 that wouldotherwise be eligible under § 570.203, were it not for theinvolvement of a Community-Based Development Organization (CBDO). (This wouldinclude activities where a CBDO makes loans to for-profit businesses.) Theseguidelines are composed of two components: guidelines for evaluating projectcosts and financial requirements; and standards for evaluating public benefit.The standards for evaluating public benefit are <E T="03">mandatory,</E> but theguidelines for evaluating projects costs and financial requirements are not.</P>
                <P>(a) <E T="03">Guidelines and objectives for evaluating project costs andfinancial requirements.</E> HUD has developed guidelines that are designed toprovide the recipient with a framework for financially underwriting andselecting CDBG-assisted economic development projects which are financiallyviable and will make the most effective use of the CDBG funds. These guidelines,also referred to as the underwriting guidelines, are published as appendix A tothis part. The use of the underwriting guidelines published by HUD is notmandatory. However, grantees electing not to use these guidelines would beexpected to conduct basic financial underwriting prior to the provision of CDBGfinancial assistance to a for-<PRTPAGE P="60"/>profit business. Where appropriate, HUD'sunderwriting guidelines recognize that different levels of review areappropriate to take into account differences in the size and scope of a proposedproject, and in the case of a microenterprise or other small business to takeinto account the differences in the capacity and level of sophistication amongbusinesses of differing sizes. Recipients are encouraged, when they developtheir own programs and underwriting criteria, to also take these factors intoaccount. The objectives of the underwriting guidelines are to ensure:</P>
                <P>(1) That project costs are reasonable;</P>
                <P>(2) That all sources of project financing are committed;</P>
                <P>(3) That to the extent practicable, CDBG funds are not substituted for non-Federal financial support;</P>
                <P>(4) That the project is financially feasible;</P>
                <P>(5) That to the extent practicable, the return on the owner's equityinvestment will not be unreasonably high; and</P>
                <P>(6) That to the extent practicable, CDBG funds are disbursed on a pro ratabasis with other finances provided to the project.</P>
                <P>(b) <E T="03">Standards for evaluating public benefit.</E> The grantee isresponsible for making sure that at least a minimum level of public benefit isobtained from the expenditure of CDBG funds under the categories of eligibilitygoverned by these guidelines. The standards set forth below identify the typesof public benefit that will be recognized for this purpose and the minimum levelof each that must be obtained for the amount of CDBG funds used. Unlike theguidelines for project costs and financial requirements covered under paragraph(a) of this section, the use of the standards for public benefit is mandatory.Certain public facilities and improvements eligible under§ 570.201(c) of the regulations, which are undertaken for economicdevelopment purposes, are also subject to these standards, as specified in§ 570.208(a)(4)(vi)(F)(<E T="03">2</E>).</P>
                <P>(1) <E T="03">Standards for activities in the aggregate.</E> Activitiescovered by these guidelines must, in the aggregate, either:</P>
                <P>(i) Create or retain at least one full-time equivalent, permanent job per$35,000 of CDBG funds used; or</P>
                <P>(ii) Provide goods or services to residents of an area, such that the numberof low- and moderate-income persons residing in the areas served by the assistedbusinesses amounts to at least one low- and moderate-income person per $350 ofCDBG funds used.</P>
                <P>(2) <E T="03">Applying the aggregate standards.</E> (i) A metropolitan cityor an urban county shall apply the aggregate standards under paragraph (b)(1) ofthis section to all applicable activities for which CDBG funds are firstobligated within each single CDBG program year, without regard to the sourceyear of the funds used for the activities. A grantee under the HUD-AdministeredSmall Cities or Insular Areas CDBG programs shall apply the aggregate standardsunder paragraph (b)(1) of this section to all funds obligated for applicableactivities from a given grant; program income obligated for applicableactivities will, for these purposes, be aggregated with the most recent opengrant. For any time period in which a community has no open HUD-Administered orInsular Areas grants, the aggregate standards shall be applied to all applicableactivities for which program income is obligated during that period.</P>
                <P>(ii) The grantee shall apply the aggregate standards to the number of jobs tobe created/retained, or to the number of persons residing in the area served (asapplicable), as determined at the time funds are obligated to activities.</P>
                <P>(iii) Where an activity is expected both to create or retain jobs and toprovide goods or services to residents of an area, the grantee may elect tocount the activity under either the jobs standard or the area residentsstandard, but not both.</P>
                <P>(iv) Where CDBG assistance for an activity is limited to job training andplacement and/or other employment support services, the jobs assisted with CDBGfunds shall be considered to be created or retained jobs for the purposes ofapplying the aggregate standards.</P>

                <P>(v) Any activity subject to these guidelines which meets one or more of <PRTPAGE P="61"/>thefollowing criteria may, at the grantee's option, be excluded from the aggregatestandards described in paragraph (b)(1) of this section:</P>
                <P>(A) Provides jobs exclusively for unemployed persons or participants in oneor more of the following programs:</P>
                <P>(<E T="03">1</E>) Jobs Training Partnership Act (JTPA);</P>
                <P>(<E T="03">2</E>) Jobs Opportunities for Basic Skills (JOBS); or</P>
                <P>(<E T="03">3</E>) Aid to Families with Dependent Children (AFDC);</P>
                <P>(B) Provides jobs predominantly for residents of Public and Indian Housingunits;</P>
                <P>(C) Provides jobs predominantly for homeless persons;</P>
                <P>(D) Provides jobs predominantly for low-skilled, low- and moderate-incomepersons, where the business agrees to provide clear opportunities for promotionand economic advancement, such as through the provision of training;</P>
                <P>(E) Provides jobs predominantly for persons residing within a census tract(or block numbering area) that has at least 20 percent of its residents who arein poverty;</P>
                <P>(F) Provides assistance to business(es) that operate(s) within a census tract(or block numbering area) that has at least 20 percent of its residents who arein poverty;</P>
                <P>(G) Stabilizes or revitalizes a neighborhood that has at least 70 percent ofits residents who are low- and moderate-income;</P>
                <P>(H) Provides assistance to a Community Development Financial Institution thatserve an area that is predominantly low- and moderate-income persons;</P>
                <P>(I) Provides assistance to a Community-Based Development Organization servinga neighborhood that has at least 70 percent of its residents who are low- andmoderate-income;</P>
                <P>(J) Provides employment opportunities that are an integral component of aproject designed to promote spatial deconcentration of low- and moderate-incomeand minority persons;</P>
                <P>(K) With prior HUD approval, provides substantial benefit to low-incomepersons through other innovative approaches;</P>
                <P>(L) Provides services to the residents of an area pursuant to a strategyapproved by HUD under the provisions of § 91.215(e) of this title;</P>
                <P>(M) Creates or retains jobs through businesses assisted in an area pursuantto a strategy approved by HUD under the provisions of § 91.215(e) ofthis title.</P>
                <P>(N) Directly involves the economic development or redevelopment ofenvironmentally contaminated properties.</P>
                <P>(3) <E T="03">Standards for individual activities.</E> Any activity subjectto these guidelines which falls into one or more of the following categorieswill be considered by HUD to provide insufficient public benefit, and thereforemay under no circumstances be assisted with CDBG funds:</P>
                <P>(i) The amount of CDBG assistance exceeds either of the following, asapplicable:</P>
                <P>(A) $50,000 per full-time equivalent, permanent job created or retained; or</P>
                <P>(B) $1,000 per low- and moderate-income person to which goods or services areprovided by the activity.</P>
                <P>(ii) The activity consists of or includes any of the following:</P>
                <P>(A) General promotion of the community as a whole (as opposed to thepromotion of specific areas and programs);</P>
                <P>(B) Assistance to professional sports teams;</P>
                <P>(C) Assistance to privately-owned recreational facilities that serve apredominantly higher-income clientele, where the recreational benefit to usersor members clearly outweighs employment or other benefits to low- and moderate-income persons;</P>
                <P>(D) Acquisition of land for which the specific proposed use has not yet beenidentified; and</P>
                <P>(E) Assistance to a for-profit business while that business or any otherbusiness owned by the same person(s) or entity(ies) is the subject of unresolvedfindings of noncompliance relating to previous CDBG assistance provided by therecipient.</P>
                <P>(4) <E T="03">Applying the individual activity standards.</E> (i) Where anactivity is expected both to create or retain jobs and to provide goods orservices to residents of an area, it will be disqualified only if the amount ofCDBG assistance exceeds both of the amounts in paragraph (b)(3)(i) of thissection.<PRTPAGE P="62"/>
                </P>
                <P>(ii) The individual activity standards in paragraph (b)(3)(i) of this sectionshall be applied to the number of jobs to be created or retained, or to thenumber of persons residing in the area served (as applicable), as determined atthe time funds are obligated to activities.</P>
                <P>(iii) Where CDBG assistance for an activity is limited to job training andplacement and/or other employment support services, the jobs assisted with CDBGfunds shall be considered to be created or retained jobs for the purposes ofapplying the individual activity standards in paragraph (b)(3)(i) of thissection.</P>
                <P>(c) <E T="03">Amendments to economic development projects after reviewdeterminations.</E> If, after the grantee enters into a contract to provideassistance to a project, the scope or financial elements of the project changeto the extent that a significant contract amendment is appropriate, the projectshould be reevaluated under these and the recipient's guidelines. (This wouldinclude, for example, situations where the business requests a change in theamount or terms of assistance being provided, or an extension to the loanpayment period required in the contract.) If a reevaluation of the projectindicates that the financial elements and public benefit to be derived have alsosubstantially changed, then the recipient should make appropriate adjustments inthe amount, type, terms or conditions of CDBG assistance which has been offered,to reflect the impact of the substantial change. (For example, if a change inthe project elements results in a substantial reduction of the total projectcosts, it may be appropriate for the recipient to reduce the amount of totalCDBG assistance.) If the amount of CDBG assistance provided to the project isincreased, the amended project must still comply with the public benefitstandards under paragraph (b) of this section.</P>
                <P>(d) <E T="03">Documentation.</E> The grantee must maintain sufficient recordsto demonstrate the level of public benefit, based on the above standards, thatis actually achieved upon completion of the CDBG-assisted economic developmentactivity(ies) and how that compares to the level of such benefit anticipatedwhen the CDBG assistance was obligated. If the grantee's actual results show apattern of substantial variation from anticipated results, the grantee isexpected to take all actions reasonably within its control to improve theaccuracy of its projections. If the actual results demonstrate that therecipient has failed the public benefit standards, HUD may require the recipientto meet more stringent standards in future years as appropriate.</P>
                <CITA>[60 FR 1947, Jan. 5, 1995, as amended at 60 FR 17445, Apr. 6, 1995; 71 FR30035, May 24, 2006]</CITA>
                <EFFDNOTP>
                  <HD SOURCE="HED">Effective Date Note:</HD>
                  <P>At 72 FR 12535, Mar. 15, 2007,§ 570.209 was amended by revising paragraph (b)(2)(i), effectiveApril 16, 2007. For the convenience of the user, the revised text is set forthas follows:</P>
                  <REVTXT>
                    <SECTION>
                      <SECTNO>§ 570.209</SECTNO>
                      <SUBJECT>Guidelines for evaluating and selecting economic development projects.</SUBJECT>
                      <STARS/>
                      <P>(b) * * *</P>
                      <P>(2) <E T="03">Applying the aggregate standards.</E> (i) A metropolitan city,an urban county, or an Insular Area shall apply the aggregate standards underparagraph (b)(1) of this section to all applicable activities for which CDBGfunds are first obligated within each single CDBG program year, without regardto the source year of the funds used for the activities. For Insular Areas, thepreceding sentence applies to grants received in program years after Fiscal Year2004. A grantee under the HUD-administered Small Cities program in New York, orInsular Areas CDBG programs grants prior to Fiscal Year 2005, shall apply theaggregate standards under paragraph (b)(1) of this section to all fundsobligated for applicable activities from a given grant; program income obligatedfor applicable activities will, for these purposes, be aggregated with the mostrecent open grant. For any time period in which a community has no open HUD-administered grant, the aggregate standards shall be applied to all applicableactivities for which program income is obligated during that period.</P>
                    </SECTION>
                    <SECTION>
                      <SECTNO>§ 570.210</SECTNO>
                      <SUBJECT>Prohibition on use of assistance for employment relocation activities.</SUBJECT>
                      <P>(a) <E T="03">Prohibition.</E> CDBG funds may not be used to directly assista business, including a business expansion, in the relocation of a plant,facility, or operation from one LMA to another LMA if the relocation is likelyto result in a <PRTPAGE P="63"/>significant loss of jobs in the LMA from which the relocationoccurs.</P>
                      <P>(b) <E T="03">Definitions.</E> The following definitions apply to thissection:</P>
                      <P>(1) <E T="03">Directly assist.</E> Directly assist means the provision ofCDBG funds for activities pursuant to:</P>
                      <P>(i) § 570.203(b); or</P>
                      <P>(ii) §§ 570.201(a)—(d), 570.201(l), 570.203(a), or§ 570.204 when the grantee, subrecipient, or, in the case of anactivity carried out pursuant to § 570.204, a Community BasedDevelopment Organization (CDBO) enters into an agreement with a business toundertake one or more of these activities as a condition of the businessrelocating a facility, plant, or operation to the grantee's LMA. Provision ofpublic facilities and indirect assistance that will provide benefit to multiplebusinesses does not fall under the definition of “directly assist,”unless it includes the provision of infrastructure to aid a specific businessthat is the subject of an agreement with the specific assisted business.</P>
                      <P>(2) <E T="03">Labor market area (LMA).</E> For metropolitan areas, an LMA isan area defined as such by the BLS. An LMA is an economically integratedgeographic area within which individuals can live and find employment within areasonable distance or can readily change employment without changing theirplace of residence. In addition, LMAs are nonoverlapping and geographicallyexhaustive. For metropolitan areas, grantees must use employment data, asdefined by the BLS, for the LMA in which the affected business is currentlylocated and from which current jobs may be lost. For non-metropolitan areas, anLMA is either an area defined by the BLS as an LMA, or a state may choose tocombine non-metropolitan LMAs. States are required to define or reaffirm priordefinitions of their LMAs on an annual basis and retain records to substantiatesuch areas prior to any business relocation that would be impacted by this rule.Metropolitan LMAs cannot be combined, nor can a non-metropolitan LMA be combinedwith a metropolitan LMA. For the HUD-administered Small Cities Program, each ofthe three participating counties in Hawaii will be considered to be its own LMA.Recipients of Fiscal Year 1999 Small Cities Program funding in New York willfollow the requirements for State CDBG recipients.</P>
                      <P>(3) <E T="03">Operation.</E> A business operation includes, but is notlimited to, any equipment, employment opportunity, production capacity orproduct line of the business.</P>
                      <P>(4) <E T="03">Significant loss of jobs.</E> (i) A loss of jobs is significantif: The number of jobs to be lost in the LMA in which the affected business iscurrently located is equal to or greater than one-tenth of one percent of thetotal number of persons in the labor force of that LMA; or in all cases, a lossof 500 or more jobs. Notwithstanding the aforementioned, a loss of 25 jobs orfewer does not constitute a significant loss of jobs.</P>
                      <P>(ii) A job is considered to be lost due to the provision of CDBG assistanceif the job is relocated within three years of the provision of assistance to thebusiness; or the time period within which jobs are to be created as specified bythe agreement between the business and the recipient if it is longer than threeyears.</P>
                      <P>(c) <E T="03">Written agreement.</E> Before directly assisting a businesswith CDBG funds, the recipient, subrecipient, or a CDBO (in the case of anactivity carried out pursuant to § 570.204) shall sign a writtenagreement with the assisted business. The written agreement shall include:</P>
                      <P>(1) <E T="03">Statement.</E> A statement from the assisted business as towhether the assisted activity will result in the relocation of any industrial orcommercial plant, facility, or operation from one LMA to another, and, if so,the number of jobs that will be relocated from each LMA;</P>
                      <P>(2) <E T="03">Required information.</E> If the assistance will not result ina relocation covered by this section, a certification from the assisted businessthat neither it, nor any of its subsidiaries, has plans to relocate jobs at thetime the agreement is signed that would result in a significant job loss asdefined in this rule; and</P>
                      <P>(3) <E T="03">Reimbursement of assistance.</E> The agreement shall providefor reimbursement of any assistance provided to, or expended on behalf of, thebusiness in the event that assistance results in a <PRTPAGE P="64"/>relocation prohibited underthis section.</P>
                      <P>(d) <E T="03">Assistance not covered by this section.</E> This section doesnot apply to:</P>
                      <P>(1) <E T="03">Relocation assistance.</E> Relocation assistance required bythe Uniform Assistance and Real Property Acquisition Policies Act of 1970, (URA)(42 U.S.C. 4601-4655);</P>
                      <P>(2) <E T="03">Microenterprises.</E> Assistance to microenterprises as definedby Section 102(a)(22) of the Housing and Community Development Act of 1974; and</P>
                      <P>(3) <E T="03">Arms-length transactions.</E> Assistance to a business thatpurchases business equipment, inventory, or other physical assets in an arms-length transaction, including the assets of an existing business, provided thatthe purchase does not result in the relocation of the sellers' businessoperation (including customer base or list, goodwill, product lines, or tradenames) from one LMA to another LMA and does not produce a significant loss ofjobs in the LMA from which the relocation occurs.</P>
                      <CITA>[70 FR 76369, Dec. 23, 2005]</CITA>
                    </SECTION>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart D—Entitlement Grants</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>53 FR 34449, Sept. 6, 1988, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.300</SECTNO>
                        <SUBJECT>General.</SUBJECT>
                        <P>This subpart describes the policies and procedures governing the making ofcommunity development block grants to entitlement communities. The policies andprocedures set forth in subparts A, C, J, K, and O of this part also apply toentitlement grantees.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.301</SECTNO>
                        <SUBJECT>Activity locations and float-funding.</SUBJECT>
                        <P>The consolidated plan, action plan, and amendment submission requirementsreferred to in this section are those in 24 CFR part 91.</P>
                        <P>(a) For activities for which the grantee has not yet decided on a specificlocation, such as when the grantee is allocating an amount of funds to be usedfor making loans or grants to businesses or for residential rehabilitation, thedescription in the action plan or any amendment shall identify who may apply forthe assistance, the process by which the grantee expects to select who willreceive the assistance (including selection criteria), and how much and underwhat terms the assistance will be provided, or in the case of a planned publicfacility or improvement, how it expects to determine its location.</P>
                        <P>(b) <E T="03">Float-funded activities and guarantees.</E> A recipient may useundisbursed funds in the line of credit and its CDBG program account that arebudgeted in statements or action plans for one or more other activities that donot need the funds immediately, subject to the limitations described below. Suchfunds shall be referred to as the “float” for purposes of thissection and the action plan. Each activity carried out using the float must meetall of the same requirements that apply to CDBG-assisted activities generally,and must be expected to produce program income in an amount at least equal tothe amount of the float so used. Whenever the recipient proposes to fund anactivity with the float, it must include the activity in its action plan oramend the action plan for the current program year. For purposes of thissection, an activity that uses such funds will be called a “float-fundedactivity.”</P>
                        <P>(1) Each float-funded activity must be individually listed and described assuch in the action plan.</P>
                        <P>(2)(i) The expected time period between obligation of assistance for a float-funded activity and receipt of program income in an amount at least equal to thefull amount drawn from the float to fund the activity may not exceed 2.5 years.An activity from which program income sufficient to recover the full amount ofthe float assistance is expected to be generated more than 2.5 years afterobligation may not be funded from the float, but may be included in an actionplan if it is funded from CDBG funds other than the float (e.g., grant funds orproceeds from an approved Section 108 loan guarantee).</P>

                        <P>(ii) Any extension of the repayment period for a float-funded activity shallbe considered to be a new float-funded activity for these purposes and may beimplemented by the grantee only if the extension is made subject to the same <PRTPAGE P="65"/>limitations and requirements as apply to a new float-funded activity.</P>
                        <P>(3) Unlike other projected program income, the full amount of income expectedto be generated by a float-funded activity must be shown as a source of programincome in the action plan containing the activity, whether or not some or all ofthe income is expected to be received in a future program year (in accordancewith 24 CFR 91.220(g)(1)(ii)(D)).</P>
                        <P>(4) The recipient must also clearly declare in the action plan thatidentifies the float-funded activity the recipient's commitment to undertake oneof the following options:</P>
                        <P>(i) Amend or delete activities in an amount equal to any default or failureto produce sufficient income in a timely manner. If the recipient makes thischoice, it must include a description of the process it will use to select theactivities to be amended or deleted and how it will involve citizens in thatprocess; and it must amend the applicable statement(s) or action plan(s) showingthose amendments or deletions promptly upon determining that the float-fundedactivity will not generate sufficient or timely program income;</P>
                        <P>(ii) Obtain an irrevocable line of credit from a commercial lender for thefull amount of the float-funded activity and describe the lender and terms ofsuch line of credit in the action plan that identifies the float-fundedactivity. To qualify for this purpose, such line of credit must beunconditionally available to the recipient in the amount of any shortfall within30 days of the date that the float-funded activity fails to generate theprojected amount of program income on schedule;</P>
                        <P>(iii) Transfer general local government funds in the full amount of anydefault or shortfall to the CDBG line of credit within 30 days of the float-funded activity's failure to generate the projected amount of the program incomeon schedule; or</P>
                        <P>(iv) A method approved in writing by HUD for securing timely return of theamount of the float funding. Such method must ensure that funds are available tomeet any default or shortfall within 30 days of the float-funded activity'sfailure to generate the projected amount of the program income on schedule.</P>
                        <P>(5) When preparing an action plan for a year in which program income isexpected to be received from a float-funded activity, and such program incomehas been shown in a prior statement or action plan, the current action planshall identify the expected income and explain that the planned use of theincome has already been described in prior statements or action plans, and shallidentify the statements or action plans in which such descriptions may be found.</P>
                        <CITA>[60 FR 56913, Nov. 9, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.302</SECTNO>
                        <SUBJECT>Submission requirements.</SUBJECT>
                        <P>In order to receive its annual CDBG entitlement grant, a grantee must submita consolidated plan in accordance with 24 CFR part 91. That part includesrequirements for the content of the consolidated plan, for the process ofdeveloping the consolidated plan, including citizen participation provisions,for the submission date, for HUD approval, and for the amendment process.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0117)</APPRO>
                        <CITA>[60 FR 1915, Jan. 5, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.303</SECTNO>
                        <SUBJECT>Certifications.</SUBJECT>
                        <P>The jurisdiction must make the certifications that are set forth in 24 CFRpart 91 as part of the consolidated plan.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0117)</APPRO>
                        <CITA>[60 FR 1915, Jan. 5, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.304</SECTNO>
                        <SUBJECT>Making of grants.</SUBJECT>
                        <P>(a) <E T="03">Approval of grant.</E> HUD will approve a grant if thejurisdiction's submissions have been made and approved in accordance with 24 CFRpart 91, and the certifications required therein are satisfactory to theSecretary. The certifications will be satisfactory to the Secretary for thispurpose unless the Secretary has determined pursuant to subpart O of this partthat the grantee has not complied with the requirements of this part, has failedto carry out its consolidated plan as provided under § 570.903, orhas determined that <PRTPAGE P="66"/>there is evidence, not directly involving the grantee's pastperformance under this program, that tends to challenge in a substantial mannerthe grantee's certification of future performance. If the Secretary makes anysuch determination, however, further assurances may be required to be submittedby the grantee as the Secretary may deem warranted or necessary to find thegrantee's certification satisfactory.</P>
                        <P>(b) <E T="03">Grant agreement.</E> The grant will be made by means of a grantagreement executed by both HUD and the grantee.</P>
                        <P>(c) <E T="03">Grant amount.</E> The Secretary will make a grant in the fullentitlement amount, generally within the last 30 days of the grantee's currentprogram year, unless:</P>
                        <P>(1) Either the consolidated plan is not received by August 16 of the federalfiscal year for which funds are appropriated or the consolidated plan is notapproved under 24 CFR part 91, subpart F—in which case, the grantee willforfeit the entire entitlement amount; or</P>
                        <P>(2) The grantee's performance does not meet the performance requirements orcriteria prescribed in subpart O and the grant amount is reduced.</P>
                        <CITA>[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995; 60 FR16379, Mar. 30, 1995; 60 FR 56913, Nov. 9, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.307</SECTNO>
                        <SUBJECT>Urban counties.</SUBJECT>
                        <P>(a) <E T="03">Determination of qualification.</E> The Secretary willdetermine the qualifications of counties to receive entitlements as urbancounties upon receipt of qualification documentation from counties at such time,and in such manner and form as prescribed by HUD. The Secretary shall determineeligibility and applicable portions of each eligible county for purposes of fundallocation under section 106 of the Act on the basis of information availablefrom the U.S. Bureau of the Census with respect to population and otherpertinent demographic characteristics, and based on information provided by thecounty and its included units of general local government.</P>
                        <P>(b) <E T="03">Qualification as an urban county.</E> (1) A county will qualifyas an urban county if such county meets the definition at § 570.3(3).As necessitated by this definition, the Secretary shall determine which countieshave authority to carry out essential community development and housingassistance activities in their included units of general local governmentwithout the consent of the local governing body and which counties must executecooperation agreements with such units to include them in the urban county forqualification and grant calculation purposes.</P>
                        <P>(2) At the time of urban county qualification, HUD may refuse to recognizethe cooperation agreement of a unit of general local government in an urbancounty where, based on past performance and other available information, thereis substantial evidence that such unit does not cooperate in the implementationof the essential community development or housing assistance activities or wherelegal impediments to such implementation exist, or where participation by a unitof general local government in noncompliance with the applicable law in subpartK would constitute noncompliance by the urban county. In such a case, the unitof general local government will not be permitted to participate in the urbancounty, and its population or other needs characteristics will not be consideredin the determination of whether the county qualifies as an urban county or indetermining the amount of funds to which the urban county may be entitled. HUDwill not take this action unless the unit of general local government and thecounty have been given an opportunity to challenge HUD's determination and toinformally consult with HUD concerning the proposed action.</P>
                        <P>(c) <E T="03">Essential activities.</E> For purposes of this section, theterm “essential community development and housing assistanceactivities” means community renewal and lower income housing activities,specifically urban renewal and publicly assisted housing. In determining whethera county has the required powers, the Secretary will consider both its authorityand, where applicable, the authority of its designated agency or agencies.</P>
                        <P>(d) <E T="03">Period of qualification.</E> (1) The qualification by HUD of anurban county shall remain effective for three successive Federal fiscal yearsregardless <PRTPAGE P="67"/>of changes in its population during that period, except as providedunder paragraph (f) of this section and except as provided under§ 570.3(3) where the period of qualification shall be two successiveFederal fiscal years.</P>
                        <P>(2) During the period of qualification, no included unit of general localgovernment may withdraw from nor be removed from the urban county for HUD'sgrant computation purposes.</P>
                        <P>(3) If some portion of an urban county's unincorporated area becomesincorporated during the urban county qualification period, the newlyincorporated unit of general local government shall not be excluded from theurban county nor shall it be eligible for a separate grant under subpart D, F,or I until the end of the urban county's current qualification period, unlessthe urban county fails to receive a grant for any year during that qualificationperiod.</P>
                        <P>(e) <E T="03">Grant ineligibility of included units of general localgovernment.</E> (1) An included unit of general local government cannot becomeeligible for an entitlement grant as a metropolitan city during the period ofqualification of the urban county (even if it becomes a principal city of ametropolitan area or its population surpasses 50,000 during that period).Rather, such a unit of general local government shall continue to be included aspart of the urban county for the remainder of the urban county's qualificationperiod, and no separate grant amount shall be calculated for the included unit.</P>
                        <P>(2) An included unit of general local government which is part of an urbancounty shall be ineligible to apply for grants under subpart F, or to be arecipient of assistance under subpart I, during the entire period of urbancounty qualification.</P>
                        <P>(f) <E T="03">Failure of an urban county to receive a grant.</E> Failure ofan urban county to receive a grant during any year shall terminate the existingqualification of that urban county, and that county shall requalify as an urbancounty before receiving an entitlement grant in any successive Federal fiscalyear. Such termination shall release units of general local government includedin the urban county, in subsequent years, from the prohibition to receive grantsunder paragraphs (d)(3), (e)(1) and (e)(2) of this section. For this purpose anurban county shall be deemed to have received a grant upon having satisfied therequirements of sections 104 (a), (b), (c), and (d) of the Act, without regardto adjustments which may be made to this grant amount under section 104(e) or111 of the Act.</P>
                        <P>(g) <E T="03">Notifications of the opportunity to be excluded.</E> Any countyseeking to qualify for an entitlement grant as an urban county for any Federalfiscal year shall notify each unit of general local government which is located,in whole or in part, within the county and which would otherwise be included inthe urban county, but which is eligible to elect to have its population excludedfrom that of the urban county, that it has the opportunity to make such anelection, and that such an election, or the failure to make such an election,shall be effective for the period for which the county qualifies as an urbancounty. These notifications shall be made by a date specified by HUD. A unit ofgeneral local government which elects to be excluded from participation as apart of the urban county shall notify the county and HUD in writing by a datespecified by HUD. Such a unit of government may subsequently elect toparticipate in the urban county for the remaining one or two year period bynotifying HUD and the county, in writing, of such election by a date specifiedby HUD.</P>
                        <CITA>[53 FR 34449, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991; 68FR 69582, Dec. 12, 2003]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.308</SECTNO>
                        <SUBJECT>Joint requests.</SUBJECT>
                        <P>(a) <E T="03">Joint requests and cooperation agreements.</E> (1) Any urbancounty and any metropolitan city located, in whole or in part, within thatcounty may submit a joint request to HUD to approve the inclusion of themetropolitan city as a part of the urban county for purposes of planning andimplementing a joint community development and housing program. Such a jointrequest shall only be considered if submitted at the time the county is seekinga three year qualification or requalification as an urban county. <PRTPAGE P="68"/>Such a jointrequest shall, upon approval by HUD, remain effective for the period for whichthe county is qualified as an urban county. An urban county may be joined bymore than one metropolitan city, but a metropolitan city located in more thanone urban county may only be included in one urban county for any program year.A joint request shall be deemed approved by HUD unless HUD notifies the city andthe county of its disapproval and the reasons therefore within 30 days ofreceipt of the request by HUD.</P>
                        <P>(2) Each metropolitan city and urban county submitting a joint request shallsubmit an executed cooperation agreement to undertake or to assist in theundertaking of essential community development and housing assistanceactivities, as defined in § 570.307(c).</P>
                        <P>(b) <E T="03">Joint grant amount.</E> The grant amount for a joint recipientshall be the sum of the amounts authorized for the individual entitlementgrantees, as described in section 106 of the Act. The urban county shall be thegrant recipient.</P>
                        <P>(c) <E T="03">Effect of inclusion.</E> Upon urban county qualification andHUD approval of the joint request and cooperation agreement, the metropolitancity shall be considered a part of the urban county for purposes of programplanning and implementation for the period of the urban county qualification,and shall be treated the same as any other unit of general local governmentwhich is part of the urban county.</P>
                        <P>(d) <E T="03">Submission requirements.</E> In requesting a grant under thispart, the urban county shall make a single submission which meets the submissionrequirements of 24 CFR part 91 and covers all members of the joint recipient.</P>
                        <CITA>[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.309</SECTNO>
                        <SUBJECT>Restriction on location of activities.</SUBJECT>
                        <P>CDBG funds may assist an activity outside the jurisdiction of the granteeonly if the grantee determines that such an activity is necessary to further thepurposes of the Act and the recipient's community development objectives, andthat reasonable benefits from the activity will accrue to residents within thejurisdiction of the grantee. The grantee shall document the basis for suchdetermination prior to providing CDBG funds for the activity.</P>
                        <CITA>[60 FR 56914, Nov. 9, 1995]</CITA>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart E—Special Purpose Grants</HD>
                      <SECTION>
                        <SECTNO>§ 570.400</SECTNO>
                        <SUBJECT>General.</SUBJECT>
                        <P>(a) <E T="03">Applicability.</E> The policies and procedures set forth insubparts A, C, J, K, and O of this part shall apply to this subpart, except tothe extent that they are specifically modified or augmented by the contents ofthis subpart, including specified exemptions described herein. The HUDEnvironmental Review Procedures contained in 24 CFR part 58 also apply to thissubpart, unless otherwise specifically provided herein.</P>
                        <P>(b) <E T="03">Data.</E> Wherever data are used in this subpart for selectingapplicants for assistance or for determining grant amounts, the source of suchdata shall be the most recent information available from the U.S. Bureau of theCensus which is referable to the same point or period of time.</P>
                        <P>(c) <E T="03">Review of applications for discretionaryassistance</E>—(1) <E T="03">Review components.</E> An application forassistance under this subpart shall be reviewed by HUD to ensure that:</P>
                        <P>(i) The application is postmarked or received on or before any final dateestablished by HUD;</P>
                        <P>(ii) The application is complete;</P>
                        <P>(iii) Required certifications have been included in the application; and</P>

                        <P>(iv) The application meets the specific program requirements listed in the <E T="04">Federal Register</E> Notice published in connection with a competitionfor funding, and any other specific requirements listed under this subpart foreach of the programs.</P>
                        <P>(2) <E T="03">Timing and review.</E> HUD is not required by the Act to reviewand approve an application for assistance or a contract proposal within anyspecified time period. However, HUD will attempt to complete its review of anyapplication/proposal within 75 days.</P>
                        <P>(3) <E T="03">Notification to applicant/proposer.</E> HUD will notify theapplicant/proposer <PRTPAGE P="69"/>in writing that the applicant/proposal has been approved,partially approved, or disapproved. If an application/proposal is partiallyapproved or disapproved, the applicant/proposer will be informed of the basisfor HUD's decision. HUD may make conditional approvals under§ 570.304(d).</P>
                        <P>(d) <E T="03">Program amendments.</E> (1) Recipients shall request priorwritten HUD approval for all program amendments involving changes in the scopeor the location of approved activities.</P>
                        <P>(2) Any program amendments, whether or not they require HUD approval, must befully documented in the recipient's records.</P>
                        <P>(e) <E T="03">Performance reports.</E> Any performance report required of adiscretionary assistance recipient shall be submitted in the form specified inthis subpart, in the award document, or (if the report relates to a specificcompetition for an assistance award) in a form specified in a Notice publishedin the <E T="04">Federal Register.</E>
                        </P>
                        <P>(f) <E T="03">Performance reviews and findings.</E> HUD may review therecipient's performance in carrying out the activities for which assistance isprovided in a timely manner and in accordance with its approved application, allapplicable requirements of this part and the terms of the assistance agreement.Findings of performance deficiencies may be cause for appropriate corrective andremedial actions under § 570.910.</P>
                        <P>(g) <E T="03">Funding sanctions.</E> Following notice and opportunity forinformal consultation, HUD may withhold, reduce or terminate the assistancewhere any corrective or remedial actions taken under § 570.910 failto remedy a recipient's performance deficiencies, and the deficiencies aresufficiently substantial, in the judgment of HUD, to warrant sanctions.</P>
                        <P>(h) <E T="03">Publication of availability of funds.</E> HUD will publish byNotice in the <E T="04">Federal Register</E> each year the amount of fundsavailable for the special purpose grants authorized by each section under thissubpart.</P>
                        <CITA>[50 FR 37525, Sept. 16, 1985, as amended at 56 FR 18968, Apr. 24, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.401</SECTNO>
                        <SUBJECT>Community adjustment and economic diversification planning assistance.</SUBJECT>
                        <P>(a) <E T="03">General</E>—(1) <E T="03">Purpose.</E> The purpose ofthis program is to assist units of general local government in nonentitlementareas to undertake the planning of community adjustments and economicdiversification activities, in response to physical, social, economic orgovernmental impacts on the communities generated by the actions of theDepartment of Defense (DoD) defined in paragraph (a)(2) of this section.</P>
                        <P>(2) <E T="03">Impacts.</E> Funding under this section is available only tocommunities affected by one or more of the following DoD-related impacts:</P>
                        <P>(i) The proposed or actual establishment, realignment, or closure of amilitary installation;</P>
                        <P>(ii) The cancellation or termination of a DoD contract or the failure toproceed with an approved major weapon system program;</P>
                        <P>(iii) A publicly announced planned major reduction in DoD spending that woulddirectly and adversely affect a unit of general local government and result inthe loss of 1,000 or more full-time DoD and contractor employee positions over afive-year period in the unit of general local government and the surroundingarea; or</P>
                        <P>(iv) The Secretary of HUD (in consultation with the Secretary of DoD)determines that an action described in paragraphs (a)(2)(i)-(iii) of thissection is likely to have a direct and significant adverse consequence on theunit of general local government.</P>
                        <P>(3) <E T="03">Form of awards.</E> Planning assistance will be awarded in theform of grants.</P>
                        <P>(4) <E T="03">Program administration.</E> HUD will publish in the <E T="04">Federal Register</E> early in each fiscal year the amount of funds to beavailable for that fiscal year for awards under this section. HUD will acceptapplications throughout the fiscal year, and will review and consider forfunding each application according to the threshold and qualifying factors inparagraphs (f) and (g) of this section.</P>
                        <P>(b) <E T="03">Definitions.</E> In addition to the definitions in§ 570.3 of this part, the following definitions apply to thissection:<PRTPAGE P="70"/>
                        </P>
                        <P>(1) <E T="03">Adjustment planning.</E> Generally, developing plans andproposals in direct response to contraction or expansion of the local economy,or changes in the physical development or the social conditions of thecommunity, resulting from a DoD-generated impact. Typically, this planningincludes one or more of the following tasks: Collecting, updating, and analyzingdata; identifying problems; formulating solutions; proposing long- and short-term policies; recommending public- and private-sector actions to implementcommunity adjustments and economic diversification activities; securing citizeninvolvement; and coordinating with Federal, State, and local entities withrespect to the DoD-related impacts.</P>
                        <P>(2) <E T="03">Community adjustment.</E> Any proposed action to change thephysical, economic, or social infrastructure within the jurisdiction orsurrounding area, directly and appropriately in response to the DoD-generatedimpact.</P>
                        <P>(3) <E T="03">Contract.</E> (i) Any defense contract in an amount not lessthan $5 million (without regard to the date on which the contract was awarded);and</P>
                        <P>(ii) Any subcontract that is entered into in connection with a contract(without regard to the effective date of the subcontract) and involves not lessthan $500,000.</P>
                        <P>(4) <E T="03">Defense facility.</E> Any private facility producing goods orservices pursuant to a defense contract.</P>
                        <P>(5) <E T="03">DoD.</E> The Department of Defense.</P>
                        <P>(6) <E T="03">Economic diversification activities.</E> Any public or privatesector actions to change the local mix of industrial, commercial, and servicesectors, or the mix of business ventures within a sector, that are intended tomitigate decline in the local economy resulting from DoD-generated impacts or,in the case of expansion of a military installation or a defense facility, thatare intended to respond to new economic growth spawned by that expansion.</P>
                        <P>(7) <E T="03">Military installation.</E> Any camp, post, station, base, yard,or other jurisdiction of a military department that is located within any of theseveral States, the District of Columbia, the Commonwealth of Puerto Rico, orGuam.</P>
                        <P>(8) <E T="03">Realignment.</E> Any action that both reduces and relocatesfunctions and civilian personnel positions, but does not include a reduction inforce resulting from workload adjustments, reduced personnel or funding levels,or skill imbalances.</P>
                        <P>(9) <E T="03">Section 107</E> means section 107 of the Housing and CommunityDevelopment Act of 1974, 42 U.S.C. 5307. Section 107(b)(6) was added by section801 of the Housing and Community Development Act of 1992 (Pub. L. 102-550,approved October 28, 1992).</P>
                        <P>(10) <E T="03">Section 2391(b).</E> The Department of Defense adjustmentplanning program as set out in 10 U.S.C. 2391(b).</P>
                        <P>(11) <E T="03">Small Cities CDBG Program.</E> The Community Development BlockGrant program for nonentitlement areas in which the States have elected not toadminister available program funds. The regulations governing this program areset out in subpart F of this part.</P>
                        <P>(12) <E T="03">Surrounding area.</E> The labor market area as defined by theBureau of Labor Statistics that:</P>
                        <P>(i) Includes all or part of the applicant's jurisdictions; and</P>
                        <P>(ii) Includes additional areas outside the jurisdiction.</P>
                        <P>(c) <E T="03">Eligible applicants.</E> Any unit of general local government,excluding units of general government that are entitlement cities or areincluded in an urban county, and which does not include Indian Tribes.</P>
                        <P>(d) <E T="03">Eligible activities.</E> Activities eligible for adjustmentplanning assistance include, generally:</P>
                        <P>(1) Initial assessments and quick studies of physical, social, economic, andfiscal impacts on the community;</P>
                        <P>(2) Preliminary identification of potential public and private sector actionsneeded for the community to initiate its response;</P>
                        <P>(3) If timely, modification of the applicant's current comprehensive plan orany functional plan, such as for housing, including shelter for the homeless, orfor transportation or other physical infrastructure;</P>

                        <P>(4) If timely, modification of the applicant's current economic plans andprograms, such as for business development, job training, or industrial orcommercial development;<PRTPAGE P="71"/>
                        </P>
                        <P>(5) Preparation for and conduct of initial community outreach activities tobegin involving local citizens and the private sector in planning for adjustmentand diversification;</P>
                        <P>(6) Environmental reviews related to DoD-related impacts;</P>
                        <P>(7) Initial identification of and coordination with Federal, State and localentities that may be expected to assist in the community's adjustment andeconomic development; and with State-designated enterprise zones, and Federalempowerment zones and enterprise communities when selected and announced.</P>
                        <P>(8) Any other planning activity that may enable the community to organizeitself, establish a start-up capacity to plan, propose specific plans andprograms, coordinate with appropriate public or private entities, or qualifymore quickly for the more substantial planning assistance available from DoD.</P>
                        <P>(e) <E T="03">Ineligible activities.</E> Activities ineligible for adjustmentplanning assistance are:</P>
                        <P>(1) Base re-use planning.</P>
                        <P>(2) Site planning, architectural and engineering studies, feasibility andcost analyses and similar planning for specific projects to implement communityadjustment or economic diversification, unless as last resort funding for thoseapplicants which are unable to obtain planning assistance from other sources.</P>
                        <P>(3) Planning by communities which are encroaching on military installations.</P>
                        <P>(4) Demonstration planning activities intended to evolve new planningtechniques for impacted communities.</P>
                        <P>(5) Any planning activity proposed to supplement or replace planning that hasbeen or is being assisted by the DoD Sec. 2391(b) adjustment planning program.</P>
                        <P>(6) Any other planning activity the purpose of which is not demonstrably indirect response to a DOD-related impact triggered by one or more of the fourcriteria specified in paragraph (a)(2) of this section.</P>
                        <P>(f) <E T="03">Threshold requirements.</E> No application will qualify forfunding unless it meets the following requirements:</P>
                        <P>(1) Verification by HUD that the applicant is a unit of general government ina nonentitlement area.</P>
                        <P>(2) Verification by HUD and DoD that a triggering event described inparagraph (a)(2) of this section has occurred or will occur.</P>
                        <P>(3) With respect to communities affected by the 49 base closings and 28realignments listed by the 1991 Base Closure and Realignment Commission,verification by DoD that it has provided no prior funding and that the applicantmay benefit from start-up planning assistance from HUD.</P>
                        <P>(4) Determination by HUD that the proposed planning activities are eligible.</P>
                        <P>(5) Determination by HUD that the submission requirements in paragraph (h) ofthis section have been satisfied.</P>
                        <P>(g) <E T="03">Qualifying factors.</E> HUD will make funding decisions onqualified applications on the basis of the factors listed below, in the order ofsuch applications received, while program funds remain available. HUD will alsorequest and consider advise from DoD's Office of Economic Assistance concerningthe relative merits of each application.</P>
                        <P>(1) The adequacy of the applicant's initial assessment of actual or probableimpacts on the community and the surrounding area;</P>
                        <P>(2) The adequacy and appropriateness of the start-up planning envisioned bythe applicant in response to the impacts;</P>
                        <P>(3) The type, extent, and adequacy of coordination that the applicant hasachieved, or plans to achieve, in order to undertake planning for communityadjustment and economic diversification.</P>
                        <P>(4) The cost-effectiveness of the proposed budget to carry out the planningwork envisioned by the applicant;</P>
                        <P>(5) The capability of the organization the applicant proposes to do theplanning;</P>
                        <P>(6) The credentials and experience of the key staff the applicant proposes todo the planning;</P>

                        <P>(7) The presence of significant private sector impact, as measured by theextent to which the DoD-generated impact is projected to decrease or increasethe employment base by 10% or more;<PRTPAGE P="72"/>
                        </P>
                        <P>(8) The presence of significant public sector impact, as measured by theextent to which the DoD-generated impact is projected to decrease or increasethe applicant's capital and operating budgets for the next fiscal year by 10% ormore;</P>
                        <P>(9) The degree of urgency, to the extent that a suddenly announced action,e.g. a plant closing, is officially scheduled to occur within a year of the dateof application.</P>
                        <P>(h) <E T="03">Submission requirements.</E> Applicants may submit applicationsat any time to: Director, Office of Technical Assistance, room 7214, 451 SeventhStreet, SW., Washington, DC 20410. Each application (an original and threecopies) shall include the following:</P>
                        <P>(1) The Standard Form SF-424 as a face sheet, signed and dated by aperson authorized to represent and contractually or otherwise commit theapplicant;</P>
                        <P>(2) A concise title and brief abstract of the proposed planning work,including the total cost;</P>
                        <P>(3) A narrative that:</P>
                        <P>(i) Documents one or more of the triggering events described in paragraph(a)(2) of this section that qualifies the applicant to apply for planningassistance for community adjustments and economic diversification;</P>
                        <P>(ii) Provides an initial assessment of actual or probable impacts on theapplicant community and the surrounding area;</P>
                        <P>(iii) Provides an initial assessment of the type and extent of start-upplanning envisioned by the applicant in response to the DoD-generated impact;and</P>
                        <P>(iv) Describes the measures by which the applicant has already coordinated,or plans to coordinate, with the DoD Office of Economic Assistance, the EconomicDevelopment Administration of the Department of Commerce, the Department ofLabor, any military department, or any other appropriate Federal agency;appropriate State agencies, specifically including the agency administering theSmall Cities CDBG Program; appropriate State-designated enterprise zones;appropriate Federal empowerment zones and enterprise communities, when selectedand announced; appropriate other units of general local government in thenonentitlement area; appropriate businesses, corporations, and defensefacilities concerned with impacts on the applicant community; and homelessnonprofit organizations, with respect to title V of the Stewart B. McKinney Act(42 U.S.C. 11411-11412), requiring the Federal property be considered foruse in assisting the homeless.</P>
                        <P>(4) A Statement of Work describing the specific project tasks proposed to beundertaken in order to plan for community adjustment and economicdiversification activities;</P>
                        <P>(5) A proposed budget showing the estimated costs and person-days of effortfor each task, by cost categories, with supporting documentation of costs and ajustification of the person-days of effort;</P>
                        <P>(6) A description of the qualifications of the proposed technical staff,including their names and resumes;</P>
                        <P>(7) A work plan that describes the schedule for accomplishing the tasksdescribed in the Statement of Work, the time needed to do each task, and theelapsed time needed for all the tasks; and</P>
                        <P>(8) Other materials, as prescribed in the application kit; these materialswill include required certifications dealing with: Drug-Free WorkplaceRequirements; Disclosure Regarding Payments to Influence Certain FederalTransactions; and Prohibition Regarding Excessive Force.</P>
                        <P>(i) <E T="03">Approval procedures</E>—(1) <E T="03">Acceptance.</E>HUD's acceptance of an application meeting the threshold requirements ofparagraph (f) does not assure a commitment to provide funding or to provide thefull amount requested. HUD may elect to negotiate both proposed tasks andbudgets in order to promote more cost-effective planning.</P>
                        <P>(2) <E T="03">Notification.</E> HUD will provide notification about whether aproject will be funded, rejected, or held for further consideration by HUD andDoD.</P>
                        <P>(3) <E T="03">Form of award.</E> HUD will award funds in the form of grants.</P>
                        <P>(4) <E T="03">Administration.</E> Project administration will be governed bythe terms of individual awards and by the following provisions of this part:</P>
                        <P>(i) Subpart A, § 570.5;<PRTPAGE P="73"/>
                        </P>
                        <P>(ii) Subpart E, §§ 570.400(d), (e), (f), and (g);</P>
                        <P>(iii) Subpart J, §§ 570.500(c), 570.501, 570.502, 570.503,and 570.509;</P>
                        <P>(iv) Subpart K, §§ 570.601, 570.602, 570.609, 570.610, and570.611.</P>
                        <FP>The environmental review requirements of 24 CFR part 58 do not apply.</FP>
                        <APPRO>(Approved by the Office of Management and Budget under control number2535-0084)</APPRO>
                        <CITA>[59 FR 15016, Mar. 30, 1994]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.402</SECTNO>
                        <SUBJECT>Technical assistance awards.</SUBJECT>
                        <P>(a) <E T="03">General.</E> (1) The purpose of the Community DevelopmentTechnical Assistance Program is to increase the effectiveness with which States,units of general local government, and Indian tribes plan, develop, andadminister assistance under title I and section 810 of the Act. Title I programsare the Entitlement Program (24 CFR part 570, subpart D); the section 108 LoanGuarantee Program (24 CFR part 570, subpart M); the Urban Development ActionGrant Program (24 CFR part 570, subpart G); the HUD-administered Small CitiesProgram (24 CFR part 570, subpart F); the State-administered Program for Non-Entitlement Communities (24 CFR part 570, subpart I); the grants for IndianTribes program (24 CFR part 571); and the Special Purpose Grants for InsularAreas, Community Development Work Study and Historically Black Colleges andUniversities (24 CFR part 570, subpart E). The section 810 program is the UrbanHomesteading Program (24 CFR part 590).</P>
                        <P>(2) Funding under this section is awarded for the provision of technicalexpertise in planning, managing or carrying out such programs including theactivities being or to be assisted thereunder and other actions being or to beundertaken for the purpose of the program, such as increasing the effectivenessof public service and other activities in addressing identified needs, meetingapplicable program requirements (e.g., citizen participation, nondiscrimination,OMB Circulars), increasing program management or capacity building skills,attracting business or industry to CDBG assisted economic development sites orprojects, assisting eligible CDBG subrecipients such as neighborhood nonprofitsor small cities in how to obtain CDBG funding from cities and States. Theprovision of technical expertise in other areas which may have some tangentialbenefit or effect on a program is insufficient to qualify for funding.</P>
                        <P>(3) Awards may be made pursuant to HUD solicitations for assistanceapplications or procurement contract proposals issued in the form of a publiclyavailable document which invites the submission of applications or proposalswithin a prescribed period of time. HUD may also enter into agreements withother Federal agencies for awarding the technical assistance funds:</P>
                        <P>(i) Where the Secretary determines that such funding procedures will achievea particular technical assistance objective more effectively and the criteriafor making the awards will be consistent with this section, or</P>
                        <P>(ii) The transfer of funds to the other Federal agency for use under theterms of the agreement is specifically authorized by law. The Department willnot accept or fund unsolicited proposals.</P>
                        <P>(b) <E T="03">Definitions.</E> (1) <E T="03">Areawide planningorganization</E> (APO) means an organization authorized by law or localagreement to undertake planning and other activities for a metropolitan or non-metropolitan area.</P>
                        <P>(2) <E T="03">Technical assistance</E> means the facilitating of skills andknowledge in planning, developing and administering activities under title I andsection 810 of the Act in entities that may need but do not possess such skillsand knowledge, and includes assessing programs and activities under title I.</P>
                        <P>(c) <E T="03">Eligible applicants.</E> Eligible applicants for award oftechnical assistance funding are:</P>
                        <P>(1) States, units of general local government, APOs, and Indian Tribes; and</P>

                        <P>(2) Public and private non-profit or for-profit groups, including educationalinstitutions, qualified to provide technical assistance to assist suchgovernmental units to carry out the title I or Urban Homesteading programs. Anapplicant group must be designated as a technical assistance provider to a unitof government's title I program or Urban Homesteading program by the chiefexecutive officer of each unit to be assisted, unless the assistance is <PRTPAGE P="74"/>limitedto conferences/workshops attended by more than one unit of government.</P>
                        <P>(d) <E T="03">Eligible activities.</E> Activities eligible for technicalassistance funding include:</P>
                        <P>(1) The provision of technical or advisory services;</P>
                        <P>(2) The design and operation of training projects, such as workshops,seminars, or conferences;</P>
                        <P>(3) The development and distribution of technical materials and information;and</P>
                        <P>(4) Other methods of demonstrating and making available skills, informationand knowledge to assist States, units of general local government, or IndianTribes in planning, developing, administering or assessing assistance undertitle I and Urban Homesteading programs in which they are participating orseeking to participate.</P>
                        <P>(e) <E T="03">Ineligible activities.</E> Activities for which costs areineligible under this section include:</P>
                        <P>(1) In the case of technical assistance for States, the cost of carrying outthe administration of the State CDBG program for non-entitlement communities;</P>
                        <P>(2) The cost of carrying out the activities authorized under the title I andUrban Homesteading programs, such as the provision of public services,construction, rehabilitation, planning and administration, for which thetechnical assistance is to be provided;</P>
                        <P>(3) The cost of acquiring or developing the specialized skills or knowledgeto be provided by a group funded under this section;</P>
                        <P>(4) Research activities;</P>
                        <P>(5) The cost of identifying units of governments needing assistance (exceptthat the cost of selecting recipients of technical assistance under theprovisions of paragraph (k) is eligible); or</P>
                        <P>(6) Activities designed primarily to benefit HUD, or to assist HUD incarrying out the Department's responsibilities; such as research, policyanalysis of proposed legislation, training or travel of HUD staff, ordevelopment and review of reports to the Congress.</P>
                        <P>(f) <E T="03">Criteria for competitive selection.</E> In determining whetherto fund competitive applications or proposals under this section, the Departmentwill use the following criteria:</P>
                        <P>(1) <E T="03">For solicited assistance applications.</E> The Department willuse two types of criteria for reviewing and selecting competitive assistanceapplications solicited by HUD:</P>
                        <P>(i) Evaluation criteria: These criteria will be used to rank applicationsaccording to weights which may vary with each competition:</P>
                        <P>(A) Probable effectiveness of the application in meeting needs of localitiesand accomplishing project objectives;</P>
                        <P>(B) Soundness and cost-effectiveness of the proposed approach;</P>
                        <P>(C) Capacity of the applicant to carry out the proposed activities in atimely and effective fashion;</P>
                        <P>(D) The extent to which the results may be transferable or applicable toother title I or Urban Homesteading program participants.</P>
                        <P>(ii) Program policy criteria: These factors may be used by the selectingofficial to select a range of projects that would best serve program objectivesfor a particular competition:</P>
                        <P>(A) Geographic distribution;</P>
                        <P>(B) Diversity of types and sizes of applicant entities; and</P>
                        <P>(C) Diversity of methods, approaches, or kinds of projects.</P>

                        <FP>The Department will publish a Notice of Fund Availability (NOFA) in the <E T="04">Federal Register</E> for each competition indicating the objective of thetechnical assistance, the amount of funding available, the applicationprocedures, including the eligible applicants and activities to be funded, anyspecial conditions applicable to the solicitation, including any requirementsfor a matching share or for commitments for CDBG or other title I funding tocarry out eligible activities for which the technical assistance is to beprovided, the maximum points to be awarded each evaluation criterion for thepurpose of ranking applications, and any special factors to be considered inassigning the points to each evaluation criterion. The Notice will also indicatewhich program policy factors will be used, the impact of those factors on theselection process, the justification for their use and, if appropriate, therelative priority of each program policy factor.<PRTPAGE P="75"/>
                        </FP>
                        <P>(2) <E T="03">For competitive procurement contract bids/proposals.</E> TheDepartment's criteria for review and selection of solicited bids/proposals forprocurement contracts will be described in its public announcement of theavailability of an Invitation for Bids (IFB) or a Request for Proposals (RFP).The public notice, solicitation and award of procurement contracts, when used toacquire technical assistance, shall be procured in accordance with the FederalAcquisition Regulation (48 CFR chapter 1) and the HUD Acquisition Regulation (48CFR chapter 24).</P>
                        <P>(g) <E T="03">Submission procedures.</E> Solicited assistance applicationsshall be submitted in accordance with the time and place and contentrequirements described in the Department's NOFA. Solicited bids/proposals forprocurement contracts shall be submitted in accordance with the requirements inthe IFB or RFP.</P>
                        <P>(h) <E T="03">Approval procedures</E>—(1) <E T="03">Acceptance.</E>HUD's acceptance of an application or proposal for review does not imply acommitment to provide funding.</P>
                        <P>(2) <E T="03">Notification.</E> HUD will provide notification of whether aproject will be funded or rejected.</P>
                        <P>(3) <E T="03">Form of award.</E> (i) HUD will award technical assistancefunds as a grant, cooperative agreement or procurement contract, consistent withthis section, the Federal Grant and Cooperative Agreement Act of 1977, 31 U.S.C.6301-6308, the HUD Acquisition Regulation, and the Federal AcquisitionRegulation.</P>
                        <P>(ii) When HUD's primary purpose is the transfer of technical assistance toassist the recipients in support of the title I or Section 810 programs, anassistance instrument (grant or cooperative agreement) will be used. A grantinstrument will be used when substantial Federal involvement is not anticipated.A cooperative agreement will be used when substantial Federal involvement isanticipated. When a cooperative agreement is selected, the agreement willspecify the nature of HUD's anticipated involvement in the project.</P>
                        <P>(iii) A contract will be used when HUD's primary purpose is to obtain aprovider of technical assistance to act on the Department's behalf. In suchcases the Department will define the specific tasks to be performed. However,nothing in this section shall preclude the Department from awarding aprocurement contract in any other case when it is determined to be in theDepartment's best interests.</P>
                        <P>(4) <E T="03">Administration.</E> Project administration will be governed bythe terms of individual awards and relevant regulations. As a general rule,proposals will be funded to operate for one to two years, and periodic and finalreports will be required.</P>
                        <P>(i) <E T="03">Environmental and intergovernmental review.</E> Therequirements for Environmental Reviews and Intergovernmental Reviews do notapply to technical assistance awards.</P>
                        <P>(j) <E T="03">Selection of recipients of technical assistance.</E> Whereunder the terms of the funding award the recipient of the funding is to selectthe recipients of the technical assistance to be provided, the funding recipientshall publish, and publicly make available to potential technical assistancerecipients, the availability of such assistance and the specific criteria to beused for the selection of the recipients to be assisted. Selected recipientsmust be entities participating or planning to participate in the title I orUrban Homesteading programs or activities for which the technical assistance isto be provided.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control numbers2535-0085 and 2535-0084)</APPRO>
                        <CITA>[56 FR 41938, Aug. 26, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.403</SECTNO>
                        <SUBJECT>New Communities.</SUBJECT>
                        <P>The regulations for New Communities grants in this section, that wereeffective immediately before April 19, 1996, will continue to govern the rightsand obligations of recipients and HUD with respect to grants under the NewCommunities program.</P>
                        <CITA>[61 FR 11476, Mar. 20, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.404</SECTNO>
                        <SUBJECT>Historically Black colleges and universities program.</SUBJECT>
                        <P>(a) <E T="03">General.</E> Grants under this section will be awarded tohistorically Black colleges and universities to expand <PRTPAGE P="76"/>their role andeffectiveness in addressing community development needs, including neighborhoodrevitalization, housing and economic development in their localities, consistentwith the purposes of title I of the Housing and Community Development Act of1974.</P>
                        <P>(b) <E T="03">Eligible applicants.</E> Only historically Black colleges anduniversities (as determined by the Department of Education in accordance withthat Department's responsibilities under Executive Order 12677, dated April 28,1989) are eligible to submit applications.</P>
                        <P>(c) <E T="03">Eligible activities.</E> Activities that may be funded underthis section are those eligible under §§ 570.201 through570.207, provided that any activity which is required by State or local law tobe carried out by a governmental entity may not be funded under this section.Notwithstanding the provisions of §§ 570.200(g), grants underthis section are not subject to the 20 percent limitation on planning andprogram administration costs, as defined in §§ 570.205 and570.206, respectively.</P>
                        <P>(d) <E T="03">Applications.</E> Applications will only be accepted fromeligible applicants in response to a Request for Applications (RFA) which willbe issued either concurrently with or after the publication of a Notice ofFunding Availability (NOFA) published in the <E T="04">Federal Register.</E> TheNOFA will describe any special objectives sought to be achieved by the fundingto be provided, including any limitations on the type of activities to be fundedto achieve the objectives, points to be awarded to each of the selectioncriteria listed in paragraph (e) of this section, and any special factors to beevaluated in assigning points under the selection factors to achieve the statedobjectives. The NOFA will also state the deadline for the submission ofapplications, the total funding available for the competition, and the maximumamount of individual grants. The NOFA will include further information andinstructions for the submission of acceptable applications to HUD.</P>
                        <P>(e) <E T="03">Selection criteria.</E> Each application submitted under thissection will be evaluated by HUD using the following criteria:</P>
                        <P>(1) The extent to which the applicant addresses the objectives published inthe NOFA and the RFA.</P>
                        <P>(2) The extent to which the applicant demonstrates to HUD that the proposedactivities will have a substantial impact in achieving the stated objectives.</P>
                        <P>(3) The special needs of the applicant or locality to be met in carrying outthe proposed activities, particularly with respect to benefiting low- andmoderate-income persons.</P>

                        <P>(4) The feasibility of the proposed activities, <E T="03">i.e.,</E> theirtechnical and financial feasibility, for achieving the stated objectives,including local support for activities proposed to be carried out in thelocality and any matching funds proposed to be provided from other sources.</P>
                        <P>(5) The capability of the applicant to carry out satisfactorily the proposedactivities in a timely fashion, including satisfactory performance in carryingout any previous HUD-assisted projects or activities.</P>
                        <P>(6) In the case of proposals/projects of approximately equal merit, HUDretains the right to exercise discretion in selecting projects in a manner thatwould best serve the program objectives, with consideration given to the needsof localities, types of activities proposed, an equitable geographicaldistribution, and program balance.</P>
                        <P>(f) <E T="03">Certifications.</E> (1) Certifications required to be submittedby applicants shall be as prescribed in the RFA packages.</P>
                        <P>(2) In the absence of independent evidence which tends to challenge in asubstantial manner the certifications made by the applicant, the requiredcertifications will be accepted by HUD. If independent evidence is available toHUD, however, HUD may require further information or assurances to be submittedin order to determine whether the applicant's certifications are satisfactory.</P>
                        <P>(g) <E T="03">Multiyear funding commitments.</E> (1) HUD may make fundingcommitments of up to five years, subject to the availability of appropriations.In determining the number of years for which a commitment will be made, HUD willconsider the nature of the activities <PRTPAGE P="77"/>proposed, the capability of the recipientto carry out the proposed activities, and year-by-year funding requirements.</P>
                        <P>(2) Awards will be made on the basis of a 12-month period of performance.Once a recipient has been selected for a multi-year award, that recipient wouldnot be required to compete in a competition for the subsequent funding yearscovered by the multi-year funding commitment. Recipients performingsatisfactorily will be invited to submit applications for subsequent fundingyears in accordance with requirements outlined in the Notice of FundingAvailability and Request for Grant Application. Subject to the availability ofappropriations, subsequent-year funding will be determined by the following:</P>
                        <P>(i) The recipient has submitted all reports required for the previous year oryears in a timely, complete and satisfactory manner in accordance with the termsand conditions of the grant.</P>
                        <P>(ii) The recipient has submitted sufficient evidence to demonstratesuccessful completion of the tasks and deliverables of the grant. Adetermination of satisfactory performance will be made by HUD based uponevidence of task completions provided by the recipient, along with data fromclient feedback and site evaluations.</P>
                        <P>(iii) The recipient has submitted the next annual application.</P>
                        <P>(iv) The subsequent year's application is consistent with that described inthe original application.</P>
                        <P>(3) Recipients participating in multi-year funding projects are not eligibleto apply for additional grants for the same project or activity subject area forwhich they are receiving funds. Recipients are, however, eligible to compete forgrants for other project or activity areas.</P>
                        <P>(h) <E T="03">Selection and notification.</E> The HUD decision to approve,disapprove or conditionally approve an application shall be communicated inwriting to the applicant.</P>
                        <P>(i) <E T="03">Environmental and intergovernmental review.</E> Therequirements for Intergovernmental Reviews do not apply to HBCU awards. HUD willconduct an environmental review in accordance with 24 CFR part 50 before givingits approval to a proposal.</P>
                        <CITA>[56 FR 18968, Apr. 24, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.405</SECTNO>
                        <SUBJECT>The insular areas.</SUBJECT>
                        <P>(a) <E T="03">Eligible applicants.</E> Eligible applicants are Guam, theVirgin Islands, American Samoa, the Trust Territory of the Pacific Islands, andthe Commonwealth of the Northern Mariana Islands.</P>
                        <P>(b) <E T="03">Threshold requirements.</E> HUD shall review each grantee'sprogress on outstanding grants made under this section based on the grantee'sperformance report, the timeliness of close-outs and compliance with fundmanagement requirements and pertinent regulations, taking into consideration thesize of the grant and the degree and complexity of the program. If HUDdetermines upon such review that the applicant does not have the capacityeffectively to administer a new grant, or a portion of a new grant, in additionto grants currently under administration, the applicant shall not be invited tosubmit an application for the current year's funding.</P>
                        <P>(c) <E T="03">Previous audit findings and outstanding monetaryobligations.</E> HUD shall not accept for review an application from anapplicant that has either an outstanding audit finding for any HUD program, oran outstanding monetary obligation to HUD that is in arrears, or for which arepayment schedule has not been established and agreed to. The Field Officemanager may waive this restriction if he or she finds that the applicant hasmade a good faith effort to clear the audit. In no instance, however, shall awaiver be provided when funds are due HUD, unless a satisfactory arrangement forrepayment of the debt has been made and payments are current.</P>
                        <P>(d) <E T="03">Criteria for funding.</E> The Secretary shall establish, foreach fiscal year, an amount for which eligible applicants may apply. Grantamounts will be based on population of the applicant and its performance inprevious years. In determining performance, HUD will consider programachievements and the applicant's effectiveness in using program funds.Effectiveness in using <PRTPAGE P="78"/>program funds shall be measured by reviewing audit,monitoring and performance reports.</P>
                        <P>(e) <E T="03">Application and performance reporting.</E> Application andperformance reporting requirements are as follows:</P>
                        <P>(1) Applicants must submit applications within 90 days of the notification ofthe grant amount from HUD.</P>
                        <P>(2) Applicants shall prepare and publish or post a proposed application inaccordance with the citizen participation requirements of paragraph (h) of thissection.</P>
                        <P>(3) Applicants shall submit to HUD a final application containing itscommunity development objectives and activities. This application shall besubmitted to the appropriate HUD office, together with the requiredcertifications, in a form prescribed by HUD.</P>
                        <P>(4) Grant recipients must submit to HUD an annual performance report onprogress achieved on previously funded grants. Grant recipients must submit thereport at a time and in a format determined by HUD. The report should be madeavailable to citizens in accordance with the requirements of paragraph(h)(1)(iv) of this section.</P>
                        <P>(f) <E T="03">Costs incurred by the applicant.</E> (1) Notwithstanding anyother provision of this part, HUD will not reimburse or recognize any costsincurred by an applicant before submission of the application to HUD.</P>
                        <P>(2) Normally, HUD will not reimburse or recognize costs incurred before HUDapproval of the application for funding. However, under unusual circumstances,the Field office manager may consider and conditionally approve written requeststo recognize and reimburse costs that will be incurred after submission of theapplication but before it is approved where failure to do so would impose undueor unreasonable hardship on the applicant. Conditional approvals will be madeonly before the costs are incurred and where the conditions for release of fundshave been met in accordance with 24 CFR 58.22, and with the understanding thatHUD has no obligation whatsoever to approve the application or to reimburse theapplicant should the application be disapproved.</P>
                        <P>(g) <E T="03">Criteria for conditional approval.</E> HUD may approve a grantsubject to specified conditions. In any such case, the obligation andutilization of funds may be restricted. The reasons for the conditionalappproval and the actions necessary to remove the conditions shall be specified.Failure of the applicant to satisfy the conditions may result in a terminationof the grant. A conditional approval may be granted under any of the followingcircumstances:</P>
                        <P>(1) When local environmental reviews under 24 CFR part 58 have not yet beencompleted;</P>
                        <P>(2) To ensure that actual provision of other resources required to completethe proposed activities will be available within a reasonable period of time;</P>
                        <P>(3) To ensure that a project can be completed within its estimated costs;</P>
                        <P>(4) Where the grantee is required to satisfy an outstanding debt due to HUDunder a payment plan executed between the grantee and the Department;</P>
                        <P>(5) Pending resolution of problems related to specific projects or thecapability of the grantee to obtain resources needed to carry out, operate ormaintain the project; or</P>
                        <P>(6) Pending approval of site and neighborhood standards for proposed housingprojects.</P>
                        <P>(h) <E T="03">Citizen participation.</E> (1) The applicant shall provide forappropriate citizen participation in the application and amendment process. Theapplicant must, at least, do each of the following:</P>
                        <P>(i) Furnish citizens with information concerning the amount of fundsavailable for community development and housing activities and the range ofactivities that may be undertaken, including the estimated amount proposed to beused for activities that will benefit persons of low and moderate income, andthe plans of the grantee for minimizing displacement of persons as a result ofactivities assisted with such funds and to assist persons actually displaced;</P>
                        <P>(ii) Hold one or more public hearings (scheduled at convenient times andplaces) to obtain the views of citizens on community development and housingneeds;</P>

