[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 94-17838]


[[Page Unknown]]

[Federal Register: August 1, 1994]


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Part III





Department of Housing and Urban Development





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Assistant Secretary for Public and Indian Housing



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24 CFR Parts 905 and 950



Indian Housing Program; Proposed Rule
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Assistant Secretary for Public and Indian Housing

24 CFR Parts 905 and 950

[Docket No. R-94-1742; FR-3646-P-01]
RIN 2577-AB43

 

Indian Housing Program: Proposed Amendments

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would add a new part 950 to HUD's 
regulations. New part 950 would contain the Indian Housing Consolidated 
regulations that are currently set forth in 24 CFR part 905. In 
addition to moving the Indian Housing Consolidated regulations from 
part 905 to part 950, the proposed rule would make a number of 
amendments to the Indian Housing Consolidated regulations to simplify 
program processes, reduce the number of regulatory requirements, and 
provide more flexibility to local Tribal and Indian housing authority 
officials in the administration of the Indian Housing program.

DATES: Comments due date: September 30, 1994.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Rules Docket Clerk, Office of the General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, S.W., Washington, D.C. 20410-0500. Communications 
should refer to the above docket number and title. Facsimile (FAX) 
comments are not acceptable. A copy of each communication submitted 
will be available for public inspection and copying between 7:30 a.m. 
to 5:30 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Director, Office of 
Native American Programs, Public and Indian Housing, Room 4140, 
Department of Housing and Urban Development, 451 Seventh Street SW, 
Washington, DC 20410, telephone (202) 708-1015, or (202) 708-0850 
(these are not toll-free numbers). Hearing- or speech-impaired persons 
may use the TDD number by contacting the Federal Information Relay 
Service on 1-800-877-TDDY (1-800-877-8339) (a toll-free number) or 202-
708-9300 (this is not a toll free number).

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

    This proposed rule does not add to the information collection 
requirements currently contained in 24 CFR part 905, and that already 
have been approved and assigned OMB control numbers under the Paperwork 
Reduction Act of 1980 (44 U.S.C. 3501-3520). These numbers are shown 
under the applicable sections.

II. Background

    Title II of the United States Housing Act of 1937 (42 U.S.C. 
1437aa) (``the Act''), as amended provides for the establishment of the 
Indian Housing program. The Indian Housing program includes the Rental 
program and the Mutual Help and Turnkey III Homeownership Opportunity 
Programs. A number of regulatory revisions have been made to the Indian 
Housing program in the past four years designed to provide IHAs with 
more administrative flexibility. Most recently, a final rule for 
``Indian Housing: Revised Consolidated Program Regulations'' was 
published on June 24, 1992 (56 FR 28250) and became effective on 
October 3, 1992. This proposed rule published today continues that 
trend.
    The move from part 905 to part 950 will allow HUD's Office of 
Native American Programs to consolidate all Native American program 
regulations in consecutive CFR parts. HUD's Community Development Block 
Grant regulations that are applicable to Indian tribes and currently 
codified in 24 CFR part 571 will eventually be moved to 24 CFR part 
951.

III. Program Streamlining

A. Administrative Actions and Pre-Publication Comments

    The primary goal in undertaking these revisions to the Indian 
Housing Program regulations is to provide greater discretion and 
responsibility to IHAs in carrying out their housing programs, thereby 
returning them to local control. Since September 1993, the six Native 
American Program Field Offices have been conducting an extensive 
consultation with IHAs and Tribal officials. A significant number of 
comments were submitted which constitute the basis for the revisions 
contained in this proposed rule.
    A consultation session to discuss these changes and to provide for 
additional input was held in Washington, DC, with the National American 
Indian Housing Council, eight regional IHA associations, as well as a 
number of representatives from other IHAs. Additional verbal comments 
were received from the Native American housing community at that time.
    Each regional Indian housing association received a full set of the 
comments submitted by other IHAs. Interested parties should contact 
their respective regional associations for a copy of these comments.
    Consistent with the principles of Executive Order 12866, HUD has 
reviewed the existing Indian Housing regulations, and has proposed 
modifications that are designed to make these regulations more 
effective, consistent, understandable and sensible.

B. Proposed Amendments

    The following describes the amendments proposed to be made to the 
Indian Housing regulations. Unless otherwise indicated, the references 
to regulatory sections and subparts are to those in the existing 
regulations in 24 CFR part 905. Additionally, unless otherwise 
indicated, the section numbers in new part 950 will remain the same as 
currently set forth in part 905 (e.g., Sec. 905.105 will be renumbered 
Sec. 950.150).

SUBPART A--GENERAL

    905.105  Types of low income housing projects. The types of low 
income housing projects contained in this section has been removed in 
an effort to streamline the regulations. The definitions will be 
included in the Indian Housing Management Handbook.
    905.115  Applicability of civil rights. The civil rights 
requirements contained in this section would be amended to include a 
reference to title II of the Americans with Disabilities Act (42 U.S.C. 
12131).
    905.126  Establishment of IHAs by Tribal ordinance. The model 
Tribal Ordinance contained in this section have been removed and will 
be placed in a handbook for reference. The revised language will state, 
``The form of Tribal ordinance shall be determined by the Tribe and 
reviewed by the ONAP Administrator. The IHA must also demonstrate that 
it has the legal capacity to develop, own and operate a public housing 
project under the Act. A sample format will be provided by HUD.''
    905.135  Administrative capability. Verbal, as well as written 
comments, recommended that the system could be simplified to benefit 
both HUD and the IHAs. No specific written comments were given. 
Comments received during the Washington, D.C. consultation were mixed 
as to the need for change. Based on the discussions during the meeting, 
slight revisions have been made to the language in new Sec. 950.135(a) 
which could provide flexibility in the future regarding determinations 
of administrative capability. The appeal process contained in this 
section also has been revised based on HUD's recent reorganization.
    905.140  Certification of housing managers. The certification of 
housing managers as a Federal requirement has been removed. HUD 
encourages the Indian housing community to continue the effort to 
professionalize the industry.

Subpart B--Procurement

General

    In the current regulation, subparts B and C of part 905 contain 
numerous references to approval by HUD for ``high risk'' IHAs. This 
proposed rule provides for the assumption that procurement and 
development processing will be completed by IHAs that are not 
designated ``high risk''. Procedures addressing processing for ``high 
risk'' IHAs are contained in Sec. 905.210. This modification has 
resulted in significant editing of subparts B and C but has no other 
impact on program requirements. Additionally, both subparts B and C 
have been reorganized to more closely follow processing steps.
    905.160  Procurement standards. This section has been reworded to 
clarify that an IHA Board of Commissioners must assure that program 
requirements have been satisfied before execution of contracts. 
Previous wording required the Board to certify to compliance before a 
contract is executed. The proposed language allows compliance with this 
requirement if the IHA Board of Commissioners develops procurement 
policies in accordance with this subpart and 24 CFR part 85 and reviews 
compliance with these policies on a regular basis.
    The requirement for submission of a bidding package or a 
certification of compliance prior to the solicitation of bids/proposals 
is proposed to be removed. Such certification is to be submitted after 
award of contract (see new Sec. 950.260).
    905.165  Indian preference requirements [Renumbered 950.175]. The 
Indian Preference (IP) part has been completely re-written and 
simplified. The re-written section closely follows the IP requirements 
included in the Indian CDBG regulations in 24 CFR part 571. It is 
anticipated that standardization of IP requirements between the Indian 
Housing, CDBG and HOME programs will provide improved flexibility to 
IHAs and tribes and will be simpler to understand and comply with for 
both grantees and contractors/suppliers.
    The proposed rule would remove HUD's involvement in the Indian 
Preference complaint process. Complaint resolution, including appeals 
and administrative hearings, is proposed to be contained at the IHA 
level. HUD will continue to monitor IHA compliance with Indian 
Preference requirements during periodic performance monitoring reviews. 
This proposal is made to expedite the complaint process and to vest 
full authority for compliance with Indian Preference with local 
officials.
    905.175  Methods of procurement [Renumbered 950.165]. The ``X'' 
factor method has been removed and will be addressed in the program 
handbook. The section ``Methods of procurement'' was a continuation of 
the IP requirements of the program. With the simplification of IP (see 
new Sec. 950.160) this part has been modified to recite the provisions 
of 24 CFR 85.36(d).
    905.180  Training and employment requirements [Renumbered 950.175]. 
This section would be relocated to the Indian Preference section (noted 
earlier in this preamble) and simplified to enable IHAs to develop 
programs which can more adequately reflect local conditions and needs.

Subpart C--Development

    905.210  Development priorities. The requirements for development 
priorities were removed from U.S. Housing Act of 1937, as amended, by 
the Housing and Community Development Act of 1992. Accordingly, the 
requirements currently contained in existing Sec. 905.210 are not 
contained in the proposed rule.
    905.212  Authority for proceeding without HUD approval [Renumbered 
950.210]. As part of the revisions to subparts B and C of part 905, to 
remove specific requirements for ``high risk'' IHA processing, this 
section had been modified to provide for HUD to require an IHA to 
obtain approval for additional processing steps where it is determined 
necessary. The section includes three circumstances where HUD may 
impose additional requirements on an IHA during the development period.
    905.215  Production methods and requirements [Retitled ``Production 
methods'']. The explanations of the usual methods of development used 
by IHAs have been abbreviated in the proposed rule and a clarification 
has been made that an IHA can use whatever method of development it 
chooses so long as the method is not counter to the requirements of 24 
CFR part 85. HUD believes that this revision expands the opportunities 
for IHAs to utilize new and innovative means of producing housing and 
may result in lower cost housing developed in shorter time periods.
    The listing of public advertisement requirements has been removed. 
These requirements are more fully covered in 24 CFR part 85 and the 
program handbooks.
    905.220  Application procedures [Renumbered 950.225, and retitled 
``Application'']. Timeframes for beginning review of applications; 
initial review and request for supplemental information steps; and 
other processing instructions have been removed from this section. 
Processing steps such as these are more appropriately covered in the 
program handbook and, if necessary, in the program NOFA.
    The term ``ranked'' in existing paragraph (c) of this section has 
been replaced with the correct term--``rated''. Projects are rated by 
program type but ranked together to arrive at an ordered list for 
funding determinations.
    The proposed rule clarifies that project funds cannot be used for 
expenses of another project except for comprehensive planning. This 
requirement is in the current regulations but is not clear.
    The limitation on planning funds of 3 percent of the program 
reservation has been removed. Experience has shown that an arbitrary 
percentage is impractical with the result being that many IHAs either 
requesting a waiver of the 3 percent limitation or delaying payment of 
incurred expenses. The proposed language specifies that IHAs must 
justify the level of funding for planning regardless of the amount 
requested.
    The word ``cluster'' has been removed from examples contained in 
the comprehensive housing plan section. The removal of this term 
clarifies that comprehensive planning is not limited to cluster or 
subdivision housing sites.
    950.230  Project coordination [New section]. A new section has been 
added to address project coordination. The new section specifies that 
IHAs must plan for the development with the tribe, utility companies, 
and other state or Federal agencies and schedule completion of these 
activities. While IHAs have always participated in the coordination of 
project planning, HUD frequently took a leadership role in the past. 
With the removal of HUD from most aspects of planning coordination 
relative to all projects unless otherwise specified (Sec. 905.210), 
this section clarifies that the IHA is fully responsible for project 
coordination. The section also requires that a project coordination 
schedule be provided to HUD for monitoring purposes.
    905.225  IHA development program [Renumbered 950.260]. A 
clarification was made to this section to specify that the Development 
Program is to be submitted in accordance with the project schedule. 
This was added to emphasize that the IHA is responsible for planning 
its project and implementing the plan.
    905.230  Site selection criteria [Renumbered 950.235]. The 
requirements contained in this section have been significantly modified 
to reduced regulatory requirements. These changes include (1) 
simplifying this section to state that all utilities needed for the 
project will be committed before final site approval; (2) removing 
requirements for topography, subsurface conditions and natural hazards, 
flooding, and multi-unit and scattered sites (these items are either 
addressed under other requirements of this part (flooding) or are more 
appropriately addressed in the program handbook); and (3) changing 
maximum site size from one acre to a local determination based on needs 
of housing occupants.
    905.235  Types of interest in land [Renumbered 950.240]. A 
clarification was made to this section, to be consistent with the 
statute, that all property included in the project must be exempt from 
state or local real and personal property tax.
    905.240  Appraisals [Renumbered 950.245]. This section was 
simplified to require compliance with the Uniform Relocation and 
Assistance Act. The part of this section which attempted to instruct 
the IHA on how to perform an appraisal was removed.
    Additionally, clarification was provided that an appraisal is not 
required for any donated property that has a value of $1,500 or less, 
regardless of the source of the donation.
    The requirement for HUD approval of appraisals was removed. If a 
Field Office determines that a project should be processed under the 
``assisted'' method, review of appraisals can be required.
    905.245  Site approval [Renumbered 950.250]. This section has been 
restructured to clarify the site approval process. Revised provisions 
include (1) clarification that the IHA may submit a site approval 
certification with the development program in lieu of the supporting 
documents; (2) clarification of the method to be followed by the IHA in 
determining tentative site approval; and (3) clarification of the 
environmental clearance process and how it will be conducted jointly by 
HUD and the IHA; and, removal of the requirement that HUD inspect all 
sites.
    905.250  Design criteria [Renumbered 950.255]. This section was 
modified to include (1) Model Energy Code requirements; (2) IHA Board 
of Commissioners designation of applicable codes in the absence of 
tribal adoption; (3) clarification that designs must be approved by 
local or tribal regulatory agencies and the BIA and/or IHS, where 
applicable. Additionally, the moderate housing design requirement was 
moved to this section.
    905.255  Total development cost standard [Renumbered 950.220 and 
retitled ``Total development cost'']. HUD processing and procedure 
requirements were removed from this section. These requirements are 
more appropriately located in the program handbook or notices.
    Wording was added to clarify that tenant training includes 
homebuyers and tenants. This has been previously authorized under the 
program with tenant counseling discussed here, and a parallel 
authorization for homebuyers under subpart E of part 905.
    Provisions have been added to allow for the escrow of insurance 
premium funds to assist in closeout of development programs. Currently, 
a development program must be held open until all expenses have been 
incurred and paid. This change will allow for certain development 
programs to be closed in a shorter period.
    905.260  Construction and inspections [Renumbered 950.265]. The 
submission requirements of plans, specifications, and other contract 
documents have been listed to clarify when the submissions must be made 
and what is to be included. Clarification also has been added that 
submissions are not due to be provided to HUD until after award of a 
contract by the IHA.
    A new subsection has been added clarifying that the IHA has the 
responsibility to coordinate construction inspections with other 
agencies.
    A new subsection, ``Construction completion and settlement,'' has 
been added to distinguish between the construction period and the 
closeout period of project development. Provisions from existing 
Sec. 905.260 that address completion and settlement will be addressed 
in this section. In addition the following has been modified to provide 
clarification and structure to the process:
    HUD's involvement in the final inspection process for standard 
method IHAs has been removed. Other agencies who may be required to 
attend the final inspection have been added to the participant list for 
the final inspection.
    This section also has been revised to clarify the procedures for 
contract settlement to include an interim and final certificate of 
completion, and to clarify that IHAs may make payment to contractors 
without prior HUD approval.
    Submittal requirements for completion documents to HUD have been 
included in this section.
    905.265  Warranty inspections and enforcement [Renumbered 950.275]. 
This section was revised to clarify that two inspections are the 
minimum requirement during the warranty period; one within six months 
of the start of the warranty period and one prior to the expiration of 
the warranty. This is not a new requirement but the wording of this 
section was modified to remove possible confusion.
    905.270  Correcting deficiencies [Renumbered 950.280]. This section 
was revised to clarify that modernization funds or IHA held funds may 
be used to correct design or construction deficiencies. This is not a 
new authority but serves to list in one place the potential funding 
sources to address design or construction deficiencies (DCDs). This 
section also was revised to clarify that HUD is under no obligation to 
fund correction of DCDs.

Subpart D--Operation

General Changes

    The subpart has been generally revised to provide for a clearer 
organization of information.

Specific Changes

    905.301  Admission policies. The ``broad range of incomes'' 
language in Sec. 950.301(a)(2)(ii) would include reference to the 
statutory change in section 501 of National Affordable Housing Act 
(NAHA) that now requires adherence to the requirement to attain a 
tenant mix with a broad range of incomes ``to the maximum extent 
feasible.''
    Additionally, Sec. 950.301(a)(2)(iv) would include the increase 
from 10 percent to 30 percent of non-Federal preference holders 
eligible for admission to Indian housing programs as permitted under 
section 501 of the NAHA.
    905.335  Rent and homebuyer payment collection policy. This section 
has been revised to include the phrase ``and homebuyer'' after the word 
``rent'' to emphasize that collection payment policies apply to Mutual 
Help (MH).

Subpart E--Mutual Help Homeownership Opportunity Program

General Changes

    HUD recognized that changes were needed to the Indian program, such 
as Mutual Help (MH), to assure that services provided to the Tribes and 
the residents continue to be in their best interests. Accordingly, the 
changes made to this subpart were directed to make the MH program more 
efficient.
    905.404  Program framework. In an effort to streamline the 
regulation, this section has been removed. As commenters indicated, the 
information outlined here is already located in subparts C and E of 
part 905. This does not eliminate the necessity for an ACC, MHO 
Agreement or Construction Contract, however.
    905.407  Application. This section has been removed. (See new 
Sec. 950.225, Application, discussed earlier in this preamble.)
    905.410  HUD review of application. This section has been removed.
    905.416  Selection of MH homebuyers. The provisions of 
Sec. 905.301(a)(3)(vi) would be contained in Sec. 950.416(a)(3) and 
revised to reflect changes made in this subpart regarding the 
determination of purchase prices and the designation of a successor. 
Paragraph (a)(3) of new Sec. 950.416 provides that the IHA's admission 
policies for MH projects should be different from those for its rental 
or Turnkey III projects. The policies for the MH program should provide 
standards for determining a homebuyer's:

--Ability to provide maintenance for the unit;
-- Potential for maintaining at least the current income return--
successor to a unit at the time of an ``event.'' (``Event'' should also 
be defined by the IHA in its policy); and
-- Initial purchase price and the purchase price for a subsequent 
homebuyer.

    Paragraph (e) of new Sec. 950.416 would be strengthened and 
clarified to address the comments received. The following language has 
been added to this section: ``Ownership or use of a decent, safe and 
sanitary residence other than the MH home at the time of occupancy or 
acquisition during occupancy would disqualify a family from the MH 
program.''
    905.419  MH Contribution. The requirement in existing 
Sec. 905.419(3) for HUD approval has been removed in the new 
Sec. 950.419(3).
    905.425  Inspections, responsibility for items covered by warranty. 
The language in paragraph (a) of this section has been revised in new 
Sec. 950.425(a) to clarify that the homebuyer move-in inspection could 
be the final inspection with the contractor, IHA, and homebuyer or a 
separate inspection with the IHA and homebuyer.
    Paragraph (c) of existing Sec. 905.425 has been removed since it is 
contained in Sec. 950.428.
    905.427  Homebuyer payments--post-1976 projects. This section has 
been revised to eliminate HUD approval of the amount of monthly payment 
for New MH program developments and HUD approval of the specific 
percentage the IHA will use to determine the monthly payment in Mutual 
Help.
    905.431  Operating reserve. The language in this section that 
requires HUD approval of unanticipated costs has been removed.
    950.432  Operating budget submission and approval [New section]. A 
new section has been added to this subpart to provide for the operating 
budget submission for Mutual Help. Subpart J does not apply to the 
Mutual Help program. Therefore, no guidance is given for IHAs 
submitting budgets for this program.
    905.434  Operating subsidy. HUD is proposing a revision to the 
current method of determining subsidy for counseling and training. HUD 
proposes the use of a formula for providing subsidy to IHAs in these 
two areas, and seeks comment from the Indian housing community on the 
specific formula to be used. The formula approach will eliminate the 
need for IHAs to submit specific training and counseling budgets 
annually.
    Subject to appropriations, an additional category of subsidy 
eligibility is also being added. Funding of up to $25 per unit per year 
would be made available to an IHA with a duly elected resident 
organization for resident participation activities. Of this amount, $15 
per unit per year shall fund resident participation activities of the 
resident organization. IHAs should refer to 905.965, Funding Resident 
Participation and 905.967, Eligible TOP Activities.
    905.437  Homebuyer reserves and accounts. The Voluntary Equity 
Payments Account (VEPA) has been removed from this section since it was 
not necessary and seldom used.
    Substantial revision was made to the provision concerning reserves 
in this section. Several requests were made to revise the section on 
investment of equity funds to allow IHAs to utilize the homebuyer's 
monthly equity payments account (MEPA), provided that a portion is 
maintained as a reserve. It was suggested that a sufficient amount of 
funds should be maintained in a secured investment for use if 
homebuyers terminate the mutual help and occupancy agreement (MHOA) and 
equity funds are to be disbursed. HUD agrees with the comment but also 
believes that HUD local office approval should be a part of the process 
to insure that the IHA has administrative capability prior to using the 
equity funds. Proposed regulatory language is as follows:

    Notwithstanding other provisions of this subpart and subject to 
HUD Field Office approval, an IHA may use a portion of the 
homebuyers' equity accounts for low-income housing purposes provided 
that a reserve of homebuyers' MEPA is maintained. The reserve must 
be at a percentage established by the IHA and approved by the HUD 
Field Office.

    905.440  Purchase of home. In paragraph (a) of this section, the 
reference to 24 CFR 203.43(h) was removed. In new Sec. 950.440(b), the 
details on determining the purchase price have been streamlined. The 
proposed language is as follows: ``(1) Initial purchase price. The 
initial purchase price of a home for a homebuyer shall be determined by 
the IHA.''
    In paragraph (b)(2) of this section, the reference to the 
prevailing interest rate for VA guaranteed mortgage loans at the time 
the schedule is established was removed because VA no longer sets this 
amount.
    Paragraph (d) of this section concerning notice of eligibility for 
financing was removed. Section 905.443/950.443 already outlines the IHA 
homeownership financing guidelines. The need to notify families at the 
time of each reexamination is burdensome.
    In paragraph (e)(7) of this section, the last sentence regarding 
the relationship with the homebuyer has been removed. It is repeated in 
Sec. 950.443.
    In paragraph (e)(8) of this section, the following language has 
been added, ``Notwithstanding the above requirements, an IHA may 
complete emergency and statutorily or regulatorily required 
modernization work on a unit which is paid off but not conveyed, during 
the term of the repayment schedule.''
    Paragraph (e)(9)(ii) has been revised to read, ``Upon repayment of 
the total delinquency, the IHA may, in accordance with 
Sec. 950.602(e)(2), complete non-emergency modernization work on a unit 
prior to conveyance.''
    905.443  IHA homeownership financing. The homeownership financing 
requirements have been streamlined. Additional guidance on IHA 
financing will be provided in a handbook.
    905.449  Succession upon death or mental incapacity [Renamed 
``Succession'']. Revisions to this section are as follows:
    In paragraph (a), language has been revised as follows, ``''Event'' 
means the death, mental incapacity, or other conditions as determined 
by the IHA, of all of the persons who have executed the MHO Agreement 
as homebuyers.''
    In paragraph (b), language was added as follows: ``A homebuyer may 
designate a successor who, at the time of the ``event'' would assume 
the status of homebuyer, provided that the successor meets the 
conditions established by the IHA which shall include satisfying 
program eligibility requirements.'' The designation may be made at the 
time of execution of the MHO Agreement, and the homebuyer may change 
the designation at any later time by written notice to the IHA.
    Paragraph (c) was revised to read, ``Upon occurrence of an `event', 
the person designated as the successor shall succeed to the former 
homebuyer's rights and responsibilities under the MHO Agreement if the 
designated successor meets the criteria established by the IHA which 
shall include program eligibility requirements.''
    Paragraphs (c)(i) through (iv) and (c)(2) of this section were 
removed. These paragraphs address current regulatory conditions 
applicable to HUD.
    Paragraph (d) was revised. The clause ``or if any of the conditions 
in paragraph (c) of this section are not met by the designated 
successor'' has been removed.
    905.453  Counseling of homebuyers. Funding of counseling has been 
modified to eliminate the $500 maximum contained in the current 
regulation for development. Counseling cost will now be determined by 
the IHA with no minimum or maximum amount. The maximum amount will be a 
factor of the IHA's needs and the availability of funds within the 
development program.
    Additionally, all portions of this section with the exception of 
(1) the requirement to submit a counseling program to the HUD Field 
Office for approval, (2) the requirement for an annual report and (3) 
the termination process have been removed. The IHA will have the 
flexibility to design a program to meet their needs.

Subpart F--Self-Help Development in the Mutual Help Homeownership 
Opportunity Program

    905.463  Basic requirements [renumbered 950.475] Section 950.463(d) 
has been removed. A detailed discussion is already in the program 
handbook.
    Paragraph (d) of this section has been removed. Construction tasks 
are more appropriately included in the program handbook.