                        <P>(iii) Develop and publish or post the community development statement in sucha manner as to afford affected citizens an opportunity to examine its contentsand to submit comments;<PRTPAGE P="79"/>
                        </P>
                        <P>(iv) Afford citizens an opportunity to review and comment on the applicant'sperformance under any community development block grant.</P>
                        <P>(2) Before submitting the application to HUD, the applicant shall certifythat it has:</P>
                        <P>(i) Met the requirements of paragraph (h)(1) of this section;</P>
                        <P>(ii) Considered any comments and views expressed by citizens; and</P>
                        <P>(iii) If appropriate, modified the application accordingly and made themodified application available to citizens.</P>
                        <CITA>[50 FR 37526, Sept. 16, 1985, as amended at 60 FR 56914, Nov. 9, 1995; 61FR 32269, June 21, 1996]</CITA>
                        <EFFDNOT>
                          <HD SOURCE="HED">Effective Date Note:</HD>
                          <P>At 61 FR 32269, June 21, 1996,§ 570.405(e)(4) was revised. This section contains informationcollection and recordkeeping requirements and will not become effective untilapproval has been given by the Office of Management and Budget.</P>
                        </EFFDNOT>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.406</SECTNO>
                        <SUBJECT>Formula miscalculation grants.</SUBJECT>
                        <P>(a) <E T="03">General.</E> Grants under this section will be made to Statesand units of general local government determined by the Secretary to havereceived insufficient amounts under section 106 of the Act as a result of amiscalculation of its share of funds under such section.</P>
                        <P>(b) <E T="03">Application.</E> Since the grant is to correct a technicalerror in the formula amount which should have been awarded under section 106, noapplication is required.</P>
                        <P>(c) <E T="03">Use of funds.</E> The use of funds shall be subject to therequirements, certifications and Final Statement otherwise applicable to thegrantee's section 106 grant funds provided for the fiscal year in which thegrant under this section is made.</P>
                        <P>(d) <E T="03">Unavailability of funds.</E> If sufficient funds are notavailable to make the grant in the fiscal year in which the Secretary makes thedetermination required in paragraph (a) of this section, the grant will be made,subject to the availability of appropriations for this subpart, in the nextfiscal year.</P>
                        <CITA>[56 FR 41940, Aug. 26, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.410</SECTNO>
                        <SUBJECT>Special Projects Program.</SUBJECT>
                        <P>(a) <E T="03">Program objectives.</E> The Community Development SpecialProjects Program enables HUD to award grants to States and units of generallocal government, subject to availability of funds, for special projects thataddress community development activities or techniques consistent with thepurposes of title I of the Housing and Community Development Act of 1974, asamended.</P>
                        <P>(b) <E T="03">Eligible applicants.</E> Only States and units of general localgovernment (as defined in § 570.3) are eligible to submit proposalsor applications for Special Projects grants. Proposals or applications may besubmitted by eligible applicants on behalf of themselves, on behalf of othereligible applicants, or jointly by more than one eligible applicant.</P>
                        <P>(c) <E T="03">Eligible activities.</E> (1) Project activities that may befunded under this section are those eligible under 24 CFR part570—Community Development Block Grants, subpart C—EligibleActivities. No more than twenty (20) percent of the funds awarded under thissection may be used for overall program administration or planning activitieseligible under §§ 570.205 and 570.206.</P>
                        <P>(2) The amount of funds awarded to a unit of general local government underthis section that may be used for public service activities is limited. Theapplicant may use whichever of the following methods of calculation yields thehighest amount:</P>
                        <P>(i) Fifteen percent of the special projects grant;</P>
                        <P>(ii) An amount equal to 15 percent of the sum of special project grant fundsplus grant funds received for the same federal fiscal year under the Entitlementor State program, less the amount of the Entitlement or State program grantfunds which will be used for other public service activities; or</P>
                        <P>(iii) In the case of an applicant that is an Entitlement grantee subject tothe exception in § 570.201(e)(3), an amount equal to the amount ofthe Entitlement grant funds received for the same federal fiscal year that maybe used for public service activities, less the amount of the Entitlement grantfunds which will be used for other public service activities.</P>
                        <P>(d) <E T="03">Proposals.</E> Eligible applicants may submit unsolicitedproposals. HUD may <PRTPAGE P="80"/>ask proposers to submit additional information if necessaryfor evaluation. There is no HUD commitment to fund any unsolicited proposalregardless of its merit. If HUD elects to fund a proposal, it will request thatthe proposer submit a formal application.</P>
                        <P>(1) Three (3) copies of a proposal must be sent to the address stated in (3),below. Each proposal submitted pursuant to this section shall be evaluated byHUD using the following criteria:</P>
                        <P>(i) The extent to which the proposal satisfies purposes of this title andaddresses a special community development need.</P>
                        <P>(ii) The eligibility of proposed activities.</P>
                        <P>(iii) The feasibility of the project; i.e., its technical and financialfeasibility for achieving the goals stated in the proposal.</P>
                        <P>(iv) The capacity of the proposer to carry out satisfactorily the proposedproject activities.</P>
                        <P>(2) If the proposal is submitted jointly by, or on behalf of, more than oneeligible applicant, the proposal must:</P>
                        <P>(i) Contain a cooperation agreement signed by the Chief Executive Officer ofeach participating jurisdiction which specifies concurrence with the purpose andintent of the proposal and intent to comply with grant requirements;</P>
                        <P>(ii) Address problems faced by all jurisdictions listed in the proposal; and,</P>
                        <P>(iii) Be submitted by the lead jurisdiction. The lead jurisdiction shall beresponsible for overall coordination and administration of the project.</P>
                        <P>(3) Unsolicited proposals may be submitted any time during the year. However,if there are no funds available for such proposals, they will be returnedwithout review. Proposals shall contain a Standard Form 424 signed by the ChiefExecutive Officer of the State or unit of general local government. They shallbe sent to: Department of Housing and Urban Development, Office of CommunityPlanning and Development, 451 Seventh Street, SW., Washington, DC 20410,Attention: Director, Office of Program Policy Development, CPP.</P>
                        <P>(e) <E T="03">Applications.</E> Applications are accepted only from eligibleapplicants in response to letters of solicitations, or to competitionannouncements published in Notices in the <E T="04">Federal Register.</E>Submission requirements and criteria to be used by HUD to evaluate solicitedapplications and instructions regarding their submission shall be stated in eachNotice or letter.</P>
                        <P>(f) <E T="03">Certifications.</E> Applications shall contain thecertifications required by 24 CFR 570.303, except that regarding citizenparticipation: The applicant must certify that citizens likely to be affected bythe project, particularly low- and moderate-income persons, have been providedan opportunity to comment on the proposal or application. If the application issubmitted jointly, or on behalf of more than one jurisdiction, each jurisdictionshall submit the required certifications.</P>
                        <P>(g) <E T="03">Selection and notification.</E> The HUD decision to approve,disapprove or conditionally approve a proposal or application shall becommunicated in writing to the applicant.</P>
                        <CITA>[47 FR 30054, July 12, 1982, as amended at 54 FR 31672, Aug. 1, 1989; 55FR 29309, July 18, 1990; 56 FR 56127, Oct. 31, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.411</SECTNO>
                        <SUBJECT>Joint Community Development Program.</SUBJECT>
                        <P>(a) <E T="03">General.</E> Grants under this section will be awarded toinstitutions of higher education or to States and local governments applyingjointly with institutions of higher education. Institutions of higher educationmust demonstrate the capacity to carry out activities under title I of theHousing and Community Development Act of 1974. For ease of reference, thisprogram may be called the Joint CD Program.</P>
                        <P>(b) <E T="03">Definitions.</E>
                        </P>
                        <P>
                          <E T="03">Demonstrated capacity</E> to carry out eligible activities undertitle I means recent satisfactory activity by the institution of highereducation's staff designated to work on the program, including subcontractorsand consultants firmly committed to work on the proposed activities, in title Iprograms or similar programs without the need for oversight by a State or unitof general local government.</P>
                        <P>
                          <E T="03">Institution of higher education</E> means a college or universitygranting 4-year degrees and accredited by a national or regional accreditingagency recognized by the U.S. Department of Education.<PRTPAGE P="81"/>
                        </P>
                        <P>(c) <E T="03">Eligible applicants.</E> Institutions of higher education orStates and units of general local government jointly with institutions of highereducation may apply. Institutions of higher education with demonstrated capacityto carry out eligible activities under title I may apply on their own, withoutthe joint participation of a State or unit of general local government. Statesor unit of general local governments must file jointly with an institution ofhigher education. For these approved joint applications, the grant will be madeto the State or unit of general local government and the institution of highereducation jointly. If an eligible applicant is an institution of highereducation, it will not be funded more than once for the same kinds ofactivities. These grantees may not receive funding under a subsequent NOFA if ithas the same program objectives as the one under which the grantee previouslyreceived funding. However, a State or unit of general local government iseligible to apply if it files jointly with a different institution of highereducation in each NOFA cycle. HUD may further limit the type of eligibleapplicant to be funded. Any such limitations will be contained in the Notice ofFunding Availability described below in paragraph (h) of this section.</P>
                        <P>(d) <E T="03">Role of participants in joint applications.</E> An institutionof higher education and a State or unit of general local government may carryout eligible activities approved in joint applications. Where there are jointapplicants, the grant will be made to both and both will be responsible foroversight, compliance, and performance. The application will have to clearlydelineate the role of each applicant in the joint application. Any fundingsanctions or other remedial actions by HUD for noncompliance or nonperformance,whether by the State or unit of general local government or by the institutionof higher education, shall be taken against both grantees.</P>
                        <P>(e) <E T="03">Eligible activities.</E> Activities that may be funded underthis section are those eligible under 24 CFR part 570—CommunityDevelopment Block Grants, subpart C—Eligible Activities. These activitiesmay be designed to assist residents of colonias, as defined in section 916(d) ofthe Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 5306 note), toimprove living conditions and standards within colonias. HUD may limit theactivities to be funded. Any such limitations will be contained in the Notice ofFunding Availability described in paragraph (h) of this section.</P>
                        <P>(f) <E T="03">Applications.</E> Applications will only be accepted fromeligible applicants in response to a publication of a Notice of FundingAvailability (NOFA) published by HUD in the <E T="04">Federal Register</E>.</P>
                        <P>(g) <E T="03">Local approval.</E> (1) Where an institution of highereducation is the applicant, each unit of general local government that is anentitlement jurisdiction where an activity is to take place must approve theactivity and certify that the activity is consistent with its Consolidated Plan.</P>
                        <P>(2) Where a State is the joint applicant and it proposes to carry out anactivity within the jurisdiction of one or more units of general localgovernment, then each such unit must approve the activity and state that theactivity is consistent with its Consolidated Plan.</P>
                        <P>(3) These approvals and findings must accompany each application and may takethe form of a letter by the chief executive officer of each unit of generallocal government affected or a resolution of the legislative body of each suchunit of general local government.</P>
                        <P>(h) <E T="03">NOFA contents.</E> The NOFA will describe any specialobjectives sought to be achieved by the funding to be provided, including anylimitations on the type of activities to be funded to achieve the objectives,any limitations on the type of eligible applicants, and points to be awarded toeach of the selection criteria and any special factors to be evaluated inassigning points under the selection criteria to achieve the stated objectives.The NOFA will also state the deadline for the submission of applications, thetotal funding available for the competition, the period of performance and themaximum and minimum amount of individual grants. The NOFA will also state whichof the various possible levels of competition HUD will use: national and/orregional or entitlement areas vs. non-<PRTPAGE P="82"/>entitlement areas; and States or units ofgeneral local government vs. institutions of higher education vs. institutionsof higher education with a demonstrated capacity. The NOFA will include furtherinformation and instructions for the submission of acceptable applications toHUD.</P>
                        <P>(i) <E T="03">Selection criteria.</E> Each application submitted under thissection will be evaluated by HUD using the following criteria:</P>
                        <P>(1) The extent to which the applicant addresses the objectives published inthe NOFA and demonstrates how the proposed activities will have a substantialimpact in achieving the objectives.</P>
                        <P>(2) The extent of the needs to be addressed by the proposed activities,particularly with respect to benefiting low- and moderate-income persons andresidents of colonias, where applicable.</P>
                        <P>(3) The feasibility of the proposed activities, i.e., their technical andfinancial feasibility, for achieving the stated objectives.</P>
                        <P>(4) The capability of the applicant to carry out satisfactorily the proposedactivities in a timely fashion, including satisfactory performance in carryingout any previous HUD-assisted projects or activities.</P>
                        <P>(5) The extent of commitment to fair housing and equal opportunity, asindicated by such factors as previous HUD monitoring/compliance activity,actions to promote minority- and women-owned business enterprise, affirmativelyfurthering fair housing issues, and nondiscriminatory delivery of services.</P>
                        <P>(j) <E T="03">Selection discretion.</E> HUD retains the right to exercisediscretion in selecting projects in a manner that would best serve the programobjectives, with consideration given to the needs of States and units of generallocal government and institutions of higher education, types of activitiesproposed, an equitable geographical distribution, and program balance. The NOFAwill state whether HUD will use this discretion in any specific competition.</P>
                        <P>(k) <E T="03">Certifications.</E> (1) Certifications, including thoseindicating that applicants have adhered to all civil rights requirements undersubpart K of this part and the Americans with Disabilities Act of 1990, requiredto be submitted by applicants shall be as prescribed in the NOFA.</P>
                        <P>(2) In the absence of independent evidence which tends to challenge in asubstantial manner the certifications made by the applicant, the requiredcertifications will be accepted by HUD. However, if independent evidence isavailable, HUD may require further information or assurances to be submitted inorder to determine whether the applicant's certifications are satisfactory.</P>
                        <P>(l) <E T="03">Consolidated plan.</E> An applicant that proposes any housingactivities as part of its application will be required to submit a certificationthat these activities are consistent with the Consolidated Plan of thejurisdiction to be served.</P>
                        <P>(m) <E T="03">Citizen participation.</E> The citizen participationrequirements of §§ 570.301, 570.431, 570.485(c) and 570.486(a)are modified to require the following: The applicant must certify that citizenslikely to be affected by the project regardless of race, color, creed, sex,national origin, familial status, or handicap, particularly low- and moderate-income persons, have been provided an opportunity to comment on the proposal orapplication.</P>
                        <P>(n) <E T="03">Environmental and Intergovernmental Review.</E> Therequirements for Intergovernmental Reviews do not apply to these awards. Whenrequired, an environmental review in accordance with 24 CFR part 58 must becarried out by the State or unit of general local government when it is theapplicant. HUD will conduct any required environmental review when aninstitution of higher education is the applicant.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2535-0084)</APPRO>
                        <CITA>[60 FR 15837, Mar. 27, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.415</SECTNO>
                        <SUBJECT>Community Development Work Study Program.</SUBJECT>
                        <P>(a) <E T="03">Applicability and objectives.</E> HUD makes grants under CDWSPto institutions of higher education, either directly or through areawideplanning organizations or States, for the purpose of providing assistance toeconomically disadvantaged and minority students who participate in a work studyprogram while enrolled in full-<PRTPAGE P="83"/>time graduate programs in community and economicdevelopment, community planning, and community management. The primaryobjectives of the program are to attract economically disadvantaged and minoritystudents to careers in community and economic development, community planning,and community management, and to provide a cadre of well-qualified professionalsto plan, implement and administer local community development programs.</P>
                        <P>(b) <E T="03">Definitions.</E> The following definitions apply to CDWSP:</P>
                        <P>
                          <E T="03">Applicant</E> means an institution of higher education, a State, oran areawide planning organization that submits an application for assistanceunder CDWSP.</P>
                        <P>
                          <E T="03">Areawide planning organization (APO)</E> means an organizationauthorized by law or by interlocal agreement to undertake planning and otheractivities for a metropolitan or nonmetropolitan area. For an organizationoperating in a nonmetropolitan area to be considered an APO, its jurisdictionmust cover at least one county.</P>
                        <P>
                          <E T="03">CDWSP</E> means the Community Development Work Study Program.</P>
                        <P>
                          <E T="03">Community building</E> means community and economic development,community planning, community management, land use and housing activities.</P>
                        <P>
                          <E T="03">Community building academic program or academic program</E> means agraduate degree program whose purpose and focus is to educate students incommunity building. “Community building academic program” or“academic program” includes but is not limited to graduate degreeprograms in community and economic development, community planning, communitymanagement, public administration, public policy, urban economics, urbanmanagement, and urban planning. “Community building academicprogram” or “academic program” excludes social and humanisticfields such as law, economics (except for urban economics), education andhistory. “Community building academic program” or “academicprogram” excludes joint degree programs except where both joint degreefields have the purpose and focus of educating students in community building.</P>
                        <P>
                          <E T="03">Economically disadvantaged and minority students</E> means studentswho satisfy all applicable guidelines established at the participatinginstitution of higher education to measure financial need for academicscholarship or loan assistance, including, but not limited to, students who areBlack, American Indian/Alaskan Native, Hispanic, or Asian/Pacific Island, andincluding students with disabilities.</P>
                        <P>
                          <E T="03">Institution of higher education</E> means a public or privateeducational institution that offers a community building academic program andthat is accredited by an accrediting agency or association recognized by theSecretary of Education under 34 CFR part 602.</P>
                        <P>
                          <E T="03">Recipient</E> means an approved applicant that executes a grantagreement with HUD.</P>
                        <P>
                          <E T="03">Student</E> means a student enrolled in an eligible full-timeacademic program. He/she must be a first-year student in a two-year graduateprogram. Students enrolled in Ph.D. programs are ineligible.</P>
                        <P>
                          <E T="03">Student with disabilities</E> means a student who meets thedefinition of “person with disabilities” in the Americans withDisabilities Act of 1990.</P>
                        <P>(c) <E T="03">Assistance provided</E>—(1) <E T="03">Types of assistanceavailable.</E> HUD provides funding in the form of grants to recipients who makeassistance available to eligible students. Grants are provided to cover thecosts of student assistance and for an administrative allowance.</P>
                        <P>(i) <E T="03">Student assistance.</E> Grants are made to recipients to coverthe costs of assistance provided to eligible students in the form of studentstipends, tuition support, and additional support.</P>
                        <P>(A) <E T="03">Student stipend.</E> The amount of the student stipend is basedupon the prevailing hourly rate for initial entry positions in communitybuilding and the number of hours worked by the student at the work placementassignment, except that the hourly rate used should be sufficiently high toallow a student to earn the full stipend without working over 20 hours per weekduring the school year and 40 hours per week during the summer. The amount ofthe stipend the student receives may not exceed the actual amount earned, up to$9,000 per year.<PRTPAGE P="84"/>
                        </P>
                        <P>(B) <E T="03">Tuition support and additional support.</E> The amount ofsupport for tuition, fees, books, and travel related to the academic program,workplace assignment or conferences may not exceed actual costs incurred or$5,000 per year, whichever is higher. The conferences are limited to thosedealing with community building, sponsored by professional organizations.</P>
                        <P>(ii) <E T="03">Administrative allowance.</E> HUD provides an allowance torecipients to cover the administrative costs of the program. The administrativeallowance is $1,000 per year for each student participating in the program.</P>
                        <P>(2) <E T="03">Number of students assisted.</E> The minimum number of studentsthat may be assisted is three students per participating institution of highereducation. If an APO or State receives assistance for a program that isconducted by two or more institutions of higher education, each participatinginstitution must have a minimum of three students in the program. The maximumnumber of students that may be assisted under CDWSP is five students perparticipating institution of higher education.</P>
                        <P>(d) <E T="03">Recipient eligibility and responsibilities</E>—(1) <E T="03">Recipient eligibility.</E> (i) The following organizations are eligibleto apply for assistance under the program:</P>
                        <P>(A) <E T="03">Institutions of higher education.</E> Institutions of highereducation offering a community building academic program are eligible forassistance under CDWSP.</P>
                        <P>(B) <E T="03">Areawide planning organizations and States.</E> An APO or aState may apply for assistance for a program to be conducted by two or moreinstitutions of higher education. Institutions participating in an APO programmust be located within the particular area that is served by the APO and isidentified by the State law or interlocal agreement creating the APO.Institutions of higher education participating in a State program must belocated within the State.</P>
                        <P>(ii) To be eligible in future funding competitions for CDWSP, recipients arerequired to maintain a 50-percent rate of graduation from a CDWSP-fundedacademic program.</P>
                        <P>(iii) If an institution of higher education that submits an individualapplication is also included in the application of an APO or State, then theseparate individual application of the institution of higher education will bedisregarded. Additionally, if an institution of higher education is included inthe application of both an APO and a State, then the references to theinstitution in the application of the State will be stricken. The State'sapplication will then be ineligible if fewer than two institutions of highereducation remain as participants in the State's application.</P>
                        <P>(2) <E T="03">Recipient responsibilities.</E> (i) The recipient isresponsible for the administration of the program, for compliance with allprogram requirements, and for the coordination of program activities carried outby the work placement agencies and (if the recipient is an APO or State), by theparticipating institutions of higher education. The recipient must:</P>
                        <P>(A) Recruit and select students for participation in CDWSP. The recipientshall establish recruitment procedures that identify economically disadvantagedand minority students pursuing careers in community building, and make suchstudents aware of the availability of assistance opportunities. Students must beselected before the beginning of the semester for which funding has beenprovided.</P>
                        <P>(B) Recruit and select work placement agencies, and negotiate and executeagreements covering each work placement assignment.</P>
                        <P>(C) Refer participating students to work placement agencies and assiststudents in the selection of work placement assignments.</P>
                        <P>(D) Assign sufficient staff to administer and supervise the program on a day-to-day basis, and, where the recipient is an APO or State, to monitor theactivities of the work study coordinating committee.</P>

                        <P>(E) Encourage participating students to obtain employment for a minimum oftwo years after graduation with a unit of State or local government, Indiantribe or nonprofit organization engaged in community building.<PRTPAGE P="85"/>
                        </P>
                        <P>(F) Maintain records by racial and ethnic categories for each economicallydisadvantaged student enrolled in the CDWSP.</P>
                        <P>(G) Keep records and make such reports as HUD may require.</P>
                        <P>(H) Comply with all other applicable Federal requirements.</P>
                        <P>(ii) If the recipient is an APO or State, the recipient must also:</P>
                        <P>(A) Establish a committee to coordinate activities between programparticipants, to advise the recipient on policy matters, to assist the recipientin ranking and selection of participating students, and to review disputesconcerning compliance with program agreements and performance. The committeeshall be chaired by a representative of the recipient, and shall includerepresentatives of the participating institutions of higher education, workplacement agencies, students, and HUD.</P>
                        <P>(B) Allocate the assistance awarded under the program to the participatinginstitutions of higher education. APOs and States may not make fractional awardsto institutions. (E.g., awards to institutions must assist a fixed number ofstudents and not, for example, 6.5 students.)</P>
                        <P>(e) <E T="03">Institutions of higher education.</E> Institutions of highereducation participating in a program are responsible for providing itseducational component. Where the recipient is an APO or State, the institutionof higher education shall assist the APO or State in the administration andoperation of the program. Responsibilities include assisting the recipient inthe selection of students by determining the eligibility of students for theacademic program, and by making the analysis of students under the financialneed guidelines established by the institution. All institutions of highereducation must comply with other applicable Federal requirements.</P>
                        <P>(f) <E T="03">Work placement agencies eligibility andresponsibilities</E>—(1) <E T="03">Eligibility.</E> To be eligible toparticipate in the CDWSP, the work placement agencies must be involved incommunity building and must be an agency of a State or unit of local government,an APO, an Indian tribe, or a nonprofit organization.</P>
                        <P>(2) <E T="03">Responsibilities.</E> Work placement agencies must:</P>
                        <P>(i) Provide practical experience and training in community building.</P>
                        <P>(ii) Consult with the institution of higher education (and the APO or State,where an APO or State is the recipient) to ensure that the student's workplacement assignment provides the requisite experience and training to meet therequired number of work hours specified in the student work placement agreement.</P>
                        <P>(iii) Provide a sufficient number of work placement assignments to provideparticipating students with a wide choice of work experience.</P>
                        <P>(iv) Require each student to devote 12-20 hours per week during theregular school year, or 35-40 hours a week during the summer, to the workplacement assignment. Work placement agencies may provide flexibility in thework period, if such a schedule is consistent with the requirements of thestudent's academic program. However, a participating student may receive stipendpayment only during the period that the student is placed with the workplacement agency.</P>
                        <P>(v) Comply with all other applicable Federal requirements.</P>
                        <P>(vi) Maintain such records as HUD may require.</P>
                        <P>(g) <E T="03">Student eligibility and responsibilities.</E> Students applydirectly to recipients receiving grants under CDWSP. Students shall be selectedin accordance with the following eligibility requirements and selectionprocedures.</P>
                        <P>(1) <E T="03">Eligibility.</E> To be eligible for CDWSP, the student:</P>
                        <P>(i) Must satisfy all applicable guidelines established at the participatinginstitution of higher education to measure financial need for academicscholarship or loan assistance.</P>
                        <P>(ii) Must be a full-time student enrolled in the first year of graduate studyin a community building academic program at the participating institution ofhigher education. Individuals enrolled in doctoral programs are ineligible.</P>

                        <P>(iii) Must demonstrate an ability to maintain a satisfactory level ofperformance in the community building academic program and in work placementassignments, and to comply with <PRTPAGE P="86"/>the professional standards set by the recipientand the work placement agencies.</P>
                        <P>(iv) May not have previously participated in CDWSP.</P>
                        <P>(v) Must provide appropriate written evidence that he or she is lawfullyadmitted for permanent residence in the United States, if the individual is nota citizen.</P>
                        <P>(2) <E T="03">Selection.</E> In selecting among eligible students, therecipient must consider the extent to which each student has demonstrated:</P>
                        <P>(i) Financial need under the applicable financial need guidelines establishedat the institution of higher education;</P>
                        <P>(ii) An interest in, and commitment to, a professional career in communitybuilding;</P>
                        <P>(iii) The ability satisfactorily to complete academic and work placementresponsibilities under CDWSP.</P>
                        <P>(3) <E T="03">Student responsibilities.</E> Participating students must:</P>
                        <P>(i) Enroll in a two-year program. A student's academic and work placementresponsibilities include: Full-time enrollment in an approved academic program;maintenance of a satisfactory level of performance in the community buildingacademic program and in work placement assignments; and compliance with theprofessional conduct standards set by the recipient and the work placementagency. A satisfactory level of academic performance consists of maintaining a Baverage. A student's participation in CDWSP shall be terminated for failure tomeet these responsibilities and standards. If a student's participation isterminated, the student is ineligible for further CDWSP assistance.</P>
                        <P>(ii) Agree to make a good-faith effort to obtain employment in communitybuilding with a unit of State or local government, an Indian tribe, or anonprofit organization. The term of employment should be for at least twoconsecutive years following graduation from the academic program. If the studentdoes not obtain such employment, the student is not required to repay theassistance received.</P>
                        <P>(h) <E T="03">Notice of fund availability.</E> HUD will solicit grantapplications from institutions of higher education, APO's and States bypublishing a notice of fund availability in the <E T="04">Federal Register.</E>The notice will:</P>
                        <P>(1) Explain how application packages (requests for grant applications)providing specific application requirements and guidance may be obtained;</P>
                        <P>(2) Specify the place for filing completed applications, and the date bywhich the applications must be physically received at that location;</P>
                        <P>(3) State the amount of funding available under the notice;</P>
                        <P>(4) Provide other appropriate program information and guidance.</P>
                        <P>(i) <E T="03">Recipient selection process.</E> The selection process forapplications under CDWSP consists of a threshold review, ranking of eligibleapplications and final selection.</P>
                        <P>(1) <E T="03">Threshold.</E> To be eligible for ranking, applicants must meeteach of the following threshold requirements:</P>
                        <P>(i) The application must be filed in the application form prescribed by HUD,and within the required time periods;</P>
                        <P>(ii) The applicant must demonstrate that it is eligible to participate;</P>
                        <P>(iii) The applicant must demonstrate that each institution of highereducation participating in the program as a recipient has the required academicprograms and faculty to carry out its activities under CDWSP. Each workplacement agency must have the required staff and community building work studyprogram to carry out its activities under CDWSP.</P>
                        <P>(2) <E T="03">Rating.</E> All applications that meet the thresholdrequirements for applicant eligibility will be rated based on the followingselection criteria:</P>
                        <P>(i) <E T="03">Quality of academic program.</E> The quality of the academicprogram offered by the institution of higher education, including withoutlimitation the:</P>
                        <P>(A) Quality of course offerings;</P>
                        <P>(B) Appropriateness of course offerings for preparing students for careers incommunity building; and</P>

                        <P>(C) Qualifications of faculty and percentage of their time devoted toteaching and research in community building.<PRTPAGE P="87"/>
                        </P>
                        <P>(ii) <E T="03">Rates of graduation.</E> The rates of graduation of studentspreviously enrolled in a community building academic program at the institutionof higher education, specifically including (where applicable) graduation ratesfrom any previously funded CDWSP academic programs or similar programs.</P>
                        <P>(iii) <E T="03">Extent of financial commitment.</E> The commitment andability of the institution of higher education to assure that CDWSP studentswill receive sufficient financial assistance (including loans, where necessary)above and beyond the CDWSP funding to complete their academic program in atimely manner and without working in excess of 20 hours per week during theschool year.</P>
                        <P>(iv) <E T="03">Quality of work placement assignments.</E> The extent to whichthe participating students will receive a sufficient number and variety of workplacement assignments, the assignments will provide practical and usefulexperience to students participating in the program, and the assignments willfurther the participating students' preparation for professional careers incommunity building.</P>
                        <P>(v) <E T="03">Likelihood of fostering students' permanent employment incommunity building.</E> The extent to which the proposed program will leadparticipating students directly and immediately to permanent employment incommunity building, as indicated by, without limitation:</P>
                        <P>(A) The past success of the institution of higher education in placing itsgraduates (particularly CDWSP-funded and similar program graduates whereapplicable) in permanent employment in community building; and</P>
                        <P>(B) The amount of faculty and staff time and institutional resources devotedto assisting students (particularly students in CDWSP-funded and similarprograms where applicable) in finding permanent employment in communitybuilding.</P>
                        <P>(vi) <E T="03">Effectiveness of program administration.</E> The degree towhich an applicant will be able effectively to coordinate and administer theprogram. HUD will allocate the maximum points available under this criterionequally among the following considerations set forth in paragraphs (i)(2)(vi)(A), (B), and (C) of this section, except that the maximum points availableunder this criterion will be allocated equally between the considerations setforth in paragraphs (i)(2)(vi) (A) and (B) of this section only where theapplicant has not previously administered a CDWSP-funded program.</P>
                        <P>(A) The strength and clarity of the applicant's plan for placing CDWSPstudents on rotating work placement assignments and monitoring CDWSP students'progress both academically and in their work placement assignments;</P>
                        <P>(B) The degree to which the individual who will coordinate and administer theprogram has clear responsibility, ample available time, and sufficient authorityto do so; and</P>
                        <P>(C) The effectiveness of the applicant's prior coordination andadministration of a CDWSP-funded program, where applicable (including thetimeliness and completeness of the applicant's compliance with CDWSP reportingrequirements).</P>
                        <P>(vii) <E T="03">Commitment to meeting economically disadvantaged and minoritystudents' needs.</E> The applicant's commitment to meeting the needs ofeconomically disadvantaged and minority students as demonstrated by policies andplans regarding, and past effort and success in, recruiting, enrolling andfinancially assisting economically disadvantaged and minority students. If theapplicant is an APO or State, then HUD will consider the demonstrated commitmentof each institution of higher education on whose behalf the APO or State isapplying; HUD will then also consider the demonstrated commitment of the APO orState to recruit and hire economically disadvantaged and minority students.</P>
                        <P>(3) <E T="03">Final selection.</E> Eligible applications will be consideredfor selection in their rank order. HUD may make awards out of rank order toachieve geographic diversity, and may provide assistance to support a number ofstudents that is less than the number requested under applications in order toprovide assistance to as many highly ranked applications as possible.</P>
                        <P>(j) <E T="03">Agreements</E>—(1) <E T="03">Grant agreement.</E> Theresponsibilities of the recipient <PRTPAGE P="88"/>under CDWSP will be incorporated in a grantagreement executed by HUD and the recipient.</P>
                        <P>(2) <E T="03">Student agreement.</E> The recipient and each participatingstudent must execute a written agreement incorporating their mutualresponsibilities under CDWSP. The agreement must be executed before the studentcan be enrolled in the program. A student's participation in CDWSP shall beterminated for failure to meet the responsibilities and standards in theagreement.</P>
                        <P>(3) <E T="03">Work placement assignment agreement.</E> The institution ofhigher education, the APO or state (if an APO or State is the grant recipient),the participating student, and the work placement agency must execute a writtenagreement covering each work placement assignment. The agreement must addressthe responsibilities of each of the parties, the educational objectives, thenature of supervision, the standards of evaluation, and the student's timecommitments under the work placement assignment.</P>
                        <P>(4) <E T="03">APO (or state) and institution of higher education.</E> Wherethe recipient is an APO (or a State), the recipient and each participatinginstitution of higher education must execute a written agreement incorporatingtheir mutual responsibilities under CDWSP.</P>
                        <P>(k) <E T="03">Grant administration</E>—(1) <E T="03">Initial obligationof funds.</E> When HUD selects an application for funding, and notifies therecipient, HUD will obligate funds to cover the amount of the approved grant.The initial obligation of funds will provide for student grants for two years.</P>
                        <P>(2) <E T="03">Disbursement.</E> Recipients will receive grant payments bydirect deposit on a reimbursement basis. If that is not possible, grant paymentswill be made by U.S. Treasury checks.</P>
                        <P>(3) <E T="03">Deobligation and recipient repayment.</E> (i) HUD maydeobligate amounts for grants if proposed activities are not begun or completedwithin a reasonable time after selection.</P>
                        <P>(ii) If a student's participation in CDWSP is terminated before thecompletion of the two-year term of the student's program, the recipient maysubstitute another student to complete the two-year term of a student whoseparticipation has terminated. The substituted student must have a sufficientnumber of academic credits to complete the degree program within the remainingportion of the terminated student's two-year term. With respect to any CDWSPgrant, there is no requirement, regardless of the date of grant award, forstudents who are terminated from the CDWSP to repay tuition and additionalassistance or for the grant recipient to repay such funds to HUD. Funds muststill be otherwise expended consistent with CDWSP regulations and the grantagreement, or repayment may be required under paragraph (k)(3)(iii) of thissection.</P>
                        <P>(iii) Consistent with OMB Circulars No. A-101 and A-110, HUD, inthe grant agreement, will set forth in detail other circumstances under whichfunds may be deobligated, recipients may be liable for repayment, or othersanctions may be imposed.</P>
                        <P>(l) <E T="03">Other Federal requirements</E>—(1) <E T="03">Handicapprovision.</E> Recipients must provide a statement certifying that no otherwisequalified handicapped person shall, solely by reason of handicap, be excludedfrom participation in, be denied the benefits of, or otherwise be subjected todiscrimination under the CDWSP.</P>
                        <P>(2) <E T="03">Nondiscrimination.</E> The recipient must adhere to thefollowing nondiscrimination provisions: The requirements of title VIII of theCivil Rights Act of 1968, 42 U.S.C. 3600-20 (Fair Housing Act) andimplementing regulations issued at subchapter A of title 24 of the Code ofFederal Regulations; title VI of the Civil Rights Act of 1964 (42 U.S.C.2000d-4) (Nondiscrimination in Federally Assisted Programs) andimplementing regulations issued at 24 CFR part 1; section 504 of theRehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24CFR part 8; Executive Order 11063 and implementing regulations at 24 CFR part107; and the Age Discrimination Act of 1975 and implementing regulations at 24CFR part 146.</P>
                        <CITA>[54 FR 27131, June 27, 1989, as amended at 61 FR 36458, July 10, 1996; 63FR 31869, June 10, 1998]</CITA>
                      </SECTION>
                      <SECTION>
                        <PRTPAGE P="89"/>
                        <SECTNO>§ 570.416</SECTNO>
                        <SUBJECT>Hispanic-serving institutions work study program.</SUBJECT>
                        <P>(a) <E T="03">Applicability and objectives.</E> HUD makes grants under theHispanic-serving Institutions Work Study Program (HSI-WSP) to public and privatenon-profit Hispanic-serving Institutions (HSI's) of higher education for thepurpose of providing assistance to economically disadvantaged and minoritystudents who participate in a work study program while enrolled in full-timecommunity college programs in community building, and to provide entry to pre-professional careers in these fields.</P>
                        <P>(b) <E T="03">Definitions.</E> The following definitions apply to HSI-WSP:</P>
                        <P>
                          <E T="03">Applicant</E> means a public or private non-profit Hispanic-servinginstitution of higher education that offers only two-year degree programs,including at least one community building academic degree program, and thatapplies for funding under HSI-WSP.</P>
                        <P>
                          <E T="03">Community building</E> means community and economic development,community planning, community management, public policy, urban economics, urbanmanagement, urban planning, land use planning, housing, and related fields.Related fields include, but are not limited to, administration of justice, childdevelopment, and human services.</P>
                        <P>
                          <E T="03">Community building academic program</E> or <E T="03">academicprogram</E> means an undergraduate associate degree program whose purpose andfocus is to educate students in community building. The terms “communitybuilding academic program” or “academic program” refer to thetypes of academic programs encompassed in the statutory phrase “communityor economic development, community planning or community management.” Forpurposes of HSI-WSP, such programs include, but are not limited to, associatedegree programs in community and economic development, community planning,community management, public administration, public policy, urban economics,urban management, urban planning, land use planning, housing, and related fieldsof study. Related fields of study that promote community building, such asadministration of justice, child development, and human services are eligible,while fields such as natural sciences, computer sciences, mathematics,accounting, electronics, engineering, and the humanities (such as English orhistory) would not be eligible. A transfer program (i.e., one that leads totransfer to a four-year institution of higher education for the student's junioryear) in a community building academic discipline is eligible only if thestudent is required to declare his/her major in this discipline while at thecommunity college.</P>
                        <P>
                          <E T="03">Community building field</E> means any of the fields of studyeligible under a community building academic program.</P>
                        <P>
                          <E T="03">Economically disadvantaged and minority students</E> means studentswho satisfy all the applicable guidelines established at the participatinginstitution of higher education to measure financial need for academicscholarship or loan assistance, including, but not limited to, students withdisabilities and students who are Black, American Indian/Alaska Native,Hispanic, Asian/Pacific Islanders, where such students satisfy the financialneeds guidelines defined above.</P>
                        <P>
                          <E T="03">Hispanic-serving institution</E> is an institution of highereducation that certifies to the satisfaction of the Secretary that it meets thecriteria set out at 20 U.S.C. 1059c(b)(1), including the following: Aninstitution that has an enrollment of undergraduate full-time students that isat least 25 percent Hispanic; in which not less than 50 percent of the Hispanicstudents are low-income individuals (i.e., their families' taxable income forthe preceding year did not exceed 150 percent of the poverty level) who arefirst generation college students; and in which another 25 percent are eitherlow-income individuals or first generation college students.</P>
                        <P>
                          <E T="03">HSI-WSP</E> or <E T="03">HSI-WSP program</E> means the Hispanic-serving Institutions Work Study program.</P>
                        <P>
                          <E T="03">Institution of higher education</E> means a public or privateeducational institution that offers two-year associate degrees in a communitybuilding academic program and that is accredited by an accrediting agency orassociation recognized by the Secretary of Education. Institutions offering BOTH <PRTPAGE P="90"/>four-year and two-year degrees are not eligible for HSI-WSP.</P>
                        <P>
                          <E T="03">Recipient</E> means an approved applicant that executes a grantagreement with HUD.</P>
                        <P>
                          <E T="03">Student</E> means a person attending the institution of highereducation on a full-time basis, as defined by that institution and pursuing aneligible community building degree. Students must have attained no more thanhalf of the credits required for their degree at the time they first receiveassistance under HSI-WSP.</P>
                        <P>
                          <E T="03">Student with disabilities</E> means a student who meets thedefinition of a “person with disabilities” in the Americans withDisabilities Act of 1990.</P>
                        <P>(c) <E T="03">Assistance provided</E>—(1) <E T="03">Types of assistanceavailable.</E> HUD provides funding in the form of grants to recipients who makeassistance available to eligible students. Grants are provided to cover thecosts of student assistance and for an administrative allowance.</P>
                        <P>(2) <E T="03">Maximum amount of assistance.</E> The maximum amount that canbe provided to a student is $13,200 a year, including $1,000 for anadministrative allowance, subject to the 20% limitation described at570.416(c)(4) below. HUD will not set maximums on how much should be spent toeach eligible expenditure, other than for administrative costs. The institutionmust be able to document that the amounts paid are customary for thatinstitution and that it has actually paid that amount to the students. If astudent is receiving a Pell grant, he/she may not receive funding for the sameeducational support through HSI-WSP. However, HSI-WSP can substitute for all orpart of the Pell grant.</P>
                        <P>(3) <E T="03">Student assistance.</E> Grants are provided in the form ofstudent stipends, tuition support, and additional support.</P>
                        <P>(i) <E T="03">Student stipend.</E> The amount of the student stipend shouldbe based on the hourly rate for initial entry positions in the communitybuilding field and the number of hours worked by the student at the workplacement assignment. The stipend should be sufficiently high to allow thestudent to earn the full stipend, as determined by the recipient, withoutworking over 20 hours per week during the school year and 40 hours per weekduring the summer.</P>
                        <P>(ii) <E T="03">Tuition support.</E> The amount of tuition support may notexceed the tuition and required fees charged at the participating institution ofhigher education.</P>
                        <P>(iii) <E T="03">Additional support.</E> The recipient may provide additionalsupport for books, tutoring, and travel related to the academic program or workplacement assignment. Costs associated with reasonable accommodations forstudents with disabilities including, but not limited to, interpreters for thedeaf/hard of hearing, special equipment, and braille materials are eligibleunder this category.</P>
                        <P>(4) <E T="03">Administrative allowance.</E> HUD provides an allowance torecipients to cover the administrative costs of the program. The administrativeallowance is $1,000 per year for each student participating in the program;however, no more than 20 percent of the grant may be used for planning andprogram administrative costs.</P>
                        <P>(5) <E T="03">Number of students assisted.</E> The minimum number of studentsthat may be assisted is three students per participating institution of highereducation. The maximum number of students that may be assisted is ten studentsper participating institution of higher education; however, a lower maximum orhigher minimum may be established for a particular funding round by the NOFAannouncing the availability of the funds.</P>
                        <P>(d) <E T="03">Recipient eligibility and responsibilities</E>—(1) <E T="03">Recipient eligibility.</E> Public or private Hispanic-servinginstitutions of higher education offering only undergraduate two-year degrees,including degrees in at least one community building academic program, areeligible for assistance under HSI-WSP. HSIs that offer BOTH two-year and four-year degrees are not eligible for HSI-WSP assistance.</P>
                        <P>(2) <E T="03">Recipient responsibilities.</E> The recipient is responsiblefor administering the program, for compliance with all program requirements, andfor coordination of program activities carried out by the work placementagencies. The recipient must:<PRTPAGE P="91"/>
                        </P>
                        <P>(i) Recruit students for participation in HSI-WSP. The recipient shallestablish recruitment procedures that identify eligible economicallydisadvantaged and minority students pursuing careers in community building, andmake them aware of the availability of assistance opportunities. While theprogram is restricted to HSIs, the recipient may neither restrict the program toany particular minority group or groups, nor provide any preferential treatmentin the selection process based on race or ethnicity. Only economicallydisadvantaged students, as defined herein, may be assisted.</P>
                        <P>(ii) Select students for participation in HSI-WSP. In selecting among theeligible students, the recipient must consider the extent to which each studenthas demonstrated financial need under the applicable guidelines established atthe institution of higher education; an interest in, and commitment to, a careerin community building; and the ability to satisfactorily complete the academicand work placement responsibilities under HSI-WSP. Students must be selectedbefore the beginning of the semester for which funding is being provided. If astudent's participation terminates, the student may not be replaced; the grantwill be reduced by the amount of unused funds allotted for that student.</P>
                        <P>(iii) Provide the educational component for participating students.</P>
                        <P>(iv) Recruit and select work placement agencies, and negotiate and execute anagreement covering each work placement assignment.</P>
                        <P>(v) Refer participating students to work placement agencies and assiststudents in the selection of work placement assignments.</P>
                        <P>(vi) Assign sufficient staff to administer and supervise the program on aday-to-day basis.</P>
                        <P>(vii) Encourage participating students to either: obtain post-graduationemployment with a unit of State or local government, an areawide planningorganization (APO), Indian tribe or nonprofit organization engaged in communitybuilding; or transfer to a four-year institution of higher education to obtain abachelor's degree in a community building academic discipline.</P>
                        <P>(viii) Maintain records by racial and ethnic categories for each economicallydisadvantaged and minority student participating in HSI-WSP.</P>
                        <P>(ix) Keep records and make such reports as HUD may require.</P>
                        <P>(x) Comply with all other applicable Federal requirements.</P>
                        <P>(e) <E T="03">Work placement agencies eligibility andresponsibilities</E>—(1) <E T="03">Eligibility.</E> To be eligible toparticipate in HSI-WSP, the work placement agency must be an agency of a Stateor local government, an APO, an Indian tribe, or a private nonprofitorganization involved in community building activities. A work placement sitethat is part of the institution of higher education (e.g., a child care center)can only be an eligible site if the services provided by that site are offeredto people in the broader community outside the institution.</P>
                        <P>(2) <E T="03">Responsibilities.</E> Work placement agencies must:</P>
                        <P>(i) Provide practical experience and training in the community building fieldto participating students through work placement assignments.</P>
                        <P>(ii) Consult with the institution of higher education to ensure that thestudent's work placement assignment provides the requisite experience andtraining to meet the required number of work hours specified in the student workplacement agreement.</P>
                        <P>(iii) Provide a sufficient number and variety of work assignments to provideparticipating students with a wide choice of work experience.</P>
                        <P>(iv) Require each student to devote 12-20 hours per week during theregular school year, and 35-40 hours a week during the summer, to the workplacement assignment. Work placement agencies may provide flexibility in thework period, if such a schedule is consistent with the requirements of thestudent's academic program. However, a participating student may receive astipend payment only during the period when the student is placed with the workplacement agency.</P>
                        <P>(v) Comply with all other applicable Federal requirements.</P>
                        <P>(vi) Maintain such records as HUD may require.</P>
                        <P>(f) <E T="03">Student eligibility and responsibilities.</E> Students applydirectly to recipients receiving grants under HSI-WSP.<PRTPAGE P="92"/>
                        </P>
                        <P>(1) <E T="03">Eligibility.</E> To be eligible for HSI-WSP, the student:</P>
                        <P>(i) Must satisfy all applicable guidelines established at the participatinginstitution of higher education to measure financial need for academicscholarship or loan assistance.</P>
                        <P>(ii) Must be a full-time student enrolled in a community building associatedegree program at the participating institution of higher education. The studentmust have attained no more than 50 percent of the credits required for his/herdegree at the time the student first receives assistance under this program.</P>
                        <P>(iii) Must demonstrate an ability to maintain a satisfactory level ofperformance in community building academic program (i.e., maintain a B average,as defined by the institution) and in work placement assignments, and complywith the professional standards set by the recipient and the work placementagencies.</P>
                        <P>(iv) May not have previously participated in HSI-WSP.</P>
                        <P>(2) <E T="03">Student responsibilities.</E> Participating students must:</P>
                        <P>(i) Enroll or be enrolled in a two-year community building associate degreeprogram. A student's academic and work placement responsibilities include: Full-time enrollment in an approved academic program; maintenance of a satisfactorylevel of performance in the community building academic program and in workplacement assignments; and compliance with the professional conduct standardsset by the recipient and by the work placement agency. A satisfactory level ofacademic performance consists of maintaining a B average, as defined by theinstitution. A student's participation in HSI-WSP shall be terminated forfailure to meet these responsibilities and standards. If the student'sparticipation is terminated, the student is ineligible for further HSI-WSPassistance.</P>
                        <P>(ii) Devote 12-20 hours per week during the regular school year, and35-40 hours a week during the summer, to the work placement assignment.Work placement agencies may provide flexibility in the work period, if such aschedule is consistent with the requirements of the student's academic program.However, a participating student may receive a stipend payment only during theperiod when the student is placed with the work placement agency.</P>
                        <P>(iii) Agree to make a good-faith effort to either: obtain employment incommunity building with a unit of State or local government, an APO, an Indiantribe, or a non-profit organization; or to transfer to a four-year institutionof higher education to obtain a bachelor's degree in a community buildingacademic discipline. However, if the student does not obtain such employment ortransfer to a four-year institution, the student is not required to repay theassistance received.</P>
                        <P>(g) <E T="03">Notice of funding availability.</E> HUD will solicit grantapplications from eligible institutions of higher education by publishing anotice of funding availability in the <E T="04">Federal Register.</E> The noticewill:</P>
                        <P>(1) Explain how application kits providing specific application requirementsand guidance may be obtained;</P>
                        <P>(2) Specify the place for filing completed applications, and the date bywhich applications must be physically received at that location;</P>
                        <P>(3) State the amount of funding available under the notice, which may includefunds recaptured from previously awarded grants;</P>
                        <P>(4) Provide other appropriate program information and guidance.</P>
                        <P>(h) <E T="03">Agreements.</E>—(1) <E T="03">Grant agreement.</E> Theresponsibilities of the recipient under HSI-WSP will be incorporated in a grantagreement executed by HUD and the recipient.</P>
                        <P>(2) <E T="03">Student agreement.</E> The recipient and each participatingstudent must execute a written agreement incorporating their mutualresponsibilities under HSI-WSP. The agreement must be executed before thestudent can be enrolled in the program. The Recipient shall terminate astudent's participation in HSI-WSP for failure to meet the responsibilities andstandards in the agreement.</P>
                        <P>(3) <E T="03">Work placement assignment agreement.</E> The recipient, thestudent, and the work placement agency must execute a written agreement coveringeach work placement assignment. The <PRTPAGE P="93"/>agreement must address the responsibilitiesof each of the parties, the educational objectives, the nature of thesupervision, the standards of evaluation, and the student's time commitmentsunder the work placement assignment.</P>
                        <P>(i) <E T="03">Grant administration</E>—(1) <E T="03">Initial obligationof funds.</E> When HUD selects an application for funding, HUD will obligatefunds to cover the amount of the approved grant. The term of the award will befor two calendar years, unless subsequently altered by HUD at its discretion forgood cause.</P>
                        <P>(2) <E T="03">Disbursement.</E> Recipients will receive grant payments bydirect deposit on a reimbursement basis. If that is not possible, grant paymentswill be made by U.S. Treasury checks.</P>
                        <P>(3) <E T="03">Deobligation.</E> HUD may deobligate amounts for grants ifproposed activities are not begun or completed within a reasonable period oftime after selection.</P>
                        <P>(j) <E T="03">Other Federal requirements</E>—(1) <E T="03">Applicability of part 570.</E> HSI-WSP shall be subject to the policiesand procedures set forth in subparts A, K, and O of 24 CFR part 570, asapplicable, except as modified or limited under the provisions of this Notice.The provisions of subparts C and J of part 570 shall not apply to HSI-WSP.</P>
                        <P>(2) <E T="03">Uniform Administrative requirements.</E> Recipients under HSI-WSP shall comply with the requirements and standards of OMB Circular No.A-22, “Cost Principles for Educational Institutions.”Recipients that are private institutions of higher education shall comply withOMB Circular A-133, “Non-Federal Audit Requirements for Institutionsof Higher Education and Other Nonprofit Institutions,” which isimplemented at 24 CFR part 45. Recipients that are public institutions of highereducation shall comply with OMB Circular A-128, “Non-Federal AuditRequirements for State and Local Governments,” which is implemented at 24CFR part 44. Audits shall be conducted annually. In addition, all recipientsunder HSI-WSP shall comply with the provisions of OMB Circular A-110,“Uniform Administrative Requirements for Grants and Agreements WithInstitutions of Higher Education, Hospitals and Other Non-ProfitOrganizations,” which is implemented at 24 CFR part 84. OMB CircularA-110 shall apply to recipients in its entirety.</P>
                        <CITA>[62 FR 17493, Apr. 9, 1997, as amended at 63 FR 9683, Feb. 25, 1998]</CITA>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart F—Small Cities and Insular Areas Programs</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>62 FR 62914, Nov. 25, 1997, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.420</SECTNO>
                        <SUBJECT>General.</SUBJECT>
                        <P>(a) <E T="03">Administration of nonentitlement CDBG funds by HUD or InsularAreas</E>—(1) <E T="03">Small cities.</E> The Act permits each State toelect to administer all aspects of the CDBG program annual fund allocation forthe nonentitlement areas within its jurisdiction. This subpart sets forthpolicies and procedures applicable to grants for nonentitlement areas in Statesthat have not elected, in a manner and time prescribed by the Secretary, toadminister the CDBG program. States that elected to administer the program afterthe close of fiscal year 1984 cannot return administration of the program toHUD. A decision by a State to discontinue administration of the program wouldresult in the loss of CDBG funds for nonentitlement areas in that State and thereallocation of those funds to all States in the succeeding fiscal year.</P>
                        <P>(2) <E T="03">Insular areas.</E> Title V of Public Law 108-186 amendedthe Act to move the insular areas funding authorization from sections 107(a) and(b) to section 106(a). This revision identified a specific portion of the CDBGallocation for insular areas that is separate from the distribution for specialpurpose grants, as well as from the Entitlement and State formula distribution.The insular areas of Guam, the Northern Mariana Islands, the Virgin Islands, andAmerican Samoa are permitted to administer all aspects of their CommunityDevelopment Block Grant (CDBG) program under section 106 of the Act inaccordance with their final statement as further described at§ 570.440.</P>
                        <P>(b) <E T="03">Scope and applicability.</E> (1) This subpart describes thepolicies and procedures of the Small Cities Program that apply to nonentitlementareas in States where HUD administers the <PRTPAGE P="94"/>CDBG program. HUD currentlyadministers the Small Cities program in only two States—New York (forgrants prior to FY2000) and Hawaii. The small cities portion of this subpartprincipally addresses the requirements for New York in§§ 570.421, 570.426, 570.427, and 570.431. Sections 570.429 and570.430 identify special procedures applicable to Hawaii. Section 570.432 isapplicable to both New York and Hawaii.</P>
                        <P>(2) This subpart also describes the policies and procedures governingcommunity development block grants to insular areas under section 106 of theAct. Sections 570.440 and 570.441 identify procedures applicable to the InsularAreas program under section 106 of the Act. Fund reservations for insular areasunder section 107 of the Act shall remain governed by the policies andprocedures described in section 107(a)(1)(A) of the Act and§§ 570.400 and 570.405 of this part.</P>
                        <P>(3) The policies and procedures set forth in the following identifiedsubparts of this part apply to the HUD-administered Small Cities and InsularAreas programs, except as modified or limited under the provisions thereof orthis subpart:</P>
                        <P>(i) Subpart A—General Provisions;</P>
                        <P>(ii) Subpart C—Eligible Activities;</P>
                        <P>(iii) Subpart J—Grant Administration;</P>
                        <P>(iv) Subpart K—Other Program Requirements;</P>
                        <P>(v) Subpart M—Loan Guarantees; and</P>
                        <P>(vi) Subpart O—Performance Reviews.</P>
                        <P>(c) <E T="03">Public notification requirements.</E> (1) Section 102 of theDepartment of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3545)contains a number of provisions that are designed to ensure greateraccountability and integrity in the provision of certain types of assistanceadministered by HUD. All competitive grants in the HUD-administered Small Citiesprogram in New York are affected by this statute, and the requirementsidentified at 24 CFR part 4 apply to them. Imminent threat grants under§ 570.424 and section 108 repayment grants under § 570.432are not affected by section 102 because they are not competitive grants.</P>
                        <P>(2) The Hawaii HUD-administered Small Cities program is not subject tosection 102 because the funds are not distributed by HUD on a competitive basis.</P>
                        <P>(3) The Insular Areas program under section 106 of the Act is not subject tosection 102 because the funds are not distributed by HUD on a competitive basis.</P>
                        <P>(d) <E T="03">Abbreviated consolidated plan.</E> Applications for the HUD-administered Small Cities Program and the Insular Areas program under section106 of the Act that contain housing activities must include a certification thatthe proposed housing activities are consistent with the applicant's consolidatedplan as described at 24 CFR part 91.</P>
                        <P>(e) <E T="03">National and primary objectives.</E> (1) Each activity fundedthrough the Small Cities program and the Insular Areas program under section 106of the Act must meet one of the following national objectives as defined underthe criteria in § 570.208:</P>
                        <P>(i) Benefit low- and moderate-income families;</P>
                        <P>(ii) Aid in the prevention or elimination of slums or blight; or</P>
                        <P>(iii) Be an activity that the grantee certifies is designed to meet othercommunity development needs having a particular urgency because existingconditions pose a serious and immediate threat to the health or welfare of thecommunity and other financial resources are not available to meet such needs.</P>

                        <P>(2) In addition to the objectives described in paragraph (e)(1) of thissection, with respect to grants made through the Small Cities program, not lessthan 70 percent of the total of grant funds from each grant and Section 108 loanguarantee funds received under subpart M of this part within a fiscal year mustbe expended for activities which benefit low- and moderate-income persons underthe criteria of § 570.208(a) or of § 570.208(d)(5) or (6).In the case of multiyear plans in New York State approved in response to NOFAspublished prior to calendar year 1997, not less than 70 percent of the totalfunding for grants approved pursuant to a multiyear plan for a time <PRTPAGE P="95"/>period of upto three years must be expended for activities which benefit low- and moderate-income persons. Thus, 70 percent of the grant for year 1 of a multiyear planapproved in response to NOFAs published prior to calendar year 1997 must meetthe 70 percent requirement, 70 percent of the combined grants from years 1 and 2must meet the requirement, and 70 percent of the combined grants from years 1,2, and 3 must meet the requirement. In determining the percentage of fundsexpended for such activity, the provisions of § 570.200(a)(3)(i),(iii), (iv), and (v) shall apply.</P>
                        <P>(3) In addition to the objectives described in paragraph (e)(1) of thissection, grants made through the Insular Areas program shall also comply withthe primary objective of 70 percent benefit to low- and moderate-income persons.Insular area recipients must meet this requirement for each separate grant undersection 107 of the Act. For grants made under section 106 of the Act, insulararea recipients must ensure that over a period of time specified in theircertifications not to exceed three years, not less than 70 percent of theaggregate of CDBG fund expenditures shall be for low- and moderate-incomeactivities meeting the criteria under § 570.208(a) or under§ 570.208(d)(5) or (6). See also § 570.200(a)(3) forfurther discussion of the primary objective.</P>
                        <P>(f) <E T="03">Allocation of funds</E>—(1) <E T="03">Small cities.</E>The allocation of formula CDBG funds for use in nonentitlement areas of Hawaiiis as provided in subpart A of this part.</P>
                        <P>(2) <E T="03">Insular areas.</E> The allocation of appropriated funds forinsular areas under section 106 of the Act shall be governed by the policies andprocedures described in section 106(a)(2) of the Act and§§ 570.440 and 570.441 of this subpart. The annualappropriations described in this section shall be distributed to insular areason the basis of the ratio of the population of each insular area to thepopulation of all insular areas.</P>
                        <CITA>[69 FR 32779, June 10, 2004]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.421</SECTNO>
                        <SUBJECT>New York Small Cities Program design.</SUBJECT>
                        <P>(a) <E T="03">Selection system</E>—(1) <E T="03">Competitiveapplications.</E> Each competitive application will be rated and scored againstat least the following factors:</P>
                        <P>(i) Need-absolute number of persons in poverty as further explained in theNOFA;</P>
                        <P>(ii) Need-percent of persons in poverty as further explained in the NOFA;</P>
                        <P>(iii) Program Impact; and</P>
                        <P>(iv) Fair Housing and Equal Opportunity, which may include the applicant'sSection 3 plan and implementation efforts with respect to actions toaffirmatively further fair housing. The NOFA described in paragraph (b) of thissection will contain a more detailed description of these factors, and therelative weight that each factor will be given.</P>
                        <P>(2) In addition HUD reserves the right to establish minimal thresholds forselection factors and otherwise select grants in accordance with§ 570.425 and the applicable NOFA.</P>
                        <P>(3) <E T="03">Imminent threats to public health and safety.</E> The criteriafor these grants are described in § 570.424.</P>
                        <P>(4) <E T="03">Repayment of Section 108 loans.</E> The criteria for thesegrants are described in § 570.432.</P>
                        <P>(5) <E T="03">Economic development grants.</E> HUD intends to use the Section108 loan guarantee program to the maximum extent feasible to fund economicdevelopment projects in the nonentitlement areas of New York. In the event thatthere are not enough Section 108 loan guarantee funds available to fund viableeconomic development projects, if a project needs a grant in addition to a loanguarantee to make it viable, or if the project does not meet the requirements ofthe Section 108 program but is eligible for a grant under this subpart, HUD mayfund Economic Development applications as they are determined to be fundable ina specific amount by HUD up to the sum set aside for economic developmentprojects in a notice of funding availability, notwithstanding paragraph (g) ofthis section. HUD also has the option in a NOFA of funding economic developmentactivities on a competitive basis, as a competitive application as described inparagraph (a)(1) of this section. In <PRTPAGE P="96"/>order for an applicant to receive SmallCities grant funds on a noncompetitive basis, the field office must determinethat the economic development project will have a substantial impact on theneeds identified by the applicant.</P>
                        <P>(b) <E T="03">Notice of funding availability.</E> HUD will issue one or moreNotice(s) of Funding Availability (NOFA) each fiscal year which will indicatethe amount of funds available, the annual grant limits per grantee, type ofgrants available, the application requirements, and the rating factors that willbe used for those grants which are competitive. A NOFA may set forth, subject tothe requirements of this subpart, additional selection criteria for all grants.</P>
                        <P>(c) <E T="03">Eligible applicants.</E> (1) Eligible applicants in New Yorkare units of general local government, excluding: Metropolitan cities, urbancounties, units of general local government which are participating in urbancounties or metropolitan cities, even if only part of the participating unit ofgovernment is located in the urban county or metropolitan city. Indian tribesare also ineligible for assistance under this subpart. An application may besubmitted individually or jointly by eligible applicants.</P>
                        <P>(2) Counties, cities, towns, and villages may apply and receive funding forseparate projects to be done in the same jurisdiction. Only one grant will bemade under each funding round for the same type of project to be located withinthe jurisdiction of a unit of general local government (e.g., both the countyand village cannot receive funding for a sewer system to be located in the samevillage, but the county can receive funding for a sewer system that is locatedin the same village as a rehabilitation project for which the village receivesfunding). The NOFA will contain additional information on applicant eligibility.</P>
                        <P>(3) Counties may apply on behalf of units of general local government locatedwithin their jurisdiction when the unit of general local government hasauthorized the county to apply. At the time that the county submits itsapplication for funding, it must submit a resolution by the governing body ofthe unit of local government that authorizes the county to submit an applicationon behalf of the unit of general local government. The county will be consideredthe grantee and will be responsible for executing all grant documents. Thecounty is responsible for ensuring compliance with all laws, regulations, andExecutive Orders applicable to the CDBG Program. HUD will deal exclusively withthe county with respect to issues of program administration and performance,including remedial actions. The unit of general local government will beconsidered the grantee for the purpose of determining grant limits. The unit ofgeneral local government's statistics will be used for purposes of the selectionfactors referred to in § 570.421(a).</P>
                        <P>(d) <E T="03">Public service activities cap.</E> Public service activitiesmay be funded up to a maximum of fifteen (15) percent of a State'snonentitlement allocation for any fiscal year. HUD may award a grant to a unitof general local government for public service activities with up to 100 percentof the funds intended for public service activities. HUD will apply the 15percent statewide cap to public service activities by funding public serviceactivities in the highest rated applications in each NOFA until the cap isreached.</P>
                        <P>(e) <E T="03">Activities outside an applicant's boundaries.</E> An applicantmay conduct eligible CDBG activities outside its boundaries. These activitiesmust be demonstrated to be appropriate to meeting the applicant's needs andobjectives, and must be consistent with State and local law. This provisionincludes using funds provided under this subpart in a metropolitan city or anurban county.</P>
                        <P>(f) <E T="03">Multiyear plans.</E> HUD will not make any new multiyearcommitments for NOFAs published in calendar year 1997 or later. HUD willcontinue to honor the terms of the multiyear plans that were approved under theprovisions of NOFAs published prior to calendar year 1997.</P>
                        <P>(g) <E T="03">Maximum grant amount.</E> The maximum grant amount that will beawarded to a single unit of general local government in response to the annualSmall Cities NOFA published in calendar year 1997 or later is $400,000, exceptthat counties may apply for up <PRTPAGE P="97"/>to $600,000 in HUD-administered Small Citiesfunds. HUD may specify lower grant limits in the NOFA, which may includedifferent limits for different types of grants available or different types ofapplicants. This paragraph (g) does not apply to multiyear plans that wereapproved under the provisions of NOFAs published prior to calendar year 1997,nor does it apply to grants awarded in connection with paragraphs (a)(3) through(a)(5) of this section. The maximum limits in this paragraph (g) apply to grantsfor economic development projects awarded under NOFAs in which there is no set-aside of funds for such projects.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§§ 570.422-425</SECTNO>
                        <RESERVED>[Reserved]</RESERVED>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.426</SECTNO>
                        <SUBJECT>Program income.</SUBJECT>
                        <P>(a) The provisions of § 570.504(b) apply to all program incomegenerated by a specific grant and received prior to grant closeout.</P>
                        <P>(b) If the unit of general local government has another ongoing CDBG grant atthe time of closeout, the program income will be considered to be program incomeof the ongoing grant. The grantee can choose which grant to credit the programincome to if it has multiple open CDBG grants.</P>
                        <P>(c) If the unit of general local government has no open ongoing CDBG grant atthe time of closeout, program income of the unit of general local government orits subrecipients which amounts to less than $25,000 per year will not beconsidered to be program income unless needed to repay a Section 108 guaranteedloan. When more than $25,000 of program income is generated from one or moreclosed out grants in a year after closeout, the entire amount of the programincome is subject to the requirements of this part. This will be a subject ofthe closeout agreement described in § 570.509(c).</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.427</SECTNO>
                        <SUBJECT>Program amendments.</SUBJECT>
                        <P>(a) <E T="03">HUD approval of certain program amendments.</E> Grantees shallrequest prior HUD approval for all program amendments involving new activitiesor alteration of existing activities that will significantly change the scope,location, or objectives of the approved activities or beneficiaries. Approval issubject to the following:</P>
                        <P>(1) Programs or projects that include new or significantly altered activitiesare rated in accordance with the criteria for selection applicable at the timethe original preapplication or application (whichever is applicable) was rated.The rating of the program or projects proposed which include the new or alteredactivities proposed by the amendment must be equal to or greater than the lowestrating received by a funded project or program during that cycle of ratings.</P>
                        <P>(2) Consideration shall be given to whether any new activity proposed can becompleted promptly.</P>
                        <P>(3) If the grant was received on a noncompetitive basis, the proposed amendedproject must be able to be completed promptly, and must meet all of thethreshold requirements that were required for the original project. If theproposal is to amend the project to a type of project that was ratedcompetitively in the fiscal year that the noncompetitive project was funded, thenew or altered activities proposed by the amendment must receive a rating equalto or greater than the lowest rating received by a funded project or programduring that cycle of ratings.</P>
                        <P>(b) <E T="03">Documentation of program amendments.</E> Any program amendmentsthat do not require HUD approval must be fully documented in the grantee'srecords.</P>
                        <P>(c) <E T="03">Citizen participation requirements.</E> Whenever an amendmentrequires HUD approval, the requirements for citizen participation in§ 570.431 must be met.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.428</SECTNO>
                        <RESERVED>[Reserved]</RESERVED>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.429</SECTNO>
                        <SUBJECT>Hawaii general and grant requirements.</SUBJECT>
                        <P>(a) <E T="03">General.</E> This section applies to the HUD-administered SmallCities Program in the State of Hawaii.</P>
                        <P>(b) <E T="03">Scope and applicability.</E> Except as otherwise provided inthis section, the policies and procedures outlined in subparts A, C, J, K, O ofthis part, and in §§ 570.420, 570.430, and 570.432, apply to theHUD-administered Small Cities Program in the State of Hawaii.</P>
                        <P>(c) <E T="03">Grant amounts.</E> (1) For each eligible unit of general localgovernment, a <PRTPAGE P="98"/>formula grant amount will be determined which bears the same ratioto the total amount available for the nonentitlement area of the State as theweighted average of the ratios between:</P>
                        <P>(i) The population of that eligible unit of general local government and thepopulation of all eligible units of general local government in thenonentitlement areas of the State;</P>
                        <P>(ii) The extent of poverty in that eligible unit of general local governmentand the extent of poverty in all the eligible units of general local governmentin the nonentitlement areas of the State; and</P>
                        <P>(iii) The extent of housing overcrowding in that eligible unit of generallocal government and the extent of housing overcrowding in all the eligibleunits of general local government in the nonentitlement areas of the State.</P>
                        <P>(2) In determining the average of the ratios under this paragraph (c), theratio involving the extent of poverty shall be counted twice and each of theother ratios shall be counted once. (0.25 + 0.50 + 0.25 = 1.00).</P>
                        <P>(d) <E T="03">Adjustments to grants.</E> Grant amounts under this section maybe adjusted where an applicant's performance is judged inadequate, considering:</P>
                        <P>(1) Capacity to utilize the grant amount effectively and efficiently;</P>
                        <P>(2) Compliance with the requirements of § 570.902(a) for timelyexpenditure of funds beginning with grants made in FY 1996. In making thiscalculation, all outstanding grants will be considered. For the FY 1995 grantthe requirement is substantial compliance with the applicant's schedule orschedules submitted in each previously funded application;</P>
                        <P>(3) Compliance with other program requirements based on monitoring visits andaudits.</P>
                        <P>(e) <E T="03">Reallocation.</E> (1) Any amounts that become available as aresult of adjustments under paragraph (d) of this section, or any reductionsunder subpart O of this part, shall be reallocated in the same fiscal year toany remaining eligible applicants on a pro rata basis.</P>
                        <P>(2) Any formula grant amounts reserved for an applicant that chooses not tosubmit an application shall be reallocated to any remaining eligible applicantson a pro rata basis.</P>
                        <P>(3) No amounts shall be reallocated under paragraph (e) of this section inany fiscal year to any applicant whose grant amount was adjusted under paragraph(d) of this section or reduced under subpart O of this part.</P>
                        <P>(f) <E T="03">Required submissions.</E> In order to receive its formula grantunder this subpart, the applicant must submit a consolidated plan in accordancewith 24 CFR part 91. That part includes requirements for the content of theconsolidated plan, for the process of developing the plan, including citizenparticipation provisions, for the submission date, for HUD approval, and for theamendment process.</P>
                        <P>(g) <E T="03">Application approval.</E> HUD will approve an application ifthe jurisdiction's submissions have been made and approved in accordance with 24CFR part 91 and the certifications required therein are satisfactory to theSecretary. The certifications will be satisfactory to the Secretary for thispurpose unless the Secretary has determined pursuant to subpart O of this partthat the grantee has not complied with the requirements of this part, has failedto carry out its consolidated plan as provided under § 570.903, orhas determined that there is evidence, not directly involving the grantee's pastperformance under this program, that tends to challenge in a substantial mannerthe grantee's certification of future performance. If the Secretary makes anysuch determination, however, further assurances may be required to be submittedby the grantee as the Secretary may deem warranted or necessary to find thegrantee's certification satisfactory.</P>
                        <P>(h) <E T="03">Grant agreement.</E> The grant will be made by means of a grantagreement executed by both HUD and the grantee.</P>
                        <P>(i) <E T="03">Conditional grant.</E> The Secretary may make a conditionalgrant in which case the obligation and use of grant funds for activities may berestricted. Conditional grants may be made where there is substantial evidencethat there has been, or there will be, a failure to meet the performancerequirements or criteria described in subpart O of this part. In such case, theconditional grant will be made by means of a grant <PRTPAGE P="99"/>agreement, executed by HUD,which includes the terms of the condition specifying the reason for theconditional grant, the actions necessary to remove the condition and thedeadline for taking those actions. The grantee shall execute and return such anagreement to HUD within 60 days of the date of its transmittal. Failure of thegrantee to execute and return the grant agreement within 60 days may be deemedby HUD to constitute rejection of the grant by the grantee and shall be causefor HUD to determine that the funds provided in the grant agreement areavailable for reallocation in accordance with section 106(c) of the Act. Failureto satisfy the condition may result in a reduction in the grant amount pursuantto § 570.911.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0060)</APPRO>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.430</SECTNO>
                        <SUBJECT>Hawaii program operation requirements.</SUBJECT>
                        <P>(a) <E T="03">Limitation on planning and administrative costs.</E> For grantsmade with allocations prior to FY 1995, no more than 20 percent of the sum ofthe grant plus program income received during the grant period shall be expendedfor planning and program administrative costs. For grants received fromallocations in FY 1995 and thereafter, a grantee will be considered to be inconformance with the requirements of § 570.200(g) if funds obligatedfor planning and administration during the most recently completed program yeardo not exceed 20 percent of the sum of the grant made for that program year andthe program income received from post FY 1994 grants during that program year.</P>
                        <P>(b) <E T="03">Performance and evaluation reports.</E> Grantees will followthe requirements of § 570.507(a) for entitlement grant recipients forall grants received in FY 1995 and thereafter. Grantees will continue followingthe requirements of § 570.507(a) for HUD-administered small citiesgrants for grants received prior to FY 1995 until those grants are closed out.</P>
                        <P>(c) <E T="03">Grant closeouts.</E> Grants received prior to FY 1995 shall beclosed out in accordance with the procedures in § 570.509. Grantsreceived in FY 1995 and thereafter shall not be closed out individually. Agrantee's entire program shall be closed upon program completion if a granteeceases its participation in the Small Cities Program.</P>
                        <P>(d) <E T="03">Public Services.</E> Starting with the FY 1996 grant, granteesmay follow the provisions of § 570.201(e)(1) that refer toentitlement grantees, allowing grantees to use 15 percent of the program incomereceived in the previous program year in addition to 15 percent of the grantamount for public services.</P>
                        <P>(e) <E T="03">Compliance with the primary objective.</E> Starting with the FY1995 grant, grantees may select a time period of one, two or three program yearsin which to meet the requirement that not less than 70 percent of the aggregateof CDBG fund expenditures be for activities benefitting low- and moderate-income persons. Grants made from allocations prior to FY 1995 will be consideredindividually for meeting the primary objective, and expenditures for grants frompre-FY 1995 allocations made during and after FY 1995 will not be considered indetermining whether the primary objective has been met for post-1994allocations. If the State of Hawaii decides to administer the CommunityDevelopment Block Grant Program for nonentitlement units of general localgovernment in Hawaii, the State will be bound by the time period for meeting theprimary objective that was chosen by each nonentitlement grantee within theState until those time periods have expired.</P>
                        <P>(f) <E T="03">Program amendments for grants received prior to FY 1995.</E>Grantees must follow the requirements of 24 CFR 91.505 when amending theirprogram with regard to grants received prior to FY 1995. For purposes of thisparagraph (f), the term <E T="03">consolidated plan</E> as used in 24 CFR 91.505means an application submitted under the Hawaii program for pre-FY 1995 funds.Also for purposes of this paragraph (f), to comply with the requirements of 24CFR 91.505, grantees must refer to their current citizen participation plans(adopted in accordance with 24 CFR 91.505) to determine the criteria forsubstantial amendment and the citizen participation process to be followed.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0020)</APPRO>
                      </SECTION>
                      <SECTION>
                        <PRTPAGE P="100"/>
                        <SECTNO>§ 570.431</SECTNO>
                        <SUBJECT>Citizen participation.</SUBJECT>
                        <P>(a) <E T="03">General.</E> An applicant that is located in a nonentitlementarea of a State that has not elected to distribute funds shall comply with thecitizen participation requirements described in this section, includingrequirements for the preparation of the proposed application and the finalapplication. The requirements for citizen participation do not restrict theresponsibility or authority of the applicant for the development and executionof its community development program.</P>
                        <P>(b) <E T="03">Citizen participation plan.</E> The applicant must develop andfollow a detailed citizen participation plan and must make the plan public. Theplan must be completed and available before the application for assistance issubmitted to HUD, and the applicant must certify that it is following the plan.The plan must set forth the applicant's policies and procedures for:</P>
                        <P>(1) Giving citizens timely notice of local meetings and reasonable and timelyaccess to local meetings, information, and records relating to the grantee'sproposed and actual use of CDBG funds including, but not limited to:</P>
                        <P>(i) The amount of CDBG funds expected to be made available for the comingyear, including the grant and anticipated program income;</P>
                        <P>(ii) The range of activities that may be undertaken with those funds;</P>
                        <P>(iii) The estimated amount of those funds proposed to be used for activitiesthat will benefit low- and moderate-income persons;</P>
                        <P>(iv) The proposed CDBG activities likely to result in displacement and theapplicant's plans, consistent with the policies developed under§ 570.606(b), for minimizing displacement of persons as a result ofits proposed activities; and</P>
                        <P>(v) The types and levels of assistance the applicant plans to make available(or to require others to make available) to persons displaced by CDBG-fundedactivities, even if the applicant expects no displacement to occur;</P>
                        <P>(2) Providing technical assistance to groups representative of persons oflow- and moderate-income that request assistance in developing proposals. Thelevel and type of assistance to be provided is at the discretion of theapplicant. The assistance need not include the provision of funds to the groups;</P>
                        <P>(3) Holding a minimum of two public hearings, for the purpose of obtainingcitizens' views and formulating or responding to proposals and questions. Eachpublic hearing must be conducted at a different stage of the CDBG program.Together, the hearings must address community development and housing needs,development of proposed activities and review of program performance. There mustbe reasonable notice of the hearings and the hearings must be held at times andaccessible locations convenient to potential or actual beneficiaries, withreasonable accommodations including material in accessible formats for personswith disabilities. The applicant must specify in its plan how it will meet therequirement for hearings at times and locations convenient to potential oractual beneficiaries;</P>
                        <P>(4) Meeting the needs of non-English speaking residents in the case of publichearings where a significant number of non-English speaking residents canreasonably be expected to participate;</P>
                        <P>(5) Responding to citizen complaints and grievances, including the proceduresthat citizens must follow when submitting complaints and grievances. Theapplicant's policies and procedures must provide for timely written answers towritten complaints and grievances within 15 working days of the receipt of thecomplaint, where practicable; and</P>
                        <P>(6) Encouraging citizen participation, particularly by low- and moderate-income persons who reside in slum or blighted areas, and in other areas in whichCDBG funds are proposed to be used.</P>
                        <P>(c) <E T="03">Publication of proposed application.</E> (1) The applicantshall publish a proposed application consisting of the proposed communitydevelopment activities and community development objectives in order to affordaffected citizens an opportunity to:</P>
                        <P>(i) Examine the application's contents to determine the degree to which theymay be affected;</P>

                        <P>(ii) Submit comments on the proposed application; and<PRTPAGE P="101"/>
                        </P>
                        <P>(iii) Submit comments on the performance of the applicant.</P>
                        <P>(2) The requirement for publishing in paragraph (c)(1) of this section may bemet by publishing a summary of the proposed application in one or morenewspapers of general circulation, and by making copies of the proposedapplication available at libraries, government offices, and public places. Thesummary must describe the contents and purpose of the proposed application, andmust include a list of the locations where copies of the entire proposedapplication may be examined.</P>
                        <P>(d) <E T="03">Preparation of a final application.</E> An applicant mustprepare a final application. In the preparation of the final application, theapplicant shall consider comments and views received related to the proposedapplication and may, if appropriate, modify the final application. The finalapplication shall be made available to the public and shall include thecommunity development objectives and projected use of funds, and the communitydevelopment activities.</P>
                        <P>(e) <E T="03">New York grantee amendments.</E> To assure citizenparticipation on program amendments to final applications that require HUDapproval under § 570.427, the grantee shall:</P>
                        <P>(1) Furnish citizens information concerning the amendment;</P>
                        <P>(2) Hold one or more public hearings to obtain the views of citizens on theproposed amendment;</P>
                        <P>(3) Develop and publish the proposed amendment in such a manner as to affordaffected citizens an opportunity to examine the contents, and to submit commentson the proposed amendment;</P>
                        <P>(4) Consider any comments and views expressed by citizens on the proposedamendment and, if the grantee finds it appropriate, modify the final amendmentaccordingly; and</P>
                        <P>(5) Make the final amendment to the community development program availableto the public before its submission to HUD.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.432</SECTNO>
                        <SUBJECT>Repayment of section 108 loans.</SUBJECT>
                        <P>Notwithstanding any other provision of this subpart, a unit of general localgovernment in a nonentitlement area where the State has not elected toadminister the CDBG program shall be eligible for Small Cities Grant assistancehereunder for the sole purpose of paying any amounts due on debt obligationsissued by such unit of general local government (or its designated publicagency) and guaranteed by the Secretary pursuant to section 108 of the Act (seesubpart M of this part). The award of grant assistance for such purpose shall beconsistent with section 106(d)(3)(B) of the Act, in such amount, and subject tosuch conditions as the Secretary may determine. Since guaranteed loan funds (asdefined in § 570.701) are required to be used in accordance withnational and primary objective requirements, and other applicable requirementsof this part, any grant made to make payments on the debt obligations evidencingthe guaranteed loan shall be presumed to meet such requirements, unless HUDdetermines that the guaranteed loan funds were not used in accordance with suchrequirements. Any such determination by HUD shall not prevent the making of thegrant in the amount of the payment due, but it may be grounds for HUD to takeappropriate action under subpart O of this part based on the originalnoncompliance.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.440</SECTNO>
                        <SUBJECT>Application requirements for insular area grants funded under section106.</SUBJECT>
                        <P>(a) <E T="03">Applicability.</E> The requirements of this section apply toinsular grants funded under section 106 of the Act. An insular area jurisdictionmay choose to prepare program statements following either:</P>
                        <P>(1) The abbreviated consolidated plan procedures described in this subpartand in 24 CFR 91.235; or</P>
                        <P>(2) The complete consolidated plan procedures applicable to localgovernments, discussed at 24 CFR 91.200 through 91.230.</P>
                        <P>(b) <E T="03">Proposed statement.</E> An insular area jurisdiction shallprepare and publish a proposed statement and comply with the citizenparticipation requirements described in § 570.441, if it submits anabbreviated consolidated plan under 24 CFR 91.235. The jurisdiction shall followthe citizen participation requirements of 24 CFR 91.105 and 91.100 (with theexception of § 91.100(a)(4)), if <PRTPAGE P="102"/>it submits a complete consolidatedplan.</P>
                        <P>(c) <E T="03">Final statement.</E> The insular area jurisdiction shall submitto HUD a final statement describing its community development objectives andactivities. The statement also must include a priority nonhousing communitydevelopment plan in accordance with 24 CFR 91.235. This final statement shall besubmitted, together with the required certifications, to the appropriate fieldoffice in a form prescribed by HUD.</P>
                        <P>(d) <E T="03">Submission requirement.</E> Each insular area jurisdictionshall submit its final statement to HUD no later than 45 days before the startof its program year. Each jurisdiction may choose the start date for the annualperiod of its program year that most closely fits its own needs. HUD may grantan extension of the submission deadline for good cause.</P>
                        <P>(e) <E T="03">Certifications.</E> The insular area jurisdiction's finalstatement must be accompanied by appropriate certifications as further describedunder 24 CFR 91.225. The jurisdiction should submit all general certifications,as well as all program certifications for each program from which it receivesfunding, if it submits a complete consolidated plan. For insular areajurisdictions receiving CDBG funds under an abbreviated consolidated plan, thesecertifications shall include at a minimum:</P>
                        <P>(1) The following general certifications described at § 91.225(a)of this title: Affirmatively furthering fair housing; anti-displacement andrelocation plan; drug-free workplace; anti-lobbying; authority of jurisdiction;consistency with plan; acquisition and relocation; and Section 3.</P>
                        <P>(2) The following CDBG certifications described at § 91.225(b) ofthis title: Citizen participation; community development plan; following a plan;use of funds; excessive force; compliance with anti-discrimination laws;compliance with lead-based paint procedures; and compliance with laws.</P>
                        <P>(f) <E T="03">HUD action on final statement.</E> Following the review of thestatement, HUD will promptly notify each jurisdiction of the action taken withregard to its statement. HUD will approve a grant if the jurisdiction'ssubmissions have been made and approved in accordance with 24 CFR part 91, andif the certifications required in such submissions are satisfactory to HUD. Thecertifications will be satisfactory to HUD for this purpose, unless HUDdetermines pursuant to subpart O of this part that the jurisdiction has notcomplied with the requirements of this part, has failed to carry out itsconsolidated plan (or abbreviated consolidated plan) as provided under§ 570.903, or has determined that there is evidence, not directlyinvolving the jurisdiction's past performance under this program, that tends tochallenge in a substantial manner the jurisdiction's certification of futureperformance. If HUD makes any such determination, however, further assurancesmay be required to be submitted by the jurisdiction as HUD may deem warranted ornecessary to find the jurisdiction's certification satisfactory.</P>
                        <P>(g) <E T="03">Reimbursement for pre-award costs.</E> Insular areajurisdictions may request reimbursement for pre-award costs in accordance with§ 570.200(h).</P>
                        <P>(h) <E T="03">Float funding.</E> An insular area jurisdiction may useundisbursed funds in the line of credit and its CDBG program account that arebudgeted in final statements or action plans for one or more activities that donot need the funds immediately, subject to the limitations described in§ 570.301(b).</P>
                        <P>(i) <E T="03">Program amendments.</E> (1) The insular area jurisdiction'scitizen participation plan (<E T="03">see</E> § 570.441) must specifythe criteria the jurisdiction will use for determining what changes in thejurisdiction's planned or actual activities will constitute a substantialamendment to its final statement. It must include changes in the use of CDBGfunds from one eligible activity to another among the changes that qualify as asubstantial amendment.</P>

                        <P>(2) The citizen participation plan must provide citizens with reasonablenotice and an opportunity to comment on substantial amendments. The citizenparticipation plan must state how reasonable notice and an opportunity tocomment will be given, as well as provide a period of not less than 30 days toreceive comments on the substantial amendment before the amendment isimplemented.<PRTPAGE P="103"/>
                        </P>
                        <P>(3) The citizen participation plan shall require the jurisdiction to considercomments or views of citizens received in writing, or orally at public hearings,if any, in preparing the substantial amendment of its statement. A summary ofcomments or views not accepted and the reasons for non-acceptance shall beattached to the substantial amendment.</P>
                        <P>(4) Any program amendment, regardless of whether it is considered to besubstantial, must be fully documented in the jurisdiction's records.</P>
                        <P>(j) <E T="03">Performance reports.</E> Each insular area jurisdiction mustsubmit annual performance reports in accordance with 24 CFR 91.520.</P>
                        <CITA>[69 FR 32780, June 10, 2004]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.441</SECTNO>
                        <SUBJECT>Citizen participation—insular areas.</SUBJECT>
                        <P>(a) <E T="03">General.</E> An insular area jurisdiction submitting anabbreviated consolidated plan under 24 CFR 91.235 shall comply with the citizenparticipation requirements described in this section. An insular areajurisdiction submitting a complete consolidated plan in accordance with 24 CFR91.200 through 91.230 shall follow the citizen participation requirements of§ 91.100 and § 91.105, except for§ 91.100(a)(4). For funding under section 106 of the Act, theserequirements are applicable to all aspects of the Insular Areas program,including the preparation of the proposed statement and final statements asdescribed in § 570.440. The requirements for citizen participation donot restrict the responsibility or authority of the jurisdiction for thedevelopment and execution of its community development program.</P>
                        <P>(b) <E T="03">Citizen participation plan.</E> The insular area jurisdictionmust develop and follow a detailed citizen participation plan and must make theplan public. The plan must be completed and available before the statement forassistance is submitted to HUD, and the jurisdiction must certify that it isfollowing the plan. The plan must set forth the jurisdiction's policies andprocedures for:</P>
                        <P>(1) Giving citizens timely notice of local meetings and reasonable and timelyaccess to local meetings, information, and records relating to the grantee'sproposed and actual use of CDBG funds including, but not limited to:</P>
                        <P>(i) The amount of CDBG funds expected to be made available for the comingyear, including the grant and anticipated program income;</P>
                        <P>(ii) The range of activities that may be undertaken with those funds;</P>
                        <P>(iii) The estimated amount of those funds proposed to be used for activitiesthat will benefit low- and moderate-income persons;</P>
                        <P>(iv) The proposed CDBG activities likely to result in displacement and thejurisdiction's plans, consistent with the policies developed under§ 570.606(b), for minimizing displacement of persons as a result ofits proposed activities; and</P>
                        <P>(v) The types and levels of assistance the jurisdiction plans to makeavailable (or to require others to make available) to persons displaced by CDBG-funded activities, even if the jurisdiction expects no displacement to occur;</P>
                        <P>(2) Providing technical assistance to groups representative of persons oflow- and moderate-income that request assistance in developing proposals. Thelevel and type of assistance to be provided is at the discretion of thejurisdiction. The assistance need not include the provision of funds to thegroups;</P>

                        <P>(3) Holding a minimum of two public hearings for the purpose of obtainingcitizens' views and formulating or responding to proposals and questions. Eachpublic hearing must be conducted at a different stage of the CDBG program.Together, the hearings must address community development and housing needs,development of proposed activities, and review of program performance. Theremust be reasonable notice of the hearings, and the hearings must be held attimes and accessible locations convenient to potential or actual beneficiaries,with reasonable accommodations including material in accessible formats forpersons with disabilities. The jurisdiction must specify in its plan how it willmeet the requirement for hearings at times and locations convenient to potentialor actual beneficiaries;<PRTPAGE P="104"/>
                        </P>
                        <P>(4) Meeting the needs of non-English speaking residents in the case of publichearings where a significant number of non-English speaking residents canreasonably be expected to participate;</P>
                        <P>(5) Responding to citizen complaints and grievances, including the proceduresthat citizens must follow when submitting complaints and grievances. Thejurisdiction's policies and procedures must provide for timely written answersto written complaints and grievances within 15 working days after the receipt ofthe complaint, where practicable; and</P>
                        <P>(6) Encouraging citizen participation, particularly by low- and moderate-income persons who reside in areas in which CDBG funds are proposed to be used.</P>
                        <P>(c) <E T="03">Publication of proposed statement.</E> (1) The insular areajurisdiction shall publish a proposed statement consisting of the proposedcommunity development activities and community development objectives in orderto afford affected citizens an opportunity to:</P>
                        <P>(i) Examine the statement's contents to determine the degree to which theymay be affected;</P>
                        <P>(ii) Submit comments on the proposed statement; and</P>
                        <P>(iii) Submit comments on the performance of the jurisdiction.</P>
                        <P>(2) The requirement for publishing in paragraph (c)(1) of this section may bemet by publishing a summary of the proposed statement in one or more newspapersof general circulation and by making copies of the proposed statement availableat libraries, government offices, and public places. The summary must describethe contents and purpose of the proposed statement and must include a list ofthe locations where copies of the entire proposed statement may be examined.</P>
                        <P>(d) <E T="03">Preparation of a final statement.</E> An insular areajurisdiction must prepare a final statement. In the preparation of the finalstatement, the jurisdiction shall consider comments and views received relatingto the proposed statement and may, if appropriate, modify the final statement.The final statement shall be made available to the public and shall include thecommunity development objectives, projected use of funds, and the communitydevelopment activities.</P>
                        <P>(e) <E T="03">Program amendments.</E> To assure citizen participation onprogram amendments to final statements, the insular area grantee shall:</P>
                        <P>(1) Furnish citizens information concerning the amendment;</P>
                        <P>(2) Hold one or more public hearings to obtain the views of citizens on theproposed amendment;</P>
                        <P>(3) Develop and publish the proposed amendment in such a manner as to affordaffected citizens an opportunity to examine the contents, and to submit commentson the proposed amendment;</P>
                        <P>(4) Consider any comments and views expressed by citizens on the proposedamendment and, if the grantee finds it appropriate, modify the final amendmentaccordingly; and</P>
                        <P>(5) Make the final amendment to the community development program availableto the public before its submission to HUD.</P>
                        <P>(f) <E T="03">Performance reports.</E> (1) The citizen participation planmust provide citizens with reasonable notice and an opportunity to comment onperformance reports. The citizen participation plan must state how reasonablenotice and an opportunity to comment will be given. The citizen participationplan must provide a period of not less than 15 days to receive comments on theperformance report before it is to be submitted to HUD.</P>
                        <P>(2) The citizen participation plan shall require the jurisdiction to considercomments or views of citizens received in writing or orally at public hearingsin preparing the performance report. A summary of these comments or views shallbe attached to the performance report.</P>
                        <P>(g) <E T="03">Application for loan guarantees.</E> Insular area jurisdictionsintending to apply for the Section 108 Loan Guarantee program must ensure thatthey follow the applicable presubmission and citizen participation requirementsof § 570.704.</P>
                        <CITA>[69 FR 32780, June 10, 2004]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.442</SECTNO>
                        <SUBJECT>Reallocations-Insular Areas.</SUBJECT>

                        <P>(a) Any Insular Area funds that become available as a result of reductionsunder subpart O of this part, shall be reallocated in the same or future <PRTPAGE P="105"/>fiscalyear to any remaining eligible Insular Area grantees pro rata according topopulation.</P>
                        <P>(b) Any Insular Area grant funds for a fiscal year reserved for an applicantthat chooses not to submit a final statement in accordance with§ 570.440 to receive such funds, shall be reallocated in the same orfuture fiscal year to any remaining eligible Insular Area grantees pro rataaccording to population.</P>
                        <P>(c) No amounts shall be reallocated under this section in any fiscal year toany applicant whose grant amount in such fiscal year was reduced under subpart Oof this part or who did not submit a final statement in accordance with§ 570.440 for that fiscal year.</P>
                        <P>(d) Insular Area grantees receiving additional funds under this section willbe evaluated for timeliness under § 570.902 based upon the originalgrant amount plus the additional funds received. Accordingly, references in§ 570.902 to an Insular Area's grant amount for its current programyear include such additional funds, and references to unexpended or undisbursedfunds include such additional funds.</P>
                        <CITA>[72 FR 12536, Mar. 15, 2007]</CITA>
                        <EFFDNOTP>
                          <HD SOURCE="HED">Effective Date Note:</HD>
                          <P>At 72 FR 12536, Mar. 15, 2007,§ 570.442 was added, effective April 16, 2007.</P>
                        </EFFDNOTP>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart G—Urban Development Action Grants</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>47 FR 7983, Feb. 23, 1982, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.450</SECTNO>
                        <SUBJECT>Purpose.</SUBJECT>
                        <P>The purpose of urban development action grants is to assist cities and urbancounties that are experiencing severe economic distress to help stimulateeconomic development activity needed to aid in economic recovery. This subpart Gcontains those regulations that are essential for the continued operation ofthis grant program.</P>
                        <CITA>[61 FR 11476, Mar. 20, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.456</SECTNO>
                        <SUBJECT>Ineligible activities and limitations on eligible activities.</SUBJECT>
                        <P>(a) Large cities and urban counties may not use assistance under this subpartfor planning the project or developing the application. However, they may useentitlement community development block grant funds for this purpose, providedthat the UDAG project meets the eligibility test of this part. Any small citywhich submits a project application which is selected for preliminary approvaland for which legally binding grant agreement and for which a release of fundspursuant to 24 CFR part 58 has been issued may devote up to three (3) percent ofthe approved amount of its action grant to defray its actual costs in planningthe project and preparing its application.</P>
                        <P>(b) Assistance under this subpart may not be used for public services asdescribed in § 570.201(e).</P>
                        <P>(c)(1) No assistance may be provided under this subpart for speculativeprojects intended to facilitate the relocation of industrial or commercialplants or facilities from one area to another. The provisions of this paragraph(c)(1) shall not apply to a relocation of any such plant or facility within ametropolitan area.</P>
                        <P>(i) HUD will presume that a proposed project which includes speculativecommercial or industrial space is intended to facilitate the relocation of aplant or facility from one area to another, if it is demonstrated to HUD'ssatisfaction that:</P>
                        <P>(A) The proposed project is reasonably proximate (i.e., within 50 miles) toan area from which there has been a significant current pattern of movement, toareas reasonably proximate, of jobs of the category for which such space isappropriate; and</P>
                        <P>(B) There is a likelihood of continuation of the pattern, based on measurablecomparisons between the area from which the movement has been occurring and thearea of the proposed project in terms of tax rates, energy costs, and similarrelevant factors.</P>

                        <P>(ii) The restrictions established in this paragraph (c)(1) shall not apply ifthe Secretary determines that the relocation does not significantly andadversely affect the employment or economic base of the area from which theindustrial or commercial plant or facility is to be relocated. However, theSecretary will not be required to make a determination whether there is asignificant and adverse effect. If such a <PRTPAGE P="106"/>determination is undertaken, theSecretary will presume that there is a significant and adverse effect where thesignificant pattern of job movement and the likelihood of continuation of such apattern has been from a distressed community.</P>
                        <P>(iii) The presumptions established in accordance with this paragraph (c)(1)are rebuttable by the applicant. However, the burden of overcoming thepresumptions will be on the applicant.</P>
                        <P>(iv) The presumptions established in this paragraph (c)(1) will not apply ifthe speculative space contained in a commercial or industrial plant or facilityincluded in a project constitutes a lesser percentage of the total spacecontained in that plant or facility than the threshold amounts specified below:</P>
                        <GPOTABLE CDEF="s25,r50" COLS="2" OPTS="L2">
                          <BOXHD>
                            <CHED H="1">Size of plant or facility</CHED>
                            <CHED H="1">Amount of speculative space</CHED>
                          </BOXHD>
                          <ROW>
                            <ENT I="01">0 to 50,000 sq. ft.</ENT>
                            <ENT>10 percent.</ENT>
                          </ROW>
                          <ROW>
                            <ENT I="01">50,001 to 250,000 sq. ft</ENT>
                            <ENT>5,000 sq. ft. or 8 percent,whichever is greater.</ENT>
                          </ROW>
                          <ROW>
                            <ENT I="01">250,001 to 1,000,000 sq. ft</ENT>
                            <ENT>20,000 sq. ft. or 5 percent,whichever is greater.</ENT>
                          </ROW>
                          <ROW>
                            <ENT I="01">1,000,001 or more sq. ft</ENT>
                            <ENT>50,000 sq. ft. or 3 percent,whichever is greater.</ENT>
                          </ROW>
                        </GPOTABLE>
                        <P>(2) <E T="03">Projects with identified intended occupants.</E> No assistancemay be provided or utilized under this subpart for any project with identifiedintended occupants that is likely to facilitate:</P>
                        <P>(i) A relocation of any operation of an industrial or commercial plant orfacility or other business establishment from any UDAG eligible jurisdiction; or</P>
                        <P>(ii) An expansion of any operation of an industrial or commercial plant orfacility or other business establishment that results in a substantial reductionof any such operation in any UDAG eligible jurisdiction. The provisions of thisparagraph (c)(2) shall not apply to a relocation of an operation or to anexpansion of an operation within a metropolitan area. The provisions of thisparagraph (c)(2) shall apply only to projects that do not have speculativespace, or to projects that include both identified intended occupant space andspeculative space.</P>
                        <P>(iii) <E T="03">Significant and adverse effect.</E> The restrictionsestablished in this paragraph (c)(2) shall not apply if the Secretary determinesthat the relocation or expansion does not significantly and adversely affect theemployment or economic base of the UDAG eligible jurisdiction from which therelocation or expansion occurs. However, the Secretary will not be required tomake a determination whether there is a significant and adverse effect. If sucha determination is undertaken, among the factors which the Secretary willconsider are:</P>
                        <P>(A) Whether it is reasonable to anticipate that there will be a significantnet loss of jobs in the plant or facility being abandoned; and</P>
                        <P>(B) Whether an equivalent productive use will be made of the plant orfacility being abandoned by the relocating or expanding operation, thus creatingno deterioration of economic base.</P>
                        <P>(3) Within 90 days following notice of intent to withhold, deny or cancelassistance under paragraph (c) (1) or (2) of this section, the applicant mayappeal in writing to the Secretary the withholding, denial or cancellation ofassistance. The applicant will be notified and given an opportunity within aprescribed time for an informal consultation regarding the action.</P>
                        <P>(4) <E T="03">Assistance for individuals adversely affected by prohibitedrelocations.</E> (i) Any amount withdrawn by, recaptured by, or paid to theSecretary because of a violation (or a settlement of an alleged violation) ofthis section (or any regulation issued or contractual provision entered into tocarry out this section) by a project with identified intended occupants will bemade available by the Secretary as a grant to the UDAG eligible jurisdictionfrom which the operation of an industrial or commercial plant or facility orother business establishment was relocated, or in which the operation wasreduced.</P>
                        <P>(ii)(A) Any amount made available under this paragraph shall be used by thegrantee to assist individuals who were employed by the operation involved beforethe relocation or reduction and whose employment or terms of employment wereadversely affected by the relocation or reduction. The assistance shall includejob training, job retraining, and job placement.</P>

                        <P>(B) If any amount made available to a grantee under this paragraph (c)(4) ismore than is required to provide the assistance described in paragraph <PRTPAGE P="107"/>(c)(4)(ii)(A) of this section, the grantee shall use the excess amount to carryout community development activities eligible under section 105(a) of theHousing and Community Development Act of 1974.</P>
                        <P>(iii)(A) The provisions of this paragraph (c)(4) shall be applicable to anyamount withdrawn by, recaptured by, or paid to the Secretary under this section,including any amount withdrawn, recaptured, or paid before the effective date ofthis paragraph.</P>
                        <P>(B) Grants may be made under this paragraph (c)(4) only to the extent ofamounts provided in appropriation Acts.</P>
                        <P>(5) For purposes of this section, the following definitions apply:</P>
                        <P>(i) “Operation” means any plant, equipment, facility, substantialnumber of positions, substantial employment opportunities, production capacity,or product line.</P>
                        <P>(ii) “Metropolitan area” means a metropolitan area as defined in§ 570.3 and which consists of either a freestanding metropolitan areaor a primary metropolitan statistical area where both primary and consolidatedareas exist.</P>
                        <P>(iii) “Likely” means probably or reasonably to be expected, asdetermined by firm evidence such as resolutions of a corporation to close aplant or facility, notifications of closure to collective bargaining units,correspondence and notifications of corporate officials relative to a closure,and supportive evidence, such as newspaper articles and notices to employeesregarding closure of a plant or facility. Consultant studies and marketingstudies may be submitted as supportive evidence, but by themselves are not firmevidence.</P>
                        <P>(iv) “UDAG eligible jurisdiction” means a distressed community, aPocket of Poverty, a Pocket of Poverty community, or an identifiable communitydescribed in section 119(p) of the Housing and Community Development Act of1974.</P>
                        <P>(6) Notwithstanding any other provision of this subpart, nothing in thissubpart may be construed to permit an inference or conclusion that the policy ofthe urban development action grant program is to facilitate the relocation ofbusinesses from one area to another.</P>
                        <CITA>[47 FR 7983, Feb. 23, 1982, as amended at 53 FR 33028, Aug. 29, 1988; 54FR 21169, May 16, 1989; 56 FR 56128, Oct. 31, 1991]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.457</SECTNO>
                        <SUBJECT>Displacement, relocation, acquisition, and replacement of housing.</SUBJECT>
                        <P>The displacement, relocation, acquisition, and replacement of housingrequirements of § 570.606 apply to applicants under this subpart G.</P>
                        <CITA>[55 FR 29309, July 18, 1990]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.461</SECTNO>
                        <SUBJECT>Post-preliminary approval requirements; lead-based paint.</SUBJECT>
                        <P>The recipient may receive preliminary approval prior to the accomplishment oflead-based paint activities conducted pursuant to part 35, subparts A, B, J, K,and R of this title, but no funds will be released until such actions arecomplete and evidence of compliance is submitted to HUD.</P>
                        <CITA>[64 FR 50225, Sept. 15, 1999]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.463</SECTNO>
                        <SUBJECT>Project amendments and revisions.</SUBJECT>
                        <P>(a) <E T="03">Pre-approval revisions to the application.</E> Applicants mustsubmit to the HUD Area Office and to Central Office all revisions to theapplication. A revision is considered significant if it alters the scope,location, or scale of the project or changes the beneficiaries' population.</P>
                        <FP>The applicant must hold at least one public hearing prior to making asignificant revision to the application.</FP>
                        <P>(b) <E T="03">Post preliminary approval amendments.</E> Applicants receivingpreliminary approval must submit to the HUD Central Office, a request forapproval of any significant amendment. A copy of the request must also besubmitted to the Area Office. A significant amendment involves new activities oralterations thereof which will change the scope, location, scale, orbeneficiaries of such activities or which, as a result of a number of smallerchanges, add up to an amount that exceeds ten percent of the grant. HUD approvalof amendments may be granted to those requests which meet all of the followingcriteria:<PRTPAGE P="108"/>
                        </P>
                        <P>(1) New or significantly altered activities must meet the criteria forselection applicable at the time of receipt of the program amendment.</P>
                        <P>(2) The recipient must have complied with all requirements of this subpart.</P>
                        <P>(3) The recipient may make amendments other than those requiring prior HUDapproval as defined in paragraph (b) of this section but each recipient mustnotify both the Area and Central Offices of such changes.</P>
                        <CITA>[47 FR 7983, Feb. 23, 1982, as amended at 61 FR 11476, Mar. 20, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.464</SECTNO>
                        <SUBJECT>Project closeout.</SUBJECT>
                        <P>HUD will advise the recipient to initiate closeout procedures when HUDdetermines, in consultation with the recipient, that there are not impedimentsto closeout. Closeout shall be carried out in accordance with§ 570.509 and applicable HUD guidelines.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.465</SECTNO>
                        <SUBJECT>Applicability of rules and regulations.</SUBJECT>
                        <P>The provisions of subparts A, B, C, J, K, and O of this part 570 shall applyto this subpart except to the extent that they are modified or augmented by thissubpart.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.466</SECTNO>
                        <SUBJECT>Additional application submission requirements for Pockets ofPoverty—employment opportunities.</SUBJECT>
                        <P>Applicants for Action Grants under the Pockets of Poverty provision mustdescribe the number and, to the extent possible, the types of new jobs(construction and permanent) that will be provided to the low- and moderate-income residents of the Pocket of Poverty as a direct result of the proposedproject. If the application calls for job training programs (such as thoserelated to the CETA program) or job recruiting services for the pocket'sresidents, then such proposed activities must be clearly and fully explained.HUD requires applicants to ensure that at least 75 percent of whatever permanentjobs initially result from the project are provided to low- and moderate-incomepersons and that at least 51 percent of whatever permanent jobs initially resultfrom the project are provided to low- and moderate-income residents from thepocket. HUD encourages applicants to ensure that at least 20 percent of allpermanent jobs are filled by persons from the pocket qualified to participate inthe CETA program on a continuous basis. HUD requires all applicants tocontinuously use best efforts to ensure that at least 75 percent of allpermanent jobs resulting from any Action Grant-assisted project are provided tolow- and moderate-income persons and that at least 51 percent of all permanentjobs resulting from any Action Grant-assisted project are provided to low- andmoderate-income residents from the pocket. The application should clearlydescribe how the applicant intends to meet initial and continuous jobrequirements. Private participating parties must meet these employmentrequirements in the aggregate. To enable the private participants to do so,lease agreements executed by a private participating party shall include:</P>
                        <P>(a) Provisions requiring lessees to follow hiring practices that the privateparticipating party has determined will enable it to meet these requirements inthe aggregate; and</P>
                        <P>(b) Provisions that will enable the private participating party to declare adefault under the lease agreement if the lessees do not follow such practices.</P>
                        <CITA>[61 FR 11476, Mar. 20, 1996]</CITA>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <RESERVED>Subpart H [Reserved]</RESERVED>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart I—State Community Development Block Grant Program</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>57 FR 53397, Nov. 9, 1992, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.480</SECTNO>
                        <SUBJECT>General.</SUBJECT>

                        <P>(a) This subpart describes policies and procedures applicable to states thatelect to receive Community Development Block Grant funds for distribution tounits of general local government in the state's nonentitlement areas under theHousing and Community Development Act of 1974. Other subparts of part 570 arenot applicable to the State CDBG Program, except as expressly providedotherwise.<PRTPAGE P="109"/>
                        </P>
                        <P>(b) HUD's authority for the waiver of regulations and for the suspension ofrequirements to address damage in a Presidentially-declared disaster area isdescribed in 24 CFR part 5 and in section 122 of the Act, respectively.</P>
                        <P>(c) In exercising the Secretary's obligation and responsibility to review astate's performance, the Secretary will give maximum feasible deference to thestate's interpretation of the statutory requirements and the requirements ofthis regulation, provided that these interpretations are not plainlyinconsistent with the Act and the Secretary's obligation to enforce compliancewith the intent of the Congress as declared in the Act. The Secretary will notdetermine that a state has failed to carry out its certifications in compliancewith requirements of the Act (and this regulation) unless the Secretary findsthat procedures and requirements adopted by the state are insufficient to affordreasonable assurance that activities undertaken by units of general localgovernment were not plainly inappropriate to meeting the primary objectives ofthe Act, this regulation, and the state's community development objectives.</P>
                        <P>(d) Administrative action taken by the Secretary that is not explicitly andfully part of this regulation shall only apply to a specific case or issue at aspecific time, and shall not be generally applicable to the state-administeredCDBG program.</P>
                        <P>(e) Religious organizations are eligible to participate under the State CDBGProgram as provided in § 570.200(j).</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 11477, Mar. 20, 1996; 61FR 54921, Oct. 22, 1996; 69 FR 41718, July 9, 2004]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.481</SECTNO>
                        <SUBJECT>Definitions.</SUBJECT>
                        <P>(a) Except for terms defined in applicable statutes or this subpart, theSecretary will defer to a state's definitions, provided that these definitionsare explicit, reasonable and not plainly inconsistent with the Act. As used inthis subpart, the following terms shall have the meaning indicated:</P>
                        <P>(1) <E T="03">Act</E> means title I of the Housing and Community DevelopmentAct of 1974 (42 U.S.C. 5301 <E T="03">et seq.</E>).</P>
                        <P>(2) <E T="03">CDBG funds</E> means Community Development Block Grant funds,in the form of grants under this subpart and program income, and loansguaranteed by the state under section 108 of the Act.</P>
                        <P>(b) [Reserved]</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 5209, Feb. 9, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.482</SECTNO>
                        <SUBJECT>Eligible activities.</SUBJECT>
                        <P>(a) <E T="03">General.</E> The choice of activities on which block grantfunds are expended represents the determination by state and local participants,developed in accordance with the state's program design and procedures, as towhich approach or approaches will best serve these interests. The eligibleactivities are listed at section 105(a) of the Act.</P>
                        <P>(b) <E T="03">Special assessments under the CDBG program.</E> The followingpolicies relate to special assessments under the CDBG program:</P>
                        <P>(1) <E T="03">Public improvements initially assisted with CDBG funds.</E>Where CDBG funds are used to pay all or part of the cost of a publicimprovement, special assessments may be imposed as follows:</P>
                        <P>(i) Special assessments to recover the <E T="03">CDBG funds</E> may be madeonly against properties owned and occupied by persons <E T="03">not</E> of lowand moderate income. These assessments constitute program income.</P>
                        <P>(ii) Special assessments to recover the <E T="03">non-CDBG</E> portion may bemade, provided that CDBG funds are used to pay the special assessment in behalfof all properties owned and occupied by low and moderate income persons; exceptthat CDBG funds need not be used to pay the special assessments in behalf ofproperties owned and occupied by moderate income persons if, when permitted bythe state, the unit of general local government certifies that it does not havesufficient CDBG funds to pay the assessments in behalf of all of the low andmoderate income owner-occupant persons. Funds collected through such specialassessments are not program income.</P>
                        <P>(2) <E T="03">Public improvements not initially assisted with CDBG funds.</E>CDBG funds may be used to pay special assessments levied against property whenthis form <PRTPAGE P="110"/>of assessment is used to recover the capital cost of eligible publicimprovements initially financed solely from sources other than CDBG funds. Thepayment of special assessments with CDBG funds constitutes CDBG assistance tothe public improvement. Therefore, CDBG funds may be used to pay specialassessments, provided that:</P>
                        <P>(i) The installation of the public improvements was carried out in compliancewith requirements applicable to activities assisted under this subpart,including labor, environmental and citizen participation requirements;</P>
                        <P>(ii) The installation of the public improvement meets a criterion fornational objectives. (See § 570.483(b)(1), (c), and (d).)</P>
                        <P>(iii) The requirements of § 570.482(b)(1)(ii) are met.</P>
                        <P>(c) <E T="03">Special eligibility provisions.</E> (1) Microenterprisedevelopment activities eligible under section 105(a)(23) of the Housing andCommunity Development Act of 1974, as amended (42 U.S.C. 5301 <E T="03">etseq.</E>) (the Act) may be carried out either through the recipient directly orthrough public and private organizations, agencies, and other subrecipients(including nonprofit and for-profit subrecipients).</P>
                        <P>(2) <E T="03">Provision of public services.</E> The following activitiesshall not be subject to the restrictions on public services under section105(a)(8) of the Act:</P>
                        <P>(i) Support services provided under section 105(a)(23) of the Act, andparagraph (c) of this section;</P>
                        <P>(ii) Services carried out under the provisions of section 105(a)(15) of theAct, that are specifically designed to increase economic opportunities throughjob training and placement and other employment support services, including, butnot limited to, peer support programs, counseling, child care, transportation,and other similar services; and</P>
                        <P>(iii) Services of any type carried out under the provisions of section105(a)(15) of the Act pursuant to a strategy approved by a state under theprovisions of § 91.315(e)(2) of this title.</P>
                        <P>(3) Environmental cleanup and economic development or redevelopment ofcontaminated properties. Remediation of known or suspected environmentalcontamination may be undertaken under the authority of section 205 of Public Law105-276 and section 105(a)(4) of the Act. Economic development activitiescarried out under sections 105(a)(14), (a)(15), or (a)(17) of the Act mayinclude costs associated with project-specific assessment or remediation ofknown or suspected environmental contamination.</P>
                        <P>(d) [Reserved]</P>
                        <P>(e) <E T="03">Guidelines and objectives for evaluating project costs andfinancial requirements</E>—(1) <E T="03">Applicability.</E> The followingguidelines, also referred to as the underwriting guidelines, are provided toassist the recipient to evaluate and select activities to be carried out foreconomic development purposes. Specifically, these guidelines are applicable toactivities that are eligible for CDBG assistance under section 105(a)(17) of theAct, economic development activities eligible under section 105(a)(14) of theAct, and activities that are part of a community economic development projecteligible under section 105(a)(15) of the Act. The use of the underwritingguidelines published by HUD is not mandatory. However, states electing not touse these guidelines would be expected to ensure that the state or units ofgeneral local government conduct basic financial underwriting prior to theprovision of CDBG financial assistance to a for-profit business.</P>
                        <P>(2) <E T="03">Objectives.</E> The underwriting guidelines are designed toprovide the recipient with a framework for financially underwriting andselecting CDBG-assisted economic development projects which are financiallyviable and will make the most effective use of the CDBG funds. Whereappropriate, HUD's underwriting guidelines recognize that different levels ofreview are appropriate to take into account differences in the size and scope ofa proposed project, and in the case of a microenterprise or other small businessto take into account the differences in the capacity and level of sophisticationamong businesses of differing sizes. Recipients are encouraged, when theydevelop their own programs and underwriting criteria, to also take these factorsinto account. These underwriting guidelines are published as appendix A to thispart. The objectives <PRTPAGE P="111"/>of the underwriting guidelines are to ensure:</P>
                        <P>(i) That project costs are reasonable;</P>
                        <P>(ii) That all sources of project financing are committed;</P>
                        <P>(iii) That to the extent practicable, CDBG funds are not substituted for non-Federal financial support;</P>
                        <P>(iv) That the project is financially feasible;</P>
                        <P>(v) That to the extent practicable, the return on the owner's equityinvestment will not be unreasonably high; and</P>
                        <P>(vi) That to the extent practicable, CDBG funds are disbursed on a pro ratabasis with other finances provided to the project.</P>
                        <P>(f) <E T="03">Standards for evaluating public benefit</E>—(1) <E T="03">Purpose and applicability.</E> The grantee is responsible for making surethat at least a minimum level of public benefit is obtained from the expenditureof CDBG funds under the categories of eligibility governed by these standards.The standards set forth below identify the types of public benefit that will berecognized for this purpose and the minimum level of each that must be obtainedfor the amount of CDBG funds used. These standards are applicable to activitiesthat are eligible for CDBG assistance under section 105(a)(17) of the Act,economic development activities eligible under section 105(a)(14) of the Act,and activities that are part of a community economic development projecteligible under section 105(a)(15) of the Act. Certain public facilities andimprovements eligible under section 105(a)(2) of the Act, which are undertakenfor economic development purposes, are also subject to these standards, asspecified in § 570.483(b)(4)(vi)(F)(<E T="03">2</E>). Unlike theguidelines for project costs and financial requirements covered under paragraph(a) of this section, the use of the standards for public benefit is mandatory.</P>
                        <P>(2) <E T="03">Standards for activities in the aggregate.</E> Activitiescovered by these standards must, in the aggregate, either:</P>
                        <P>(i) Create or retain at least one full-time equivalent, permanent job per$35,000 of CDBG funds used; or</P>
                        <P>(ii) Provide goods or services to residents of an area, such that the numberof low- and moderate-income persons residing in the areas served by the assistedbusinesses amounts to at least one low- and moderate-income person per $350 ofCDBG funds used.</P>
                        <P>(3) <E T="03">Applying the aggregate standards.</E> (i) A state shall applythe aggregate standards under paragraph (e)(2) of this section to all fundsdistributed for applicable activities from each annual grant. This includes theamount of the annual grant, any funds reallocated by HUD to the state, anyprogram income distributed by the state and any guaranteed loan funds made underthe provisions of subpart M of this part covered in the method of distributionin the final statement for a given annual grant year.</P>
                        <P>(ii) The grantee shall apply the aggregate standards to the number of jobs tobe created/retained, or to the number of persons residing in the area served (asapplicable), as determined at the time funds are obligated to activities.</P>
                        <P>(iii) Where an activity is expected both to create or retain jobs and toprovide goods or services to residents of an area, the grantee may elect tocount the activity under either the jobs standard or the area residentsstandard, but not both.</P>
                        <P>(iv) Where CDBG assistance for an activity is limited to job training andplacement and/or other employment support services, the jobs assisted with CDBGfunds shall be considered to be created or retained jobs for the purposes ofapplying the aggregate standards.</P>
                        <P>(v) Any activity subject to these standards which meets one or more of thefollowing criteria may, at the grantee's option, be excluded from the aggregatestandards described in paragraph (f)(2) of this section:</P>
                        <P>(A) Provides jobs exclusively for unemployed persons or participants in oneor more of the following programs:</P>
                        <P>(<E T="03">1</E>) Jobs Training Partnership Act (JTPA);</P>
                        <P>(<E T="03">2</E>) Jobs Opportunities for Basic Skills (JOBS); or</P>
                        <P>(<E T="03">3</E>) Aid to Families with Dependent Children (AFDC);</P>

                        <P>(B) Provides jobs predominantly for residents of Public and Indian Housingunits;<PRTPAGE P="112"/>
                        </P>
                        <P>(C) Provides jobs predominantly for homeless persons;</P>
                        <P>(D) Provides jobs predominantly for low-skilled, low- and moderate-incomepersons, where the business agrees to provide clear opportunities for promotionand economic advancement, such as through the provision of training;</P>
                        <P>(E) Provides jobs predominantly for persons residing within a census tract(or block numbering area) that has at least 20 percent of its residents who arein poverty;</P>
                        <P>(F) Provides assistance to business(es) that operate(s) within a census tract(or block numbering area) that has at least 20 percent of its residents who arein poverty;</P>
                        <P>(G) Stabilizes or revitalizes a neighborhood income that has at least 70percent of its residents who are low- and moderate-income;</P>
                        <P>(H) Provides assistance to a Community Development Financial Institution (asdefined in the Community Development Banking and Financial Institutions Act of1994, (12 U.S.C. 4701 note)) serving an area that has at least 70 percent of itsresidents who are low- and moderate-income;</P>
                        <P>(I) Provides assistance to an organization eligible to carry out activitiesunder section 105(a)(15) of the Act serving an area that has at least 70 percentof its residents who are low- and moderate-income;</P>
                        <P>(J) Provides employment opportunities that are an integral component of aproject designed to promote spatial deconcentration of low- and moderate-incomeand minority persons;</P>
                        <P>(K) With prior HUD approval, provides substantial benefit to low-incomepersons through other innovative approaches;</P>
                        <P>(L) Provides services to the residents of an area pursuant to a strategyapproved by the State under the provisions of § 91.315(e)(2) of thistitle;</P>
                        <P>(M) Creates or retains jobs through businesses assisted in an area pursuantto a strategy approved by the State under the provisions of§ 91.315(e)(2) of this title.</P>
                        <P>(N) Directly involves the economic development or redevelopment ofenvironmentally contaminated properties.</P>
                        <P>(4) <E T="03">Standards for individual activities.</E> Any activity subjectto these standards which falls into one or more of the following categories willbe considered by HUD to provide insufficient public benefit, and therefore mayunder no circumstances be assisted with CDBG funds:</P>
                        <P>(i) The amount of CDBG assistance exceeds either of the following, asapplicable:</P>
                        <P>(A) $50,000 per full-time equivalent, permanent job created or retained; or</P>
                        <P>(B) $1,000 per low- and moderate-income person to which goods or services areprovided by the activity.</P>
                        <P>(ii) The activity consists of or includes any of the following:</P>
                        <P>(A) General promotion of the community as a whole (as opposed to thepromotion of specific areas and programs);</P>
                        <P>(B) Assistance to professional sports teams;</P>
                        <P>(C) Assistance to privately-owned recreational facilities that serve apredominantly higher-income clientele, where the recreational benefit to usersor members clearly outweighs employment or other benefits to low- and moderate-income persons;</P>
                        <P>(D) Acquisition of land for which the specific proposed use has not yet beenidentified; and</P>
                        <P>(E) Assistance to a for-profit business while that business or any otherbusiness owned by the same person(s) or entity(ies) is the subject of unresolvedfindings of noncompliance relating to previous CDBG assistance provided by therecipient.</P>
                        <P>(5) <E T="03">Applying the individual activity standards.</E> (i) Where anactivity is expected both to create or retain jobs and to provide goods orservices to residents of an area, it will be disqualified only if the amount ofCDBG assistance exceeds both of the amounts in paragraph (f)(4)(i) of thissection.</P>
                        <P>(ii) The individual activity tests in paragraph (f)(4)(i) of this sectionshall be applied to the number of jobs to be created or retained, or to thenumber of persons residing in the area served (as applicable), as determined atthe time funds are obligated to activities.</P>

                        <P>(iii) Where CDBG assistance for an activity is limited to job training andplacement and/or other employment support services, the jobs assisted with <PRTPAGE P="113"/>CDBGfunds shall be considered to be created or retained jobs for the purposes ofapplying the individual activity standards in paragraph (f)(4)(i) of thissection.</P>
                        <P>(6) <E T="03">Documentation.</E> The state and its grant recipients mustmaintain sufficient records to demonstrate the level of public benefit, based onthe above standards, that is actually achieved upon completion of the CDBG-assisted economic development activity(ies) and how that compares to the levelof such benefit anticipated when the CDBG assistance was obligated. If a stategrant recipient's actual results show a pattern of substantial variation fromanticipated results, the state and its recipient are expected to take thoseactions reasonably within their respective control to improve the accuracy ofthe projections. If the actual results demonstrate that the state has failed thepublic benefit standards, HUD may require the state to meet more stringentstandards in future years as appropriate.</P>
                        <P>(g) <E T="03">Amendments to economic development projects after reviewdeterminations.</E> If, after the grantee enters into a contract to provideassistance to a project, the scope or financial elements of the project changeto the extent that a significant contract amendment is appropriate, the projectshould be reevaluated under these and the recipient's guidelines. (This wouldinclude, for example, situations where the business requests a change in theamount or terms of assistance being provided, or an extension to the loanpayment period required in the contract.) If a reevaluation of the projectindicates that the financial elements and public benefit to be derived have alsosubstantially changed, then the recipient should make appropriate adjustments inthe amount, type, terms or conditions of CDBG assistance which has been offered,to reflect the impact of the substantial change. (For example, if a change inthe project elements results in a substantial reduction of the total projectcosts, it may be appropriate for the recipient to reduce the amount of totalCDBG assistance.) If the amount of CDBG assistance provided to the project isincreased, the amended project must still comply with the public benefitstandards under paragraph (f) of this section.</P>
                        <P>(h) <E T="03">Prohibition on use of assistance for employment relocationactivities</E>—(1) <E T="03">Prohibition.</E> CDBG funds may not be usedto directly assist a business, including a business expansion, in the relocationof a plant, facility, or operation from one labor market area (LMA) to anotherLMA if the relocation is likely to result in a significant loss of jobs in theLMA from which the relocation occurs.</P>
                        <P>(2) <E T="03">Definitions.</E> The following definitions apply to thesection:</P>
                        <P>(i) <E T="03">Directly assist.</E> Directly assist means the provision ofCDBG funds to a business pursuant to section 105(a)(15) or (17) of the Housingand Community Development Act of 1974 (42 U.S.C. 5301 <E T="03">et seq</E>).Direct assistance also includes assistance under section 105(a)(1), (2), (4),(7), and (14) of the Housing and Community Development Act of 1974, when thestate's grantee, subrecipient, or nonprofit entity eligible under section105(a)(15) enters into an agreement with a business to undertake one or more ofthese activities as a condition of the business relocating a facility, plant, oroperation to the LMA. Provision of public facilities and indirect assistancethat will provide benefit to multiple businesses does not fall under thedefinition of “directly assist,” unless it includes the provision ofinfrastructure to aid a specific business that is the subject of an agreementwith the specific assisted business.</P>
                        <P>(ii) <E T="03">Labor market area (LMA).</E> For metropolitan areas, an LMA isan area defined as such by the U.S. Bureau of Labor Statistics (BLS). An LMA isan economically integrated geographic area within which individuals can live andfind employment within a reasonable distance or can readily change employmentwithout changing their place of residence. In addition, LMAs are nonoverlappingand geographically exhaustive. For metropolitan areas, grantees must useemployment data, as defined by the BLS, for the LMA in which the affectedbusiness is currently located and from which current jobs may be lost. For non-metropolitan areas, grantees must use employment data, as defined by the BLS,for the <PRTPAGE P="114"/>LMA in which the assisted business is currently located and from whichcurrent jobs may be lost. For non-metropolitan areas, a LMA is either an areadefined by the BLS as an LMA, or a state may choose to combine non-metropolitanLMAs. States are required to define or reaffirm prior definitions of their LMAson an annual basis and retain records to substantiate such areas prior to anybusiness relocation that would be impacted by this rule. Metropolitan LMAscannot be combined, nor can a non-metropolitan LMA be combined with ametropolitan LMA. For the Insular Areas, each jurisdiction will be considered tobe an LMA. For the HUD-administered Small Cities Program, each of the threeparticipating counties in Hawaii will be considered to be its own LMA.Recipients of Fiscal Year 1999 Small Cities Program funding in New York willfollow the requirements for State CDBG recipients.</P>
                        <P>(iii) <E T="03">Operation.</E> A business operation includes, but is notlimited to, any equipment, employment opportunity, production capacity, orproduct line of the business.</P>
                        <P>(iv) <E T="03">Significant loss of jobs.</E> (A) A loss of jobs issignificant if: The number of jobs to be lost in the LMA in which the affectedbusiness is currently located is equal to or greater than one-tenth of onepercent of the total number of persons in the labor force of that LMA; or in allcases, a loss of 500 or more jobs. Notwithstanding the aforementioned, a loss of25 jobs or fewer does not constitute a significant loss of jobs.</P>
                        <P>(B) A job is considered to be lost due to the provision of CDBG assistance ifthe job is relocated within three years from the date the assistance is providedto the business or the time period within which jobs are to be created asspecified by the agreement among the business, the recipient, and the state (asapplicable) if it is longer than three years.</P>
                        <P>(3) <E T="03">Written agreement.</E> Before directly assisting a businesswith CDBG funds, the recipient, subrecipient, or (in the case of any activitycarried out pursuant to 105(a)(15)) nonprofit entity shall sign a writtenagreement with the assisted business. The written agreement shall include:</P>
                        <P>(i) <E T="03">Statement.</E> A statement from the assisted business as towhether the assisted activity will result in the relocation of any industrial orcommercial plant, facility, or operation from one LMA to another and, if so, thenumber of jobs that will be relocated from each LMA;</P>
                        <P>(ii) <E T="03">Required certification.</E> If the assistance will not resultin a relocation covered by this section, a certification from the assistedbusiness that neither it, nor any of its subsidiaries, has plans to relocatejobs at the time the agreement is signed that would result in a significant jobloss as defined in this rule; and</P>
                        <P>(iii) <E T="03">Reimbursement of assistance.</E> The agreement shall providefor reimbursement to the recipient of any assistance provided to, or expended onbehalf of, the business in the event that assistance results in a relocationprohibited under this section.</P>
                        <P>(4) <E T="03">Assistance not covered by this paragraph.</E> This paragraphdoes not apply to:</P>
                        <P>(i) <E T="03">Relocation assistance.</E> Relocation assistance required bythe Uniform Assistance and Real Property Acquisition Policies Act of 1970 (URA),(42 U.S.C. 4601-4655); optional relocation assistance under section105(a)(11), as implemented at 570.606(d);</P>
                        <P>(ii) <E T="03">Microenterprises.</E> Assistance to microenterprises asdefined by section 102(a)(22) of the Housing and Community Development Act of1974; and</P>
                        <P>(iii) <E T="03">Arms-length transactions.</E> Assistance to a business thatpurchases business equipment, inventory, or other physical assets in an arms-length transaction, including the assets of an existing business, provided thatthe purchase does not result in the relocation of the sellers' businessoperation (including customer base or list, goodwill, product lines, or tradenames) from one LMA to another LMA and does not produce a significant loss ofjobs in the LMA from which the relocation occurs.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1949, Jan. 5, 1995; 61 FR54921, Oct. 22, 1996; 70 FR 76370, Dec. 23, 2005; 71 FR 30035, May 24, 2006]</CITA>
                      </SECTION>
                      <SECTION>
                        <PRTPAGE P="115"/>
                        <SECTNO>§ 570.483</SECTNO>
                        <SUBJECT>Criteria for national objectives.</SUBJECT>
                        <P>(a) <E T="03">General.</E> The following criteria shall be used to determinewhether a CDBG assisted activity complies with one or more of the nationalobjectives as required to section 104(b)(3) of the Act. (HUD is willing toconsider a waiver of these requirements in accordance with§ 570.480(b)).</P>
                        <P>(b) <E T="03">Activities benefiting low and moderate income persons.</E> Anactivity will be considered to address the objective of benefiting low andmoderate income persons if it meets one of the criteria in paragraph (b) of thissection, unless there is substantial evidence to the contrary. In assessing anysuch evidence, the full range of direct effects of the assisted activity will beconsidered. The activities, when taken as a whole, must not benefit moderateincome persons to the exclusion of low income persons:</P>
                        <P>(1) <E T="03">Area benefit activities.</E> (i) An activity, the benefits ofwhich are available to all the residents in a particular area, where at least 51percent of the residents are low and moderate income persons. Such an area neednot be coterminous with census tracts or other officially recognized boundariesbut must be the entire area served by the activity. Units of general localgovernment may, at the discretion of the state, use either HUD-provided datacomparing census data with appropriate low and moderate income levels or surveydata that is methodologically sound. An activity that serves an area that is notprimarily residential in character shall not qualify under this criterion.</P>
                        <P>(ii) An activity, where the assistance is to a public improvement thatprovides benefits to all the residents of an area, that is limited to payingspecial assessments levied against residential properties owned and occupied bypersons of low and moderate income.</P>
                        <P>(iii)(A) An activity to develop, establish and operate (not to exceed twoyears after establishment), a uniform emergency telephone number system servingan area having less than 51 percent of low and moderate income residents, whenthe system has not been made operational before the receipt of CDBG funds,provided a prior written determination is obtained from HUD. HUD's determinationwill be based upon certifications by the State that:</P>
                        <P>(<E T="03">1</E>) The system will contribute significantly to the safety ofthe residents of the area. The unit of general local government must provide thestate a list of jurisdictions and unincorporated areas to be served by thesystem and a list of the emergency services that will participate in theemergency telephone number system;</P>
                        <P>(<E T="03">2</E>) At least 51 percent of the use of the system will be by lowand moderate income persons. The state's certification may be based uponinformation which identifies the total number of calls actually received overthe preceding twelve-month period for each of the emergency services to becovered by the emergency telephone number system and relates those calls to thegeographic segment (expressed as nearly as possible in terms of census tracts,enumeration districts, block groups, or combinations thereof that are containedwithin the segment) of the service area from which the calls were generated. Inanalyzing this data to meet the requirements of this section, the state willassume that the distribution of income among callers generally reflects theincome characteristics of the general population residing in the same geographicarea where the callers reside. Alternatively, the state's certification may bebased upon other data, agreed to by HUD and the state, which shows that over thepreceding twelve-month period the users of all the services to be included inthe emergency telephone number system consisted of at least 51 percent low andmoderate income persons.</P>
                        <P>(<E T="03">3</E>) Other federal funds received by the unit of general localgovernment are insufficient or unavailable for a uniform emergency telephonenumber system. The unit of general local government must submit a statementexplaining whether the problem is caused by the insufficiency of the amount ofsuch funds, the restrictions on the use of such funds, or the prior commitmentof such funds for other purposes by the unit of general local government.</P>
                        <P>(<E T="03">4</E>) The percentage of the total costs of the system paid for byCDBG funds does not exceed the percentage of low <PRTPAGE P="116"/>and moderate income persons inthe service area of the system. The unit of general local government mustinclude a description of the boundaries of the service area of the system; thecensus tracts or enumeration districts within the boundaries; the total numberof persons and the total number of low and moderate income persons in eachcensus tract or enumeration district, and the percentage of low and moderateincome persons in the service area; and the total cost of the system.</P>
                        <P>(B) The certifications of the state must be submitted along with a briefstatement describing the factual basis upon which the certifications were made.</P>
                        <P>(iv) Activities meeting the requirements of paragraph (e)(4)(i) of thissection may be considered to qualify under paragraph (b)(1) of this section.</P>
                        <P>(v) HUD will consider activities meeting the requirements of paragraph(e)(5)(i) of this section to qualify under paragraph (b)(1) of this section,provided that the area covered by the strategy meets one of the followingcriteria:</P>
                        <P>(A) The area is in a Federally-designated Empowerment Zone or EnterpriseCommunity;</P>
                        <P>(B) The area is primarily residential and contains a percentage of low andmoderate income residents that is no less than 70 percent;</P>
                        <P>(C) All of the census tracts (or block numbering areas) in the area havepoverty rates of at least 20 percent, at least 90 percent of the census tracts(or block numbering areas) in the area have poverty rates of at least 25percent, and the area is primarily residential. (If only part of a census tractor block numbering area is included in a strategy area, the poverty rate shallbe computed for those block groups (or any part thereof) which are included inthe strategy area.)</P>
                        <P>(D) Upon request by the State, HUD may grant exceptions to the 70 percent lowand moderate income or 25 percent poverty minimum thresholds on a case-by-casebasis. In no case, however, may a strategy area have both a percentage of lowand moderate income residents less than 51 percent and a poverty rate less than20 percent.</P>
                        <P>(2) <E T="03">Limited clientele activities.</E> (i) An activity whichbenefits a limited clientele, at least 51 percent of whom are low and moderateincome persons. The following kinds of activities may not qualify underparagraph (b)(2) of this section:</P>
                        <P>(A) Activities, the benefits of which are available to all the residents ofan area;</P>
                        <P>(B) Activities involving the acquisition, construction or rehabilitation ofproperty for housing; or</P>
                        <P>(C) Activities where the benefit to low- and moderate-income persons to beconsidered is the creation or retention of jobs, except as provided in paragraph(b)(2)(v) of this section.</P>
                        <P>(ii) To qualify under paragraph (b)(2) of this section, the activity mustmeet one or the following tests:</P>
                        <P>(A) It must benefit a clientele who are generally presumed to be principallylow and moderate income persons. Activities that exclusively serve a group ofpersons in any one or a combination of the following categories may be presumedto benefit persons, 51 percent of whom are low and moderate income: abusedchildren, battered spouses, elderly persons, adults meeting the Bureau of theCensus' Current Population Reports definition of “severelydisabled,” homeless persons, illiterate adults, persons living with AIDS,and migrant farm workers; or</P>
                        <P>(B) It must require information on family size and income so that it isevident that at least 51 percent of the clientele are persons whose familyincome does not exceed the low and moderate income limit; or</P>
                        <P>(C) It must have income eligibility requirements which limit the activityexclusively to low and moderate income persons; or</P>
                        <P>(D) It must be of such a nature, and be in such a location, that it may beconcluded that the activity's clientele will primarily be low and moderateincome persons.</P>

                        <P>(iii) An activity that serves to remove material or architectural barriers tothe mobility or accessibility of elderly persons or of adults meeting the Bureauof the Census' Current Population Reports definition of “severelydisabled” will be presumed to qualify under this criterion if it isrestricted, <PRTPAGE P="117"/>to the extent practicable, to the removal of such barriers byassisting:</P>
                        <P>(A) The reconstruction of a public facility or improvement, or portionthereof, that does not qualify under § 570.483(b)(1);</P>
                        <P>(B) The rehabilitation of a privately owned nonresidential building orimprovement that does not qualify under § 570.483(b) (1) or (4); or</P>
                        <P>(C) The rehabilitation of the common areas of a residential structure thatcontains more than one dwelling unit and that does not qualify under§ 570.483(b)(3).</P>
                        <P>(iv) A microenterprise assistance activity (carried out in accordance withthe provisions of section 105(a)(23) of the Act or § 570.482(c) andlimited to microenterprises) with respect to those owners of microenterprisesand persons developing microenterprises assisted under the activity who are low-and moderate-income persons. For purposes of this paragraph, persons determinedto be low and moderate income may be presumed to continue to qualify as such forup to a three-year period.</P>
                        <P>(v) An activity designed to provide job training and placement and/or otheremployment support services, including, but not limited to, peer supportprograms, counseling, child care, transportation, and other similar services, inwhich the percentage of low- and moderate-income persons assisted is less than51 percent may qualify under this paragraph in the following limitedcircumstances:</P>
                        <P>(A) In such cases where such training or provision of supportive services isan integrally-related component of a larger project, the only use of CDBGassistance for the project is to provide the job training and/or supportiveservices; and</P>
                        <P>(B) The proportion of the total cost of the project borne by CDBG funds is nogreater than the proportion of the total number of persons assisted who are lowor moderate income.</P>
                        <P>(3) <E T="03">Housing activities.</E> An eligible activity carried out forthe purpose of providing or improving permanent residential structures that,upon completion, will be occupied by low and moderate income households. Thiswould include, but not necessarily be limited to, the acquisition orrehabilitation of property by the unit of general local government, asubrecipient, an entity eligible to receive assistance under section 105(a)(15)of the Act, a developer, an individual homebuyer, or an individual homeowner;conversion of nonresidential structures; and new housing construction. If thestructure contains two dwelling units, at least one must be so occupied, and ifthe structure contains more than two dwelling units, at least 51 percent of theunits must be so occupied. If two or more rental buildings being assisted are orwill be located on the same or contiguous properties, and the buildings will beunder common ownership and management, the grouped buildings may be consideredfor this purpose as a single structure. If housing activities being assistedmeet the requirements of paragraph (e)(4)(ii) or (e)(5)(ii) of this section, allsuch housing may also be considered for this purpose as a single structure. Forrental housing, occupancy by low and moderate income households must be ataffordable rents to qualify under this criterion. The unit of general localgovernment shall adopt and make public its standards for determining“affordable rents” for this purpose. The following shall alsoqualify under this criterion:</P>
                        <P>(i) When less than 51 percent of the units in a structure will be occupied bylow and moderate income households, CDBG assistance may be provided in thefollowing limited circumstances:</P>
                        <P>(A) The assistance is for an eligible activity to reduce the development costof the new construction of a multifamily, non-elderly rental housing project;and</P>
                        <P>(B) Not less than 20 percent of the units will be occupied by low andmoderate income households at affordable rents; and</P>
                        <P>(C) The proportion of the total cost of developing the project to be borne byCDBG funds is no greater than the proportion of units in the project that willbe occupied by low and moderate income households.</P>

                        <P>(ii) Where CDBG funds are used to assist rehabilitation delivery services orin direct support of the unit of general local government's RentalRehabilitation Program authorized under 24 CFR part 511, the funds shall beconsidered <PRTPAGE P="118"/>to benefit low and moderate income persons where not less than 51percent of the units assisted, or to be assisted, by the Rental RehabilitationProgram overall are for low and moderate income persons.</P>
                        <P>(iii) When CDBG funds are used for housing services eligible under section105(a)(21) of the Act, such funds shall be considered to benefit low andmoderate income persons if the housing units for which the services are providedare HOME-assisted and the requirements of § 92.252 or§ 92.254 of this title are met.</P>
                        <P>(4) <E T="03">Job creation or retention activities.</E> (i) An activitydesigned to create permanent jobs where at least 51 percent of the jobs,computed on a full time equivalent basis, involve the employment of low andmoderate income persons. For an activity that creates jobs, the unit of generallocal government must document that at least 51 percent of the jobs will be heldby, or will be made available to low and moderate income persons.</P>
                        <P>(ii) For an activity that retains jobs, the unit of general local governmentmust document that the jobs would actually be lost without the CDBG assistanceand that either or both of the following conditions apply with respect to atleast 51 percent of the jobs at the time the CDBG assistance is provided: Thejob is known to be held by a low or moderate income person; or the job canreasonably be expected to turn over within the following two years and that itwill be filled by, or that steps will be taken to ensure that it is madeavailable to, a low or moderate income person upon turnover.</P>
                        <P>(iii) Jobs will be considered to be available to low and moderate incomepersons for these purposes only if:</P>
                        <P>(A) Special skills that can only be acquired with substantial training orwork experience or education beyond high school are not a prerequisite to fillsuch jobs, or the business agrees to hire unqualified persons and providetraining; and</P>
                        <P>(B) The unit of general local government and the assisted business takeactions to ensure that low and moderate income persons receive firstconsideration for filling such jobs.</P>
                        <P>(iv) For purposes of determining whether a job is held by or made availableto a low- or moderate-income person, the person may be presumed to be a low- ormoderate-income person if:</P>
                        <P>(A) He/she resides within a census tract (or block numbering area) thateither:</P>
                        <P>(<E T="03">1</E>) Meets the requirements of paragraph (b)(4)(v) of thissection; or</P>
                        <P>(<E T="03">2</E>) Has at least 70 percent of its residents who are low- andmoderate-income persons; or</P>
                        <P>(B) The assisted business is located within a census tract (or blocknumbering area) that meets the requirements of paragraph (b)(4)(v) of thissection and the job under consideration is to be located within that censustract.</P>

                        <P>(v) A census tract (or block numbering area) qualifies for the presumptionspermitted under paragraphs (b)(4)(iv) (A)(<E T="03">1</E>) and (B) of thissection if it is either part of a Federally-designated Empowerment Zone orEnterprise Community or meets the following criteria:</P>
                        <P>(A) It has a poverty rate of at least 20 percent as determined by the mostrecently available decennial census information;</P>
                        <P>(B) It does not include any portion of a central business district, as thisterm is used in the most recent Census of Retail Trade, unless the tract has apoverty rate of at least 30 percent as determined by the most recently availabledecennial census information; and</P>
                        <P>(C) It evidences pervasive poverty and general distress by meeting at leastone of the following standards:</P>
                        <P>(<E T="03">1</E>) All block groups in the census tract have poverty rates ofat least 20 percent;</P>
                        <P>(<E T="03">2</E>) The specific activity being undertaken is located in ablock group that has a poverty rate of at least 20 percent; or</P>
                        <P>(<E T="03">3</E>) Upon the written request of the recipient, HUD determinesthat the census tract exhibits other objectively determinable signs of generaldistress such as high incidence of crime, narcotics use, homelessness, abandonedhousing, and deteriorated infrastructure or substantial population decline.</P>