Subpart G--Turnkey III Program

    The revisions to this subpart are designed to streamline the 
Turnkey III program regulations as appropriate to the present status of 
the program, which is limited to the management, operation, conversion 
and sale of the remaining unsold Turnkey III units only. Accordingly, 
language concerning development and initial occupancy of new projects 
was removed.
    At the present time, there are only about 30 IHAs with active 
Turnkey III programs, and the total inventory of Turnkey III homes 
still in management nationwide amounts to 1,749 units. It is 
anticipated that the remaining program inventory will be rapidly 
reduced, and the rest of the Turnkey III homes will be sold or 
converted to Mutual Help and the program completely closed out within 
the next few years.
    905.501  Introduction. This section was streamlined to provide only 
essential elements of the Turnkey III program.
    A new paragraph (5), ``Program Overview,'' was added to provide a 
brief description of how the Turnkey III Program works. This paragraph 
is added for the orientation of the reader who wants basic information 
about the general nature of the program.
    905.503  Conversions of Turnkey III units and transfer of occupants 
[Retitled ``Conversion of Turnkey III developments'']. The requirements 
of this section have been streamlined. The conversion procedures are 
now similar to those in Secs. 950.455 and 950.458 which cover 
conversions of rental and Mutual Help programs, and simplify the 
process and provide consistency from one program to another.
    905.505  Selection of Turnkey III homebuyers [Retitled 
``Eligibility and selection of Turnkey III homebuyers'']. This section 
was retitled to clarify basic provisions on homebuyer requirements.
    Paragraph (a) of this section was retitled ``Applications'' to 
clarify basic provisions on homebuyer requirements.
    The ``Turnkey III waiting list'' provisions have been eliminated 
from this section, and replaced with streamlined requirements in 
paragraph (b) titled ``Selection and notification of homebuyers.''
    905.507  Homebuyer Ownership Opportunity Agreements (HOOA). 
Paragraph (c) of this section, ``New agreements'', has been removed 
because the information is adequately covered in other sections of the 
regulation.
    905.511  Homebuyers' association and homeowners' association 
[Retitled ``Homebuyers Association (HBA)'']. This section has been 
retitled to reflect that this section only addresses information on the 
HBA. Homeowners' associations are addressed in Sec. 950.512. 
Additionally, the requirements in paragraph (a) of this section have 
been streamlined.
    950.512  Homeowners' association (HOA) [New section]. This section 
has been added to discuss HOAs.
    905.513  Break-even amount and application of monthly payments. The 
requirements of this section have been streamlined and paragraph (d) 
has been revised to insert limits on EHPA/NRMR credits in circumstances 
specified.
    905.515  Monthly operating expense. Paragraph (c) of this section 
titled ``Provision for common property maintenance'' has been removed.
    905.517  Earned Home Payments Account (EHPA). Paragraphs (c)(1) 
(i), (ii), (iii) and (2) concerning exercise of option and required 
amount in EHPA have been removed for the purpose of expediting sale to 
subsequent homebuyers without their having to wait two years.
    905.521  Operating reserve. Paragraph (b) of this section titled 
``Nonroutine maintenance--common property (contribution to operating 
reserve)'' has been revised to remove all references to maximum 
operating reserve. Paragraph (c) of this section has been removed.
    905.525  Achievement of Ownership [Retitled ``Purchase price and 
methods of purchase'']. Revisions have been made to this section 
regarding the terms of sale to original and subsequent homebuyers. 
Based on comments received, the procedures for determining the purchase 
price and the term of the purchase price schedule have been changed to 
agree with the Mutual Help program.
    A new subparagraph (c)(5) has been added to make clear that IHA 
financing is allowed, without the need for HUD approval, just like in 
the MH program (see Sec. 950.440, Purchase of Home).
    905.527  Payment upon resale at profit. A new paragraph (c) titled 
``Death of Homeowner'' has been added to respond to any questions 
concerning the death of the homebuyer before the end of the five-year 
period of the promissory note.

Subpart I--Modernization

    The Comprehensive Grant Program (CGP) portion of this subpart has 
been revised in an effort to simplify and streamline the CGP process. 
The revised CGP regulation, which includes both the Indian housing and 
public housing CGP regulations, was published as a proposed rule on 
March 8, 1994 (59 FR 10876). The revisions were made in consultation 
with the housing authorities and interest groups which included 
representation from the National American Indian Housing Council 
(NAIHC). Additional changes to the proposed version of the CGP 
regulation are included in this proposed rule. Indian Housing 
Authorities (IHAs) are encouraged to provide any additional comments 
they may have on this program. Additionally, in this proposed part 950 
rule, changes to the General Provisions and Comprehensive Improvement 
Assistance Program (CIAP) sections of subpart I are also proposed to be 
made.
    A recommendation to remove the CIAP requirement that states that 
each development for which work is proposed must be at least three 
years old from the end of the initial operating period has been adopted 
in the proposed revisions to the CIAP regulation.
    905.602  Special requirements for TKIII and Mutual Help 
developments. The requirements for TKIII homebuyers to be charged for 
the cost of modernization work have been removed.
    This section also has been revised to allow IHAs to modernize 
Mutual Help units which are paid off but not conveyed.
    Changes have been made to allow IHAs to do work necessary to meet 
statutory or regulatory requirements in TKIII units which are paid off, 
so long as the work is completed prior to conveyance

Comprehensive Improvement Assistance Program (CIAP)

    905.618  Procedures for obtaining approval of a modernization 
program. The following requirements have been removed from this 
section: (1) that developments proposed for work must be at least three 
years old from the date of EIOP; (2) that the submission of a fiscal 
audit is an eligibility requirement; and (3) the use of a Declaration 
of Trust as a requirement for Mutual Help units.
    905.624  Resident and homebuyer participation. This section 
consolidates homebuyer consultation requirements in one section by 
removing special consultation requirements for TKIII homebuyers where 
the cost of modernization work increased the amortization period of the 
home.
    905.633  Special requirements for section 23 leased housing bond-
financed development [Removed]. This section has been removed since 
there is no longer any Section 23 housing management by IHAs.
    905.635  Initiation of modernization activities. The requirement 
for prior HUD approval of force account work has been removed from this 
section.

Comprehensive Grant Program

    Revisions have been made to make the $75 million set-aside for 
emergencies and disasters available to CIAP housing authorities as well 
as CGP housing authorities.
    Also, changes were made to continue the rolling base concept of the 
Five-Year Action Plan. The regulations now allow for full 
interchangability of work items in any of the five years.
    The following provisions have been removed from the CGP 
requirements:
    1. The annual Statement by making the level of detail for 
describing work items the same for each year of the Five-Year Plan;
    2. The concept of ``major changes'' has been eliminated since IHAs 
would be able to move work items within any of the five years of the 
plan; however, amendments to the Annual Work Statement would be 
required where any work items are added which are not in the Five-Year 
Action Plan;
    3. The optional two-year Annual Statement;
    4. The presumptive estimate by providing only a final formula 
amount;
    5. The requirement for an initial notice and specific notification 
of democratically elected presidents of resident organizations but 
public notice is required prior to the advance meeting and public 
hearing;
    6. The specified three week time frame for holding the advance 
meeting before the public hearing;
    7. The requirement for use of a Declaration of Trust for Mutual 
help units;
    8. The Executive Summary as a separate document; and
    9. The requirement for prior approval of force account work.
    The percentage limitation on management improvements from 10 to 20 
percent has been increased for all IHAs. IHAs determined by the ONAP to 
be ``high performing'' would have no percentage limitation on 
management improvements.
    The revisions proposed allow IHAs to hold the advance meeting for 
residents and the public hearing earlier in the year by using the 
formula amount for the current year as the planning level for the 
coming year.
    905.666  Eligible costs. The charge to TKIII homebuyers for the 
cost of health and safety work items has been removed from this 
section. Also removed from this section is the requirement for IHAs to 
keep records by unit of the substantial rehabilitation of TKIII units, 
and the requirement for IHAs to demonstrate that the proposed 
substantial rehabilitation of vacant or non-homebuyer occupied TKIII 
units will bring the units into full compliance with the homeownership 
objectives of subpart G. Additionally, the proposed rule removes the 
language requiring that to the ``maximum extent feasible'' IHAs should 
use their management improvement funds to train residents.

Subpart J--Operating Subsidy

    905.715  Computation of utilities expense level. Revisions have 
been made to this section to extend, for a period not to exceed an 
additional six (6) years, the existing arrangement under which an IHA 
may share equally with HUD any cost reductions due to the differences 
between projected and actual utility rates in the first year reductions 
occur. Similar changes were made in Sec. 905/950.730, discussed below.
    950.720  Other costs. Revisions were made to paragraph (b)(2) of 
this section. The revisions include removing the need for a waiver 
before operating subsidy may be paid for certain units approved for 
nondwelling use to promote economic self-sufficiency and anti-drug 
activities.
    905.730  Adjustments. The 60 day deadline in this section for 
requesting a revision of an IHA's Allowable Expense Level in 
950.730(f)(3)) has been removed.
    905.740  Operating reserves. The maximum operating reserve 
requirement has been removed from this section. IHAs will be required 
to maintain sufficient working capital for future nonroutine 
maintenance requirements, insurance premiums and unanticipated project 
requirements.
    905.772  Operating subsidy eligibility for projects owned by IHAs 
in Alaska [Renumbered 950.774]. In the proposed rule, the provisions of 
this section are in Sec. 950.774. Additionally, the provisions of 
subpart N have been incorporated into subpart J to address Alaska's non 
PFS status and the need for them to comply with budget submission 
requirements.
    950.772  Financial management systems, monitoring and reporting. In 
the existing regulations, these provisions are found in Sec. 905.950 of 
subpart N. In the proposed rule, these provisions are in Sec. 950.772 
and apply to all programs.

Subpart K--Energy Audits, Energy Conservation Measures and Utility 
Allowances General Changes

    In the majority of sections in this subpart, the examples of 
methodologies of performing energy audits have removed. These examples 
will be placed, more appropriately, in the Indian Housing Management 
Handbook.
    Descriptions of specific energy saving items, such as ceiling 
insulation and timers for hot water heaters, have been removed from 
this subpart and also will be addressed in the Handbook.
    905.807  Energy conservation measures [Removed].This section will 
be moved in its entirety to the Handbook.
    905.810  Order of funding. Paragraphs (b) and (c) of this section 
have been removed, and their provisions will be addressed in the 
Handbook.
    905.815  Energy conservation equipment (renamed Energy conservation 
equipment and practices). The list of energy conservation equipment has 
been removed and will be placed in the Handbook.
    905.822  Compliance schedule, and 905.848 Compliance schedule. Both 
sections have been revised to eliminate dates that have passed, and 
therefore are no longer applicable.
    905.842  Benefit/cost analysis. The methodology for performing a 
benefit/cost analysis has been removed and will be addressed in the 
Handbook.
    905.870  Standards for allowances for utilities. This section has 
been edited to remove duplicative language.

Subpart L--Operation of Projects After Expiration of Initial ACC 
Term

    No comments were received on this subpart from IHAs and Tribal 
officials, and no changes are proposed. Therefore, this subpart is not 
being published for comment.

Subpart M--Disposition or Demolition of Projects

General Changes

    This subpart has been streamlined by removing sections and 
subsections that are more appropriate in a handbook (those regulatory 
provisions that merely provide examples). The removed provisions will 
be incorporated in the Indian Housing Management Handbook.

Specific Changes

    905.925  Relocation of displaced tenants [Removed]. This section 
was removed by a technical amendment and replaced by Sec. 950.117.
    950.925  Resident organization opportunity to purchase [New 
section]. A new Sec. 950.925 which implements the new statutory 
requirements on this subject contained in the Federal Register of 
October 6, 1992 (57 FR 46074), has been added.
    905.933  Use of Proceeds. Paragraph (a)(2) of this section titled 
``Proceeds of a Disposition'' was revised to reflect the statutory 
requirement for application of a proportional ratio in scattered site 
housing when satisfying outstanding debt obligations of a project.
    950.937  Reports and records [Removed]. This section was removed 
and the subject matter of this section will be addressed in the 
Handbook.

Subpart O--Resident Participation and Opportunities

General Changes

    The proposed rule on Resident Participation and Opportunities in 
Indian Housing, 24 CFR 905, subpart O, was published in the Federal 
Register on April 19, 1994 (59 FR 18666). Comments were due May 19, 
1994. HUD anticipates publishing a final rule on subpart O that takes 
into consideration public comment in the summer of 1994. Because the 
proposed rule on subpart O was recently published, this proposed rule 
does not republish subpart O.

Subpart P--Section 5(h) Homeownership Program

    HUD is currently preparing the final rule on section 5(h) for 
publication. The interim rule was published September 20, 1991 (56 FR 
47866), made effective October 21, 1991, and is codified at 24 CFR part 
906, and part 905, subpart P. The final rule makes the following 
changes:
    1. It streamlines the rules for the Section 5(h) Program;
    2. It allows more flexibility in the regulatory requirements of the 
Section 5(h) Program; and
    3. It requires only what is statutory according to the United 
States Housing Act of 1937 and provides additional technical guidance 
will be provided in a forthcoming handbook.
    The major change to be made in the final rule is the clarification 
that the section 5(h) program applies to the Mutual Help and Turnkey 
III programs.
    No comments were received from the Native American community during 
the comment period of the interim rule, or during the recent 
consultation with IHAs and Tribal officials. Accordingly, subpart P is 
not republished in this proposed rule for further comment.

Subpart R--Indian Housing Family Self-Sufficiency (FSS) Program

    HUD proposes to make very few changes to the regulation 
implementing the FSS program because the current regulation reflects 
the statutory provisions of section 23 of the U.S. Housing Act of 1937 
(42 U.S.C. 1437u). However, the following minor changes have been made 
to streamline the policies and procedures applicable to the FSS program 
under HUD's Indian housing program.
    905.3012  Program Coordinating Committee (PCC). In paragraph (b)(1) 
of this section, the heading ``Required Membership'' has been removed 
as the statutory provision does not contain language that directs IHAs 
to have a required membership. In this paragraph, the word ``must'' in 
the phrase ``The PCC must'' has been removed and the word ``may'' has 
been substituted. The U.S. Housing Act of 1937 does not require IHA 
representatives or residents of the IHA to be members of the PCC.
    Paragraph (b)(2) states that ``the PCC should . . .''. The ``should 
has been removed and word ``may'' substituted for the same reasons 
stated above.

IV. Other Matters

Finding of No Significant Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50 that 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4332). The Finding of No Significant Impact is 
available for public inspection and copying during regular business 
hours (7:30 a.m. to 5:00 p.m. weekdays) in the Office of the Rules 
Docket Clerk, Room 10272, 451 Seventh Street, S.W., Washington, D.C. 
20410.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this proposed rule before publication and 
by approving it certifies that this proposed rule does not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule would make a number of amendments to the Indian 
Housing Consolidated regulations to simplify program processes, reduce 
the number of regulatory requirements, and to provide more flexibility 
to local Tribal and Indian housing authority officials in the 
administration of the Indian Housing program.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this proposed rule will not have substantial direct 
effects on states or their political subdivisions, or the relationship 
between the Federal government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
As a result, the proposed rule is not subject to review under the 
order.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this proposed rule does 
not have potential for significant impact on family formation, 
maintenance, and general well-being, and, thus, is not subject to 
review under the order. No significant change in existing HUD policies 
or programs will result from promulgation of this rule, as those 
policies and programs relate to family concerns.

Regulatory Agenda

    This proposed rule was listed as sequence number 1681 in the 
Department's Semiannual Regulatory Agenda published on April 25, 1994 
(59 FR 20424, 20468) in accordance with Executive Order 12866 and the 
Regulatory Flexibility Act.
    The Catalog of Domestic Assistance numbers for the programs 
affected by this proposed rule are 14.146, 14.147, 14.850, 14.851, 
14.852, and 15.141.

List of Subjects in 24 CFR Part 950

    Aged, Grant programs--housing and community development, Grant 
programs--Indians, Disability, Homeownership, Indians, Low and moderate 
income housing, Public housing, Reporting and recordkeeping 
requirements.

    Accordingly, and under the authority of 42 U.S.C. 3535(d), title 24 
of the Code of Federal Regulations would be amended by:
    1. Redesignating part 905 as part 950;
    2. Revising the table of contents for the newly designated part 
950;
    3. Revising subparts A--G, I, J, K, and M;
    4. Reserving subpart Q; and
    5. Adding a new subpart R, consisting of Secs. 950.3001 through 
950.3030, as follows:

PART 950--INDIAN HOUSING PROGRAMS

Subpart A--General

Sec.
950.101  Applicability and scope.
950.102  Definitions.
950.110  Assistance from Indian Health Service and Bureau of Indian 
Affairs.
950.115  Applicability of civil rights requirements.
950.117  Displacement, relocation, and acquisition.
950.120  Compliance with other Federal requirements.
950.125  Establishment of IHAs pursuant to State law.
950.126  Establishment of IHAs by Tribal ordinance.
950.130  IHA Commissioners who are tenants or homebuyers.
950.135  Administrative capability.

Subpart B--Procurement

950.160  Procurement standards.
950.165  Methods of procurement.
950.170  Other requirements applicable to development contracts.
950.172  Wage rates.
950.175  Indian preference requirements.
950.190  Insurance.

Subpart C--Development

950.200  Roles and responsibilities of Federal agencies.
950.205  Allocation.
950.210  Authority for proceeding without HUD approval.
950.215  Production methods.
950.220  Total development cost.
950.225  Application.
950.230  Project coordination.
950.235  Site selection criteria.
950.240  Types of interest in land.
950.245  Appraisals.
950.250  Site approval.
950.255  Design criteria.
950.260  IHA development program.
950.265  Construction and inspections.
950.270  Construction completion and settlement.
950.275  Warranty inspections and enforcement.
950.280  Correcting deficiencies.
950.285  Fiscal closeout.

Subpart D--Operation

950.301  Admission policies.
950.305  Federal selection preferences.
950.310  [Reserved].
950.315  Initial determination, verification, and reexamination of 
family income and composition.
950.320  Determination of rents and homebuyer payments.
950.325  Total tenant payment--Rental and Turnkey III programs.
950.335  Rent and homebuyer payment collection policy.
950.340  Grievance procedures and leases.
950.345  Maintenance and improvements.
950.346  Fire safety.
950.360  IHA employment practices.

Subpart E--Mutual Help Homeownership Opportunity Program

950.401  Scope and applicability.
950.413  Special provisions for development of an MH project.
950.416  Selection of MH homebuyers.
950.419  MH contribution.
950.422  Commencement of occupancy.
950.425  Inspections, responsibility for items covered by warranty.
950.426  Homebuyer payments--pre-1976  projects.
950.427  Homebuyer payments--post-1976  projects.
950.428  Maintenance, utilities, and use of home.
950.431  Operating reserve.
950.432  Operating budget submission and approval.
950.434  Operating subsidy.
950.437  Homebuyer reserves and accounts.
950.440  Purchase of home.
950.443  IHA homeownership financing.
950.446  Termination of MHO agreement.
950.449  Succession.
950.452  Miscellaneous.
950.453  Counseling of homebuyers.
950.455  Conversion of rental projects.
950.458  Conversion of Mutual Help projects to Rental Program.

Subpart F--Self-Help Development in the Mutual Help Homeownership 
Program

950.470  Purpose and applicability.
950.475  Basic requirements.
950.480  Self-Help agreement.
950.485  Application.
950.490  Development program.
950.495  Default of self-help agreement.

Subpart G--Turnkey III Program

950.501  Introduction.
950.503  Conversion of Turnkey III developments.
950.505  Eligibility and selection of Turnkey III homebuyers.
950.507  Homebuyer Ownership Opportunity Agreements (HOOA).
950.509  Responsibilities of homebuyer.
950.511  Homebuyers' association (HBA).
950.512  Homeowners' association (HOA).
950.513  Breakeven amount and application of monthly payments.
950.515  Monthly operating expense.
950.517  Earned Home Payments Account (EHPA).
950.519  Nonroutine Maintenance Reserve (NRMR).
950.521  Operating reserve.
950.523  Operating subsidy.
950.525  Purchase price and methods of purchase.
950.527  Payment upon resale at profit.
950.529  Termination of Homebuyer Ownership Opportunity Agreement.

Subpart H--Lead-Based Paint Poisoning Prevention

950.551  Purpose and applicability.
950.553  Testing and abatement applicable to development.
950.555  Testing and abatement applicable to modernization.
950.560  Notification.
950.565  Maintenance obligation; defective paint surfaces.
950.570  Procedures involving EBLs.
950.575  Compliance with Tribal, State and local laws.
950.580  Monitoring and enforcement.

Subpart I--Modernization Program

General Provisions

950.600  Purpose and applicability.
950.601  Allocation of funds under Section 14.
950.602  Special requirements for Turnkey III and Mutual Help 
developments.
950.603  Modernization and energy conservation standards.

Comprehensive Improvement Assistance Program (for IHAs That Own or 
Operate Fewer Than 250 Indian Housing Units

950.609  Purpose.
950.615  Eligible costs.
950.618  Procedures for obtaining approval of a modernization 
program.
950.624  Resident and homebuyer participation.
950.635  Initiation of modernization activities.
950.639  Fund requisitions.
950.642  Contracting requirements.
950.645  On-site inspections.
950.648  Budget revisions.
950.651  Progress reports.
950.654  HUD review of IHA performance.
950.657  Fiscal closeout.

Comprehensive Grant Program (for IHAs That Own or Operate 250 or More 
Indian Housing Units

950.660  Purpose.
950.666  Eligible costs.
950.667  Reserve for emergencies and disasters.
950.669  Allocation of assistance.
950.672  Comprehensive Plan (including Five-Year Action Plan).
950.675  HUD review and approval of Comprehensive Plan (including 
action plan).
950.678  Annual Submission of activities and expenditures.
950.681  Conduct of modernization activities.
950.684  IHA Performance and Evaluation Report.
950.687  HUD review of IHA performance.

Subpart J--Operating Subsidy

950.701  Purpose and applicability.
950.705  Determination of amount of operating subsidy under PFS.
950.710  Computation of allowable expense level.
950.715  Computation of utilities expense level.
950.720  Other costs.
950.725  Projected operating income level.
950.730  Adjustments.
950.735  Transition funding for excessive high-cost IHAs.
950.740  Operating reserves.
950.745  Operating budget submission and approval.
950.750  Payment procedure for operating subsidy under PFS.
950.755  Payments of operating subsidy conditioned upon 
reexamination of income of families in occupancy.
950.760  Determining actual occupancy percentage.
950.770  Comprehensive Occupancy Plan requirements.
950.772  Financial management systems, monitoring and reporting.
950.774  Operating subsidy eligibility for projects owned by IHAs in 
Alaska.
Subpart K--Energy Audits, Energy Conservation Measures and Utility 
Allowances
950.801  Purpose and applicability.

Energy Audits and Energy Conservation Measures

950.805  Requirements for energy audits.
950.810  Order of funding.
950.812  Funding.
950.815  Energy conservation equipment and practices.
950.822  Compliance schedule.
950.825  Energy performance contracts.

Individual Metering of Utilities

950.840  Individually metered utilities.
950.842  Benefit/cost analysis.
950.844  Funding.
950.845  Order of conversion.
950.846  Actions affecting residents.
950.849  Waivers for similar projects.
950.850  Reevaluations of mastermeter systems.

Resident Utility Allowances

950.860  Applicability.
950.865  Establishment of utility allowances by IHAs.
950.867  Categories for establishment of allowances.
950.869  Period for which allowances are established.
950.870  Standards for allowances for utilities.
950.872  Surcharges for excess consumption of IHA-furnished 
utilities.
950.874  Review and revision of allowances.
950.876  Individual relief.

Subpart L--Operation of Projects After Expiration of Initial ACC Term

950.901  Purpose and applicability.
950.903  Continuing eligibility for operating subsidy; ACC 
extension.
950.905  ACC extension in absence of current operating subsidy.
950.907  HUD approval of disposition or demolition.

Subpart M--Disposition or Demolition of Projects

950.921  Purpose and applicability.
950.923  General requirements for HUD approval of disposition or 
demolition.
950.925  Resident organization opportunity to purchase.
950.927  Specific criteria for HUD approval of disposition requests.
950.928  Specific criteria for HUD approval of demolition requests.
950.931  IHA application for HUD approval.
950.933  Use of proceeds.
950.935  Replacement housing plan.

Subpart N--Miscellaneous

950.950  Operating subsidy eligibility for projects owned by IHAs in 
Alaska.

Subpart O--Resident Management and Participation

950.960  Purpose.
950.961  Applicablity and scope.
950.962  Definitions.
950.963  HUD's role in activities under this subpart.
950.964  Resident participation requirements.
950.965  Resident managment requirements.
950.966  Continued IHA responsibility to HUD.
950.967  Management specialist.
950.969  Modernization assistance.
950.970  Operating subsidy, preparation of operating budget, 
operating reserves and retention of excess revenues.
950.971  Waiver of HUD requirements.
950.972  Audit and administrative requirements.
950.973  Technical assistance.

Subpart P--Section 5(h) Homeownership Program

950.1001  Purpose.
950.1002  Applicability.
950.1003  General authority for sale.
950.1004  Fundamental criteria for HUD approval.
950.1005  Resident consultation and involvement.
950.1006  Property that may be sold.
950.1007  Methods of sale and ownership.
950.1008  Purchase eligibility and selection.
950.1009  Counseling, training, and technical assistance.
950.1010  Nonpurchasing residents.
950.1011  Maintenance reserve.
950.1012  Purchase prices and financing.
950.1013  Protection against fraud and abuse.
950.1014  Limitation of resale profit.
950.1015  Use of sale proceeds.
950.1016  Replacement housing.
950.1017  Records, reports, and audits.
950.1018  Submission and review of homeownership plan.
950.1019  HUD approval and IHA-HUD implementing agreement.
950.1020  Content of homeownership plan.
950.1021  Supporting documentation.

Subpart Q--[Reserved]

Subpart R--Family Self Sufficiency

950.3001  Purpose, scope and applicability.
950.3002  Program objectives.
950.3003  Definitions.
950.3004  Basic requirements of the FSS program.
950.3011  Action Plan.
950.3012  Program Coordinating Committee (PCC).
950.3013  FSS family selection procedures.
950.3014  On-site facilities.
950.3020  Program implementation.
950.3021  Administrative fees.
950.3022  Contract of participation.
950.3024  Total tenant payment and increases in family income.
950.3025  FSS account.
950.3030  Reporting.

    Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa-1437ee and 
3535(d).

Subpart A--General


Sec. 950.101  Applicability and scope.

    (a) General. (1) Under title II of the United States Housing Act of 
1937, as added by the Indian Housing Act of 1988 (42 U.S.C. 1437aa, et 
seq.), the U.S. Department of Housing and Urban Development (HUD) 
provides financial and technical assistance to Indian Housing 
Authorities (IHAs), for the development and operation of low income 
housing projects in Indian areas. This part is applicable to such 
projects developed or operated by an IHA in an Indian area, as defined 
in Sec. 950.102.
    (2) If assistance under this part is not available to a low income 
family because the family desires housing in an area within which no 
IHA is authorized to provide housing, or if for any other reason a 
family desires housing assistance other than under this part, a family 
may seek housing assistance under other HUD programs: (See 24 CFR part 
203, chapter VIII of this title, as well as the remainder of chapter IX 
of this title.)
    (b) Other HUD regulations and requirements. The provisions of this 
part are a complete statement of HUD regulations affecting the 
development and operation of low income housing by IHAs except as 
supplemented by parts in other chapters of this title, which are 
referenced in this part.


Sec. 950.102  Definitions.