                        <P>(vi) As a general rule, each assisted business shall be considered to be aseparate activity for purposes of determining whether the activity qualifiesunder this paragraph, except:<PRTPAGE P="119"/>
                        </P>
                        <P>(A) In certain cases such as where CDBG funds are used to acquire, develop orimprove a real property (e.g., a business incubator or an industrial park) therequirement may be met by measuring jobs in the aggregate for all the businessesthat locate on the property, provided the businesses are not otherwise assistedby CDBG funds.</P>
                        <P>(B) Where CDBG funds are used to pay for the staff and overhead costs of anentity specified in section 105(a)(15) of the Act making loans to businessesexclusively from non-CDBG funds, this requirement may be met by aggregating thejobs created by all of the businesses receiving loans during any one-yearperiod.</P>
                        <P>(C) Where CDBG funds are used by a recipient or subrecipient to providetechnical assistance to businesses, this requirement may be met by aggregatingthe jobs created or retained by all of the businesses receiving technicalassistance during any one-year period.</P>
                        <P>(D) Where CDBG funds are used for activities meeting the criteria listed at§ 570.482(f)(3)(v), this requirement may be met by aggregating thejobs created or retained by all businesses for which CDBG assistance isobligated for such activities during any one-year period, except as provided atparagraph (e)(6) of this section.</P>
                        <P>(E) Where CDBG funds are used by a Community Development FinancialInstitution to carry out activities for the purpose of creating or retainingjobs, this requirement may be met by aggregating the jobs created or retained byall businesses for which CDBG assistance is obligated for such activities duringany one-year period, except as provided at paragraph (e)(6) of this section.</P>
                        <P>(F) Where CDBG funds are used for public facilities or improvements whichwill result in the creation or retention of jobs by more than one business, thisrequirement may be met by aggregating the jobs created or retained by all suchbusinesses as a result of the public facility or improvement.</P>
                        <P>(<E T="03">1</E>) Where the public facility or improvement is undertakenprincipally for the benefit of one or more particular businesses, but whereother businesses might also benefit from the assisted activity, the requirementmay be met by aggregating only the jobs created or retained by those businessesfor which the facility/improvement is principally undertaken, provided that thecost (in CDBG funds) for the facility/improvement is less than $10,000 perpermanent full-time equivalent job to be created or retained by thosebusinesses.</P>
                        <P>(<E T="03">2</E>) In any case where the cost per job to be created orretained (as determined under paragraph (b)(4)(vi)(F)(<E T="03">1</E>) of thissection) is $10,000 or more, the requirement must be met by aggregating the jobscreated or retained as a result of the public facility or improvement by allbusinesses in the service area of the facility/improvement. This aggregationmust include businesses which, as a result of the public facility/improvement,locate or expand in the service area of the public facility/improvement betweenthe date the state awards the CDBG funds to the recipient and the date one yearafter the physical completion of the public facility/improvement. In addition,the assisted activity must comply with the public benefit standards at§ 570.482(f).</P>
                        <P>(5) <E T="03">Planning-only activities.</E> An activity involving planning(when such activity is the only activity for which the grant to the unit ofgeneral local government is given, or if the planning activity is unrelated toany other activity assisted by the grant) if it can be documented that at least51 percent of the persons who would benefit from implementation of the plan arelow and moderate income persons. Any such planning activity for an area or acommunity composed of persons of whom at least 51 percent are low and moderateincome shall be considered to meet this national objective.</P>
                        <P>(c) <E T="03">Activities which aid in the prevention or elimination of slumsor blight.</E> Activities meeting one or more of the following criteria, in theabsence of substantial evidence to the contrary, will be considered to aid inthe prevention or elimination of slums or blight:</P>
                        <P>(1) <E T="03">Activities to address slums or blight on an area basis.</E> Anactivity will be considered to address prevention or elimination of slums orblight in an area if the state can determine that:<PRTPAGE P="120"/>
                        </P>
                        <P>(i) The area, delineated by the unit of general local government, meets adefinition of a slum, blighted, deteriorated or deteriorating area under stateor local law;</P>
                        <P>(ii) The area also meets the conditions in either paragraph (c)(1)(ii)(A)or(c)(1)(ii)(B) of this section.</P>
                        <P>(A) At least 25 percent of properties throughout the area experience one ormore of the following conditions:</P>
                        <P>(<E T="03">1</E>) Physical deterioration of buildings or improvements;</P>
                        <P>(<E T="03">2</E>) Abandonment of properties;</P>
                        <P>(<E T="03">3</E>) Chronic high occupancy turnover rates or chronic highvacancy rates in commercial or industrial buildings;</P>
                        <P>(<E T="03">4</E>) Significant declines in property values or abnormally lowproperty values relative to other areas in the community; or</P>
                        <P>(<E T="03">5</E>) Known or suspected environmental contamination.</P>
                        <P>(B) The public improvements throughout the area are in a general state ofdeterioration.</P>
                        <P>(iii) The assisted activity addresses one or more of the conditions whichcontributed to the deterioration of the area. Rehabilitation of residentialbuildings carried out in an area meeting the above requirements will beconsidered to address the area's deterioration only where each such buildingrehabilitated is considered substandard before rehabilitation, and alldeficiencies making a building substandard have been eliminated if less criticalwork on the building is also undertaken. The State shall ensure that the unit ofgeneral local government has developed minimum standards for building qualitywhich may take into account local conditions.</P>
                        <P>(iv) The state keeps records sufficient to document its findings that aproject meets the national objective of prevention or elimination of slums andblight. The state must establish definitions of the conditions listed at§ 570.483(c)(1)(ii)(A) and maintain records to substantiate how thearea met the slums or blighted criteria. The designation of an area as slum orblighted under this section is required to be redetermined every 10 years forcontinued qualification. Documentation must be retained pursuant to therecordkeeping requirements contained at § 570.490.</P>
                        <P>(2) <E T="03">Activities to address slums or blight on a spot basis.</E> Thefollowing activities can be undertaken on a spot basis to eliminate specificconditions of blight, physical decay, or environmental contamination that arenot located in a slum or blighted area: Acquisition; clearance; relocation;historic preservation; remediation of environmentally contaminated properties;or rehabilitation of buildings or improvements. However, rehabilitation must belimited to eliminating those conditions that are detrimental to public healthand safety. If acquisition or relocation is undertaken, it must be a precursorto another eligible activity (funded with CDBG or other resources) that directlyeliminates the specific conditions of blight or physical decay, or environmentalcontamination.</P>
                        <P>(3) <E T="03">Planning only activities.</E> An activity involving planning(when the activity is the only activity for which the grant to the unit ofgeneral local government is given, or the planning activity is unrelated to anyother activity assisted by the grant) if the plans are for a slum or blightedarea, or if all elements of the planning are necessary for and related to anactivity which, if funded, would meet one of the other criteria of eliminationof slums or blight.</P>
                        <P>(d) <E T="03">Activities designed to meet community development needs havinga particular urgency.</E> In the absence of substantial evidence to thecontrary, an activity will be considered to address this objective if the unitof general local government certifies, and the state determines, that theactivity is designed to alleviate existing conditions which pose a serious andimmediate threat to the health or welfare of the community which are of recentorigin or which recently became urgent, that the unit of general localgovernment is unable to finance the activity on its own, and that other sourcesof funding are not available. A condition will generally be considered to be ofrecent origin if it developed or became urgent within 18 months preceding thecertification by the unit of general local government.<PRTPAGE P="121"/>
                        </P>
                        <P>(e) <E T="03">Additional criteria.</E> (1) In any case where the activityundertaken is a public improvement and the activity is clearly designed to servea primarily residential area, the activity must meet the requirements ofparagraph (b)(1) of this section whether or not the requirements of paragraph(b)(4) of this section are met in order to qualify as benefiting low andmoderate income persons.</P>
                        <P>(2) Where the assisted activity is acquisition of real property, apreliminary determination of whether the activity addresses a national objectivemay be based on the planned use of the property after acquisition. A finaldetermination shall be based on the actual use of the property, excluding anyshort-term, temporary use. Where the acquisition is for the purpose of clearancewhich will eliminate specific conditions of blight or physical decay, theclearance activity shall be considered the actual use of the property. However,any subsequent use or disposition of the cleared property shall be treated as a“change of use” under § 570.489(j).</P>
                        <P>(3) Where the assisted activity is relocation assistance that the unit ofgeneral local government is required to provide, the relocation assistance shallbe considered to address the same national objective as is addressed by thedisplacing activity. Where the relocation assistance is voluntary, the unit ofgeneral local government may qualify the assistance either on the basis of thenational objective addressed by the displacing activity or, if the relocationassistance is to low and moderate income persons, on the basis of the nationalobjective of benefiting low and moderate income persons.</P>
                        <P>(4) Where CDBG-assisted activities are carried out by a Community DevelopmentFinancial Institution whose charter limits its investment area to a primarilyresidential area consisting of at least 51 percent low- and moderate-incomepersons, the unit of general local government may also elect the followingoptions:</P>
                        <P>(i) Activities carried out by the Community Development Financial Institutionfor the purpose of creating or retaining jobs may, at the option of the unit ofgeneral local government, be considered to meet the requirements of thisparagraph under the criteria at paragraph (b)(1)(iv) of this section in lieu ofthe criteria at paragraph (b)(4) of this section; and</P>
                        <P>(ii) All housing activities for which the Community Development FinancialInstitution obligates CDBG assistance during any one-year period may beconsidered to be a single structure for purposes of applying the criteria atparagraph (b)(3) of this section.</P>
                        <P>(5) If the unit of general local government has elected to prepare acommunity revitalization strategy pursuant to the authority of§ 91.315(e)(2) of this title, and the State has approved thestrategy, the unit of general local government may also elect the followingoptions:</P>
                        <P>(i) Activities undertaken pursuant to the strategy for the purpose ofcreating or retaining jobs may, at the option of the grantee, be considered tomeet the requirements of paragraph (b) of this section under the criteria at§ 570.483(b)(1)(v) instead of the criteria at§ 570.483(b)(4); and</P>
                        <P>(ii) All housing activities in the area undertaken pursuant to the strategymay be considered to be a single structure for purposes of applying the criteriaat paragraph (b)(3) of this section.</P>
                        <P>(6) If an activity meeting the criteria in § 570.482(f)(3)(v) alsomeets the requirements of either paragraph (e)(4)(i) or (e)(5)(i) of thissection, the unit of general local government may elect to qualify the activityeither under the area benefit criteria at paragraph (b)(1)(iv) or (v) of thissection or under the job aggregation criteria at paragraph (b)(4)(vi)(D) of thissection, but not under both. Where an activity may meet the job aggregationcriteria at both paragraphs (b)(4)(vi)(D) and (E) of this section, the unit ofgeneral local government may elect to qualify the activity under eithercriterion, but not both.</P>
                        <P>(f) <E T="03">Planning and administrative costs.</E> CDBG funds expended foreligible planning and administrative costs by units <PRTPAGE P="122"/>of general local governmentin conjunction with other CDBG assisted activities will be considered to addressthe national objectives.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1951, Jan. 5, 1995; 60 FR17445, Apr. 6, 1995; 61 FR 54921, Oct. 22, 1996; 71 FR 30036, May 24, 2006]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.484</SECTNO>
                        <SUBJECT>Overall benefit to low and moderate income persons.</SUBJECT>
                        <P>(a) <E T="03">General.</E> The State must certify that, in the aggregate, notless than 70 percent of the CDBG funds received by the state during a periodspecified by the state, not to exceed three years, will be used for activitiesthat benefit persons of low and moderate income. The period selected andcertified to by the state shall be designated by fiscal year of annual grants,and shall be for one, two or three consecutive annual grants. The period shallbe in effect until all included funds are expended. No CDBG funds may beincluded in more than one period selected, and all CDBG funds received must beincluded in a selected period.</P>
                        <P>(b) <E T="03">Computation of 70 percent benefit.</E> Determination that astate has carried out its certification under paragraph (a) of this sectionrequires evidence that not less than 70 percent of the aggregate of thedesignated annual grant(s), any funds reallocated by HUD to the state, anydistributed program income and any guaranteed loan funds under the provisions ofsubpart M of this part covered in the method of distribution in the finalstatement or statements for the designated annual grant year or years have beenexpended for activities meeting criteria as provided in § 570.483(b)for activities benefiting low and moderate income persons. In calculating thepercentage of funds expended for such activities:</P>
                        <P>(1) All CDBG funds included in the period selected and certified to by thestate shall be accounted for, except for funds used by the State, or by theunits of general local government, for program administration, or for planningactivities other than those which must meet a national objective under§ 570.483 (b)(5) or (c)(3).</P>
                        <P>(2) Any funds expended by a state for the purpose of repayment of loansguaranteed under the provisions of subpart M of this part shall be excepted frominclusion in this calculation.</P>
                        <P>(3) Except as provided in paragraph (b)(4) of this section, CDBG fundsexpended for an eligible activity meeting the criteria for activities benefitinglow and moderate income persons shall count in their entirety towards meetingthe 70 percent benefit to persons of low and moderate income requirement.</P>
                        <P>(4) Funds expended for the acquisition, new construction or rehabilitation ofproperty for housing that qualifies under § 570.483(b)(3) shall becounted for this purpose, but shall be limited to an amount determined bymultiplying the total cost (including CDBG and non-CDBG costs) of theacquisition, construction or rehabilitation by the percent of units in suchhousing to be occupied by low and moderate income persons, except that theamount counted shall not exceed the amount of CDBG funds provided.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.485</SECTNO>
                        <SUBJECT>Making of grants.</SUBJECT>
                        <P>(a) <E T="03">Required submissions.</E> In order to receive its annual CDBGgrant under this subpart, a State must submit a consolidated plan in accordancewith 24 CFR part 91. That part includes requirements for the content of theconsolidated plan, for the process of developing the plan, including citizenparticipation provisions, for the submission date, for HUD approval, and for theamendment process.</P>
                        <P>(b) <E T="03">Failure to make submission.</E> The state's failure to make thesubmission required by paragraph (a) of this section within the prescribeddeadline constitutes the state's election not to receive and distribute amountsallocated for its nonentitlement areas for the applicable fiscal year. Fundswill be either:</P>
                        <P>(1) Administered by HUD pursuant to subpart F of this part if the state hasnot administered the program in any previous fiscal year; or</P>
                        <P>(2) Reallocated to all states in the succeeding fiscal year according to theformula of section 106(d) of the Act, if the state administered the program inany previous year.</P>
                        <P>(c) <E T="03">Approval of grant.</E> HUD will approve a grant if the State'ssubmissions have been made and approved in accordance with 24 CFR part 91, and <PRTPAGE P="123"/>the certifications required therein are satisfactory to the Secretary. Thecertifications will be satisfactory to the Secretary for this purpose unless theSecretary has determined pursuant to § 570.493 that the State has notcomplied with the requirements of this subpart, or has determined that there isevidence, not directly involving the State's past performance under thisprogram, that tends to challenge in a substantial manner the State'scertification of future performance. If the Secretary makes any suchdetermination, however, the State may be required to submit further assurancesas the Secretary may deem warranted or necessary to find the grantee'scertification satisfactory.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1916, Jan. 5, 1995; 61 FR54922, Oct. 22, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.486</SECTNO>
                        <SUBJECT>Local government requirements.</SUBJECT>
                        <P>(a) <E T="03">Citizen participation requirements of a unit of general localgovernment.</E> Each unit of general local government shall meet the followingrequirements as required by the state at § 91.115(e) of this title.</P>
                        <P>(1) Provide for and encourage citizen participation, particularly by low andmoderate income persons who reside in slum or blighted areas and areas in whichCDBG funds are proposed to be used;</P>
                        <P>(2) Ensure that citizens will be given reasonable and timely access to localmeetings, information, and records relating to the unit of local government'sproposed and actual use of CDBG funds;</P>
                        <P>(3) Furnish citizens information, including but not limited to:</P>
                        <P>(i) The amount of CDBG funds expected to be made available for the currentfiscal year (including the grant and anticipated program income);</P>
                        <P>(ii) The range of activities that may be undertaken with the CDBG funds;</P>
                        <P>(iii) The estimated amount of the CDBG funds proposed to be used foractivities that will meet the national objective of benefit to low and moderateincome persons; and</P>
                        <P>(iv) The proposed CDBG activities likely to result in displacement and theunit of general local government's antidisplacement and relocation plansrequired under § 570.488.</P>
                        <P>(4) Provide technical assistance to groups representative of persons of lowand moderate income that request assistance in developing proposals inaccordance with the procedures developed by the state. Such assistance need notinclude providing funds to such groups;</P>
                        <P>(5) Provide for a minimum of two public hearings, each at a different stageof the program, for the purpose of obtaining citizens' views and responding toproposals and questions. Together the hearings must cover community developmentand housing needs, development of proposed activities and a review of programperformance. The public hearings to cover community development and housingneeds must be held before submission of an application to the state. There mustbe reasonable notice of the hearings and they must be held at times andlocations convenient to potential or actual beneficiaries, with accommodationsfor the handicapped. Public hearings shall be conducted in a manner to meet theneeds of non-English speaking residents where a significant number of non-English speaking residents can reasonably be expected to participate;</P>
                        <P>(6) Provide citizens with reasonable advance notice of, and opportunity tocomment on, proposed activities in an application to the state and, for grantsalready made, activities which are proposed to be added, deleted orsubstantially changed from the unit of general local government's application tothe state. Substantially changed means changes made in terms of purpose, scope,location or beneficiaries as defined by criteria established by the state.</P>
                        <P>(7) Provide citizens the address, phone number, and times for submittingcomplaints and grievances, and provide timely written answers to writtencomplaints and grievances, within 15 working days where practicable.</P>
                        <P>(b) <E T="03">Activities serving beneficiaries outside the jurisdiction ofthe unit of general local government.</E> CDBG-funded activities may servebeneficiaries outside the jurisdiction of the unit of general local governmentthat receives the grant, <PRTPAGE P="124"/>provided the unit of general local governmentdetermines that the activity is meeting its needs in accordance with section106(d)(2)(D) of the Act.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.487</SECTNO>
                        <SUBJECT>Other applicable laws and related program requirements.</SUBJECT>
                        <P>(a) <E T="03">General.</E> Certain statutes are expressly made applicable toactivities assisted under the Act by the Act itself, while other laws notreferred to in the Act may be applicable to such activities by their own terms.Certain statutes or executive orders that may be applicable to activitiesassisted under the Act by their own terms are administered or enforced bygovernmental officials, departments or agencies other than HUD. Paragraphs (d)and (c) of this section contain two of the requirements expressly madeapplicable to CDBG activities by the Act itself.</P>
                        <P>(b) <E T="03">Affirmatively furthering fair housing.</E> The Act requires thestate to certify to the satisfaction of HUD that it will affirmatively furtherfair housing. The act also requires each unit of general local government tocertify that it will affirmatively further fair housing. The certification thatthe State will affirmatively further fair housing shall specifically require theState to assume the responsibility of fair housing planning by:</P>
                        <P>(1) Conducting an analysis to identify impediments to fair housing choicewithin the State;</P>
                        <P>(2) Taking appropriate actions to overcome the effects of any impedimentsidentified through that analysis;</P>
                        <P>(3) Maintaining records reflecting the analysis and actions in this regard;and</P>
                        <P>(4) Assuring that units of local government funded by the State comply withtheir certifications to affirmatively further fair housing.</P>
                        <P>(c) <E T="03">Lead-Based Paint Poisoning Prevention Act.</E> States shalldevise, adopt and carry out procedures with respect to CDBG assistance thatfulfill the objectives and requirements of the Lead-Based Paint PoisoningPrevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based PaintHazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementingregulations at part 35, subparts A, B, J, K, and R of this title.</P>
                        <P>(d) States shall comply with section 3 of the Housing and Urban DevelopmentAct of 1968 (12 U.S.C. 1701u) and the implementing regulations in 24 CFR part135. Section 3 requires that employment and other economic opportunities arisingin connection with housing rehabilitation, housing construction, or other publicconstruction projects shall, to the greatest extent feasible, and consistentwith existing Federal, State, and local laws and regulations, be given to low-and very low-income persons.</P>
                        <P>(e) <E T="03">Architectural Barriers Act and the Americans with DisabilitiesAct.</E> The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157)requires certain Federal and Federally-funded buildings and other facilities tobe designed, constructed, or altered in accordance with standards that ensureaccessibility to, and use by, physically handicapped people. A building orfacility designed, constructed, or altered with funds allocated or reallocatedunder this subpart after November 21, 1996 and that meets the definition of <E T="03">residential structure</E> as defined in 24 CFR 40.2, or the definition of<E T="03">building</E> as defined in 41 CFR 101-19.602(a), is subject tothe requirements of the Architectural Barriers Act of 1968 and shall comply withthe Uniform Federal Accessibility Standards. For general type buildings, thesestandards are in appendix A to 41 CFR part 101-19.6. For residentialstructures, these standards are available from the Department of Housing andUrban Development, Office of Fair Housing and Equal Opportunity, DisabilityRights Division, Room 5240, 451 Seventh Street, SW, Washington, DC 20410;telephone (202) 708-2333 (voice) or (202) 708-1734 (TTY) (these arenot toll-free numbers).</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 59 FR 33894, June 30, 1994; 60FR 1916, Jan. 5, 1995; 61 FR 54922, Oct. 22, 1996; 64 FR 50225, Sept. 15, 1999]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.488</SECTNO>
                        <SUBJECT>Displacement, relocation, acquisition, and replacement of housing.</SUBJECT>

                        <P>The requirements for States and state recipients with regard to thedisplacement, relocation, acquisition, and <PRTPAGE P="125"/>replacement of housing are in§ 570.606 and 24 CFR part 42.</P>
                        <CITA>[61 FR 11477, Mar. 20, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.489</SECTNO>
                        <SUBJECT>Program administrative requirements.</SUBJECT>
                        <P>(a) <E T="03">Administrative and planning costs</E>—(1) <E T="03">Stateadministrative costs.</E> (i) The state is responsible for the administration ofall CDBG funds. The state shall pay from its own resources all administrativecosts incurred by the state in carrying out its responsibilities under thissubpart, except that the state may use CDBG funds to pay such costs in an amountnot to exceed $100,000 plus 50 percent of such costs in excess of $100,000.States are therefore required to match such costs in excess of $100,000 on adollar for dollar basis. The amount of CDBG funds used to pay such costs inexcess of $100,000 shall not exceed 2 percent of the aggregate of the state'sannual grant, program income received by units of general local government(whether retained by the unit of general local government or paid to the State)and funds reallocated by HUD to the state.</P>
                        <P>(ii) For determining the amount of CDBG funds available in past years foradministrative costs incurred by the state, the following schedule applies:</P>
                        <P>(A) $100,000 per annual grant beginning with FY 1984 allocations;</P>
                        <P>(B) Two percent of program income returned by units of general localgovernment to the State after August 21, 1985; and</P>
                        <P>(C) Two percent of program income received by units of general localgovernment after February 11, 1991.</P>
                        <P>(iii) The state has the option of selecting its approach for demonstratingcompliance with this requirement. Regardless of the approach selected by thestate, the state will be required to pay its 50 percent of administrative costsin excess of $100,000 in the same amount and at the same time at which it drawsCDBG funds for such costs after the expenditure of the $100,000. Any state forwhich it is determined that matching costs contributions are in arrears on theuse of CDBG funds for administrative costs will be required to bring matchingcost expenditures up to the level of CDBG expenditures for such costs within oneyear of the effective date of this subpart. A state grant may not be closed outif the state's matching cost contribution is not at least equal to the amount ofCDBG funds in excess of $100,000 expended for administration. Funds from anyyear's grant may be used to pay administrative costs associated with any otheryear's grant. The two approaches are:</P>
                        <P>(A) Cumulative accounting of administrative costs incurred by the state sinceits assumption of the Program. Under this approach, the state will identify, foreach grant it has received, the CDBG funds eligible to be used foradministrative costs as well as the maximum amount of matching funds which thestate is required to pay. The amounts will then be aggregated for all grantsreceived. The state must keep records demonstrating the actual amount of CDBGfunds from each grant received which was used for administrative costs as wellas matching amounts paid by the state. These amounts will also be aggregated forall grants received. The state will be considered to be in compliance with therequirement if the aggregate of actual amounts spent for administrative costsdoes not exceed the maximum amount allowable and the amount which the state haspaid in matching funds is at least equal to the amount of CDBG funds in excessof $100,000 (for each applicable allocation) drawn for administrative purposes.Any administrative amounts associated with a particular state grant shall bededucted from the aggregate totals upon closeout of that state grant.</P>
                        <P>(B) An accounting process developed and implemented by the state whichprovides sufficient information to demonstrate that the requirements of thissubsection are met.</P>
                        <P>(2) The state may not charge fees of any entity for processing or consideringany application for CDBG fund, or for carrying out its responsibilities underthis subpart.</P>

                        <P>(3) The state and its funded units of general local government shall notexpend for planning, management and administrative costs more than 20 percent ofthe aggregate amount of the annual grant, plus program income and fundsreallocated by HUD to the State which are distributed during the time <PRTPAGE P="126"/>the finalStatement for the annual grant is in effect. Administrative costs are thosedescribed at § 570.489(a)(1) for states, and for units of generallocal government those described at sections 105(a)(12) and (a)(13) of the Act.</P>
                        <P>(b) <E T="03">Reimbursement of pre-agreement costs.</E> The state may permit,in accordance with such procedures as the State may establish, a unit of localgovernment to incur costs for CDBG activities before the establishment of aformal grant relationship between the State and the unit of general localgovernment and to charge these pre-agreement costs to the grant, provided thatthe activities are eligible and undertaken in accordance with the requirementsof this subpart and 24 CFR part 58.</P>
                        <P>(c) <E T="03">Federal grant payments</E>—(1) <E T="03">Payments.</E>The state shall be paid in advance in accordance with Treasury Circular 1075 (31CFR part 205). The State shall use procedures to minimize the time elapsingbetween the transfer of grant funds and disbursement of funds by the State tounits of general local government. Units of general local government shall alsouse procedures to minimize the time elapsing between the transfer of funds bythe State and disbursement for CDBG activities.</P>
                        <P>(2) <E T="03">Interest on advances.</E> Interest earned by units of generallocal government on grant funds before disbursement of the funds for activitiesis not program income and must be returned to the Treasury, except that the unitof general local government may keep interest amounts of up $100 per year foradministrative expenses. However, the state shall not be held accountable forinterest earned on grants for which payments are made in accordance withparagraph (c)(1) of this section pending disbursement for CDBG activities.</P>
                        <P>(d) <E T="03">Fiscal controls and accounting procedures.</E> (1) A stateshall have fiscal and administrative requirements for expending and accountingfor all funds received under this subpart. These requirements must be availablefor Federal inspection and must:</P>
                        <P>(i) Be sufficiently specific to ensure that funds received under this subpartare used in compliance with all applicable statutory and regulatory provisions:</P>
                        <P>(ii) Ensure that funds received under this subpart are only spent forreasonable and necessary costs of operating programs under this subpart; and</P>
                        <P>(iii) Ensure that funds received under this subpart are not used for generalexpenses required to carry out other responsibilities of state and localgovernments.</P>
                        <P>(2) A state may satisfy this requirement by:</P>
                        <P>(i) Using fiscal and administrative requirements applicable to the use of itsown funds;</P>
                        <P>(ii) Adopting new fiscal and administrative requirements; or</P>
                        <P>(iii) Applying the provisions in 24 CFR part 85 “Uniform AdministrativeRequirements for Grants and Cooperative Agreements to State and LocalGovernments.”</P>
                        <P>(e) <E T="03">Program income.</E> (1) For the purposes of this subpart,“program income” is defined as gross income received by a state, aunit of general local government or a subrecipient of a unit of general localgovernment that was generated from the use of CDBG funds, except as provided inparagraph (e)(2) of this section. When income is generated by an activity thatis only partially assisted with CDBG funds, the income shall be prorated toreflect the percentage of CDBG funds used (e.g., a single loan supported by CDBGfunds and other funds; a single parcel of land purchased with CDBG funds andother funds). Program income includes, but is not limited to, the following:</P>
                        <P>(i) Proceeds from the disposition by sale or long term lease of real propertypurchased or improved with CDBG funds;</P>
                        <P>(ii) Proceeds from the disposition of equipment purchased with CDBG funds;</P>
                        <P>(iii) Gross income from the use or rental of real or personal propertyacquired by the unit of general local government or a subrecipient of a unit ofgeneral local government with CDBG funds; less the costs incidental to thegeneration of the income;</P>

                        <P>(iv) Gross income from the use or rental of real property owned by the unitof general local government or a subrecipient of a unit of general localgovernment, that was constructed or improved with CDBG funds, less the <PRTPAGE P="127"/>costsincidental to the generation of the income;</P>
                        <P>(v) Payments of principal and interest on loans made using CDBG funds;</P>
                        <P>(vi) Proceeds from the sale of loans made with CDBG funds;</P>
                        <P>(vii) Proceeds from the sale of obligations secured by loans made with CDBGfunds;</P>
                        <P>(viii) Interest earned on funds held in a revolving fund account;</P>
                        <P>(ix) Interest earned on program income pending disposition of the income;</P>

                        <P>(x) Funds collected through special assessments made against properties ownedand occupied by households <E T="03">not</E> of low and moderate income, wherethe special assessments are used to recover all or part of the CDBG portion of apublic improvement; and</P>
                        <P>(xi) Gross income paid to a unit of general local government or subrecipientfrom the ownership interest in a for-profit entity acquired in return for theprovision of CDBG assistance.</P>
                        <P>(2) “Program income” does not include the following:</P>
                        <P>(i) The total amount of funds which is less than $25,000 received in a singleyear that is retained by a unit of general local government and itssubrecipients;</P>
                        <P>(ii) Amounts generated by activities eligible under section 105(a)(15) of theAct and carried out by an entity under the authority of section 105(a)(15) ofthe Act;</P>
                        <P>(iii) Amounts generated by activities that are financed by a loan guaranteedunder section 108 of the Act and meet one or more of the public benefit criteriaspecified at § 570.482(f)(3)(v) or are carried out in conjunctionwith a grant under section 108(q) of the Act in an area determined by HUD tomeet the eligibility requirements for designation as an Urban Empowerment Zonepursuant to 24 CFR part 597, subpart B. Such exclusion shall not apply if CDBGfunds are used to repay the guaranteed loan. When such a guaranteed loan ispartially repaid with CDBG funds, the amount generated shall be prorated toreflect the percentage of CDBG funds used. Amounts generated by activitiesfinanced with loans guaranteed under section 108 of the Act which are notdefined as program income shall be treated as miscellaneous revenue and shallnot be subject to any of the requirements of this part. However, such treatmentshall not affect the right of the Secretary to require the section 108 borrowerto pledge such amounts as security for the guaranteed loan. The determinationwhether such amounts shall constitute program income shall be governed by theprovisions of the contract required at § 570.705(b)(1).</P>
                        <P>(3) The state may permit the unit of general local government which receivesor will receive program income to retain the program income, subject to therequirements of paragraph (e)(3)(ii) of this section, or the state may requirethe unit of general local government to pay the program income to the state. Thestate, however, must permit the unit of general local government to retain theprogram income if the program income will be used to continue the activity fromwhich the program income was derived. The state will determine when an activitywill be considered to be continued.</P>
                        <P>(i) <E T="03">Program income paid to the state.</E> Program income that ispaid to the state is treated as additional CDBG funds subject to therequirements of this subpart and must be distributed to units of general localgovernment in accordance with the method of distribution in the state's finalStatement. To the maximum extent feasible, program income shall be distributedbefore the state makes additional withdrawals from the Treasury, except asprovided in paragraph (f) of this section.</P>
                        <P>(ii) <E T="03">Program income retained by a unit of general localgovernment.</E> (A) Program income that is received and retained by the unit ofgeneral local government before closeout of the grant that generated the programincome is treated as additional CDBG funds and is subject to all applicablerequirements of this subpart.</P>
                        <P>(B) Program income that is received and retained by the unit of general localgovernment after closeout of the grant that generated the program income is notsubject to the requirements of this subpart, except:</P>
                        <P>(<E T="03">1</E>) If the unit of general local government has another ongoingCDBG grant from the state at the time of closeout, <PRTPAGE P="128"/>the program income continuesto be subject to the requirements of this subpart as long as there is an ongoinggrant; and</P>
                        <P>(<E T="03">2</E>) If program income is used to continue the activity thatgenerated the program income, the requirements of this subpart apply to theprogram income as long as the unit of general local government uses the programincome to continue the activity;</P>
                        <P>(<E T="03">3</E>) The state may extend the period of applicability of therequirements of this subpart.</P>
                        <P>(C) The state shall require units of general local government, to the maximumextent feasible, to disburse program income that is subject to the requirementsof this subpart before requesting additional funds from the state foractivities, except as provided in paragraph (f) of this section.</P>
                        <P>(f) <E T="03">Revolving funds.</E> (1) The state may permit units of generallocal government to establish revolving funds to carry out specific, identifiedactivities. A revolving fund, for this purpose, is a separate fund (with a setof accounts that are independent of other program accounts) established to carryout specific activities which, in turn, generate payments to the fund for use incarrying out such activities. These payments to the revolving fund are programincome and must be substantially disbursed from the revolving fund beforeadditional grant funds are drawn from the Treasury for revolving fundactivities. Such program income is not required to be disbursed for non-revolving fund activities.</P>
                        <P>(2) The state may establish a revolving fund to distribute funds to units ofgeneral local government to carry out specific, identified activities. Arevolving fund, for this purpose, is a separate fund (with a set of accountsthat are independent of other program accounts) established to fund grants tounits of general local government to carry out specific activities which, inturn, generate payments to the fund for additional grants to units of generallocal government to carry out such activities. Program income in the revolvingfund must be disbursed from the fund before additional grant funds are drawnfrom the Treasury for payments to units of general local government which couldbe funded from the revolving fund.</P>
                        <P>(3) A revolving fund established by either the State or unit of general localgovernment shall not be directly funded or capitalized with grant funds.</P>
                        <P>(g) <E T="03">Procurement.</E> When procuring property or services to be paidfor in whole or in part with CDBG funds, the state shall follow its procurementpolicies and procedures. The state shall establish requirements for procurementpolicies and procedures for units of general local government, based on full andopen competition. Methods of procurement (e.g., small purchase, sealedbids/formal advertising, competitive proposals, and noncompetitive proposals)and their applicability shall be specified by the state. Cost plus a percentageof cost and percentage of construction costs methods of contracting shall not beused. The policies and procedures shall also include standards of conductgoverning employees engaged in the award or administration of contracts. (Otherconflicts of interest are covered by § 570.489(h).) The state shallensure that all purchase orders and contracts include any clauses required byFederal statutes, executive orders and implementing regulations.</P>
                        <P>(h) <E T="03">Conflict of interest</E>—(1) <E T="03">Applicability.</E>(i) In the procurement of supplies, equipment, construction, and services by theStates, units of local general governments, and subrecipients, the conflict ofinterest provisions in paragraph (g) of this section shall apply.</P>
                        <P>(ii) In all cases not governed by paragraph (g) of this section, thisparagraph (h) shall apply. Such cases include the acquisition and disposition ofreal property and the provision of assistance with CDBG funds by the unit ofgeneral local government or its subrecipients, to individuals, businesses andother private entities.</P>
                        <P>(2) <E T="03">Conflicts prohibited.</E> Except for eligible administrative orpersonnel costs, the general rule is that no persons described in paragraph(h)(3) of this section who exercise or have exercised any functions orresponsibilities with respect to CDBG activities assisted under this subpart orwho are in <PRTPAGE P="129"/>a position to participate in a decisionmaking process or gain insideinformation with regard to such activities, may obtain a financial interest orbenefit from the activity, or have an interest or benefit from the activity, orhave an interest in any contract, subcontract or agreement with respect thereto,or the proceeds thereunder, either for themselves or those with whom they havefamily or business ties, during their tenure or for one year thereafter.</P>
                        <P>(3) <E T="03">Persons covered.</E> The conflict of interest provisions forparagraph (h)(2) of this section apply to any person who is an employee, agent,consultant, officer, or elected official or appointed official of the state, orof a unit of general local government, or of any designated public agencies, orsubrecipients which are receiving CDBG funds.</P>
                        <P>(4) <E T="03">Exceptions: Thresholds requirements.</E> Upon written requestby the State, an exception to the provisions of paragraph (h)(2) of this sectioninvolving an employee, agent, consultant, officer, or elected official orappointed official of the state may be granted by HUD on a case-by-case basis.In all other cases, the state may grant such an exception upon written requestof the unit of general local government provided the state shall fully documentits determination in compliance with all requirements of paragraph (h)(4) ofthis section including the state's position with respect to each factor atparagraph (h)(5) of this section and such documentation shall be available forreview by the public and by HUD. An exception may be granted after it isdetermined that such an exception will serve to further the purpose of the Actand the effective and efficient administration of the program or project of thestate or unit of general local government as appropriate. An exception may beconsidered only after the state or unit of general local government, asappropriate, has provided the following:</P>
                        <P>(i) A disclosure of the nature of the conflict, accompanied by an assurancethat there has been public disclosure of the conflict and a description of howthe public disclosure was made; and</P>
                        <P>(ii) An opinion of the attorney for the state or the unit of general localgovernment, as appropriate, that the interest for which the exception is soughtwould not violate state or local law.</P>
                        <P>(5) <E T="03">Factors to be considered for exceptions.</E> In determiningwhether to grant a requested exception after the requirements of paragraph(h)(4) of this section have been satisfactorily met, the cumulative effect ofthe following factors, where applicable, shall be considered:</P>
                        <P>(i) Whether the exception would provide a significant cost benefit or anessential degree of expertise to the program or project which would otherwisenot be available;</P>
                        <P>(ii) Whether an opportunity was provided for open competitive bidding ornegotiation;</P>
                        <P>(iii) Whether the person affected is a member of a group or class of low ormoderate income persons intended to be the beneficiaries of the assistedactivity, and the exception will permit such person to receive generally thesame interests or benefits as are being made available or provided to the groupor class;</P>
                        <P>(iv) Whether the affected person has withdrawn from his or her functions orresponsibilities, or the decisionmaking process with respect to the specificassisted activity in question;</P>
                        <P>(v) Whether the interest or benefit was present before the affected personwas in a position as described in paragraph (h)(3) of this section;</P>
                        <P>(vi) Whether undue hardship will result either to the State or the unit ofgeneral local government or the person affected when weighed against the publicinterest served by avoiding the prohibited conflict; and</P>
                        <P>(vii) Any other relevant considerations.</P>
                        <P>(i) <E T="03">Closeout of grants to units of general local government.</E>The State shall establish requirements for timely closeout of grants to units ofgeneral local government and shall take action to ensure the timely closeout ofsuch grants.</P>
                        <P>(j) <E T="03">Change of use of real property.</E> The standards described inthis section apply to real property within the unit of general localgovernment's control (including activities undertaken by subrecipients) whichwas acquired or <PRTPAGE P="130"/>improved in whole or in part using CDBG funds in excess of thethreshold for small purchase procurement (24 CFR 85.36, “AdministrativeRequirements for Grants and Cooperative Agreements to State, Local and FederallyRecognized Indian Tribal Governments”). These standards shall apply fromthe date CDBG funds are first spent for the property until five years aftercloseout of the unit of general local government's grant.</P>
                        <P>(1) A unit of general local governments may not change the use or planned useof any such property (including the beneficiaries of such use) from that forwhich the acquisition or improvement was made, unless the unit of general localgovernment provides affected citizens with reasonable notice of and opportunityto comment on any proposed change, and either:</P>
                        <P>(i) The new use of the property qualifies as meeting one of the nationalobjectives and is not a building for the general conduct of government; or</P>
                        <P>(ii) The requirements in paragraph (j)(2) of this section are met.</P>
                        <P>(2) If the unit of general local government determines, after consultationwith affected citizens, that it is appropriate to change the use of the propertyto a use which does not qualify under paragraph (j)(1) of this section, it mayretain or dispose of the property for the changed use if the unit of generallocal government's CDBG program is reimbursed or the state's CDBG program isreimbursed, at the discretion of the state. The reimbursement shall be in theamount of the current fair market value of the property, less any portion of thevalue attributable to expenditures of non-CDBG funds for acquisition of, andimprovements to, the property, except that if the change in use occurs aftergrant closeout but within 5 years of such closeout, the unit of general localgovernment shall make the reimbursement to the State's CDBG program account.</P>
                        <P>(3) Following the reimbursement of the CDBG program in accordance withparagraph (j)(2) of this section, the property no longer will be subject to anyCDBG requirements.</P>
                        <P>(k) <E T="03">Accountability for real and personal property.</E> The Stateshall establish and implement requirements, consistent with State law and thepurposes and requirements of this subpart (including paragraph (j) of thissection) governing the use, management, and disposition of real and personalproperty acquired with CDBG funds.</P>
                        <P>(l) <E T="03">Debarment and suspension.</E> As required by 24 CFR part 24,each CDBG participant shall require participants in lower tier coveredtransactions to include a certification that neither it nor its principals arecurrently debarred, suspended, proposed for debarment, declared ineligible, orvoluntarily excluded from participation in the covered transaction, in anyproposal submitted in connection with the lower tier covered transactions. Aparticipant may rely on the certification, unless it knows the certification iserroneous.</P>
                        <P>(m) <E T="03">Audits.</E> Audits of the state and units of general localgovernment shall be conducted in accordance with 24 CFR part 44 which implementsthe Single Audit Act (31 U.S.C. 7501-07). States shall develop andadminister an audits management system to ensure that audits of units of generallocal government are conducted in accordance with 24 CFR part 44.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1952, Jan. 5, 1995; 61 FR54922, Oct. 22, 1996; 67 FR 15112, Mar. 29, 2002]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.490</SECTNO>
                        <SUBJECT>Recordkeeping requirements.</SUBJECT>
                        <P>(a) <E T="03">State records.</E> (1) The state shall establish and maintainsuch records as may be necessary to facilitate review and audit by HUD of thestate's administration of CDBG funds under § 570.493. The content ofrecords maintained by the state shall be as jointly agreed upon by HUD and thestates and sufficient to enable HUD to make the determinations described at§ 570.493. For fair housing and equal opportunity purposes, and asapplicable, such records shall include data on the racial, ethnic, and gendercharacteristics of persons who are applicants for, participants in, orbeneficiaries of the program. The records shall also permit audit of the statesin accordance with 24 CFR part 85.</P>

                        <P>(2) The state shall keep records to document its funding decisions reachedunder the method of distribution described in 24 CFR 91.320(j)(1), including <PRTPAGE P="131"/>allthe criteria used to select applications from local governments for funding andthe relative importance of the criteria (if applicable), regardless of theorganizational level at which final funding decisions are made, so that they canbe reviewed by HUD, the Inspector General, the Government Accountability Office,and citizens pursuant to the requirements of § 570.490(c).</P>
                        <P>(b) <E T="03">Unit of general local government's record.</E> The State shallestablish recordkeeping requirements for units of general local governmentreceiving CDBG funds that are sufficient to facilitate reviews and audits ofsuch units of general local government under §§ 570.492 and570.493. For fair housing and equal opportunity purposes, and as applicable,such records shall include data on the racial, ethnic, and gendercharacteristics of persons who are applicants for, participants in, orbeneficiaries of the program.</P>
                        <P>(c) <E T="03">Access to records.</E> (1) Representatives of HUD, theInspector General, and the General Accounting Office shall have access to allbooks, accounts, records, reports, files, and other papers, or propertypertaining to the administration, receipt and use of CDBG funds and necessary tofacilitate such reviews and audits.</P>
                        <P>(2) The State shall provide citizens with reasonable access to recordsregarding the past use of CDBG funds and ensure that units of general localgovernment provide citizens with reasonable access to records regarding the pastuse of CDBG funds consistent with State or local requirements concerning theprivacy of personal records.</P>
                        <P>(d) <E T="03">Record retention.</E> Records of the State and units of generallocal government, including supporting documentation, shall be retained for thegreater of three years from closeout of the grant to the state, or the periodrequired by other applicable laws and regulations as described in§ 570.487 and § 570.488.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 71 FR 6971, Feb. 9, 2006]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.491</SECTNO>
                        <SUBJECT>Performance and evaluation report.</SUBJECT>
                        <P>The annual performance and evaluation report shall be submitted in accordancewith 24 CFR part 91.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0117)</APPRO>
                        <CITA>[60 FR 1916, Jan. 5, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.492</SECTNO>
                        <SUBJECT>State's reviews and audits.</SUBJECT>
                        <P>(a) The state shall make reviews and audits including on-site reviews, ofunits of general local government as may be necessary or appropriate to meet therequirements of section 104(e)(2) of the Act.</P>
                        <P>(b) In the case of noncompliance with these requirements, the State shalltake such actions as may be appropriate to prevent a continuance of thedeficiency, mitigate any adverse effects or consequences and prevent arecurrence. The state shall establish remedies for units of general localgovernment noncompliance.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.493</SECTNO>
                        <SUBJECT>HUD's reviews and audits.</SUBJECT>
                        <P>(a) <E T="03">General.</E> At least on an annual basis, HUD shall make suchreviews and audits as may be necessary or appropriate to determine:</P>
                        <P>(1) Whether the state has distributed CDBG funds to units of general localgovernment in a timely manner in conformance to the method of distributiondescribed in its action plan under part 91 of this title;</P>
                        <P>(2) Whether the state has carried out its certifications in compliance withthe requirements of the Act and this subpart and other applicable laws; and</P>
                        <P>(3) Whether the state has made reviews and audits of the units of generallocal government required by § 570.492.</P>
                        <P>(b) <E T="03">Information considered.</E> In conducting performance reviewsand audits, HUD will rely primarily on information obtained from the state'sperformance report, records maintained by the state, findings from on-sitemonitoring, audit reports, and the status of the state's unexpended grant funds.HUD may also consider relevant information on the state's performance gainedfrom other sources, including litigation, citizens' comments, and otherinformation provided by the state. A State's failure to maintain <PRTPAGE P="132"/>records inaccordance with § 570.490 may result in a finding that the State hasfailed to meet the applicable requirement to which the record pertains.</P>
                        <CITA>[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.494</SECTNO>
                        <SUBJECT>Timely distribution of funds by states.</SUBJECT>
                        <P>(a) States are encouraged to adopt and achieve a goal of obligating andannouncing 95 percent of funds to units of general local government within 12months of the state signing its grant agreement with HUD.</P>
                        <P>(b) HUD will review each state to determine if the state has distributed CDBGfunds in a timely manner. The state's distribution of CDBG funds is timely if:</P>
                        <P>(1) All of the state's annual grant (excluding state administration) has beenobligated and announced to units of general local government within 15 months ofthe state signing its grant agreement with HUD; and</P>
                        <P>(2) Recaptured funds and program income received by the state areexpeditiously obligated and announced to units of general local government.</P>
                        <P>(c) HUD may collect necessary information from states to determine whetherCDBG funds have been distributed in a timely manner.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.495</SECTNO>
                        <SUBJECT>Reviews and audits response.</SUBJECT>
                        <P>(a) If HUD's review and audit under § 570.493 results in anegative determination, or if HUD otherwise determines that a state or unit ofgeneral local government has failed to comply with any requirement of thissubpart, the state will be given an opportunity to contest the finding and willbe requested to submit a plan for corrective action. If the state isunsuccessful in contesting the validity of the finding to the satisfaction ofHUD, or if the state's plan for corrective action is not satisfactory to HUD,HUD may take one or more of the following actions to prevent a continuation ofthe deficiency; mitigate, to the extent possible, the adverse effects orconsequence of the deficiency; or prevent a recurrence of the deficiency:</P>
                        <P>(1) Issue a letter of warning that advises the State of the deficiency andputs the state on notice that additional action will be taken if the deficiencyis not corrected or is repeated;</P>
                        <P>(2) Advise the state that additional information or assurances will berequired before acceptance of one or more of the certifications required for thesucceeding year grant;</P>
                        <P>(3) Advise the state to suspend or terminate disbursement of funds for adeficient activity or grant;</P>
                        <P>(4) Advise the state to reimburse its grant in any amounts improperlyexpended;</P>
                        <P>(5) Change the method of payment to the state from an advance basis to areimbursement basis;</P>
                        <P>(6) Based on the state's current failure to comply with a requirement of thissubpart which will affect the use of the succeeding year grant, condition theuse of the succeeding fiscal years grant funds upon appropriate correctiveaction by the state. When the use of funds is conditioned, HUD shall specify thereasons for the conditions and the actions necessary to satisfy the conditions.</P>
                        <P>(b)(1) Whenever HUD determines that a state or unit of general localgovernment which is a recipient of CDBG funds has failed to comply with section109 of the Act (nondiscrimination requirements), HUD shall notify the governorof the State or chief executive officer of the unit of general local governmentof the noncompliance and shall request the governor or the chief executiveofficer to secure compliance. If within a reasonable time, not to exceed sixtydays, the governor or chief executive officer fails or refuses to securecompliance, HUD may take the following action:</P>
                        <P>(i) Refer the matter to the Attorney General with a recommendation that anappropriate civil action be instituted;</P>
                        <P>(ii) Exercise the powers and functions provided by title VI of the CivilRights Act of 1964 (42 U.S.C. 2000d-2000d-7);</P>
                        <P>(iii) Exercise the powers and functions provided for in § 570.496;or</P>
                        <P>(iv) Take such other action as may be provided by law.</P>

                        <P>(2) When a matter is referred to the Attorney General pursuant to paragraph(b)(1)(i) of this section, or whenever HUD has reason to believe that a <PRTPAGE P="133"/>State orunit of general local government is engaged in a pattern or practice inviolation of the provisions of section 109 of the Act, the Attorney General maybring a civil action in any appropriate United States district court for suchrelief as may be appropriate, including injunctive relief.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.496</SECTNO>
                        <SUBJECT>Remedies for noncompliance; opportunity for hearing.</SUBJECT>
                        <P>(a) <E T="03">General.</E> Action pursuant to this section will be taken onlyafter at least one of the corrective or remedial actions specified in§ 570.495 has been taken, and only then if the State or unit ofgeneral local government has not made an appropriate or timely response.</P>
                        <P>(b) <E T="03">Remedies.</E> (1) If HUD finds after reasonable notice andopportunity for hearing that a State or unit of general local government hasfailed to comply with any provision of this subpart, until HUD is satisfied thatthere is no longer failure to comply, HUD shall:</P>
                        <P>(i) Terminate payments to the state;</P>
                        <P>(ii) Reduce payments for current or future grants to the state by an amountequal to the amount of CDBG funds distributed or used without compliance withthe requirements of this subpart;</P>
                        <P>(iii) Limit the availability of payments to the state to activities notaffected by the failure to comply or to activities designed to overcome thefailure to comply;</P>
                        <P>(iv) Based on the state's failure to comply with a requirement of thissubpart (other than the state's current failure to comply which will affect theuse of the succeeding year grant), condition the use of the grant funds uponappropriate corrective action by the state specified by HUD; or</P>
                        <P>(v) With respect to a CDBG grant awarded by the state to a unit of generallocal government, withhold, reduce, or withdraw the grant, require the state towithhold, reduce, or withdraw the grant, or take other action as appropriate,except that CDBG funds expended on eligible activities shall not be recapturedor deducted from future CDBG grants to such unit of general local government.</P>
                        <P>(2) HUD may on due notice suspend payments at any time after the issuance ofa notice of opportunity for hearing pursuant to paragraph (d) of this section,pending such hearing and a final decision, to the extent HUD determines suchaction necessary to prevent a continuation of the noncompliance.</P>
                        <P>(c) In lieu of, or in addition to, the action authorized by paragraph (b) ofthis section, if HUD has reason to believe that the state or unit of generallocal government has failed to comply substantially with any provision of thissubpart, HUD may:</P>
                        <P>(1) Refer the matter to the Attorney General of the United States with arecommendation that an appropriate civil action be instituted; and</P>
                        <P>(2) Upon such a referral, the Attorney General may bring a civil action inany United States district court having venue thereof for such relief as may beappropriate, including an action to recover the amount of the CDBG funds whichwas not expended in accordance with this subpart, or for mandatory or injunctiverelief.</P>
                        <P>(d) <E T="03">Proceedings.</E> When HUD proposes to take action pursuant tothis section, the respondent in the proceedings will be the state. At the optionof HUD, a unit of general local government may also be a respondent. Theseprocedures are to be followed before imposition of a sanction described inparagraph (b)(1) of this section:</P>
                        <P>(1) <E T="03">Notice of opportunity for hearing.</E> HUD shall notify therespondent in writing of the proposed action and of the opportunity for ahearing. The notice shall be sent to the respondent by first class mail andshall provide notice:</P>
                        <P>(i) In a manner which is adequate to allow the respondent to prepare itsresponse, the basis upon which HUD determined that the respondent failed tocomply with a provision of this subpart;</P>
                        <P>(ii) That the hearing procedures are governed by these rules;</P>

                        <P>(iii) That the respondent has 14 days from receipt of the notice within whichto provide a written request for a hearing to the Chief Docket Clerk, Office ofAdministrative Law Judges, and the address and telephone number of the ChiefDocket Clerk;<PRTPAGE P="134"/>
                        </P>
                        <P>(iv) Of the action which HUD proposes to take and that the authority for thisaction is § 570.496 of this subpart;</P>
                        <P>(v) That if the respondent fails to request a hearing within the timespecified, HUD's determination that the respondent failed to comply with aprovision of this subpart shall be final and HUD may proceed to take theproposed action.</P>
                        <P>(2) <E T="03">Initiation of hearing.</E> The respondent shall be allowed 14days from receipt of the notice within which to notify HUD in writing of itsrequest for a hearing. If no request is received within the time specified,HUD's determination that the respondent failed to comply with a provision ofthis subpart shall be final and HUD may proceed to take the proposed action.</P>
                        <P>(3) <E T="03">Administrative Law Judge.</E> Proceedings conducted under theserules shall be presided over by an Administrative Law Judge (ALJ), appointed asprovided by section 11 of the Administrative Procedure Act (5 U.S.C. 3105). Thecase shall be referred to the ALJ by HUD at the time a hearing is requested. TheALJ shall promptly notify the parties of the time and place at which the hearingwill be held. The ALJ shall conduct a fair and impartial hearing and take allaction necessary to avoid delay in the disposition of proceedings and tomaintain order. The ALJ shall have all powers necessary to those ends, includingbut not limited to the power:</P>
                        <P>(i) To administer oaths and affirmations;</P>
                        <P>(ii) To issue subpoenas as authorized by law;</P>
                        <P>(iii) To rule upon offers of proof and receive relevant evidence;</P>
                        <P>(iv) To order or limit discovery before the hearing as the interests ofjustice may require;</P>
                        <P>(v) To regulate the course of the hearing and the conduct of the parties andtheir counsel;</P>
                        <P>(vi) To hold conferences for the settlement or simplification of the issuesby consent of the parties;</P>
                        <P>(vii) To consider and rule upon all procedural and other motions appropriatein adjudicative proceedings; and</P>
                        <P>(viii) To make and file initial determinations.</P>
                        <P>(4) <E T="03">Ex parte communications.</E> An ex parte communication is anycommunication with an ALJ, direct or indirect, oral or written, concerning themerits or procedures of any pending proceeding which is made by a party in theabsence of any other party. Ex parte communications are prohibited except wherethe purpose and content of the communication have been disclosed in advance orsimultaneously to all parties, or the communication is a request for informationconcerning the status of the case. Any ALJ who receives an ex partecommunication which the ALJ knows or has reason to believe is unauthorized shallpromptly place the communication, or its substance, in all files and shallfurnish copies to all parties. Unauthorized ex parte communications shall not betaken into consideration in deciding any matter in issue.</P>
                        <P>(5) <E T="03">The hearing.</E> All parties shall have the right to berepresented at the hearing by counsel. The ALJ shall conduct the proceedings inan expeditious manner while allowing the parties to present all oral and writtenevidence which tends to support their respective positions, but the ALJ shallexclude irrelevant, immaterial or unduly repetitious evidence. HUD has theburden of proof in showing by a preponderance of evidence that the respondentfailed to comply with a provision of this subpart. Each party shall be allowedto cross-examine adverse witnesses and to rebut and comment upon evidencepresented by the other party. Hearings shall be open to the public. So far asthe orderly conduct of the hearing permits, interested persons other than theparties may appear and participate in the hearing.</P>
                        <P>(6) <E T="03">Transcripts.</E> Hearings shall be recorded and transcribedonly by a reporter under the supervision of the ALJ. The original transcriptshall be a part of the record and shall constitute the sole official transcript.Respondents and the public, at their own expense, shall obtain copies of thetranscript.</P>
                        <P>(7) <E T="03">The ALJ's decisions.</E> At the conclusion of the hearing, theALJ shall give the parties a reasonable opportunity to submit proposed findingsand conclusions and supporting reasons therefor. <PRTPAGE P="135"/>Generally, within 60 days afterthe conclusion of the hearing, the ALJ shall prepare a written decision whichincludes a Statement of findings and conclusions, and the reasons or basistherefor, on all the material issues of fact, law or discretion presented on therecord and the appropriate sanction or denial thereof. The decision shall bebased on consideration of the whole record or those parts thereof cited by aparty and supported by and in accordance with the reliable, probative, andsubstantial evidence. A copy of the decision shall be furnished to the partiesimmediately by first class mail and shall include a notice that any requests forreview by the Secretary must be made in writing to the Secretary within 30 daysof the receipt of the decision.</P>
                        <P>(8) <E T="03">Record.</E> The transcript of testimony and exhibits, togetherwith the decision of the ALJ and all papers and requests filed in theproceeding, constitutes the exclusive record for decision and, on payment of itsreasonable cost, shall be made available to the parties. After reaching theinitial decision, the ALJ shall certify to the complete record and forward therecord to the Secretary.</P>
                        <P>(9) <E T="03">Review by the Secretary.</E> The decision by the ALJ shallconstitute the final decision of HUD unless, within 30 days after the receipt ofthe decision, either the respondent or the Assistant Secretary for CommunityPlanning and Development files an exception and request for review by theSecretary. The excepting party must transmit simultaneously to the Secretary andthe other party the request for review and the bases of the party's exceptionsto the findings of the ALJ. The other party shall be allowed 30 days fromreceipt of the exception to provide the Secretary and the excepting party with awritten reply. The Secretary shall then review the record of the case, includingthe exceptions and the reply. On the basis of such review, the Secretary shallissue a written determination, including a Statement of the rationale therefor,affirming, modifying or revoking the decision of the ALJ. The Secretary'sdecision shall be made and transmitted to the parties within 60 days after thedecision of the ALJ was furnished to the parties.</P>
                        <P>(10) <E T="03">Judicial review.</E> The respondent may seek judicial reviewof HUD's decision pursuant to section 111(c) of the Act.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.497</SECTNO>
                        <SUBJECT>Condition of State election to administer State CDBG Program.</SUBJECT>
                        <P>Pursuant to section 106(d)(2)(A)(i) of the Act, a State has the right toelect, in such manner and at such time as the Secretary may prescribe, toadminister funds allocated under subpart A of this part for use innonentitlement areas of the State. After January 26, 1995, any State whichelects to administer the allocation of CDBG funds for use in nonentitlementareas of the State in any year must, in addition to all other requirements ofthis subpart, submit a pledge by the State in accordance with section 108(d)(2)of the Act, and in a form acceptable to HUD, of any future CDBG grants it mayreceive under subpart A and this subpart. Such pledge shall be for the purposeof assuring repayment of any debt obligations (as defined in§ 570.701), in accordance with their terms, that HUD may haveguaranteed in the respective State on behalf of any nonentitlement public entity(as defined in § 570.701) or its designated public agency prior tothe State's election.</P>
                        <CITA>[59 FR 66604, Dec. 27, 1994]</CITA>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart J—Grant Administration</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>53 FR 8058, Mar. 11, 1988, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.500</SECTNO>
                        <SUBJECT>Definitions.</SUBJECT>
                        <P>For the purposes of this subpart, the following terms shall apply:</P>
                        <P>(a) <E T="03">Program income</E> means gross income received by the recipientor a subrecipient directly generated from the use of CDBG funds, except asprovided in paragraph (a)(4) of this section.</P>
                        <P>(1) Program income includes, but is not limited to, the following:</P>
                        <P>(i) Proceeds from the disposition by sale or long-term lease of real propertypurchased or improved with CDBG funds;</P>

                        <P>(ii) Proceeds from the disposition of equipment purchased with CDBG funds;<PRTPAGE P="136"/>
                        </P>
                        <P>(iii) Gross income from the use or rental of real or personal propertyacquired by the recipient or by a subrecipient with CDBG funds, less costsincidental to generation of the income;</P>
                        <P>(iv) Gross income from the use or rental of real property, owned by therecipient or by a subrecipient, that was constructed or improved with CDBGfunds, less costs incidental to generation of the income;</P>
                        <P>(v) Payments of principal and interest on loans made using CDBG funds, exceptas provided in paragraph (a)(3) of this section;</P>
                        <P>(vi) Proceeds from the sale of loans made with CDBG funds;</P>
                        <P>(vii) Proceeds from sale of obligations secured by loans made with CDBGfunds;</P>
                        <P>(viii) [Reserved]</P>
                        <P>(ix) Interest earned on program income pending its disposition; and</P>

                        <P>(x) Funds collected through special assessments made against properties ownedand occupied by households <E T="03">not</E> of low and moderate income, wherethe assessments are used to recover all or part of the CDBG portion of a publicimprovement.</P>
                        <P>(2) Program income does not include income earned (except for interestdescribed in § 570.513) on grant advances from the U.S. Treasury. Thefollowing items of income earned on grant advances must be remitted to HUD fortransmittal to the U.S. Treasury, and will not be reallocated under section106(c) or (d) of the Act:</P>
                        <P>(i) Interest earned from the investment of the initial proceeds of a grantadvance by the U.S. Treasury;</P>
                        <P>(ii) Interest earned on loans or other forms of assistance provided with CDBGfunds that are used for activities determined by HUD either to be ineligible orto fail to meet a national objective in accordance with the requirements ofsubpart C of this part, or that fail substantially to meet any other requirementof this part; and</P>
                        <P>(iii) Interest earned on the investment of amounts reimbursed to the CDBGprogram account prior to the use of the reimbursed funds for eligible purposes.</P>
                        <P>(3) The calculation of the amount of program income for the recipient's CDBGprogram as a whole (i.e., comprising activities carried out by a grantee and itssubrecipients) shall exclude payments made by subrecipients of principal and/orinterest on CDBG-funded loans received from grantees if such payments are madeusing program income received by the subrecipient. (By making such payments, thesubrecipient shall be deemed to have transferred program income to the grantee.)The amount of program income derived from this calculation shall be used forreporting purposes, for purposes of applying the requirement under§ 570.504(b)(2)(iii), and in determining limitations on planning andadministration and public services activities to be paid for with CDBG funds.</P>
                        <P>(4) Program income does not include:</P>
                        <P>(i) Any income received in a single program year by the recipient and all itssubrecipients if the total amount of such income does not exceed $25,000; and</P>

                        <P>(ii) Amounts generated by activities that are financed by a loan guaranteedunder section 108 of the Act and meet one or more of the public benefit criteriaspecified at § 570.209(b)(2)(v) or are carried out in conjunctionwith a grant under section 108(q) in an area determined by HUD to meet theeligibility requirements for designation as an Urban Empowerment Zone pursuantto 24 CFR part 597, subpart B. Such exclusion shall not apply if CDBG funds areused to repay the guaranteed loan. When such a guaranteed loan is partiallyrepaid with CDBG funds, the amount generated shall be prorated to reflect thepercentage of CDBG funds used. Amounts generated by activities financed withloans guaranteed under section 108 which are not defined as program income shallbe treated as miscellaneous revenue and shall not be subject to any of therequirements of this part, except that the use of such funds shall be limited toactivities that are located in a revitalization strategy area and implement aHUD approved area revitalization strategy pursuant to § 91.215(e) ofthis title. However, such treatment shall not affect the right of the Secretaryto require the section 108 borrower to pledge such amounts as security for theguaranteed loan. The determination whether such amounts shall constitute programincome shall <PRTPAGE P="137"/>be governed by the provisions of the contract required at§ 570.705(b)(1).</P>
                        <P>(5) Examples of other receipts that are not considered program income areproceeds from fund raising activities carried out by subrecipients receivingCDBG assistance (the costs of fundraising are generally unallowable under theapplicable OMB circulars referenced in 24 CFR 84.27), funds collected throughspecial assessments used to recover the non-CDBG portion of a publicimprovement, and proceeds from the disposition of real property acquired orimproved with CDBG funds when the disposition occurs after the applicable timeperiod specified in § 570.503(b)(8) for subrecipient-controlledproperty, or in § 570.505 for recipient-controlled property.</P>
                        <P>(b) <E T="03">Revolving fund</E> means a separate fund (with a set ofaccounts that are independent of other program accounts) established for thepurpose of carrying out specific activities which, in turn, generate payments tothe fund for use in carrying out the same activities. Each revolving loan fund'scash balance must be held in an interest-bearing account, and any interest paidon CDBG funds held in this account shall be considered interest earned on grantadvances and must be remitted to HUD for transmittal to the U.S. Treasury noless frequently than annually. (Interest paid by borrowers on eligible loansmade from the revolving loan fund shall be program income and treatedaccordingly.)</P>
                        <P>(c) <E T="03">Subrecipient</E> means a public or private nonprofit agency,authority, or organization, or a for-profit entity authorized under§ 570.201(o), receiving CDBG funds from the recipient or anothersubrecipient to undertake activities eligible for such assistance under subpartC of this part. The term excludes an entity receiving CDBG funds from therecipient under the authority of § 570.204, unless the granteeexplicitly designates it as a subrecipient. The term includes a public agencydesignated by a unit of general local government to receive a loan guaranteeunder subpart M of this part, but does not include contractors providingsupplies, equipment, construction, or services subject to the procurementrequirements in 24 CFR 85.36 or 84.40, as applicable.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992; 60FR 1952, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56914, Nov. 9, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.501</SECTNO>
                        <SUBJECT>Responsibility for grant administration.</SUBJECT>
                        <P>(a) One or more public agencies, including existing local public agencies,may be designated by the chief executive officer of the recipient to undertakeactivities assisted by this part. A public agency so designated shall be subjectto the same requirements as are applicable to subrecipients.</P>
                        <P>(b) The recipient is responsible for ensuring that CDBG funds are used inaccordance with all program requirements. The use of designated public agencies,subrecipients, or contractors does not relieve the recipient of thisresponsibility. The recipient is also responsible for determining the adequacyof performance under subrecipient agreements and procurement contracts, and fortaking appropriate action when performance problems arise, such as the actionsdescribed in § 570.910. Where a unit of general local government isparticipating with, or as part of, an urban county, or as part of a metropolitancity, the recipient is responsible for applying to the unit of general localgovernment the same requirements as are applicable to subrecipients, except thatthe five-year period identified under § 570.503(b)(8)(i) shall beginwith the date that the unit of general local government is no longer consideredby HUD to be a part of the metropolitan city or urban county, as applicable,instead of the date that the subrecipient agreement expires.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.502</SECTNO>
                        <SUBJECT>Applicability of uniform administrative requirements.</SUBJECT>

                        <P>(a) Recipients and subrecipients that are governmental entities (includingpublic agencies) shall comply with the requirements and standards of OMBCircular No. A-87, “Cost Principles for State, Local, and IndianTribal Governments”; OMB Circular A-128, “Audits <PRTPAGE P="138"/>of State andLocal Governments” (implemented at 24 CFR part 44); and with the followingsections of 24 CFR part 85 “Uniform Administrative Requirements for Grantsand Cooperative Agreements to State and Local Governments” or the relatedCDBG provision, as specified in this paragraph:</P>
                        <P>(1) Section 85.3, “Definitions”;</P>
                        <P>(2) Section 85.6, “Exceptions”;</P>
                        <P>(3) Section 85.12, “Special grant or subgrant conditions for‘high-risk’ grantees”;</P>
                        <P>(4) Section 85.20, “Standards for financial management systems,”except paragraph (a);</P>
                        <P>(5) Section 85.21, “Payment,” except as modified by§ 570.513;</P>
                        <P>(6) Section 85.22, “Allowable costs”;</P>
                        <P>(7) Section 85.26, “Non-federal audits”;</P>
                        <P>(8) Section 85.32, “Equipment,” except in all cases in which theequipment is sold, the proceeds shall be program income;</P>
                        <P>(9) Section 85.33, “Supplies”;</P>
                        <P>(10) Section 85.34, “Copyrights”;</P>
                        <P>(11) Section 85.35, “Subawards to debarred and suspendedparties”;</P>
                        <P>(12) Section 85.36, “Procurement,” except paragraph (a);</P>
                        <P>(13) Section 85.37, “Subgrants”;</P>
                        <P>(14) Section 85.40, “Monitoring and reporting programperformance,” except paragraphs (b) through (d) and paragraph (f);</P>
                        <P>(15) Section 85.41, “Financial reporting,” except paragraphs (a),(b), and (e);</P>
                        <P>(16) Section 85.42, “Retention and access requirements forrecords,” except that the period shall be four years;</P>
                        <P>(17) Section 85.43, “Enforcement”;</P>
                        <P>(18) Section 85.44, “Termination for convenience”;</P>
                        <P>(19) Section 85.51 “Later disallowances and adjustments” and</P>
                        <P>(20) Section 85.52, “Collection of amounts due.”</P>
                        <P>(b) Subrecipients, except subrecipients that are governmental entities, shallcomply with the requirements and standards of OMB Circular No. A-122,“Cost Principles for Non-profit Organizations,” or OMB Circular No.A-21, “Cost Principles for Educational Institutions,” asapplicable, and OMB Circular A-133, “Audits of Institutions ofHigher Education and Other Nonprofit Institutions” (as set forth in 24 CFRpart 45). Audits shall be conducted annually. Such subrecipients shall alsocomply with the following provisions of the Uniform Administrative requirementsof OMB Circular A-110 (implemented at 24 CFR part 84, “UniformAdministrative Requirements for Grants and Agreements With Institutions ofHigher Education, Hospitals and Other Non-Profit Organizations”) or therelated CDBG provision, as specified in this paragraph:</P>
                        <P>(1) Subpart A—“General”;</P>
                        <P>(2) Subpart B—“Pre-Award Requirements,” except for§ 84.12, “Forms for Applying for Federal Assistance”;</P>
                        <P>(3) Subpart C—“Post-Award Requirements,” except for:</P>
                        <P>(i) Section 84.22, “Payment Requirements.” Grantees shall followthe standards of §§ 85.20(b)(7) and 85.21 in making payments tosubrecipients;</P>
                        <P>(ii) Section 84.23, “Cost Sharing and Matching”;</P>
                        <P>(iii) Section 84.24, “Program Income.” In lieu of§ 84.24, CDBG subrecipients shall follow § 570.504;</P>
                        <P>(iv) Section 84.25, “Revision of Budget and Program Plans”;</P>
                        <P>(v) Section 84.32, “Real Property.” In lieu of§ 84.32, CDBG subrecipients shall follow § 570.505;</P>
                        <P>(vi) Section 84.34(g), “Equipment.” In lieu of the dispositionprovisions of § 84.34(g), the following applies:</P>
                        <P>(A) In all cases in which equipment is sold, the proceeds shall be programincome (prorated to reflect the extent to which CDBG funds were used to acquirethe equipment); and</P>
                        <P>(B) Equipment not needed by the subrecipient for CDBG activities shall betransferred to the recipient for the CDBG program or shall be retained aftercompensating the recipient;</P>
                        <P>(vii) Section 84.51 (b), (c), (d), (e), (f), (g), and (h), “Monitoringand Reporting Program Performance”;</P>
                        <P>(viii) Section 84.52, “Financial Reporting”;</P>
                        <P>(ix) Section 84.53(b), “Retention and access requirements forrecords.” Section 84.53(b) applies with the following exceptions:</P>

                        <P>(A) The retention period referenced in § 84.53(b) pertaining toindividual CDBG activities shall be four years; and<PRTPAGE P="139"/>
                        </P>
                        <P>(B) The retention period starts from the date of submission of the annualperformance and evaluation report, as prescribed in 24 CFR 91.520, in which thespecific activity is reported on for the final time rather than from the date ofsubmission of the final expenditure report for the award;</P>
                        <P>(x) Section 84.61, “Termination.” In lieu of the provisions of§ 84.61, CDBG subrecipients shall comply with§ 570.503(b)(7); and</P>
                        <P>(4) Subpart D—“After-the-Award Requirements,” except for§ 84.71, “Closeout Procedures.”</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 60 FR56915, Nov. 9, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.503</SECTNO>
                        <SUBJECT>Agreements with subrecipients.</SUBJECT>
                        <P>(a) Before disbursing any CDBG funds to a subrecipient, the recipient shallsign a written agreement with the subrecipient. The agreement shall remain ineffect during any period that the subrecipient has control over CDBG funds,including program income.</P>
                        <P>(b) At a minimum, the written agreement with the subrecipient shall includeprovisions concerning the following following items:</P>
                        <P>(1) <E T="03">Statement of work.</E> The agreement shall include adescription of the work to be performed, a schedule for completing the work, anda budget. These items shall be in sufficient detail to provide a sound basis forthe recipient effectively to monitor performance under the agreement.</P>
                        <P>(2) <E T="03">Records and reports.</E> The recipient shall specify in theagreement the particular records the subrecipient must maintain and theparticular reports the subrecipient must submit in order to assist the recipientin meeting its recordkeeping and reporting requirements.</P>
                        <P>(3) <E T="03">Program income.</E> The agreement shall include the programincome requirements set forth in § 570.504(c). The agreement shallalso specify that, at the end of the program year, the grantee may requireremittance of all or part of any program income balances (including investmentsthereof) held by the subrecipient (except those needed for immediate cash needs,cash balances of a revolving loan fund, cash balances from a lump sum drawdown,or cash or investments held for section 108 security needs).</P>
                        <P>(4) <E T="03">Uniform administrative requirements.</E> The agreement shallrequire the subrecipient to comply with applicable uniform administrativerequirements, as described in § 570.502.</P>
                        <P>(5) <E T="03">Other program requirements.</E> The agreement shall require thesubrecipient to carry out each activity in compliance with all Federal laws andregulations described in subpart K of these regulations, except that:</P>
                        <P>(i) The subrecipient does not assume the recipient's environmentalresponsibilities described at § 570.604; and</P>
                        <P>(ii) The subrecipient does not assume the recipient's responsibility forinitiating the review process under the provisions of 24 CFR part 52.</P>
                        <P>(6) <E T="03">Suspension and termination.</E> The agreement shall specifythat, in accordance with 24 CFR 85.43, suspension or termination may occur ifthe subrecipient materially fails to comply with any term of the award, and thatthe award may be terminated for convenience in accordance with 24 CFR 85.44.</P>
                        <P>(7) <E T="03">Reversion of assets.</E> The agreement shall specify that uponits expiration the subrecipient shall transfer to the recipient any CDBG fundson hand at the time of expiration and any accounts receivable attributable tothe use of CDBG funds. It shall also include provisions designed to ensure thatany real property under the subrecipient's control that was acquired or improvedin whole or in part with CDBG funds (including CDBG funds provided to thesubrecipient in the form of a loan) in excess of $25,000 is either:</P>
                        <P>(i) Used to meet one of the national objectives in § 570.208(formerly § 570.901) until five years after expiration of theagreement, or for such longer period of time as determined to be appropriate bythe recipient; or</P>