    ACC expiration date. The last day of the term during which a 
particular Indian housing project is subject to all or any of the 
provisions of the ACC.
    Act. The United States Housing Act of 1937 (42 U.S.C. 1437-1440).
    Action plan. A plan of the actions to be funded by an IHA over a 
period of five years (including an IHA's proposed allocation of its 
modernization funds to a reserve established under Sec. 950.666(a)(3)) 
to make the necessary physical and management improvements identified 
in the IHA's comprehensive plan under subpart I of this part. The plan 
shall be based upon HUD's and the IHA's best estimates of the funding 
reasonably expected to become available over the next five-year period. 
The action plan is updated annually to reflect a rolling five-year 
base.
    Adjusted income. Annual income less the following allowances, 
determined in accordance with HUD instructions:
    (1) $480 for each dependent;
    (2) $400 for any elderly family;
    (3) For any family that is not an elderly family but has a 
handicapped or disabled member other than the head of household or 
spouse, handicapped assistance expenses in excess of three percent of 
annual income, but this allowance may not exceed the employment income 
received by family members who are 18 years of age or older as a result 
of the assistance to the handicapped or disabled person;
    (4) For any elderly family--
    (i) That has no handicapped assistance expenses (as defined in this 
section), an allowance for medical expenses (as defined in this 
section) equal to the amount by which the medical expenses exceed three 
percent of annual income;
    (ii) That has handicapped assistance expenses greater than or equal 
to three percent of annual income, an allowance for handicapped 
assistance expenses computed in accordance with paragraph (3) of this 
definition, plus an allowance for medical expenses that is equal to the 
family's medical expenses;
    (iii) That has handicapped assistance expenses that are less than 
three percent of annual income, an allowance for combined handicapped 
assistance expenses and medical expenses that is equal to the amount by 
which the sum of these expenses exceeds three percent of annual income; 
and
    (5) Child care expenses, as defined in this section; and
    (6) Excessive travel expenses, not to exceed $25 per family per 
week, for employment- or education-related travel.
    Administration charge. In Mutual Help projects, the amount budgeted 
per-unit per-month for operating expense, exclusive of the cost of HUD-
approved expenditures for which operating subsidy is being provided in 
accordance with Sec. 950.434 (see Sec. 950.427(c)).
    Administrative capability assessment (ACA). An annual evaluation of 
the IHA's administrative capability to administer programs in 
compliance with the Act and all applicable HUD regulations, contracts, 
HUD handbooks, and other applicable requirements (see Sec. 950.135).
    Allowable expense level. In rental projects, the per-unit per-month 
dollar amount of expenses (excluding utilities, and expenses allowed 
under Sec. 950.720) computed in accordance with Sec. 950.710, which is 
used to compute the amount of operating subsidy.
    Allowable utilities consumption level (AUCL). In rental projects, 
the amount of utilities expected to be consumed per-unit per-month by 
the IHA during the requested budget year, which is equal to the average 
amount consumed per-unit per-month during the rolling base period. 
After the end of the requested budget year, the AUCL of the utility 
(ies) used for space heating will be adjusted by a change factor, which 
is defined in this section.
    Annual contributions contract (ACC). A contract under the Act 
between HUD and the IHA containing the terms and conditions under which 
HUD assists the IHA in providing decent, safe, and sanitary housing for 
low income families. The ACC must be in a form prescribed by HUD under 
which HUD agrees to provide assistance in the development, 
modernization and/or operation of a low income housing project under 
the Act, and the IHA agrees to develop, modernize and operate the 
project in compliance with all provisions of the ACC and the Act, and 
all HUD regulations and implementing requirements and procedures.
    Annual income. Annual income is the anticipated total income from 
all sources received by the family head and spouse (even if temporarily 
absent) and by each additional member of the family, including all net 
income derived from assets, for the 12-month period following the 
effective date of the initial determination or reexamination of income, 
exclusive of certain types of income as provided in paragraph (2) of 
this definition.
    (1) Annual income includes, but is not limited to:
    (i) The full amount, before any payroll deductions, of wages and 
salaries, overtime pay, commissions, fees, tips and bonuses, and other 
compensation for personal services;
    (ii) The net income from operation of a business or profession. 
Expenditures for business expansion or amortization of capital 
indebtedness shall not be used as deductions in determining net income. 
An allowance for depreciation of assets used in a business or 
profession may be deducted, based on straight line depreciation, as 
provided in Internal Revenue Service regulations. Any withdrawal of 
cash or assets from the operation of a business or profession will be 
included in income, except to the extent the withdrawal is 
reimbursement of cash or assets invested in the operation by the 
family;
    (iii) Interest, dividends, and other net income of any kind from 
real or personal property. Expenditures for amortization of capital 
indebtedness shall not be used as deductions in determining net income. 
An allowance for depreciation is permitted only as authorized in 
paragraph (1)(ii) of this definition. Any withdrawal of cash or assets 
from an investment will be included in income, except to the extent the 
withdrawal is reimbursement of cash or assets invested by the family. 
Where the family has net family assets in excess of $5,000, annual 
income shall include the greater of the actual income derived from all 
net family assets or a percentage of the value of such assets based on 
the current passbook savings rate as determined by HUD;
    (iv) The full amount of periodic payments received from social 
security, annuities, insurance policies, retirement funds, pensions, 
disability or death benefits and other similar types of periodic 
receipts, including a lump-sum payment for the delayed start of a 
periodic payment;
    (v) Payments in lieu of earnings, such as unemployment and 
disability compensation, worker's compensation and severance pay (but 
see paragraph (2) (iii) of this definition);
    (vi) Welfare assistance. If the welfare assistance payment includes 
an amount specifically designated for shelter and utilities that is 
subject to adjustment by the welfare assistance agency in accordance 
with the actual cost of shelter and utilities, the amount of welfare 
assistance income to be included as income shall consist of:
    (A) The amount of the allowance or grant exclusive of the amount 
specifically designated for shelter or utilities, plus
    (B) The maximum amount that the welfare assistance agency could, in 
fact, allow the family for shelter and utilities. If the family's 
welfare assistance is ratably reduced from the standard of need by 
applying a percentage, the amount calculated under paragraph (1)(vi)(B) 
of this definition shall be the amount resulting from one application 
of the percentage;
    (vii) Periodic and determinable allowances, such as alimony and 
child support payments, and regular contributions or gifts received 
from persons not residing in the dwelling; and
    (viii) All regular pay, special pay and allowances of a member of 
the Armed Forces (but see paragraph (2)(vii) of this section).
    (2) Annual income does not include the following:
    (i) Income from employment of children (including foster children) 
under the age of 18 years;
    (ii) Payments received for the care of foster children;
    (iii) Lump-sum additions to family assets, such as inheritances, 
insurance payments (including payments under health and accident 
insurance and worker's compensation), capital gains and settlement for 
personal or property losses (but see paragraph (1)(v) of this 
definition);
    (iv) Amounts received by the family that are specifically for, or 
in reimbursement of, the cost of medical expenses for any family 
member;
    (v) Income of a live-in aide;
    (vi) Amounts of educational scholarships paid directly to the 
student or to the educational institution, and amounts paid by the 
Government to a veteran, for use in meeting the costs of tuition, fees, 
books, equipment, materials, supplies, transportation and miscellaneous 
personal expenses of the student. Any amount of such scholarship or 
payment to a veteran that is made available for subsistence is to be 
included in income;
    (vii) The special pay to a family member serving in the Armed 
Forces who is exposed to hostile fire;
    (viii) (A) Amounts received under training programs funded by HUD;
    (B) Amounts received by a disabled person that are disregarded for 
a limited time for purposes of Supplemental Security Income eligibility 
and benefits because they are set aside for use under a Plan for 
Achieving Self-Support (PASS); or
    (C) Amounts received by a participant in other publicly assisted 
programs which are specifically for or in reimbursement of out-of-
pocket expenses incurred (special equipment, clothing, transportation, 
child care, etc.) and which are made solely to allow participation in a 
specific program;
    (ix) Temporary, nonrecurring or sporadic income (including gifts);
    (x) For all initial determinations and reexaminations of income 
carried out on or after April 23, 1993, reparation payments paid by a 
foreign government pursuant to claims filed under the laws of that 
government by persons who were persecuted during the Nazi era; or
    (xi) Amounts specifically excluded by any other Federal statute 
from consideration as income for purposes of determining eligibility or 
benefits under a category of assistance programs that includes 
assistance under the United States Housing Act of 1937. A notice is 
published from time to time in the Federal Register and distributed to 
IHAs identifying the benefits that qualify for this exclusion. Updates 
will be published and distributed when necessary.
    (3) If it is not feasible to anticipate a level of income over a 
12-month period, the income anticipated for a shorter period may be 
annualized subject to a redetermination at the end of the shorter 
period.
    (4) Any family receiving the reparation payments referred to in 
paragraph (2)(x) of this definition of Annual Income that has been 
requested to repay assistance under this part as a result of receipt of 
such payments shall not be required to make further repayments on or 
after April 23, 1993.
    Applicable surface. All intact and nonintact interior and exterior 
painted surfaces of a residential structure.
    Assisted dwelling unit. A dwelling unit assisted under the programs 
covered by this part 950.
    Base year. The IHA's fiscal year immediately preceding its first 
fiscal year under PFS.
    Base-year expense level. The expense level (excluding utilities, 
audits, and certain other items) for the year, computed as provided in 
Sec. 950.710(a)
    Benefit/cost analysis. For purposes of subpart K of this part, a 
direct comparison of the present worth of any savings generated by a 
given system during the expected useful life of the system or the 
estimated remaining life of the project, whichever is the shortest 
number of years, to the cost of the change.
    BIA. The Bureau of Indian Affairs in the Department of the 
Interior.
    Change factor. The ratio of the affected IHA fiscal year heating 
degree days (HDD) divided by the average annual HDD of the rolling base 
period. (Affected year HDD divided by rolling base period average HDD).
    Checkmeter. A device for measuring utility consumption of each 
individual dwelling unit where the utility service is supplied through 
a mastermeter system. The IHA pays the utility supplier on the basis of 
the mastermeter readings and uses the checkmeters to determine whether 
and to what extent utility consumption of each dwelling unit is in 
excess of the allowance for IHA-furnished utilities, established in 
accordance with subpart K of this part.
    Chewable surface. All chewable protruding painted surfaces up to 
five feet from the floor or ground, which are readily accessible to 
children under seven years of age, e.g., protruding corners, 
windowsills and frames, doors and frames, and other protruding 
woodwork.
    Chief executive officer (CEO). The CEO of a unit of general local 
government means the elected official or the legally designated 
official who has the primary responsibility for the conduct of that 
entity's governmental affairs. Examples of the CEO of a unit of general 
local government are: the elected mayor of a municipality; the elected 
county executive of a county; the chairperson of a county commission or 
board in a county that has no elected county executive; or the official 
designated pursuant to law by the governing body of a unit of general 
local government (e.g., Tribal administrator). The CEO for an Indian 
Tribe is the Tribal governing official.
    Child care expenses. Amounts anticipated to be paid by the family 
for the care of children under 13 years of age during the period for 
which annual income is computed, but only where such care is necessary 
to enable a family member to be gainfully employed or to further his or 
her education only to the extent such amounts are not reimbursed. The 
amount deducted shall reflect reasonable charges for child care, and, 
in the case of child care necessary to permit employment, the amount 
deducted shall not exceed the amount of income received from such 
employment.
    Common property. The non-dwelling structures and equipment, common 
areas, community facilities, and in some cases certain component parts 
of dwelling structures, which are contained in the development. It also 
may include common property as defined in a cooperative form of 
ownership, as determined by the IHA.
    Comprehensive grant number. A grant number that is unique to each 
work statement (under subpart I of this part) covering the improvements 
to one or more existing Indian housing projects.
    Comprehensive Plan. A plan prepared by an IHA, and approved by HUD, 
under the Comprehensive Grant Program setting forth all of the physical 
and management improvement needs of the IHA and its Indian housing 
developments, indicating the relative urgency of needs, and which 
includes the IHA's action plan, cost estimates, and required local 
government and IHA certifications. The Comprehensive Plan may be 
revised, as necessary, but must be revised at least every sixth year. 
(See subpart I of this part.)
    Construction contract. The contract for construction in the case of 
the conventional method, or the contract of sale in the case of the 
Turnkey method.
    Cooperation agreement. An agreement between an IHA and a local 
governing (taxing) body that assures exemption from real and personal 
property taxes and provides for payments in lieu of taxes by the IHA; 
and that provides for cooperation with respect to the development and 
operation of low income housing owned by the IHA.
    Cost effective. As used in subpart K of this part, an energy 
conservation measure with a pay-back period of fifteen years or shorter 
shall be considered cost effective.
    Current budget year. The IHA fiscal year in which the IHA is 
operating.
    Defective lead-based paint surface. Paint on applicable surfaces 
having a lead content of greater than or equal to 1 mg/cm2, that is 
cracking, scaling, chipping, peeling or loose.
    Defective paint surface. Paint on applicable surfaces that is 
cracking, scaling, chipping, peeling or loose.
    Demolition. The razing in whole, or in part, of one or more 
permanent buildings of an Indian housing project.
    Dependent. A member of the family household (excluding foster 
children) other than the family head or spouse, who is under 18 years 
of age or is a disabled person or handicapped person, or is a full-time 
student.
    Deprogramming. Removal from the IHA's inventory under the ACC, 
pursuant to the IHA's formal request and HUD's approval, of a dwelling 
unit no longer used for dwelling purposes or a nondwelling structure or 
a unit used for nondwelling purposes that the IHA has determined will 
no longer be used for IHA purposes.
    Development. Any or all undertakings necessary for planning, land 
acquisition, demolition, construction, or equipment, in connection with 
a low income housing project.
    Disabled person. A person who is under a disability as defined in 
section 223 of the Social Security Act (42 U.S.C. 423), or who has a 
developmental disability as defined in section 102(7) of the 
Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 
6001(7)).
    Displaced person. A person displaced by governmental action, or a 
person whose dwelling has been extensively damaged or destroyed as a 
result of a disaster declared or otherwise formally recognized under 
Federal disaster relief laws.
    Disposition. The conveyance or other transfer by the IHA, by sale 
or other transaction, of any interest in the real estate of an Indian 
housing project, excluding transfers of property described in 
Sec. 950.921(b)(1)(i) through (vii).
    Earned home payments account (EHPA). In the Turnkey III program 
(subpart G of this part), this account is established and maintained 
pursuant to Sec. 950.517 by the IHA based on a portion of the 
homebuyer's required monthly payment. The EHPA should equal the IHA's 
estimate of the monthly cost for routine maintenance of the home.
    Elderly family. A family whose head or spouse (or sole member) is 
an elderly, disabled, or handicapped person, as defined in this 
section. It may include two or more elderly, disabled or handicapped 
persons living together, or one or more of these persons living with 
one or more live-in aides, as defined in this section.
    Elderly person. A person who is at least 62 years of age.
    Elevated blood lead level or EBL. Excessive absorption of lead, 
that is, a confirmed concentration of lead in whole blood of 25 ug/dl 
(micrograms of lead per deciliter of whole blood) or greater.
    Emergency Modernization (CIAP). A type of modernization program for 
a development that is limited to physical work items of an emergency 
nature, posing an immediate threat to the health or safety of residents 
or related to fire safety, which must be corrected within one year of 
CIAP funding approval.
    Emergency work. Physical work items of an emergency nature, posing 
an immediate threat to the health or safety of residents, which must be 
completed within one year of funding. Under the Comprehensive Grant 
program, management improvements are not eligible as emergency work 
and, therefore, must be covered by the Comprehensive Plan (including 
the action plan), before the IHA may carry them out. See subpart I of 
this part.
    Energy audit. A process carried out in accordance with subpart K of 
this part, which identifies and specifies the energy and cost savings 
that are estimated to result from installing or accomplishing an energy 
conservation measure.
    Energy conservation measures (ECMs). Physical improvements or 
modifications that, if undertaken for a building or facility, or its 
equipment, are likely to reduce the cost of energy in an amount 
sufficient to recover the installation costs in a period no longer than 
the useful life of the measure. (See subpart K of this part.)
    Family. Family includes but is not limited to:
    (1) An elderly family or single person as defined in this part;
    (2) The remaining member of a tenant family; and
    (3) A displaced person.
    Family project. Any project assisted under section 9 of the Act (42 
U.S.C. 1437g) that is not an elderly project. For this purpose, an 
elderly project is one that was designated for occupancy by the elderly 
at its inception (and has retained that character) or, although not so 
designated, for which the IHA gives preference in tenant selection 
(with HUD approval) for all units in the project to elderly families. A 
building within a mixed-use project that meets these qualifications 
shall, for purposes of this definition, be excluded from any family 
project, as shall zero bedroom units.
    Federally recognized tribe. Any Indian tribe, band, nation or other 
organized group or community, including any Alaska Native village or 
regional corporation or village as defined in or established pursuant 
to the Alaska Native Claims Settlement Act, which is recognized as 
eligible for the special programs and services provided by the United 
States to Indians because of their status as Indians.
    FFY. Federal Fiscal Year (starting with October 1, and ending with 
September 30, and designated by the calendar year in which it ends).
    Force account labor. Labor directly employed by the IHA on either a 
permanent or a temporary basis.
    Formula. The formula prescribed by HUD to be used in the 
Performance Funding System to estimate the cost of operating an average 
unit in an IHA's inventory. (See subpart J of this part.)
    Formula expense level. The per-unit per-month dollar amount of 
expenses (excluding utilities and audits) computed under the formula, 
in accordance with Sec. 950.710.
    Full-time student. A person who is carrying a subject load that is 
considered full-time for day students under the standards and practices 
of the educational institution attended. An educational institution 
includes a vocational school with a diploma or certificate program, as 
well as an institution offering a college degree.
    Handicapped assistance expenses. Reasonable expenses that are 
anticipated, during the period for which annual income is computed, for 
attendant care and auxiliary apparatus for a handicapped or disabled 
family member and that are necessary to enable a family member 
(including the handicapped or disabled member) to be employed, provided 
that the expenses are neither paid to a member of the family nor 
reimbursed by an outside source.
    Handicapped person. A person having a physical or mental impairment 
that:
    (1) Is expected to be of long-continued and indefinite duration;
    (2) Substantially impedes his or her ability to live independently; 
and
    (3) Is of such a nature that such ability could be improved by more 
suitable housing conditions.
    Hard costs. The physical improvement costs in development accounts 
1450 through 1475 of the Low-Rent Housing Accounting Handbook, 7510.1, 
as revised, which include: Account 1450 Site Improvements; Account 1460 
Dwelling Structures; Account 1465.1 Dwelling Equipment--Nonexpendable; 
Account 1470 Nondwelling Structures; and Account 1475 Nondwelling 
Equipment.
    Heating degree days (HDD). The annual arithmetic sum of the 
positive differences (those under 65 degrees) of the average of the 
lowest and highest daily outside temperature in degrees Fahrenheit, 
subtracted from 65 degrees Fahrenheit.
    High-risk. See 24 CFR 85.12 and Sec. 950.135.
    Home. A dwelling unit covered by a homebuyer agreement.
     Homebuyer. The member or members of a low income family who have 
executed a homebuyer agreement with the IHA and who have not yet 
achieved homeownership.
    Homebuyer agreement. A Mutual Help and Occupancy Agreement or a 
Turnkey III Homebuyer's Ownership Opportunity Agreement.
    Homebuyer Association. In the Turnkey III program this means an 
incorporated organization (as defined in Sec. 950.511) composed of all 
of the families who are entitled to occupancy pursuant to a Homebuyer 
Ownership Opportunity Agreement or who are homeowners.
    Homeowner. A former homebuyer who has achieved ownership of his or 
her home and acquired title to the home.
    HUD. The Department of Housing and Urban Development, including the 
Field Offices that have been delegated authority under the Act to 
perform functions pertaining to this part for the area in which the IHA 
is located.
    HUD Field Office. The HUD Offices in Chicago, Oklahoma City, 
Denver, Phoenix, Seattle, and Anchorage, which have been delegated 
authority to administer programs under the United States Housing Act of 
1937 for the area in which the IHA is located.
    IHA homeownership financing. IHA financing for purchase of a home 
by an eligible homebuyer who gives the IHA a promissory note and 
mortgage for the balance of the purchase price.
    IHS. The Indian Health Service in the Department of Health and 
Human Services.
    Indian. Any person recognized as being an Indian or Alaska Native 
by an Indian Tribe, the Federal Government, or any State.
    Indian area. The area within which an Indian Housing Authority is 
authorized to provide low income housing.
    Indian Housing Authority (IHA). An entity that is authorized to 
engage in or assist in the development or operation of low income 
housing for Indians that is established either:
    (1) By exercise of the power of self-government of an Indian Tribe 
independent of State law; or
    (2) By operation of State law providing specifically for housing 
authorities for Indians, including regional housing authorities in the 
State of Alaska.
    Indian Tribe. Any Tribe, band, pueblo, group, community, or nation 
of Indians or Alaska Natives.
    Interdepartmental agreement. The agreement among HUD, the 
Department of Health and Human Services, the Department of Interior, 
and other appropriate agencies, concerning assistance to projects 
developed and operated under the Act.
    Latent defect. A design or construction deficiency that could not 
reasonably have been foreseen by the IHA or the Office of Indian 
Programs.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1.0 mg/
cm2, or .5 percent by weight.
    Live-in aide. A person who resides with an elderly, disabled, or 
handicapped person or persons and who:
    (1) Is determined by the IHA to be essential to the care and well-
being of the person(s);
    (2) Is not obligated for support of the person(s); and
    (3) Would not be living in the unit except to provide necessary 
supportive services. (See definition of annual income for treatment of 
a live-in aide's income.)
    Local inflation factor. The weighted average percentage increase in 
local government wages and salaries for the area in which the IHA is 
located and non-wage expenses based upon the implicit price deflator 
for State and local government purchases of goods and services. This 
weighted average percentage will be supplied by HUD. HUD anticipates 
that it will update the local inflation factor each year.
    Low-income family. A family whose annual income does not exceed 80 
percent of the median income for the area, as determined by HUD with 
adjustments for smaller and larger families. HUD may establish income 
limits higher or lower than 80 percent of the median income for an 
Indian area on the basis of its finding that such variations are 
necessary because of the prevailing levels of construction costs or 
unusually high or lower family incomes.
    Management capability. (1) An IHA has management capability if it 
is:
    (i) Not designated as High Risk under Sec. 950.135; or
    (ii) Designated as High Risk, but has a reasonable prospect of 
acquiring management capability which may include modernization-funded 
management improvements.
    (2) An IHA may be considered for funding of non-emergency physical 
improvements where it is making reasonable progress toward meeting the 
goals established in its management improvement plan under 
Sec. 950.135.
    Management improvement plan. A document developed by the IHA in 
accordance with Sec. 950.135 which specifies the actions to be taken, 
including timetables, to correct deficiencies identified as a result of 
a management assessment.
    Mastermeter system. A utility distribution system in which an IHA 
is supplied utility service by a utility supplier through a meter or 
meters and the IHA then distributes the utility to its tenants.
    Medical expenses. Those medical expenses, including medical 
insurance premiums, that are anticipated during the period for which 
annual income is computed, and that are not covered by insurance.
    Meter loop. A device provided to accommodate future installation of 
a utility meter. (See subpart K of this part).
    Modernization capability. An IHA has modernization capability for 
CIAP if it is capable of effectively carrying out the proposed 
modernization improvements. Where an IHA does not have a funded 
modernization program in progress, HUD will determine whether the IHA 
has a reasonable prospect of acquiring modernization capability through 
hiring staff or contracting for assistance. (See Sec. 950.135.)
    Modernization funds. Funds derived from an allocation of budget 
authority for the purpose of funding physical and management 
improvements.
    Modernization program. An IHA's program for carrying out 
modernization, as set forth in the approved CIAP budget for 
modernization funds. (See subpart I (CIAP) of this part.)
    Modernization project. The improvement of one or more existing 
Indian housing developments under a new number designated for that 
modernization program (CIAP). For each modernization project, HUD and 
the IHA shall enter into an ACC amendment, requiring low-income use of 
the housing for not less than 20 years from the date of the ACC 
amendment (subject to sale of homeownership units in accordance with 
the terms of the ACC).
    Monthly adjusted income. One twelfth of adjusted income.
    Monthly Equity Payments Account (MEPA). A homebuyer account in the 
Mutual Help Homeownership Opportunity program credited with the amount 
by which each required monthly payment exceeds the administration 
charge.
    Monthly income. One twelfth of annual income.
    MH. Mutual Help.
    MH Construction Contract. A construction contract for an MH 
project, which shall be on a form prescribed by HUD.
    MH Contribution. Land, labor, cash, materials, or equipment--or a 
combination of these--contributed toward the development cost of a 
project in accordance with a homebuyer's MHO Agreement, credit for 
which is to be used toward purchase of a home.
    MH Program. The MH Homeownership Opportunity Program.
    MHO Agreement. A Mutual Help and Occupancy Agreement between an IHA 
and a homebuyer.
    Near elderly family. A family whose head or spouse (or sole member) 
is at least 50 years of age but below the age of 62 years.
    Net family assets. Net cash value after deducting reasonable costs 
that would be incurred in disposing of real property, savings, stocks, 
bonds, and other forms of capital investment, excluding interests in 
Indian trust land and excluding equity accounts in HUD homeownership 
programs. The value of necessary items of personal property such as 
furniture and automobiles are excluded, and, in the case of a family in 
which any member is actively engaged in a business or farming 
operation, the assets that are a part of the business or farming 
operation are excluded. In cases where a trust fund, such as individual 
Indian monies held by the BIA, has been established and the trust is 
not revocable by, or under the control of, any member of the family or 
household, the value of the trust fund will not be considered an asset 
so long as the fund continues to be held in trust. In determining net 
family assets, IHAs shall include the value of any business or family 
assets disposed of by an applicant or tenant for less than fair market 
value (including a disposition in trust, but not in a foreclosure or 
bankruptcy sale) during the two years preceding the date of application 
for the program or reexamination, as applicable, in excess of the 
consideration received therefor. In the case of a disposition as part 
of a separation or divorce settlement, the disposition will not be 
considered to be for less than fair market value if the applicant or 
tenant receives important consideration not measurable in dollar terms.
    Nonroutine maintenance. (1) For purposes of the Turnkey III Program 
(Nonroutine Maintenance Reserve), nonroutine maintenance refers to 
infrequent and costly items of maintenance and replacement, including 
dwelling equipment such as a range or refrigerator, or major components 
such as heating or plumbing systems or a roof. Specifically excluded 
are maintenance expenses attributable to homebuyer negligence or to 
defective materials or workmanship.
    (2) For purposes of the CIAP and Comprehensive Grant Modernization 
Programs under subpart I of this part and the applicability of wage 
rates, nonroutine maintenance refers to work items that ordinarily 
would be performed on a regular basis in the course of upkeep of a 
property, but have become substantial in scope because they have been 
put off, and that involve expenditures that would otherwise materially 
distort the level trend of maintenance expenses. Replacement of 
equipment and materials rendered unsatisfactory because of normal wear 
and tear by items of substantially the same kind does qualify, but 
reconstruction, substantial improvement in the quality or kind of 
original equipment and materials, or remodeling that alters the nature 
or type of housing units does not qualify.
    NRMR. The nonroutine maintenance reserve account in the Turnkey III 
Program established and maintained in accordance with Sec. 950.519.
    Operating budget. The IHA's operating budget (HUD form 52564) and 
all related documents, required by HUD to be submitted pursuant to the 
ACC.
    Operating subsidy. Annual contributions for IHA operations made by 
HUD under the authority of section 9 of the Act. (See subpart J of this 
part with respect to rental projects. See also Sec. 950.434 (Mutual 
Help Operating Subsidy) and Sec. 950.523 (Turnkey III Operating 
Subsidy).)
    Other income. Income to the IHA other than dwelling rental income 
and income from investments, except that, for purposes of determining 
operating subsidy eligibility, the following items are excluded: Grants 
and gifts for operations, other than for utility expenses, received 
from Federal, State, and local governments, individuals or private 
organizations; amounts charged to tenants for repairs for which the IHA 
incurs an offsetting expense; and legal fees in connection with 
eviction proceedings, when those fees are lawfully charged to tenants.
    Other Modernization (modernization other than emergency). A type of 
modernization program under the Comprehensive Improvement Assistance 
Program (CIAP) for a development that includes one or more physical 
work items, where HUD determines that the physical improvements are 
necessary and sufficient to extend substantially the useful life of the 
development, and/or one or more management work items (including 
planning costs), and/or testing, professional risk assessments, interim 
containment, and abatement of lead-based paint.
    Partnership process. A specific and ongoing process that is 
designed to ensure that residents, resident groups, and the IHA work in 
a cooperative and collaborative manner to develop, implement and 
monitor the CIAP or Comprehensive Grant Program. At a minimum, an IHA 
shall ensure that the partnership process incorporates full resident 
participation in each of the required program components.
    Pay-back period. The number of years required to accumulate net 
savings to equal the cost of an energy conservation measure.
    Performance funding system (PFS). The standards, policies and 
procedures established by HUD for determining the amount of operating 
subsidy an IHA is eligible to receive for its owned rental projects, 
based on the costs of operating a comparable well-managed project.
    Pilot. Payment in lieu of taxes. Includes all payments made by an 
IHA to the local governing body (or other taxing jurisdiction) for the 
provision of certain municipal services, including that portion of 
payments in lieu of taxes which is to be applied as a reimbursement of 
payments of offsite utilities. The amount charged is determined by the 
cooperation agreement which is generally defined as 10 percent of 
shelter rent. Shelter rent is defined as dwelling rentals less total 
utility expenses.
    Program reservation. A written notification by HUD to an IHA, which 
is not a legal obligation, but which expresses HUD's determination, 
subject to fulfillment by an IHA of all legal and administrative 
requirements within a stated time, that HUD will enter into a new or 
amended ACC covering the stated number of housing units, or such other 
number as is consistent with funding reserved by HUD for the project.
    Project. Housing developed, acquired, or assisted by an IHA under 
the Act, and the improvement of this housing.
    Project for elderly families. A rental project or portion of a 
rental project assisted under the U.S. Housing Act of 1937 that was 
designated for occupancy by the elderly at its inception (and that has 
retained that character) or, although not so designated, for which the 
IHA gives preference in tenant selection (with HUD approval) for all 
units in the project, or for a portion of the units in the project, to 
elderly families.
    Project units. All dwelling units of an IHA's projects.
    Projected operating income level. The per unit per month dollar 
amount of dwelling rental income plus nondwelling income, computed as 
provided in Sec. 950.725.
    Reasonable cost. Total unfunded hard cost needs for a development 
that do not exceed 90 percent of the computed total development cost 
limit for a new development with the same structure type and number and 
size of units in the market area.
    Requested budget year. The budget year (fiscal year) of an IHA 
following the current budget year.
    Resident groups. Democratically elected resident groups such as 
IHA-wide resident groups, area-wide resident groups, single development 
resident groups, or RMCs.
    Retail service. Purchase of utility service by IHA tenants directly 
from the utility supplier.
    Rolling base period. The 36-month period that ends 12 months before 
the beginning of the IHA requested budget year, which is used to 
determine the allowable utilities consumption level used to compute the 
utilities expense level.
    Single person. A person who lives alone or intends to live alone, 
and who does not qualify as:
    (1) An elderly family;
    (2) A displaced person (as defined in this section); or
    (3) The remaining member of a tenant family.
    Soft costs. The non-physical improvement costs, which exclude any 
costs in development accounts 1450 through 1475.
    State. Any of the several States of the United States of America, 
the District of Columbia, the Commonwealth of Puerto Rico, the 
territories and possessions of the United States, the Trust Territory 
of the Pacific Islands, and Indian Tribes.
    Subsequent homebuyer. Any homebuyer other than the homebuyer who 
first occupies a home pursuant to an MHO agreement.
    Substantial rehabilitation. A modernization program for a project 
that provides for all physical and management improvements needed to 
meet the modernization and energy conservation standards and to ensure 
long-term physical and social viability.
    Successor homebuyer. A person eligible to become a homebuyer who 
has been designated by a current homebuyer to succeed to an interest 
under a homeownership agreement in the event of the current homebuyer's 
death or mental incapacity.
    Surcharge. The amount charged by the IHA to a tenant, in addition 
to the Tenant Rent, for consumption of utilities in excess of the 
allowance for IHA-furnished utilities or for estimated consumption 
attributable to tenant-owned major appliances or to optional functions 
of IHA-furnished equipment. Surcharges calculated pursuant to subpart 
K, based on estimated consumption where checkmeters have not been 
installed, are referred to as ``scheduled surcharges.''
    Tenant-purchased utilities. Utilities purchased by the tenant 
directly from a utility supplier.
    Tenant rent. The amount payable monthly by the family as rent to 
the IHA. Where all utilities (except telephone) and other essential 
housing services are supplied by the IHA, tenant rent equals total 
tenant payment. Where some or all utilities (except telephone) and 
other essential housing services are not supplied by the IHA and the 
cost thereof is not included in the amount paid as rent, tenant rent 
equals total tenant payment less the utility allowance.
    Total development cost. The sum of all HUD-approved costs for a 
project including all undertakings necessary for administration, 
planning, site acquisition, demolition, construction or equipment and 
financing (including the payment of carrying charges), and for 
otherwise carrying out the development of the project. The maximum 
total development cost excludes offsite water and sewer facilities 
development costs; costs normally paid for by other entities, but 
included in the development cost budget for the project for contracting 
or accounting convenience; and any donations received from public or 
private sources.
    Total tenant payment. The monthly amount calculated under subpart D 
of this part. Total tenant payment does not include any surcharge for 
excess utility consumption or other miscellaneous charges (see subpart 
K of this part).
    Unit approved for deprogramming. (1) A dwelling unit for which HUD 
has approved the IHA's formal request to remove the dwelling unit from 
the IHA's inventory and the Annual Contributions Contract but for which 
removal, i.e. deprogramming, has not yet been completed; or
    (2) A nondwelling structure or a dwelling unit used for nondwelling 
purposes which the IHA has determined will no longer be used for IHA 
purposes and which HUD has approved for removal from the IHA's 
inventory and Annual Contributions Contract.
    Unit months available. Project units multiplied by the number of 
months the project units are expected to be available for occupancy 
during a given IHA fiscal year. Except as provided in the following 
sentence, for purposes of this part, a unit is considered available for 
occupancy from the date on which the end of the initial operating 
period for the project is established until the time it is approved by 
HUD for deprogramming and is vacated or approved for nondwelling use. 
On or after July 1, 1991, a unit is not considered available for 
occupancy in any IHA Requested Budget Year if the unit is located in a 
vacant building in a project that HUD has determined is nonviable.
    Utilities. For purposes of determining utility allowances, 
utilities include electricity, gas, heating fuel, water, sewerage 
service, septic tank pumping/maintenance, sewer system hookup charges 
(after development), and trash and garbage collection. Telephone 
service is not included as a utility. For purposes of IHA accounting, 
PFS and non-PFS, trash and garbage collection and maintenance and 
repair of any systems are considered maintenance expenses and not 
utility expenses.
    Utilities expense level. The per-unit per-month dollar amount of 
utilities expense used in calculation of operating subsidy, as provided 
in Sec. 950.715.
    Utility allowance. An allowance for IHA-furnished utilities 
represents the maximum consumption units (e.g., kilowatt hours of 
electricity), that may be used by a dwelling unit without a surcharge 
against the tenant for excess consumption. An allowance for tenant-
purchased utilities is a fixed dollar amount that is deducted from the 
total tenant payment otherwise chargeable to a tenant who has retail 
service, whether the charges are more or less than the amounts of the 
allowance. (See Secs. 950.865 and 950.870.)
    Utility reimbursement. The amount, if any, by which the utility 
allowance for tenant-purchased utilities for the unit, if applicable, 
exceeds the family's total tenant payment.
    Very low-income family. A low-income family whose annual income 
does not exceed 50 percent of the median income for the area, as 
determined by HUD, with adjustments for smaller and larger families. 
HUD may establish income limits higher or lower than 50 percent of the 
median income for an Indian area on the basis of its finding that such 
variations are necessary because of unusually high or low family 
incomes.
    Welfare assistance. Welfare or other payments to families or 
individuals, based on need, that are made under programs funded, 
separately or jointly, by Federal, State or local governments.
    Work item. Any separately identifiable unit of work constituting a 
part of a modernization program.


Sec. 950.110  Assistance from Indian Health Service and Bureau of 
Indian Affairs.

    Because HUD assistance under this part is not limited to IHAs of 
federally recognized Tribes, provisions in this part relating to 
assistance from BIA or IHS, or to required approvals, actions or 
determinations by these agencies in connection with such assistance, 
are applicable only to projects undertaken by IHAs of federally 
recognized Tribes or by regional housing authorities created by Alaska 
state law. These projects shall be developed promptly and operated in 
accordance with the provisions of this part and the Interdepartmental 
Agreement.


Sec. 950.115  Applicability of civil rights requirements.

    (a) Indian Civil Rights Act. (1) The Indian Civil Rights Act (title 
II of the Civil Rights Act of 1968, 25 U.S.C. 1301-1303) provides, 
among other things, that ``no Indian tribe in exercising powers of 
self-government shall . . . deny to any person within its jurisdiction 
the equal protection of its laws or deprive any person of liberty or 
property without due process of law.'' The Indian Civil Rights Act 
(ICRA) applies to any tribe, band, or other group of Indians subject to 
the jurisdiction of the United States in the exercise of recognized 
powers of self-government. The ICRA is applicable in all cases where an 
IHA has been established by exercise of Tribal powers of self-
government.
    (2) In the case of IHAs established pursuant to State law, 
determinations by HUD of the applicability of the ICRA on a case-by-
case basis may consider such factors as the existence of recognized 
powers of self-government; the scope and jurisdiction of such powers; 
and the applicability of such powers to the area of operation of a 
particular IHA. Generally, determinations by HUD of the existence of 
recognized powers of self-government and the jurisdiction of such 
powers will be made in consultation with the Department of Interior-
Bureau of Indian Affairs, and may consider applicable legislation, 
treaties and judicial decisions. The area of operation of an IHA may be 
determined by the jurisdiction of the governing body creating the IHA, 
any limitations within the enabling legislation, and judicial 
decisions.
    (3) Projects of IHAs subject to the ICRA shall be developed and 
operated in compliance with its provisions and all HUD regulations and 
handbooks thereunder.
    (b) Nonapplicability of Title VI, the Fair Housing Act, and title 
II of the Americans with Disabilities Act. Title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d), which prohibits discrimination on the 
basis of race, color or national origin in federally assisted programs, 
the Fair Housing Act (42 U.S.C. 3601-3619), which prohibits 
discrimination based on race, color, religion, sex or national origin 
in the sale or rental of housing, and title II of the Americans with 
Disabilities Act (42 U.S.C. 12131) do not apply to IHAs established by 
exercise of a Tribe's powers of self-government. HUD regulations 
implementing Title VI and the Fair Housing Act (24 CFR parts 1 and 100) 
and 49 CFR part 24 which implements title II of the Americans with 
Disabilities Act shall not be applicable to development or operation of 
projects by such IHAs. Any determination by HUD of the applicability of 
Title VI, the Fair Housing Act and title II of the Americans with 
Disabilities Act on a case-by-case basis shall consider the 
applicability of the Indian Civil Rights Act under paragraph (a) of 
this section. Actions taken by an IHA to implement the statutory 
admission restriction in favor of Indian families in the MH program, as 
set forth in Sec. 950.416, shall not be considered a violation of any 
provision of either Title VI, the Fair Housing Act, or title II of the 
Americans with Disabilities Act.
    (c) Indian Housing Act of 1988--Mutual Help program admissions. For 
provisions generally limiting admission to the Mutual Help 
Homeownership Opportunity program to Indians and requiring findings of 
need for admission of non-Indians, see Sec. 950.416.
    (d) Disability. (1) Under section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794), as amended, HUD is required to assure that no 
otherwise-qualified disabled person is excluded from participation, 
denied benefits, or discriminated against under any program or activity 
receiving Federal financial assistance, solely by reason of his or her 
disability. IHAs must comply with implementing instructions in 24 CFR 
part 8.
    (2) The IHA shall comply with the Architectural Barriers Act of 
1968 (42 U.S.C. 4151-4157), and HUD implementing regulations (24 CFR 
part 40).
    (e) Minority Business Enterprise Development and Women's Business 
Enterprise Policy. Executive Orders 12432 (3 CFR, 1983 Comp., p. 198) 
and 12138 (3 CFR, 1979 Comp. p. 39), respectively, apply to Indian 
Housing Authorities.


Sec. 950.117  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, IHAs shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organizations, and farms) as a 
result of a project assisted under this part.
    (b) Temporary relocation. Residents who will not be required to 
move permanently, but who must relocate temporarily (e.g., to permit 
rehabilitation), shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses 
incurred in connection with the temporary relocation, including the 
cost of moving to and from the temporary housing and any increase in 
monthly rent/utility costs.
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary 
housing to be made available for the temporary period;
    (iii) The terms and conditions under which the resident may lease 
and occupy a suitable, decent, safe, and sanitary dwelling in the 
development following its completion; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. (1) A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance 
with the requirements of, the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 
4601-4655) and implementing regulations at 49 CFR part 24.
    (2) A comparable Indian housing unit, project-based Section 8 
housing or a privately-owned dwelling made affordable by a Section 8 
Rental Certificate or Rental Voucher, may qualify as a comparable 
replacement dwelling for a person displaced from an Indian housing 
unit.
    (d) Real property acquisition requirements. The acquisition of real 
property for a development is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B, whether the acquiring entity is 
organized under State law or Tribal law.
    (e) Appeals. A person who disagrees with the IHA's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is eligible, 
may file a written appeal of that determination with the IHA. A lower-
income person who is dissatisfied with the IHA's determination on his 
or her appeal may submit a written request for review of that 
determination to the HUD Field Office.
    (f) Responsibility of IHA. (1) The IHA shall certify (i.e., provide 
assurance of compliance, as required by 49 CFR part 24) that it will 
comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, and shall ensure such compliance 
notwithstanding any third party's contractual obligation to the IHA to 
comply with those provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. However such assistance also may be paid from funds available 
from other sources.
    (3) The IHA shall maintain records in sufficient detail to 
demonstrate compliance with the requirements of this section.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term ``displaced person'' means a person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, 
demolition, or conversion of a unit to homeownership (Mutual Help 
Homeownership Opportunity (MH) Program) for a project assisted under 
this part or as a direct result of disposition in accordance with 
subpart M of this part. This includes any permanent, involuntary move 
for an assisted project including any permanent move from the 
development that is made:
    (i) After notice to the person by the IHA or property owner to move 
permanently from the property, if the move occurs on or after:
    (A) For the comprehensive improvement assistance program (CIAP) and 
the comprehensive grant program (CGP) under subpart I of this part, 45 
calendar days from before:
    (1) The IHA issues the invitation for bids for the project, or
    (2) The start of force account work, whichever is applicable; or
    (B) For the disposition or demolition of Indian housing under 
subpart M of this part, the date of HUD approval of the IHA's proposal; 
or
    (C) For other projects subject to this section, the date HUD 
approves the site for the project; or, if HUD site approval is not 
required, the date the IHA approves the site for the project;
    (ii) Before the date described in paragraph (g)(1)(i) of this 
section, if the IHA or HUD determines that the displacement resulted 
directly from acquisition, rehabilitation, demolition, or conversion 
for the assisted project; or
    (iii) By a resident of a dwelling unit, if any one of the following 
three situations occurs:
    (A) The resident moves after the ``initiation of negotiations'' and 
the move occurs before the resident is provided written notice offering 
him or her the opportunity to lease and occupy a suitable, decent, 
safe, and sanitary dwelling in the same development, under reasonable 
terms and conditions, upon its completion. Such reasonable terms and 
conditions include a monthly rent and estimated average monthly utility 
costs that do not exceed the amount determined in accordance with 
Sec. 950.325; or
    (B) The resident is required to relocate temporarily, does not 
return to the development, and either:
    (1) The resident is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, 
or
    (2) Other conditions of the temporary relocation are not 
reasonable; or
    (C) The resident is required to move to another dwelling unit in 
the same development but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is 
not eligible for relocation assistance under the URA or this section), 
if:
    (i) The person has been evicted for serious or repeated violation 
of the terms and conditions of the lease or occupancy agreement, 
violation of applicable Federal, State, tribal, or local law, or other 
good cause, and HUD determines that the eviction was not undertaken for 
the purpose of evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the date described in 
paragraph (g)(1)(i) of this section and, before commencing occupancy, 
was provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that he or she will not qualify as 
a ``displaced person'' (or for assistance under this section) as a 
result of the project:
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, demolition, or conversion for 
the project.
    (3) The IHA may, at any time, ask HUD to determine whether a 
displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing 
assistance to be provided to a resident, the term ``initiation of 
negotiations'' means the following action:
    (1) For the comprehensive improvement assistance program (CIAP) or 
comprehensive grant program (CGP) under subpart I of this part, 45 
calendar days before:
    (i) The IHA's issuance of the invitation for bids for the project; 
or
    (ii) The start of force account work, whichever is applicable;
    (2) For an IHA purchase through an arm's-length transaction as 
described in 49 CFR 24.101(a)(1), the seller's acceptance of the IHA's 
written offer to purchase the property;
    (3) For an IHA purchase that does not qualify as an arm's-length 
transaction, the delivery of the initial written purchase offer from 
the IHA to the Owner of the property. However, if the IHA issues a 
notice of intent to acquire the property, and a person moves after that 
notice, but before the initial written purchase offer, the ``initiation 
of negotiations'' is the actual move of the person from the property;
    (4) For disposition or demolition of Indian housing under subpart M 
of this part, HUD approval of the IHA's proposal; or
    (5) For other programs under this part 950, the notice to the 
occupant that he or she must move permanently, or, if there is no 
notice, the person's actual move from the property.
    (Approved by the Office of Management and Budget under control 
number 2506-0121)


Sec. 950.120  Compliance with other Federal requirements.

    (a) Environmental clearance. Before approving a proposed 
development program or modernization project, HUD will comply with the 
requirements of 24 CFR part 50.
    (b) Flood insurance protection. HUD will not approve financial 
assistance for acquisition, construction, reconstruction, repair, or 
improvement of a building located in an area that has been identified 
by the Federal Emergency Management Agency (FEMA) as having special 
flood hazards, unless the following conditions are met:
    (1) Flood insurance on the building is obtained in compliance with 
section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4012a(a)); and
    (2) The community in which the area is situated is participating in 
the National Flood Insurance Program in accord with section 202(a) of 
the Act (42 U.S.C. 4106(a)), or less than a year has passed since FEMA 
notification regarding such flood hazards. For this purpose, the 
``community'' is the jurisdiction, such as an Indian Tribe or 
authorized Tribal organization, an Alaska native village or authorized 
native organization, or a municipality or county, that has authority to 
adopt and enforce flood plain management regulations for the area.
    (c) Wage rates for laborers and mechanics. (1) With respect to 
construction work on a project, including a modernization project 
(except for nonroutine maintenance work, as described in paragraph (2) 
of the definition of ``nonroutine maintenance'' in Sec. 950.102), the 
IHA and its contractors shall pay not less than the wages prevailing in 
the locality, as predetermined by the Secretary of Labor pursuant to 
the Davis-Bacon Act (40 U.S.C. 276a through 276a-5), to all laborers 
and mechanics who are employed by an IHA or its contractors for work or 
contracts over $2,000.
    (2) With respect to all maintenance work on a project, including 
nonroutine maintenance work (as described in paragraph (2) of the 
definition of ``nonroutine maintenance'' in Sec. 950.102) on a 
modernization project, the IHA and its contractors shall pay not less 
than the wages prevailing in the locality, as determined or adopted 
(after a determination under State, Tribal or local law) by HUD 
pursuant to section 12 of the United States Housing Act of 1937 (42 
U.S.C. 1437j), to all laborers and mechanics who are employed by an IHA 
or its contractors.
    (3) Prevailing wage rates determined under State or Tribal law are 
inapplicable under the circumstances set out in Sec. 950.172(b).
    (d) Professional and technical wage rates. All architects, 
technical engineers, draftsmen and technicians employed in the 
development of a project shall be paid not less than the wages 
prevailing in the locality, as determined or adopted (after a 
determination under applicable State, Tribal, or local law) by HUD.
    (e) Access to records: audits. (1) HUD and the Comptroller General 
of the United States shall have access to all books, documents, papers, 
and other records that are pertinent to the activities carried out 
under this part, in order to make audit examinations, excerpts, and 
transcripts, in accordance with 24 CFR 85.42.
    (2) IHAs that receive financial assistance under this part must 
comply with the audit requirements of 24 CFR part 44. If an IHA has 
failed to submit an acceptable audit on a timely basis in accordance 
with that part, HUD may arrange for, and pay the costs of, the audit. 
In such circumstances, HUD may withhold, from assistance otherwise 
payable to the IHA under this part, amounts sufficient to pay for the 
reasonable costs of conducting an acceptable audit, including, when 
appropriate, the reasonable costs of accounting services necessary to 
place the IHA's books and records into auditable condition. The costs 
to place the IHA's books and records into auditable condition do not 
generate additional subsidy eligibility under this part.
    (f) Uniform administrative requirements. The Uniform Administrative 
Requirements for Grants and Cooperative Agreements to States, Local, 
and Federally Recognized Indian Tribal Governments, as set forth in 24 
CFR part 85, are applicable to grants under this part, except as 
specified in this part. However, the provisions of 24 CFR 85.36 have 
been incorporated in the procurement subpart (subpart B) of this part.
    (g) Lead based paint poisoning prevention. See 24 CFR part 35 and 
subpart H of this part.
    (h) Coastal barriers. In accordance with the Coastal Barriers 
Resources Act (16 U.S.C. 3501), no financial assistance under this part 
may be made available within the Coastal Barrier Resources System.
    (i) Economic opportunities for low and very low-income persons. 
IHAs shall comply with section 3 of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701u) and the regulations in part 135, as 
provided in part 135, to the maximum extent consistent with, but not in 
derogation of, compliance with section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450e(b)). (See 
also 24 CFR 950.170(c).)


Sec. 950.125  Establishment of IHAs pursuant to State law.

    An IHA may be established pursuant to a State law that provides for 
the establishment of IHAs by State or federally recognized Indian 
tribes with all necessary legal powers to carry out low-income housing 
projects for Indians.


Sec. 950.126  Establishment of IHAs by Tribal ordinance.

    (a) Legal capacity of Tribe to establish IHA. Where an Indian Tribe 
has governmental police power to promote the general welfare, including 
the power to create a housing authority, an IHA may be established by 
Tribal ordinance enacted by the governing body of the Tribe.
    (b) Form of ordinance. The form of Tribal ordinance shall be 
determined by the Tribe and reviewed by the ONAP Administrator. The IHA 
must also demonstrate that it has the legal authority to develop, own, 
and operate a public housing project under the Act. A sample format 
will be provided by HUD.
    (c) Approval or review of ordinance. HUD shall not enter into an 
undertaking for assistance to an IHA formed by Tribal ordinance unless 
such ordinance has been submitted to HUD, accompanied by evidence that 
the Tribe's enactment of the ordinance either has been approved by the 
Department of the Interior or has been reviewed and not objected to by 
that Department.
    (d) Submission to HUD of documents establishing IHA. The Tribal 
ordinance, evidence of Department of the Interior approval or review, 
and the following documentation relating to the initial organization of 
the IHA shall be submitted to HUD prior to receiving financial 
assistance. This includes:
    (1) Certificate of appointment of Commissioners;
    (2) Commissioner's oath of office;
    (3) Notice of organization;
    (4) Consent to meeting;
    (5) Minutes of meeting;
    (6) Resolutions establishing the IHA, adopting the by-laws, 
adopting the seal, designating a regular place of meeting, and 
designating officers;
    (7) By-Laws;
    (8) Certificate of Secretary as to authenticity of documents; and
    (9) General certificate of Housing Authority.


Sec. 950.130  IHA Commissioners who are tenants or homebuyers.

    (a) Tenant or homebuyer commissioners. No person shall be barred 
from serving on an IHA's Board of Commissioners because he or she is a 
tenant or homebuyer in a housing project of the IHA. A Commissioner who 
is a tenant or homebuyer shall be entitled to participate fully in all 
meetings concerning matters that affect all of the tenants or 
homebuyers, even though such matters affect him or her as well. 
However, no such Commissioner shall be entitled or permitted to 
participate in or be present at any meeting (except in his or her 
capacity as a tenant or homebuyer), or be counted or treated as a 
member of the Board, concerning any matter involving his or her 
individual rights, obligations, or status as a tenant or homebuyer.
    (b) Commissioner as IHA employee. A member of the IHA's Board of 
Commissioners shall not be eligible for employment by the IHA, except 
under extremely unusual circumstances where it is documented that no 
one except the commissioner is qualified for the position and where the 
HUD Field Office approves in advance of the hiring.


Sec. 950.135  Administrative capability.