                        <P>(ii) Not used in accordance with paragraph (b)(7)(i) of this section, inwhich event the subrecipient shall pay to the recipient an amount equal to thecurrent market value of the property less any portion of the value attributableto expenditures of non-CDBG funds for the acquisition of, or improvement to, theproperty. The payment is program income to the recipient. (No payment <PRTPAGE P="140"/>isrequired after the period of time specified in paragraph (b)(7)(i) of thissection.)</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988; 57FR 27120, June 17, 1992; 60 FR 56915, Nov. 9, 1995; 68 FR 56405, Sept. 30, 2003]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.504</SECTNO>
                        <SUBJECT>Program income.</SUBJECT>
                        <P>(a) <E T="03">Recording program income.</E> The receipt and expenditure ofprogram income as defined in § 570.500(a) shall be recorded as partof the financial transactions of the grant program.</P>
                        <P>(b) <E T="03">Disposition of program income received by recipients.</E> (1)Program income received before grant closeout may be retained by the recipientif the income is treated as additional CDBG funds subject to all applicablerequirements governing the use of CDBG funds.</P>
                        <P>(2) If the recipient chooses to retain program income, that program incomeshall be disposed of as follows:</P>
                        <P>(i) Program income in the form of repayments to, or interest earned on, arevolving fund as defined in § 570.500(b) shall be substantiallydisbursed from the fund before additional cash withdrawals are made from theU.S. Treasury for the same activity. (This rule does not prevent a lump sumdisbursement to finance the rehabilitation of privately owned properties asprovided for in § 570.513.)</P>
                        <P>(ii) Substantially all other program income shall be disbursed for eligibleactivities before additional cash withdrawals are made from the U.S. Treasury.</P>
                        <P>(iii) At the end of each program year, the aggregate amount of program incomecash balances and any investment thereof (except those needed for immediate cashneeds, cash balances of a revolving loan fund, cash balances from a lump-sumdrawdown, or cash or investments held for section 108 loan guarantee securityneeds) that, as of the last day of the program year, exceeds one-twelfth of themost recent grant made pursuant to § 570.304 shall be remitted to HUDas soon as practicable thereafter, to be placed in the recipient's line ofcredit. This provision applies to program income cash balances and investmentsthereof held by the grantee and its subrecipients. (This provision shall beapplied for the first time at the end of the program year for which FederalFiscal Year 1996 funds are provided.)</P>
                        <P>(3) Program income on hand at the time of closeout shall continue to besubject to the eligibility requirements in subpart C and all other applicableprovisions of this part until it is expended.</P>
                        <P>(4) Unless otherwise provided in any grant closeout agreement, and subject tothe requirements of paragraph (b)(5) of this section, income received aftercloseout shall not be governed by the provisions of this part, except that, ifat the time of closeout the recipient has another ongoing CDBG grant receiveddirectly from HUD, funds received after closeout shall be treated as programincome of the ongoing grant program.</P>
                        <P>(5) If the recipient does not have another ongoing grant received directlyfrom HUD at the time of closeout, income received after closeout from thedisposition of real property or from loans outstanding at the time of closeoutshall not be governed by the provisions of this part, except that such incomeshall be used for activities that meet one of the national objectives in§ 570.901 and the eligibility requirements described in section 105of the Act.</P>
                        <P>(c) <E T="03">Disposition of program income received by subrecipients.</E>The written agreement between the recipient and the subrecipient, as required by§ 570.503, shall specify whether program income received is to bereturned to the recipient or retained by the subrecipient. Where program incomeis to be retained by the subrecipient, the agreement shall specify theactivities that will be undertaken with the program income and that allprovisions of the written agreement shall apply to the specified activities.When the subrecipient retains program income, transfers of grant funds by therecipient to the subrecipient shall be adjusted according to the principlesdescribed in paragraphs (b)(2) (i) and (ii) of this section. Any program incomeon hand when the agreement expires, or received after the agreement'sexpiration, shall be paid to the recipient as required by§ 570.503(b)(8).<PRTPAGE P="141"/>
                        </P>
                        <P>(d) <E T="03">Disposition of certain program income received by urbancounties.</E> Program income derived from urban county program activitiesundertaken by or within the jurisdiction of a unit of general local governmentwhich thereafter terminates its participation in the urban county shall continueto be program income of the urban county. The urban county may transfer theprogram income to the unit of general local government, upon its termination ofurban county participation, provided that the unit of general local governmenthas become an entitlement grantee and agrees to use the program income in itsown CDBG entitlement program.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 56915, Nov. 9, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.505</SECTNO>
                        <SUBJECT>Use of real property.</SUBJECT>
                        <P>The standards described in this section apply to real property within therecipient's control which was acquired or improved in whole or in part usingCDBG funds in excess of $25,000. These standards shall apply from the date CDBGfunds are first spent for the property until five years after closeout of anentitlement recipient's participation in the entitlement CDBG program or, withrespect to other recipients, until five years after the closeout of the grantfrom which the assistance to the property was provided.</P>
                        <P>(a) A recipient may not change the use or planned use of any such property(including the beneficiaries of such use) from that for which the acquisition orimprovement was made unless the recipient provides affected citizens withreasonable notice of, and opportunity to comment on, any proposed change, andeither:</P>
                        <P>(1) The new use of such property qualifies as meeting one of the nationalobjectives in § 570.208 (formerly § 570.901) and is not abuilding for the general conduct of government; or</P>
                        <P>(2) The requirements in paragraph (b) of this section are met.</P>
                        <P>(b) If the recipient determines, after consultation with affected citizens,that it is appropriate to change the use of the property to a use which does notqualify under paragraph (a)(1) of this section, it may retain or dispose of theproperty for the changed use if the recipient's CDBG program is reimbursed inthe amount of the current fair market value of the property, less any portion ofthe value attributable to expenditures of non-CDBG funds for acquisition of, andimprovements to, the property.</P>
                        <P>(c) If the change of use occurs after closeout, the provisions governingincome from the disposition of the real property in § 570.504(b)(4)or (5), as applicable, shall apply to the use of funds reimbursed.</P>
                        <P>(d) Following the reimbursement of the CDBG program in accordance withparagraph (b) of this section, the property no longer will be subject to anyCDBG requirements.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.506</SECTNO>
                        <SUBJECT>Records to be maintained.</SUBJECT>
                        <P>Each recipient shall establish and maintain sufficient records to enable theSecretary to determine whether the recipient has met the requirements of thispart. At a minimum, the following records are needed:</P>
                        <P>(a) Records providing a full description of each activity assisted (or beingassisted) with CDBG funds, including its location (if the activity has ageographical locus), the amount of CDBG funds budgeted, obligated and expendedfor the activity, and the provision in subpart C under which it is eligible.</P>

                        <P>(b) Records demonstrating that each activity undertaken meets one of thecriteria set forth in § 570.208. (Where information on income byfamily size is required, the recipient may substitute evidence establishing thatthe person assisted qualifies under another program having income qualificationcriteria at least as restrictive as that used in the definitions of “lowand moderate income person” and “low and moderate incomehousehold” (as applicable) at § 570.3, such as Job TrainingPartnership Act (JTPA) and welfare programs; or the recipient may substituteevidence that the assisted person is homeless; or the recipient may substitute acopy of a verifiable certification from the assisted person that his or herfamily income does not exceed the applicable income limit established inaccordance with § 570.3; or the recipient may substitute a noticethat <PRTPAGE P="142"/>the assisted person is a referral from a state, county or local employmentagency or other entity that agrees to refer individuals it determines to be lowand moderate income persons based on HUD's criteria and agrees to maintaindocumentation supporting these determinations.) Such records shall include thefollowing information:</P>
                        <P>(1) For each activity determined to benefit low and moderate income persons,the income limits applied and the point in time when the benefit was determined.</P>
                        <P>(2) For each activity determined to benefit low and moderate income personsbased on the area served by the activity:</P>
                        <P>(i) The boundaries of the service area;</P>
                        <P>(ii) The income characteristics of families and unrelated individuals in theservice area; and</P>
                        <P>(iii) If the percent of low and moderate income persons in the service areais less than 51 percent, data showing that the area qualifies under theexception criteria set forth at § 570.208(a)(1)(ii).</P>
                        <P>(3) For each activity determined to benefit low and moderate income personsbecause the activity involves a facility or service designed for use by alimited clientele consisting exclusively or predominantly of low and moderateincome persons:</P>
                        <P>(i) Documentation establishing that the facility or service is designed forthe particular needs of or used exclusively by senior citizens, adults meetingthe Bureau of the Census' Current Population Reports definition of“severely disabled,” persons living with AIDS, battered spouses,abused children, the homeless, illiterate adults, or migrant farm workers, forwhich the regulations provide a presumption concerning the extent to which low-and moderate-income persons benefit; or</P>
                        <P>(ii) Documentation describing how the nature and, if applicable, the locationof the facility or service establishes that it is used predominantly by low andmoderate income persons; or</P>
                        <P>(iii) Data showing the size and annual income of the family of each personreceiving the benefit.</P>
                        <P>(4) For each activity carried out for the purpose of providing or improvinghousing which is determined to benefit low and moderate income persons:</P>
                        <P>(i) A copy of a written agreement with each landlord or developer receivingCDBG assistance indicating the total number of dwelling units in eachmultifamily structure assisted and the number of those units which will beoccupied by low and moderate income households after assistance;</P>
                        <P>(ii) The total cost of the activity, including both CDBG and non-CDBG funds.</P>
                        <P>(iii) For each unit occupied by a low and moderate income household, the sizeand income of the household;</P>
                        <P>(iv) For rental housing only:</P>
                        <P>(A) The rent charged (or to be charged) after assistance for each dwellingunit in each structure assisted; and</P>
                        <P>(B) Such information as necessary to show the affordability of units occupied(or to be occupied) by low and moderate income households pursuant to criteriaestablished and made public by the recipient;</P>
                        <P>(v) For each property acquired on which there are no structures, evidence ofcommitments ensuring that the criteria in § 570.208(a)(3) will be metwhen the structures are built;</P>
                        <P>(vi) Where applicable, records demonstrating that the activity qualifiesunder the special conditions at § 570.208(a)(3)(i);</P>
                        <P>(vii) For any homebuyer assistance activity qualifying under§ 570.201(e), 570.201(n), or 570.204, identification of theapplicable eligibility paragraph and evidence that the activity meets theeligibility criteria for that provision; for any such activity qualifying under§ 570.208(a), the size and income of each homebuyer's household; and</P>
                        <P>(viii) For a § 570.201(k) housing services activity,identification of the HOME project(s) or assistance that the housing servicesactivity supports, and evidence that project(s) or assistance meet the HOMEprogram income targeting requirements at 24 CFR 92.252 or 92.254.</P>

                        <P>(5) For each activity determined to benefit low and moderate income personsbased on the creation of jobs, the recipient shall provide the documentationdescribed in either paragraph (b)(5)(i) or (ii) of this section.<PRTPAGE P="143"/>
                        </P>
                        <P>(i) Where the recipient chooses to document that at least 51 percent of thejobs will be available to low and moderate income persons, documentation foreach assisted business shall include:</P>
                        <P>(A) A copy of a written agreement containing:</P>
                        <P>(<E T="03">1</E>) A commitment by the business that it will make at least 51percent of the jobs available to low and moderate income persons and willprovide training for any of those jobs requiring special skills or education;</P>
                        <P>(<E T="03">2</E>) A listing by job title of the permanent jobs to be createdindicating which jobs will be available to low and moderate income persons,which jobs require special skills or education, and which jobs are part-time, ifany; and</P>
                        <P>(<E T="03">3</E>) A description of actions to be taken by the recipient andbusiness to ensure that low and moderate income persons receive firstconsideration for those jobs; and</P>
                        <P>(B) A listing by job title of the permanent jobs filled, and which jobs ofthose were available to low and moderate income persons, and a description ofhow first consideration was given to such persons for those jobs. Thedescription shall include what hiring process was used; which low and moderateincome persons were interviewed for a particular job; and which low and moderateincome persons were hired.</P>
                        <P>(ii) Where the recipient chooses to document that at least 51 percent of thejobs will be held by low and moderate income persons, documentation for eachassisted business shall include:</P>
                        <P>(A) A copy of a written agreement containing:</P>
                        <P>(<E T="03">1</E>) A commitment by the business that at least 51 percent ofthe jobs, on a full-time equivalent basis, will be held by low and moderateincome persons; and</P>
                        <P>(<E T="03">2</E>) A listing by job title of the permanent jobs to be created,identifying which are part-time, if any;</P>
                        <P>(B) A listing by job title of the permanent jobs filled and which jobs wereinitially held by low and moderate income persons; and</P>
                        <P>(C) For each such low and moderate income person hired, the size and annualincome of the person's family prior to the person being hired for the job.</P>
                        <P>(6) For each activity determined to benefit low and moderate income personsbased on the retention of jobs:</P>
                        <P>(i) Evidence that in the absence of CDBG assistance jobs would be lost;</P>
                        <P>(ii) For each business assisted, a listing by job title of permanent jobsretained, indicating which of those jobs are part-time and (where it is known)which are held by low and moderate income persons at the time the CDBGassistance is provided. Where applicable, identification of any of the retainedjobs (other than those known to be held by low and moderate income persons)which are projected to become available to low and moderate income personsthrough job turnover within two years of the time CDBG assistance is provided.Information upon which the job turnover projections were based shall also beincluded in the record;</P>
                        <P>(iii) For each retained job claimed to be held by a low and moderate incomeperson, information on the size and annual income of the person's family;</P>
                        <P>(iv) For jobs claimed to be available to low and moderate income personsbased on job turnover, a description covering the items required for“available to” jobs in paragraph (b)(5) of this section; and</P>
                        <P>(v) Where jobs were claimed to be available to low and moderate incomepersons through turnover, a listing of each job which has turned over to date,indicating which of those jobs were either taken by, or available to, low andmoderate income persons. For jobs made available, a description of how firstconsideration was given to such persons for those jobs shall also be included inthe record.</P>

                        <P>(7) For purposes of documenting, pursuant to paragraph (b)(5)(i)(B),(b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(v) of this section, that the person forwhom a job was either filled by or made available to a low- or moderate-incomeperson based upon the census tract where the person resides or in which thebusiness is located, the recipient, in lieu of maintaining records showing theperson's family size and income, may substitute records showing either theperson's address at the time the determination of income status was made or <PRTPAGE P="144"/>theaddress of the business providing the job, as applicable, the census tract inwhich that address was located, the percent of persons residing in that tractwho either are in poverty or who are low- and moderate-income, as applicable,the data source used for determining the percentage, and a description of thepervasive poverty and general distress in the census tract in sufficient detailto demonstrate how the census tract met the criteria in§ 570.208(a)(4)(v), as applicable.</P>
                        <P>(8) For each activity determined to aid in the prevention or elimination ofslums or blight based on addressing one or more of the conditions whichqualified an area as a slum or blighted area:</P>
                        <P>(i) The boundaries of the area; and</P>
                        <P>(ii) A description of the conditions which qualified the area at the time ofits designation in sufficient detail to demonstrate how the area met thecriteria in § 570.208(b)(1).</P>
                        <P>(9) For each residential rehabilitation activity determined to aid in theprevention or elimination of slums or blight in a slum or blighted area:</P>
                        <P>(i) The local definition of “substandard”;</P>
                        <P>(ii) A pre-rehabilitation inspection report describing the deficiencies ineach structure to be rehabilitated; and</P>
                        <P>(iii) Details and scope of CDBG assisted rehabilitation, by structure.</P>
                        <P>(10) For each activity determined to aid in the prevention or elimination ofslums or blight based on the elimination of specific conditions of blight orphysical decay not located in a slum or blighted area:</P>
                        <P>(i) A description of the specific condition of blight or physical decaytreated; and</P>
                        <P>(ii) For rehabilitation carried out under this category, a description of thespecific conditions detrimental to public health and safety which wereidentified and the details and scope of the CDBG assisted rehabilitation bystructure.</P>
                        <P>(11) For each activity determined to aid in the prevention or elimination ofslums or blight based on addressing slums or blight in an urban renewal area, acopy of the Urban Renewal Plan, as in effect at the time the activity is carriedout, including maps and supporting documentation.</P>
                        <P>(12) For each activity determined to meet a community development need havinga particular urgency:</P>
                        <P>(i) Documentation concerning the nature and degree of seriousness of thecondition requiring assistance;</P>
                        <P>(ii) Evidence that the recipient certified that the CDBG activity wasdesigned to address the urgent need;</P>
                        <P>(iii) Information on the timing of the development of the serious condition;and</P>
                        <P>(iv) Evidence confirming that other financial resources to alleviate the needwere not available.</P>
                        <P>(c) Records that demonstrate that the recipient has made the determinationsrequired as a condition of eligibility of certain activities, as prescribed in§§ 570.201(f), 570.201(i)(2), 570.201(p), 570.201(q),570.202(b)(3), 570.206(f), 570.209, 570.210, and 570.309.</P>
                        <P>(d) Records which demonstrate compliance with § 570.505 regardingany change of use of real property acquired or improved with CDBG assistance.</P>
                        <P>(e) Records that demonstrate compliance with the citizen participationrequirements prescribed in 24 CFR part 91, subpart B, for entitlementrecipients, or in 24 CFR part 91, subpart C, for HUD-administered small citiesrecipients.</P>
                        <P>(f) Records which demonstrate compliance with the requirements in§ 570.606 regarding acquisition, displacement, relocation, andreplacement housing.</P>
                        <P>(g) Fair housing and equal opportunity records containing:</P>
                        <P>(1) Documentation of the analysis of impediments and the actions therecipient has carried out with its housing and community development and otherresources to remedy or ameliorate any impediments to fair housing choice in therecipient's community.</P>

                        <P>(2) Data on the extent to which each racial and ethnic group and single-headed households (by gender of household head) have applied for, participatedin, or benefited from, any program or activity funded in whole or in part withCDBG funds. Such information shall be used only as a basis for furtherinvestigation as to compliance with nondiscrimination requirements. No recipientis required to attain or maintain any particular statistical <PRTPAGE P="145"/>measure by race,ethnicity, or gender in covered programs.</P>
                        <P>(3) Data on employment in each of the recipient's operating units funded inwhole or in part with CDBG funds, with such data maintained in the categoriesprescribed on the Equal Employment Opportunity Commission's EEO-4 form;and documentation of any actions undertaken to assure equal employmentopportunities to all persons regardless of race, color, national origin, sex orhandicap in operating units funded in whole or in part under this part.</P>
                        <P>(4) Data indicating the race and ethnicity of households (and gender ofsingle heads of households) displaced as a result of CDBG funded activities,together with the address and census tract of the housing units to which eachdisplaced household relocated. Such information shall be used only as a basisfor further investigation as to compliance with nondiscrimination requirements.No recipient is required to attain or maintain any particular statisticalmeasure by race, ethnicity, or gender in covered programs.</P>
                        <P>(5) Documentation of actions undertaken to meet the requirements of§ 570.607(b) which implements section 3 of the Housing DevelopmentAct of 1968, as amended (12 U.S.C. 1701U) relative to the hiring and training oflow and moderate income persons and the use of local businesses.</P>
                        <P>(6) Data indicating the racial/ethnic character of each business entityreceiving a contract or subcontract of $25,000 or more paid, or to be paid, withCDBG funds, data indicating which of those entities are women's businessenterprises as defined in Executive Order 12138, the amount of the contract orsubcontract, and documentation of recipient's affirmative steps to assure thatminority business and women's business enterprises have an equal opportunity toobtain or compete for contracts and subcontracts as sources of supplies,equipment, construction and services. Such affirmative steps may include, butare not limited to, technical assistance open to all businesses but designed toenhance opportunities for these enterprises and special outreach efforts toinform them of contract opportunities. Such steps shall not include preferringany business in the award of any contract or subcontract solely or in part onthe basis of race or gender.</P>
                        <P>(7) Documentation of the affirmative action measures the recipient has takento overcome prior discrimination, where the courts or HUD have found that therecipient has previously discriminated against persons on the ground of race,color, national origin or sex in administering a program or activity funded inwhole or in part with CDBG funds.</P>
                        <P>(h) Financial records, in accordance with the applicable requirements listedin § 570.502, including source documentation for entities not subjectto parts 84 and 85 of this title. Grantees shall maintain evidence to supporthow the CDBG funds provided to such entities are expended. Such documentationmust include, to the extent applicable, invoices, schedules containingcomparisons of budgeted amounts and actual expenditures, construction progressschedules signed by appropriate parties (e.g., general contractor and/or aproject architect), and/or other documentation appropriate to the nature of theactivity.</P>
                        <P>(i) Agreements and other records related to lump sum disbursements to privatefinancial institutions for financing rehabilitation as prescribed in§ 570.513; and</P>
                        <P>(j) Records required to be maintained in accordance with other applicablelaws and regulations set forth in subpart K of this part.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control number2506-0077)</APPRO>
                        <CITA>[53 FR 34454, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 60FR 1916, 1953, Jan. 5, 1995; 60 FR 56915, Nov. 9, 1995; 61 FR 18674, Apr. 29,1996; 64 FR 38813, July 19, 1999; 70 FR 76370, Dec. 23, 2005]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.507</SECTNO>
                        <SUBJECT>Reports.</SUBJECT>
                        <P>(a) <E T="03">Performance and evaluation report</E>—(1) <E T="03">Entitlement grant recipients and HUD-administered small cities recipientsin Hawaii.</E> The annual performance and evaluation report shall be submittedin accordance with 24 CFR part 91.</P>
                        <P>(2) <E T="03">HUD-administered Small Cities recipients in New York, andHawaii recipients for pre-FY 1995 grants</E>—(i) <E T="03">Content.</E>
                          <PRTPAGE P="146"/>Each performance and evaluation report must contain completed copies of allforms and narratives prescribed by HUD, including a summary of the citizencomments received on the report.</P>
                        <P>(ii) <E T="03">Timing.</E> The performance and evaluation report on eachgrant shall be submitted:</P>
                        <P>(A) No later than October 31 for all grants executed before April 1 of thesame calendar year. The first report should cover the period from the executionof the grant until September 30. Reports on grants made after March 31 of acalendar year will be due October 31 of the following calendar year, and thereports will cover the period of time from the execution of the grant untilSeptember 30 of the calendar year following grant execution. After the initialsubmission, the performance and evaluation report will be submitted annually onOctober 31 until completion of the activities funded under the grant;</P>
                        <P>(B) Hawaii grantees will submit their small cities performance and evaluationreport for each pre-FY 1995 grant no later than 90 days after the completion oftheir most recent program year. After the initial submission, the performanceand evaluation report will be submitted annually until completion of theactivities funded under the grant; and</P>
                        <P>(C) No later than 90 days after the criteria for grant closeout, as describedin § 570.509(a), have been met.</P>
                        <P>(iii) <E T="03">Citizen comments on the report.</E> Each recipient shall makecopies of the performance and evaluation report available to its citizens insufficient time to permit the citizens to comment on the report before itssubmission to HUD. Each recipient may determine the specific manner and timesthe report will be made available to citizens consistent with the precedingsentence.</P>
                        <P>(b) <E T="03">Equal employment opportunity reports.</E> Recipients ofentitlement grants or HUD-administered small cities grants shall submit to HUDeach year a report (HUD/EEO-4) on recipient employment containing data asof June 30.</P>
                        <P>(c) <E T="03">Minority business enterprise reports.</E> Recipients ofentitlement grants, HUD-administered small cities grants or Urban DevelopmentAction Grants shall submit to HUD, by April 30, a report on contracts andsubcontract activity during the first half of the fiscal year and by October 31a report on such activity during the second half of the year.</P>
                        <P>(d) <E T="03">Other reports.</E> Recipients may be required to submit suchother reports and information as HUD determines are necessary to carry out itsresponsibilities under the Act or other applicable laws.</P>
                        <APPRO>(Approved by the Office of Management and Budget under control numbers2506-0077 for paragraph (a) and 2529-0008 for paragraph (b) and2506-0066 for paragraph (c))</APPRO>
                        <CITA>[53 FR 34456, Sept. 6, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 61 FR32269, June 21, 1996]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.508</SECTNO>
                        <SUBJECT>Public access to program records.</SUBJECT>
                        <P>Notwithstanding 24 CFR 85.42(f), recipients shall provide citizens withreasonable access to records regarding the past use of CDBG funds, consistentwith applicable State and local laws regarding privacy and obligations ofconfidentiality.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.509</SECTNO>
                        <SUBJECT>Grant closeout procedures.</SUBJECT>
                        <P>(a) <E T="03">Criteria for closeout.</E> A grant will be closed out when HUDdetermines, in consultation with the recipient, that the following criteria havebeen met:</P>
                        <P>(1) All costs to be paid with CDBG funds have been incurred, with theexception of closeout costs (e.g., audit costs) and costs resulting fromcontingent liabilities described in the closeout agreement pursuant to paragraph(c) of this section. Contingent liabilities include, but are not limited to,third-party claims against the recipient, as well as related administrativecosts.</P>
                        <P>(2) With respect to activities (such as rehabilitation of privately ownedproperties) which are financed by means of escrow accounts, loan guarantees, orsimilar mechanisms, the work to be assisted with CDBG funds (but excludingprogram income) has actually been completed.</P>

                        <P>(3) Other responsibilities of the recipient under the grant agreement andapplicable laws and regulations appear to have been carried out satisfactorily <PRTPAGE P="147"/>or there is no further Federal interest in keeping the grant agreement open forthe purpose of securing performance.</P>
                        <P>(b) <E T="03">Closeout actions.</E> (1) Within 90 days of the date it isdetermined that the criteria for closeout have been met, the recipient shallsubmit to HUD a copy of the final performance and evaluation report described in24 CFR part 91. If an acceptable report is not submitted, an audit of therecipient's grant activities may be conducted by HUD.</P>
                        <P>(2) Based on the information provided in the performance report and otherrelevant information, HUD, in consultation with the recipient, will prepare acloseout agreement in accordance with paragraph (c) of this section.</P>
                        <P>(3) HUD will cancel any unused portion of the awarded grant, as shown in thesigned grant closeout agreement. Any unused grant funds disbursed from the U.S.Treasury which are in the possession of the recipient shall be refunded to HUD.</P>
                        <P>(4) Any costs paid with CDBG funds which were not audited previously shall besubject to coverage in the recipient's next single audit performed in accordancewith 24 CFR part 44. The recipient may be required to repay HUD any disallowedcosts based on the results of the audit, or on additional HUD reviews providedfor in the closeout agreement.</P>
                        <P>(c) <E T="03">Closeout agreement.</E> Any obligations remaining as of thedate of the closeout shall be covered by the terms of a closeout agreement. Theagreement shall be prepared by the HUD field office in consultation with therecipient. The agreement shall identify the grant being closed out, and includeprovisions with respect to the following:</P>
                        <P>(1) Identification of any closeout costs or contingent liabilities subject topayment with CDBG funds after the closeout agreement is signed;</P>
                        <P>(2) Identification of any unused grant funds to be canceled by HUD;</P>
                        <P>(3) Identification of any program income on deposit in financial institutionsat the time the closeout agreement is signed:</P>
                        <P>(4) Description of the recipient's responsibility after closeout for:</P>
                        <P>(i) Compliance with all program requirements, certifications and assurancesin using program income on deposit at the time the closeout agreement is signedand in using any other remaining CDBG funds available for closeout costs andcontingent liabilities;</P>
                        <P>(ii) Use of real property assisted with CDBG funds in accordance with theprinciples described in § 570.505;</P>
                        <P>(iii) Compliance with requirements governing program income receivedsubsequent to grant closeout, as described in § 570.504(b)(4) and(5); and</P>
                        <P>(iv) Ensuring that flood insurance coverage for affected property owners ismaintained for the mandatory period;</P>
                        <P>(5) Other provisions appropriate to any special circumstances of the grantcloseout, in modification of or in addition to the obligations in paragraphs(c)(1) through (4) of this section. The agreement shall authorize monitoring byHUD, and shall provide that findings of noncompliance may be taken into accountby HUD, as unsatisfactory performance of the recipient, in the consideration ofany future grant award under this part.</P>
                        <P>(d) <E T="03">Status of consolidated plan after closeout.</E> Unlessotherwise provided in a closeout agreement, the Consolidated Plan will remain ineffect after closeout until the expiration of the program year covered by thelast approved consolidated plan.</P>
                        <P>(e) <E T="03">Termination of grant for convenience.</E> Grant assistanceprovided under this part may be terminated for convenience in whole or in partbefore the completion of the assisted activities, in accordance with theprovisions of 24 CFR 85.44. The recipient shall not incur new obligations forthe terminated portions after the effective date, and shall cancel as manyoutstanding obligations as possible. HUD shall allow full credit to therecipient for those portions of obligations which could not be canceled andwhich had been properly incurred by the recipient in carrying out the activitiesbefore the termination. The closeout policies contained in this section shallapply in such cases, except where the approved grant is terminated in itsentirety. Responsibility for the environmental review to <PRTPAGE P="148"/>be performed under 24CFR part 50 or 24 CFR part 58, as applicable, shall be determined as part of thecloseout process.</P>
                        <P>(f) <E T="03">Termination for cause.</E> In cases in which the Secretaryterminates the recipient's grant under the authority of subpart O of this part,or under the terms of the grant agreement, the closeout policies contained inthis section shall apply, except where the approved grant is cancelled in itsentirety. The provisions in 24 CFR 85.43(c) on the effects of termination shallalso apply. HUD shall determine whether an environmental assessment or findingof inapplicability is required, and if such review is required, HUD shallperform it in accordance with 24 CFR part 50.</P>
                        <CITA>[53 FR 8058, Mar. 11, 1988, as amended at 56 FR 56128, Oct. 31, 1991; 60FR 1916, Jan. 5, 1995; 60 FR 16379, Mar. 30, 1995]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.510</SECTNO>
                        <SUBJECT>Transferring projects from urban counties to metropolitan cities.</SUBJECT>
                        <P>Section 106(c)(3) of the Act authorizes the Secretary to transfer unobligatedgrant funds from an urban county to a new metropolitan city, provided: the citywas an included unit of general local government in the urban county immediatelybefore its qualification as a metropolitan city; the funds to be transferredwere received by the county before the qualification of the city as ametropolitan city; the funds to be transferred had been programmed by the urbancounty for use in the city before such qualification; and the city and countyagree to transfer responsibility for the administration of the funds beingtransferred from the county's letter of credit to the city's letter of credit.The following rules apply to the transfer of responsibility for an activity froman urban county to the new metropolitan city.</P>
                        <P>(a) The urban county and the metropolitan city must execute a legally bindingagreement which shall specify:</P>
                        <P>(1) The amount of funds to be transferred from the urban county's letter ofcredit to the metropolitan city's letter of credit;</P>
                        <P>(2) The activities to be carried out by the city with the funds beingtransferred;</P>
                        <P>(3) The county's responsibility for all expenditures and unliquidatedobligations associated with the activities before the time of transfer,including a statement that responsibility for all audit and monitoring findingsassociated with those expenditures and obligations shall remain with the county;</P>
                        <P>(4) The responsibility of the metropolitan city for all other audit andmonitoring findings;</P>
                        <P>(5) How program income (if any) from the activities specified shall bedivided between the metropolitan city and the urban county; and</P>
                        <P>(6) Such other provisions as may be required by HUD.</P>
                        <P>(b) Upon receipt of a request for the transfer of funds from an urban countyto a metropolitan city and a copy of the executed agreement, HUD, inconsultation with the Department of the Treasury, shall establish a date uponwhich the funds shall be transferred from the letter of credit of the urbancounty to the letter of credit of the metropolitan city, and shall take allnecessary actions to effect the requested transfer of funds.</P>
                        <P>(c) HUD shall notify the metropolitan city and urban county of any specialaudit and monitoring rules which apply to the transferred funds when the date ofthe transfer is communicated to the city and the county.</P>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.511</SECTNO>
                        <SUBJECT>Use of escrow accounts for rehabilitation of privately ownedresidential property.</SUBJECT>
                        <P>(a) <E T="03">Limitations.</E> A recipient may withdraw funds from its letterof credit for immediate deposit into an escrow account for use in funding loansand grants for the rehabilitation of privately owned residential property under§ 570.202(a)(1). The following additional limitations apply to theuse of escrow accounts for residential rehabilitation loans and grants closedafter September 7, 1990:</P>

                        <P>(1) The use of escrow accounts under this section is limited to loans andgrants for the rehabilitation of primarily residential properties containing nomore than four dwelling units (and accessory neighborhood-scale non-residentialspace within the same structure, if any, <E T="03">e.g.,</E> a store front belowa dwelling unit).<PRTPAGE P="149"/>
                        </P>
                        <P>(2) An escrow account shall not be used unless the contract between theproperty owner and the contractor selected to do the rehabilitation workspecifically provides that payment to the contractor shall be made through anescrow account maintained by the recipient, by a subrecipient as defined in§ 570.500(c), by a public agency designated under§ 570.501(a), or by an agent under a procurement contact governed bythe requirements of 24 CFR 85.36. No deposit to the escrow account shall be madeuntil after the contract has been executed between the property owner and therehabilitation contractor.</P>
                        <P>(3) All funds withdrawn under this section shall be deposited into oneinterest earning account with a financial institution. Separate bank accountsshall not be established for individual loans and grants.</P>
                        <P>(4) The amount of funds deposited into an escrow account shall be limited tothe amount expected to be disbursed within 10 working days from the date ofdeposit. If the escrow account, for whatever reason, at any time contains fundsexceeding 10 days cash needs, the grantee immediately shall transfer the excessfunds to its program account. In the program account, the excess funds shall betreated as funds erroneously drawn in accordance with the requirements of U.S.Treasury Financial Manual, paragraph 6-2075.30.</P>

                        <P>(5) Funds deposited into an escrow account shall be used only to pay theactual costs of rehabilitation incurred by the owner under the contract with aprivate contractor. Other eligible costs related to the rehabilitation loan orgrant, <E T="03">e.g.,</E> the recipient's administrative costs under§ 570.206 or rehabilitation services costs under§ 570.202(b)(9), are not permissible uses of escrowed funds. Suchother eligible rehabilitation costs shall be paid under normal CDBG paymentprocedures (<E T="03">e.g.,</E> from withdrawals of grant funds under therecipient's letter of credit with the Treasury).</P>
                        <P>(b) <E T="03">Interest.</E> Interest earned on escrow accounts established inaccordance with this section, less any service charges for the account, shall beremitted to HUD at least quarterly but not more frequently than monthly.Interest earned on escrow accounts is not required to be remitted to HUD to theextent the interest is attributable to the investment of program income.</P>
                        <P>(c) <E T="03">Remedies for noncompliance.</E> If HUD determines that arecipient has failed to use an escrow account in accordance with this section,HUD may, in addition to imposing any other sanctions provided for under thispart, require the recipient to discontinue the use of escrow accounts, in wholeor in part.</P>
                        <CITA>[55 FR 32369, Aug. 8, 1990]</CITA>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.512</SECTNO>
                        <RESERVED>[Reserved]</RESERVED>
                      </SECTION>
                      <SECTION>
                        <SECTNO>§ 570.513</SECTNO>
                        <SUBJECT>Lump sum drawdown for financing of property rehabilitation activities.</SUBJECT>
                        <P>Subject to the conditions prescribed in this section, recipients may drawfunds from the letter of credit in a lump sum to establish a rehabilitation fundin one or more private financial institutions for the purpose of financing therehabilitation of privately owned properties. The fund may be used inconjunction with various rehabilitation financing techniques, including loans,interest subsidies, loan guarantees, loan reserves, or such other uses as may beapproved by HUD consistent with the objectives of this section. The fund mayalso be used for making grants, but only for the purpose of leveraging non-CDBGfunds for the rehabilitaton of the same property.</P>
                        <P>(a) <E T="03">Limitation on drawdown of grant funds.</E> (1) The funds that arecipient deposits to a rehabilitation fund shall not exceed the grant amountthat the recipient reasonably expects will be required, together withanticipated program income from interest and loan repayments, for therehabilitation activities during the period specified in the agreement toundertake activities, based on either:</P>
                        <P>(i) Prior level of rehabilitation activity; or</P>
                        <P>(ii) Rehabilitation staffing and management capacity during the periodspecified in the agreement to undertake activities.</P>

                        <P>(2) No grant funds may be deposited under this section solely for the purposeof investment, notwithstanding that the interest or other income is to <PRTPAGE P="150"/>be usedfor the rehabilitation activities.</P>
                        <P>(3) The recipient's rehabilitation program administrative costs and theadministrative costs of the financial institution may not be funded through lumpsum drawdown. Such costs must be paid from periodic letter of credit withdrawalsin accordance with standard procedures or from program income, other thanprogram income generated by the lump sum distribution.</P>
                        <P>(b) <E T="03">Standards to be met.</E> The following standards shall apply toall lump sum drawdowns of CDBG funds for rehabilitation:</P>
                        <P>(1) <E T="03">Eligible rehabilitation activities.</E> The rehabilitation fundshall be used to finance the rehabilitation of privately owned propertieseligible under the general policies in § 570.200 and the specificprovisions of either § 570.202, including the acquisition ofproperties for rehabilitation, or § 570.203.</P>
                        <P>(2) <E T="03">Requirements for agreement.</E> The recipient shall execute awritten agreement with one or more private financial institutions for theoperation of the rehabilitation fund. The agreement shall specify theobligations and responsibilities of the parties, the terms and conditions onwhich CDBG funds are to be deposited and used or returned, the anticipated levelof rehabilitation activities by the financial institution, the rate of interestand other benefits to be provided by the financial institution in return for thelump sum deposit, and such other terms as are necessary for compliance with theprovisions of this section. Upon execution of the agreement, a copy must beprovided to the HUD field office for its record and use in monitoring. Anymodifications made during the term of the agreement must also be provided toHUD.</P>
                        <P>(3) <E T="03">Period to undertake activities.</E> The agreement must providethat the rehabilitation fund may only be used for authorized activities during aperiod of no more than two years. The lump sum deposit shall be made only afterthe agreement is fully executed.</P>
                        <P>(4) <E T="03">Time limit on use of deposited funds.</E> Use of the depositedfunds for rehabilitation financing assistance must start (e.g., first loan mustbe made, subsidized or guaranteed) within 45 days of the deposit. In addition,substantial disbursements from the fund must occur within 180 days of thereceipt of the deposit. (Where CDBG funds are used as a guarantee, the fundsthat must be substantially disbursed are the guaranteed funds.) For a recipientwith an agreement specifying two years to undertake activities, the disbursementof 25 percent of the fund (deposit plus any interest earned) within 180 dayswill be regarded as meeting this requirement. If a recipient with an agreementspecifying two years to undertake activities determines that it has hadsubstantial disbursement from the fund within the 180 days although it had notmet this 25 percent threshold, the justification for the recipient'sdetermination shall be included in the program file. Should use of depositedfunds not start within 45 days, or substantial disbursement from such fund notoccur within 180 days, the recipient may be required by HUD to return all orpart of the deposited funds to the recipient's letter of credit.</P>
                        <P>(5) <E T="03">Progam activity.</E> Recipients shall review the level ofprogram activity on a yearly basis. Where activity is substantially below thatanticipated, program funds shall be returned to the recipient's letter ofcredit.</P>
                        <P>(6) <E T="03">Termination of agreement.</E> In the case of substantialfailure by a private financial institution to comply with the terms of a lumpsum drawdown agreement, the recipient shall terminate its agreement, providewritten justification for the action, withdraw all unobligated deposited fundsfrom the private financial institution, and return the funds to the recipient'sletter of credit.</P>
                        <P>(7) <E T="03">Return of unused deposits.</E> At the end of the periodspecified in the agreement for undertaking activities, all unobligated depositedfunds shall be returned to the recipient's letter of credit unless the recipiententers into a new agreement conforming to the requirements of this section. Inaddition, the recipient shall reserve the right to withdraw any unobligateddeposited funds required by HUD in the exercise of corrective or remedialactions authorized under § 570.910(b), § 570.911,§ 570.912 or § 570.913.<PRTPAGE P="151"/>
                        </P>
                        <P>(8) <E T="03">Rehabilitation loans made with non-CDBG funds.</E> If thedeposited funds or program income derived from deposited funds are used tosubsidize or guarantee repayment of rehabilitation loans made with non-CDBGfunds, or to provide a supplemental loan or grant to the borrower of the non-CDBG funds, the rehabilitation activities are considered to be CDBG-assistedactivities subject to the requirements applicable to such activities, exceptthat repayment of non-CDBG funds shall not be treated as program income.</P>
                        <P>(9) <E T="03">Provision of consideration.</E> In consideration for the lumpsum deposit by the recipient in a private financial institution, the depositmust result in appropriate benefits in support of the recipient's localrehabilitation program. Minimum requirements for such benefits are:</P>
                        <P>(i) Grantees shall require the financial institution to pay interest on thelump sum deposit.</P>
                        <P>(A) The interest rate paid by the financial institution shall be no more thanthree points below the rate on one year Treasury obligations at constantmaturity.</P>
                        <P>(B) When an agreement sets a fixed interest rate for the entire term of theagreement, the rate should be based on the rate at the time the agreement isexcuted.</P>
                        <P>(C) The agreement may provide for an interest rate that would fluctuateperiodically during the term of the agreement, but at no time shall the rate beestablished at more than three points below the rate on one year Treasuryobligations at constant maturity.</P>
                        <P>(ii) In addition to the payment of interest, at least one of the followingbenefits must be provided by the financial institution:</P>
                        <P>(A) Leverage of the deposited funds so that the financial institution commitsprivate funds for loans in the rehabilitation program in an amount substantiallyin excess of the amount of the lump sum deposit;</P>
                        <P>(B) Commitment of private funds by the financial institution forrehabilitation loans at below market interest rates, at higher than normal risk,or with longer than normal repayment periods; or</P>
                        <P>(C) Provision of administrative services in support of the rehabilitationprogram by the participating financial institution at no cost or at lower thanactual cost.</P>
                        <P>(c) <E T="03">Program income.</E> Interest earned on lump sum deposits andpayments on loans made from such deposits are program income and, during theperiod of the agreement, shall be used for rehabilitation activities under theprovisions of this section.</P>
                        <P>(d) <E T="03">Outstanding findings.</E> Notwithstanding any other provisionof this section, no recipient shall enter into a new agreement during any periodof time in which an audit or monitoring finding on a previous lump sum drawdownagreement remains unresolved.</P>
                        <P>(e) <E T="03">Prior notification.</E> The recipient shall provide the HUDfield office with written notification of the amount of funds to be distributedto a private financial institution before distribution under the provisions ofthis section.</P>
                        <P>(f) <E T="03">Recordkeeping requirements.</E> The recipient shall maintain inits files a copy of the written agreement and related documents establishingconformance with this section and concerning performance by a financialinstitution in accordance with the agreement.</P>
                      </SECTION>
                    </SUBPART>
                    <SUBPART>
                      <HD SOURCE="HED">Subpart K—Other Program Requirements</HD>
                      <SOURCE>
                        <HD SOURCE="HED">Source:</HD>
                        <P>53 FR 34456, Sept. 6, 1988, unless otherwise noted.</P>
                      </SOURCE>
                      <SECTION>
                        <SECTNO>§ 570.600</SECTNO>
                        <SUBJECT>General.</SUBJECT>
                        <EXT-XREF HREF="20070315" REFID="41">Link to an amendment published at 72 FR12536, Mar. 15, 2007.</EXT-XREF>

                        <P>(a) This subpart K enumerates laws that the Secretary will treat asapplicable to grants made under section 106 of the Act, other than grants toStates made pursuant to section 106(d) of the Act, for purposes of theSecretary's determinations under section 104(e)(1) of the Act, includingstatutes expressly made applicable by the Act and certain other statutes andExecutive Orders for which the Secretary has enforcement responsibility. Thissubpart K applies to grants made under the Insular areas program in§ 570.405, with the exception of § 570.612. The absence ofmention herein of any other statute for which the Secretary does not have directenforcement responsibility is not intended to be taken as an indication <PRTPAGE P="152"/>that, inthe Secretary's opinion, such statute or Executive Order is not applicable toactivities assisted under the Act. For laws that the Secretary will treat asapplicable to grants made to States under section 106(d) of the Act for purposesof the determination required to be made by the Secretary pursuant to section104(e)(2) of the Act, see § 570.487.</P>
                        <P>(b) This subpart also sets forth certain additional program requirementswhich the Secretary has determined to be applicable to grants provided under theAct as a matter of administrative discretion.</P>
                        <P>(c) In addition to grants made pursuant to section 106(b) and 106(d)(2)(B) ofthe Act (subparts D and F, respectively), the requirements of this subpart K areapplicable to grants made pursuant to sections 107 and 119 of the Act (subpartsE and G, respectively), and to loans guaranteed pursuant to subpart M.</P>
                        <CITA>[53 FR 34456, Sept. 6, 1988, as amended at 61 FR 11477, Mar. 20, 1996]</CITA>
                        <EFFDNOTP>
                          <HD SOURCE="HED">Effective Date Note:</HD>
                          <P>At 72 FR 12536, Mar. 15, 2007,§ 570.600 was amended by revising paragraph (a), effective April 16,2007. For the convenience of the user, the revised text is set forth as follows:</P>
                          <REVTXT>
                            <SECTION>
                              <SECTNO>§ 570.600</SECTNO>
                              <SUBJECT>General.</SUBJECT>
                              <P>(a) This subpart K enumerates laws that the Secretary will treat asapplicable to grants made under section 106 of the Act, other than grants tostates made pursuant to section 106(d) of the Act, for purposes of theSecretary's determinations under section 104(e)(1) of the Act, includingstatutes expressly made applicable by the Act and certain other statutes andExecutive Orders for which the Secretary has enforcement responsibility. Thissubpart K applies to grants made under the Insular Areas Program in§ 570.405 and § 570.440 with the exception of§ 570.612. The absence of mention herein of any other statute forwhich the Secretary does not have direct enforcement responsibility is notintended to be taken as an indication that, in the Secretary's opinion, suchstatute or Executive Order is not applicable to activities assisted under theAct. For laws that the Secretary will treat as applicable to grants made tostates under section 106(d) of the Act for purposes of the determinationrequired to be made by the Secretary pursuant to section 104(e)(2) of the Act,see § 570.487.<STARS/>
                              </P>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.601</SECTNO>
                              <SUBJECT>Public Law 88-352 and Public Law 90-284; affirmativelyfurthering fair housing; Executive Order 11063.</SUBJECT>
                              <P>(a) The following requirements apply according to sections 104(b) and 107 ofthe Act:</P>

                              <P>(1) Public Law 88-352, which is title VI of the Civil Rights Act of1964 (42 U.S.C. 2000d <E T="03">et seq.</E>), and implementing regulations in 24CFR part 1.</P>
                              <P>(2) Public Law 90-284, which is the Fair Housing Act (42 U.S.C.3601-3620). In accordance with the Fair Housing Act, the Secretaryrequires that grantees administer all programs and activities related to housingand community development in a manner to affirmatively further the policies ofthe Fair Housing Act. Furthermore, in accordance with section 104(b)(2) of theAct, for each community receiving a grant under subpart D of this part, thecertification that the grantee will affirmatively further fair housing shallspecifically require the grantee to assume the responsibility of fair housingplanning by conducting an analysis to identify impediments to fair housingchoice within its jurisdiction, taking appropriate actions to overcome theeffects of any impediments identified through that analysis, and maintainingrecords reflecting the analysis and actions in this regard.</P>
                              <P>(b) Executive Order 11063, as amended by Executive Order 12259 (3 CFR,1959-1963 Comp., p. 652; 3 CFR, 1980 Comp., p. 307) (Equal Opportunity inHousing), and implementing regulations in 24 CFR part 107, also apply.</P>
                              <CITA>[61 FR 11477, Mar. 20, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.602</SECTNO>
                              <SUBJECT>Section 109 of the Act.</SUBJECT>

                              <P>Section 109 of the Act requires that no person in the United States shall onthe grounds of race, color, national origin, religion, or sex be excluded fromparticipation in, be denied the benefits of, or be subjected to discriminationunder any program or activity receiving Federal financial assistance madeavailable pursuant to the Act. Section 109 also directs that the prohibitionsagainst discrimination on the basis of age under the Age Discrimination Act andthe prohibitions against discrimination on the basis of disability under Section504 shall apply to programs or <PRTPAGE P="153"/>activities receiving Federal financial assistanceunder Title I programs. The policies and procedures necessary to ensureenforcement of section 109 are codified in 24 CFR part 6.</P>
                              <CITA>[64 FR 3802, Jan. 25, 1999]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.603</SECTNO>
                              <SUBJECT>Labor standards.</SUBJECT>

                              <P>(a) Section 110(a) of the Act contains labor standards that apply tononvolunteer labor financed in whole or in part with assistance received underthe Act. In accordance with section 110(a) of the Act, the Contract Work Hoursand Safety Standards Act (40 U.S.C. 327 <E T="03">et seq.</E>) also applies.However, these requirements apply to the rehabilitation of residential propertyonly if such property contains not less than 8 units.</P>
                              <P>(b) The regulations in 24 CFR part 70 apply to the use of volunteers.</P>
                              <CITA>[61 FR 11477, Mar. 20, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.604</SECTNO>
                              <SUBJECT>Environmental standards.</SUBJECT>
                              <P>For purposes of section 104(g) of the Act, the regulations in 24 CFR part 58specify the other provisions of law which further the purposes of the NationalEnvironmental Policy Act of 1969, and the procedures by which grantees mustfulfill their environmental responsibilities. In certain cases, grantees assumethese environmental review, decisionmaking, and action responsibilities byexecution of grant agreements with the Secretary.</P>
                              <CITA>[61 FR 11477, Mar. 20, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.605</SECTNO>
                              <SUBJECT>National Flood Insurance Program.</SUBJECT>
                              <P>Notwithstanding the date of HUD approval of the recipient's application (or,in the case of grants made under subpart D of this part or HUD-administeredsmall cities recipients in Hawaii, the date of submission of the grantee'sconsolidated plan, in accordance with 24 CFR part 91), section 202(a) of theFlood Disaster Protection Act of 1973 (42 U.S.C. 4106) and the regulations in 44CFR parts 59 through 79 apply to funds provided under this part 570.</P>
                              <CITA>[61 FR 11477, Mar. 20, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.606</SECTNO>
                              <SUBJECT>Displacement, relocation, acquisition, and replacement of housing.</SUBJECT>
                              <P>(a) <E T="03">General policy for minimizing displacement.</E> Consistent withthe other goals and objectives of this part, grantees (or States or staterecipients, as applicable) shall assure that they have taken all reasonablesteps to minimize the displacement of persons (families, individuals,businesses, nonprofit organizations, and farms) as a result of activitiesassisted under this part.</P>
                              <P>(b) <E T="03">Relocation assistance for displaced persons at URA levels.</E>(1) A displaced person shall be provided with relocation assistance at thelevels described in, and in accordance with the requirements of 49 CFR part 24,which contains the government-wide regulations implementing the UniformRelocation Assistance and Real Property Acquisition Policies Act of 1970 (URA)(42 U.S.C. 4601-4655).</P>
                              <P>(2) <E T="03">Displaced person.</E> (i) For purposes of paragraph (b) of thissection, the term “<E T="03">displaced person</E>” means any person(family, individual, business, nonprofit organization, or farm) that moves fromreal property, or moves his or her personal property from real property,permanently and involuntarily, as a direct result of rehabilitation, demolition,or acquisition for an activity assisted under this part. A permanent,involuntary move for an assisted activity includes a permanent move from realproperty that is made:</P>
                              <P>(A) After notice by the grantee (or the state recipient, if applicable) tomove permanently from the property, if the move occurs after the initialofficial submission to HUD (or the State, as applicable) for grant, loan, orloan guarantee funds under this part that are later provided or granted.</P>
                              <P>(B) After notice by the property owner to move permanently from the property,if the move occurs after the date of the submission of a request for financialassistance by the property owner (or person in control of the site) that islater approved for the requested activity.</P>

                              <P>(C) Before the date described in paragraph (b)(2)(i)(A) or (B) of thissection, if either HUD or the grantee (or State, <PRTPAGE P="154"/>as applicable) determines thatthe displacement directly resulted from acquisition, rehabilitation, ordemolition for the requested activity.</P>
                              <P>(D) After the “initiation of negotiations” if the person is thetenant-occupant of a dwelling unit and any one of the following three situationsoccurs:</P>
                              <P>(<E T="03">1</E>) The tenant has not been provided with a reasonableopportunity to lease and occupy a suitable decent, safe, and sanitary dwellingin the same building/complex upon the completion of the project, including amonthly rent that does not exceed the greater of the tenant's monthly rent andestimated average utility costs before the initiation of negotiations or 30percent of the household's average monthly gross income; or</P>
                              <P>(<E T="03">2</E>) The tenant is required to relocate temporarily for theactivity but the tenant is not offered payment for all reasonable out-of-pocketexpenses incurred in connection with the temporary relocation, including thecost of moving to and from the temporary location and any increased housingcosts, or other conditions of the temporary relocation are not reasonable; andthe tenant does not return to the building/complex; or</P>
                              <P>(<E T="03">3</E>) The tenant is required to move to another unit in thebuilding/complex, but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move.</P>

                              <P>(ii) Notwithstanding the provisions of paragraph (b)(2)(i) of this section,the term “<E T="03">displaced person</E>-” does not include:</P>
                              <P>(A) A person who is evicted for cause based upon serious or repeatedviolations of material terms of the lease or occupancy agreement. To exclude aperson on this basis, the grantee (or State or state recipient, as applicable)must determine that the eviction was not undertaken for the purpose of evadingthe obligation to provide relocation assistance under this section;</P>
                              <P>(B) A person who moves into the property after the date of the noticedescribed in paragraph (b)(2)(i)(A) or (B) of this section, but who received awritten notice of the expected displacement before occupancy.</P>
                              <P>(C) A person who is not displaced as described in 49 CFR 24.2(g)(2).</P>
                              <P>(D) A person who the grantee (or State, as applicable) determines is notdisplaced as a direct result of the acquisition, rehabilitation, or demolitionfor an assisted activity. To exclude a person on this basis, HUD must concur inthat determination.</P>
                              <P>(iii) A grantee (or State or state recipient, as applicable) may, at anytime, request HUD to determine whether a person is a displaced person under thissection.</P>
                              <P>(3) <E T="03">Initiation of negotiations.</E> For purposes of determining thetype of replacement housing assistance to be provided under paragraph (b) ofthis section, if the displacement is the direct result of privately undertakenrehabilitation, demolition, or acquisition of real property, the term “<E T="03">initiation of negotiations</E>” means the execution of the grant orloan agreement between the grantee (or State or state recipient, as applicable)and the person owning or controlling the real property.</P>
                              <P>(c) <E T="03">Residential antidisplacement and relocation assistanceplan.</E> The grantee shall comply with the requirements of 24 CFR part 42,subpart B.</P>
                              <P>(d) <E T="03">Optional relocation assistance.</E> Under section 105(a)(11) ofthe Act, the grantee may provide (or the State may permit the state recipient toprovide, as applicable) relocation payments and other relocation assistance topersons displaced by activities that are not subject to paragraph (b) or (c) ofthis section. The grantee may also provide (or the State may also permit thestate recipient to provide, as applicable) relocation assistance to personsreceiving assistance under paragraphs (b) or (c) of this section at levels inexcess of those required by these paragraphs. Unless such assistance is providedunder State or local law, the grantee (or state recipient, as applicable) shallprovide such assistance only upon the basis of a written determination that theassistance is appropriate (see, e.g., 24 CFR 570.201(i), as applicable). Thegrantee (or state recipient, as applicable) must adopt a written policyavailable to the public that describes the relocation assistance that thegrantee (or state recipient, as applicable) has elected to provide and thatprovides for equal relocation assistance within each class of displaced persons.<PRTPAGE P="155"/>
                              </P>
                              <P>(e) <E T="03">Acquisition of real property.</E> The acquisition of realproperty for an assisted activity is subject to 49 CFR part 24, subpart B.</P>
                              <P>(f) <E T="03">Appeals.</E> If a person disagrees with the determination ofthe grantee (or the state recipient, as applicable) concerning the person'seligibility for, or the amount of, a relocation payment under this section, theperson may file a written appeal of that determination with the grantee (orstate recipient, as applicable). The appeal procedures to be followed aredescribed in 49 CFR 24.10. In addition, a low- or moderate-income household thathas been displaced from a dwelling may file a written request for review of thegrantee's decision to the HUD Field Office. For purposes of the State CDBGprogram, a low- or moderate-income household may file a written request forreview of the state recipient's decision with the State.</P>
                              <P>(g) <E T="03">Responsibility of grantee or State.</E> (1) The grantee (orState, if applicable) is responsible for ensuring compliance with therequirements of this section, notwithstanding any third party's contractualobligation to the grantee to comply with the provisions of this section. Forpurposes of the State CDBG program, the State shall require state recipients tocertify that they will comply with the requirements of this section.</P>
                              <P>(2) The cost of assistance required under this section may be paid from localpublic funds, funds provided under this part, or funds available from othersources.</P>
                              <P>(3) The grantee (or State and state recipient, as applicable) must maintainrecords in sufficient detail to demonstrate compliance with the provisions ofthis section.</P>
                              <APPRO>(Approved by the Office of Management and Budget under OMB control number2506-0102)</APPRO>
                              <CITA>[61 FR 11477, Mar. 20, 1996, as amended at 61 FR 51760, Oct. 3, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.607</SECTNO>
                              <SUBJECT>Employment and contracting opportunities.</SUBJECT>
                              <P>To the extent that they are otherwise applicable, grantees shall comply with:</P>

                              <P>(a) Executive Order 11246, as amended by Executive Orders 11375, 11478, <E T="03">12086,</E> and 12107 (3 CFR 1964-1965 Comp. p. 339; 3 CFR,1966-1970 Comp., p. 684; 3 CFR, 1966-1970., p. 803; 3 CFR, 1978Comp., p. 230; 3 CFR, 1978 Comp., p. 264 (Equal Employment Opportunity), andExecutive Order 13279 (Equal Protection of the Laws for Faith-Based andCommunity Organizations), 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and theimplementing regulations at 41 CFR chapter 60; and</P>
                              <P>(b) Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C.1701u) and implementing regulations at 24 CFR part 135.</P>
                              <CITA>[68 FR 56405, Sept. 30, 2003]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.608</SECTNO>
                              <SUBJECT>Lead-based paint.</SUBJECT>
                              <P>The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846),the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.4851-4856), and implementing regulations at part 35, subparts A, B, J, K,and R of this part apply to activities under this program.</P>
                              <CITA>[64 FR 50226, Sept. 15, 1999]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.609</SECTNO>
                              <SUBJECT>Use of debarred, suspended or ineligible contractors or subrecipients.</SUBJECT>
                              <P>The requirements set forth in 24 CFR part 5 apply to this program.</P>
                              <CITA>[61 FR 5209, Feb. 9, 1996]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.610</SECTNO>
                              <SUBJECT>Uniform administrative requirements and cost principles.</SUBJECT>
                              <P>The recipient, its agencies or instrumentalities, and subrecipients shallcomply with the policies, guidelines, and requirements of 24 CFR part 85 and OMBCirculars A-87, A-110 (implemented at 24 CFR part 84), A-122,A-133 (implemented at 24 CFR part 45), andA-128 <SU>2</SU>
                                <FTREF/> (implemented at 24 CFR part 44), asapplicable, as they relate to the acceptance and use of Federal funds under thispart. The applicable sections of 24 CFR parts 84 and 85 are set forth at§ 570.502.</P>
                              <FTNT>
                                <P>
                                  <SU>2</SU> See footnote 1 at § 570.200(a)(5).</P>
                              </FTNT>
                              <CITA>[60 FR 56916, Nov. 9, 1995]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.611</SECTNO>
                              <SUBJECT>Conflict of interest.</SUBJECT>
                              <P>(a) <E T="03">Applicability.</E> (1) In the procurement of supplies,equipment, construction, and services by recipients and by subrecipients, theconflict of interest <PRTPAGE P="156"/>provisions in 24 CFR 85.36 and 24 CFR 84.42, respectively,shall apply.</P>
                              <P>(2) In all cases not governed by 24 CFR 85.36 and 84.42, the provisions ofthis section shall apply. Such cases include the acquisition and disposition ofreal property and the provision of assistance by the recipient or by itssubrecipients to individuals, businesses, and other private entities undereligible activities that authorize such assistance (e.g., rehabilitation,preservation, and other improvements of private properties or facilitiespursuant to § 570.202; or grants, loans, and other assistance tobusinesses, individuals, and other private entities pursuant to§ 570.203, 570.204, 570.455, or 570.703(i)).</P>
                              <P>(b) <E T="03">Conflicts prohibited.</E> The general rule is that no personsdescribed in paragraph (c) of this section who exercise or have exercised anyfunctions or responsibilities with respect to CDBG activities assisted underthis part, or who are in a position to participate in a decisionmaking processor gain inside information with regard to such activities, may obtain afinancial interest or benefit from a CDBG-assisted activity, or have a financialinterest in any contract, subcontract, or agreement with respect to a CDBG-assisted activity, or with respect to the proceeds of the CDBG-assistedactivity, either for themselves or those with whom they have business orimmediate family ties, during their tenure or for one year thereafter. For theUDAG program, the above restrictions shall apply to all activities that are apart of the UDAG project, and shall cover any such financial interest or benefitduring, or at any time after, such person's tenure.</P>
                              <P>(c) <E T="03">Persons covered.</E> The conflict of interest provisions ofparagraph (b) of this section apply to any person who is an employee, agent,consultant, officer, or elected official or appointed official of the recipient,or of any designated public agencies, or of subrecipients that are receivingfunds under this part.</P>
                              <P>(d) <E T="03">Exceptions.</E> Upon the written request of the recipient, HUDmay grant an exception to the provisions of paragraph (b) of this section on acase-by-case basis when it has satisfactorily met the threshold requirements of(d)(1) of this section, taking into account the cumulative effects of paragraph(d)(2) of this section.</P>
                              <P>(1) <E T="03">Threshold requirements.</E> HUD will consider an exception onlyafter the recipient has provided the following documentation:</P>
                              <P>(i) A disclosure of the nature of the conflict, accompanied by an assurancethat there has been public disclosure of the conflict and a description of howthe public disclosure was made; and</P>
                              <P>(ii) An opinion of the recipient's attorney that the interest for which theexception is sought would not violate State or local law.</P>
                              <P>(2) <E T="03">Factors to be considered for exceptions.</E> In determiningwhether to grant a requested exception after the recipient has satisfactorilymet the requirements of paragraph (d)(1) of this section, HUD shall concludethat such an exception will serve to further the purposes of the Act and theeffective and efficient administration of the recipient's program or project,taking into account the cumulative effect of the following factors, asapplicable:</P>
                              <P>(i) Whether the exception would provide a significant cost benefit or anessential degree of expertise to the program or project that would otherwise notbe available;</P>
                              <P>(ii) Whether an opportunity was provided for open competitive bidding ornegotiation;</P>
                              <P>(iii) Whether the person affected is a member of a group or class of low- ormoderate-income persons intended to be the beneficiaries of the assistedactivity, and the exception will permit such person to receive generally thesame interests or benefits as are being made available or provided to the groupor class;</P>
                              <P>(iv) Whether the affected person has withdrawn from his or her functions orresponsibilities, or the decisionmaking process with respect to the specificassisted activity in question;</P>
                              <P>(v) Whether the interest or benefit was present before the affected personwas in a position as described in paragraph (b) of this section;</P>

                              <P>(vi) Whether undue hardship will result either to the recipient or the personaffected when weighed against the public interest served by avoiding theprohibited conflict; and<PRTPAGE P="157"/>
                              </P>
                              <P>(vii) Any other relevant considerations.</P>
                              <CITA>[60 FR 56916, Nov. 9, 1995]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.612</SECTNO>
                              <SUBJECT>Executive Order 12372.</SUBJECT>
                              <P>(a) <E T="03">General.</E> Executive Order 12372, Intergovernmental Review ofFederal Programs, and the Department's implementing regulations at 24 CFR part52, allow each State to establish its own process for review and comment onproposed Federal financial assistance programs.</P>
                              <P>(b) <E T="03">Applicability.</E> Executive Order 12372 applies to the CDBGEntitlement program and the UDAG program. The Executive Order applies to allactivities proposed to be assisted under UDAG, but it applies to the Entitlementprogram only where a grantee proposes to use funds for the planning orconstruction (reconstruction or installation) of water or sewer facilities. Suchfacilities include storm sewers as well as all sanitary sewers, but do notinclude water and sewer lines connecting a structure to the lines in the publicright-of-way or easement. It is the responsibility of the grantee to initiatethe Executive Order review process if it proposes to use its CDBG or UDAG fundsfor activities subject to review.</P>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.613</SECTNO>
                              <SUBJECT>Eligibility restrictions for certain resident aliens.</SUBJECT>
                              <P>(a) <E T="03">Restriction.</E> Certain newly legalized aliens, as describedin 24 CFR part 49, are not eligible to apply for benefits under coveredactivities funded by the programs listed in paragraph (e) of this section.“Benefits” under this section means financial assistance, publicservices, jobs and access to new or rehabilitated housing and other facilitiesmade available under covered activities funded by programs listed in paragraph(e) of this section. “Benefits” do not include relocation servicesand payments to which displacees are entitled by law.</P>
                              <P>(b) <E T="03">Covered activities.</E> “Covered activities” underthis section means activities meeting the requirements of§ 570.208(a) that either:</P>
                              <P>(1) Have income eligibility requirements limiting the benefits exclusively tolow and moderate income persons; or</P>
                              <P>(2) Are targeted geographically or otherwise to primarily benefit low andmoderate income persons (excluding activities serving the public at large, suchas sewers, roads, sidewalks, and parks), and that provide benefits to persons onthe basis of an application.</P>
                              <P>(c) <E T="03">Limitation on coverage.</E> The restrictions under this sectionapply only to applicants for new benefits not being received by covered residentaliens as of the effective date of this section.</P>
                              <P>(d) <E T="03">Compliance.</E> Compliance can be accomplished by obtainingcertification as provided in 24 CFR 49.20.</P>
                              <P>(e) <E T="03">Programs affected.</E> (1) The Community Development BlockGrant program for small cities, administered under subpart F of part 570 of thistitle until closeout of the recipient's grant.</P>
                              <P>(2) The Community Development Block Grant program for entitlement grants,administered under subpart D of part 570 of this title.</P>
                              <P>(3) The Community Development Block Grant program for States, administeredunder subpart I of part 570 of this title until closeout of the unit of generallocal government's grant by the State.</P>
                              <P>(4) The Urban Development Action Grants program, administered under subpart Gof part 570 of this title until closeout of the recipient's grant.</P>
                              <CITA>[55 FR 18494, May 2, 1990]</CITA>
                            </SECTION>
                            <SECTION>
                              <SECTNO>§ 570.614</SECTNO>
                              <SUBJECT>Architectural Barriers Act and the Americans with Disabilities Act.</SUBJECT>

                              <P>(a) The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157)requires certain Federal and Federally funded buildings and other facilities tobe designed, constructed, or altered in accordance with standards that insureaccessibility to, and use by, physically handicapped people. A building orfacility designed, constructed, or altered with funds allocated or reallocatedunder this part after December 11, 1995, and that meets the definition of“residential structure” as defined in 24 CFR 40.2 or the definitionof “building” as defined in 41 CFR 101-19.602(a) is subject tothe requirements of the Architectural Barriers Act of 1968 (42 U.S.C.4151-4157) and shall comply with the Uniform Federal AccessibilityStandards (appendix A to 24 CFR part 40 for <PRTPAGE P="158"/>residential structures, and appendixA to 41 CFR part 101-19, subpart 101-19.6, for general typebuildings).</P>
                              <P>(b) The Americans with Disabilities Act (42 U.S.C. 12131; 47 U.S.C. 155, 201,218 and 225) (ADA) provides comprehensive civil rights to individuals withdisabilities in the areas of employment, public accommodations, State and localgovernment services, and telecommunications. It further provides thatdiscrimination includes a failure to design and construct facilities for firstoccupancy no later than January 26, 1993, that are readily accessible to andusable by individuals with disabilities. Further, the ADA requires the removalof architectural barriers and communication barriers that are structural innature in existing facilities, where such removal is readilyachievable—that is, easily accomplishable and able to be carried outwithout much difficulty or expense.</P>
                              <CITA>[60 FR 56917, Nov. 9, 1995]</CITA>
                            </SECTION>
                            <SUBPART>
                              <RESERVED>Subpart L [Reserved]</RESERVED>
                            </SUBPART>
                            <SUBPART>
                              <HD SOURCE="HED">Subpart M—Loan Guarantees</HD>
                              <SOURCE>
                                <HD SOURCE="HED">Source:</HD>
                                <P>59 FR 66604, Dec. 27, 1994, unless otherwise noted.</P>
                              </SOURCE>
                              <SECTION>
                                <SECTNO>§ 570.700</SECTNO>
                                <SUBJECT>Purpose.</SUBJECT>
                                <P>This subpart contains requirements governing the guarantee under section 108of the Act of debt obligations as defined in § 570.701.</P>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.701</SECTNO>
                                <SUBJECT>Definitions.</SUBJECT>
                                <P>
                                  <E T="03">Borrower</E> means the public entity or its designated publicagency that issues debt obligations under this subpart.</P>
                                <P>
                                  <E T="03">Debt obligation</E> means a promissory note or other obligationissued by a public entity or its designated public agency and guaranteed by HUDunder this subpart, or a trust certificate or other obligation offered by HUD orby a trust or other offeror approved for purposes of this subpart by HUD whichis guaranteed by HUD under this subpart and is based on and backed by a trust orpool composed of notes or other obligations issued by public entities or theirdesignated public agencies and guaranteed or eligible for guarantee by HUD underthis subpart.</P>
                                <P>
                                  <E T="03">Designated public agency</E> means a public agency designated by apublic entity to issue debt obligations as borrower under this subpart.</P>
                                <P>
                                  <E T="03">Entitlement public entity</E> means a metropolitan city or an urbancounty receiving a grant under subpart D of this part.</P>
                                <P>
                                  <E T="03">Guaranteed loan funds</E> means the proceeds payable to theborrower from the issuance of debt obligations under this subpart.</P>
                                <P>
                                  <E T="03">Nonentitlement public entity</E> means any unit of general localgovernment in a nonentitlement area.</P>
                                <P>
                                  <E T="03">Public entity</E> shall have the meaning provided for the term“<E T="03">Eligible public entity</E>” in section 108(o) of the Act.</P>
                                <P>
                                  <E T="03">State-assisted public entity</E> means a unit of general localgovernment in a nonentitlement area which is assisted by a State as required in§ 570.704(b)(9) and § 570.705(b)(2).</P>
                                <CITA>[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996]</CITA>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.702</SECTNO>
                                <SUBJECT>Eligible applicants.</SUBJECT>
                                <P>The following public entities may apply for loan guarantee assistance underthis subpart.</P>
                                <P>(a) Entitlement public entities.</P>
                                <P>(b) Nonentitlement public entities that are assisted in the submission ofapplications by States that administer the CDBG program (under subpart I of thispart). Such assistance shall consist, at a minimum, of the certificationsrequired under § 570.704(b)(9) (and actions pursuant thereto).</P>
                                <P>(c) Nonentitlement public entities eligible to apply for grant assistanceunder subpart F of this part.</P>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.703</SECTNO>
                                <SUBJECT>Eligible activities.</SUBJECT>
                                <P>Guaranteed loan funds may be used for the following activities, provided suchactivities meet the requirements of § 570.200. However, guaranteedloan funds may not be used to reimburse the CDBG program account or line ofcredit for costs incurred by the public entity or designated public agency andpaid with CDBG grant funds or program income.</P>

                                <P>(a) Acquisition of improved or unimproved real property in fee or by long-<PRTPAGE P="159"/>term lease, including acquisition for economic development purposes.</P>
                                <P>(b) Rehabilitation of real property owned or acquired by the public entity orits designated public agency.</P>
                                <P>(c) Payment of interest on obligations guaranteed under this subpart.</P>
                                <P>(d) Relocation payments and other relocation assistance for individuals,families, businesses, nonprofit organizations, and farm operations who mustrelocate permanently or temporarily as a result of an activity financed withguaranteed loan funds, where the assistance is:</P>
                                <P>(1) Required under the provisions of § 570.606(b) or (c); or</P>
                                <P>(2) Determined by the public entity to be appropriate under the provisions of§ 570.606(d).</P>
                                <P>(e) Clearance, demolition, and removal, including movement of structures toother sites and remediation of properties with known or suspected environmentalcontamination, of buildings and improvements on real property acquired orrehabilitated pursuant to paragraphs (a) and (b) of this section. Remediationmay include project-specific environmental assessment costs not otherwiseeligible under § 570.205.</P>
                                <P>(f) Site preparation, including construction, reconstruction, installation ofpublic and other site improvements, utilities or facilities (other thanbuildings), or remediation of properties (remediation can include project-specific environmental assessment costs not otherwise eligible under§ 570.205) with known or suspected environmental contamination, whichis:</P>
                                <P>(1) Related to the redevelopment or use of the real property acquired orrehabilitated pursuant to paragraphs (a) and (b) of this section, or</P>
                                <P>(2) For an economic development purpose.</P>
                                <P>(g) Payment of issuance, underwriting, servicing, trust administration andother costs associated with private sector financing of debt obligations underthis subpart.</P>
                                <P>(h) Housing rehabilitation eligible under § 570.202.</P>
                                <P>(i) The following economic development activities:</P>
                                <P>(1) Activities eligible under § 570.203; and</P>
                                <P>(2) Community economic development projects eligible under§ 570.204.</P>
                                <P>(j) Construction of housing by nonprofit organizations for homeownershipunder section 17(d) of the United States Housing Act of 1937 (HousingDevelopment Grants Program, 24 CFR part 850) or title VI of the Housing andCommunity Development Act of 1987 (Nehemiah Housing Opportunity Grants Program,24 CFR part 280).</P>
                                <P>(k) A debt service reserve to be used in accordance with requirementsspecified in the contract entered into pursuant to § 570.705(b)(1).</P>
                                <P>(l) Acquisition, construction, reconstruction, rehabilitation or historicpreservation, or installation of public facilities (except for buildings for thegeneral conduct of government) to the extent eligible under§ 570.201(c), including public streets, sidewalks, other siteimprovements and public utilities, and remediation of known or suspectedenvironmental contamination in conjunction with these activities. Remediationmay include project-specific environmental assessment costs not otherwiseeligible under § 570.205.</P>
                                <P>(m) In the case of applications by public entities which are, or whichcontain, “colonias” as defined in section 916 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 5306 note), as amended bysection 810 of the Housing and Community Development Act of 1992, acquisition,construction, reconstruction, rehabilitation or installation of public works andsite or other improvements which serve the colonia.</P>
                                <CITA>[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 71FR 30036, May 24, 2006]</CITA>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.704</SECTNO>
                                <SUBJECT>Application requirements.</SUBJECT>
                                <P>(a) <E T="03">Presubmission and citizen participation requirements.</E> (1)Before submission of an application for loan guarantee assistance to HUD, thepublic entity must:</P>
                                <P>(i) Develop a proposed application that includes the following items:</P>
                                <P>(A) The community development objectives the public entity proposes to pursuewith the guaranteed loan funds.</P>

                                <P>(B) The activities the public entity proposes to carry out with theguaranteed loan funds. Each activity must be <PRTPAGE P="160"/>described in sufficient detail,including the specific provision of § 570.703 under which it iseligible and the national objective to be met, amount of guaranteed loan fundsexpected to be used, and location, to allow citizens to determine the degree towhich they will be affected. The proposed application must indicate whichactivities are expected to generate program income. The application must alsodescribe where citizens may obtain additional information about proposedactivities.</P>
                                <P>(C) A description of the pledge of grants required under§ 570.705(b)(2). In the case of applications by State-assisted publicentities, the description shall note that pledges of grants will be made by theState and by the public entity.</P>
                                <P>(ii) Fulfill the applicable requirements in its citizen participation plandeveloped in accordance with § 570.704(a)(2).</P>
                                <P>(iii) Publish community-wide its proposed application so as to affordaffected citizens an opportunity to examine the application's contents and toprovide comments on the proposed application.</P>
                                <P>(iv) Prepare its final application. Once the public entity has held thepublic hearing and published the proposed application as required by paragraphs(a)(1)(ii) and (iii) of this section, respectively, the public entity mustconsider any such comments and views received and, if the public entity deemsappropriate, modify the proposed application. Upon completion, the public entitymust make the final application available to the public. The final applicationmust describe each activity in sufficient detail to permit a clear understandingof the nature of each activity, as well as identify the specific provision of§ 570.703 under which it is eligible, the national objective to bemet, and the amount of guaranteed loan funds to be used. The final applicationmust also indicate which activities are expected to generate program income.</P>
                                <P>(v) If an application for loan guarantee assistance is to be submitted by anentitlement or nonentitlement public entity simultaneously with the publicentity's submission for its grant, the public entity shall include and identifyin its proposed and final consolidated plan the activities to be undertaken withthe guaranteed loan funds, the national objective to be met by each of theseactivities, the amount of any program income expected to be received during theprogram year, and the amount of guaranteed loan funds to be used. The publicentity shall also include in the consolidated plan a description of the pledgeof grants, as required under § 570.705(b)(2). In such cases theproposed and final application requirements of paragraphs (a)(1)(i), (iii), and(iv) of this section will be deemed to have been met.</P>
                                <P>(2) <E T="03">Citizen participation plan.</E> The public entity must developand follow a detailed citizen participation plan and make the plan public. Theplan must be completed and available before the application is submitted to HUD.The plan may be the citizen plan required for the consolidated plan, modified toinclude guaranteed loan funds. The public entity is not required to hold aseparate public hearing for its consolidated plan and for the guaranteed loanfunds to obtain citizens' views on community development and housing needs. Theplan must set forth the public entity's policies and procedures for:</P>
                                <P>(i) Giving citizens timely notice of local meetings and reasonable and timelyaccess to local meetings, information, and records relating to the publicentity's proposed and actual use of guaranteed loan funds, including, but notlimited to:</P>
                                <P>(A) The amount of guaranteed loan funds expected to be made available for thecoming year, including program income anticipated to be generated by theactivities carried out with guaranteed loan funds;</P>
                                <P>(B) The range of activities that may be undertaken with guaranteed loanfunds;</P>
                                <P>(C) The estimated amount of guaranteed loan funds (including program incomederived therefrom) proposed to be used for activities that will benefit low andmoderate income persons;</P>

                                <P>(D) The proposed activities likely to result in displacement and the publicentity's plans, consistent with the policies developed under§ 570.606 for minimizing displacement of persons as a result of itsproposed activities.<PRTPAGE P="161"/>
                                </P>
                                <P>(ii) Providing technical assistance to groups representative of persons oflow and moderate income that request assistance in developing proposals. Thelevel and type of assistance to be provided is at the discretion of the publicentity. Such assistance need not include the provision of funds to such groups.</P>
                                <P>(iii) Holding a minimum of two public hearings, each at a different stage ofthe public entity's program, for the purpose of obtaining the views of citizensand formulating or responding to proposals and questions. Together the hearingsmust address community development and housing needs, development of proposedactivities and review of program performance. At least one of these hearingsmust be held before submission of the application to obtain the views ofcitizens on community development and housing needs. Reasonable notice of thehearing must be provided and the hearing must be held at times and locationsconvenient to potential or actual beneficiaries, with accommodation for thehandicapped. The public entity must specify in its plan how it will meet therequirement for a hearing at times and locations convenient to potential oractual beneficiaries.</P>
                                <P>(iv) Meeting the needs of non-English speaking residents in the case ofpublic hearings where a significant number of non-English speaking residents canreasonably be expected to participate.</P>
                                <P>(v) Providing affected citizens with reasonable advance notice of, andopportunity to comment on, proposed activities not previously included in anapplication and activities which are proposed to be deleted or substantiallychanged in terms of purpose, scope, location, or beneficiaries. The criteria thepublic entity will use to determine what constitutes a substantial change forthis purpose must be described in the citizen participation plan.</P>
                                <P>(vi) Responding to citizens' complaints and grievances, including theprocedures that citizens must follow when submitting complaints and grievances.The public entity's policies and procedures must provide for timely writtenanswers to written complaints and grievances within 15 working days of thereceipt of the complaint, where practicable.</P>
                                <P>(vii) Encouraging citizen participation, particularly by low and moderateincome persons who reside in slum or blighted areas, and other areas in whichguaranteed loan funds are proposed to be used.</P>
                                <P>(b) <E T="03">Submission requirements.</E> An application for loan guaranteeassistance may be submitted at any time. The application (or consolidated plan)shall be submitted to the appropriate HUD Office and shall be accompanied by thefollowing:</P>
                                <P>(1) A description of how each of the activities to be carried out with theguaranteed loan funds meets one of the criteria in § 570.208.</P>
                                <P>(2) A schedule for repayment of the loan which identifies the sources ofrepayment, together with a statement identifying the entity that will act asborrower and issue the debt obligations.</P>
                                <P>(3) A certification providing assurance that the public entity possesses thelegal authority to make the pledge of grants required under§ 570.705(b)(2).</P>
                                <P>(4) A certification providing assurance that the public entity has madeefforts to obtain financing for activities described in the application withoutthe use of the loan guarantee, the public entity will maintain documentation ofsuch efforts for the term of the loan guarantee, and the public entity cannotcomplete such financing consistent with the timely execution of the programplans without such guarantee.</P>
                                <P>(5) The drug-free workplace certification required under 24 CFR part 24(appendix C).</P>
                                <P>(6) The certification regarding debarment and suspension required under 24CFR part 24 (appendix A).</P>
                                <P>(7) The anti-lobbying statement required under 24 CFR part 87 (appendix A).</P>
                                <P>(8) Certifications by the public entity that:</P>
                                <P>(i) It possesses the legal authority to submit the application for assistanceunder this subpart and to use the guaranteed loan funds in accordance with therequirements of this subpart.</P>

                                <P>(ii) Its governing body has duly adopted or passed as an official act a <PRTPAGE P="162"/>resolution, motion or similar official action:</P>
                                <P>(A) Authorizing the person identified as the official representative of thepublic entity to submit the application and amendments thereto and allunderstandings and assurances contained therein, and directing and authorizingthe person identified as the official representative of the public entity to actin connection with the application to provide such additional information as maybe required; and</P>
                                <P>(B) Authorizing such official representative to execute such documents as maybe required in order to implement the application and issue debt obligationspursuant thereto (provided that the authorization required by this paragraph (B)may be given by the local governing body after submission of the application butprior to execution of the contract required by § 570.705(b);</P>
                                <P>(iii) Before submission of its application to HUD, the public entity has:</P>
                                <P>(A) Furnished citizens with information required by§ 570.704(a)(2)(i);</P>
                                <P>(B) Held at least one public hearing to obtain the views of citizens oncommunity development and housing needs; and</P>
                                <P>(C) Prepared its application in accordance with§ 570.704(a)(1)(iv) and made the application available to the public.</P>
                                <P>(iv) It is following a detailed citizen participation plan which meets therequirements described in § 570.704(a)(2).</P>
                                <P>(v) The public entity will affirmatively further fair housing, and theguaranteed loan funds will be administered in compliance with:</P>

                                <P>(A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d <E T="03">etseq.</E>); and</P>
                                <P>(B) The Fair Housing Act (42 U.S.C. 3601-3619).</P>
                                <P>(vi)(A) (For entitlement public entities only.) In the aggregate, at least 70percent of all CDBG funds, as defined at § 570.3, to be expendedduring the one, two, or three consecutive years specified by the public entityfor its CDBG program will be for activities which benefit low and moderateincome persons, as described in criteria at § 570.208(a).</P>
                                <P>(B) (For nonentitlement public entities eligible under subpart F of this partonly.) It will comply with primary and national objectives requirements, asapplicable under subpart F of this part.</P>
                                <P>(vii) It will comply with the requirements governing displacement,relocation, real property acquisition, and the replacement of low and moderateincome housing described in § 570.606.</P>
                                <P>(viii) It will comply with the requirements of § 570.200(c)(2)with regard to the use of special assessments to recover the capital costs ofactivities assisted with guaranteed loan funds.</P>
                                <P>(ix) (Where applicable, the public entity may also include the followingadditional certification.) It lacks sufficient resources from funds providedunder this subpart or program income to allow it to comply with the provisionsof § 570.200(c)(2), and it must therefore assess properties owned andoccupied by moderate income persons, to recover the guaranteed loan fundedportion of the capital cost without paying such assessments in their behalf fromguaranteed loan funds.</P>
                                <P>(x) It will comply with the other provisions of the Act and with otherapplicable laws.</P>
                                <P>(9) In the case of an application submitted by a State-assisted publicentity, certifications by the State that:</P>
                                <P>(i) It agrees to make the pledge of grants required under§ 570.705(b)(2).</P>
                                <P>(ii) It possesses the legal authority to make such pledge.</P>
                                <P>(iii) At least 70 percent of the aggregate use of CDBG grant funds receivedby the State, guaranteed loan funds, and program income during the one, two, orthree consecutive years specified by the State for its CDBG program will be foractivities that benefit low and moderate income persons.</P>
                                <P>(iv) It agrees to assume the responsibilities described in§ 570.710.</P>
                                <P>(c) <E T="03">HUD review and approval of applications.</E> (1) HUD willnormally accept the certifications submitted with the application. HUD may,however, consider relevant information which challenges the certifications andrequire additional information or assurances from the public entity or State aswarranted by such information.</P>

                                <P>(2) The HUD Office shall review the application for compliance withrequirements specified in this subpart <PRTPAGE P="163"/>and forward the application together withits recommendation for approval or disapproval of the requested loan guaranteeto HUD Headquarters.</P>
                                <P>(3) HUD may disapprove an application, or may approve loan guaranteeassistance for an amount less than requested, for any of the following reasons:</P>
                                <P>(i) HUD determines that the guarantee constitutes an unacceptable financialrisk. Factors that will be considered in assessing financial risk shall include,but not be limited to, the following:</P>
                                <P>(A) The length of the proposed repayment period;</P>
                                <P>(B) The ratio of expected annual debt service requirements to expected annualgrant amount;</P>
                                <P>(C) The likelihood that the public entity or State will continue to receivegrant assistance under this part during the proposed repayment period;</P>
                                <P>(D) The public entity's ability to furnish adequate security pursuant to§ 570.705(b), and</P>
                                <P>(E) The amount of program income the proposed activities are reasonablyestimated to contribute toward repayment of the guaranteed loan.</P>
                                <P>(ii) The requested loan amount exceeds any of the limitations specified under§ 570.705(a).</P>
                                <P>(iii) Funds are not available in the amount requested.</P>
                                <P>(iv) The performance of the public entity, its designated public agency orState under this part is unacceptable.</P>
                                <P>(v) Activities to be undertaken with the guaranteed loan funds are noteligible under § 570.703.</P>
                                <P>(vi) Activities to be undertaken with the guaranteed loan funds do not meetthe criteria in § 570.208 for compliance with one of the nationalobjectives of the Act.</P>
                                <P>(4) HUD will notify the public entity in writing that the loan guaranteerequest has either been approved, reduced or disapproved. If the request isreduced or disapproved, the public entity shall be informed of the specificreasons for reduction or disapproval. If the request is approved, HUD shallissue an offer of commitment to guarantee debt obligations of the borroweridentified in the application subject to compliance with this part, includingthe requirements under § 570.705(b), (d), (g) and (h) for securingand issuing debt obligations, the conditions for release of funds described inparagraph (d) of this section, and such other conditions as HUD may specify inthe commitment documents in a particular case.</P>
                                <P>(5) <E T="03">Amendments.</E> If the public entity wishes to carry out anactivity not previously described in its application or to substantially changethe purpose, scope, location, or beneficiaries of an activity, the amendmentmust be approved by HUD. Amendments by State-assisted public entities must alsobe approved by the State. The public entity shall follow the citizenparticipation requirements for amendments in § 570.704(a)(2).</P>
                                <P>(d) <E T="03">Environmental review.</E> The public entity shall comply withHUD environmental review procedures (24 CFR part 58) for the release of fundsfor each project carried out with loan guarantee assistance. These proceduresset forth the regulations, policies, responsibilities and procedures governingthe carrying out of environmental review responsibilities of public entities.All public entities, including nonentitlement public entities, shall submit therequest for release of funds and related certification for each project to beassisted with guaranteed loan funds to the appropriate HUD Field Office.</P>
                                <P>(e) <E T="03">Displacement, relocation, acquisition, and replacement ofhousing.</E> The public entity (or the designated public agency) shall complywith the displacement, relocation, acquisition, and replacement of low/moderate-income housing requirements in § 570.606 in connection with anyactivity financed in whole or in part with guaranteed loan funds.</P>
                                <CITA>[59 FR 66604, Dec. 27, 1994, as amended at 60 FR 1917, Jan. 5, 1995; 61 FR11481, Mar. 20, 1996; 69 FR 32781, June 10, 2004]</CITA>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.705</SECTNO>
                                <SUBJECT>Loan requirements.</SUBJECT>
                                <P>(a) <E T="03">Limitations on commitments.</E> (1) If loan guaranteecommitments have been issued in any fiscal year in an aggregate amount equal to50 percent of the amount approved in an appropriation act for that fiscal year,HUD may limit the amount of commitments any one public entity may receive duringsuch fiscal year as follows (except that <PRTPAGE P="164"/>HUD will not decrease commitmentsalready issued):</P>
                                <P>(i) The amount any one entitlement public entity may receive may be limitedto $35,000,000.</P>
                                <P>(ii) The amount any one nonentitlement public entity may receive may belimited to $7,000,000.</P>
                                <P>(iii) The amount any one public entity may receive may be limited to suchamount as is necessary to allow HUD to give priority to applications containingactivities to be carried out in areas designated as empowerment zones/enterprisecommunities by the Federal Government or by any State.</P>
                                <P>(2) In addition to the limitations specified in paragraph (a)(1) of thissection, the following limitations shall apply.</P>
                                <P>(i) <E T="03">Entitlement public entities.</E> No commitment to guaranteeshall be made if the total unpaid balance of debt obligations guaranteed underthis subpart (excluding any amount defeased under the contract entered intounder § 570.705(b)(1)) on behalf of the public entity would therebyexceed an amount equal to five times the amount of the most recent grant madepursuant to § 570.304 to the public entity.</P>
                                <P>(ii) <E T="03">State-assisted public entities.</E> No commitment to guaranteeshall be made if the total unpaid balance of debt obligations guaranteed underthis subpart (excluding any amount defeased under the contract entered intounder § 570.705(b)(1)) on behalf of the public entity and all otherState-assisted public entities in the State would thereby exceed an amount equalto five times the amount of the most recent grant received by such State undersubpart I.</P>
                                <P>(iii) <E T="03">Nonentitlement public entities eligible under subpart F ofthis part.</E> No commitment to guarantee shall be made with respect to anonentitlement public entity in an insular area or the State of Hawaii if thetotal unpaid balance of debt obligations guaranteed under this subpart(excluding any amount defeased under the contract entered into under§ 570.705(b)(1)) on behalf of the public entity would thereby exceedan amount equal to five times the amount of the most recent grant made pursuantto § 570.429 or § 570.440 (as applicable) to the publicentity.</P>
                                <P>(A) The most recent grant approved for the public entity pursuant to subpartF of this part,</P>
                                <P>(B) The average of the most recent three grants approved for the publicentity pursuant to subpart F of this part, excluding any grant in the samefiscal year as the commitment, or</P>
                                <P>(C) The average amount of grants made under subpart F of this part to unitsof general local government in New York State in the previous fiscal year.</P>
                                <P>(b) <E T="03">Security requirements.</E> To assure the repayment of debtobligations and the charges incurred under paragraph (g) of this section and asa condition for receiving loan guarantee assistance, the public entity (andState and designated public agency, as applicable) shall:</P>
                                <P>(1) Enter into a contract for loan guarantee assistance with HUD, in a formacceptable to HUD, including provisions for repayment of debt obligationsguaranteed hereunder;</P>
                                <P>(2) Pledge all grants made or for which the public entity or State may becomeeligible under this part; and</P>
                                <P>(3) Furnish, at the discretion of HUD, such other security as may be deemedappropriate by HUD in making such guarantees. Other security shall be requiredfor all loans with repayment periods of ten years or longer. Such other securityshall be specified in the contract entered into pursuant to§ 570.705(b)(1). Examples of other security HUD may require are:</P>
                                <P>(i) Program income as defined in § 570.500(a);</P>
                                <P>(ii) Liens on real and personal property;</P>
                                <P>(iii) Debt service reserves; and</P>
                                <P>(iv) Increments in local tax receipts generated by activities carried outwith the guaranteed loan funds.</P>
                                <P>(c) <E T="03">Use of grants for loan repayment.</E> Notwithstanding any otherprovision of this part:</P>

                                <P>(1) Community Development Block Grants allocated pursuant to section 106 ofthe Act (including program income derived therefrom) may be used for:<PRTPAGE P="165"/>
                                </P>
                                <P>(i) Paying principal and interest due (including such issuance, servicing,underwriting, or other costs as may be incurred under paragraph (g) of thissection) on the debt obligations guaranteed under this subpart;</P>
                                <P>(ii) Defeasing such debt obligations; and</P>
                                <P>(iii) Establishing debt service reserves as additional security pursuant toparagraph (b)(3) of this section.</P>
                                <P>(2) HUD may apply grants pledged pursuant to paragraph (b)(2) of this sectionto any amounts due under the debt obligations, the payment of costs incurredunder paragraph (g) of this section, or to the purchase or defeasance of suchdebt obligations, in accordance with the terms of the contract required byparagraph (b)(l) of this section.</P>
                                <P>(d) <E T="03">Debt obligations.</E> Debt obligations guaranteed under thissubpart shall be in the form and denominations prescribed by HUD. Such debtobligations may be issued and sold only under such terms and conditions as maybe prescribed by HUD. HUD may prescribe the terms and conditions of debtobligations, or of their issuance and sale, by regulation or by contractualarrangements authorized by section 108(r)(4) of the Act and paragraph (h) ofthis section. Unless specifically provided otherwise in the contract for loanguarantee assistance required under paragraph (b) of this section, debtobligations shall not constitute general obligations of any public entity orState secured by its full faith and credit.</P>
                                <P>(e) <E T="03">Taxable obligations.</E> Interest earned on debt obligationsunder this subpart shall be subject to Federal taxation as provided in section108(j) of the Act.</P>
                                <P>(f) <E T="03">Loan repayment period.</E> The term of debt obligations underthis subpart shall not exceed twenty years.</P>
                                <P>(g) <E T="03">Issuance, underwriting, servicing, and other costs.</E> Eachpublic entity or its designated public agency issuing debt obligations underthis subpart must pay the issuance, underwriting, servicing, trustadministration and other costs associated with the private sector financing ofthe debt obligations. Such costs are payable out of the guaranteed loan fundsand shall be secured under paragraph (b) of this section.</P>
                                <P>(h) <E T="03">Contracting with respect to issuance and sale of debtobligations; effect of other laws.</E> No State or local law, and no Federallaw, shall preclude or limit HUD's exercise of:</P>
                                <P>(1) The power to contract with respect to public offerings and other sales ofdebt obligations under this subpart upon such terms and conditions as HUD deemsappropriate;</P>
                                <P>(2) The right to enforce any such contract by any means deemed appropriate byHUD;</P>
                                <P>(3) Any ownership rights of HUD, as applicable, in debt obligations underthis subpart.</P>
                                <CITA>[59 FR 66604, Dec. 27, 1994, as amended at 69 FR 32782, June 10, 2004]</CITA>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.706</SECTNO>
                                <SUBJECT>Federal guarantee; subrogation.</SUBJECT>
                                <P>Section 108(f) of the Act provides for the incontestability of guarantees byHUD under subpart M of this part in the hands of a holder of such guaranteedobligations. If HUD pays a claim under a guarantee made under section 108 of theAct, HUD shall be fully subrogated for all the rights of the holder of theguaranteed debt obligation with respect to such obligation.</P>
                                <CITA>[61 FR 11481, Mar. 20, 1996]</CITA>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.707</SECTNO>
                                <SUBJECT>Applicability of rules and regulations.</SUBJECT>
                                <P>(a) <E T="03">Entitlement public entities.</E> The provisions of subparts A,C, J, K and O of this part applicable to entitlement grants shall apply equallyto guaranteed loan funds and other CDBG funds, except to the extent they arespecifically modified or augmented by the provisions of this subpart.</P>
                                <P>(b) <E T="03">State-assisted public entities.</E> The provisions of subpart Iof this part, and the requirements the State imposes on units of general localgovernment receiving Community Development Block Grants or program income to theextent applicable, shall apply equally to guaranteed loan funds and CommunityDevelopment Block Grants (including program income derived therefrom)administered by the State under the CDBG program, except to the extent they arespecifically modified or <PRTPAGE P="166"/>augmented by the provisions of this subpart.</P>
                                <P>(c) <E T="03">Nonentitlement public entities eligible under subpart F of thispart.</E> The provisions of subpart F of this part shall apply equally toguaranteed loan funds and other CDBG funds, except to the extent they arespecifically modified or augmented by the provisions of this subpart.</P>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.708</SECTNO>
                                <SUBJECT>Sanctions.</SUBJECT>
                                <P>(a) <E T="03">Non-State assisted public entities.</E> The performance reviewprocedures described in subpart O of this part apply to all public entitiesreceiving guaranteed loan funds other than State-assisted public entities.Performance deficiencies in the use of guaranteed loan funds made available tosuch public entities (or program income derived therefrom) or violations of thecontract entered into pursuant to § 570.705(b)(1) may result in theimposition of a sanction authorized pursuant to § 570.900(b)(7)against pledged CDBG grants. In addition, upon a finding by HUD that the publicentity has failed to comply substantially with any provision of the Act withrespect to either the pledged grants or the guaranteed loan funds or programincome, HUD may take action against the pledged grants as provided in§ 570.913 and/or may take action as provided in the contract for loanguarantee assistance.</P>
                                <P>(b) <E T="03">State-assisted public entities.</E> Performance deficiencies inthe use of guaranteed loan funds (or program income derived therefrom) orviolations of the contract entered into pursuant to § 570.705(b)(1)may result in an action authorized pursuant to § 570.495 or§ 570.496. In addition, upon a finding by HUD that the State orpublic entity has failed to comply substantially with any provision of the Actwith respect to the pledged CDBG nonentitlement funds, the guaranteed loanfunds, or program income, HUD may take action against the pledged funds asprovided in § 570.496 and/or may take action as provided in thecontract.</P>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.709</SECTNO>
                                <SUBJECT>Allocation of loan guarantee assistance.</SUBJECT>
                                <P>Of the amount approved in any appropriation act for guarantees under thissubpart in any fiscal year, 70 percent shall be allocated for entitlement publicentities and 30 percent shall be allocated for nonentitlement public entities.HUD need not comply with these percentage requirements in any fiscal year to theextent that there is an absence of applications approvable under this subpartfrom entitlement or nonentitlement public entities.</P>
                              </SECTION>
                              <SECTION>
                                <SECTNO>§ 570.710</SECTNO>
                                <SUBJECT>State responsibilities.</SUBJECT>
                                <P>The State is responsible for choosing public entities that it will assistunder this subpart. States are free to develop procedures and requirements fordetermining which activities will be assisted, subject to the requirements ofthis subpart. Upon approval by HUD of an application from a State-assistedpublic entity, the State will be principally responsible, subject to HUDoversight under subpart I of this part, for ensuring that the public entitycomplies with all applicable requirements governing the use of the guaranteedloan funds. Notwithstanding the State's responsibilities described in thissection, HUD may take any action necessary for ensuring compliance withrequirements affecting the security interests of HUD with respect to theguaranteed loan.</P>
                              </SECTION>
                            </SUBPART>
                            <SUBPART>
                              <HD SOURCE="HED">Subpart N—Urban Renewal Provisions</HD>
                              <SOURCE>
                                <HD SOURCE="HED">Source:</HD>
                                <P>41 FR 20524, May 18, 1976, unless otherwise noted.</P>
                              </SOURCE>
                              <SECTION>
                                <SECTNO>§ 570.800</SECTNO>
                                <SUBJECT>Urban renewal regulations.</SUBJECT>
                                <P>The regulations governing urban renewal projects and neighborhood developmentprograms in subpart N of this part, that were effective immediately before April19, 1996, will continue to govern the rights and obligations of recipients andHUD with respect to such projects and programs.</P>
                                <CITA>[61 FR 11481, Mar. 20, 1996]</CITA>
                              </SECTION>
                            </SUBPART>
                            <SUBPART>
                              <HD SOURCE="HED">Subpart O—Performance Reviews</HD>
                              <SOURCE>
                                <HD SOURCE="HED">Source:</HD>
                                <P>53 FR 34466, Sept. 6, 1988, unless otherwise noted.</P>
                              </SOURCE>
                              <SECTION>
                                <SECTNO>§ 570.900</SECTNO>
                                <SUBJECT>General.</SUBJECT>
                                <EXT-XREF HREF="20070315" REFID="42">Link to an amendment published at 72 FR12536, Mar. 15, 2007.</EXT-XREF>
                                <P>(a) <E T="03">Performance review authorities</E>—(1) <E T="03">Entitlement and HUD-administered Small <PRTPAGE P="167"/>Cities performance reviews.</E>Section 104(e)(1) of the Act requires that the Secretary shall, at least on anannual basis, make such reviews and audits as may be necessary or appropriate todetermine whether the recipient has carried out its activities, and whereapplicable, its housing assistance plan in a timely manner, whether therecipient has carried out those activities and its certifications in accordancewith the requirements and the primary objectives of the Act and with otherapplicable laws, and whether the recipient has a continuing capacity to carryout those activities in a timely manner.</P>
                                <P>(2) <E T="03">Urban Development Action Grant (UDAG) performance reviews.</E>Section 119(g) of the Act requires the Secretary, at least on an annual basis,to make such reviews and audits of recipients of Urban Development Action Grantsas necessary to determine whether the recipient's progress in carrying out theapproved activities is substantially in accordance with the recipient's approvedplans and timetables.</P>
                                <P>(b) <E T="03">Performance review procedures.</E> This paragraph describes thereview procedures the Department will use in conducting the performance reviewsrequired by sections 104(e) and 119(g) of the Act:</P>
                                <P>(1) The Department will determine the performance of each entitlement andHUD-administered small cities recipient in accordance with section 104(e)(1) ofthe Act by reviewing for compliance with the requirements described in§ 570.901 and by applying the performance criteria described in§§ 570.902 and 570.903 relative to carrying out activities and,where applicable, the housing assistance plan in a timely manner. The reviewcriteria in § 570.904 will be used to assist in determining if therecipient's program is being carried out in compliance with civil rightsrequirements.</P>
                                <P>(2) The Department will review UDAG projects and activities to determinewhether such projects and activities are being carried out substantially inaccordance with the recipient's approved plans and schedules. The Departmentwill also review to determine if the recipient has carried out its UDAG programin accordance with all other requirements of the Grant Agreement and with allapplicable requirements of this part.</P>
                                <P>(3) In conducting performance reviews, HUD will primarily rely on informationobtained from the recipient's performance report, records maintained, findingsfrom monitoring, grantee and subrecipient audits, audits and surveys conductedby the HUD Inspector General, and financial data regarding the amount of fundsremaining in the line of credit plus program income. HUD may also considerrelevant information pertaining to a recipient's performance gained from othersources, including litigation, citizen comments, and other information providedby or concerning the recipient. A recipient's failure to maintain records in theprescribed manner may result in a finding that the recipient has failed to meetthe applicable requirement to which the record pertains.</P>
                                <P>(4) If HUD determines that a recipient has not met a civil rights reviewcriterion in § 570.904, the recipient will be provided an opportunityto demonstrate that it has nonetheless met the applicable civil rightsrequirement.</P>
                                <P>(5) If HUD finds that a recipient has failed to comply with a programrequirement or has failed to meet a performance criterion in§ 570.902 or § 570.903, HUD will give the recipient anopportunity to provide additional information concerning the finding.</P>
                                <P>(6) If, after considering any additional information submitted by arecipient, HUD determines to uphold the finding, HUD may advise the recipient toundertake appropriate corrective or remedial actions as specified in§ 570.910. HUD will consider the recipient's capacity as described in§ 570.905 prior to selecting the corrective or remedial actions.</P>
                                <P>(7) If the recipient fails to undertake appropriate corrective or remedialactions which resolve the deficiency to the satisfaction of the Secretary, theSecretary may impose a sanction pursuant to § 570.911, 570,912, or570.913, as applicable.</P>
                                <CITA>[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995]</CITA>
                                <EFFDNOTP>
                                  <HD SOURCE="HED">Effective Date Note:</HD>

                                  <P>At 72 FR 12536, Mar. 15, 2007,§ 570.900 was amended by revising paragraphs (a)(1) and (b)(1),effective April <PRTPAGE P="168"/>16, 2007. For the convenience of the user, the revised text isset forth as follows:</P>
                                  <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.900</SECTNO>
                                    <SUBJECT>General.</SUBJECT>
                                    <P>(a) <E T="03">Performance review authorities</E>—(1) <E T="03">Entitlement, Insular Areas, and HUD-administered Small Cities performancereviews.</E> Section 104(e)(1) of the Act requires that the Secretary shall, atleast on an annual basis, make such reviews and audits as may be necessary orappropriate to determine whether the recipient has carried out its activities ina timely manner, whether the recipient has carried out those activities and itscertifications in accordance with the requirements and the primary objectives ofthe Act and with other applicable laws, and whether the recipient has acontinuing capacity to carry out those activities in a timely manner.<STARS/>
                                    </P>
                                    <P>(b) * * *</P>
                                    <P>(1) The Department will determine the performance of each entitlement,Insular Areas, and HUD-administered small cities recipient in accordance withsection 104(e)(1) of the Act by reviewing for compliance with the requirementsdescribed in § 570.901 and by applying the performance criteriadescribed in §§ 570.902 and 570.903 relative to carrying outactivities in a timely manner. The review criteria in § 570.904 willbe used to assist in determining if the recipient's program is being carried outin compliance with civil rights requirements.<STARS/>
                                    </P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.901</SECTNO>
                                    <SUBJECT>Review for compliance with the primary and national objectives andother program requirements.</SUBJECT>
                                    <EXT-XREF HREF="20070315" REFID="43">Link to an amendment published at 72 FR12536, Mar. 15, 2007.</EXT-XREF>
                                    <P>HUD will review each entitlement and HUD-administered small citiesrecipient's program to determine if the recipient has carried out its activitiesand certifications in compliance with:</P>
                                    <P>(a) The requirement described at § 570.200(a)(3) that, consistentwith the primary objective of the Act, not less than 70 percent of the aggregateamount of CDBG funds received by the recipient shall be used over the periodspecified in its certification for activities that benefit low and moderateincome persons;</P>
                                    <P>(b) The requirement described at § 570.200(a)(2) that each CDBGassisted activity meets the criteria for one or more of the national objectivesdescribed at § 570.208;</P>
                                    <P>(c) All other activity eligibility requirements defined in subpart C of thispart;</P>
                                    <P>(d) For entitlement grants only, the submission requirements of 24 CFR part91 and the displacement policy requirements at § 570.606;</P>
                                    <P>(e) For HUD-administered small cities grants only, the citizen participationrequirements at § 570.431, the amendment requirements at§ 570.427 (New York HUD-administered small cities) or§ 570.430(f) (Hawaii HUD-administered small cities), and thedisplacement policy requirements of § 570.606;</P>
                                    <P>(f) The grant administration requirements described in subpart J;</P>
                                    <P>(g) Other applicable laws and program requirements described in subpart K;and</P>
                                    <P>(h) Where applicable, the requirements pertaining to loan guarantees (subpartM) and urban renewal completions (subpart N).</P>
                                    <CITA>[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995; 60 FR56917, Nov. 9, 1995]</CITA>
                                    <EFFDNOTP>
                                    <HD SOURCE="HED">Effective Date Note:</HD>
                                    <P>At 72 FR 12536, Mar. 15, 2007,§ 570.901 was amended by revising the introductory paragraph,redesignating existing paragraphs (f), (g), and (h), as paragraphs (g), (h), and(i) respectively, and adding a new paragraph (f), effective April 16, 2007. Forthe convenience of the user, the added and revised text is set forth as follows:</P>
                                    <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.901</SECTNO>
                                    <SUBJECT>Review for compliance with the primary and national objectives andother program requirements.</SUBJECT>
                                    <P>HUD will review each entitlement, Insular Areas, and HUD-administered smallcities recipient's program to determine if the recipient has carried out itsactivities and certifications in compliance with:<STARS/>
                                    </P>
                                    <P>(f) For Insular Areas Program grants only, the application and amendmentrequirements at § 570.440, the citizen participation requirements at§ 570.441, the displacement policy requirements of§ 570.606, and the lead-based paint requirements of 24 CFR 35.940;<STARS/>
                                    </P>
                                    </SECTION>
                                    <SECTION>
                                    <PRTPAGE P="169"/>
                                    <SECTNO>§ 570.902</SECTNO>
                                    <SUBJECT>Review to determine if CDBG funded activities are being carried out ina timely manner.</SUBJECT>
                                    <EXT-XREF HREF="20070315" REFID="44">Link to an amendment published at 72 FR12536, Mar. 15, 2007.</EXT-XREF>
                                    <P>HUD will review the performance of each entitlement and HUD-administeredsmall cities recipient to determine whether each recipient is carrying out itsCDBG assisted activities in a timely manner.</P>
                                    <P>(a) <E T="03">Entitlement recipients.</E> (1) Before the funding of the nextannual grant and absent contrary evidence satisfactory to HUD, HUD will consideran entitlement recipient to be failing to carry out its CDBG activities in atimely manner if:</P>
                                    <P>(i) Sixty days prior to the end of the grantee's current program year, theamount of entitlement grant funds available to the recipient under grantagreements but undisbursed by the U.S. Treasury is more than 1.5 times theentitlement grant amount for its current program year; and</P>
                                    <P>(ii) The grantee fails to demonstrate to HUD's satisfaction that the lack oftimeliness has resulted from factors beyond the grantee's reasonable control.</P>
                                    <P>(2) Notwithstanding that the amount of funds in the line of credit indicatesthat the recipient is carrying out its activities in a timely manner pursuant toparagraph (a)(1) of this section, HUD may determine that the recipient is notcarrying out its activities in a timely manner if:</P>
                                    <P>(i) The amount of CDBG program income the recipient has on hand 60 days priorto the end of its current program year, together with the amount of funds in itsCDBG line of credit, exceeds 1.5 times the entitlement grant amount for itscurrent program year; and</P>
                                    <P>(ii) The grantee fails to demonstrate to HUD's satisfaction that the lack oftimeliness has resulted from factors beyond the grantee's reasonable control.</P>
                                    <P>(3) In determining the appropriate corrective action to take with respect toa HUD determination that a recipient is not carrying out its activities in atimely manner pursuant to paragraphs (a)(1) or (a)(2) of this section, HUD willconsider the likelihood that the recipient will expend a sufficient amount offunds over the next program year to reduce the amount of unexpended funds to alevel that will fall within the standard described in paragraph (a)(1) of thissection when HUD next measures the grantee's timeliness performance. For thesepurposes, HUD will take into account the extent to which funds on hand have beenobligated by the recipient and its subrecipients for specific activities at thetime the finding is made and other relevant information.</P>
                                    <P>(b) <E T="03">HUD-administered Small Cities program.</E> The Department will,absent substantial evidence to the contrary, consider that a HUD-administeredsmall cities recipient is carrying out its CDBG funded activities in a timelymanner if the schedule for carrying out its activities as contained in theapproved application, or subsequent amendment, is being substantially met.</P>
                                    <CITA>[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995]</CITA>
                                    <EFFDNOTP>
                                    <HD SOURCE="HED">Effective Date Note:</HD>
                                    <P>At 72 FR 12536, Mar. 15, 2007,§ 570.902 was amended by revising the introductory paragraph, andadding a new paragraph (c), effective April 16, 2007. For the convenience of theuser, the added and revised text is set forth as follows:</P>
                                    <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.902</SECTNO>
                                    <SUBJECT>Review to determine if CDBG-funded activities are being carried out ina timely manner.</SUBJECT>
                                    <P>HUD will review the performance of each entitlement, HUD-administered smallcities, and Insular Areas recipient to determine whether each recipient iscarrying out its CDBG-assisted activities in a timely manner.<STARS/>
                                    </P>
                                    <P>(c) <E T="03">Insular Areas recipients.</E> (1) Before the funding of thenext annual grant and absent contrary evidence satisfactory to HUD, HUD willconsider an Insular Areas recipient to be failing to carry out its CDBGactivities in a timely manner if:</P>
                                    <P>(i) Sixty days prior to the end of the grantee's current program year, theamount of Insular Area grant funds available to the recipient under grantagreements but undisbursed by the U.S. Treasury is more than 2.0 times theInsular Area's grant amount for its current program year; and</P>
                                    <P>(ii) The grantee fails to demonstrate to HUD's satisfaction that the lack oftimeliness has resulted from factors beyond the grantee's reasonable control.</P>

                                    <P>(2) Notwithstanding that the amount of funds in the line of credit indicatesthat the <PRTPAGE P="170"/>Insular Area recipient is carrying out its activities in a timelymanner pursuant to paragraph (c)(1) of this section, HUD may determine that therecipient is not carrying out its activities in a timely manner if:</P>
                                    <P>(i) The amount of CDBG program income the recipient has on hand 60 days priorto the end of its current program year, together with the amount of funds in itsCDBG line of credit, exceeds 2.0 times the Insular Area's grant amount for itscurrent program year; and</P>
                                    <P>(ii) The grantee fails to demonstrate to HUD's satisfaction that the lack oftimeliness has resulted from factors beyond the grantee's reasonable control.</P>
                                    <P>(3) In determining the appropriate corrective action to take with respect toa HUD determination that a recipient is not carrying out its activities in atimely manner pursuant to paragraphs (c)(1) or (c)(2) of this section, HUD willconsider the likelihood that the recipient will expend a sufficient amount offunds over the next program year to reduce the amount of unexpended funds to alevel that will fall within the standards described in paragraphs (c)(1) and (2)of this section when HUD next measures the grantee's timeliness performance. Forthese purposes, HUD will take into account the extent to which funds on handhave been obligated by the recipient and its sub-recipients for specificactivities at the time the finding is made and other relevant information.</P>
                                    <P>(4) If a recipient is determined to be untimely pursuant to paragraphs (c)(1)or (c)(2) of this section in one year, and the recipient is again determined tobe untimely in the following year, HUD may reduce the recipient's next grant by100 percent of the amount in excess of twice the Insular Area's most recent CDBGgrant, unless HUD determines that the untimeliness resulted from factors outsideof the grantee's reasonable control.</P>
                                    <P>(5) The first review under paragraphs (c)(1) and (c)(2) of this section willtake place 60 days prior to the conclusion of the Fiscal Year 2006 program year.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.903</SECTNO>
                                    <SUBJECT>Review to determine if the recipient is meeting its consolidated planresponsibilities.</SUBJECT>
                                    <EXT-XREF HREF="20070315" REFID="45">Link to an amendment published at 72 FR12537, Mar. 15, 2007.</EXT-XREF>
                                    <P>The consolidated plan, action plan, and amendment submission requirementsreferred to in this section are in 24 CFR part 91.</P>
                                    <P>(a) <E T="03">Review timing and purpose.</E> HUD will review the consolidatedplan performance of each entitlement and Hawaii HUD-administered small citiesgrant recipient prior to acceptance of a grant recipient's annual certificationunder 24 CFR 91.225(b)(3) to determine whether the recipient followed its HUD-approved consolidated plan for the most recently completed program year, andwhether activities assisted with CDBG funds during that period were consistentwith that consolidated plan, except that grantees are not bound by theconsolidated plan with respect to the use or distribution of CDBG funds to meetnonhousing community development needs.</P>
                                    <P>(b) <E T="03">Following a consolidated plan.</E> The recipient will beconsidered to be following its consolidated plan if it has taken all of theplanned actions described in its action plan. This includes, but is not limitedto:</P>
                                    <P>(1) Pursuing all resources that the grantee indicated it would pursue;</P>
                                    <P>(2) Providing certifications of consistency, when requested to do so byapplicants for HUD programs for which the grantee indicated that it wouldsupport application by other entities, in a fair and impartial manner; and</P>
                                    <P>(3) Not hindering implementation of the consolidated plan by action orwillful inaction.</P>
                                    <P>(c) <E T="03">Disapproval.</E> If HUD determines that a recipient has not metthe criteria outlined in paragraph (b) of this section, HUD will notify therecipient and provide the recipient up to 45 days to demonstrate to thesatisfaction of the Secretary that it has followed its consolidated plan. HUDwill consider all relevant circumstances and the recipient's actions and lack ofactions affecting the provision of assistance covered by the consolidated planwithin its jurisdiction. Failure to so demonstrate in a timely manner will because for HUD to find that the recipient has failed to meet its certification. Acomplete and specific response by the recipient shall describe:</P>
                                    <P>(1) Any factors beyond the control of the recipient that prevented it fromfollowing its consolidated plan, and any actions the recipient has taken orplans to take to alleviate such factors; and</P>
                                    <P>(2) Actions taken by the recipient, if any, beyond those described in theconsolidated plan performance report to facilitate following the consolidatedplan, including the effects of such actions.</P>
                                    <P>(d) <E T="03">New York HUD-administered Small Cities.</E> New York HUD-administered grantees shall follow the provisions of <PRTPAGE P="171"/>paragraph (b) of thissection for their abbreviated or full consolidated plan to the extent that theprovisions of paragraph (b) of this section are applicable. If the grantee doesnot comply with the requirements of paragraph (b) of this section, and does notprovide HUD with an acceptable explanation, HUD may decide, in accordance withthe requirements of the notice of fund availability, that the grantee does notmeet threshold requirements to apply for a new small cities grant.</P>
                                    <CITA>[60 FR 56918, Nov. 9, 1995]</CITA>
                                    <EFFDNOTP>
                                    <HD SOURCE="HED">Effective Date Note:</HD>
                                    <P>At 72 FR 12537, Mar. 15, 2007,§ 570.903 was amended by revising the introductory paragraph,paragraph (a), and removing paragraph (d), effective April 16, 2007. For theconvenience of the user, the revised text is set forth as follows:</P>
                                    <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.903</SECTNO>
                                    <SUBJECT>Review to determine if the recipient is meeting its consolidated planresponsibilities.</SUBJECT>
                                    <P>The consolidated plan, action plan, and amendment submission requirementsreferred to in this section are in 24 CFR part 91. For the purpose of thissection, the term consolidated plan includes an abbreviated consolidated planthat is submitted pursuant to 24 CFR 91.235.</P>
                                    <P>(a) <E T="03">Review timing and purpose.</E> HUD will review the consolidatedplan performance of each entitlement, Insular Areas, and Hawaii HUD-administeredSmall Cities grant recipient prior to acceptance of a grant recipient's annualcertification under 24 CFR 91.225(b)(3) to determine whether the recipientfollowed its HUD-approved consolidated plan for the most recently completedprogram year, and whether activities assisted with CDBG funds during that periodwere consistent with that consolidated plan, except that grantees are not boundby the consolidated plan with respect to the use or distribution of CDBG fundsto meet non-housing community development needs.<STARS/>
                                    </P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.904</SECTNO>
                                    <SUBJECT>Equal opportunity and fair housing review criteria.</SUBJECT>
                                    <P>(a) <E T="03">General.</E> (1) Where the criteria in this section are met,the Department will presume that the recipient has carried out its CDBG-fundedprogram in accordance with civil rights certifications and civil rightsrequirements of the Act relating to equal employment opportunity, equalopportunity in services, benefits and participation, and is affirmativelyfurthering fair housing unless:</P>
                                    <P>(i) There is evidence which shows, or from which it is reasonable to infer,that the recipient, motivated by considerations of race, color, religion whereapplicable, sex, national origin, age or handicap, has treated some persons lessfavorably than others, or</P>
                                    <P>(ii) There is evidence that a policy, practice, standard or method ofadministration, although neutral on its face, operates to deny or affectadversely in a significantly disparate way the provision of employment orservices, benefits or participation to persons of a particular race, color,religion where applicable, sex, national origin, age or handicap, or fairhousing to persons of a particular race, color, religion, sex, or nationalorigin, or</P>
                                    <P>(iii) Where the Secretary required a further assurance pursuant to§ 570.304 in order to accept the recipient's prior civil rightscertification, the recipient has failed to meet any such assurance.</P>
                                    <P>(2) In such instances, or where the review criteria in this section are notmet, the recipient will be afforded an opportunity to present evidence that ithas not failed to carry out the civil rights certifications and fair housingrequirements of the Act. The Secretary's determination of whether there has beencompliance with the applicable requirements will be made based on a review ofthe recipient's performance, evidence submitted by the recipient, and all otheravailable evidence. The Department may also initiate separate compliance reviewsunder title VI of the Civil Rights Act of 1964 or section 109 of the Act.</P>
                                    <P>(b) <E T="03">Review for equal opportunity.</E> Title VI of the Civil RightsAct of 1964 (42 U.S.C. 2000d <E T="03">et seq.</E>), and implementingregulations in 24 CFR part 1, together with section 109 of the Act (see§ 570.602), prohibit discrimination in any program or activity fundedin whole or in part with funds made available under this part.</P>
                                    <P>(1) <E T="03">Review for equal employment opportunity.</E> The Departmentwill presume that a recipient's hiring and employment practices have beencarried out in compliance with its equal opportunity certifications andrequirements of the Act. This presumption may be rebutted <PRTPAGE P="172"/>where, based on thetotality of circumstances, there has been a deprivation of employment,promotion, or training opportunities by a recipient to any person within themeaning of section 109. The extent to which persons of a particular race,gender, or ethnic background are represented in the workforce may in certaincircumstances be considered, together with complaints, performance reviews, andother information.</P>
                                    <P>(2) <E T="03">Review of equal opportunity in services, benefits andparticipation.</E> The Department will presume a recipient is carrying out itsprograms and activities in accordance with the civil rights certifications andrequirements of the Act. This presumption may be rebutted where, based on thetotality of circumstances, there has been a deprivation of services, benefits,or participation in any program or activity funded in whole or in part withblock grant funds by a recipient to any person within the meaning of section109. The extent to which persons of a particular race, gender, or ethnicbackground participate in a program or activity may in certain circumstances beconsidered, together with complaints, performance reviews, and otherinformation.</P>
                                    <P>(c) <E T="03">Fair housing review criteria.</E> See the requirements in theFair Housing Act (42 U.S.C. 3601-20), as well as § 570.601(a),which sets forth the grantee's responsibility to certify that it willaffirmatively further fair housing.</P>
                                    <P>(d) <E T="03">Actions to use minority and women's business firms.</E> TheDepartment will review a recipient's performance to determine if it hasadministered its activities funded with assistance under this part in a mannerto encourage use of minority and women's business enterprises described inExecutive Orders 11625, 12432 and 12138, and 24 CFR 85.36(e). In making thisreview, the Department will determine if the grantee has taken actions requiredunder § 85.36(e) of this chapter, and will review the effectivenessof those actions in accomplishing the objectives of § 85.36(e) ofthis chapter and the Executive Orders. No recipient is required by this part toattain or maintain any particular statistical level of participation in itscontracting activities by race, ethnicity, or gender of the contractor's ownersor managers.</P>
                                    <CITA>[53 FR 34466, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at 54FR 37411, Sept. 9, 1989; 60 FR 1917, Jan. 5, 1995; 61 FR 11482, Mar. 20, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.905</SECTNO>
                                    <SUBJECT>Review of continuing capacity to carry out CDBG funded activities in atimely manner.</SUBJECT>
                                    <P>If HUD determines that the recipient has not carried out its CDBG activitiesand certifications in accordance with the requirements and criteria described in§ 570.901 or 570.902, HUD will undertake a further review todetermine whether or not the recipient has the continuing capacity to carry outits activities in a timely manner. In making the determination, the Departmentwill consider the nature and extent of the recipient's performance deficiencies,types of corrective actions the recipient has undertaken and the success orlikely success of such actions.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.906</SECTNO>
                                    <SUBJECT>Review of urban counties.</SUBJECT>
                                    <P>In reviewing the performance of an urban county, HUD will hold the countyaccountable for the actions or failures to act of any of the units of generallocal government participating in the urban county. Where the Department findsthat a participating unit of government has failed to cooperate with the countyto undertake or assist in undertaking an essential community development orassisted housing activity and that such failure results, or is likely to result,in a failure of the urban county to meet any requirement of the program or otherapplicable laws, the Department may prohibit the county's use of funds madeavailable under this part for that unit of government. HUD will also considerany such failure to cooperate in its review of a future cooperation agreementbetween the county and such included unit of government described at§ 570.307(b)(2).</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§§ 570.907-570.909</SECTNO>
                                    <RESERVED>[Reserved]</RESERVED>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.910</SECTNO>
                                    <SUBJECT>Corrective and remedial actions.</SUBJECT>
                                    <EXT-XREF HREF="20070315" REFID="46">Link to an amendment published at 72 FR12537, Mar. 15, 2007.</EXT-XREF>
                                    <P>(a) <E T="03">General.</E> Consistent with the procedures described in§ 570.900(b), the Secretary may take one or more of the <PRTPAGE P="173"/>actionsdescribed in paragraph (b) of this section. Such actions shall be designed toprevent a continuation of the performance deficiency; mitigate, to the extentpossible, the adverse effects or consequences of the deficiency; and prevent arecurrence of the deficiency.</P>
                                    <P>(b) <E T="03">Actions authorized.</E> The following lists the actions thatHUD may take in response to a deficiency identified during the review of arecipient's performance:</P>
                                    <P>(1) Issue a letter of warning advising the recipient of the deficiency andputting the recipient on notice that additional action will be taken if thedeficiency is not corrected or is repeated;</P>
                                    <P>(2) Recommend, or request the recipient to submit, proposals for correctiveactions, including the correction or removal of the causes of the deficiency,through such actions as:</P>
                                    <P>(i) Preparing and following a schedule of actions for carrying out theaffected CDBG activities, consisting of schedules, timetables and milestonesnecessary to implement the affected CDBG activities;</P>
                                    <P>(ii) Establishing and following a management plan which assignsresponsibilities for carrying out the actions identified in paragraph (b)(2)(i)of this section;</P>
                                    <P>(iii) For entitlement recipients, canceling or revising affected activitieswhich are no longer feasible to implement due to the deficiency andreprogramming funds from such affected activities to other eligible activities(pursuant to the citizen participation requirements in 24 CFR part 91); or</P>
                                    <P>(iv) Other actions which will serve to prevent a continuation of thedeficiency, mitigate (to the extent possible) the adverse effects orconsequences of the deficiency, and prevent a recurrence of the deficiency;</P>
                                    <P>(3) Advise the recipient that a certification will no longer be acceptableand that additional assurances will be required;</P>
                                    <P>(4) Advise the recipient to suspend disbursement of funds for the deficientactivity;</P>
                                    <P>(5) Advise the recipient to reimburse its program account or letter of creditin any amounts improperly expended and reprogram the use of the funds inaccordance with applicable requirements;</P>
                                    <P>(6) Change the method of payment to the recipient from a letter of creditbasis to a reimbursement basis;</P>
                                    <P>(7) In the case of claims payable to HUD or the U.S. Treasury, institutecollection procedures pursuant to subpart B of 24 CFR part 17; and</P>
                                    <P>(8) In the case of an entitlement recipient, condition the use of funds froma succeeding fiscal year's allocation upon appropriate corrective action by therecipient pursuant to § 570.304(d). The failure of the recipient toundertake the actions specified in the condition may result in a reduction,pursuant to § 570.911, of the entitlement recipient's annual grant byup to the amount conditionally granted.</P>
                                    <CITA>[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995]</CITA>
                                    <EFFDNOTP>
                                    <HD SOURCE="HED">Effective Date Note:</HD>
                                    <P>At 72 FR 12537, Mar. 15, 2007,§ 570.910 was amended by revising paragraphs (b)(2)(iii) and (b)(8),effective April 16, 2007. For the convenience of the user, the revised text isset forth as follows:</P>
                                    <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.910</SECTNO>
                                    <SUBJECT>Corrective and remedial actions.</SUBJECT>
                                    <STARS/>
                                    <P>(b) * * *</P>
                                    <P>(2) * * *</P>
                                    <P>(iii) For entitlement and Insular Areas recipients, canceling or revisingaffected activities that are no longer feasible to implement due to thedeficiency and re-programming funds from such affected activities to othereligible activities (pursuant to the citizen participation requirements in 24CFR part 91); or<STARS/>
                                    </P>
                                    <P>(8) In the case of an entitlement or Insular Areas recipient, condition theuse of funds from a succeeding fiscal year's allocation upon appropriatecorrective action by the recipient. The failure of the recipient to undertakethe actions specified in the condition may result in a reduction, pursuant to§ 570.911, of the entitlement or Insular Areas recipient's annualgrant by up to the amount conditionally granted.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.911</SECTNO>
                                    <SUBJECT>Reduction, withdrawal, or adjustment of a grant or other appropriateaction.</SUBJECT>
                                    <EXT-XREF HREF="20070315" REFID="47">Link to an amendment published at 72 FR12537, Mar. 15, 2007.</EXT-XREF>
                                    <P>(a) <E T="03">Opportunity for an informal consultation.</E> Prior to areduction, withdrawal, or adjustment of a grant or <PRTPAGE P="174"/>other appropriate action,taken pursuant to paragraph (b), (c), or (d) of this section, the recipientshall be notified of such proposed action and given an opportunity within aprescribed time period for an informal consultation.</P>
                                    <P>(b) <E T="03">Entitlement grants.</E> Consistent with the proceduresdescribed in § 570.900(b), the Secretary may make a reduction in theentitlement grant amount either for the succeeding program year or, if the granthad been conditioned, up to the amount that had been conditioned. The amount ofthe reduction shall be based on the severity of the deficiency and may be forthe entire grant amount.</P>
                                    <P>(c) <E T="03">HUD-administered small cities grants.</E> Consistent with theprocedures described in § 570.900(b), the Secretary may adjust,reduce or withdraw the grant or take other actions as appropriate, except thatfunds already expended on eligible approved activities shall not be recapturedor deducted from future grants.</P>
                                    <P>(d) <E T="03">Urban Development Action Grants.</E> Consistent with theprocedures described in § 570.900(b), the Secretary may adjust,reduce or withdraw the grant or take other actions as appropriate, except thatfunds already expended on eligible approved activities shall not be recapturedor deducted from future grants made to the recipient.</P>
                                    <EFFDNOTP>
                                    <HD SOURCE="HED">Effective Date Note:</HD>
                                    <P>At 72 FR 12537, Mar. 15, 2007,§ 570.911 was amended by revising § 570.911(b), effectiveApril 16, 2007. For the convenience of the user, the revised text is set forthas follows:</P>
                                    <REVTXT>
                                    <SECTION>
                                    <SECTNO>§ 570.911</SECTNO>
                                    <SUBJECT>Reduction, withdrawal, or adjustment of a grant or other appropriateaction.</SUBJECT>
                                    <STARS/>

                                    <P>(b) <E T="03">Entitlement and Insular Areas grants.</E> Consistent with theprocedures described in § 570.900(b), the Secretary may make areduction in the entitlement or insular areas grant amount either for thesucceeding program year or, if the grant had been conditioned, up to the amountthat had been conditioned. The amount of the reduction shall be based on theseverity of the deficiency and may be for the entire grant amount.<STARS/>
                                    </P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.912</SECTNO>
                                    <SUBJECT>Nondiscrimination compliance.</SUBJECT>
                                    <P>(a) Whenever the Secretary determines that a unit of general local governmentwhich is a recipient of assistance under this part has failed to comply with§ 570.602, the Secretary shall notify the governor of such State orchief executive officer of such unit of general local government of thenoncompliance and shall request the governor or the chief executive officer tosecure compliance. If within a reasonable period of time, not to exceed sixtydays, the governor or chief executive officer fails or refuses to securecompliance, the Secretary is authorized to:</P>
                                    <P>(1) Refer the matter to the Attorney General with a recommendation that anappropriate civil action be instituted;</P>
                                    <P>(2) Exercise the powers and functions provided by title VI of the CivilRights Act of 1964 (42 U.S.C. 2000d);</P>
                                    <P>(3) Exercise the powers and functions provided for in § 570.913;or</P>
                                    <P>(4) Take such other action as may be provided by law.</P>
                                    <P>(b) When a matter is referred to the Attorney General pursuant to paragraph(a)(1) of this section, or whenever the Secretary has reason to believe that aState or a unit of general local government is engaged in a pattern or practicein violation of the provisions of § 570.602, the Attorney General maybring a civil action in any appropriate United States district court for suchrelief as may be appropriate, including injunctive relief.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 570.913</SECTNO>
                                    <SUBJECT>Other remedies for noncompliance.</SUBJECT>

                                    <P>(a) <E T="03">Action to enforce compliance.</E> When the Secretary acts toenforce the civil rights provisions of Section 109, as described in§ 570.602 and 24 CFR part 6, the procedures described in 24 CFR parts6 and 180 apply. If the Secretary finds, after reasonable notice and opportunityfor hearing, that a recipient has failed to comply substantially with any otherprovisions of this part, the provisions of this section apply. The Secretary,until he/she is satisfied that there is no longer any such failure to comply,shall:</P>

                                    <P>(1) Terminate payments to the recipient;<PRTPAGE P="175"/>
                                    </P>
                                    <P>(2) Reduce payments to the recipient by an amount equal to the amount of suchpayments which were not expended in accordance with this part; or</P>
                                    <P>(3) Limit the availability of payments to programs or activities not affectedby such failure to comply.</P>
                                    <P>
                                    <E T="03">Provided, however,</E> that the Secretary may on due notice suspendpayments at any time after the issuance of a notice of opportunity for hearingpursuant to paragraph (c)(1) of this section, pending such hearing and a finaldecision, to the extent the Secretary determines such action necessary topreclude the further expenditure of funds for activities affected by suchfailure to comply.</P>
                                    <P>(b) In lieu of, or in addition to, any action authorized by paragraph (a) ofthis section, the Secretary may, if he/she has reason to believe that arecipient has failed to comply substantially with any provision of this part;</P>
                                    <P>(1) Refer the matter to the Attorney General of the United States with arecommendation that an appropriate civil action be instituted; and</P>
                                    <P>(2) Upon such a referral, the Attorney General may bring a civil action inany United States district court having venue thereof for such relief as may beappropriate, including an action to recover the amount of the assistancefurnished under this part which was not expended in accordance with it, or formandatory or injunctive relief;</P>

                                    <P>(c) <E T="03">Proceedings.</E> When the Secretary proposes to take actionpursuant to this section, the respondent is the unit of general local governmentor State receiving assistance under this part. These procedures are to befollowed prior to imposition of a sanction described in paragraph (a) of thissection:</P>

                                    <P>(1) <E T="03">Notice of opportunity for hearing:</E> The Secretary shallnotify the respondent in writing of the proposed action and of the opportunityfor a hearing. The notice shall:</P>
                                    <P>(i) Specify, in a manner which is adequate to allow the respondent to prepareits response, allegations with respect to a failure to comply substantially witha provision of this part;</P>
                                    <P>(ii) State that the hearing procedures are governed by these rules;</P>
                                    <P>(iii) State that a hearing may be requested within 10 days from receipt ofthe notice and the name, address and telephone number of the person to whom anyrequest for hearing is to be addressed:</P>
                                    <P>(iv) Specify the action which the Secretary proposes to take and that theauthority for this action is section 111(a) of the Act;</P>
                                    <P>(v) State that if the respondent fails to request a hearing within the timespecified a decision by default will be rendered against the respondent; and</P>
                                    <P>(vi) Be sent to the respondent by certified mail, return receipt requested.</P>

                                    <P>(2) <E T="03">Initiation of hearing.</E> The respondent shall be allowed atleast 10 days from receipt of the notice within which to notify HUD of itsrequest for a hearing. If no request is received within the time specified, theSecretary may proceed to make a finding on the issue of compliance with thispart and to take the proposed action.</P>

                                    <P>(3) <E T="03">Administrative Law Judge.</E> Proceedings conducted under theserules shall be presided over by an Administrative Law Judge (ALJ), appointed asprovided by section 11 of the Administrative Procedures Act (5 U.S.C. 3105). Thecase shall be referred to the ALJ by the Secretary at the time a hearing isrequested. The ALJ shall promptly notify the parties of the time and place atwhich the hearing will be held. The ALJ shall conduct a fair and impartialhearing and take all action necessary to avoid delay in the disposition ofproceedings and to maintain order. The ALJ shall have all powers necessary tothose ends, including but not limited to the power to:</P>
                                    <P>(i) Administer oaths and affirmations;</P>
                                    <P>(ii) Issue subpoenas as authorized by law;</P>
                                    <P>(iii) Rule upon offers of proof and receive relevant evidence;</P>
                                    <P>(iv) Order or limit discovery prior to the hearing as the interests ofjustice may require;</P>
                                    <P>(v) Regulate the course of the hearing and the conduct of the parties andtheir counsel;</P>
                                    <P>(vi) Hold conferences for the settlement or simplification of the issues byconsent of the parties;</P>

                                    <P>(vii) Consider and rule upon all procedural and other motions appropriate inadjudicative proceedings; and<PRTPAGE P="176"/>
                                    </P>
                                    <P>(viii) Make and file initial determinations.</P>

                                    <P>(4) <E T="03">Ex parte communications.</E> An ex parte communication is anycommunication with an ALJ, direct or indirect, oral or written, concerning themerits or procedures of any pending proceeding which is made by a party in theabsence of any other party. Ex parte communications are prohibited except wherethe purpose and content of the communication have been disclosed in advance orsimultaneously to all parties, or the communication is a request for informationconcerning the status of the case. Any ALJ who receives an ex partecommunication which the ALJ knows or has reason to believe is unauthorized shallpromptly place the communication, or its substance, in all files and shallfurnish copies to all parties. Unauthorized ex parte communications shall not betaken into consideration in deciding any matter in issue.</P>

                                    <P>(5) <E T="03">The hearing.</E> All parties shall have the right to berepresented at the hearing by counsel. The ALJ shall conduct the proceedings inan expeditious manner while allowing the parties to present all oral and writtenevidence which tends to support their respective positions, but the ALJ shallexclude irrelevant, immaterial or unduly repetitious evidence. The Departmenthas the burden of proof in showing by a preponderance of the evidence that therespondent failed to comply substantially with a provision of this part. Eachparty shall be allowed to cross-examine adverse witnesses and to rebut andcomment upon evidence presented by the other party. Hearings shall be open tothe public. So far as the orderly conduct of the hearing permits, interestedpersons other than the parties may appear and participate in the hearing.</P>

                                    <P>(6) <E T="03">Transcripts.</E> Hearing shall be recorded and transcribed onlyby a reporter under the supervision of the ALJ. The orginal transcript shall bea part of the record and shall constitute the sole official transcript.Respondents and the public, at their own expense, may obtain copies of thetranscript.</P>

                                    <P>(7) <E T="03">The ALJ's decision.</E> At the conclusion of the hearing, theALJ shall give the parties a reasonable opportunity to submit proposed findingsand conclusions and supporting reasons therefor. Within 25 days after theconclusion of the hearing, the ALJ shall prepare a written decision whichincludes a statement of findings and conclusions, and the reasons or basistherefor, on all the material issues of fact, law or discretion presented on therecord and the appropriate sanction or denial thereof. The decision shall bebased on consideration of the whole record or those parts thereof cited by aparty and supported by and in accordance with the reliable, probative, andsubstantial evidence. A copy of the decision shall be furnished to the partiesimmediately by certified mail, return receipt requested, and shall include anotice that any requests for review by the Secretary must be made in writing tothe Secretary within 30 days of the receipt of the decision.</P>

                                    <P>(8) <E T="03">The record.</E> The transcript of testimony and exhibits,together with the decision of the ALJ and all papers and requests filed in theproceeding, constitutes the exclusive record for decision and, on payment of itsreasonable cost, shall be made available to the parties. After reaching his/herinitial decision, the ALJ shall certify to the complete record and forward therecord to the Secretary.</P>

                                    <P>(9) <E T="03">Review by the Secretary.</E> The decision by the ALJ shallconstitute the final decision of the Secretary unless, within 30 days after thereceipt of the decision, either the respondent or the Assistant Secretary forCommunity Planning and Development files an exception and request for review bythe Secretary. The excepting party must transmit simultaneously to the Secretaryand the other party the request for review and the basis of the party'sexceptions to the findings of the ALJ. The other party shall be allowed 30 daysfrom receipt of the exception to provide the Secretary and the excepting partywith a written reply. The Secretary shall then review the record of the case,including the exceptions and the reply. On the basis of such review, theSecretary shall issue a written determination, including a statement of thereasons or basis therefor, affirming, modifying or revoking the <PRTPAGE P="177"/>decision of theALJ. The Secretary's decision shall be made and transmitted to the partieswithin 80 days after the decision of the ALJ was furnished to the parties.</P>

                                    <P>(10) <E T="03">Judicial review.</E> The respondent may seek judicial reviewof the Secretary's decision pursuant to section 111(c) of the Act.</P>
                                    <CITA>[53 FR 34466, Sept. 6, 1988, as amended at 64 FR 3802, Jan. 25, 1999]</CITA>
                                    </SECTION>
                                    <APPENDIX>
                                    <EAR>Pt. 570, App. A</EAR>
                                    <HD SOURCE="HED">Appendix A to Part 570—Guidelines andObjectives for Evaluating Project Costs and Financial Requirements</HD>

                                    <P>I. <E T="03">Guidelines and Objectives for Evaluating Project Costs andFinancial Requirements.</E> HUD has developed the following guidelines that aredesigned to provide the recipient with a framework for financially underwritingand selecting CDBG-assisted economic development projects which are financiallyviable and will make the most effective use of the CDBG funds. <E T="03">The useof these underwriting guidelines as published by HUD is not mandatory.</E>However, grantees electing not to use these underwriting guidelines would beexpected to conduct basic financial underwriting prior to the provision of CDBGfinancial assistance to a for-profit business. States electing not to use theseunderwriting guidelines would be expected to ensure that the state or units ofgeneral local government conduct basic financial underwriting prior to theprovision of CDBG financial assistance to a for-profit business.</P>
                                    <P>II. Where appropriate, HUD's underwriting guidelines recognize that differentlevels of review are appropriate to take into account differences in the sizeand scope of a proposed project, and in the case of a microenterprise or othersmall business to take into account the differences in the capacity and level ofsophistication among businesses of differing sizes.</P>
                                    <P>III. Recipients are encouraged, when they develop their own programs andunderwriting criteria, to also take these factors into account. For example, arecipient administering a program providing only technical assistance to smallbusinesses might choose to apply underwriting guidelines to the technicalassistance program as a whole, rather than to each instance of assistance to abusiness. Given the nature and dollar value of such a program, a recipient mightchoose to limit its evaluation to factors such as the extent of need for thistype of assistance by the target group of businesses and the extent to whichthis type of assistance is already available.</P>
                                    <P>IV. The objectives of the underwriting guidelines are to ensure:</P>
                                    <P>(1) that project costs are reasonable;</P>
                                    <P>(2) that all sources of project financing are committed;</P>
                                    <P>(3) that to the extent practicable, CDBG funds are not substituted for non-Federal financial support;</P>
                                    <P>(4) that the project is financially feasible;</P>
                                    <P>(5) that to the extent practicable, the return on the owner's equityinvestment will not be unreasonably high; and</P>
                                    <P>(6) that to the extent practicable, CDBG funds are disbursed on a pro ratabasis with other finances provided to the project.</P>
                                    <P>
                                    <E T="03">i. Project costs are reasonable.</E> i. Reviewing costs forreasonableness is important. It will help the recipient avoid providing eithertoo much or too little CDBG assistance for the proposed project. Therefore, itis suggested that the grantee obtain a breakdown of all project costs and thateach cost element making up the project be reviewed for reasonableness. Theamount of time and resources the recipient expends evaluating the reasonablenessof a cost element should be commensurate with its cost. For example, it would beappropriate for an experienced reviewer looking at a cost element of less than$10,000 to judge the reasonableness of that cost based upon his or her knowledgeand common sense. For a cost element in excess of $10,000, it would be moreappropriate for the reviewer to compare the cost element with a third-party,fair-market price quotation for that cost element. Third-party price quotationsmay also be used by a reviewer to help determine the reasonableness of costelements below $10,000 when the reviewer evaluates projects infrequently or ifthe reviewer is less experienced in cost estimations. If a recipient does notuse third-party price quotations to verify cost elements, then the recipientwould need to conduct its own cost analysis using appropriate cost estimatingmanuals or services.</P>
                                    <P>ii. The recipient should pay particular attention to any cost element of theproject that will be carried out through a non-arms-length transaction. A non-arms-length transaction occurs when the entity implementing the CDBG assistedactivity procures goods or services from itself or from another party with whomthere is a financial interest or family relationship. If abused, non-arms-lengthtransactions misrepresent the true cost of the project.</P>