    (a) HUD determination. At least annually, HUD shall carry out such 
reviews of the performance of each IHA, including remote reviews, on-
site limited and full reviews, audits, surveys, and a formal annual 
review or risk analysis assessment, as may be necessary or appropriate 
to make the determinations required by this section, taking into 
consideration all available evidence. HUD will evaluate an IHA's 
compliance in the areas of development, modernization, and operations, 
including such functions as administration, financial management, 
occupancy, and maintenance.
    (b) Obligation to maintain. (1) An IHA must maintain administrative 
capability at all times throughout the term of the ACC. In order to be 
considered administratively capable, an IHA must administer the Indian 
housing program in accordance with applicable statutory requirements, 
HUD regulations, contracts, HUD handbooks and other program 
requirements with no serious deficiencies. If any of the following 
conditions exist, it shall be considered a serious deficiency:
    (i) The IHA is not financially stable, based on the most recent 
Administrative Capability Assessment, annual audit, technical 
assistance visit, or other reliable information;
    (ii) An audit, conducted in accordance with 24 CFR part 44 and with 
Sec. 950.120, or HUD reviews (including monitoring findings) reveal 
deficiencies that HUD reasonably believes require corrective action 
and/or that corrective actions are not taken in accordance with 
established timeframes;
    (iii) The IHA has management systems that do not meet the standards 
as set forth in 24 CFR part 85, and the lack of such systems may result 
in mismanagement or misuse of Federal funds;
    (iv) The IHA has not conformed to the terms and conditions of 
previous awards, including for new construction, the Comprehensive 
Improvement Assistance Program or the use of Operating Subsidies;
    (v) The IHA lacks properly trained and competent personnel at key 
management positions of the IHA; or
    (vi) The IHA is in violation of the terms of applicable statutes, 
regulations, Annual Contributions Contracts or handbooks.
    (2) If an IHA has serious deficiencies, HUD shall take any or all 
of the following actions:
    (i) Issue a notice of deficiency;
    (ii) Issue a corrective action order; or
    (iii) Classify the IHA as ``high risk'' (see 24 CFR part 85).
    (c) Notice of deficiency. Based on HUD reviews of IHA performance 
and findings of any of the deficiencies in paragraph (b)(1) of this 
section, HUD may issue to the IHA a notice of deficiency, stating the 
specific program requirements that the IHA has violated and requesting 
the IHA to take appropriate action. The notification shall be in 
writing and contain the following:
    (1) The deficiencies, i.e., the IHA actions and the statutory, 
regulatory, handbook or other requirements that have been violated;
    (2) Recommended actions that may be taken by the IHA and a 
timeframe for completion;
    (3) The documentation necessary for evidence that all actions have 
been completed.
    (d) Corrective action order. (1) Based on HUD reviews of IHA 
performance and findings of any of the deficiencies described in 
paragraph (b)(1) of this section, HUD may issue to the IHA a corrective 
action order. An order may be issued, whether or not a notice of 
deficiency previously has been issued with regard to the specific 
deficiency on which the corrective action order is based. HUD may order 
corrective action at any time by notifying the IHA of the specific 
program requirements that the IHA has violated, and by specifying the 
corrective actions that must be taken. HUD shall design corrective 
action to prevent a continuation of the deficiency, mitigate any 
adverse effects of the deficiency to the extent possible, and prevent a 
recurrence of the same or similar deficiencies.
    (2) Before ordering corrective action, HUD will notify the IHA and 
give it an opportunity to consult with HUD regarding the proposed 
action.
    (3) Any corrective action ordered by HUD shall become a condition 
of the ACC grant agreement.
    (4) The order shall be in writing and shall contain the following:
    (i) The deficiencies, i.e., the IHA actions and the statutory, 
regulatory, handbook or other requirements that have been violated;
    (ii) The corrective action(s) that must be taken by the IHA and the 
time allowed for completing the corrective action(s);
    (iii) The method of requesting reconsideration of the HUD action 
and the documentation necessary to evidence that all corrective actions 
have been completed.
    (e) Management improvement plan. (1) When an IHA receives a 
corrective action order, it must respond to the determination, in 
writing. This response must include a management improvement plan to 
correct existing deficiencies. The plan shall describe in detail the 
method to be used and the time schedule to be maintained, shall be 
approved by the IHA Board of Commissioners, and is subject to HUD 
approval.
    (2) After receiving the response from the IHA, HUD may direct the 
IHA to take one or more of the following actions:
    (i) Submit additional information: (A) Concerning the IHA's 
administrative, planning, budgeting, accounting, management, and 
evaluation functions, to determine the cause for the IHA having 
deficiencies, as described in paragraph (b)(1) of this section;
    (B) Explaining any steps the IHA is taking to correct the 
deficiencies;
    (C) Documenting that IHA activities were not inconsistent with the 
IHA's annual statement or other applicable statutes, regulations, or 
program requirements;
    (ii) Submit schedules for completing the work identified in the 
MIP;
    (iii) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's MIP;
    (iv) Not incur financial obligations, or to suspend payments for 
one or more activities;
    (v) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended; or
    (vi) Take such other corrective actions as HUD determines 
appropriate to correct the IHA deficiencies.
    (3) HUD shall determine whether the IHA has satisfied, or has made 
reasonable progress towards satisfying, the management improvement 
plan.
    (4) If the IHA does not satisfy the terms of the plan or does not 
act in good faith to meet the timeframes included in its MIP, HUD may 
impose additional restrictions. In addition, existing projects may be 
terminated, or other action may be instituted, as appropriate.
    (f) High risk determination. An IHA may be classified as ``high 
risk'' and determined ineligible for certain types of future funding 
related to the classification of risk, or may be determined eligible 
for future funding but subject to special conditions or restrictions 
corresponding to the high risk classification. A corrective action 
order listing the specific violation shall accompany the ``high risk'' 
designation.
    (1) If an IHA is determined to be high risk, the conditions that 
form the basis for that determination shall be sufficiently serious to 
warrant a determination to exclude the IHA from future funding of a 
particular type. The determination of high risk shall state the cause 
for that finding.
    (2) An IHA may continue to be eligible for funding despite a 
finding that it is high risk--subject to special conditions and/or 
restrictions corresponding to the deficiencies found--if it has 
submitted a management improvement plan that was approved by HUD, and 
it has exhibited substantial compliance with the plan or a good faith 
effort to comply with the plan. If HUD determines that it is necessary 
to impose special conditions or restrictions, it will notify the IHA in 
writing of the applicable conditions or restrictions. One or more of 
the following special conditions or restrictions may be imposed:
    (i) Submission to HUD of additional documentation;
    (ii) Submission to HUD of additional or more detailed financial 
reports;
    (iii) Additional project monitoring from the HUD Field Office;
    (iv) Additional requirements for technical assistance, from HUD or 
another entity approved by HUD;
    (v) Establishing additional approvals by HUD;
    (vi) Withholding some or all of the IHA's grant;
    (vii) Declaring a breach of the ACC grant amendment with respect to 
some or all of the IHA's functions; or
    (viii) Any other sanction authorized by law or regulation.
    (g) Appeals. (1) An IHA may appeal a corrective action order or a 
determination of high risk status to the local HUD Administrator, 
Office of Native American Programs (ONAP). All appeals must be made in 
writing, within 30 calendar days of notice to the IHA of the HUD action 
and must state clearly any justification or evidence that the action is 
unwarranted or too severe. If an appeal is filed concerning one or more 
action(s), the action(s) shall not take effect until HUD makes a final 
determination on the appeal or notifies the IHA that special 
circumstances exist that warrant giving immediate effect to the 
announced HUD action. The HUD Administrator must respond to the appeal 
within 30 days of receipt of the appeal.
    (2) An IHA may appeal a decision of the Administrator to the ONAP, 
Headquarters, only if the case involves actions related to a 
determination of ineligibility of funding for the upcoming funding 
cycle. An appeal of the Administrator's decision must be made to ONAP, 
Headquarters in writing, stating the justification or evidence, and 
must be received within 21 days of the date of the Administrator's 
decision. Decisions reviewed by Headquarters will be evaluated based on 
the facts as presented to the Administrator and on any aggravating or 
extenuating circumstances.
    (3) The IHA's Board of Commissioners must notify the Tribal 
government of HUD's final determination to withhold or suspend funds or 
declare a breach of the ACC grant agreement, as well as the basis for, 
and consequences resulting from, such a determination.

Subpart B--Procurement


Sec. 950.160  Procurement standards.

    (a) HUD standards. (1) Applicability. This subpart sets forth 
Federal requirements to be followed by IHAs in the procurement of 
services, supplies, and goods.
    (2) Contracting authorization. An IHA may execute contracts without 
HUD approval for the procurement of work, materials, equipment and/or 
professional services, in accordance with paragraph (a)(3)(ii) of this 
section. Before the execution of contracts, the IHA Board of 
Commissioners will insure that systems are in place to ensure program 
requirements are satisfied before the execution of contracts and will 
periodically review compliance with such systems.
    (3) Limitations. (i) An IHA shall not award a contract for the 
project until the prospective contractor has demonstrated, to the 
satisfaction of the IHA, the technical, administrative and financial 
capability to perform contract work of the size and type involved and 
within the time provided under the contract. The IHA shall not award a 
contract to a person or firm on the List of Parties Excluded from 
Federal Procurement and Nonprocurement Programs compiled, maintained 
and distributed by the General Services Administration (GSA) or to a 
person or firm that is subject to a limited denial of participation 
issued by the HUD Office of Native American Programs. (See 24 CFR part 
24.)
    (ii) The IHA may execute or approve any agreement or contract for 
personnel, management, legal, or other services with any person or firm 
without the prior written approval of HUD, except under the following 
circumstances:
    (A) Where the term of the agreement or contract (including renewal) 
is in excess of two years; or
    (B) Where the amount of the agreement or contract is in excess of 
the amount included for such purpose in the HUD-approved development 
cost budget, or operating budget or an amount specified from time to 
time by HUD, as the case may be; or
    (C) Where the agreement or contract is for legal or other services 
in connection with litigation if the estimated cost exceeds $25,000; or
    (D) For contracts in excess of $25,000 in the aggregate where the 
IHA proposes to award a contract based upon a single bid or proposal 
received.
    (4) Records. An IHA shall maintain records sufficient to detail the 
significant history of a procurement. The IHA shall maintain evidence 
in its files:
    (i) That the solicitation and award procedures were conducted in 
compliance with State, Tribal, or local laws and Federal requirements, 
including requirements for Indian preference and wage rates;
    (ii) That the award does not exceed the approved budget amount and 
is not being made on the basis of a single bid or proposal; and
    (iii) That the IHA reviewed the contractor's qualifications; 
checked to ensure that the contractor is not listed on the GSA List of 
Parties Excluded from Federal Procurement and Nonprocurement Programs; 
and determined that the contractor has the capacity to successfully 
complete the work or services under the terms and conditions of the 
contract. This determination shall consider the contractor's record of 
past performance, integrity, compliance with public policy, and 
financial and technical resources.
    (5) Contract administration. An IHA is responsible, in accordance 
with good administrative practice and sound business judgment, for the 
settlement of all contractual and administrative issues arising out of 
procurement.
    (6) Competition. All procurement transactions must be conducted in 
a manner providing full and open competition.
    (7) Contract cost and price. An IHA must perform a cost or price 
analysis in connection with every procurement action, including 
contract modifications.
    (b) IHA standards--(1) IHA procedures. Each IHA shall adopt, 
promulgate, and comply with, rules or regulations for the procurement 
and administration of supplies, materials, services and equipment in 
connection with the development and operation of projects. Upon 
adoption or modification, the IHA will promptly furnish a copy of these 
rules or regulations to HUD. These rules or regulations shall contain 
provisions on at least the following subjects:
    (i) Procedures to ensure that all procurement transactions are 
conducted in a full and open competitive manner, consistent with the 
standards of 24 CFR 85.36;
    (ii) Identification (by position title) of IHA officials authorized 
to enter into and approve contracts on a competitive basis as 
authorized by 24 CFR 85.36(d)(4);
    (iii) Procedures for inventory control;
    (iv) Procedures for storage and protection of goods and supplies;
    (v) Procedures for issuance of, or other disposition of, supplies 
and equipment;
    (vi) Procedures for implementing Indian preference requirements;
    (vii) Procedures for handling complaints and protests regarding 
procurement;
    (viii) Standards of conduct governing IHA directors, board members, 
officers and employees; and
    (ix) Conflict of interest provisions governing directors, officers, 
employees, contractors/developers and others doing business with the 
IHA.
    (2) Contract administration system. An IHA shall maintain a 
contract administration system that ensures that contractors perform in 
accordance with the terms, conditions, and specifications of their 
contracts and purchase orders.
    (c) Government-wide contract requirements. A HUD regulation found 
at 24 CFR part 85 embodies government-wide administrative requirements 
for grants to State, local and Federally recognized Indian Tribal 
governments (including grants received by IHAs). The contract 
provisions listed in 24 CFR 85.36(i) of that regulation are to be 
included in any IHA contracts.


Sec. 950.165  Methods of procurement.

    (a) Small purchase procedures. Small purchase procedures are those 
relatively simple and informal procurement methods for securing 
services, supplies, or other property that do not cost more than 
$25,000 in the aggregate. If small purchase procurements are used, 
price or rate quotations will be obtained from an adequate number of 
qualified sources.
    (b) Procurement by sealed bids (Invitations for Bid (IFB)). Bids 
are publicly solicited and a firm-fixed-price contract (lump sum or 
unit price) is awarded to the responsible bidder whose bid, conforming 
with all the material terms and conditions of the invitation for bids, 
is the lowest in price. The sealed bid method is the preferred method 
for procuring construction, if the conditions in Sec. 950.165(b)(1) 
apply.
    (1) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (i) A complete, adequate, and realistic specification or purchase 
description is available;
    (ii) Two or more responsible bidders are willing and able to 
compete effectively for the business; and
    (iii) The procurement lends itself to a firm fixed price contract 
and the selection of the successful bidder can be made principally on 
the basis of price.
    (2) If sealed bids are used, the following requirements apply:
    (i) The invitation for bids will be publicly advertised and bids 
shall be solicited from an adequate number of known suppliers, 
providing them sufficient time prior to the date set for opening the 
bids;
    (ii) The invitation for bids, which will include any specifications 
and pertinent attachments, shall define the items or services in order 
for the bidder to properly respond;
    (iii) All bids will be publicly opened at the time and place 
prescribed in the invitation for bids;
    (iv) A firm fixed-price contract award will be made in writing to 
the lowest responsive and responsible bidder; and
    (v) Any or all bids may be rejected if there is a sound documented 
reason.
    (c) Procurement by competitive proposals (Request for Proposals 
(RFP)). The technique of competitive proposals is normally conducted 
with more than one source submitting an offer, and either a fixed-price 
or cost-reimbursement type contract is awarded. It is generally used 
when conditions are not appropriate for the use of sealed bids. If this 
method is used, the following requirements apply:
    (1) Requests for proposals will be publicized and identify all 
evaluation factors and their relative importance. Any response to 
publicized requests for proposals shall be honored to the maximum 
extent practical;
    (2) Proposals will be solicited from an adequate number of 
qualified sources;
    (3) IHAs will have a method for conducting technical evaluations of 
the proposals received and for selecting awardees;
    (4) Awards will be made to the responsible firm whose proposal is 
most advantageous to the program, with price and other factors 
considered; and
    (5) IHAs may use competitive proposal procedures for 
qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby competitors' qualifications are evaluated 
and the most qualified competitor is selected, subject to negotiation 
of fair and reasonable compensation. The method, where price is not 
used as a selection factor, can only be used in procurement of A/E 
professional services. It cannot be used to purchase other types of 
services though A/E firms are a potential source to perform the 
proposed effort.
    (d) Procurement by noncompetitive proposals is procurement through 
solicitation of a proposal from only one source, or where after 
solicitation of a number of sources, competition is determined 
inadequate.
    (1) Procurement by noncompetitive proposals may be used only when 
the award of a contract is infeasible under small purchase procedures, 
sealed bids or competitive proposals and one of the following 
circumstances applies:
    (i) The item is available only from a single source;
    (ii) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (iii) HUD authorizes noncompetitive proposals; or
    (iv) After solicitation of a number of sources, competition is 
determined inadequate.
    (2) Cost analysis, i.e., verifying the proposed cost data, the 
projections of the data, and the evaluation of the specific elements of 
costs and profit, is required.


Sec. 950.170  Other requirements applicable to development contracts.

    (a) Bonding requirements. For construction contracts for more than 
$100,000, each contractor shall be required to provide bid guarantees 
and adequate assurance of performance and payment acceptable to HUD in 
accordance with 24 CFR 85.36(h). The following methods may be used to 
provide performance and payment assurance:
    (1) Performance and payment bonds for 100 percent of the total 
contract price.
    (2) Deposit with the IHA of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk.
    (3) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the IHA, subject to reduction 
during the warranty period commensurate with potential risk.
    (4) Letter of credit for 10 percent of the total contract price and 
compliance with the procedures for monitoring of disbursements by the 
contractor. In the case of a Mutual Help project, the term total 
contract price as used with respect to each of the above assurance 
methods includes the value of all Mutual Help contributions for work, 
materials, or equipment to be provided to the contractor for use in 
performing the contract work.
    (b) Executive Order 11246 (equal employment opportunity). Contracts 
for construction work in connection with Projects under this part are 
subject to Executive Order 11246 (3 CFR, 1964-65 Comp., p. 339), and 
Executive Order 11375 (3 CFR, 1966-70 Comp., p. 684), and to applicable 
implementing regulations (24 CFR part 130; 41 CFR chapter 60), rules, 
and orders of HUD and the Office of Federal Contract Compliance 
Programs of the Department of Labor. Executive Order 11246 prohibits 
discrimination and requires affirmative action to ensure that employees 
or applicants for employment are treated without regard to their race, 
color, religion, sex, or national origin. Compliance with E.O. 11246, 
and related regulations, orders and requirements shall be to the 
maximum extent consistent with, but not in derogation of, compliance 
with section 7(b) of the Indian Self-Determination and Education 
Assistance Act.
    (c) Local area residents. In accordance with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the 
implementing regulations in 24 CFR part 135, IHAs, their contractors 
and subcontractors shall make best efforts, consistent with existing 
Federal, State, and local laws and regulations (including section 7(b) 
of the Indian Self-Determination and Education Assistance Act, to give 
low- and very low-income persons the training and employment 
opportunities generated by section 3 covered assistance (as this term 
is defined in 24 CFR 135.7) and to give section 3 business concerns the 
contracting opportunities generated by section 3 covered assistance.


Sec. 950.172  Wage rates.

    (a) Determination of prevailing wage rates. For the applicable 
method of determination of the prevailing wage rates to be paid 
laborers and mechanics, see Sec. 950.120(c).
    (b) Preemption of prevailing wage rates. (1) A prevailing wage rate 
determined under State or Tribal law shall be inapplicable to a 
contract or IHA-performed work item for the development, maintenance or 
modernization of a project whenever:
    (i) The contract or the work item is otherwise subject to State or 
Tribal law requiring the payment of wage rates determined by a State, 
local, or Tribal government or agency to be prevailing and is for a 
project assisted with funds for low-income housing under the Act; and
    (ii) The wage rate (the basic hourly rate and any fringe benefits) 
determined under State or Tribal law to be prevailing with respect to 
an employee in any trade or position employed in the development, 
maintenance, or improvement of a project exceeds whichever of the 
following Federal wage rates is applicable:
    (A) The wage rate determined by the Secretary of Labor pursuant to 
the Davis-Bacon Act (40 U.S.C. 276a, et seq.) to be prevailing in the 
locality with respect to such trade;
    (B) An applicable apprentice wage rate based thereon specified in 
an apprenticeship program registered with the Department of Labor or a 
DOL-recognized State Apprenticeship Agency;
    (C) An applicable trainee wage rate based thereon specified in a 
DOL-certified trainee program; or
    (D) The wage rate determined by the Secretary of HUD to be 
prevailing in the locality with respect to such trade or position.
    (2) For the purpose of ascertaining whether a wage rate determined 
under State or Tribal law for a trade or position exceeds the Federal 
wage rate:
    (i) Where a rate determined by the Secretary of Labor or an 
apprentice or trainee wage rate based thereon is applicable, the total 
wage rate determined under State or Tribal law, including fringe 
benefits (if any) and basic hourly rate, shall be compared to the total 
wage rate determined by the Secretary of Labor or apprentice or trainee 
wage rate; and
    (ii) Where a rate determined by the Secretary of HUD is applicable, 
any fringe benefits determined under State or Tribal law shall be 
excluded from the comparison with the rate determined by the Secretary 
of HUD.
    (3) Whenever paragraph (b)(1)(i) of this section is applicable:
    (i) Any solicitation issued by the IHA and any contract executed by 
the IHA for development, maintenance or modernization of the project 
shall include a statement as prescribed in this paragraph and failure 
to include this statement may constitute grounds for requiring re-
solicitation. The statement that any prevailing wage rate (including 
basic hourly rate and any fringe benefits) determined under State or 
Tribal law to be prevailing with respect to an employee in any trade or 
position employed under the contract is inapplicable to the contract 
and shall not be enforced against the contractor or any subcontractor 
with respect to employees engaged under the contract must be included 
whenever either of the following occurs:
    (A) Such nonfederal prevailing wage rate exceeds:
    (1) The applicable wage rate determined by the Secretary of Labor 
pursuant to the Davis-Bacon Act (40 U.S.C. 276a, et seq.) to be 
prevailing in the locality with respect to such trade;
    (2) An applicable apprentice wage rate based thereon specified in 
an apprenticeship program registered with the Department of Labor or a 
DOL-recognized State Apprenticeship Agency; or
    (3) An applicable trainee wage rate based thereon specified in a 
DOL-certified trainee program; or
    (B) Such nonfederal prevailing wage rate, exclusive of any fringe 
benefits, exceeds the applicable wage rate determined by the Secretary 
of HUD to be prevailing in the locality with respect to such trade or 
position.
    (ii) The IHA itself shall not be required to pay the basic hourly 
rate or any fringe benefits comprising a prevailing wage rate 
determined under State or Tribal law and described in paragraph (b)(2) 
of this section to any of its own employees who may be engaged in the 
development, maintenance or modernization of the project; and
    (iii) Neither the basic hourly rate nor any fringe benefits 
comprising a prevailing wage rate determined under State or Tribal law 
and described in paragraph (b)(2) of this section shall be enforced 
against the IHA or any of its contractors or subcontractors with 
respect to employees engaged in the contract or IHA-performed work item 
for development, maintenance or modernization of the project.
    (4) Nothing in paragraph (b) of this section shall affect the 
applicability of any wage rate established in a collective bargaining 
agreement with an IHA or its contractors or subcontractors where such 
wage rate equals or exceeds the applicable Federal wage rate referred 
to in paragraph (b)(1)(ii) of this section, nor does paragraph (b) of 
this section impose a ceiling on wage rates an IHA or its contractors 
or subcontractors may choose to pay independent of State law.
    (5) The provisions of paragraph (b) of this section shall apply to 
work performed under any prime contract entered into as a result of a 
solicitation of bids or proposals issued on or after October 6, 1988 
and to any work performed by employees of an IHA on or after October 6, 
1988.


Sec. 950.175  Indian preference requirements.

    (a) Applicability. HUD has determined that grants under this part 
are subject to section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)), which requires that, to 
the greatest extent feasible:
    (1) Preference and opportunities for training and employment shall 
be given to Indians; and
    (2) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (b) Definitions. Indian organizations and Indian-owned economic 
enterprises include both of the following:
    (1) Any economic enterprise as defined in section 3(e) of the 
Indian Financing Act of 1974 (25 U.S.C. 1452); that is, ``any Indian-
owned commercial, industrial, or business activity established or 
organized for the purpose of profit provided that such Indian ownership 
and control shall constitute not less than 51 percent of the 
enterprise''; and
    (2) Any ``Tribal organizations'' as defined in section 4(c) of the 
Indian Self-Determination and Education Assistance Act (25 U.S.C. 
1453); that is, ``the recognized governing body of any Indian Tribe; 
any legally established organization of Indians which is controlled, 
sanctioned or chartered by such governing body or which is 
democratically elected by the adult members of the Indian community to 
be served by such organizations and which includes the maximum 
participation of Indians in all phases of its activities.''
    (c) Preference employment and training. To the greatest extent 
feasible, IHAs and their contractors and subcontractors shall give 
preference and opportunities for training and employment in connection 
with the administration of grants awarded under this part to Indians 
and Alaskan natives.
    (d) Preference in contracting. To the greatest extent feasible, 
IHAs shall give preference in the award of contracts for projects 
funded under this part to Indian organizations and Indian-owned 
economic enterprises.
    (1) Each IHA shall: (i) Advertise for bids or proposals limited to 
qualified Indian organizations and Indian-owned enterprises; or
    (ii) Use a two-stage preference procedure, as follows:
    (A) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid 
announcement limited to Indian-owned firms.
    (B) Stage 2. If responses are received from more than one Indian 
enterprise found to be qualified, advertise for bids or proposals 
limited to Indian organizations and Indian-owned economic enterprises; 
or
    (iii) Develop and incorporate into their procurement policy, 
subject to HUD Field Office one-time approval, the IHA's method of 
providing preference. In no instance shall HUD approve a method which 
provides preference based upon affiliation or membership in a 
particular tribe or group of tribes.
    (2) If the IHA selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a statement of intent, a bid or a proposal to 
perform the contract at a reasonable cost, then the IHA shall:
    (i) Re-compete the contract, using any of the methods described in 
paragraph (e)(1) of this section; or
    (ii) Re-compete the contract without limiting the advertisement for 
bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (iii) If only one bid or proposal is received, request Field Office 
review and approval of the proposed contract and related procurement 
documents, in accordance with 24 CFR 85.36, in order to award the 
contract to the single source.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36(d)(1) need not follow the formal 
requirements for public announcement and advertising for bids or 
proposals as provided in paragraph (d)(1) of this section. However, an 
IHA small purchase procurement shall, to the greatest extent feasible, 
provide Indian preference in the award of contracts.
    (4) All preferences shall be publicly announced in the 
advertisement and in the solicitation and the contract documents.
    (5) An IHA, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. IHAs may require prospective 
contractors to submit information prior to submitting a bid or 
proposal, or at the time of submission. Information requested by the 
IHA may include but is not limited to the following:
    (i) Evidence showing fully the extent of Indian ownership, control, 
and interest;
    (ii) Evidence of structure, management and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (iii) Evidence sufficient to demonstrate to the satisfaction of the 
IHA that the prospective contractor has the technical, administrative, 
and financial capability to perform contract work of the size and type 
involved.
    (6) The IHA shall incorporate the following clause (referred to as 
the Section 7(b) clause) in each contract awarded in connection with a 
project funded under this part:
    (i) The work to be performed under this contract is on a project 
subject to Section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)) (Indian Act). Section 7(b) requires 
that to the greatest extent feasible:
    (A) Preferences and opportunities for training and employment shall 
be given to Indians, and
    (B) Preferences in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (ii) The parties to this contract shall comply with the provisions 
of section 7(b) of the Indian Act.
    (iii) In connection with this contract, the contractor shall, to 
the greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians and Alaskan natives.
    (iv) The contractor shall include this Section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the IHA, take appropriate action pursuant to the subcontract upon a 
finding by the IHA or HUD that the subcontractor has violated the 
Section 7(b) clause of the Indian Act.
    (e) Additional Indian preference requirements. An IHA may, with 
prior HUD approval, provide for additional Indian preference 
requirements as conditions for the award of, or in the terms of, any 
contract in connection with a project funded under this part. The 
additional Indian preference requirements shall be consistent with the 
objectives of the Section 7(b) clause of the Indian Act and shall not 
result in a significantly higher cost or greater risk of non-
performance or longer period of performance. The additional Indian 
preference requirements permitted by this part do not include the 
imposition of geographic preferences or restrictions to the procurement 
process.
    (f) Complaint procedures. The following complaint procedures are 
applicable to complaints arising out of any of the methods of providing 
for Indian preference contained in this subpart, including alternate 
methods enacted and approved in the manner described in this subpart.
    (1) Each complaint shall be in writing, signed, and filed with the 
IHA.
    (2) A complaint must be filed with the IHA no later than 20 
calendar days from the date of the action (or omission) upon which the 
complaint is based.
    (3) Upon receipt of a complaint, the IHA shall promptly stamp the 
date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (4) Within 20 calendar days of receipt of a complaint, the IHA 
shall either meet, or communicate by mail or telephone, with the 
complaining party in an effort to resolve the matter. The IHA shall 
make a determination on a complaint and notify the complainant, in 
writing, within 30 calendar days of submittal of the complaint to the 
IHA. The decision of the IHA shall constitute final administrative 
action on the complaint.


Sec. 950.190  Insurance.

    (a) Purpose. This section implements policies concerning insurance 
coverage required under the Annual Contributions Contract (ACC) or 
Mutual Help Annual Contributions Contract (MHACC) between HUD and an 
IHA. These contracts require (in section 305 of the ACC and Article IX 
of the MHACC) that IHAs maintain specified insurance coverage for 
property and casualty losses that would jeopardize the financial 
stability of the IHAs. The insurance coverage is required to be 
obtained under procedures that provide ``for open and competitive 
bidding.'' The HUD Appropriations Act for Fiscal Year 1992 (Pub.L. 102-
368) provided that an IHA could purchase insurance coverage without 
regard to competitive selection procedures when it purchases it from a 
nonprofit insurance entity owned and controlled by IHAs approved by HUD 
in accordance with standards established by regulation. This section 
specifies the standards.
    (b) Method of selection of insurance coverage. While 24 CFR part 85 
requires that grantees solicit full and open competition for their 
procurements, the HUD Appropriations Act for Fiscal Year 1992 (Pub.L. 
102-368) provides an exception to this requirement. IHAs are authorized 
to obtain any line of insurance from a nonprofit insurance entity that 
is owned and controlled by IHAs and approved by HUD in accordance with 
this section, without regard to competitive selection procedures. 
Procurement of insurance from other entities is subject to competitive 
selection procedures.
    (c) Approval of a nonprofit insurance entity. Under the following 
conditions, HUD will approve a nonprofit self-funded insurance entity 
created by IHAs that limits participation to IHAs (and to nonprofit 
entities associated with IHAs that engage in activities or perform 
functions only for housing authorities or housing authority residents):
     (1) An insurance company (including a risk retention group).
    (i) The insurance company maintains a current license or is 
authorized to do business in the State or Tribal area by the State 
Insurance Commissioner or Indian Tribal governing body and has 
submitted documentation of this authority to HUD and
    (ii) The insurance company has not been suspended from providing 
insurance coverage in the State or Tribal area or been suspended or 
debarred from doing business with the federal government. The insurance 
company is obligated to send to HUD a copy of any action taken by the 
authorizing official to withdraw the license or authorization.
    (2) An entity not organized as an insurance company.
    (i) The entity has competent underwriting staff (hired directly or 
engaged by contract with a third party), as evidenced by professionals 
with an average of at least five years of experience in large risk 
(exceeding $100,000 in annual premiums) commercial underwriting or at 
least five years of experience in the underwriting of risks for public 
entity risk pools. This standard may be satisfied by submission of 
evidence of competent underwriting staff, including copies of resumes 
of underwriting staff for the entity;
    (ii) The entity has efficient and qualified management (hired 
directly or engaged by contract with a third party), as evidenced by 
the report submitted to HUD in accordance with paragraph (d)(3) of this 
section and by having at least one senior staff person who has a 
minimum of five years of experience:
    (A) At the management level of Vice President of a property/
casualty insurance entity;
    (B) As a senior branch manager of a branch office with annual 
property/casualty premiums exceeding $5 million; or
    (C) As a senior manager of a public entity risk pool. Documentation 
for this standard must include copies of resumes of key management 
personnel responsible for oversight and for the day-to-day operation of 
the entity;
    (iii) The entity maintains internal controls and cost containment 
measures, as evidenced by an annual budget;
    (iv) The entity maintains sound investments consistent with:
    (A) The State insurance commissioner's requirements for licensed 
insurance companies, or other State statutory requirements controlling 
investments of public entities in the State in which the entity is 
organized, investing only in assets that qualify as ``admitted 
assets''; or
    (B) Any applicable provisions of Indian Tribal law concerning 
investments, in the case of an IHA that is not subject to such State 
law;
    (v) The entity maintains adequate surplus and reserves for 
undischarged liabilities of all types, as evidenced by a current 
audited financial statement and an actuarial review conducted in 
accordance with paragraph (d) of this section; and
    (vi) Upon application for initial approval, the entity has proper 
organizational documentation, as evidenced by copies of the articles of 
incorporation, by-laws, business plans, copies of contracts with third 
party administrators, and an opinion from legal counsel that 
establishment of the entity conforms with all legal requirements under 
Federal and State, or Tribal law. Any material changes made to these 
documents after initial approval must be submitted for review and 
approval before becoming effective.
    (d) Professional evaluations of performance. Audits and actuarial 
reviews are required to be prepared and submitted annually to the HUD 
Office of Public and Indian Housing, for review and appropriate action, 
by nonprofit insurance entities that are not insurance companies 
approved under paragraph (c)(1) of this section. Selection of entities 
to perform such reviews shall comply with the competitive requirements 
of 24 CFR 85.36. In addition, an evaluation of other management factors 
is required to be performed by an insurance professional every three 
years. For fiscal years ending on or after December 31, 1993, the 
initial audit, actuarial review, and insurance management review 
required for a nonprofit insurance entity must be submitted to HUD 
within 90 days after the end of entity's fiscal year.
    (1) The annual financial statement prepared in accordance with 
generally accepted accounting principles (including any supplementary 
data required by GASB 10) is to be audited by an independent auditor 
(see 24 CFR part 44), in accordance with generally accepted auditing 
standards. The independent auditor shall express an opinion on whether 
the entity's financial statement is presented fairly in accordance with 
generally accepted accounting principles. A copy of this audit must be 
submitted to HUD.
    (2) The actuarial review must be done consistent with requirements 
established by the National Association of Insurance Commissioners and 
must be conducted by an independent property/casualty actuary who is an 
Associate or Fellow of a recognized professional actuarial 
organization, such as the Casualty Actuary Society. The report issued, 
a copy of which must be submitted to HUD, must include an opinion on 
any over or under reserving and the adequacy of the reserves maintained 
for the open claims and for incurred but unreported claims.
    (3) A review must be conducted, a copy of which must be submitted 
to HUD, by an independent insurance consulting firm that has at least 
one person on staff who has received the professional designation of 
chartered property/casualty underwriter (CPCU), associate in risk 
management (ARM), of associate in claims (AIC), of the following:
    (i) Efficiency of any Third Party Administrator;
    (ii) Timeliness of the claim payments and reserving practices; and
    (iii) The adequacy of reinsurance coverage.
    (e) Revocation of approval of a nonprofit insurance entity. HUD may 
revoke its approval of a nonprofit insurance entity under this section 
when it no longer meets the requirements of this section. The nonprofit 
insurance entity will be notified in writing of the proposed revocation 
of its approval, and the manner and time in which to request a hearing 
to challenge the determination. The procedure to be followed is 
specified in 24 CFR part 26.

Subpart C--Development


Sec. 950.200  Roles and responsibilities of Federal agencies.

    HUD, IHS, BIA, and other appropriate agencies shall coordinate 
functions in accordance with the Interdepartmental Agreement. HUD shall 
take the lead role in any area specifically related to the construction 
of Indian housing under this part.


Sec. 950.205  Allocation.

    HUD will allocate funds to Indian Field Offices using a systematic 
process that considers the relative need for housing in each HUD area 
or other geographic area, based on the most recent and reliable data 
available. (See 24 CFR part 791, subpart D.)


Sec. 950.210  Authority for proceeding without HUD approval.

    (a) IHA authority to proceed. An IHA may proceed with development 
functions without obtaining HUD approval as otherwise specified in this 
part.
    (b) Rescinding authorization. At any time during the development 
process, HUD may make a determination that an IHA, due to performance 
deficiencies, shall obtain HUD approval of additional processing steps. 
If such a determination is made, HUD shall explain in writing the 
reasons for the determination and specify any processing steps which 
are subject to additional technical assistance and prior approval by 
HUD. Processing under this ``assisted'' method of development may 
result from:
    (1) A request from an IHA to receive additional assistance in the 
development process but only to the extent that HUD agrees that such 
assistance is necessary and has the resources available to provide such 
assistance;
    (2) The result of monitoring an IHA's development performance 
pursuant to Sec. 950.135. When identified deficiencies are corrected to 
the satisfaction of HUD, the IHA's development processing will return 
to the ``standard'' method of development or, with the agreement of the 
IHA and HUD, may continue to be processed under the ``assisted'' method 
of development in accordance with Sec. 950.210(b).
    (3) The IHA staff is inexperienced in or has had no recent 
experience in the development of new housing.


Sec. 950.215  Production methods.

    Choice and approval of production method. The IHA may utilize any 
production method or combination of production methods to develop its 
projects as long as the production method(s) is not in conflict with 
the procurement requirements of 24 CFR 85.36 and subpart B of this 
part. The IHA shall advise HUD on the application for a project of its 
choice of production methods. Prior HUD approval is required if the 
method selected is force account or if the IHA proposes to utilize a 
noncompetitive procurement method. If HUD disapproves the IHA's 
preferred development method, it will furnish a statement of its 
reasons to the IHA. Historically, production methods utilized in the 
Indian Housing program are:
    (a) Conventional method. Under the Conventional method, the IHA 
plans the project and prepares drawings and specifications. The IHA 
solicits competitive bids through public advertisement and awards the 
contract to the lowest responsible bidder.
    (b) Turnkey method. Under the Turnkey method, the IHA advertises 
for developers to submit proposals to build a project described in the 
IHA's invitation for proposals. The invitation for proposals may 
prescribe the sites to be used. The IHA evaluates the proposals and 
selects the best proposal after considering price, design, site, the 
developer's experience and other evidence of the developer's ability to 
complete the project. Upon completion of the project (or stages 
thereof) in accordance with the contract of sale, the IHA purchases the 
project (or stage) from the developer.
    (c) Modified Turnkey. Under this modified method, the procedure is 
similar to the conventional method, except that the developer/
contractor usually receives no progress payments from the IHA and is 
responsible for acceptable completion before receiving any payment from 
the IHA.
    (d) Self-Help. The Self-Help method is applicable only to the 
Mutual Help Homeownership Opportunity program. Under this method, with 
technical assistance and supervision and materials provided by the IHA, 
a small group of families build a substantial portion of the homes to 
be purchased by the families in the group. Their work is supplemented 
by skilled labor obtained under contract. See subpart F of this part 
for more details concerning this method.
    (e) Acquisition of existing housing (with or without 
rehabilitation). Under the Acquisition method, the IHA purchases 
existing housing that may need only minor repairs or that may require 
substantial rehabilitation. Repair or rehabilitation may be 
accomplished before acquisition using Turnkey procedures or after 
acquisition using Conventional or Force Account procedures. An ACC may 
be executed before site approval, provided the IHA has documented 
evidence that adequate sites are available to accommodate the units 
contained in the program reservation.
    (f) Force account method. (1) Under the Force Account method, an 
IHA performs construction or rehabilitation using its own work force, 
either entirely or in combination with contractors.
    (2) The Force Account method may be used only if justified by the 
IHA and approved by the HUD Field Office. The IHA must demonstrate that 
it has the technical and administrative capabilities to complete the 
project within the projected time and budget. The HUD Field Office 
shall require that a Tribe or IHA agree in writing: to cover any costs 
in excess of the HUD-estimated construction costs; demonstrate that it 
has the financial resources to meet the excess costs up to a specified 
amount; and provide some form of security acceptable to HUD to cover 
excess costs. For this purpose, an IHA may use attachable assets 
including funds maintained in its reserve for replacements received 
from the sale of Mutual Help units.


Sec. 950.220  Total development cost.

    (a) Total development cost standard. The total development cost 
(TDC) standard, which limits the allowable cost for developing Indian 
housing projects, is determined as a per unit cost for various unit 
sizes, structure types and geographic areas. It is developed by HUD by 
applying a simple multiplier to an average construction cost. The costs 
covered by the TDC approved for a project, which is subject to the TDC 
standard, include all costs associated with the project, except for 
costs of off-site water and sanitation facilities infrastructure and 
donations received from any public or private source. Costs for off-
site water and sanitation facilities infrastructure and any donations 
received must be included in the project development cost budget but 
will be excluded from the calculation of the project TDC.
    (b) Creation of TDC areas. HUD Field Offices shall periodically 
assess the adequacy of the existing TDC areas. The geographical area 
used as a TDC area shall be a single contiguous physical area with a 
clearly identified boundary line. TDC areas shall have a relatively 
consistent construction bidding environment, and they shall not 
overlap. An IHA may request or the HUD Field Office Administrator may 
initiate preparation of a recommendation for changing the TDC areas.
    (c) Approval of total development cost for a project. The total 
development cost, as defined in Sec. 950.102, is the amount approved by 
HUD for development of a particular project, and it will not exceed the 
TDC limit except as follows:
    (1) The Secretary may provide that the TDC for a project may exceed 
the TDC limit by up to 10 percent of the published TDC for special 
situations such as, but not limited to, required relocation costs, 
start-up costs for on-site solid waste removal, and energy efficient 
housing design.
    (2) In unusual circumstances, where the Secretary makes a written 
determination that there is good cause to exceed the limit of 110 
percent of the maximum allowable TDC, the Secretary may approve a 
higher amount. An example of a circumstance that might form the basis 
for this type of determination is an unforeseen site improvement cost 
that is on-site only (not including any cost related to roads or 
driveways).
    (3) Any approval to exceed the TDC limit for a development that is 
based on the published TDC standard shall be subject to fund 
availability.
    (d) In approving the total development cost, HUD will approve a 
reasonable amount for preliminary planning.
    (e) Program reservations. (1) Funds reserved for initial program 
reservations shall be based on reasonable costs for developments.
    (2) After initial funding, the IHA may propose any reasonable 
housing design in their development program, as long as the building 
codes and other standards adopted by the IHA are not compromised and 
the cost of the units to HUD will not exceed the funds reserved.
    (3) The IHA must commence construction within 30 months from the 
program reservation date. An IHA's failure to commence construction 
within 30 months constitutes grounds for termination of the project. 
Excluded from this computation is delay in construction caused by the 
failure of HUD to process such project within a reasonable period of 
time, any environmental review requirement, any legal action affecting 
the project, or any other factor beyond the control of the IHA.
    (f) Cost review. HUD will review the development budget of each 
project for compliance with the maximum allowable TDC based on 
published TDC standards and with reasonable development costs, 
determined by a cost estimate prepared using HUD data on Indian housing 
developments actually constructed. The review will consider any 
conditions that may affect the cost analysis, such as logistical 
problems associated with developments of remote location, low density 
or scattered sites, the unavailability of skilled labor and acceptable 
materials, local customs, abnormal climatic conditions, and alternative 
heat sources, such as wood or coal.
    (g) Construction at reasonable cost. The IHA shall complete 
development of each project at the lowest possible cost of construction 
and long-term operation of the project, and in no event may the cost of 
the project exceed the approved total development cost.
    (h) Training of residents. The development cost budget submitted 
with the development program shall include an estimated amount for 
costs of a HUD-approved tenant counseling program. This counseling 
shall be subject to the provisions of Sec. 950.453, substituting renter 
and prospective renter for Homebuyer, where applicable. Those 
provisions which by their nature are only applicable to MH projects are 
applicable only to a MH counseling program.
    (i) Initial insurance premiums. The insurance premiums for the 
first three years may be included in development costs, with no 
obligation for reimbursement from operating receipts. The anticipated 
cost of such premiums may be charged to the development and placed in 
escrow by the IHA to enable closeout of the development program.

(Approved by the Office of Management and Budget under control 
number 2577-0101.)


Sec. 950.225  Application.

    (a) Submission to HUD. (1) An IHA may submit an application for a 
project after HUD issues a general notification that funds are 
available.
    (2) The application shall be on the form prescribed by HUD and 
shall be accompanied by all the legal and administrative attachments 
required by the form. The application must include comments by the 
Chief Executive Officer on behalf of the unit of local government where 
the project is to be located.
    (3) Where the provisions for the necessary local government 
cooperation are not contained in the ordinance or other enactment 
creating the IHA, the IHA shall submit an executed cooperation 
agreement (or a copy of an existing one) for the location involved, 
which is sufficient to cover the number of units in the application.
    (4) For an IHA that administers the Indian housing program for more 
than one specific Tribal government, or in the case of Alaska, more 
than one village, the IHA may submit an application on behalf of each 
distinct Tribal entity or village. An IHA administering the program in 
this manner is an ``umbrella'' IHA.
    (5) An application which contains rental housing shall include:
    (i) A certification that the IHA has reviewed the expected income 
and expenses of the proposed development and that the development is 
financially feasible at the current subsidy expense level; or
    (ii) A request for an allowable expense level which will enable the 
project to be feasibly operated.
    (6) An application which contains mutual help housing shall include 
a certification that there is a sufficient number of eligible 
homebuyers to ensure the viability of the project.
    (b) In order to submit an application, the IHA must be eligible and 
have satisfied any requirements imposed in accordance with 
Sec. 950.135. If an ineligible IHA submits an application, the HUD 
Field Office will return the application and will outline the specific 
reasons for the determination of ineligibility.
    (c)(1) Applications will be rated and points will be awarded for 
the following categories:
    (i) The relative unmet need for housing;
    (ii) The relative IHA occupancy rate compared to the occupancy 
rates of other eligible IHAs submitting applications;
    (iii) Length of time since the last program reservation date for 
each IHA compared to other eligible IHAs submitting applications;
    (iv) Current IHA development pipeline activity; and
    (v) Other factors identified in a notice of funding availability.
    (2) After the completion of the rating process, applications will 
be listed together to produce an ordered ranking. An IHA that has not 
previously received housing assistance under this part will be given a 
preference over all previously funded IHAs. The application with the 
highest point total will be funded first; the next highest will be 
funded second; and the process will continue until funds are exhausted.
    (d) Program reservation. (1) The program reservation will specify 
housing type, household type, development method, the funds reserved, 
the minimum and maximum number of total units, and units of each 
bedroom size to be developed. The program reservation will limit the 
total project development cost to the TDC level.
    (2) As long as the total project development cost limit is not 
exceeded, the number of units may be changed by the IHA. If an IHA 
desires to change the number of units to be developed, it must submit 
to HUD a request to amend the program reservation, including 
documentation supporting the request. HUD will either approve the 
request or notify the IHA of the reason the request is not approved. 
Amendment funds may not be used to increase the project size.
    (e) Execution of ACC. (1) Upon issuance of the program reservation 
by HUD, the IHA and HUD may execute an ACC to cover the costs of 
surveys and other HUD-approved planning activities with respect to the 
number of units covered by the program reservation. HUD may execute an 
ACC for an amount which the IHA demonstrates to the satisfaction of the 
HUD Field Office is required for the planning of the project. In 
support of a request for an ACC for planning, the IHA shall submit for 
HUD approval a preliminary budget showing anticipated expenditures and 
any needed supporting documentation. A preliminary budget for planning 
may include costs for comprehensive planning. (See paragraph (g) of 
this section).
    (2) Funds for planning shall in no event be provided or used for 
purposes, or in amounts, that would not be approvable for inclusion in 
a development cost budget.
    (3) Use of development funds of projects under ACC to cover costs 
for another project is strictly prohibited except as provided for under 
paragraph (g) of this section.
    (f) ACC amendment for construction and operation. An amendment to 
the ACC to cover development and operation of a project shall not be 
executed until the IHA has adopted, and HUD has approved, the 
development program for the project. In no event may an IHA execute a 
contract for construction or development before the execution of an ACC 
amendment for construction or development.
    (g) Comprehensive housing plan. At the request of an IHA, HUD may 
approve up to an additional one percent of the program reservation 
above the amount approved in accordance with paragraph (d)(1) of this 
section to establish and/or update a master housing plan for its area 
of operation. The plan should contain such elements as proposed housing 
sites, existing and proposed off-site roads, existing and proposed 
water and sewer facilities. In addition, the plan should address 
geographical and topographical features, as well as socio-economic and 
cultural factors such as employment opportunities, schools and services 
which have an impact on the placement of residential housing. The plan 
should be approved by resolution of the Tribal council. The one percent 
cost for the comprehensive housing plan may be charged to the 
development and placed in an escrow or revolving fund account by the 
IHA to enable closeout of the development program and/or pooling of 
planning resources.


Sec. 950.230  Project coordination.

    (a) Project coordination meeting. Upon notification of a Program 
Reservation, the IHA shall schedule a project coordination meeting to 
plan and schedule the steps needed to develop the project. The IHA will 
invite to the project coordination meeting the project designer (if 
known) and any Tribal, state or Federal officials who will participate 
in the development of the project. At the project coordination meeting, 
the IHA shall establish a schedule of planning activities including 
target date(s) for completion of key activities including the 
submission of the complete development program to HUD. The schedule, 
including any amendments thereto, shall be provided to meeting 
participant and to HUD to be used in planning and monitoring 
activities.
    (b) Citizen participation. The IHA shall hold at least one public 
meeting at which comments are solicited on both the proposed sites and 
project design from potential occupants, as well as from other persons 
interested in the project. Such meeting may be held in conjunction with 
a regularly scheduled board meeting or may be held separately after 
adequate notice is provided to the public to enable full participation 
by interested parties. The IHA should give maximum consideration to all 
public comments in the design of the project. Minutes from the meeting 
and a summary of the IHA's action on public comments shall be included 
in the submission of the development program to HUD. Failure to hold a 
public meeting or to include the minutes of the meeting in the 
development program shall be grounds for disapproval of the development 
program.


Sec. 950.235  Site selection criteria.

    (a) Relation to Tribal, local and regional plans. Selected sites 
must comply with all applicable Tribal, local and/or regional plans.
    (b) Access roads. Access roads up to the boundaries of multi-unit 
sites shall be provided by the BIA, the Tribe or other appropriate 
agency and shall not be an eligible cost of the project. Access roads 
up to the boundaries of individual homesites in a scattered site 
project shall be provided by the homebuyer, the Tribe, or other 
appropriate agency and shall not be an eligible cost of the project. 
Access roads shall be maintained by a responsible local entity to 
provide safe and suitable vehicular access at all times. No site may be 
approved unless such access roads exist, or a written assurance has 
been obtained from the responsible entity that roads will be 
constructed before commencement of project construction.
    (c) Utilities. Before final site approval, the IHA must demonstrate 
that all utility services necessary for the operation of the project 
are available or will be available at the time of project occupancy and 
that no legal, political, geographical, or contractual obstacles exist 
that will prevent access to these utility services.
    (d) Physical characteristics of site. The physical characteristics 
of a site shall facilitate overall economy in site preparation, 
construction, and management. Only reasonable costs for surveys, 
planning, test borings, and test wells shall be included in the 
development cost of the project.
    (e) Size of sites. An individual homesite, whether a scattered site 
or included in a multi-unit site, shall not exceed the size determined 
by the IHA or by Tribal or local policy to be necessary for the use and 
occupancy by the resident of the dwelling unit.
    (f) Alternate sites. In order to minimize delay to the project in 
the event of the withdrawal of a selected homebuyer or an approved 
site, the IHA should have a reasonable number of alternates available. 
Each homesite shall be legally and practicably available for use by 
another homebuyer. If a site is part of other land owned by the 
prospective homebuyer, the lease or other conveyance to the IHA shall 
include the legal right of access to the site by any substitute 
homebuyer.


Sec. 950.240  Types of interest in land.

    (a) Trust or restricted land. Sites on Tribally or individually 
owned trust or restricted land (as defined in 25 CFR 151.2) shall be 
leased to the IHA for a term of not less than 50 years (25 years, 
automatically renewable for an additional term of 25 years) on a HUD 
approved form of lease, which will provide that the lease cannot be 
terminated before its expiration without the consent of the IHA, or, 
while the site remains under the ACC, by HUD.
    (b) Unrestricted land. Sites on unrestricted land shall be either 
conveyed to the IHA in fee or leased to the IHA on a HUD approved form 
of lease for a term of not less than 50 years.
    (c) Other. Not withstanding the type of interest in land, all 
project property shall be exempt from local or state imposed real or 
personal property tax in accordance with section 6(d) of the U.S. 
Housing Act of 1937 (42 U.S.C. 1437d(d)).


Sec. 950.245  Appraisals.

    (a) When the cost of a site is to be charged to the IHA's 
development cost, an appraisal shall be made in accordance with the 
requirements of the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (42 U.S.C. 4601-4655). 
Government-wide implementing regulations are at 49 CFR part 24. The 
cost of donated land may be assumed to be $1,500 per unit. An appraisal 
of donated land must be performed only if the IHA determines that the 
value to be attributed to the site exceeds $1,500.
    (b) When the interest to be appraised is a leasehold interest in 
Tribally or individually owned trust or restricted land and comparable 
leasehold transactions are not available, the appraiser shall estimate 
the value of the land as if alienable in fee, based on a comparison of 
the land being valued with sales of fee interests in comparable land in 
the same or competing market areas.


Sec. 950.250  Site approval.

    (a) IHA certification. Prior to or concurrent with the submission 
of the Development Program, the IHA shall submit a written 
certification to HUD that all conditions which would prevent the site 
from being included in the project have been satisfactorily addressed 
and there are no legal or physical reasons which would interfere with 
the occupancy and use of the site during the term of the ACC. Such 
certification shall be conditioned only upon final acquisition or 
execution of a lease on the property.
    (b) Tentative site approval. (1) When a site is proposed for use, 
the IHA shall inspect the property to ascertain its suitability for 
development. Where appropriate, the IHA shall request an inspection of 
any proposed site by utility suppliers, the BIA, the IHS, and a 
representative of the local governing body and shall include each 
agency's comments in a list of potential site approval concerns. If the 
IHA determines that a site does not contain any legal or physical 
conditions which would exclude it from consideration for acquisition, 
the IHA shall prepare a listing of all conditions which must be 
corrected or addressed prior to acquisition of the site. The 
determination by the IHA and the preparation of the list of conditions 
shall be considered the tentative approval of the site.
    (2) Tentative site approval will not be determined until the 
requirements for compliance with local governmental approval have been 
met. (See 24 CFR part 791.)
    (3) Upon determination of tentative site approval, the IHA shall 
request environmental review by HUD. HUD may request the IHA to provide 
information or conduct surveys or studies which will assist in the 
determination by HUD of the environmental suitability of the site for 
development. Upon completion of the environmental review, HUD will 
provide the IHA with a copy of its Environmental Assessment, 
environmental review, Finding of No Significant Impact (FONSI) and/or 
with the reasons why the site was not environmentally satisfactory. The 
cost of completing environmental surveys or studies is an eligible 
project cost. Until HUD issues a FONSI, eligible planning costs are 
limited to those activities necessary to aid in the completion of the 
environmental assessment.
    (c) Final site approval. (1) Final site approval occurs when a site 
satisfies all of the conditions stated in the tentative approval and, 
with respect to trust land or restricted land over which the BIA has 
authority, the BIA has given either unconditional concurrence for final 
site approval or concurrence conditioned only on subsequent execution 
of site leases or right-of-way easements. If the BIA has given final 
site approval conditioned on subsequent execution of site leases of 
rights-of-way, the IHA shall obtain from the BIA written assurance that 
a valid lease, executed by all the necessary parties, can be obtained 
within a reasonable time and before start of construction.
    (2) Final site approval on all sites for the project must occur:
    (i) Before execution of an ACC for construction and operation, 
except for a project developed under the acquisition method or for 
restricted land sites, in accordance with paragraph (c)(3) of this 
section;
    (ii) Before any commitment is made to acquire or lease any site; 
and
    (iii) Before construction is started. In addition, leases and 
necessary rights-of-way must be obtained before solicitation of 
construction bids or before construction may begin on any units.
    (3) With respect to trust or restricted land sites, HUD may execute 
the ACC for construction and operation before final site approval of 
all sites only when the following conditions have been met:
    (i) All sites for the project have tentative site approval;
    (ii) At least 50 percent of the sites have final site approval;
    (iii) HUD is satisfied that the balance of the sites will meet the 
requirements for final site approval no later than one year from 
execution of the construction contract; and
    (iv) The construction contract provides that if all sites, finally 
approved and with executed leases, have not been delivered by the IHA 
to the contractor within one year from execution of the construction 
contract (or HUD-approved extension), the construction contract shall 
be reduced by the amount attributable to the units to be developed on 
the undelivered sites.