                                    <P>2. <E T="03">Commitment of all project sources of financing.</E> Therecipient should review all projected sources of financing necessary to carryout the economic development project. This is to ensure that time and effort isnot wasted on assessing a proposal that is not able to proceed. To the extentpracticable, prior to the commitment of CDBG funds to the project, the recipientshould verify that: sufficient sources of funds have been identified to financethe project; all participating parties <PRTPAGE P="178"/>providing those funds have affirmed theirintention to make the funds available; and the participating parties have thefinancial capacity to provide the funds.</P>

                                    <P>3. <E T="03">Avoid substitution of CDBG funds for non-Federal financialsupport.</E> i. The recipient should review the economic development project toensure that, to the extent practicable, CDBG funds will not be used tosubstantially reduce the amount of non-Federal financial support for theactivity. This will help the recipient to make the most efficient use of itsCDBG funds for economic development. To reach this determination, therecipient's reviewer would conduct a financial underwriting analysis of theproject, including reviews of appropriate projections of revenues, expenses,debt service and returns on equity investments in the project. The extent ofthis review should be appropriate for the size and complexity of the project andshould use industry standards for similar projects, taking into account theunique factors of the project such as risk and location.</P>
                                    <P>ii. Because of the high cost of underwriting and processing loans, manyprivate financial lenders do not finance commercial projects that are less than$100,000. A recipient should familiarize itself with the lending practices ofthe financial institutions in its community. If the project's total cost is onethat would normally fall within the range that financial institutionsparticipate, then the recipient should normally determine the following:</P>

                                    <P>A. <E T="03">Private debt financing</E>—whether or not theparticipating private, for-profit business (or other entity having an equityinterest) has applied for private debt financing from a commercial lendinginstitution and whether that institution has completed all of its financialunderwriting and loan approval actions resulting in either a firm commitment ofits funds or a decision not to participate in the project; and</P>

                                    <P>B. <E T="03">Equity participation</E>—whether or not the degree ofequity participation is reasonable given general industry standards for rates ofreturn on equity for similar projects with similar risks and given the financialcapacity of the entrepreneur(s) to make additional financial investments.</P>
                                    <P>iii. If the recipient is assisting a microenterprise owned by a low- ormoderate-income person(s), in conducting its review under this paragraph, therecipient might only need to determine that non-Federal sources of financing arenot available (at terms appropriate for such financing) in the community toserve the low- or moderate-income entrepreneur.</P>

                                    <P>4. <E T="03">Financial feasibility of the project.</E> i. The public benefita grantee expects to derive from the CDBG assisted project (the subject ofseparate regulatory standards) will not materialize if the project is notfinancially feasible. To determine if there is a reasonable chance for theproject's success, the recipient should evaluate the financial viability of theproject. A project would be considered financially viable if all of theassumptions about the project's market share, sales levels, growth potential,projections of revenue, project expenses and debt service (including repaymentof the CDBG assistance if appropriate) were determined to be realistic and metthe project's break-even point (which is generally the point at which allrevenues are equal to all expenses). Generally speaking, an economic developmentproject that does not reach this break-even point over time is not financiallyfeasible. The following should be noted in this regard:</P>
                                    <P>A. some projects make provisions for a negative cash flow in the early yearsof the project while space is being leased up or sales volume built up, but theproject's projections should take these factors into account and provide sourcesof financing for such negative cash flow; and</P>
                                    <P>B. it is expected that a financially viable project will also projectsufficient revenues to provide a reasonable return on equity investment. Therecipient should carefully examine any project that is not economically able toprovide a reasonable return on equity investment. Under such circumstances, abusiness may be overstating its real equity investment (actual costs of theproject may be overstated as well), or it may be overstating some of theproject's operating expenses in the expectation that the difference will betaken out as profits, or the business may be overly pessimistic in its marketshare and revenue projections and has downplayed its profits.</P>
                                    <P>ii. In addition to the financial underwriting reviews carried out earlier,the recipient should evaluate the experience and capacity of the assistedbusiness owners to manage an assisted business to achieve the projections. Basedupon its analysis of these factors, the recipient should identify thoseelements, if any, that pose the greatest risks contributing to the project'slack of financial feasibility.</P>

                                    <P>5. <E T="03">Return on equity investment.</E> To the extent practicable, theCDBG assisted activity should provide not more than a reasonable return oninvestment to the owner of the assisted activity. This will help ensure that thegrantee is able to maximize the use of its CDBG funds for its economicdevelopment objectives. However, care should also be taken to avoid thesituation where the owner is likely to receive too small a return on his/herinvestment, so that his/her motivation remains high to pursue the business withvigor. The amount, type and terms of the CDBG assistance should be adjusted toallow the owner a reasonable return on his/her investment given industry ratesof return for that investment, local conditions and the risk of the project.<PRTPAGE P="179"/>
                                    </P>

                                    <P>6. <E T="03">Disbursement of CDBG funds on a pro rata basis.</E> To theextent practicable, CDBG funds used to finance economic development activitiesshould be disbursed on a pro rata basis with other funding sources. Recipientsshould be guided by the principle of not placing CDBG funds at significantlygreater risk than non-CDBG funds. This will help avoid the situation where it islearned that a problem has developed that will block the completion of theproject, even though all or most of the CDBG funds going in to the project havealready been expended. When this happens, a recipient may be put in a positionof having to provide additional financing to complete the project or watch thepotential loss of its funds if the project is not able to be completed. When therecipient determines that it is not practicable to disburse CDBG funds on a prorata basis, the recipient should consider taking other steps to safeguard CDBGfunds in the event of a default, such as insisting on securitizing assets of theproject.</P>
                                    <CITA>[60 FR 1953, Jan. 5, 1995]</CITA>
                                    </APPENDIX>
                                    <PART>
                                    <EAR>Pt. 572</EAR>
                                    <HD SOURCE="HED">PART 572—HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILYHOMES PROGRAM (HOPE 3)</HD>
                                    <CONTENTS>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart A—General</HD>
                                    <SECHD>Sec.</SECHD>
                                    <SECTNO>572.1</SECTNO>
                                    <SUBJECT>Overview of HOPE 3.</SUBJECT>
                                    <SECTNO>572.5</SECTNO>
                                    <SUBJECT>Definitions.</SUBJECT>
                                    <SECTNO>572.10</SECTNO>
                                    <SUBJECT>Section 8 assistance.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart B—Homeownership ProgramRequirements—Implementation Grants</HD>
                                    <SECTNO>572.100</SECTNO>
                                    <SUBJECT>Acquisition and rehabilitation of eligible properties;rehabilitation standards.</SUBJECT>
                                    <SECTNO>572.105</SECTNO>
                                    <SUBJECT>Financing the purchase of properties by eligiblefamilies.</SUBJECT>
                                    <SECTNO>572.110</SECTNO>
                                    <SUBJECT>Identifying and selecting eligible families forhomeownership.</SUBJECT>
                                    <SECTNO>572.115</SECTNO>
                                    <SUBJECT>Transfer of homeownership interests.</SUBJECT>
                                    <SECTNO>572.120</SECTNO>
                                    <SUBJECT>Affordability standards.</SUBJECT>
                                    <SECTNO>572.125</SECTNO>
                                    <SUBJECT>Replacement reserves.</SUBJECT>
                                    <SECTNO>572.130</SECTNO>
                                    <SUBJECT>Restrictions on resale by initial homeowners.</SUBJECT>
                                    <SECTNO>572.135</SECTNO>
                                    <SUBJECT>Use of proceeds from sales to eligible families, resaleproceeds, and program income.</SUBJECT>
                                    <SECTNO>572.140</SECTNO>
                                    <SUBJECT>Third party rights.</SUBJECT>
                                    <SECTNO>572.145</SECTNO>
                                    <SUBJECT>Displacement prohibited; protection of nonpurchasingresidents.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart C—Grants</HD>
                                    <SECTNO>572.200</SECTNO>
                                    <SUBJECT>Planning grants.</SUBJECT>
                                    <SECTNO>572.205</SECTNO>
                                    <SUBJECT>Planning grants—eligible activities.</SUBJECT>
                                    <SECTNO>572.210</SECTNO>
                                    <SUBJECT>Implementation grants.</SUBJECT>
                                    <SECTNO>572.215</SECTNO>
                                    <SUBJECT>Implementation grants—eligible activities.</SUBJECT>
                                    <SECTNO>572.220</SECTNO>
                                    <SUBJECT>Implementation grants—matching requirements.</SUBJECT>
                                    <SECTNO>572.225</SECTNO>
                                    <SUBJECT>Grant agreements; corrective and remedial actions.</SUBJECT>
                                    <SECTNO>572.230</SECTNO>
                                    <SUBJECT>Cash and Management Information (C/MI) System.</SUBJECT>
                                    <SECTNO>572.235</SECTNO>
                                    <SUBJECT>Amendments.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart D—Selection Process</HD>
                                    <SECTNO>572.300</SECTNO>
                                    <SUBJECT>Notices of funding availability (NOFAs); grantapplications.</SUBJECT>
                                    <SECTNO>572.315</SECTNO>
                                    <SUBJECT>Rating criteria for planning grants.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart E—Other Federal Requirements</HD>
                                    <SECTNO>572.400</SECTNO>
                                    <SUBJECT>Consolidated plan.</SUBJECT>
                                    <SECTNO>572.405</SECTNO>
                                    <SUBJECT>Nondiscrimination and equal opportunity requirements.</SUBJECT>
                                    <SECTNO>572.410</SECTNO>
                                    <SUBJECT>Environmental procedures and standards.</SUBJECT>
                                    <SECTNO>572.415</SECTNO>
                                    <SUBJECT>Conflict of interest.</SUBJECT>
                                    <SECTNO>572.420</SECTNO>
                                    <SUBJECT>Miscellaneous requirements.</SUBJECT>
                                    <SECTNO>572.425</SECTNO>
                                    <SUBJECT>Recordkeeping and reports; audit ofrecipients.</SUBJECT>
                                    </SUBPART>
                                    </CONTENTS>
                                    <AUTH>
                                    <HD SOURCE="HED">Authority:</HD>
                                    <P>42 U.S.C. 3535(d) and 12891.</P>
                                    </AUTH>
                                    <SOURCE>
                                    <HD SOURCE="HED">Source:</HD>
                                    <P>58 FR 36526, July 7, 1993, unless otherwise noted.</P>
                                    </SOURCE>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart A—General</HD>
                                    <SECTION>
                                    <SECTNO>§ 572.1</SECTNO>
                                    <SUBJECT>Overview of HOPE 3.</SUBJECT>
                                    <P>The purpose of the HOPE for Homeownership of Single Family Homes program(HOPE 3) is to provide homeownership opportunities for eligible families topurchase Federal, State, and local government-owned single family properties.HOPE 3 provides grants to eligible applicants to plan and implementhomeownership programs designed to meet the needs of low-income first-timehomebuyers.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.5</SECTNO>
                                    <SUBJECT>Definitions.</SUBJECT>

                                    <P>The terms <E T="03">HUD, Indian Housing Authority (IHA), NAHA, 1937 Act,NOFA,</E> and <E T="03">Public Housing Agency (PHA)</E> are defined in 24 CFRpart 5.</P>
                                    <P>

                                    <E T="03">Administrative costs</E> means reasonable and necessary costs, asdescribed and valued in accordance with OMB Circular No. A-87 orA-122 <SU>1</SU>

                                    <FTREF/> as applicable, incurred by a recipient incarrying out a homeownership program under this <PRTPAGE P="180"/>part. For purposes of complyingwith the 15 percent limitation in § 572.215(o), administrative costsdo not include the costs of activities that are separately eligible under§ 572.215.</P>
                                    <FTNT>
                                    <P>
                                    <SU>1</SU> See § 572.420(a) concerning theavailability of OMB Circulars.</P>
                                    </FTNT>
                                    <P>

                                    <E T="03">Applicant</E> means a private nonprofit organization; a cooperativeassociation; or a public body in cooperation with a private nonprofitorganization that applies for a HOPE 3 grant under this part. A cooperativeassociation is an eligible applicant only for eligible property it proposes toacquire and transfer ownership interests to eligible families under ahomeownership program.</P>
                                    <P>

                                    <E T="03">Consolidated plan</E> means the document that is submitted to HUDthat serves as the planning document of the jurisdiction, in accordance with 24CFR part 91.</P>
                                    <P>

                                    <E T="03">Cooperating entity</E> means a private nonprofit organization orpublic body that the lead applicant has designed in its application to carry outcertain functions in the HOPE 3 program. The responsibilities of a cooperatingentity must be specified in a memorandum of agreement signed by the leadapplicant and the cooperating entity.</P>
                                    <P>

                                    <E T="03">Cooperative association</E> means an association organized andexisting under applicable State, local, territorial, or tribal law primarily forthe purpose of acquiring, owning, and operating housing for its members orshareholders, as applicable.</P>
                                    <P>

                                    <E T="03">Displaced homemaker</E> means as the term is defined in 42 U.S.C.12704. The individual must not have worked full-time, full-year in the laborforce for at least 2 years.</P>
                                    <P>

                                    <E T="03">Eligible family</E> means a low-income family who is a first-timehomebuyer.</P>
                                    <P>

                                    <E T="03">Eligible property</E> means a single residential property,containing no more than four units, that is owned or held by HUD, the Secretaryof Veterans Affairs, the Secretary of Agriculture, the Secretary of Defense, theSecretary of Transportation, the Resolution Trust Corporation, the FederalDeposit Insurance Corporation, the General Services Administration, or any otherFederal agency; a State or local government (including any in rem property); ora PHA/IHA (excluding public or Indian housing under the 1937 Act). Thisdefinition includes individual condominium units located in multifamilystructures owned or held by an eligible source and properties held byinstitutions within the jurisdiction of the Resolution Trust Corporation. Allcooperative units acquired under HOPE 3 must be located in properties containingno more than four units to qualify as eligible property under this part. In thecase of two- to four-unit property, only property that may be divided so eachunit may be acquired by an eligible family is eligible, except as provided in§ 572.115(c). For purposes of this definition, the term State orlocal government means any entity included in the first sentence of thedefinition of public body.</P>
                                    <P>

                                    <E T="03">First-time homebuyer</E> means as the term is defined in 42 U.S.C.12704.</P>
                                    <P>

                                    <E T="03">Homeownership program</E> means a program for homeownership meetingthe requirements under this part. The program must provide for acquisition byeligible families of ownership interests in the units in an eligible propertyunder an ownership arrangement approved by HUD under this part. All eligibleproperties assisted under the program must be initially acquired by eligiblefamilies.</P>
                                    <P>

                                    <E T="03">Lead applicant</E> means an eligible applicant designated in a HOPE3 application to assume legal responsibility as the recipient and execute thegrant agreement.</P>
                                    <P>

                                    <E T="03">Lease-purchase</E> means</P>
                                    <P>(1) An agreement, enforceable under State (or territorial) and local law,between the recipient or its designee and an eligible family under which thefamily:</P>
                                    <P>(i) Obtains the right to occupy a unit in an eligible property, subject tothe payment of rent and other reasonable lease conditions, for a period of notmore than two years, except as provided in § 572.115(a)(2); and</P>
                                    <P>(ii) At the end of such two years has the right to purchase the unit underthe terms stated in the lease-purchase agreement, including the completion ofany additional rehabilitation required during the lease-purchase period.</P>

                                    <P>(2) A lease-purchase agreement qualifies as a transfer of the unit to theeligible family for purposes of the deadline for transfer in§ 572.115(a), but it is not otherwise an “ownershipinterest” <PRTPAGE P="181"/>under this part. The interest that the family acquires at theend of the two-year lease-purchase period must be an ownership interest underthis part, and the terms and conditions of the purchase of such interest mustmeet the affordability requirements of this part.</P>
                                    <P>

                                    <E T="03">Low-income family</E> means a family or individual qualifying as alow-income family under 24 CFR part 813 (where the recipient is not a PHA/IHA),part 913 (where the recipient is a PHA), or part 905 (where the recipient is anIndian tribe or IHA). A low-income family is generally defined as a family whoseannual income does not exceed 80 percent of median income for the area, asdetermined by HUD with adjustment for family size. HUD may establish incomelimits higher or lower than 80 percent of median income for the area on thebasis of its finding that such variations are necessary because of prevailingconstruction costs or unusually high or low family incomes.</P>
                                    <P>

                                    <E T="03">Ownership interest</E> means ownership by an eligible family by feesimple title to a unit in an eligible property (including a condominium unit),ownership of shares of or membership in a cooperative, or another form ofownership proposed and justified by the applicant and approved by HUD pursuantto § 572.115(b).</P>
                                    <P>

                                    <E T="03">Private nonprofit organization</E> means any nonprofit organizationthat</P>
                                    <P>(1) Is organized and exists under applicable Federal, State, territorial,local, or tribal law;</P>
                                    <P>(2) Has no part of its net earnings inuring to the benefit of any individual,corporation, or other entity;</P>
                                    <P>(3) Has a voluntary board;</P>
                                    <P>(4) Has an accounting system or has designated a fiscal agent in accordancewith requirements established by HUD;</P>
                                    <P>(5) Practices nondiscrimination in the provision of assistance;</P>
                                    <P>(6) Is a tax exempt entity under section 501(c) of the Internal Revenue Codeof 1986 (26 U.S.C. 501(c)), or for a private nonprofit organization in theCommonwealth of Puerto Rico, is a tax-exempt entity under Puerto Rico law;</P>
                                    <P>(7) Is privately controlled and has a governing body that is controlled 51percent or more by private individuals acting in a private capacity. Anindividual is considered to be acting in a private capacity if the individual isnot an employee of a public body, is not appointed by or acting as therepresentative of a public body (including the applicant or recipient), and isnot being paid by a public body (including the applicant or recipient) whileperforming functions in connection with the nonprofit organization.</P>
                                    <P>

                                    <E T="03">Program income</E> means income earned from the program asdescribed in parts 84 and 85 of this title, as applicable, except that programincome does not include proceeds from the sale and resale of properties. Suchsale and resale proceeds, and interest earned by the recipient or its designeeon those proceeds, are governed by § 572.135(a) through (c).</P>
                                    <P>

                                    <E T="03">Public body</E> means any State of the United States; any city,county, town, township, parish, village, or other general purpose politicalsubdivision of a State; the Commonwealth of Puerto Rico, the District ofColumbia, Guam, the Northern Mariana Islands, the Virgin Islands, AmericanSamoa, or a general purpose political subdivision thereof; any Indian tribe, asdefined in title I of the Housing and Community Development Act of 1974; anypublic agency or instrumentality of any of the foregoing jurisdictions that iscreated by or pursuant to State, territorial, local, or tribal law, including aState or local Housing Finance Agency; and any PHA or IHA. For purposes of thisdefinition, an organization that meets the requirements of paragraphs (1) and(2) of the definition of private nonprofit organization, but is controlled 51percent or more by public officials acting in their official capacities, mayqualify as a public body.</P>
                                    <P>

                                    <E T="03">Recipient</E> means the lead applicant that is approved by HUD toreceive a HOPE 3 grant and is legally responsible for the grant.</P>
                                    <P>

                                    <E T="03">Single parent</E> means as the term is defined in 42 U.S.C. 12896.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61FR 5209, Feb. 9, 1996; 61 FR 48797, Sept. 16, 1996; 62 FR 34145, June 24, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.10</SECTNO>
                                    <SUBJECT>Section 8 assistance.</SUBJECT>

                                    <P>Assistance under section 8 of the 1937 Act and other rental assistance to the <PRTPAGE P="182"/>homebuyer will be terminated not later than the date an eligible family acquiresan ownership interest in an eligible property or executes a lease-purchaseagreement for the property.</P>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart B—Homeownership ProgramRequirements—Implementation Grants</HD>
                                    <SECTION>
                                    <SECTNO>§ 572.100</SECTNO>
                                    <SUBJECT>Acquisition and rehabilitation of eligible properties; rehabilitationstandards.</SUBJECT>

                                    <P>(a) <E T="03">Minimum number of properties.</E> (1) Each homeownershipprogram must involve acquisition of at least ten units in eligible properties byeligible families.</P>
                                    <P>(2) A homeownership program may not result in appreciably reducing in thelocality the number of affordable rental housing units of the type to beassisted that would be available to residents currently residing in the types ofproperties proposed for use under the program or to families who would beeligible to reside in the properties.</P>

                                    <P>(b) <E T="03">Maximum acquisition costs.</E> The cost of acquiring aneligible property (by a recipient or other entity for transfer to eligiblefamilies or by an eligible family from a recipient or directly from an eligiblesource) may not exceed the as-is fair market value of the property, plusreasonable and customary closing costs charged for comparable transactions inthe market area. The as-is fair market value of a property must be determined inaccordance with a recent appraisal conducted under procedures consistent withappraisal standards published by The Appraisal Foundation in the current editionof “Uniform Standards of Professional Appraisal Practice.”</P>

                                    <P>(c) <E T="03">Maximum cost of acquisition and rehabilitation.</E> The cost ofacquisition and rehabilitation paid for from grant funds or credited as matchmay not exceed 80 percent of the maximum amount that may be insured in the areaunder section 203(b) of the National Housing Act, plus reasonable and customaryclosing costs charged for comparable transactions in the market area.</P>

                                    <P>(d) <E T="03">Rehabilitation standards.</E> (1) The recipient is responsibleto assure that rehabilitation of eligible property meets local codes applicableto rehabilitation of work in the jurisdiction (but not less than the housingquality standards established under the Section 8 rental voucher program,described in § 982.401 of this title). Rehabilitation must alsoinclude work necessary to meet applicable federal requirements, including lead-based paint requirements set forth at part 35, subparts A, B, J, K, and R ofthis title.</P>
                                    <P>(2) The property must be rehabilitated to a level that makes it marketablefor homeownership in the market area to families with incomes at or below 80percent of the median for the area. Luxury items (fixtures, equipment, andlandscaping of a type or quality that substantially exceeds that customarilyused in the locality for properties of the same general type as that beingrehabilitated) are not eligible expenses. HUD reserves the right to disapproveimprovements or amenities to be paid for from nonprogram funds that itdetermines are unsuitable for the HOPE 3 program.</P>
                                    <P>(3) Rehabilitation costs must comply with the cost standards established byHUD (see paragraph (c) of this section for applicable cost limitations coveringboth acquisition and rehabilitation). If improvements are made to an eligibleproperty beyond those that qualify as eligible costs, the applicant must assurethat the entire cost of the excess improvements will be covered by funds otherthan the HOPE 3 grant and any amounts contributed toward the match, and that theaffordability of the property will not be impaired.</P>
                                    <P>(4) Higher standards may be proposed by the applicant or required by lenders.</P>
                                    <P>(5) The applicant must adopt written rehabilitation standards.</P>

                                    <P>(e) <E T="03">Rehabilitation and transfer of units.</E> (1) The unit must befree from any defects that pose a danger to life, health, or safety beforetransfer of an ownership interest in the unit to the family or occupancy of aunit by an eligible family under a lease-purchase agreement. The recipient mustinspect, or ensure inspection of, each unit to determine that it does not posean imminent threat to the life, health, or safety of residents and that theproperty <PRTPAGE P="183"/>has passed recent fire and other applicable safety inspectionsconducted by appropriate local officials.</P>
                                    <P>(2) The unit must, not later than 2 years after transfer of an ownershipinterest in the unit to an eligible family, or execution of a lease-purchaseagreement for the unit, meet minimum rehabilitation standards under paragraph(d)(1) of this section. The recipient must inspect, or ensure inspection of,each unit to determine that it meets the rehabilitation standards required underparagraph (d)(1) of this section.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 62 FR 34145, June 24, 1997; 64FR 50226, Sept. 15, 1999]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.105</SECTNO>
                                    <SUBJECT>Financing the purchase of properties by eligible families.</SUBJECT>

                                    <P>(a) <E T="03">Types of financing.</E> (1) Financing may include use of theimplementation grant to permit transfer of an ownership interest in a unit to aneligible family for less than fair market value or with assisted financing; orother sources of financing (subject to requirements that apply to thosesources), including, but not limited to, conventional mortgage loans, mortgageloans insured under title II of the National Housing Act, and mortgage loansunder other available programs, such as Veterans Administration (VA), FarmersHome Administration (FmHA), and Resolution Trust Corporation (RTC) seller-assisted financing.</P>

                                    <P>(2) <E T="03">FHA single family mortgage insurance requirements.</E> Allregulatory requirements and underwriting procedures established for FHA singlefamily mortgage insurance apply to mortgages insured by FHA on propertiesassisted under the HOPE 3 program. Exceptions in the regulations specificallyfor homebuyers under the HOPE 3 program are:</P>
                                    <P>(i) The eligible family/mortgagor may obtain a loan for the down payment froma corporation or another person under conditions satisfactory to HUD (24 CFR203.19(b) and 234.28(c));</P>
                                    <P>(ii) A second mortgage may be placed against the property even though theentity holding a second mortgage is not a Federal, State, or local governmentagency, if the entity is designated in the homeownership plan of an applicantfor an implementation grant (24 CFR 203.32(b) and 234.55(b)); and</P>
                                    <P>(iii) Certain restrictions on conveyance may be permissible. Property withrestrictions that do not comply with FHA regulations will be ineligible for FHAmortgage insurance, notwithstanding HUD approval under § 572.130(e).</P>

                                    <P>(b) <E T="03">Financial assistance to homebuyers.</E> Recipients may provideassistance to, or on behalf of, eligible families to make acquisition andrehabilitation of eligible properties affordable. This may include interest ratereductions (“interest rate buy-downs”), payment of all or a portionof closing costs, down payments, mortgage insurance premiums, and otherexpenses, and other forms of assistance approved by HUD. No mechanisms tofinancially assist homebuyers that would require grant recipients to make lumpsum deposits of HOPE 3 grant funds will be permitted.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.110</SECTNO>
                                    <SUBJECT>Identifying and selecting eligible families for homeownership.</SUBJECT>

                                    <P>(a) <E T="03">Selection procedures.</E> (1) Recipients must establish writtenequitable procedures for identifying and selecting eligible families toparticipate in the homeownership program, consistent with the affordabilitystandards in § 572.120. Except for Indian tribes and IHAs asdescribed in § 572.405(a)(2), the recipient must have a procedure tocarry out its affirmative fair marketing responsibilities, described in§ 572.405(e), that apply whenever homeownership opportunities aremade available to other than current residents of the property. These proceduresmust include specific steps to inform potential applicants and solicitapplications from eligible families in the housing market area who are leastlikely to apply for the program without special outreach.</P>

                                    <P>(2) The written selection procedures must provide for selection only offamilies that are creditworthy and have the financial capacity to handle theanticipated costs of homeownership. Any family determined not to have paid theappropriate amount of tenant contribution under a HUD housing assistance programmust be required to resolve <PRTPAGE P="184"/>any deficiency before being selected forhomeownership.</P>

                                    <P>(b) <E T="03">Preferences.</E> (1) In making selections for the program, eachrecipient must give first preference to qualified residents who legally occupiedunits on the date the recipient's application for the implementation grant wassubmitted to HUD and to persons residing in the units at the time the propertiesare selected. If the unit occupied by a former resident on the date theimplementation grant application was submitted to HUD is occupied by a differentresident at the time of property selection, a vacant unit under this programmust be offered to the former resident at the earliest possible time.</P>
                                    <P>(2) In the case of vacant properties for which the preferences in paragraph(b)(1) of this section do not apply, recipients must give a first preference tootherwise qualified eligible families who reside in public or Indian housingunder the 1937 Act. Recipients must use whatever measures are consideredappropriate to inform residents of public and Indian housing developments withinthe housing market area of the preference, such as informing resident councils,PHAs, and IHAs, or other appropriate measures.</P>
                                    <P>(3) Recipients must give a second preference to otherwise qualified eligiblefamilies who have completed participation in one of the following economic self-sufficiency programs: Project Self-Sufficiency, Operation Bootstrap, FamilySelf-Sufficiency, JOBS, and any other Federal, State, territorial, or localprogram approved by HUD as equivalent.</P>

                                    <P>(c) <E T="03">Responsibilities of selected families.</E> (1) Each eligiblefamily selected for homeownership must certify at the time it acquires anownership interest in the unit (or enters into a lease-purchase agreement forthe unit) that it intends to occupy the unit as its principal residence duringthe six-year period from the date it acquires ownership interest in the unit,unless the recipient determines that the family is required to move outside themarket area due to a change in employment or an emergency situation or thefamily sells its ownership interest. The family may permit others to rent space(such as a basement area or a spare bedroom) in the unit occupied by the familyas its principal residence. (See § 572.115(c) concerning the rentalof units in a multi-unit property purchased by a homebuyer under this part.)</P>
                                    <P>(2) Any homebuyer that violates the agreement made under paragraph (c)(1) ofthis section shall be subject to penalties as provided in the transferdocuments, as prescribed by HUD.</P>
                                    <P>(3) Each eligible family selected for the program must participate incounseling and training of homebuyers and homeowners regarding the generalrights and responsibilities of homeownership.</P>

                                    <P>(d) <E T="03">Social security numbers; wage and claims information.</E> As acondition of eligibility for homeownership under this part, at the time a familyapplies for howeownership, the recipient (or other appropriate entity) must:</P>
                                    <P>(1) Require the family to meet the requirements for the disclosure andverification of social security numbers, as provided by part 5, subpart B, ofthis title; and</P>
                                    <P>(2) Require the family to sign and submit consent forms for the obtaining ofwage and claim information from State Wage Information Collection Agencies, asprovided by part 5, subpart B, of this title.</P>

                                    <P>(e) <E T="03">Notification of rejected applicant families.</E> Recipients oranother appropriate entity must promptly notify in writing any rejectedapplicant family of the grounds for any rejection.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 61 FR 11118, Mar. 18, 1996; 61FR 48797, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.115</SECTNO>
                                    <SUBJECT>Transfer of homeownership interests.</SUBJECT>

                                    <P>(a) <E T="03">Deadline for transfer.</E> (1) All units in eligible properties(including in rem properties) must be transferred to eligible families withintwo years of the effective date of the implementation grant agreement, except asotherwise provided for multi-unit properties in paragraph (c) of this section.The transfer must involve either:</P>
                                    <P>(i) Acquisition by an eligible family of an ownership interest in a unit; or</P>
                                    <P>(ii) Execution of a lease-purchase agreement for a unit.</P>

                                    <P>(2) The HUD Field Office may approve a request for an extension of the <PRTPAGE P="185"/>deadline in paragraph (a)(1) of this section on a per-program or per-unit basisif the Field Office determines that all program activities will be completed inaccordance with the timing requirements of § 572.210(f) (includingany extension granted under § 572.210(f)).</P>

                                    <P>(b) <E T="03">Form of ownership.</E> (1) Forms of ownership interestsacquired by eligible families under this part may include fee simple ownership(including condominium ownership), cooperative ownership, or another form ofownership interest proposed and justified by the applicant and approved by HUD.HUD will not approve other forms of ownership that would substantially limit theability of homeowners to realize financial appreciation in the value of theirhomes as determined by HUD. The type of ownership interest must be consistentwith any applicable State (or territorial), local, or tribal law.</P>
                                    <P>(2) The ownership interest may be subject only to:</P>
                                    <P>(i) The restrictions on resale required or approved under§ 572.130;</P>
                                    <P>(ii) Mortgages, deeds of trust, or other liens or instruments securing theeligible family's purchase money financing as approved by the recipient; or</P>
                                    <P>(iii) Any other restrictions or encumbrances that do not impair the good andmarketable nature of title to the ownership interest except as otherwiseapproved by the recipient. In approving the terms of an eligible family'spurchase money financing or any other encumbrances on the property underparagraphs (b)(2)(ii) and (iii) of this section, the recipient shall not approvefinancing terms that do not comply with the affordability standards in§ 572.120, or mortgage terms and conditions or other encumbrancesthat in effect constitute resale restrictions that would not be approved by HUDunder this part.</P>
                                    <P>(3) Mutual housing is eligible only to the extent it provides for thetransfer of ownership interests to eligible families.</P>

                                    <P>(c) <E T="03">Transfer of multi-unit properties.</E> (1) In the case of atwo-to-four unit property, only property that may be divided so that anownership interest in each unit may be acquired by an eligible family iseligible. HUD may grant an exception to this requirement on a program-by-programbasis when it determines that such an exception will serve to further thepurposes of the HOPE 3 program.</P>
                                    <P>(2) HUD Headquarters will consider and may approve an exception under thefollowing circumstances:</P>
                                    <P>(i) The reasonably projected net rental income will be included in thedetermination of the appraised value of the property at the time of thehomebuyer's purchase;</P>
                                    <P>(ii) The rent charged by the owner will not exceed the Fair Market Rentestablished by HUD for the area;</P>
                                    <P>(iii) The recipient will provide the homebuyer with counseling and trainingin property management, and will approve the form of lease used by thehomebuyer; and</P>
                                    <P>(iv) The recipient will include the family's potential net rental income incalculating the family's initial affordability in accordance with§ 572.120 of this part.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.120</SECTNO>
                                    <SUBJECT>Affordability standards.</SUBJECT>

                                    <P>(a) <E T="03">Initial affordability.</E> (1) The monthly expenditure forprincipal, interest, taxes, and insurance by an eligible family that is requiredunder the financing both for the acquisition and for the rehabilitation inaccordance with § 572.100(d) of a unit (whether the requiredrehabilitation occurs before or after the family takes title) must be not lessthan 20 percent and not more than 30 percent of one-twelfth of the annual incomeof the family used for the purpose of determining eligibility under§ 572.110(a). (For the purpose of determining affordability of thefamily, the recipient may, at its option, adjust downward the annual incomes ofeligible families using reasonable standards and procedures consistentlyapplied.) HUD may approve a justified request for a floor lower than 20 percentto avoid undue hardship to families, such as where the cost of utilities ishigh.</P>

                                    <P>(2) The 30 percent cap on monthly payments includes closing costs only ifclosing costs are included in the costs <PRTPAGE P="186"/>of principal and interest, or areotherwise required to be paid by the homeowner over time after acquisition.</P>
                                    <P>(3) Applicants are encouraged to consider the additional monthly costs ofutilities and other monthly housing costs, such as condominium and cooperativefees, in determining whether the family can afford to purchase a unit.</P>

                                    <P>(b) <E T="03">Continued affordability.</E> The recipient must develop a plandemonstrating reasonable efforts to ensure continued affordability by homeownersin the eligible property. Financing that would impair the continuedaffordability of the property for homebuyers, such as a mortgage that is notfully amortizing (<E T="03">e.g.,</E> a “balloon” mortgage) may notbe used. The plan should take into account such program features as long-termfinancing at reasonable terms, energy conservation, and improvements that willentail low-cost maintenance.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.125</SECTNO>
                                    <SUBJECT>Replacement reserves.</SUBJECT>

                                    <P>(a) <E T="03">Purpose.</E> A single replacement reserve may be establishedfor the homeownership program only if HUD determines it is necessary to preventsevere financial hardship to families caused by the failure of a major system orcomponent of the property that would render the unit substandard. Initially, thereserve must be justified by the applicant and approved by HUD as part of theprogram budget in the application or an amended application.</P>

                                    <P>(b) <E T="03">Need for reserve account.</E> In determining the need for areplacement reserve, the applicant or recipient must demonstrate that thefinancial status of eligible families is insufficient to meet the needs forwhich the reserve is established, and that the amount proposed for the reserveis reasonable, taking into account the following factors:</P>
                                    <P>(1) The size of the implementation grant and the amount of matchingcontributions;</P>
                                    <P>(2) The availability of insurance, and the home maintenance and repaircapabilities of the families; and</P>
                                    <P>(3) The condition and age of the properties and each of their major systemsand components (including at least the heating, plumbing, and electricalsystems, the roof, foundation, windows, exterior walls, and common area, ifany).</P>

                                    <P>(c) <E T="03">Drawdown of reserve funds.</E> Replacement reserve funds mayonly be drawn down under the Cash and Management Information System whenspecifically needed to assist a homeowner. At time of program closeout, allfunds approved for a replacement reserve may be drawn down to fund a reserveaccount. The account may not exceed six years estimated replacement cost needsfor the properties transferred under the homeownership program.</P>

                                    <P>(d) <E T="03">Administration of the reserve account.</E> The recipient mustidentify the entity that will administer the replacement reserve account at timeof program closeout. The entity responsible for administering the account mustbe bonded and approved by HUD. The account must be interest bearing, ifpossible, and interest earned thereon must be used for the purposes for whichthe account is established. Unused funds at the end of the term of the accountmust be treated as program income in accordance with § 572.135(d).</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.130</SECTNO>
                                    <SUBJECT>Restrictions on resale by initial homeowners.</SUBJECT>

                                    <P>(a) <E T="03">Right to transfer.</E> A homeowner may transfer the homeowner'sownership interest in the unit, subject only to the right to purchase underparagraph (b) of this section; the requirement for the purchaser to execute apromissory note, if required under paragraph (d) of this section; and thelimitation on the amount of sales proceeds a family may retain upon sale withinthe first six years, as required under paragraph (c) of this section.</P>

                                    <P>(b) <E T="03">Right to purchase.</E> (1) Where a cooperative has jurisdictionover the unit, it has the prior right to purchase the ownership interest in theunit from the initial homeowner for the amount and on the terms specified in afirm contract between the homeowner and a prospective buyer. The cooperativeassociation has 10 days after receiving notice of the firm contract to decidewhether to exercise its right and 60 additional days to complete closing of thepurchase.<PRTPAGE P="187"/>
                                    </P>
                                    <P>(2) If no cooperative has jurisdiction over the unit and if the prospectivebuyer is not a low-income family, the recipient or a PHA/IHA with jurisdictionfor the area in which the unit is located, whichever is specified in thedocuments under which the initial family acquires an ownership interest in theunit, has the prior right to purchase the ownership interest in the unit for theamount and on the terms specified in a firm contract between the homeowner and aprospective buyer. The recipient or PHA/IHA has 10 days after receiving noticeof the firm contract to decide whether to exercise its right and 60 additionaldays to complete closing of the purchase.</P>
                                    <P>(3) Where a recipient, cooperative, or PHA/IHA exercises a right to purchase,it must resell the unit to an eligible family promptly.</P>
                                    <P>(4) Unless otherwise provided in the property transfer documents, none of theprovisions of paragraph (b) of this section apply in the case of liquidation ofa security interest in the property. If FHA has insured a mortgage on theproperty, the provisions of paragraph (b) of this section shall not apply uponoccurrence of an event requiring termination under 24 CFR 203.41(c)(2) or234.66(c)(2).</P>

                                    <P>(c) <E T="03">Limitation on equity interest an initial homeowner may retainfrom sale during first six years.</E> (1) The HOPE program is designed to assurethat an initial or subsequent homeowner does not receive any undue profit fromacquiring a unit under the program and that, to the extent the sales price issufficient, an initial homeowner recovers the equity interest in the property.With respect to any sale by an initial homeowner during the first six yearsafter acquisition, the family may retain only the amount computed under thisparagraph. Any excess must be distributed as provided in§ 572.135(b). The amount of equity an initial homeowner has in theproperty is determined by computing the sum of the following:</P>
                                    <P>(i) The contribution to equity paid by the family (such as any downpayment(in the form of cash or the value of sweat equity) and any amount paid towardsprincipal on a mortgage loan during the period of ownership);</P>
                                    <P>(ii) The value of any improvements (not including normal or routinemaintenance) installed at the expense of the family during the family's tenureas owner (including improvements made through sweat equity), as determined bythe recipient or other entity specified in the approved application based onevidence of amounts spent on the improvements, including the cost of materialand labor (or the value of the sweat equity); and</P>
                                    <P>(iii) The appreciated value, determined by applying the Consumer Price Index(Urban Consumers) or other HUD approved index against the contribution to equityunder paragraphs (d)(i) and (ii) of this section.</P>
                                    <P>(2) The recipient (or other entity) may, at the time of initial sale, enterinto an agreement with the family to set a maximum amount which thisappreciation may not exceed.</P>
                                    <P>(3) Amounts that count towards a family's equity may not also count towardsthe match.</P>

                                    <P>(d) <E T="03">Promissory note.</E> (1) If the purchase price of the unit(adjusted, if applicable as described in this paragraph) paid by the initialhomebuyer is less than the fair market value of the property (based on anappraisal of the value of the unit after rehabilitation to applicable programstandards conducted in accordance with the appraisal requirements in§ 572.100(b)), the initial homeowner must, at closing, execute anonamortizing, nonrecourse, noninterest-bearing promissory note, in a formacceptable to HUD, equal to the difference between such fair market value of theunit and the adjusted purchase price, together with a security instrumentsecuring the obligation of the note and recorded in local land records or otherapplicable system of recordation appropriate to the type of security interestbeing recorded. The note must be payable to the recipient or other entitydesignated in the approved homeownership plan. In determining the amount of thepromissory note and for that purpose only, the purchase price must be adjustedby deducting all substantial amounts of financial assistance with respect to thefamily's acquisition or rehabilitation of the unit that would result in an undueprofit to the family if it were to sell the unit at the <PRTPAGE P="188"/>beginning of the 7thyear of homeownership. (See paragraph (c) of this section for an additionalrestriction on return to the homeowner on reasales during the first six years.)For this purpose, “substantial financial assistance” includes allforms of assistance or subsidy from HOPE 3 resources that reduce the cash return(sales proceeds) received by the recipient for the unit below its appraisedafter-rehabilitation fair market value by more than a total of $4,000, including(without limitation) discounted purchase prices, downpayment assistance, andrehabilitation or purchase money grants or loans that are not repayable on anamortizing basis. Financing to homeowners provided from HOPE 3 resources may notbe assumed by subsequent homebuyers.</P>
                                    <P>(2) With respect to a sale by an initial homeowner, the note must requirepayment upon sale by the initial homeowner, to the extent proceeds of the saleremain after paying off other outstanding debt secured by the property that wasincurred for the purpose of acquisition or property improvement, paying anyother amounts due in connection with the sale (such as closing costs andtransfer taxes), and paying the family the amount of its equity in the property,computed in accordance with paragraph (c) of this section.</P>
                                    <P>(3) With respect to a sale by an initial homeowner after the first six yearsafter acquisition, through the 20th year, the amount payable under the note mustbe reduced by <FR>1/168</FR> of the original principal amount of the note foreach full month of ownership by the family after the end of the sixth year. Thehomeowner may retain all other proceeds of the sale.</P>
                                    <P>(4) Where a subsequent purchaser during the 20-year period, measured by theterm of the initial promissory note, purchases the property for less than thethen current fair market value (determined in accordance with the appraisalrequirements in § 572.100(b)), the purchaser must also execute atclosing a promissory note and mortgage (to be recorded as stated in paragraph(d)(1) of this section) payable to the recipient or its designee, for the amountof the discount (but no more than the amount payable at the time of the sale onthe promissory note by the seller). The term of the promissory note must be theperiod remaining of the original 20-year period. The note must require paymentupon sale by the subsequent homeowner, to the extent proceeds of the sale remainafter covering costs of the sale, paying off other outstanding debt secured bythe property that was incurred for the purpose of acquisition or propertyimprovement, and paying any other amounts due in connection with the sale. Theamount payable on the note must be reduced by a percentage of the originalprincipal amount of the note for each full month of ownership by the subsequenthomeowner. The percentage must be computed by determining the percentage of theterm of the promissory note the homeowner has owned the property. The remaindermay be retained by the subsequent homeowner selling the property.</P>

                                    <P>(e) <E T="03">Additional restrictions.</E> Notwithstanding paragraph (a) ofthis section, an applicant may propose in its application, and HUD may approve,additional reasonable restrictions on the resale of units under the program. HUDdoes not encourage additional restrictions, but HUD approval will be based on areview of the individual circumstances. However, HUD will not approverestrictions that it determines will substantially limit the ability ofhomeowners to realize financial appreciation in the value of their homes.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 61 FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.135</SECTNO>
                                    <SUBJECT>Use of proceeds from sales to eligible families, resale proceeds, andprogram income.</SUBJECT>

                                    <P>(a) <E T="03">Proceeds from sales.</E> The recipient or another entityapproved by HUD must use the proceeds, if any, from the initial sale for costsof their HOPE 3 program, including additional homeownership opportunitieseligible under the HOPE 3 program, improvements to properties under the HOPE 3program, business opportunities for low-income families participating in theHOPE 3 program, supportive services related to the HOPE 3 program, and otheractivities approved by HUD, either as part of the approved application or lateron request. Such proceeds include the full consideration received by therecipient <PRTPAGE P="189"/>or other entity for the property, including principal and interest onpurchase money loans from HOPE 3 funds or match.</P>

                                    <P>(b) <E T="03">Resale proceeds.</E> Fifty percent of any portion of the netsales proceeds that may not be retained by the homeowner under§ 572.130(c), (d), and (e) must be paid to the recipient, or anotherentity approved by HUD, for use for additional homeownership opportunitieseligible under the HOPE 3 program, improvements to properties under the HOPE 3program, business opportunities for homeowners under the HOPE 3 program,supportive services related to the HOPE 3 program, and other activities approvedby HUD in the approved homeownership program or later on request. The remaining50 percent must be collected by the recipient and returned to HUD within 15 daysof the sale for use under the HOPE 3 program, subject to any limitationscontained in appropriations Acts.</P>

                                    <P>(c) <E T="03">Requirements for use of sale and resale proceeds.</E> Sale andresale proceeds must be committed for approved activities within one year ofreceipt. All sale and resale proceeds must be accounted for by the recipient,and 50 percent of all resale proceeds received by the recipient must be returnedto HUD, as described in paragraph (b) of this section. Recipients may use up to15 percent of their sale and resale proceeds for administrative expenses toexpand their HOPE 3 program and provide additional homeownership opportunities.Recipients must retain records on the use of these funds to the same level ofdetail as required of grant funds under the HOPE 3 system or whatever recordsHUD otherwise prescribes. The recipient, and any other entity approved by HUD toadminister the sale and resale proceeds, remain responsible to comply with therequirements of this part, or such other requirements as HUD may prescribe(consistent with then applicable law) in closeout procedures or agreements.</P>

                                    <P>(d) <E T="03">Program income.</E> Any program income, as defined in§ 572.5, received by the recipient may be added to the fundscommitted to the grant agreement by HUD and the recipient, in accordance withthe requirements of parts 84 and 85 of this title, as applicable.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 62FR 34145, June 24, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.140</SECTNO>
                                    <SUBJECT>Third party rights.</SUBJECT>
                                    <P>The rights of third parties are governed by 42 U.S.C. 12895(d) and apply tothe requirements of this part.</P>
                                    <CITA>[61 FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.145</SECTNO>
                                    <SUBJECT>Displacement prohibited; protection of nonpurchasing residents.</SUBJECT>

                                    <P>(a) <E T="03">Displacement prohibited.</E> (1) No person may be displacedfrom his or her dwelling as a direct result of a homeownership program underthis part. This does not preclude terminations of tenancy for violation of theterms of occupancy of the unit. Each resident of an eligible property on thedate the application for an implementation grant was submitted to HUD and eachresident at the time the property is selected must be given an opportunity tobecome a homeowner under this program if the resident qualifies as an eligiblefamily and meets other program requirements. If the resident does not qualify ordoes not elect to move, the property is not eligible. The protections providedto residents under this section do not apply to the former owner of the propertyif the property is acquired from him or her as a result of a tax or mortgageforeclosure.</P>
                                    <P>(2) In addition to any applicable sanctions under the grant agreement, aviolation of paragraph (a)(1) of this section may trigger a requirement toprovide relocation assistance in accordance with the Uniform RelocationAssistance and Real Property Acquisition Policies Act of 1970 and governmentwideimplementing regulations at 49 CFR part 24.</P>

                                    <P>(b) <E T="03">Relocation assistance for residents who elect to move.</E> Therecipient must offer each nonpurchasing resident who elects to move relocationassistance in accordance with the approved homeownership program. The programmust provide, at least, the following assistance:</P>

                                    <P>(1) Advisory services, including timely information, counseling (including <PRTPAGE P="190"/>the provision of information on a resident's rights under the Fair Housing Act),and referrals to suitable, affordable, decent, safe, and sanitary alternativehousing;</P>
                                    <P>(2) Payment for actual, reasonable moving expenses; and</P>
                                    <P>(3) Financial assistance sufficient to permit relocation to suitable,affordable, decent, safe, and sanitary housing. This requirement is met if thefamily is provided the opportunity to relocate to suitable, decent, safe, andsanitary housing for which the monthly rent and estimated average utility costsdo not exceed the greater of 30 percent of the person's income or the person'smonthly rent before relocation and the estimated average monthly utility costs.The homeownership program must specify the period for which replacement housingassistance will be provided to persons who do not receive assistance through aSection 8 rental certificate or voucher or other housing program subsidy.</P>

                                    <P>(c) <E T="03">Temporary relocation.</E> The recipient must provide eachresident of an eligible property, who is required to relocate temporarily topermit work to be carried out, with suitable, decent, safe, and sanitary housingfor the temporary period and must reimburse the resident for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation,including the costs of moving to and from the temporarily occupied housing andany increase in monthly costs of rent and utilities.</P>

                                    <P>(d) <E T="03">Notice of relocation assistance.</E> As soon as feasible, eachrecipient must give each resident of an eligible property a written descriptionof the applicable provisions of this section.</P>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart C—Grants</HD>
                                    <SECTION>
                                    <SECTNO>§ 572.200</SECTNO>
                                    <SUBJECT>Planning grants.</SUBJECT>
                                    <P>Any planning grants made by HUD under the HOPE 3 program will continue to begoverned by the provisions in this section in effect immediately before October16, 1996. When or before HUD announces the availability of funds for planninggrants under this part, these provisions will be recodified.</P>
                                    <CITA>[61 FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.205</SECTNO>
                                    <SUBJECT>Planning grants—eligible activities.</SUBJECT>
                                    <P>Any planning grants made by HUD under the HOPE 3 program will continue to begoverned by the provisions in this section in effect immediately before October16, 1996. When or before HUD announces the availability of funds for planninggrants under this part, these provisions will be recodified.</P>
                                    <CITA>[61 FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.210</SECTNO>
                                    <SUBJECT>Implementation grants.</SUBJECT>

                                    <P>(a) <E T="03">General authority.</E> Any implementation grants for thepurpose of carrying out homeownership programs approved under this part will beawarded using a selection process and selection criteria to be published in aNOFA.</P>

                                    <P>(b) <E T="03">Deadline for completion.</E> A recipient must spend allimplementation grant amounts within 4 years from the effective date of the grantagreement. The appropriate HUD field office may approve a request to extend thedeadline when it determines that an extension is warranted. A previouslyapproved grant amount may not be amended to increase the grant amount.</P>

                                    <P>(c) <E T="03">Program closeout.</E> Recipients will comply with closeoutprocedures as issued by HUD.</P>
                                    <CITA>[62 FR 34145, June 24, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.215</SECTNO>
                                    <SUBJECT>Implementation grants—eligible activities.</SUBJECT>
                                    <P>Implementation grants may be used for the reasonable costs of eligibleactivities necessary to carry out a homeownership program under this part. Onlycosts incurred on or after the effective date of an implementation grantagreement qualify for funding under this part. Eligible activities include:</P>

                                    <P>(a) <E T="03">Acquisition of eligible properties by the recipient.</E>Acquisition of eligible properties for the purpose of transferring ownershipinterests to eligible families in a homeownership program under this part, inaccordance with § 572.100. (Where the applicant owns the <PRTPAGE P="191"/>eligibleproperty or where HUD otherwise determines that an “arms length”relationship for acquisition does not exist, program funds may not be used foracquisition of the property for the program. However, if the property is ownedby an eligible source, it may be donated as match in accordance with§ 572.220(b)(4).)</P>

                                    <P>(b) <E T="03">Recipient closing costs.</E> Customary and reasonable closingcosts of the buyer associated with the purchase of eligible properties under theprogram.</P>

                                    <P>(c) <E T="03">Financial assistance to homebuyers.</E> Provision of assistanceto families to make acquisition and rehabilitation of eligible propertiesaffordable, in accordance with § 572.105(b).</P>

                                    <P>(d) <E T="03">Rehabilitation.</E> Rehabilitation of the eligible propertycovered by the homeownership program, in accordance with standards and costlimitations established by HUD in § 572.100.</P>

                                    <P>(e) <E T="03">Architectural and engineering work.</E> Architectural andengineering work, and related professional services required to preparearchitectural plans or drawings, write-ups, specifications or inspections,including lead-based paint evaluation.</P>

                                    <P>(f) <E T="03">Relocation.</E> Relocation of residents in eligible propertieswho elect to move, in accordance with § 572.145(b).</P>

                                    <P>(g) <E T="03">Temporary relocation of homebuyers.</E> Temporary relocation ofresidents during rehabilitation, in accordance with § 572.145(c).</P>

                                    <P>(h) <E T="03">Legal fees.</E> Customary and reasonable costs of professionallegal services.</P>

                                    <P>(i) <E T="03">Replacement reserves.</E> A single replacement reserve for theproperties under the program if necessary, in accordance with§ 572.125.</P>

                                    <P>(j) <E T="03">Homebuyer outreach and selection.</E> Reasonable and necessarycosts of marketing the program to potential homebuyers and of identifying andselecting homebuyers under the program. These costs may include costs related toimplementing the affirmative fair housing marketing strategy required under§ 572.110.</P>

                                    <P>(k) <E T="03">Counseling and training.</E> Counseling and training of onlythose homebuyers (and their alternates) and homeowners selected under thehomeownership program. This may include such subjects as personal financialmanagement, home maintenance, home repair, construction skills (especially wherethe eligible family will do some of the rehabilitation), property management forowners of multi-unit properties, and the general rights and responsibilities ofhomeownership.</P>

                                    <P>(l) <E T="03">Property management and holding costs.</E> Reasonable andnecessary costs related to properly maintaining and securing eligible propertiesafter acquisition or donation and before sale to an eligible homebuyer. Thesecosts may include property insurance expenses, security costs, property taxes,utility charges, and other costs related to sound property management ofrecipient-owned properties before sale under the program. These costs may not becharged relative to eligible properties donated to the program by the recipientor another entity that HUD determines does not have an “arm'slength” relationship with the recipient.</P>

                                    <P>(m) <E T="03">Recipient training needs.</E> Defraying costs for ongoingtraining needs of the recipient for courses of instruction that are directlyrelated to developing and carrying out the homeownership program.</P>

                                    <P>(n) <E T="03">Economic development.</E> Economic development activities thatpromote economic self-sufficiency of homebuyers and homeowners under thehomeownership program. The economic development activities must be directlyrelated to the homeownership program, and may only benefit families andindividuals who are homeowners or who have been selected as homebuyers under theprogram. These costs are limited to job training or retraining and day carecosts of those participating in job training and retraining activities approvedunder the HOPE 3 program. The recipient must enter into written agreements withthe providers of economic development services specifying the services to beprovided, including estimates of the numbers of homebuyers and homeowners to beassisted. The aggregate amount of planning and implementation grants that may beused for economic development activities related to any one program may notexceed $250,000.</P>

                                    <P>(o) <E T="03">Administrative costs.</E> Reasonable and necessary costs, asdescribed and valued in accordance with the OMB <PRTPAGE P="192"/>Circular Nos. A-87 orA-122, as applicable, incurred by a recipient in carrying out the HOPE 3program. The total amount that may be spent on administrative activities fromthe implementation grant and any contribution toward the match may not exceed 15percent of the amount of the grant. For purposes of complying with the 15percent limitation, administrative costs do not include the cost of activitiesthat are separately eligible under this section.</P>

                                    <P>(p) <E T="03">Other activities.</E> Other activities proposed by theapplicant, to the extent the applicant justifies them as necessary for theproposed homeownership program and HUD approves them.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 64 FR 50226, Sept. 15, 1999]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.220</SECTNO>
                                    <SUBJECT>Implementation grants—matching requirements.</SUBJECT>

                                    <P>(a) <E T="03">General requirements.</E> (1) Except as provided in paragraph(a)(3) of this section, each recipient must assure that matching contributionsequal to not less than 33 percent (or 25 percent for grants awarded after April11, 1994) of the amount of the implementation grant shall be provided from non-Federal sources to carry out the homeownership program. Amounts contributed tothe match must be used for eligible activities or in accordance with therequirements of this section.</P>
                                    <P>(2) All contributions toward eligible activities to be counted toward thematch must be provided no later than the deadline for completion of programactivities established in accordance with § 572.210(f), except aspermitted under paragraphs (b)(1)(iv) and (b)(3) of this section.</P>
                                    <P>(3) When the recipient is an IHA, and the IHA (acting in that capacity) hasnot received, and will not receive, amounts under title I of the Housing andCommunity Development Act of 1974 for the fiscal year in which HUD obligatesHOPE grant funds, the match requirements under this section will not apply.</P>

                                    <P>(b) <E T="03">Form.</E> Contributions may only be in the form of:</P>

                                    <P>(1) <E T="03">Cash contributions.</E> (i) Cash contributions from non-Federalresources contributed permanently for uses under the HOPE 3 program by theapplicant, non-Federal public entities, private entities, or individuals, exceptthat a cash contribution in the form of a down payment made by an eligiblefamily may not count as a matching contribution. Funds will be consideredpermanently contributed if all principal, interest, and any other return on thecontribution are used for eligible activities in accordance with programrequirements.</P>
                                    <P>(ii) Non-Federal resources may include:</P>
                                    <P>(A) Contribution of trust funds held by Federal agencies for Indian tribes;</P>
                                    <P>(B) PHA section 8 operating reserve funds, where approved by HUD;</P>
                                    <P>(C) Income from a Federal grant earned after the end of the award period, ifno Federal programmatic requirements govern the disposition of the programincome.</P>
                                    <P>(D) Amounts, determined in accordance with paragraph (b)(1)(iv)(B) of thissection, that have been requested by the applicant in an application submittedto the Federal Housing Finance Board for assistance under its affordable housingprogram, so long as the application is approved within 30 days of HUD'sconditional approval of the HOPE 3 application.</P>
                                    <P>(iii) Non-Federal resources may not include:</P>
                                    <P>(A) Funds from a Community Development Block Grant under section 106(b) orsection 106(d), respectively, of the Housing and Community Development Act of1974, except to the extent permitted for administrative expenses under paragraph(b)(2) of this section;</P>
                                    <P>(B) Federal tax expenditures, including low-income housing tax credits.</P>
                                    <P>(iv) The grant equivalent of a below-market interest rate loan to thehomebuyer from non-Federal resources, where all repayments, interest, and otherreturn will not be permanently contributed to the HOPE 3 program, may be countedas a cash contribution. The grant equivalent of a below market interest rateloan must be calculated in accordance with paragraphs (b)(1)(iv) (A) and (B) ofthis section—</P>

                                    <P>(A) If the loan is made from proceeds of obligations issued by or on behalfof a public body that are exempt from taxation by the United States, thecontribution is the present discounted <PRTPAGE P="193"/>cash value of the difference betweenpayments to be made on the borrowed funds and payments to be received on theloan to the homebuyer, based on a discount rate equal to the interest rate onthe borrowed funds;</P>
                                    <P>(B) If the loan is made from funds other than under paragraph (b)(1)(iv)(A)of this section, the contribution is the present discounted cash value of theyield forgone, calculated based on a discount rate approved or prescribed byHUD. In determining the yield forgone, the recipient must use as a measure of amarket yield one of the following, as appropriate:</P>

                                    <P>(<E T="03">1</E>) With respect to housing financed with a fixed interest ratemortgage, a rate equal to the 10-year Treasury note rate plus 200 basis points;or</P>

                                    <P>(<E T="03">2</E>) With respect to housing financed with an adjustableinterest rate mortgage, a rate equal to the one-year Treasury bill rate plus 250basis points.</P>
                                    <P>(v) Cash contributions may also be made from sales proceeds from the TurnkeyIII Homeownership and Mutual Help programs, as approved by HUD, or an approvedhomeownership program under section 5(h) of the 1937 Act.</P>

                                    <P>(2) <E T="03">Administrative costs.</E> (i) Contributions of eligibleadministrative services up to a value equal to 7 percent of the amount of theimplementation grant. This limitation is in addition to the 15 percentlimitation on administrative costs (see § 572.215(o)).</P>
                                    <P>(ii) If an applicant proposes to contribute administrative services, HUD willautomatically approve an applicant's assurances for matching purposes that itwill pay eligible administrative costs from non-Federal sources in an amount upto 7 percent of the implementation grant, and will not require furtherdocumentation of those expenditures for purposes of the HOPE 3 program. If arecipient uses more than 8 percent of its implementation grant to payadministrative costs, the amount credited toward the match will be reduced toless than 7 percent to stay within the 15 percent limitation.</P>
                                    <P>(iii) Non-Federal resources, for the purposes of counting contributions foradministrative costs, may include funds from a Community Development Block Grantunder section 106(b) or section 106(d) of the Housing and Community DevelopmentAct of 1974 and are subject to the recordkeeping and documentation requirementsof that program.</P>

                                    <P>(3) <E T="03">Taxes, fees, and other charges.</E> (i) The present value oftaxes, fees, or other charges that are normally and customarily imposed but arewaived, forgone, or deferred in a manner that facilitates the implementation ofa homeownership program assisted under this part. Only amounts that would havebeen imposed after the date a property is acquired by a recipient or otherentity for transfer to eligible families, the effective date of theimplementation grant agreement if the recipient already owns the property, orthe date after an eligible property is acquired directly from an eligible sourceby an eligible family, as applicable, may be counted towards the match.</P>
                                    <P>(ii) Amounts that would be waived, forgone, or deferred for longer than 20years from the date a family acquires homeownership interests in the unit maynot be counted towards the match.</P>
                                    <P>(iii) The present value of taxes, fees, or other charges waived, forgone, ordeferred must be computed by discounting the estimated amount that would beotherwise payable over the time period (up to 20 years) based on a discount rateapproved or prescribed by HUD.</P>
                                    <P>(iv) Where the match includes amounts under paragraph (b)(3) of this section,the documents transferring the homeownership interest to the family mustevidence the contribution, to the extent the contribution has not already beenreceived.</P>

                                    <P>(4) <E T="03">Real property.</E> Real property contributed for use under anapproved homeownership program. To the extent properties were acquired withFederal resources or are donated directly to the program from Federal sources,their value is not an eligible match contribution.</P>

                                    <P>(i) The as-is fair market value of eligible property may be counted as a <PRTPAGE P="194"/>contribution toward the match, determined in accordance with a recent appraisalconducted under procedures established or approved by HUD. The maximum valuecontributed will be limited as provided in § 572.100.</P>
                                    <P>(ii) When eligible real property is sold to the recipient or its designeefrom non-Federal sources at a price below fair market value, the differentialbetween the fair market value and the discounted sales price may be countedtoward the match.</P>
                                    <P>(iii) Vacant land from any non-Federal source located on existing streetswith available utilities (which need not include laterals) may be contributedfor use under the program, but only if a structure acquired or donated from aneligible HOPE 3 source will be moved onto it. The total amount of thecontribution and any amount paid from HOPE 3 funds for acquisition of thestructure, moving, and rehabilitation costs must be within the limits providedin § 572.100.</P>

                                    <P>(5) <E T="03">Infrastructure.</E> The fair market value of investment (asapproved by HUD), not made with Federal resources, in on-site and off-siteinfrastructure that directly contributes to a homeownership program. Theinfrastructure investment may be counted toward the match only if it wascompleted no earlier than 12 months before the deadline date set by HUD in theNOFA for receipt of implementation grant applications. Investment ininfrastructure may include such activities as new or repaired utility lateralsconnecting eligible property to the main line and new or rebuilt walkways,sidewalks, or curbs on or contiguous to the eligible property. If the investmentin infrastructure also benefits other properties, only the share of the costsdirectly benefiting the eligible property under the homeownership program may becounted toward the match.</P>

                                    <P>(6) <E T="03">Donated labor.</E> All donated labor, including sweat equityprovided by a homebuyer or homeowner, to be valued at $10 an hour or at a ratepromulgated by HUD in the NOFA, except for donated professional labor, asapproved by HUD, including professional labor by homebuyers and homeowners. Thedonated professional labor will be valued at the fair market value of the workcompleted. Professional labor is work ordinarily performed by the donor forpayment, such as work by attorneys, electricians, carpenters, and architectsthat is equivalent to work they do in their occupations. Sweat equity may becounted towards the match only if it is not also counted toward a family'sequity.</P>

                                    <P>(7) <E T="03">Donated materials and supplies.</E> Donated materials andsupplies may be counted toward the match contribution at their fair marketvalue. The recipient must maintain a written enumeration of what donatedmaterials and supplies are being used in the program, as well as documentationof their cost or value.</P>

                                    <P>(8) <E T="03">Other in-kind contributions.</E> The reasonable value of in-kind contributions proposed by the applicant in the application and approved byHUD. In reviewing proposed in-kind contributions, HUD will review to ensure:</P>
                                    <P>(i) The proposed contribution is to be used for an eligible activity underthe proposed homeownership program;</P>
                                    <P>(ii) The application demonstrates that the proposed in-kind contribution willactually be provided; and</P>
                                    <P>(iii) The proposed value of the contribution is reasonable. In determiningwhether the value is reasonable, HUD will generally consider the amount suchcontribution would otherwise cost the program.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.225</SECTNO>
                                    <SUBJECT>Grant agreements; corrective and remedial actions.</SUBJECT>

                                    <P>(a) <E T="03">Terms and conditions.</E> After HUD approves an application fora planning grant or an implementation grant under this part, it will enter intoa grant agreement with the recipient setting forth the amount of the grant andapplicable terms and conditions. The grant agreement will be effective forpurposes of this part and funds may be disbursed under the Cash and ManagementInformation (C/MI) System, described in § 572.230, after the grantagreement has been executed by the authorized official of the recipient and HUD.Among other things, the grant agreement will provide that the recipient agrees:<PRTPAGE P="195"/>
                                    </P>
                                    <P>(1) To carry out the program in accordance with the provisions of this part,applicable law, the approved application, and all other applicable requirements;and</P>
                                    <P>(2) To comply with such other terms and conditions, including recordkeepingand reports, as HUD may establish for the purposes of administering, monitoring,and evaluating the program in an effective and efficient manner.</P>

                                    <P>(b) <E T="03">Corrective and remedial actions.</E> (1) HUD may withhold,withdraw, or recapture any portion of a grant, terminate the grant agreement, ortake other appropriate action authorized under the grant agreement, if HUDdetermines that the recipient is failing to carry out the approved homeownershipprogram in accordance with the terms of the approved application and this part,including failure to provide the contributions toward the match. Corrective orremedial actions that HUD may instruct the recipient to undertake include;</P>
                                    <P>(i) Preparing and following a schedule of actions or a management plan forproperly completing the approved activities;</P>
                                    <P>(ii) Cancelling or revising the affected activities before expending grantfunds for them, revising the grant budget as necessary, and substituting othereligible activities;</P>
                                    <P>(iii) Discontinuing draws under the C/MI System, and not incurring furthercosts for the affected activities;</P>
                                    <P>(iv) Reimbursing its HOPE 3 program account in the amount not used inaccordance with this part and the grant agreement; and</P>
                                    <P>(v) In the case of implementation grants, making additional matchingcontributions in substitution for contributions not in compliance with this partand the grant agreement or submitting to HUD acceptable evidence that matchingcontributions sufficient to meet the total match required under this part andthe grant agreement will be made, before additional draws are made.</P>
                                    <P>(2) If HUD determines that the recipient is not complying with the correctiveor remedial actions agreed upon with the recipient, or as otherwise authorizedin the grant agreement, HUD may implement the following additional correctiveand remedial actions:</P>
                                    <P>(i) Changing the method of payment under the C/MI System to a reimbursementbasis;</P>
                                    <P>(ii) Suspending the recipient's authority to make draws under the C/MI Systemfor affected activities;</P>
                                    <P>(iii) Reducing (deobligating) the grant in the amount affected by theperformance deficiency, including, in the case of implementation grants, failureto furnish matching contributions in the required amount;</P>
                                    <P>(iv) Terminating the grant for all further activities and initiating close-out procedures;</P>
                                    <P>(v) Taking action against the recipient under 24 CFR part 24 and ExecutiveOrder 12549 (3 CFR, 1986 Comp., p. 189) with respect to future HOPE 3, HUD, orFederal grant awards; and</P>
                                    <P>(vi) Taking any other remedial action legally available.</P>
                                    <P>(3) If the amount of grant funds that has been disbursed under the C/MISystem exceeds the amount finally determined by HUD to be authorized (includingany authorized deobligation), the recipient must repay such excess amount toHUD, and will have no right to reclaim or reuse such excess amount.</P>

                                    <P>(c) <E T="03">Failure to complete and transfer a property to a homebuyer.</E>If a property assisted under this part or credited as match is not completed andtransferred to homebuyers as required under this part, whether voluntarily bythe recipient or otherwise, grant expenditures on the property are consideredineligible, and HOPE 3 funds for acquisition and rehabilitation must be repaidto the program account. Preliminary costs (such as architectural andengineering, inspection, and appraisal fees) expended before acquisition areconsidered general program expenses and need not be repaid.</P>

                                    <P>(d) <E T="03">Failure to provide homeownership opportunities under animplementation grant.</E> Failure to provide at least 70 percent of the numberof homeownership opportunities proposed in the application for an implementationgrant within the timeframe specified in § 572.210(f) may result inremedial actions, as described in paragraph (b) of <PRTPAGE P="196"/>this section, being taken byHUD, including requiring repayment of all or part of the grant.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.230</SECTNO>
                                    <SUBJECT>Cash and Management Information (C/MI) System.</SUBJECT>
                                    <P>Disbursement of HOPE 3 grant funds is managed through HUD's Cash andManagement Information (C/MI) System for the HOPE 3 program. Funds that may bedisbursed through the C/MI System include funds awarded to the recipient andobligated through the grant approval letter issued by HUD. HOPE 3 funds aredrawn down by the recipient or its authorized designee from a United StatesTreasury account for the program, using the Treasury Automated Clearinghouse(ACH) System. Any drawdown of HOPE 3 funds from the United States Treasuryaccount is conditioned upon the submission of satisfactory information about theprogram and compliance with other procedures specified by HUD in HUD's forms andissuances concerning the C/MI System.</P>
                                    <CITA>[62 FR 34145, June 24, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.235</SECTNO>
                                    <SUBJECT>Amendments.</SUBJECT>
                                    <P>Amendments to the approved program must be documented or approved by HUD inaccordance with instructions provided by HUD.</P>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart D—Selection Process</HD>
                                    <SECTION>
                                    <SECTNO>§ 572.300</SECTNO>
                                    <SUBJECT>Notices of funding availability (NOFAs); grant applications.</SUBJECT>

                                    <P>When funds are made available for planning grants or implementation grantsunder this part, HUD will publish a NOFA in the <E T="04">Federal Register,</E>in accordance with the requirements of part 4 of this title, and will selectapplications for funding on a competitive basis as provided in the applicableNOFA.</P>
                                    <CITA>[62 FR 34145, June 24, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.315</SECTNO>
                                    <SUBJECT>Rating criteria for planning grants.</SUBJECT>
                                    <P>Any planning grants made by HUD under the HOPE 3 program will continue to begoverned by the provisions in this section in effect immediately before October16, 1996. When or before HUD announces the availability of funds for planninggrants under this part, these provisions will be recodified.</P>
                                    <CITA>[61 FR 48798, Sept. 16, 1996]</CITA>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart E—Other Federal Requirements</HD>
                                    <SECTION>
                                    <SECTNO>§ 572.400</SECTNO>
                                    <SUBJECT>Consolidated plan.</SUBJECT>
                                    <P>Applicants must provide a certification of consistency with the approvedconsolidated plan, in accordance with 24 CFR 91.510.</P>
                                    <CITA>[60 FR 36018, July 12, 1995]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.405</SECTNO>
                                    <SUBJECT>Nondiscrimination and equal opportunity requirements.</SUBJECT>
                                    <P>In addition to the nondiscrimination and equal opportunity requirements setforth in 24 CFR part 5, the following requirements apply to homeownershipprograms under this part:</P>