Sec. 950.255  Design criteria.

    (a) Applicable building code. (1) General. For purposes of housing 
assisted under chapter IX of this title, the IHA must use the 
applicable Tribal or other local building code where it meets or 
exceeds standards of model national building codes; or if there is 
none, it must use a model building code, or a State or other locality's 
building code. Newly constructed housing shall meet or exceed the 
requirements of the latest Model Energy Code published by the Council 
of American Building Officials. The IHA must coordinate with the Tribe, 
or local government, if appropriate, to assure adoption of a code that 
satisfies the standards specified in paragraph (a)(2) of this section. 
The code may make special provisions for traditional and culturally 
oriented design features. In the absence of tribally adopted codes, the 
IHA shall determine, by Resolution of the Board of Commissioners, 
building codes to be followed in the development of its housing.
    (2) Required standards. The code used must provide sufficient 
flexibility to permit the use of different designs and materials; must 
include standards for reasonable site designs; must include cost-
effective energy conservation performance standards designed to ensure 
the lowest total construction and operating costs; must give proper 
consideration to the needs of physically handicapped persons for ready 
access to, and use of, housing assisted under this chapter (see 24 CFR 
part 8); and must be sufficient to produce a decent, safe and sanitary 
home.
    (b) Fuel and energy consumption. In selecting from among design 
options for heating, cooking, and electrical systems, maximum attention 
shall be given to cost, adequacy, maintenance of the system, and the 
long term reliability of fuel supplies. Where fuel is not locally 
available at low cost, alternate systems such as wind, solar, or coal, 
may be used and included in the project cost.
    (c) Moderate housing design. The design chosen by the IHA must be 
of moderate design standard taking into consideration anticipated long 
term operating costs.
    (d) Water provisions for Alaska. Alaska Native housing assisted 
under this part shall be designed and constructed to include water 
storage tanks when the housing is not served by or scheduled to be 
served by piped utilities. These tanks shall be no less than 100 
gallons in capacity and be constructed to be accessed from outside the 
house.
    (e) Design approval. The IHA shall obtain the approval of project 
designs by all local or tribal regulatory agencies, by the BIA for on-
site streets, and the IHS, where appropriate, for community water and/
or sewer facilities. The IHA shall assure the design meets applicable 
building codes, that the project can be constructed within the amount 
of funds reserved for the development, and that the project is 
financially feasible including ongoing maintenance cost considerations.


Sec. 950.260  IHA development program.

    An IHA development program is required for all development methods, 
and must be approved by HUD.
    (a) IHA submission. (1) Submission of the development program shall 
be in accordance with the schedule established at the project 
coordination meeting. The IHA's failure to submit the complete 
development program in the form prescribed by HUD by the date 
established will be a factor in HUD's evaluation of an IHA's 
administrative capability in accordance with Sec. 950.135.
    (2) In order to achieve construction start within 30 months from 
the program reservation date (see Sec. 950.220(e)(3), the development 
program should be submitted to HUD not later than 18 months from the 
program reservation date.
    (b) HUD review. HUD will review the IHA development program upon 
receipt. HUD will advise the IHA of any deficiencies and will provide 
the IHA an opportunity to make corrections within 30 days of receipt of 
the notice of deficiencies. To be approvable, the development program 
must demonstrate legal sufficiency, the financial feasibility of the 
project, and its compliance with all program requirements. Upon 
conclusion of HUD's review, the development program will be either 
approved or disapproved. If the development program is approved, the 
ACC will be executed or amended, as necessary, and the IHA will be 
authorized to acquire the units or prepare final plans for 
construction. If the initial submission is disapproved, HUD will notify 
the IHA of the reasons and allow the IHA to amend and resubmit the 
development program.


Sec. 950.265  Construction and inspections.

    Following approval of the development program, the IHA shall 
commence final planning and begin construction within 12 months of the 
development program approval date. Unless there are circumstances 
beyond the IHA's control, as defined in Sec. 950.220(e)(3), failure to 
commence construction within 30 months from the time of program 
reservation constitutes cause for HUD termination of the ACC and 
recapture of the reserved funds.
    (a) Conventional projects. The IHA shall prepare the plans, 
advertise for bids, and award a construction contract. Within 10 days 
of the award of a construction contract, the IHA shall prepare and 
submit to HUD a certification that it has met all program requirements 
for site acquisition; the preparation of final plans and 
specifications; and the bidding, evaluation and award of the 
construction contract. Included in the submission to HUD, the IHA shall 
submit a copy of the set of construction plans and specifications, the 
bid advertisement, the construction contract, the notice to proceed and 
the contract award development cost budget.
    (b) Turnkey and modified turnkey projects. The IHA shall execute 
the contract of sale. Within 10 days of execution of the contract of 
sale, the IHA shall prepare and submit to HUD a certification that it 
has met all program requirements for site acquisition; the review and 
acceptance of the final plans and specifications; and the execution of 
the contract of sale. The IHA shall submit a copy of the set of 
construction plans and specifications and the Contract of Sale and the 
contract award development cost budget with the certification to HUD.
    (c) Force account. The IHA shall prepare the final construction 
plans and specifications; a detailed plan for constructing the project 
including the scope of work to be performed by the IHA staff or by 
subcontractors; and begin work. Within 10 days of the date construction 
activities begin, the IHA shall prepare and submit to HUD a 
certification that it has met all program requirements for site 
acquisition, the proper preparation of final plans and specifications 
and the preparation of its work plan. Included in the submission to 
HUD, the IHA shall provide a copy of the set of construction plans and 
specifications, the work plan developed to complete construction of the 
project, and the contract award development cost budget.
    (d) Inspections and monitoring. (1) IHA construction inspections. 
Whatever the development method used, the IHA shall be responsible for 
obtaining inspections throughout the construction period. The frequency 
of inspections and the procedures to be used shall assure completion of 
quality housing in accordance with the contract documents. Inspections 
shall be performed by an architect, engineer, or other qualified person 
selected by the IHA.
    (2) Coordination of inspections. The IHA shall coordinate 
inspections with tribal or local regulatory agencies and, where 
applicable, the BIA and/or IHS, to assure that all governing codes and 
other requirements are met.
    (3) HUD construction monitoring. HUD representatives or agents may 
visit construction sites to evaluate the IHA's contract administration. 
These visits should not be construed by the IHA as construction 
inspections.


Sec. 950.270  Construction completion and settlement.

    (a) Final inspection. The IHA shall assure that all work is 
satisfactorily completed, in accordance with the terms of the 
construction contract, prior to scheduling a final inspection. The 
final inspection shall be made jointly by the IHA and the contractor. 
Where appropriate, the IHA shall notify tribal or local regulatory 
agencies, the BIA, the IHS, and HUD before this inspection to provide 
them with the opportunity to participate in the final inspection of all 
or part of the work. In a MH project, homebuyers shall also be invited 
to participate in the inspection of their homes, but acceptance shall 
be by the IHA. Maximum consideration shall be given to all homebuyer 
concerns.
    (b) Contract settlement. (1) If the final inspection discloses no 
deficiencies other than punch list items or seasonal completion items, 
the IHA shall, as soon as practical, develop an interim Certificate of 
Completion to enable partial settlement of the contract. The interim 
Certificate will detail the items remaining and set forth a schedule 
for their completion, and will allow the IHA to accept the units (or 
stage) for occupancy. Upon completion of the interim Certificate and 
receipt of the contractors Certificate and Release, the IHA shall 
release the monies due the contractor less withholdings in accordance 
with the construction contract.
    (2) The contractor shall complete the punch list items in 
accordance with the time schedule contained in the interim Certificate 
of Completion. The IHA may pay the contractor for such items which are 
completed to the satisfaction of the IHA. If the IHA is satisfied that 
the applicable requirements of the construction contract and the 
interim Certificate have been met, the IHA shall prepare a final 
Certificate of Completion and release the amounts withheld to the 
contractor/developer.
    (c) Notification to HUD. (1) Within 10 days of acceptance of the 
project or any part thereof, the IHA shall notify HUD of such action. 
Upon acceptance of all units within a project, the IHA shall provide a 
notification to HUD of the date the project was fully available for 
occupancy by residents.
    (2) The IHA shall provide HUD notice of the end of the rent-up 
period within 10 days of such occurrence.
    (3) The IHA shall provide HUD with a copy of all interim and final 
certificates of completion within 10 days of their execution.


Sec. 950.275  Warranty inspections and enforcement.

    (a) The construction contract shall specify the warranty periods 
applicable to items completed as part of the contract. It shall also 
provide for assignment to the IHA of manufacturers' and suppliers' 
warranties covering equipment or supplies.
    (b) The IHA shall conduct an inspection of each dwelling unit at 
least once not later than six months after the start of the 
contractor's warranty period. A separate or final warranty inspection 
shall be made in time to exercise the IHA's rights before expiration of 
the contractor's warranties. Each inspection shall cover all items 
under warranty at the time of the inspection, including items covered 
by manufacturers' and suppliers' warranties. At each inspection, the 
IHA shall obtain a signed statement from the occupants as to any 
deficiencies in the structure, equipment, grounds, etc., so that it may 
enforce any rights under applicable warranties.


Sec. 950.280  Correcting deficiencies.

    (a) Responsibility. The IHA shall pursue correction of any 
deficiencies against the responsible party (e.g. architect, contractor 
or the MH homebuyer) as soon as possible after discovering the 
deficiencies. Where the costs of correcting deficiencies cannot be 
recovered from the responsible party and/or the deficiency requires 
immediate correction to protect life or safety or to avoid further 
damage to the project unit(s), the IHA may apply to HUD for amendment 
of the development budget to provide the funds required, or may request 
that operating receipts or other funds be authorized to be used to 
cover the costs. In any case, program funds shall not be used for this 
purpose without prior HUD approval. The IHA shall be responsible for 
correction of any deficiencies which could have been detected and/or 
corrected during the warranty period if the IHA had inspected at the 
appropriate time or had pursued correction of deficiencies against the 
responsible parties.
    (b) Amendments. (1) HUD may, but is not obligated to provide 
additional funding to the IHA to correct deficiencies. The ACC may be 
amended to provide amounts needed to correct deficiencies (and any 
damage resulting there from) in design, construction, and equipment 
only where there is substantial evidence that it is not possible to 
obtain timely correction or payment by the responsible parties, 
including the source of the performance bond.
    (2) In the case of a MH home, the additional cost for correcting 
deficiencies in design, construction or equipment (and any damage 
resulting therefrom) shall not result in an increase in the homebuyer's 
purchase price. If a homebuyer is not in compliance with the MHO 
Agreement, HUD shall require the IHA to reach agreement with the 
homebuyer to correct the noncompliance before approving the work.


Sec. 950.285  Fiscal closeout.

    The IHA shall submit the actual development cost certificate within 
24 months of the date of full availability (see Sec. 950.270(c)(1)), or 
such later date as may be approved by HUD, in a form prescribed by HUD, 
to the HUD office for review, audit verification and approval. The 
audit shall follow the requirements of 24 CFR part 44 (Single Audit Act 
of 1984). If the audited development cost indicates that excess funds 
have been approved, the IHA shall dispose of the excess as HUD directs. 
If the audited development cost certificate discloses unauthorized 
expenditures, the IHA shall take such corrective actions as HUD 
directs.

Subpart D--Operation


Sec. 950.301  Admission policies.

    (a) Admission policies. (1) The IHA shall adopt written policies 
for admission of participants. The policies shall cover all programs 
operated by the housing authority and, as applicable, will address the 
programs individually to meet their specific requirements (i.e., 
Rental, MH, or Turnkey III). A copy of the policies shall be posted 
prominently in the IHA's office for examination by prospective 
participants, and shall be submitted to the HUD Field Office promptly 
after adoption by the IHA. (See Sec. 950.416 with respect to Mutual 
Help admission policies.)
    (2) The policies shall include tenant and homebuyer selection 
criteria designed to:
    (i) Avoid concentrations of the most economically and socially 
deprived families in any one or all of the IHA's projects;
    (ii) Ensure that, to the maximum extent feasible, the projects of 
the IHA include families with a broad range of incomes which generally 
reflect the range of incomes of those low-income families in the Indian 
area who would be qualified for admission to the type of project;
    (iii) Preclude admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the 
participants or the project environment; and
    (iv) For not less than 70 percent of the units made available for 
occupancy in a given fiscal year, to give a preference in the selection 
of participants (in accordance with Sec. 950.305) who at the time they 
are seeking housing assistance, are involuntarily displaced, living in 
substandard housing, or paying more than 50 percent of family income 
for rent.
    (3) The IHA admission policies shall include the following:
    (i) Requirements for applications and waiting lists, including 
requirement for selection from the top of the list;
    (ii) Procedures governing participant transfer between units, 
projects, and programs;
    (iii) Other IHA priorities, if any, and a requirement that a 
participant is not eligible for voluntary transfer unless all 
obligations under the current program have been met, including payment 
of charges to the IHA and completion of maintenance requirements;
    (iv) Compliance with 24 CFR part 750, which requires applicants and 
participants to disclose and verify social security numbers at the time 
eligibility is determined and at later income reexaminations; and
    (v) Compliance with 24 CFR part 760, which requires applicants and 
participants to sign and submit consent forms for the obtaining of wage 
and claims information from State wage and information collection 
agencies.
    (b) Income limits. (1) A family must be a Low-income Family, as 
defined in Sec. 950.102, to be eligible for admission. (With respect to 
eligibility for the Mutual Help program, see special provisions of 
Sec. 950.416.)
    (2) In extremely unusual circumstances, the IHA may request that 
HUD increase or decrease income limits for low-income families or for 
very low-income families in the Indian area because of unusually high 
or low family incomes. Such a request can be granted only by joint 
approval of HUD's Assistant Secretary for Housing and Assistant 
Secretary for Public and Indian Housing, after consultation with the 
Secretary of Agriculture (if the income limits are being established 
for a ``rural area'' as defined in section 520 of the Housing Act of 
1949 (42 U.S.C. 1490)).
    (c) Standards for IHA tenant/homebuyer selection criteria. (1) The 
criteria to be established and information to be considered shall be 
reasonably related to individual attributes and behavior of an 
applicant, and shall not be related to those which may be imputed to a 
particular group or category of persons of which an applicant may be a 
member. The IHA's tenant/homebuyer selection criteria must be in 
accordance with HUD guidelines and submitted to the HUD Field Office. 
(With respect to the Mutual Help program, see special provisions of 
Sec. 950.416.)
    (2) In the event of any unfavorable information regarding an 
applicant, the IHA must take into consideration the time, nature, and 
extent of the past occurrence and reasonable probability of future 
favorable performance.
    (d) Admission of single persons--priority to elderly and displaced 
persons. An IHA shall extend preference to elderly families (including 
disabled persons and handicapped persons) and displaced persons over 
single persons.
    (e) Selection preference with respect to projects for elderly 
families. (1) In determining priority for admission to projects for 
elderly families, an IHA must give a preference to elderly families. 
When selecting applicants for admission from among elderly families, an 
IHA must follow its policies and procedures for applying the Federal 
preferences contained in Sec. 950.305.
    (2) An IHA may give a preference to near elderly families in 
determining priority for admission to projects for elderly families 
when the IHA determines that there are not enough eligible elderly 
families to fill all the units that are currently vacant or expected to 
become vacant in the next 12 months. In no event may an IHA admit a 
near elderly family if there are eligible elderly families on the IHA's 
waiting list that would be willing to accept an offer for a suitable 
vacant unit in that project.
    (3) Before electing the discretionary preference in paragraph 
(e)(2) of this section, an IHA must conduct outreach to attract 
eligible elderly families, including, where appropriate, elderly 
families residing in projects not designated as being for elderly 
families.
    (4) If an IHA elects the discretionary preference in paragraph 
(e)(2) of this section, the IHA must follow its policies and procedures 
for applying the Federal preferences contained in Sec. 950.305 when 
selecting applicants for admission from among near elderly families. 
Near elderly families that do not qualify for a Federal preference and 
that are given preference for admission under this section over other 
non-elderly families that qualify for such a Federal preference are not 
subject to the 30 percent limitation on admission of families without a 
Federal preference over families with such a Federal preference that 
may initially receive assistance in any one-year period, as set out in 
Sec. 950.305(b)(2)(ii). If a near elderly applicant is a single person, 
the near elderly single person may be given a preference for admission 
over other single persons to projects for the elderly.
    (f) Verification of information and notification to applicants.
    (1) Verification. Adequate procedures shall be developed to obtain 
and verify information with respect to each applicant. Information 
relative to the acceptance or rejection of an applicant shall be 
documented and placed in the applicant's file.
    (2) Notification to applicants. (i) If an applicant is determined 
to be ineligible for admission to a project, the IHA shall promptly 
notify the applicant of the basis for such determination and shall 
provide the applicant, upon request and within a reasonable time after 
the determination is made, with an opportunity for an informal hearing 
on such determination; and
    (ii) When a determination has been made that an applicant is 
eligible and satisfies all requirements for admission including the 
tenant selection criteria, the applicant shall be notified of the 
approximate date of occupancy insofar as that date can be reasonably 
determined.

(Approved by the Office of Management and Budget under control 
number 2577-0063.)


Sec. 950.305  Federal selection preferences.

    (a) General. (1) In selecting applicants for admission to its 
projects, each IHA must give preference to applicants who are otherwise 
eligible for assistance and who, at the time they are seeking housing 
assistance, are involuntarily displaced, living in substandard housing, 
or paying more than 50 percent of family income for rent.
    (2)(i) The IHA must inform all applicants of the availability of 
the Federal preferences, and must give all applicants an opportunity to 
show that they qualify for a preference. For purposes of this paragraph 
(a)(2)(i) of this section, applicants include families on any waiting 
list maintained by the IHA when this section is implemented or 
thereafter.
    (ii) If the IHA determines that the notification to all applicants 
on a waiting list required by paragraph (a)(2)(i) of this section is 
impracticable because of the length of the list, the IHA may provide 
this notification to fewer than all applicants on the list at any given 
time. The IHA must, however, have notified a sufficient number of 
applicants at any given time that, on the basis of the IHA's 
determination of the number of applicants on the waiting list who 
already claim a Federal preference, and the anticipated number of 
project admissions:
    (A) There is an adequate pool of applicants who are likely to 
qualify for a Federal preference; and
    (B) It is unlikely that, on the basis of the IHA's framework for 
applying the preferences under paragraph (b) of this section and the 
preferences claimed by those already on the waiting list, any applicant 
who has not been so notified would receive assistance before those who 
have received notification.
    (3) An IHA must apply the definitions of ``standard, permanent 
replacement housing''; ``involuntary displacement''; ``substandard 
housing'' and ``homeless family''; ``family income''; and ``rent'' set 
forth in paragraphs (c)(5), (d), (f), (h), and (i), respectively, of 
this section, unless the IHA submits alternative definitions for HUD's 
review and approval. An IHA may apply the verification procedures found 
in paragraphs (e), (g), and (j) of this section, or it may, in its own 
discretion and without HUD approval, adopt verification procedures of 
its own.
    (4) For purposes of this section, the term ``Federal preference'' 
means a tenant selection preference provided under this section. The 
term ``preference'' means a Federal preference, unless the context 
indicates otherwise.
    (b) Applying the Federal preferences. (1) Each IHA must include the 
Federal preferences in its tenant selection policies and procedures. 
The IHA must apply the Federal preferences in a manner that is 
consistent with the provisions of this section, and other applicable 
requirements.
    (2)(i) Except as provided in paragraph (b)(2)(ii) of this section, 
the IHA must establish a system for applying the Federal preferences 
that provides that an applicant who qualifies for any of the Federal 
preferences is to be admitted before any other applicant who is not so 
qualified without regard to the other applicant's qualification for one 
or more preferences or priorities that are not provided by Federal law, 
place on the waiting list, or the time of submission of an application 
for admission.
    (ii) The IHA's system for applying the Federal preferences may 
provide for circumstances in which applicants who do not qualify for a 
Federal preference are admitted before other applicants who are so 
qualified. Not more than 10 percent of the applicants who initially are 
admitted in any one-year period (or such shorter period selected by the 
IHA before the beginning of its first full year under this paragraph 
(b)(2)(ii)) of this section may be applicants referred to in the 
preceding sentence.
    (iii) In applying the preferences under paragraph (b)(2) of this 
section, the IHA may determine the relative weight to be accorded the 
Federal preferences, through means such as:
    (A) Applying non-Federal preferences or priorities (such as local 
residency preferences) as a way of ranking applicants who qualify (or 
claim qualification) for a Federal preference;
    (B) Aggregating the Federal preferences (i.e., two Federal 
preferences outweigh one and three outweigh two);
    (C) Ranking the Federal preferences (e.g., provide that an 
applicant living in substandard housing has greater need for housing 
than (and, therefore, would be considered for admission before) an 
applicant paying more than 50 percent of income for rent); or
    (D) Ranking the Federal preferences' definitional elements (e.g., 
provide that those living in housing that is dilapidated or has been 
declared unfit for habitation by an agency or unit of government have a 
greater need for housing than, and take precedence over, those whose 
housing is substandard only because it does not have a usable bathtub 
or shower inside the unit for the exclusive use of the family).
    (3) To the extent that title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d) and the Fair Housing Act (42 U.S.C. 3601-3619) apply to a 
Tribal government, any selection preferences or priorities used by an 
IHA within such a Tribe's jurisdiction must be established and 
administered in a manner that is consistent with HUD's affirmative fair 
housing objectives and that is not incompatible with title VI of the 
Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 
U.S.C. 3601-3620); Executive Order 11063 on Equal Opportunity in 
Housing, (3 CFR, 1959-63 Comp., p. 652), as amended by Executive Order 
12259 (3 CFR, 1980 Comp., p. 307); section 504 of the Rehabilitation 
Act of 1973 (29 U.S.C. 794); the Age Discrimination Act of 1975 (42 
U.S.C. 6101-07); and HUD's regulations and requirements issued under 
these authorities.
    (c) Qualifying for a Federal preference. (1) An applicant qualifies 
for a Federal preference if:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing, or within no more 
than six months from the date of certification under paragraph (c)(2) 
of this section or verification under paragraph (c)(3) of this section 
(as appropriate), the applicant will be involuntarily displaced;
    (ii) The applicant is living in substandard housing; or
    (iii) The applicant is paying more than 50 percent of family income 
for rent.
    (2) Applicants may claim qualification for a Federal preference 
when they apply for admission to a project (or thereafter until they 
are offered a unit in the project) by certifying to the IHA that they 
qualify for a preference under paragraph (c)(1) of this section by 
virtue of the applicant's current status. The applicant's current 
status must be determined without regard to whether there has been a 
change in the applicant's qualification for a preference between the 
certification under paragraph (c)(2) of this section and admission to a 
project, including a change from one Federal preference category to 
another.
    (3) Once an applicant's qualification for a Federal preference 
under paragraph (c)(1) of this section has been verified, an IHA need 
not require the applicant to verify such qualification again, unless, 
as determined by the IHA, such a long time has elapsed since 
verification as to make reverification desirable, or the IHA has 
reasonable grounds to believe that the applicant no longer qualifies 
for a Federal preference.
    (4) For purposes of this paragraph (c), ``standard, permanent 
replacement housing'' is housing:
    (i)(A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) Such housing does not include transient facilities, such as 
motels, hotels, or temporary shelters for victims of domestic violence 
or homeless families, and in the case of domestic violence referred to 
in paragraph (d)(2) of this section, does not include the housing unit 
in which the applicant and the applicant's spouse or other member of 
the household who engages in such violence live.
    (5) An applicant may not qualify for a Federal preference under 
paragraph (c)(1)(ii) of this section if the applicant is paying more 
than 50 percent of family income to rent a unit because the applicant's 
housing assistance under the United States Housing Act of 1937 (42 
U.S.C. 1437-1440) or section 101 of the Housing and Urban Development 
Act of 1965 (12 U.S.C. 1701s) with respect to that unit has been 
terminated as a result of the applicant's refusal to comply with 
applicable program policies and procedures with respect to the 
occupancy of underoccupied and overcrowded units.
    (d) Definition of involuntary displacement. (1) An applicant is or 
will be involuntarily displaced if the applicant has vacated or will 
have to vacate his or her housing unit as a result of one or more of 
the following actions:
    (i) A disaster, such as a fire or flood, that results in the 
uninhabitability of an applicant's unit;
    (ii) Activity carried on by an agency of the United States or by 
any State or local governmental body or agency in connection with code 
enforcement or a public improvement or development program; or
    (iii) Action by a housing owner that results in an applicant's 
having to vacate his or her unit, where:
    (A) The reason for the owner's action is beyond an applicant's 
ability to control or prevent;
    (B) The action occurs despite an applicant's having met all 
previously imposed conditions of occupancy; and
    (C) The action taken is other than a rent increase.
    (2) An applicant also is involuntarily displaced if:
    (i)(A) The applicant has vacated his or her housing unit as a 
result of actual or threatened physical violence directed against the 
applicant or one or more members of the applicant's family by a spouse 
or other member of the applicant's household; or
    (B) The applicant lives in a housing unit with such an individual 
who engages in such violence.
    (ii) For purposes of paragraph (d)(2) of this section, the actual 
or threatened violence must, as determined by the IHA in accordance 
with HUD's administrative instructions, have occurred recently or be of 
a continuing nature.
    (3) For purposes of paragraph (d)(1)(iii) of this section, reasons 
for an applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to non-rental or 
non-residential use; closure of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that he 
or she must vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit must be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market. Such reasons do not include 
the vacating of a unit by a tenant as a result of actions taken because 
of the tenant's refusal:
    (i) To comply with applicable program policies and procedures under 
this title with respect to the occupancy of underoccupied and 
overcrowded units, or
    (ii) To accept a transfer to another housing unit in accordance 
with a court decree or in accordance with such policies and procedures 
under a HUD-approved desegregation plan.
    (e) Verification procedures for applicants involuntarily displaced. 
Verification of an applicant's involuntary displacement is established 
by the certification, in a form prescribed by the Secretary:
    (1) Made by a unit or agency of government that an applicant has 
been or will be displaced as a result of a disaster, as defined in 
paragraph (d)(1)(i) of this section;
    (2) Made by a unit or agency of government that an applicant has 
been or will be displaced by government action, as defined in paragraph 
(d)(1)(ii) of this section;
    (3) Made by an owner or owner's agent that an applicant had to, or 
will have to, vacate a unit by a date certain because of an owner 
action referred to in paragraph (d)(1)(iii) of this section; or
    (4) Made by the local police department, social services agency, or 
court of competent jurisdiction, or a clergyman, physician, or public 
or private facility that provides shelter or counseling to the victims 
of domestic violence, that an applicant has been or is being displaced 
because of domestic violence, as described in paragraph (d)(2) of this 
section.
    (f) Definition of substandard housing. (1) A unit is substandard if 
it:
    (i) Is dilapidated;
    (ii) Does not have operable indoor plumbing;
    (iii) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (iv) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (v) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (vi) Does not have a safe or adequate source of heat;
    (vii) Should, but does not, have a kitchen; or
    (viii) Has been declared unfit for habitation by an agency or unit 
of government.
    (2) For purposes of paragraph (f)(1) of this section, a housing 
unit is dilapidated if it does not provide safe and adequate shelter, 
and in its present condition endangers the health, safety, or well-
being of a family, or it has one or more critical defects, or a 
combination of intermediate defects in sufficient number or extent to 
require considerable repair or rebuilding. The defects may involve 
original construction, or they may result from continued neglect or 
lack of repair or from serious damage to the structure.
    (3) For purposes of paragraph (f) of this section, an applicant who 
is a ``homeless family'' is living in substandard housing. For purposes 
of the preceding sentence, a ``homeless family'' includes any 
individual or family who:
    (i) Lacks a fixed, regular, and adequate nighttime residence; and
    (ii) Has a primary nighttime residence that is:
    (A) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing for the mentally ill);
    (B) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (C) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings. A ``homeless 
family'' does not include any individual imprisoned or otherwise 
detained pursuant to an Act of the Congress or a State law.
    (4) For purposes of paragraph (f)(1) of this section, single room 
occupancy (SRO) housing, as defined in 24 CFR 882.102, is not 
substandard solely because it does not contain sanitary or food 
preparation facilities (or both).
    (g) Verification procedures for applicants living in substandard 
housing. Verification that an applicant is living in substandard 
housing consists of certification, in a form prescribed by the 
Secretary, from a unit or agency of government or from an applicant's 
present landlord that the applicant's unit has one or more of the 
deficiencies listed in, or the unit's condition is as described in, 
paragraph (f)(1) or (f)(2) of this section. In the case of a ``homeless 
family'' (as described in paragraph (f)(3) of this section), 
verification consists of certification, in a form prescribed by the 
Secretary, of this status from a public or private facility that 
provides shelter for such individuals, or from the local police 
department or social services agency.
    (h) Definition of family income. For purposes of this section, 
family income is ``monthly income'', which is one-twelfth of ``annual 
income'' as defined in Sec. 950.102.
    (i) Definition of rent. (1) For purposes of this section, rent is 
defined as:
    (i) The actual amount due, calculated on a monthly basis, under a 
lease or occupancy agreement between a family and the family's current 
landlord; and
    (ii) In the case of utilities purchased directly by tenants from 
utility providers;
    (A) The IHA's reasonable estimate of tenant-purchased utilities 
(except telephone) and the other housing services that are normally 
included in rent; or
    (B) If the family chooses, the average monthly payments that it 
actually made for these utilities and services for the most recent 12-
month period or, if information is not obtainable for the entire 
period, for an appropriate recent period.
    (2) For purposes of calculating rent under paragraph (i) of this 
section, amounts paid to or on behalf of a family under any energy 
assistance program must be subtracted from the otherwise applicable 
rental amount to the extent that they are not included in the family's 
income.
    (3) In the case of an applicant who owns a manufactured home, but 
who rents the space upon which it is located, rent under paragraph (i) 
of this section includes the monthly payment to amortize the purchase 
price of the home, as calculated in accordance with HUD's requirements.
    (4) In the case of members of a cooperative, rent under paragraph 
(i) of this section means the charges under the occupancy agreement 
between the members and the cooperative.
    (j) Verification of an applicant's income, rent, and utilities 
payments. The IHA must verify that an applicant is paying more than 50 
percent of family income for rent, as follows:
    (1) The IHA must verify the family's income in accordance with the 
standards and procedures that it uses to verify income for the purpose 
of determining applicant eligibility and total tenant payment.
    (2)(i) An IHA must verify the amount due to the family's landlord 
(or cooperative) under the lease or occupancy agreement:
    (A) By requiring the family to furnish copies of its most recent 
rental (or cooperative charges) receipts (which may include cancelled 
checks or money order receipts) or a copy of the family's current lease 
or occupancy agreement; or
    (B) By contacting the landlord (or cooperative) or its agent 
directly.
    (ii) An IHA must verify the amount paid to amortize the purchase 
price of a manufactured home:
    (A) By requiring the family to furnish copies of its most recent 
payment receipts (which may include cancelled checks or money order 
receipts) or a copy of the family's current purchase agreement; or
    (B) By contacting the lienholder directly.
    (3) To verify the actual amount that a family paid for utilities 
and other housing services, the IHA must require the family to provide 
copies of the appropriate bills or receipts, or must obtain the 
information directly from the utility or service supplier.
    (k) Notice and opportunity for a meeting where Federal preference 
is denied. If the IHA determines that an applicant does not meet the 
criteria for receiving a Federal preference, the IHA must promptly 
provide the applicant with written notice of the determination. The 
notice must contain a brief statement of the reasons for the 
determination, and state that the applicant has the right to meet with 
the IHA's designee to review it. If requested, the meeting must be 
conducted by a person or persons designated by the IHA. Those 
designated may be an officer or employee of the IHA, including the 
person who made or reviewed the determination, or his or her 
subordinate. The procedures specified in this paragraph must be carried 
out in accordance with HUD's requirements. The applicant may exercise 
other rights if the applicant believes that he or she has been 
discriminated against on the basis of race, color, religion, sex, 
national origin, age, or handicap.
    (l) Closure of waiting list. Notwithstanding the fact that the IHA 
may not be accepting additional applications because of the length of 
the waiting list, the IHA may not refuse to place an applicant on the 
waiting list if the applicant is otherwise eligible for admission and 
claims that he or she qualifies for a Federal preference under this 
section, unless the IHA determines, on the basis of the number of 
applicants who are already on the waiting list and who claim a Federal 
preference, and the anticipated number of project admissions, that:
    (1) There is an inadequate pool of applicants who are likely to 
qualify for a Federal preference; and
    (2) It is unlikely that, on the basis of the IHA's system for 
applying the Federal preferences, the preference or preferences that 
the applicant claims, and the preferences claimed by applicants on the 
waiting list, the applicant would qualify for admission before other 
applicants on the waiting list.