                                    <P>(a) <E T="03">Modification of fair housing and nondiscrimination requirementsfor Indian tribes and IHAs.</E> (1) The Indian Civil Rights Act (25 U.S.C. 1301<E T="03">et seq</E>.) applies to tribes when they exercise their powers ofself-government. Thus, it is applicable in all cases when an IHA has beenestablished by exercise of such powers. In the case of the IHA establishedpursuant to State law, the applicability of the Indian Civil Rights Act shall bedetermined on a case-by-case basis. Development subject to the Indian CivilRights Act must be developed and operated in compliance with its provisions andall implementing HUD requirements, instead of title VI and the Fair Housing Actand their implementing regulations.</P>
                                    <P>(2) In the case of Indian tribes and IHAs, compliance with the requirementsof this section shall be to the maximum extent consistent, but not in derogationof, the Indian Self-Determination and Education Assistance Act (25 U.S.C.450e(b)).</P>

                                    <P>(b) <E T="03">Affirmative fair housing marketing.</E> The recipient mustadopt a strategy for informing and soliciting applications from people who areleast likely to apply, because of race, color, religion, sex, disability,familial status, or national origin, for the program without special outreach,consistent with the affirmative fair housing marketing requirements. (See 24 CFR92.351 for an <PRTPAGE P="197"/>example of an affirmative strategy.) Paragraph (b) of this sectiondoes not apply to Indian tribes and IHAs, as described in paragraph (a)(1) ofthis section.</P>

                                    <P>(c) <E T="03">Authority for collection of racial, ethnic, and genderdata.</E> HUD requires submission of racial, ethnic, and gender data under thispart under the authority of section 562 of the Housing and Community DevelopmentAct of 1987 and section 808(e)(6) of the Fair Housing Act.</P>

                                    <P>(d) <E T="03">Faith-based activities.</E> (1) Organizations that arereligious or faith-based are eligible, on the same basis as any otherorganization, to participate in the HOPE 3 program. Neither the Federalgovernment nor a State or local government receiving funds under HOPE 3 programsshall discriminate against an organization on the basis of the organization'sreligious character or affiliation.</P>
                                    <P>(2) Organizations that are directly funded under the HOPE 3 program may notengage in inherently religious activities, such as worship, religiousinstruction, or proselytization, as part of the programs or services fundedunder this part. If an organization conducts such activities, the activitiesmust be offered separately, in time or location, from the programs or servicesfunded under this part, and participation must be voluntary for thebeneficiaries of the HUD-funded programs or services.</P>
                                    <P>(3) A religious organization that participates in the HOPE 3 program willretain its independence from Federal, State, and local governments, and maycontinue to carry out its mission, including the definition, practice, andexpression of its religious beliefs, provided that it does not use direct HOPE 3funds to support any inherently religious activities, such as worship, religiousinstruction, or proselytization. Among other things, faith-based organizationsmay use space in their facilities to provide HOPE 3-funded services, withoutremoving religious art, icons, scriptures, or other religious symbols. Inaddition, a HOPE 3-funded religious organization retains its authority over itsinternal governance, and it may retain religious terms in its organization'sname, select its board members on a religious basis, and include religiousreferences in its organization's mission statements and other governingdocuments.</P>
                                    <P>(4) An organization that participates in the HOPE 3 program shall not, inproviding program assistance, discriminate against a program beneficiary orprospective program beneficiary on the basis of religion or religious belief.</P>

                                    <P>(5) HOPE 3 funds may not be used for the acquisition, construction, orrehabilitation of structures to the extent that those structures are used forinherently religious activities. HOPE 3 funds may be used for the acquisition,construction, or rehabilitation of structures only to the extent that thosestructures are used for conducting eligible activities under this part. Where astructure is used for both eligible and inherently religious activities, HOPE 3funds may not exceed the cost of those portions of the acquisition,construction, or rehabilitation that are attributable to eligible activities inaccordance with the cost accounting requirements applicable to HOPE 3 funds inthis part. Sanctuaries, chapels, or other rooms that a HOPE 3-funded religiouscongregation uses as its principal place of worship, however, are ineligible forHOPE 3-funded improvements. Disposition of real property after the term of thegrant, or any change in use of the property during the term of the grant, issubject to government-wide regulations governing real property disposition (<E T="03">see</E> 24 CFR parts 84 and 85).</P>
                                    <P>(6) If a State or local government voluntarily contributes its own funds tosupplement federally funded activities, the State or local government has theoption to segregate the Federal funds or commingle them. However, if the fundsare commingled, this section applies to all of the commingled funds.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 59 FR 33894, June 30, 1994; 61FR 5209, Feb. 9, 1996; 68 FR 56405, Sept. 30, 2003]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.410</SECTNO>
                                    <SUBJECT>Environmental procedures and standards.</SUBJECT>

                                    <P>(a) <E T="03">Planning grants.</E> HUD has determined that its approval ofapplications for planning grants under this part is <PRTPAGE P="198"/>categorically excluded fromenvironmental review and compliance requirements of the National EnvironmentalPolicy Act of 1969 (NEPA) and that other Federal environmental laws andauthorities listed in 24 CFR 50.4 are not applicable.</P>

                                    <P>(b) <E T="03">Implementation grants.</E> (1) Recipients of implementationgrants must comply with the applicable environmental laws and authorities at 24CFR 50.4 and must:</P>
                                    <P>(i) Supply HUD with information necessary for it to perform any necessaryenvironmental review of the property (or neighborhood);</P>
                                    <P>(ii) Carry out mitigating measures required by HUD or select alternateeligible property; and</P>
                                    <P>(iii) Not acquire or otherwise carry out program activities with respect toany eligible property until HUD approval for the property (or neighborhood) isreceived.</P>
                                    <P>(2) Before any amounts under this part are used to acquire or rehabilitate aneligible property, HUD must determine whether the proposed activities triggerapplicability thresholds for the applicable Federal environmental laws andauthorities. These may apply when the property is:</P>
                                    <P>(i) Located within designated coastal barriers;</P>
                                    <P>(ii) Listed on, or eligible for listing on, the National Register of HistoricPlaces; or is located within, or adjacent to, an historic district;</P>
                                    <P>(iii) Located near hazardous operations handling fuels or chemicals of anexplosive or flammable nature;</P>
                                    <P>(iv) Contaminated by toxic chemicals or radioactive materials;</P>
                                    <P>(v) Located within a runway clear zone at a civil airport or within a clearzone or accident potential zone at a military airfield; or</P>
                                    <P>(vi) Located within a special flood hazard area or within a locationrequiring flood insurance protection.</P>
                                    <P>(3) A recipient may choose to make the threshold reviews itself or withassistance from State or local governments or qualified persons or to refer theproperty to HUD for threshold review. Where the recipient makes the thresholdreview itself, it must submit the result to HUD.</P>
                                    <P>(4) If a recipient chooses not to make the threshold reviews, it must submitinformation to HUD to permit HUD to make the review.</P>
                                    <P>(5) If HUD determines on the basis of the recipient's threshold review orHUD's threshold review that one or more of the thresholds are exceeded, HUD willconduct an environmental review of that issue and, if appropriate, establishmitigating measures that the recipient must carry out for the property unless itdecides to select an alternate property.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.415</SECTNO>
                                    <SUBJECT>Conflict of interest.</SUBJECT>

                                    <P>(a) <E T="03">Conflict of interest.</E> In addition to the conflict ofinterest requirements in OMB Circular A-110 <SU>1</SU>
                                    <FTREF/> and 24CFR part 85, no person who is an employee, agent, consultant, officer, orelected or appointed official of the recipient or cooperating entity named inthe application and who exercises or has exercised any functions orresponsibilities with respect to assisted activities, or who is in a position toparticipate in a decision-making process or gain inside information with regardto such activities, may obtain a financial interest or benefit from theactivity, or have an interest in any contract, subcontract, or agreement withrespect thereto, or the proceeds thereunder, either for himself or herself orfor those with whom he or she has family or business ties, during his or hertenure or for one year thereafter, except that a resident of an eligibleproperty may acquire an ownership interest.</P>
                                    <FTNT>
                                    <P>
                                    <SU>1</SU> See § 572.425(b) concerning availability ofOMB Circulars.</P>
                                    </FTNT>

                                    <P>(b) <E T="03">Exception.</E> HUD may grant an exception to the exclusion inparagraph (a) of this section on a case-by-case basis when it determines thatsuch an exception will serve to further the purposes of the HOPE 3 program andthe effective and efficient administration of the local homeownership program.An exception may be considered only after the applicant or recipient hasprovided a disclosure of the nature of the conflict, accompanied by an assurancethat there has been public disclosure of the conflict, a description of how thepublic disclosure was made, <PRTPAGE P="199"/>and an opinion of the applicant's or recipient'sattorney that the interest for which the exception is sought would not violateState or local law. In determining whether to grant a requested exception, HUDwill consider the cumulative effect of the following factors, where applicable:</P>
                                    <P>(1) Whether the exception would provide a significant cost benefit or anessential degree of expertise to the local homeownership program that wouldotherwise not be available;</P>
                                    <P>(2) Whether an opportunity was provided for open competitive bidding ornegotiation;</P>
                                    <P>(3) Whether the person affected is a member of a group or class intended tobe the beneficiaries of the activity and the exception will permit such personto receive generally the same interests or benefits as are being made availableor provided to the group or class;</P>
                                    <P>(4) Whether the affected person has withdrawn from his or her functions orresponsibilities, or the decisionmaking process, with respect to the specificactivity in question;</P>
                                    <P>(5) Whether the interest or benefit was present before the affected personwas in a position as described in paragraph (b) of this section;</P>
                                    <P>(6) Whether undue hardship will result either to the applicant, recipient, orthe person affected when weighed against the public interest served by avoidingthe prohibited conflict; and</P>
                                    <P>(7) Any other relevant considerations.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.420</SECTNO>
                                    <SUBJECT>Miscellaneous requirements.</SUBJECT>

                                    <P>(a) <E T="03">Application of OMB Circulars.</E> (1) The policies, guidelines,and requirements of OMB Circular Nos. A-87 (Cost Principles Applicable toGrants, Contracts and Other Agreements with State and Local Governments) and 24CFR part 85 (Administrative Requirements for Grants and Cooperative Agreementsto State, Local and Federally Recognized Indian Tribal Governments) apply to theaward, acceptance, and use of assistance under this part by applicable entities,and to the remedies for non-compliance, except where inconsistent with theprovisions of NAHA, other Federal statutes, or this part. Part 84 of this title(Grants and Agreements with Institutions of Higher Education, Hospitals, andOther Nonprofit Organizations) and OMB Circular Nos. A-122 (CostPrinciples Applicable to Grants, Contract and Other Agreements with NonprofitInstitutions) and, as applicable, A-21 (Cost Principles for EducationalInstitutions) apply to the acceptance and use of assistance under this part bycovered organizations, except where inconsistent with the provisions of Federalstatutes or this part. Recipients are also subject to the audit requirements ofOMB Circular A-128 (Audits of State and Local Governments) implemented at24 CFR part 44, and OMB Circular A-133 (Audits of Institutions of HigherLearning and Other Nonprofit Institutions), implemented at 24 CFR part 45, asapplicable.</P>
                                    <P>(2) Copies of OMB Circulars may be obtained from E.O.P. Publications, room2200, New Executive Office Building, Washington, DC 20503, telephone (202)395-7332 (this is not a toll-free number). There is a limit of two freecopies.</P>

                                    <P>(b) <E T="03">Requirements in 24 CFR part 5.</E> The Disclosure requirements;provisions on Debarred, suspended or ineligible contractors; and Drug-FreeWorkplace requirements, as identified in § 5.105 (b), (c), and (d) ofthis title, apply to this program.</P>
                                    <P>(c)-(d) [Reserved]</P>

                                    <P>(e) <E T="03">Labor standards.</E> If other Federal programs are used inconnection with the HOPE 3 homeownership program, labor standards requirementsapply to the extent required by such other Federal programs.</P>

                                    <P>(f) <E T="03">Flood insurance.</E> Pursuant to the Flood Disaster ProtectionAct of 1973 (42 U.S.C. 4001-4128), the recipient may not provide financialassistance for acquisition or rehabilitation of properties located in an areaidentified by the Federal Emergency Management Agency (FEMA) as having specialflood hazards, unless:</P>
                                    <P>(1) The community in which the area is situated is participating in theNational Flood Insurance program (see 44 CFR parts 59 through 79), or less thanone year has passed since FEMA notification regarding such hazards; and</P>

                                    <P>(2) Flood insurance is obtained as a condition of the acquisition orrehabilitation of the property.<PRTPAGE P="200"/>
                                    </P>

                                    <P>(g) <E T="03">Coastal Barrier Resources Act.</E> Pursuant to the CoastalBarrier Resources Act (16 U.S.C. 3601), HUD will not approve use of propertiesin the Coastal Barrier Resources System.</P>

                                    <P>(h) <E T="03">Lead-based paint activities.</E> The Lead-Based Paint PoisoningPrevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based PaintHazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementingregulations at part 35, subparts A, B, J, K and R of this title apply toactivities under these programs.</P>
                                    <CITA>[58 FR 36526, July 7, 1993, as amended at 59 FR 2738, Jan. 19, 1994; 61 FR48798, Sept. 16, 1996; 62 FR 34145, June 24, 1997; 64 FR 50226, Sept. 15, 1999]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 572.425</SECTNO>
                                    <SUBJECT>Recordkeeping and reports; audit of recipients.</SUBJECT>

                                    <P>(a) <E T="03">General records.</E> Each recipient must keep records that willfacilitate an effective audit to determine compliance with program requirementsand that fully disclose:</P>
                                    <P>(1) The amount and disposition by the recipient of the planning andimplementation grants received under this part, including sufficient recordsthat document the reasonableness and necessity of each expenditure;</P>
                                    <P>(2) The amount and disposition of proceeds from financing obtained inconnection with the program, sales to eligible families, and any fundsrecaptured upon sale by the homeowner;</P>
                                    <P>(3) The total cost of the homeownership program;</P>
                                    <P>(4) The amount and nature of any other assistance, including cash, property,services, or other items contributed as a condition of receiving animplementation grant;</P>
                                    <P>(5) The cost or other value of all in-kind contributions towards the matchrequired by § 572.220; and</P>
                                    <P>(6) Any other proceeds received for, or otherwise used in connection with,the homeownership program under this part.</P>

                                    <P>(b) <E T="03">Family size and income; racial, ethnic, and gender data.</E>The recipient must maintain records on the family size and income, and racial,ethnic, and gender characteristics of families who apply for homeownership andfamilies who become homeowners.</P>

                                    <P>(c) <E T="03">Selection procedures.</E> The recipient must maintain a copy ofits procedures for identifying and selecting eligible families in accordancewith § 572.110, and records documenting the eligibility of eachfamily selected for homeownership.</P>

                                    <P>(d) <E T="03">Rehabilitation standards.</E> The recipient must maintainwritten rehabilitation standards required by § 572.100(d)(5).</P>

                                    <P>(e) <E T="03">Cooperative and condominium agreements.</E> The recipient mustmaintain a copy of any condominium and cooperative association agreements forproperties under a homeownership program approved under this part.</P>

                                    <P>(f) <E T="03">Amounts available for reuse.</E> The recipient must keep andmake available to HUD all records necessary to calculate accurately payments dueto HUD under § 572.135(b) and (c).</P>

                                    <P>(g) <E T="03">Access by HUD and the Comptroller General.</E> For purposes ofaudit, examination, monitoring, and evaluation, each recipient must give HUD(including any duly authorized representatives and the Inspector General) andthe Comptroller General of the United States (and any duly authorizedrepresentatives) access to any books, documents, papers, and records of therecipient that are pertinent to assistance received under this part, includingall records required to be kept under this section.</P>

                                    <P>(h) <E T="03">Reports.</E> The recipient must submit reports required by HUD.</P>
                                    <APPRO>(Approved by the Office of Management and Budget, with respect toimplementation grants, under control number 2506-0128)</APPRO>
                                    </SECTION>
                                    </SUBPART>
                                    </PART>
                                    <PART>
                                    <EAR>Pt. 573</EAR>
                                    <HD SOURCE="HED">PART 573—LOAN GUARANTEE RECOVERY FUND</HD>
                                    <CONTENTS>
                                    <SECHD>Sec.</SECHD>
                                    <SECTNO>573.1</SECTNO>
                                    <SUBJECT> Authority and purpose.</SUBJECT>
                                    <SECTNO>573.2</SECTNO>
                                    <SUBJECT> Definitions.</SUBJECT>
                                    <SECTNO>573.3</SECTNO>
                                    <SUBJECT> Eligible activities.</SUBJECT>
                                    <SECTNO>573.4</SECTNO>
                                    <SUBJECT> Loan term.</SUBJECT>
                                    <SECTNO>573.5</SECTNO>
                                    <SUBJECT> Underwriting standards and availability of loanguarantee assistance.</SUBJECT>
                                    <SECTNO>573.6</SECTNO>
                                    <SUBJECT> Submission requirements.</SUBJECT>
                                    <SECTNO>573.7</SECTNO>
                                    <SUBJECT> Loan guarantee agreement.</SUBJECT>
                                    <SECTNO>573.8</SECTNO>
                                    <SUBJECT> Environmental procedures and standards.</SUBJECT>
                                    <SECTNO>573.9</SECTNO>
                                    <SUBJECT> Other requirements.</SUBJECT>
                                    <SECTNO>573.10</SECTNO>
                                    <SUBJECT> Fees for guaranteed loans.</SUBJECT>
                                    <SECTNO>573.11</SECTNO>
                                    <SUBJECT> Record access and recordkeeping.</SUBJECT>
                                    </CONTENTS>
                                    <AUTH>

                                    <PRTPAGE P="201"/>
                                    <HD SOURCE="HED">Authority:</HD>
                                    <P>Pub. L. 104-155, 110 Stat. 1392, 18 U.S.C. 241note; 42 U.S.C. 3535(d).</P>
                                    </AUTH>
                                    <SOURCE>
                                    <HD SOURCE="HED">Source:</HD>
                                    <P>61 FR 47405, Sept. 6, 1996, unless otherwise noted.</P>
                                    </SOURCE>
                                    <SECTION>
                                    <SECTNO>§ 573.1</SECTNO>
                                    <SUBJECT>Authority and purpose.</SUBJECT>
                                    <P>Section 4 of the Church Arson Prevention Act of 1996 (Pub. L. 104-155,approved July 3, 1996) authorizes HUD to guarantee loans made by financialinstitutions to certain nonprofit organizations to finance activities designedto remedy the damage and destruction to real and personal property caused byacts of arson or terrorism. This part establishes the general procedures andrequirements that apply to HUD's guarantee of these loans.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.2</SECTNO>
                                    <SUBJECT>Definitions.</SUBJECT>
                                    <P>The following definitions are only applicable to loan guarantees under thispart, and are not criminal definitions.</P>
                                    <P>

                                    <E T="03">Act</E> means “The Church Arson Prevention Act of 1996”(Pub. L. 104-155, approved July 3, 1996).</P>
                                    <P>

                                    <E T="03">Arson</E> means a fire or explosion causing damage to (ordestruction of) real or personal property that a Qualified CertificationOfficial determines, or reasonably believes, to be deliberately set.</P>
                                    <P>

                                    <E T="03">Borrower</E> means an organization described in section 501(c)(3)of the Internal Revenue Code of 1986, as amended, whose property has beendamaged or destroyed as a result of an act of arson or terrorism and that incursa debt obligation to a financial institution for the purpose of carrying outactivities eligible under his part.</P>
                                    <P>

                                    <E T="03">Financial Institution</E> means a lender which may be a bank, trustcompany, savings and loan association, credit union, mortgage company, or otherissuer regulated by the Federal Deposit Insurance Corporation, the Office ofThrift Supervision, the Credit Union Administration, or the U.S. Comptroller ofthe Currency. A Financial Institution may also be a Pension Fund.</P>
                                    <P>

                                    <E T="03">Guarantee</E> means an obligation of the United States Governmentguaranteeing payment of the outstanding principal loan amount, in whole or inpart, plus interest thereon, on a debt obligation of the Borrower to a FinancialInstitution upon failure of the Borrower to repay the debt.</P>
                                    <P>

                                    <E T="03">Guaranteed Loan Funds</E> means funds received by the borrower fromthe Financial Institution to finance eligible activities under this part, therepayment of which is guaranteed by HUD.</P>
                                    <P>

                                    <E T="03">Loan Guarantee Agreement</E> means an agreement between a FinancialInstitution and the Secretary detailing the rights, responsibilities,procedures, terms, and conditions under which a loan provided by a FinancialInstitution to a Borrower may be guaranteed under section 4 of the Act.</P>
                                    <P>

                                    <E T="03">Qualified Certification Official (QCO)</E>—(1) <E T="03">Forthe purpose of certifying an act of arson.</E> A State or local officialauthorized to investigate possible acts of arson. For the purposes of thisdefinition, such an official is authorized to execute an Official IncidentReport or its equivalent and may be an official or employee of such agencies asthe local fire department, the local police department, or the State FireMarshall Office or its equivalent. The term “Qualified CertificationOfficial” also includes HUD, which will consult with the Bureau ofAlcohol, Tobacco, and Firearms of the Department of the Treasury in making itsdeterminations.</P>

                                    <P>(2) <E T="03">For the purpose of certifying an act of terrorism.</E> TheSecretary or his designee, in consultation with the Federal Bureau ofInvestigation, shall determine whether an act of violence is a terrorist act oris reasonably believed to be a terrorist act.</P>
                                    <P>

                                    <E T="03">Section 4 Guaranteed Loan</E> means a HUD guaranteed loan made by aFinancial Institution to a Borrower for the purpose of carrying out eligibleactivities to address damage or destruction caused by acts of arson orterrorism.</P>
                                    <P>

                                    <E T="03">Terrorism</E> means an act of violence causing damage to (ordestruction of) real or personal property that the Secretary or his designee, inconsultation with the Federal Bureau of Investigation, determines to be, orreasonably believes to be, a terrorist act, as defined by applicable Federal lawor guidelines.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.3</SECTNO>
                                    <SUBJECT>Eligible activities.</SUBJECT>

                                    <P>Guaranteed Loan Funds may be used by a Borrower for the following activitieswhen it is certified in accordance <PRTPAGE P="202"/>with § 573.6(e) that the activityis necessary to address damage caused by an act or acts of arson or terrorism ascertified in accordance with § 573.6(f):</P>
                                    <P>(a) Acquisition of improved or unimproved real property in fee or under longterm lease.</P>
                                    <P>(b) Acquisition and installation of personal property.</P>
                                    <P>(c) Rehabilitation of real property owner, acquired, or leased by theBorrower.</P>
                                    <P>(d) Construction, reconstruction, or replacement of real propertyimprovement.</P>
                                    <P>(e) Clearance, demolition, and removal, including movement of structures toother sites, of buildings, fixtures and improvements on real property.</P>
                                    <P>(f) Site preparation, including construction, reconstruction, or installationof site improvements, utilities, or facilities, which is related to theactivities described in paragraph (a), (c), or (d) of this section.</P>
                                    <P>(g) Architectural, engineering, and similar services necessary to developplans in connection with activities financed under paragraph (a), (b), (c), or(d) of this section.</P>
                                    <P>(h) Acquisition, installation and restoration of security systems.</P>
                                    <P>(i) Loans for refinancing existing indebtedness secured by a property whichhas been or will be acquired, constructed, rehabilitated or reconstructed, ifsuch financing is determined to be appropriate to achieve the objectives of theAct and this part.</P>
                                    <P>(j) Other necessary project costs such as insurance, bonding, legal fees,appraisals, surveys, relocation, closing costs, etc., paid or incurred by theBorrower in connection with the completion of the above activities.</P>
                                    <CITA>[61 FR 47405, Sept. 6, 1996, as amended at 62 FR 24574, May 6, 1997]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.4</SECTNO>
                                    <SUBJECT>Loan term.</SUBJECT>
                                    <P>The term of the loan to be guaranteed by HUD under this part may not exceed20 years.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.5</SECTNO>
                                    <SUBJECT>Underwriting standards and availability of loan guarantee assistance.</SUBJECT>
                                    <P>(a) HUD may, in its discretion, accept the underwriting standards of theFinancial Institution making a loan to a Borrower.</P>
                                    <P>(b) HUD will not make the loan guarantee unless it determines that theguaranteed loan is an acceptable financial risk under HUD's generally applicableloan underwriting standards based on the following:</P>
                                    <P>(1) The Borrower's ability to pay debt service; and</P>
                                    <P>(2) The value of the collateral assigned or pledged as security for therepayment of the loan.</P>
                                    <P>(c) The provision of a loan guarantee to a Financial Institution and theamount of the guarantee do not depend in any way on the purpose, function, oridentity of the organization to which the Financial Institution has made, orintends to make, a Section 4 Guaranteed Loan.</P>
                                    <P>(d) HUD may disapprove a request for loan guarantee assistance based on theavailability of funding.</P>
                                    <P>(e) HUD may decline any Financial Institution's participation if itsunderwriting criteria are insufficient to make the guarantee an acceptablefinancial risk, or if the proposed interest rates or fees are unacceptable. HUDexpects the proposed interest rates to take into account the value of theFederal guarantee.</P>
                                    <P>(f) HUD may limit the availability of Guaranteed Loan Funds to geographicareas having the greatest need, as determined by a needs analysis of the mostcurrent available date conducted by HUD.</P>
                                    <P>(g) Other requirements associated with the underwriting standards andguidelines shall be contained in the Loan Guarantee Agreement.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.6</SECTNO>
                                    <SUBJECT>Submission requirements.</SUBJECT>
                                    <P>A Financial Institution seeking a Section 4 Guaranteed Loan must submit toHUD the following documentation:</P>
                                    <P>(a) A statement that the institution is a Financial Institution as defined at§ 573.2.</P>
                                    <P>(b) A statement that the Borrower is eligible as defined at§ 573.2.</P>
                                    <P>(c) A description of each eligible activity for which the loan is requested.</P>

                                    <P>(d) A statement of other available funds to be used to finance the eligibleactivities (e.g., insurance proceeds).<PRTPAGE P="203"/>
                                    </P>
                                    <P>(e) A certification by the Borrower that the activities to be assistedresulted from an act of arson or terrorism which is the subject of thecertification described in paragraph (f) of this section.</P>
                                    <P>(f) A certification by a QCO that the damage or destruction to be remedied bythe use of the Guaranteed Loan Funds resulted from an act of arson or terrorism.</P>
                                    <P>(g) The environmental documentation required by § 573.8.</P>
                                    <P>(h) A narrative of the institution's underwriting standards used in reviewingthe Borrower's loan request.</P>
                                    <P>(i) The interest rate on the loan and fees the lender intends to use inconnection with the loan; and</P>
                                    <P>(j) The percentage of the loan for which a guarantee is requested.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.7</SECTNO>
                                    <SUBJECT>Loan guarantee agreement.</SUBJECT>
                                    <P>(a) The rights and responsibilities with respect to the guaranteed loan shallbe substantially described in an agreement entered into between the FinancialInstitution, as the lender, and the Secretary, as the guarantor, which agreementshall provide that:</P>
                                    <P>(1) The lender has submitted or will submit a request for loan guaranteeassistance that is accompanied by the Borrower's request for a loan to carry outeligible activities described in § 573.3;</P>
                                    <P>(2) The lender will require the Borrower to execute a promissory notepromising to repay the guaranteed loan in accordance with the terms thereof;</P>
                                    <P>(3) The lender will require the Borrower to provide collateral security, toan extent and in a form, acceptable to HUD;</P>
                                    <P>(4) HUD reserves the right to limit loan guarantees to loans financing thereplacement of damaged property with comparable new property;</P>
                                    <P>(5) The lender will follow certain claim procedures to be specified by HUD inconnection with any defaults, including appropriate notification of default asrequired by HUD;</P>
                                    <P>(6) The lender will follow procedures for payment under the guarantee wherebythe lender will be paid (up to the amount of guarantee) the amount owed to thelender less any amount recovered from the underlying collateral security for theloan; and</P>
                                    <P>(7) The lender will act as the fiscal agent for the loan, servicing theguaranteed loan, maintaining loan documents, and receiving the Borrower'spayments of principal and interest. The Borrower and the lender may be requiredto execute a fiscal agency agreement.</P>
                                    <P>(b) In addition, the agreement shall contain other requirements, terms, andconditions required or approved by HUD.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.8</SECTNO>
                                    <SUBJECT>Environmental procedures and standards.</SUBJECT>
                                    <P>The environmental review requirements at 24 CFR part 50 are applicable tothis part.</P>

                                    <P>(a) <E T="03">Environmental procedures.</E> Before any lender's submissionrequesting a loan guarantee for the acquisition, rehabilitation, or constructionof real property can be selected for a loan guarantee, HUD shall determinewhether any environmental thresholds are exceeded in accordance with 24 CFR part50, which implements the National Environmental Policy Act (NEPA) and therelated Federal environmental laws and authorities listed under 24 CFR 50.4. Toassist in complying with environmental requirements, Borrowers are encouraged toselect sites that are free of environmental hazards and are to provide HUD withenvironmental data needed to make a determination of compliance. For successfulBorrowers, the costs for preparing the environmental data are eligible asproject costs.</P>
                                    <P>(1) If HUD determines that one or more of the thresholds are exceeded, HUDshall conduct a compliance review of the issue and, if appropriate, establishmitigating measures that the applicant shall carry out for the property.</P>
                                    <P>(2) The lender's submissions under § 573.6 shall provide HUD with:</P>
                                    <P>(i) Documentation for environmental threshold review; and</P>
                                    <P>(ii) Any previously issued environmental reviews prepared by local, State, orother Federal agencies for the proposed property.</P>

                                    <P>(3) In providing the above information, the Borrower is encouraged to <PRTPAGE P="204"/>contactthe local community development agency to obtain any previously issuedenvironmental reviews for the proposed property as well as for other relevantinformation that can be used in the applicant documentation for theenvironmental threshold review.</P>
                                    <P>(4) HUD reserves the right to disqualify any request where one or moreenvironmental thresholds are exceeded if HUD determines that the compliancereview cannot be satisfactorily completed.</P>
                                    <P>(5) If Guaranteed Loan Funds are requested for acquisition, rehabilitation,or construction, Borrowers and Financial Institutions are prohibited fromcommitting or expending State, local, or other funds to undertake propertyacquisition, rehabilitation or construction under this part until HUD issues aletter of commitment notifying the lender of HUD approval of the loan guarantee.</P>

                                    <P>(b) <E T="03">Environmental thresholds.</E> HUD shall determine whether aNEPA environmental assessment is required. Also, HUD shall determine whether theproposed property triggers thresholds for the applicable Federal environmentallaws and authorities listed under 24 CFR 50.4 as follows:</P>
                                    <P>(1) For minor rehabilitation of a building and acquisition of any property,Federal environmental laws and authorities may apply when the property is:</P>
                                    <P>(i) Located within designated coastal barrier resources;</P>
                                    <P>(ii) Contaminated by toxic chemicals or radioactive materials;</P>
                                    <P>(iii) Located within a floodplain;</P>
                                    <P>(iv) A building for which flood insurance protection is required;</P>
                                    <P>(v) Located within a runway clear zone at a civil airport or within a clearzone or accident potential zone at a military airfield; or</P>
                                    <P>(vi) Listed on, or eligible for listing on, the National Register of HistoricPlaces; located within, or adjacent to, an historic district, or is a propertywhose area of potential effects includes a historic district or property.</P>
                                    <P>(2) For major rehabilitation of a building or for new construction orrebuilding, and environmental assessment under NEPA is required and, in additionto paragraph (b)(1)(i) through (vi) of this section, other Federal environmentallaws and authorities may apply when the property:</P>
                                    <P>(i) Affects coastal zone management;</P>
                                    <P>(ii) Is located near hazardous industrial operations handling fuels orchemicals of an explosive or flammable nature;</P>
                                    <P>(iii) Affects a sole source aquifer;</P>
                                    <P>(iv) Affects endangered species;</P>
                                    <P>(v) Is located within a designated wetland; or</P>
                                    <P>(vi) Is located in a high noise area.</P>

                                    <P>(c) <E T="03">Qualified data sources.</E> The environmental thresholdinformation provided by applicants mut be from qualified data sources. Aqualified data source means any Federal, State, or local agency with expertiseor experience in environmental protection (e.g., the local community developmentagency; the local planning agency; the State environmental protection agency; orthe State Historic Preservation Officer) or any other source qualified toprovide reliable information on the particular property.</P>

                                    <P>(d) <E T="03">Definition.</E> Minor rehabilitation means proposed fixing andrepairs:</P>
                                    <P>(1) Whose estimated cost is less than 75 percent of the estimated cost ofreplacement after completion;</P>
                                    <P>(2) That does not involve changes in land use from residential tononresidential, or from nonresidential to residential; and</P>
                                    <P>(3) In the case of residential properties, that does not increase densitymore than 20 percent.</P>

                                    <P>(e) <E T="03">Project consultants.</E> In achieving compliance with theseprocedures, Borrower's architectural and engineering consultants shall considerthese environmental factors and provide information in their plan narratives asto how their construction plans conform with the above environmental factors. Tofacilitate HUD's compliance with part 50, the Borrower is required to submit theconsultant's information and plan narrative discussing the pertinentenvironmental factors under this section.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.9</SECTNO>
                                    <SUBJECT>Other requirements.</SUBJECT>

                                    <P>(a) <E T="03">Nondiscrimination and equal opportunity.</E> Thenondiscrimination and equal opportunity requirements described in 24 CFR part 5,subpart A apply to this part.<PRTPAGE P="205"/>
                                    </P>

                                    <P>(b) <E T="03">24 CFR part 84.</E> The provisions of 24 CFR part 84 apply toguaranteed loans under this part.</P>

                                    <P>(c) <E T="03">Lead-based paint.</E> Housing assisted under this part issubject to the lead-based paint requirements described in part 35, subparts A,B, E, G, and R of this title.</P>

                                    <P>(d) <E T="03">Labor standards</E>—(1) <E T="03">Davis-Bacon.</E> Alllaborers and mechanics employed by contractors or subcontractors in theperformance of construction work financed in whole or in part with GuaranteedLoan Funds under this part shall be paid wages at rates not less than thoseprevailing on similar construction in the locality as determined by theSecretary of Labor in accordance with the Davis-Bacon Act, as amended (40 U.S.C.276a-276a-5). This paragraph shall apply to the rehabilitation ofresidential property only if such property contains not less than 8 units.</P>

                                    <P>(2) <E T="03">Volunteers.</E> The provisions of paragraph (d)(1) of thissection shall not apply to volunteers under the conditions set forth in 24 CFRpart 70. In applying part 70, loan guarantees under this part shall be treatedas a program for which there is a statutory exemption for volunteers.</P>

                                    <P>(3) <E T="03">Labor standards.</E> Any contract, subcontract, or buildingloan agreement executed for a project subject to Davis-Bacon wage rates underparagraph (d)(1) of this section shall comply with all labor standards andprovisions of 29 CFR parts 1, 3 and 5 that would be applicable to a loanguarantee program to which Davis-Bacon wage rates are made applicable bystatute.</P>
                                    <CITA>[61 FR 47405, Sept. 6, 1996, as amended at 64 FR 50226, Sept. 15, 1999]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.10</SECTNO>
                                    <SUBJECT>Fees for guaranteed loans.</SUBJECT>
                                    <P>(a) No fees will be assessed by HUD for its guaranty of a loan under thispart.</P>
                                    <P>(b) The lender may assess the Borrower loan origination fees or other chargesprovided that such fees and charges are those charged by the lender to its othercustomers for similar transactions, and are no higher than those charged by thelender for similar transactions.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 573.11</SECTNO>
                                    <SUBJECT>Record access and recordkeeping.</SUBJECT>
                                    <P>Records pertaining to the loans made by the Financial Institution shall beheld for the life of the loan. A lender with a Section 4 Guaranteed Loan shallallow HUD, the Comptroller General of the United States, and their authorizedrepresentatives access from time to time to any documents, papers or files whichare pertinent to the guaranteed loan, and to inspect and make copies of suchrecords which relate to any Section 4 Loan. Any inspection will be made duringthe lender's regular business hours or any other mutually convenient time.</P>
                                    </SECTION>
                                    </PART>
                                    <PART>
                                    <EAR>Pt. 574</EAR>
                                    <HD SOURCE="HED">PART 574—HOUSING OPPORTUNITIES FOR PERSONS WITHAIDS</HD>
                                    <CONTENTS>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart A—General</HD>
                                    <SECHD>Sec.</SECHD>
                                    <SECTNO>574.3</SECTNO>
                                    <SUBJECT>Definitions.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart B—Formula Entitlements</HD>
                                    <SECTNO>574.100</SECTNO>
                                    <SUBJECT>Eligible applicants.</SUBJECT>
                                    <SECTNO>574.110</SECTNO>
                                    <SUBJECT>Overview of formula allocations.</SUBJECT>
                                    <SECTNO>574.120</SECTNO>
                                    <SUBJECT>Responsibility of applicant to serve EMSA.</SUBJECT>
                                    <SECTNO>574.130</SECTNO>
                                    <SUBJECT>Formula allocations.</SUBJECT>
                                    <SECTNO>574.190</SECTNO>
                                    <SUBJECT>Reallocation of grant amounts.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart C—Competitive Grants</HD>
                                    <SECTNO>574.200</SECTNO>
                                    <SUBJECT>Amounts available for competitive grants.</SUBJECT>
                                    <SECTNO>574.210</SECTNO>
                                    <SUBJECT>Eligible applicants.</SUBJECT>
                                    <SECTNO>574.240</SECTNO>
                                    <SUBJECT>Application requirements.</SUBJECT>
                                    <SECTNO>574.260</SECTNO>
                                    <SUBJECT>Amendments.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart D—Uses of Grant Funds</HD>
                                    <SECTNO>574.300</SECTNO>
                                    <SUBJECT>Eligible activities.</SUBJECT>
                                    <SECTNO>574.310</SECTNO>
                                    <SUBJECT>General standards for eligible housing activities.</SUBJECT>
                                    <SECTNO>574.320</SECTNO>
                                    <SUBJECT>Additional standards for rental assistance.</SUBJECT>
                                    <SECTNO>574.330</SECTNO>
                                    <SUBJECT>Additional standards for short-term supported housing.</SUBJECT>
                                    <SECTNO>574.340</SECTNO>
                                    <SUBJECT>Additional standards for community residences.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart E—Special Responsibilities of Grantees and ProjectSponsors</HD>
                                    <SECTNO>574.400</SECTNO>
                                    <SUBJECT>Prohibition of substitution of funds.</SUBJECT>
                                    <SECTNO>574.410</SECTNO>
                                    <SUBJECT>Capacity.</SUBJECT>
                                    <SECTNO>574.420</SECTNO>
                                    <SUBJECT>Cooperation.</SUBJECT>
                                    <SECTNO>574.430</SECTNO>
                                    <SUBJECT>Fee prohibitions.</SUBJECT>
                                    <SECTNO>574.440</SECTNO>
                                    <SUBJECT>Confidentiality.</SUBJECT>
                                    <SECTNO>574.450</SECTNO>
                                    <SUBJECT>Financial records.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>

                                    <PRTPAGE P="206"/>
                                    <HD SOURCE="HED">Subpart F—Grant Administration</HD>
                                    <SECTNO>574.500</SECTNO>
                                    <SUBJECT>Responsibility for grant administration.</SUBJECT>
                                    <SECTNO>574.510</SECTNO>
                                    <SUBJECT>Environmental procedures and standards.</SUBJECT>
                                    <SECTNO>574.520</SECTNO>
                                    <SUBJECT>Performance reports.</SUBJECT>
                                    <SECTNO>574.530</SECTNO>
                                    <SUBJECT>Recordkeeping.</SUBJECT>
                                    <SECTNO>574.540</SECTNO>
                                    <SUBJECT>Deobligation of funds.</SUBJECT>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart G—Other Federal Requirements</HD>
                                    <SECTNO>574.600</SECTNO>
                                    <SUBJECT>Cross-reference.</SUBJECT>
                                    <SECTNO>574.603</SECTNO>
                                    <SUBJECT>Nondiscrimination and equal opportunity.</SUBJECT>
                                    <SECTNO>574.605</SECTNO>
                                    <SUBJECT>Applicability of OMB circulars.</SUBJECT>
                                    <SECTNO>574.625</SECTNO>
                                    <SUBJECT>Conflict of interest.</SUBJECT>
                                    <SECTNO>574.630</SECTNO>
                                    <SUBJECT>Displacement, relocation and real property acquisition.</SUBJECT>
                                    <SECTNO>574.635</SECTNO>
                                    <SUBJECT>Lead-based paint.</SUBJECT>
                                    <SECTNO>574.640</SECTNO>
                                    <SUBJECT>Flood insurance protection.</SUBJECT>
                                    <SECTNO>574.645</SECTNO>
                                    <SUBJECT>Coastal barriers.</SUBJECT>
                                    <SECTNO>574.650</SECTNO>
                                    <SUBJECT>Audit.</SUBJECT>
                                    <SECTNO>574.655</SECTNO>
                                    <SUBJECT>Wage rates.</SUBJECT>
                                    </SUBPART>
                                    </CONTENTS>
                                    <AUTH>
                                    <HD SOURCE="HED">Authority:</HD>
                                    <P>42 U.S.C. 3535(d) and 12901-12912.</P>
                                    </AUTH>
                                    <SOURCE>
                                    <HD SOURCE="HED">Source:</HD>
                                    <P>57 FR 61740, Dec. 28, 1992, unless otherwise noted.</P>
                                    </SOURCE>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart A—General</HD>
                                    <SECTION>
                                    <SECTNO>§ 574.3</SECTNO>
                                    <SUBJECT>Definitions.</SUBJECT>

                                    <P>The terms <E T="03">Grantee</E> and <E T="03">Secretary</E> are defined in 24CFR part 5.</P>
                                    <P>

                                    <E T="03">Acquired immunodeficiency syndrome (AIDS) or related diseases</E>means the disease of acquired immunodeficiency syndrome or any conditionsarising from the etiologic agent for acquired immunodeficiency syndrome,including infection with the human immunodeficiency virus (HIV).</P>
                                    <P>

                                    <E T="03">Administrative costs</E> mean costs for general management,oversight, coordination, evaluation, and reporting on eligible activities. Suchcosts do not include costs directly related to carrying out eligible activities,since those costs are eligible as part of the activity delivery costs of suchactivities.</P>
                                    <P>

                                    <E T="03">Applicant</E> means a State or city applying for a formulaallocation as described under § 574.100 or a State, unit of generallocal government, or a nonprofit organization applying for a competitive grantas described under § 574.210.</P>
                                    <P>

                                    <E T="03">City</E> has the meaning given it in section 102(a) of the Housingand Community Development Act of 1974 (42 U.S.C. 5302).</P>
                                    <P>

                                    <E T="03">Eligible Metropolitan Statistical Area (EMSA)</E> means ametropolitan statistical area that has a population of more than 500,000 and hasmore than 1,500 cumulative cases of AIDS.</P>
                                    <P>

                                    <E T="03">Eligible person</E> means a person with acquired immunodeficiencysyndrome or related diseases who is a low-income individual, as defined in thissection, and the person's family. A person with AIDS or related diseases or afamily member regardless of income is eligible to receive housing informationservices, as described in § 574.300(b)(1). Any person living inproximity to a community residence is eligible to participate in thatresidence's community outreach and educational activities regarding AIDS orrelated diseases, as provided in § 574.300(b)(9).</P>
                                    <P>

                                    <E T="03">Eligible State</E> means a State that has:</P>
                                    <P>(1) More than 1,500 cumulative cases of AIDS in those areas of the Stateoutside of eligible metropolitan statistical areas that are eligible to befunded through a qualifying city; and</P>
                                    <P>(2) A consolidated plan prepared, submitted, and approved in accordance with24 CFR part 91 that covers the assistance to be provided under this part. (AState may carry out activities anywhere in the State, including within an EMSA.)</P>
                                    <P>

                                    <E T="03">Family</E> means a household composed of two or more relatedpersons. The term family also includes one or more eligible persons living withanother person or persons who are determined to be important to their care orwell being, and the surviving member or members of any family described in thisdefinition who were living in a unit assisted under the HOPWA program with theperson with AIDS at the time of his or her death.</P>
                                    <P>

                                    <E T="03">Low-income individual</E> has the meaning given it in section853(3) of the AIDS Housing Opportunity Act (42 U.S.C. 12902).</P>
                                    <P>

                                    <E T="03">Metropolitan statistical area</E> has the meaning given it insection 853(5) of the AIDS Housing Opportunity Act (42.U.S.C. 12902).</P>
                                    <P>

                                    <E T="03">Nonprofit organization</E> means any nonprofit organization(including a State or locally chartered, nonprofit organization) that:</P>

                                    <P>(1) Is organized under State or local laws;<PRTPAGE P="207"/>
                                    </P>
                                    <P>(2) Has no part of its net earnings inuring to the benefit of any member,founder, contributor, or individual;</P>
                                    <P>(3) Has a functioning accounting system that is operated in accordance withgenerally accepted accounting principles, or has designated an entity that willmaintain such an accounting system; and</P>
                                    <P>(4) Has among its purposes significant activities related to providingservices or housing to persons with acquired immunodeficiency syndrome orrelated diseases.</P>
                                    <P>

                                    <E T="03">Non-substantial rehabilitation</E> means rehabilitation thatinvolves costs that are less than or equal to 75 percent of the value of thebuilding after rehabilitation.</P>
                                    <P>

                                    <E T="03">Population</E> means total resident population based on datacompiled by the U.S. Census and referable to the same point in time.</P>
                                    <P>

                                    <E T="03">Project sponsor</E> means any nonprofit organization orgovernmental housing agency that receives funds under a contract with thegrantee to carry out eligible activities under this part. The selection ofproject sponsors is not subject to the procurement requirements of 24 CFR 85.36.</P>
                                    <P>

                                    <E T="03">Qualifying city</E> means a city that is the most populous unit ofgeneral local government in an eligible metropolitan statistical area (EMSA) andthat has a consolidated plan prepared, submitted, and approved in accordancewith 24 CFR part 91 that covers the assistance to be provided under this part.</P>
                                    <P>

                                    <E T="03">Rehabilitation</E> means the improvement or repair of an existingstructure, or an addition to an existing structure that does not increase thefloor area by more than 100 percent.</P>
                                    <P>

                                    <E T="03">State</E> has the meaning given it in section 853(9) of the AIDSHousing Opportunity Act (42 U.S.C. 12902).</P>
                                    <P>

                                    <E T="03">Substantial rehabilitation</E> means rehabilitation that involvescosts in excess of 75 percent of the value of the building after rehabilitation.</P>
                                    <P>

                                    <E T="03">Unit of general local government</E> means any city, town,township, parish, county, village, or other general purpose politicalsubdivision of a State; Guam, the Northern Mariana Islands, the Virgin Islands,American Samoa, the Federated States of Micronesia and Palau, the MarshallIslands, or a general purpose political subdivision thereof; and any agency orinstrumentality thereof that is established pursuant to legislation anddesignated by the chief executive to act on behalf of the jurisdiction withregard to provisions of the National Affordable Housing Act.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994; 60FR 1917, Jan. 5, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 7963, Feb. 29, 1996]</CITA>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart B—Formula Entitlements</HD>
                                    <SECTION>
                                    <SECTNO>§ 574.100</SECTNO>
                                    <SUBJECT>Eligible applicants.</SUBJECT>
                                    <P>(a) Eligible States and qualifying cities, as defined in § 574.3,qualify for formula allocations under HOPWA.</P>
                                    <P>(b) HUD will notify eligible States and qualifying cities of their formulaeligibility and allocation amounts and EMSA service areas annually.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994; 60FR 1917, Jan. 5, 1995]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.110</SECTNO>
                                    <SUBJECT>Overview of formula allocations.</SUBJECT>
                                    <P>The formula grants are awarded upon submission and approval of a consolidatedplan, pursuant to 24 CFR part 91, that covers the assistance to be providedunder this part. Certain states and cities that are the most populous unit ofgeneral local government in eligible metropolitan statistical areas will receiveformula allocations based on their State or metropolitan population andproportionate number of cases of persons with AIDS. They will receive fundsunder this part (providing they comply with 24 CFR part 91) for eligibleactivities that address the housing needs of persons with AIDS or relateddiseases and their families (see § 574.130(b)).</P>
                                    <CITA>[61 FR 7963, Feb. 29, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.120</SECTNO>
                                    <SUBJECT>Responsibility of applicant to serve EMSA.</SUBJECT>

                                    <P>The EMSA's applicant shall serve eligible persons who live anywhere withinthe EMSA, except that housing assistance shall be provided only in localitieswithin the EMSA that have a consolidated plan prepared, submitted, and approvedin accordance with 24 CFR part 91 that covers the assistance to be <PRTPAGE P="208"/>providedunder this part. In allocating grant amounts among eligible activities, theEMSA's applicant shall address needs of eligible persons who reside within themetropolitan statistical area, including those not within the jurisdiction ofthe applicant.</P>
                                    <CITA>[60 FR 1917, Jan. 5, 1995]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.130</SECTNO>
                                    <SUBJECT>Formula allocations.</SUBJECT>

                                    <P>(a) <E T="03">Data sources.</E> HUD will allocate funds based on the numberof cases of acquired immunodeficiency syndrome reported to and confirmed by theDirector of the Centers for Disease Control, and on population data provided bythe U.S. Census. The number of cases of acquired immunodeficiency syndrome usedfor this purpose shall be the number reported as of March 31 of the fiscal yearimmediately preceding the fiscal year for which the amounts are appropriated andallocated.</P>

                                    <P>(b) <E T="03">Distribution of appropriated funds for entitlement awards.</E>(1) Seventy-five percent of the funds allocated under the formula is distributedto qualifying cities and eligible States, as described in § 574.100,based on each metropolitan statistical area's or State's proportionate share ofthe cumulative number of AIDS cases in all eligible metropolitan statisticalareas and eligible States.</P>
                                    <P>(2) The remaining twenty-five percent is allocated among qualifying cities,but not States, where the per capita incidence of AIDS for the year, April 1through March 31, preceding the fiscal year of the appropriation is higher thanthe average for all metropolitan statistical areas with more than 500,000population. Each qualifying city's allocation reflects its EMSA's proportionateshare of the high incidence factor among EMSA's with higher than average percapita incidence of AIDS. The high incidence factor is computed by multiplyingthe population of the metropolitan statistical area by the difference betweenits twelve-month-per-capita-incidence rate and the average rate for allmetropolitan statistical areas with more than 500,000 population. The EMSA'sproportionate share is determined by dividing its high incidence factor by thesum of the high incidence factors for all EMSA's with higher than average percapita incidence of AIDS.</P>

                                    <P>(c) <E T="03">Minimum grant.</E> No grant awarded under paragraph (b) of thissection shall be less than $200,000. Therefore, if the calculations underparagraph (b) of this section would result in any eligible metropolitanstatistical area or eligible State receiving less than $200,000, the amountallocated to that entity is increased to $200,000 and allocations to entities inexcess of $200,000 are proportionately reduced by the amount of the increase.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.190</SECTNO>
                                    <SUBJECT>Reallocation of grant amounts.</SUBJECT>
                                    <P>If an eligible State or qualifying city does not submit a consolidated planin a timely fashion, in accordance with 24 CFR part 91, that provides for use ofits allocation of funding under this part, the funds allocated to thatjurisdiction will be added to the funds available for formula allocations toother jurisdictions in the current fiscal year. Any formula funds that becomeavailable as a result of deobligations or the imposition of sanctions asprovided for in § 574.540 will be added to the funds available forformula allocations in the next fiscal year.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 60 FR 1918, Jan. 5, 1995]</CITA>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart C—Competitive Grants</HD>
                                    <SECTION>
                                    <SECTNO>§ 574.200</SECTNO>
                                    <SUBJECT>Amounts available for competitive grants.</SUBJECT>
                                    <P>(a) The Department will set aside 10 percent of the amounts appropriatedunder this program to fund on a competitive basis:</P>
                                    <P>(1) Special projects of national significance; and</P>
                                    <P>(2) Other projects submitted by States and localities that do not qualify forformula grants.</P>
                                    <P>(b) Any competitively awarded funds that become available as a result ofdeobligations or the imposition of sanctions, as provided in§ 574.540, will be added to the funds available for competitivegrants in the next fiscal year.</P>

                                    <P>(c) The competitive grants are awarded based on applications, as described insubpart C of this part, submitted in <PRTPAGE P="209"/>response to a Notice of FundingAvailability published in the <E T="04">Federal Register.</E> All States andunits of general local government and nonprofit organizations are eligible toapply for competitive grants to fund projects of national significance. Onlythose States and units of general local government that do not qualify forformula allocations are eligible to apply for competitive grants to fund otherprojects.</P>
                                    <P>(d) If HUD makes a procedural error in a funding competition that, whencorrected, would warrant funding of an otherwise eligible application, HUD willselect that application for potential funding when sufficient funds becomeavailable.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 61 FR 7963, Feb. 29, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.210</SECTNO>
                                    <SUBJECT>Eligible applicants.</SUBJECT>
                                    <P>(a) All States, units of general local government, and nonprofitorganizations, may apply for grants for projects of national significance.</P>
                                    <P>(b) Only those States and units of general local government that do notqualify for formula grants, as described in § 574.100; may apply forgrants for other projects as described in § 574.200(a)(2).</P>
                                    <P>(c) Except for grants for projects of national significance, nonprofitorganizations are not eligible to apply directly to HUD for a grant but mayreceive funding as a project sponsor under contract with a grantee.</P>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.240</SECTNO>
                                    <SUBJECT>Application requirements.</SUBJECT>

                                    <P>Applications must comply with the provisions of the Department's Notice ofFunding Availability (NOFA) for the fiscal year published in the <E T="04">Federal Register</E> in accordance with 24 CFR part 12. The ratingcriteria, including the point value for each, are described in the NOFA,including criteria determined by the Secretary.</P>
                                    <CITA>[61 FR 7963, Feb. 29, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.260</SECTNO>
                                    <SUBJECT>Amendments.</SUBJECT>
                                    <P>(a) After an application has been selected for funding, any change that willsignificantly alter the scope, location, service area, or objectives of anactivity or the number of eligible persons served must be justified to HUD andapproved by HUD. Whenever any other amendment to the application is made, thegrantee must provide a copy to HUD.</P>
                                    <P>(b) Each amendment request must contain a description of the revised proposeduse of funds. Funds may not be expended for the revised proposed use of fundsuntil:</P>
                                    <P>(1) HUD accepts the revised proposed use; and</P>
                                    <P>(2) For amendments to acquire, rehabilitate, convert, lease, repair orconstruct properties to provide housing, an environmental review of the revisedproposed use of funds has been completed in accordance with§ 574.510.</P>
                                    <APPRO>(Approved by the Office of Management and Budget under control number2506-0133)</APPRO>
                                    </SECTION>
                                    </SUBPART>
                                    <SUBPART>
                                    <HD SOURCE="HED">Subpart D—Uses of Grant Funds</HD>
                                    <SECTION>
                                    <SECTNO>§ 574.300</SECTNO>
                                    <SUBJECT>Eligible activities.</SUBJECT>

                                    <P>(a) <E T="03">General.</E> Subject to applicable requirements described in§§ 574.310, 574.320, 574.330, and 574.340, HOPWA funds may beused to assist all forms of housing designed to prevent homelessness includingemergency housing, shared housing arrangements, apartments, single roomoccupancy (SRO) dwellings, and community residences. Appropriate supportiveservices, as required by § 574.310(a), must be provided as part ofany HOPWA assisted housing, but HOPWA funds may also be used to provide servicesindependently of any housing activity.</P>

                                    <P>(b) <E T="03">Activities.</E> The following activities may be carried outwith HOPWA funds:</P>
                                    <P>(1) Housing information services including, but not limited to, counseling,information, and referral services to assist an eligible person to locate,acquire, finance and maintain housing. This may also include fair housingcounseling for eligible persons who may encounter discrimination on the basis ofrace, color, religion, sex, age, national origin, familial status, or handicap;</P>

                                    <P>(2) Resource identification to establish, coordinate and develop housingassistance resources for eligible persons (including conducting preliminaryresearch and making expenditures necessary to determine the feasibility ofspecific housing-related initiatives);<PRTPAGE P="210"/>
                                    </P>
                                    <P>(3) Acquisition, rehabilitation, conversion, lease, and repair of facilitiesto provide housing and services;</P>
                                    <P>(4) New construction (for single room occupancy (SRO) dwellings and communityresidences only).</P>
                                    <P>(5) Project- or tenant-based rental assistance, including assistance forshared housing arrangements;</P>
                                    <P>(6) Short-term rent, mortgage, and utility payments to prevent thehomelessness of the tenant or mortgagor of a dwelling;</P>
                                    <P>(7) Supportive services including, but not limited to, health, mental health,assessment, permanent housing placement, drug and alcohol abuse treatment andcounseling, day care, personal assistance, nutritional services, intensive carewhen required, and assistance in gaining access to local, State, and Federalgovernment benefits and services, except that health services may only beprovided to individuals with acquired immunodeficiency syndrome or relateddiseases and not to family members of these individuals;</P>
                                    <P>(8) Operating costs for housing including maintenance, security, operation,insurance, utilities, furnishings, equipment, supplies, and other incidentalcosts;</P>
                                    <P>(9) Technical assistance in establishing and operating a community residence,including planning and other pre-development or pre-construction expenses andincluding, but not limited to, costs relating to community outreach andeducational activities regarding AIDS or related diseases for persons residingin proximity to the community residence;</P>
                                    <P>(10) Administrative expenses:</P>
                                    <P>(i) Each grantee may use not more than 3 percent of the grant amount for itsown administrative costs relating to administering grant amounts and allocatingsuch amounts to project sponsors; and</P>
                                    <P>(ii) Each project sponsor receiving amounts from grants made under thisprogram may use not more than 7 percent of the amounts received foradministrative costs.</P>
                                    <P>(11) For competitive grants only, any other activity proposed by theapplicant and approved by HUD.</P>

                                    <P>(c) <E T="03">Faith-based activities.</E> (1) Organizations that arereligious or faith-based are eligible, on the same basis as any otherorganization, to participate in the HOPWA program. Neither the Federalgovernment nor a State or local government receiving funds under HOPWA programsshall discriminate against an organization on the basis of the organization'sreligious character or affiliation.</P>
                                    <P>(2) Organizations that are directly funded under the HOPWA program may notengage in inherently religious activities, such as worship, religiousinstruction, or proselytization, as part of the programs or services fundedunder this part. If an organization conducts such activities, the activitiesmust be offered separately, in time or location, from the programs or servicesfunded under this part, and participation must be voluntary for thebeneficiaries of the HUD-funded programs or services.</P>
                                    <P>(3) An organization that participates in the HOPWA program will retain itsindependence from Federal, State, and local governments, and may continue tocarry out its mission, including the definition, practice, and expression of itsreligious beliefs, provided that it does not use direct HOPWA funds to supportany inherently religious activities, such as worship, religious instruction, orproselytization. Among other things, faith-based organizations may use space intheir facilities to provide HOPWA-funded services, without removing religiousart, icons, scriptures, or other religious symbols. In addition, a HOPWA-fundedreligious organization retains its authority over its internal governance, andit may retain religious terms in its organization's name, select its boardmembers on a religious basis, and include religious references in itsorganization's mission statements and other governing documents.</P>
                                    <P>(4) An organization that participates in the HOPWA program shall not, inproviding program assistance, discriminate against a program beneficiary orprospective program beneficiary on the basis of religion or religious belief.</P>

                                    <P>(5) HOPWA funds may not be used for the acquisition, construction, orrehabilitation of structures to the extent <PRTPAGE P="211"/>that those structures are used forinherently religious activities. HOPWA funds may be used for the acquisition,construction, or rehabilitation of structures only to the extent that thosestructures are used for conducting eligible activities under this part. Where astructure is used for both eligible and inherently religious activities, HOPWAfunds may not exceed the cost of those portions of the acquisition,construction, or rehabilitation that are attributable to eligible activities inaccordance with the cost accounting requirements applicable to HOPWA funds inthis part. Sanctuaries, chapels, or other rooms that a HOPWA-funded religiouscongregation uses as its principal place of worship, however, are ineligible forHOPWA-funded improvements. Disposition of real property after the term of thegrant, or any change in use of the property during the term of the grant, issubject to government-wide regulations governing real property disposition (<E T="03">see</E> 24 CFR parts 84 and 85).</P>
                                    <P>(6) If a State or local government voluntarily contributes its own funds tosupplement federally funded activities, the State or local government has theoption to segregate the Federal funds or commingle them. However, if the fundsare commingled, this section applies to all of the commingled funds.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994; 68FR 56405, Sept. 30, 2003]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.310</SECTNO>
                                    <SUBJECT>General standards for eligible housing activities.</SUBJECT>
                                    <P>All grantees using grant funds to provide housing must adhere to thefollowing standards:</P>

                                    <P>(a)(1) <E T="03">General.</E> The grantee shall ensure that qualified serviceproviders in the area make available appropriate supportive services to theindividuals assisted with housing under this subpart. Supportive services aredescribed in § 574.300(b)(7). For any individual with acquiredimmunodeficiency syndrome or a related disease who requires more intensive carethan can be provided in housing assisted under this subpart, the grantee shallprovide for locating a care provider who can appropriately care for theindividual and for referring the individual to the care provider.</P>

                                    <P>(2) <E T="03">Payments.</E> The grantee shall ensure that grant funds willnot be used to make payments for health services for any item or service to theextent that payment has been made, or can reasonably be expected to be made,with respect to that item or service:</P>
                                    <P>(i) Under any State compensation program, under an insurance policy, or underany Federal or State health benefits program; or</P>
                                    <P>(ii) By an entity that provides health services on a prepaid basis.</P>

                                    <P>(b) <E T="03">Housing quality standards.</E> All housing assisted under§ 574.300(b) (3), (4), (5), and (8) must meet the applicable housingquality standards outlined below.</P>

                                    <P>(1) <E T="03">State and local requirements.</E> Each recipient of assistanceunder this part must provide safe and sanitary housing that is in compliancewith all applicable State and local housing codes, licensing requirements, andany other requirements in the jurisdiction in which the housing is locatedregarding the condition of the structure and the operation of the housing.</P>

                                    <P>(2) <E T="03">Habitability standards.</E> Except for such variations as areproposed by the locality and approved by HUD, recipients must meet the followingrequirements:</P>

                                    <P>(i) <E T="03">Structure and materials.</E> The structures must bestructurally sound so as not to pose any threat to the health and safety of theoccupants and so as to protect the residents from hazards.</P>

                                    <P>(ii) <E T="03">Access.</E> The housing must be accessible and capable ofbeing utilized without unauthorized use of other private properties. Structuresmust provide alternate means of egress in case of fire.</P>

                                    <P>(iii) <E T="03">Space and security.</E> Each resident must be affordedadequate space and security for themselves and their belongings. An acceptableplace to sleep must be provided for each resident.</P>

                                    <P>(iv) <E T="03">Interior air quality.</E> Every room or space must be providedwith natural or mechanical ventilation. Structures must be free of pollutants inthe air at levels that threaten the health of residents.</P>

                                    <P>(v) <E T="03">Water supply.</E> The water supply must be free fromcontamination at <PRTPAGE P="212"/>levels that threaten the health of individuals.</P>

                                    <P>(vi) <E T="03">Thermal environment.</E> The housing must have adequateheating and/or cooling facilities in proper operating condition.</P>

                                    <P>(vii) <E T="03">Illumination and electricity.</E> The housing must haveadequate natural or artificial illumination to permit normal indoor activitiesand to support the health and safety of residents. Sufficient electrical sourcesmust be provided to permit use of essential electrical appliance while assuringsafety from fire.</P>

                                    <P>(viii) <E T="03">Food preparation and refuse disposal.</E> All foodpreparation areas must contain suitable space and equipment to store, prepare,and serve food in a sanitary manner.</P>

                                    <P>(ix) <E T="03">Sanitary condition.</E> The housing and any equipment must bemaintained in sanitary condition.</P>

                                    <P>(c) <E T="03">Minimum use period for structures.</E> (1) Any building orstructure assisted with amounts under this part must be maintained as a facilityto provide housing or assistance for individuals with acquired immunodeficiencysyndrome or related diseases:</P>
                                    <P>(i) For a period of not less than 10 years, in the case of assistanceprovided under an activity eligible under § 574.300(b) (3) and (4)involving new construction, substantial rehabilitation or acquisition of abuilding or structure; or</P>
                                    <P>(ii) For a period of not less than 3 years in the cases involving non-substantial rehabilitation or repair of a building or structure.</P>
                                    <P>(2) Waiver of minimum use period. HUD may waive the minimum use period of abuilding or structure as stipulated in paragraph (c)(1) of this section if thegrantee can demonstrate, to the satisfaction of HUD, that:</P>
                                    <P>(i) The assisted structure is no longer needed to provide supported housingor assistance, or the continued operation of the structure for such purposes isno longer feasible; and</P>
                                    <P>(ii) The structure will be used to benefit individuals or families whoseincomes do not exceed 80 percent of the median income for the area, asdetermined by HUD with adjustments for smaller and larger families, if theSecretary finds that such variations are necessary because of construction costsor unusually high or low family incomes.</P>

                                    <P>(d) <E T="03">Resident rent payment.</E> Except for persons in short-termsupported housing, each person receiving rental assistance under this program orresiding in any rental housing assisted under this program must pay as rent,including utilities, an amount which is the higher of:</P>
                                    <P>(1) 30 percent of the family's monthly adjusted income (adjustment factorsinclude the age of the individual, medical expenses, size of family and childcare expenses and are described in detail in 24 CFR 5.609). The calculation ofthe family's monthly adjusted income must include the expense deductionsprovided in 24 CFR 5.611(a), and for eligible persons, the calculation ofmonthly adjusted income also must include the disallowance of earned income asprovided in 24 CFR 5.617, if applicable;</P>
                                    <P>(2) 10 percent of the family's monthly gross income; or</P>
                                    <P>(3) If the family is receiving payments for welfare assistance from a publicagency and a part of the payments, adjusted in accordance with the family'sactual housing costs, is specifically designated by the agency to meet thefamily's housing costs, the portion of the payment that is designated forhousing costs.</P>

                                    <P>(e) <E T="03">Termination of assistance</E>—(1) <E T="03">Survivingfamily members.</E> With respect to the surviving member or members of a familywho were living in a unit assisted under the HOPWA program with the person withAIDS at the time of his or her death, housing assistance and supportive servicesunder the HOPWA program shall continue for a grace period following the death ofthe person with AIDS. The grantee or project sponsor shall establish areasonable grace period for continued participation by a surviving familymember, but that period may not exceed one year from the death of the familymember with AIDS. The grantee or project sponsor shall notify the family of theduration of their grace period and may assist the family with information onother available housing programs and with moving expenses.<PRTPAGE P="213"/>
                                    </P>

                                    <P>(2) <E T="03">Violation of requirements</E>—(i) <E T="03">Basis.</E>Assistance to participants who reside in housing programs assisted under thispart may be terminated if the participant violates program requirements orconditions of occupancy. Grantees must ensure that supportive services areprovided, so that a participant's assistance is terminated only in the mostsevere cases.</P>

                                    <P>(ii) <E T="03">Procedure.</E> In terminating assistance to any programparticipant for violation of requirements, grantees must provide a formalprocess that recognizes the rights of individuals receiving assistance to dueprocess of law. This process at minimum, must consist of:</P>
                                    <P>(A) Serving the participant with a written notice containing a clearstatement of the reasons for termination;</P>
                                    <P>(B) Permitting the participant to have a review of the decision, in which theparticipant is given the opportunity to confront opposing witnesses, presentwritten objections, and be represented by their own counsel, before a personother than the person (or a subordinate of that person) who made or approved thetermination decision; and</P>
                                    <P>(C) Providing prompt written notification of the final decision to theparticipant.</P>
                                    <APPRO>(Paragraph (c) approved by the Office of Management and Budget undercontrol number 2506-0133)</APPRO>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17200, Apr. 11, 1994; 61FR 7963, Feb. 29, 1996; 66 FR 6225, Jan. 19, 2001]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.320</SECTNO>
                                    <SUBJECT>Additional standards for rental assistance.</SUBJECT>
                                    <P>(a) If grant funds are used to provide rental assistance, the followingadditional standards apply:</P>

                                    <P>(1) <E T="03">Maximum subsidy.</E> The amount of grant funds used to paymonthly assistance for an eligible person may not exceed the difference between:</P>
                                    <P>(i) The lower of the rent standard or reasonable rent for the unit; and</P>
                                    <P>(ii) The resident's rent payment calculated under § 574.310(d).</P>

                                    <P>(2) <E T="03">Rent standard.</E> The rent standard shall be established bythe grantee and shall be no more than the published section 8 fair market rent(FMR) or the HUD-approved community-wide exception rent for the unit size.However, on a unit by unit basis, the grantee may increase that amount by up to10 percent for up to 20 percent of the units assisted.</P>

                                    <P>(3) <E T="03">Rent reasonableness.</E> The rent charged for a unit must bereasonable in relation to rents currently being charged for comparable units inthe private unassisted market and must not be in excess of rents currently beingcharged by the owner for comparable unassisted units.</P>
                                    <P>(b) With respect to shared housing arrangements, the rent charged for anassisted family or individual shall be in relation to the size of the privatespace for that assisted family or individual in comparison to other privatespace in the shared unit, excluding common space. An assisted family orindividual may be assigned a pro rata portion based on the ratio derived bydividing the number of bedrooms in their private space by the number of bedroomsin the unit. Participation in shared housing arrangements shall be voluntary.</P>
                                    <CITA>[57 FR 61740, Dec. 28, 1992, as amended at 61 FR 7963, Feb. 29, 1996]</CITA>
                                    </SECTION>
                                    <SECTION>
                                    <SECTNO>§ 574.330</SECTNO>
                                    <SUBJECT>Additional standards for short-term supported housing.</SUBJECT>
                                    <P>Short-term supported housing includes facilities to provide temporary shelterto eligible individuals as well as rent, mortgage, and utilities payments toenable eligible individuals to remain in their own dwellings. If grant funds areused to provide such short-term supported housing assistance, the followingadditional standards apply:</P>

                                    <P>(a) <E T="03">Time limits.</E> (1) A short-term supported housing facilitymay not provide residence to any individual for more than 60 days during any sixmonth period. Rent, mortgage, and utilities payments to prevent the homelessnessof the tenant or mortgagor of a dwelling may not be provided to such anindividual for these costs accruing over a period of more than 21 weeks in any52 week period. These limitations do not apply to rental assistance providedunder § 574.300(b)(5).</P>

                                    <P>(2) <E T="03">Waiver of time limitations.</E> HUD may waive, as it determinesappropriate, the limitations of paragraph (a)(1) and will favorably consider a <PRTPAGE P="214"/>waiver based on the good faith effort of a project sponsor to provide permanenthousing under subsection (c).</P>

                                    <P>(b) <E T="03">Residency limitations</E>—(1) <E T="03">Residency.</E> Ashort-term supported facility may not provide shelter or housing at any singletime for more than 50 families or individuals;</P>

                                    <P>(2) <E T="03">Waiver of residency limitations.</E> HUD may waive, as itdetermines appropriate, the limitations of paragraph (b)(1) of this section.</P>

                                    <P>(c) <E T="03">Placement.</E> A short-term supported housing facility assistedunder this part must, to the maximum extent practicable, provide each individualliving in such housing the opportunity for placement in permanent housing or ina living environment appropriate to his or her health and social needs.</P>

                                    <P>(d) <E T="03">Assistance to continue independent living.</E> In addition tothe supportive services provided when an individual is relocated to a short-termsupported housing facility, supportive services may be provided to individualswhen t