Sec. 950.310  [Reserved]


Sec. 950.315  Initial determination, verification, and reexamination of 
family income and composition.

    (a) Income, family composition, and eligibility. The IHA is 
responsible for determination of annual income and adjusted income, for 
determination of eligibility for admission and total tenant payment or 
homebuyer required monthly payment; and for reexamination of family 
income and composition at least annually for all tenants and 
homebuyers. The ``effective date'' of an examination or reexamination 
refers to:
    (1) In the case of an examination for admission, the effective date 
of initial occupancy; and
    (2) In the case of a reexamination of an existing tenant or 
homebuyer, the effective date of any change in tenant payment or 
required monthly payment resulting from the reexamination.
    (3) If there is no change, the effective date is the date a change 
would have taken place if the reexamination had resulted in a change in 
payment.
    (b) Verification. As a condition of admission to, or continued 
occupancy of, any assisted unit, the IHA shall require the family head 
and other such family members as it designates to execute a HUD-
approved release and consent form (including any release and consent as 
required under 24 CFR part 760) authorizing any depository or private 
source of income, or any Federal, State, or local agency, to furnish or 
release to the IHA and to HUD such information as the IHA or HUD 
determines to be necessary. The IHA also shall require the family to 
submit directly the documentation determined to be necessary, including 
any information required under 24 CFR part 750. Information or 
documentation shall be determined to be necessary if it is required for 
purposes of determining or auditing a family's eligibility to receive 
housing assistance, for determining the family's adjusted income or 
tenant rent or required monthly payment, for verifying related 
information, or for monitoring compliance with equal opportunity 
requirements. The use or disclosure of information obtained from a 
family or from another source pursuant to this release and consent 
shall be limited to purposes directly connected with administration of 
this part or an application for assistance.
    (c) Rent and homebuyer payment adjustments. After consultation with 
the family and upon verification of the information, the IHA shall make 
appropriate adjustments in the rent or homebuyer payment amount. The 
tenant or homebuyer shall comply with the IHA's policy regarding 
required interim reporting of changes in the family's income.


Sec. 950.320  Determination of rents and homebuyer payments.

    (a) Rental and Turnkey III projects. The amount of rent required of 
a tenant in a rental project or the Turnkey III homebuyer payment 
amount for a homebuyer in a Turnkey III project for Turnkey III 
contracts executed after August 1, 1982, shall be equal to the total 
tenant payment as determined in accordance with Sec. 950.325. For 
Turnkey III contracts executed on or before August 1, 1982, the Turnkey 
III homebuyer payment is determined in accordance with the contract. If 
the utility allowance exceeds the rent or required monthly payment, the 
IHA will pay the utility reimbursement as provided in Sec. 950.325(b). 
In the case of a Turnkey III homebuyer, payment of a utility 
reimbursement may affect the IHA's evaluation of the Turnkey III 
homebuyer's homeownership potential. (See Secs. 950.503(c)(3) and 
950.529 regarding loss of homeownership potential and Sec. 950.523 
regarding funds to cover such reimbursements.)
    (b) MH projects. The amount of the required monthly payment for a 
homebuyer in an MH project is determined in accordance with subpart E 
of this part.


Sec. 950.325  Total tenant payment--Rental and Turnkey III programs.

    (a) Total tenant payment. Total tenant payment shall be the highest 
of the following, rounded to the nearest dollar:
    (i) 30 percent of monthly adjusted income;
    (ii) 10 percent of monthly income; or
    (iii) If the family receives welfare assistance from a public 
agency and a part of such payments, adjusted in accordance with the 
family's actual housing costs, is specifically designated by such 
agency to meet the family's housing costs, the monthly portion of such 
payments which is so designated.
    (2) If the family's welfare assistance is ratably reduced from the 
standard of need by applying a percentage, the amount calculated under 
paragraph (a)(3) of this section shall be the amount resulting from one 
application of the percentage.
    (b) Utility reimbursement. If the utility allowance exceeds the 
total tenant payment, the difference (the utility reimbursement) shall 
be due to the family. If the utility company consents, an IHA may, at 
its discretion, pay the utility reimbursement directly to the utility 
company.


Sec. 950.335  Rent and homebuyer payment collection policy.

    Each IHA shall establish and adopt, and use its best efforts to 
obtain compliance with, written policies sufficient to assure the 
prompt payment and collection of rent and homebuyer payments. A copy of 
the written policies shall be posted prominently in the IHA office, and 
shall be provided upon request. Such policies must be in accordance 
with HUD guidelines and will be reviewed by HUD. Unless HUD has issued 
a corrective action order in accordance with Sec. 950.135, HUD approval 
of the policy is not required.


Sec. 950.340  Grievance procedures and leases.

    (a) Grievance procedures. (1) General. Each IHA shall adopt 
grievance procedures that are appropriate to local circumstances. These 
procedures shall comply with the Indian Civil Rights Act, if 
applicable, and section 6(k) of the Act, as applicable, and shall 
assure that tenants and homebuyers will:
    (i) Be advised of the specific grounds of any proposed adverse 
action by the IHA;
    (ii) Have an opportunity for a hearing before an impartial party 
upon timely request;
    (iii) Have a reasonable opportunity to examine any documents, 
records or regulations related to the proposed action before the 
hearing (or trial in court);
    (iv) Be entitled to be represented by another person of their 
choice at any hearing;
    (v) Be entitled to ask questions of witnesses and have others make 
statements on their behalf; and
    (vi) Be entitled to receive a written decision by the IHA on the 
proposed action.
    (2) Expedited grievance procedure. An IHA may establish an 
expedited grievance procedure for any grievance concerning a 
termination of tenancy or eviction that involves:
    (i) Any criminal activity that threatens the health, safety or 
right to peaceful enjoyment of the Indian housing development by other 
residents or employees of the IHA or,
    (ii) Any drug-related criminal activity on or near the premises.
    (3) Exclusion of certain grievances. (i) General. An IHA may pursue 
termination of tenancy or eviction without offering a grievance 
procedure where the termination or eviction is based on one of the 
grounds stated in paragraph (a)(2) of this section if applicable. 
Tribal or State law requires that, before eviction, a tenant (including 
a homebuyer under a homeownership agreement) be given a hearing in 
court, if HUD has determined that the Tribal or State procedures 
provide the basic elements of due process.
    (ii) Basic elements of due process. The elements of due process 
against which the jurisdiction's procedures are measured by HUD are the 
following:
    (A) Adequate notice to the tenant of the grounds for terminating 
the tenancy and for eviction;
    (B) Right of the tenant to be represented by counsel;
    (C) Opportunity for the tenant to refute the evidence presented by 
the IHA, including the right to confront and cross-examine witnesses 
and to present any affirmative legal or equitable defense that the 
tenant might have; and
    (D) A decision on the merits.
    (4) Notice to post office of certain evictions. When an IHA evicts 
an individual or family from a dwelling unit for engaging in criminal 
activity, including drug-related criminal activity, the IHA shall 
notify the local post office serving that dwelling unit that the 
evicted individual or family is no longer residing in the dwelling unit 
(so that the post office will terminate delivery of mail for such 
persons at the unit, and that such persons will not return to the unit 
to pick up mail).
    (5) Notice of procedures. A copy of the grievance procedures shall 
be posted prominently in the IHA office, and shall be provided to any 
tenant, homebuyer, or applicant upon request.
    (b) Leases. Each IHA shall use leases that:
    (1) Do not contain unreasonable terms and conditions;
    (2) Obligate the IHA to maintain the project in a decent, safe, and 
sanitary condition;
    (3) Require the IHA to give adequate written notice of termination 
of the lease which shall not be less than--
    (i) A reasonable time, but not to exceed 30 days, when the health 
or safety of other tenants or IHA employees is threatened;
    (ii) Fourteen days in the case of nonpayment of rent; and
    (iii) Thirty days in any other case;
    (4) Require that the IHA may not terminate the tenancy except for 
serious or repeated violation of the terms or conditions of the lease 
or for other good cause;
    (5) Provide that any criminal activity that threatens the health, 
safety or right to peaceful enjoyment of the premises by other tenants 
or any drug-related criminal activity, on or near the premises, engaged 
in by an Indian housing tenant, any member of the tenant's household, 
or any guest or other person under the tenant's control, shall be cause 
for termination of tenancy. For purposes of this section, the term 
``drug-related criminal activity'' means the illegal manufacture, sale, 
distribution, use, or possession with intent to manufacture, sell, 
distribute, or use, of a controlled substance (as defined in section 
102 of the Controlled Substances Act (21 U.S.C. 802)); and
    (6) Specify that respect to any notice of termination of tenancy or 
eviction, notwithstanding any applicable Tribal or State law, an Indian 
housing tenant shall be informed of the opportunity, before any hearing 
or trial, to examine any relevant documents, records or regulations 
directly related to the termination or eviction.

(Approved by the Office of Management and Budget under control 
number 2577-0171)


Sec. 950.345  Maintenance and improvements.

    (a) General. Each IHA shall adopt, and use its best efforts to 
obtain compliance with, written policies to assure full performance of 
the respective maintenance responsibilities of the IHA and tenants. A 
copy of such policies shall be posted prominently in the IHA office, 
and shall be provided to an applicant or tenant upon entry into the 
program and upon request.
    (b) Provisions for rental projects. For rental projects, the 
maintenance policies shall contain provisions on at least the following 
subjects:
    (1) The responsibilities of tenants for normal care and maintenance 
of their dwelling units, and of the common property, if any;
    (2) Procedures for handling maintenance service requests from 
tenants;
    (3) Procedures for IHA inspections of dwelling units and common 
property;
    (4) Special arrangements, if any, for obtaining maintenance 
services from outside workers or contractors; and
    (5) Procedures for charging tenants for damages for which they are 
responsible.

(Approved by the Office of Management and Budget under control 
number 2577-0114)


Sec. 950.346  Fire safety.

    (a) Applicability. This section applies to all IHA-owned or leased 
housing, including Mutual Help and Turnkey III.
    (b) Smoke detectors. (1) After October 30, 1992, each unit must be 
equipped with at least one battery-operated or hard-wired smoke 
detector, or such greater number as may be required by applicable 
State, local or Tribal codes, in working condition, on each level of 
the unit. In units occupied by hearing-impaired residents, smoke 
detectors must be hard-wired.
    (2) After October 30, 1992, the public areas of all housing covered 
by this section must be equipped with a sufficient number, but not less 
than one for each area, of battery-operated or hard-wired smoke 
detectors to serve as adequate warning of fire. Public areas include, 
but are not limited to, laundry rooms, community rooms, day care 
centers, hallways, stairwells, and other common areas.
    (3) The smoke detector for each individual unit must be located, to 
the extent practicable, in a hallway adjacent to the bedroom or 
bedrooms. In units occupied by hearing-impaired residents, hard-wired 
smoke detectors must be connected to an alarm system designed for 
hearing-impaired persons and installed in the bedroom or bedrooms 
occupied by the hearing-impaired residents. Individual units that are 
jointly occupied by both hearing and hearing-impaired residents must be 
equipped with both audible and visual types of alarm devices.
    (4) If needed, battery-operated smoke detectors, except in units 
occupied by hearing-impaired residents, may be installed as a temporary 
measure where no detectors are present in a unit. Temporary battery-
operated smoke detectors must be replaced with hard-wired electric 
smoke detectors in the normal course of an IHA's planned CIAP or CGP 
program to meet the HUD Modernization Standards of applicable State, 
local or Tribal codes, whichever standard is stricter. Smoke detectors 
for units occupied by hearing-impaired residents must be installed in 
accordance with the acceptability criteria in paragraph (b)(3) of this 
section.
    (5) IHAs shall use operating funds to provide battery-operated 
smoke detectors in units that do not have any smoke detectors in place. 
If operating funds or reserves are insufficient to accomplish this, 
IHAs may apply for emergency CIAP funding. IHAs may apply for CIAP or 
CGP funds to replace battery-operated smoke detectors with hard-wired 
smoke detectors in the normal course of a planned modernization 
program.


Sec. 950.360  IHA employment practices.

    (a) Indian preference. Each IHA shall adopt written policies with 
respect to the IHA's own employment practices, which shall be in 
compliance with its obligations under section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450e(b)), and 
E.O. 11246 (3 CFR, 1964-65 Comp., p. 339) as amended by Executive Order 
11375 (3 CFR, 1966-70 Comp., p. 684), where applicable. A copy of these 
policies shall be posted in the IHA office, and a copy shall be 
submitted to HUD promptly after adoption by the IHA. (Title VII of the 
Civil Rights Act of 1964 (42 U.S.C. 2000e), as amended, which prohibits 
discrimination in employment by making it unlawful for employers to 
engage in certain discriminatory practices, excludes Indian Tribes from 
the nondiscrimination requirements of Title VII. See also 
Sec. 950.165(b)(2)(ii).)
    (b) Wage rates. See Sec. 950.120 (c) and (d) with respect to the 
wage rates applicable to IHA employees.

(Approved by the Office of Management and Budget under control 
number 2577-0130)

Subpart E--Mutual Help Homeownership Opportunity Program


Sec. 950.401  Scope and applicability.

    (a) Scope. This subpart sets forth the requirements that are 
applicable to the MH Homeownership Opportunity Program. For any matter 
not covered in this subpart, see the provisions of the other subparts 
contained in this part. Projects developed under the Self-Help 
development method must comply with the requirements of subparts E and 
F of this part.
    (b) Applicability. The provisions of this subpart are applicable to 
all MH projects placed under ACC on or after March 9, 1976, and to any 
projects converted in accordance with Secs. 950.455 or 950.503.


Sec. 950.413  Special provisions for development of an MH project.

    (a) MH construction contracts. (1) Special provisions to be 
included in advertisements. The advertisement for a construction 
contract other than one used in Self-Help shall state that:
    (i) The project is an MH project;
    (ii) The contractor may obtain a copy of the proposed MH 
construction contract; and
    (iii) The contractor may obtain a list of the sites.
    (2) Responsibility of contractor. The construction contract shall 
provide that the contractor is responsible for acceptable completion of 
all the homes.
    (b) Consultation with homebuyers. The IHA shall provide for 
soliciting comments from homebuyers and other interested parties, as 
provided in Sec. 950.225(c), concerning the planning and design of the 
homes. Any changes resulting from such consultation shall be consistent 
with project standards and cost limitations.
    (c) Financial feasibility. The application shall be supported by 
signed applications maintained in the IHA's office of a sufficient 
number of selected homebuyers who are able and willing to pay the 
projected administration charge, meet the other obligations under MHO 
Agreements (see Sec. 950.416(b)), and enter into MHO Agreements. HUD 
may request submission of the applications, as necessary.
    (d) Rights under MHO agreement if project fails to proceed. Any MHO 
Agreement shall be subject to revocation by the IHA if the IHA or HUD 
decides not to proceed with the development of the project in whole or 
in part. In such event, any contribution made by the homebuyer or Tribe 
shall be returned. If the contribution was a land contribution, it will 
be returned to the contributor.
    (e) Mutual Help contribution. See Sec. 950.419.
    (f) Insurance. Upon occupancy, the homebuyer is responsible for 
payment of insurance coverage as part of its administration charge (see 
Sec. 950.427(b)).


Sec. 950.416  Selection of MH homebuyers.

    (a) Admission policies. (1) Low-income families. An IHA's written 
admission policies for the MH program, adopted in accordance with 
Sec. 950.301, must limit admission to low-income families.
    (i) An IHA may provide for admission of applicants whose family 
income exceeds the levels established for low-income families to the MH 
program operated on an Indian reservation or in an Indian area, if the 
IHA demonstrates to HUD's satisfaction that there is a need for housing 
for such families that cannot reasonably be met except under this 
program.
    (ii) An IHA may provide for admission of a non-Indian applicant to 
the MH program operated on an Indian reservation or in an Indian area, 
if the IHA determines that the presence of the family on the Indian 
reservation or other Indian area is essential to the well-being of 
Indian families and the need for housing for the family cannot 
reasonably be met except under this program. If the IHA permits 
admission of non-Indians to its MH program, the IHA must specify the 
criteria it uses to determine whether a family's presence is essential 
in its admission policies.
    (2) Limitation on number of units for non-low income families. The 
number of dwelling units in any project assisted under the MH program 
that may be occupied by or reserved for families on Indian reservations 
and other Indian areas whose incomes exceed the levels established for 
low-income families (i.e., applicants admitted under paragraph 
(a)(1)(i) of this section) may not exceed whichever of the following is 
higher:
    (i) Ten percent of the dwelling units in the project; or
    (ii) Five dwelling units.
    (3) Different standards for MH program. The IHA's admission 
policies for MH projects should be different from those for its rental 
or Turnkey III projects. The policies for the MH program should provide 
standards for determining a homebuyer's:
    (i) Ability to provide maintenance for the unit;
    (ii) Potential for maintaining at least the current income level;
    (iii) Successor to a unit at the time of an ``event'' (``event'' 
should also be defined by the IHA in its policy); and
    (iv) Initial purchase price and the purchase price for a subsequent 
homebuyer.
    (b) Ability to meet homebuyer obligations. A family shall not be 
selected for MH housing unless, in addition to meeting the income 
limits and other requirements for admission (see Sec. 950.301), the 
family is able and willing to meet all obligations of an MHO Agreement, 
including the obligations to perform or provide the required 
maintenance, to provide the required MH Contribution and its own 
utilities, and to pay the administration charge.
    (c) MH waiting list. (1) Families who wish to be considered for 
selection for MH housing shall apply specifically for such housing. A 
family on any other IHA waiting list, or a tenant in a rental project 
of the IHA, must also submit an application for selection in order to 
be considered for an MH project; and
    (2) The IHA shall maintain a waiting list, separate from any other 
IHA waiting list, of families that have applied for MH housing and that 
have been determined to meet the admission requirements. The IHA shall 
maintain an MH waiting list in accordance with requirements prescribed 
by HUD and shall make selections in the order in which they appear on 
the list.
    (d) Making the selections. Within 30 days after HUD approval of the 
application for a project, the IHA must proceed with preliminary 
selection of as many Homebuyers as there are homes in the project. 
Preliminary selection of homebuyers must be made from the MH waiting 
list in accordance with the date of application, qualification for a 
Federal preference in accordance with Sec. 950.305, other pertinent 
factors under the IHA's admissions policies established in accordance 
with Sec. 950.301, and all admissions are subject to 24 CFR part 750. 
Final selection of a homebuyer will be made only after the site for 
that homebuyer has received final site approval, and the form of MH 
contribution to be made by that homebuyer (or donated for that 
homebuyer) has been determined.
    (e) Principal residence. A condition for selection as a homebuyer 
is that the family agrees to use the home as their principal residence 
during the term of the MHO Agreement. Ownership or use of a decent, 
safe and sanitary residence other than the MH home at the time of 
occupancy or acquisition during occupancy would disqualify a family 
from the MH program. However, there are two situations that are deemed 
not to violate the principal residence requirement. First, ownership or 
use of a secondary home that is necessary for the family's livelihood 
or for cultural preservation, as described in the IHA's admission and 
occupancy policy, is acceptable. Second, a family's temporary absence 
from its MH home, and related subleasing of it is acceptable if it is 
done for reasons and time periods prescribed in the IHA's admission and 
occupancy policy.
    (f) Notification of applicants. The IHA shall give families prompt 
written notice of whether or not they have been selected. If a family 
is not selected, the notice must state the basis for the determination 
and that the family is entitled to an informal hearing by the IHA on 
the determination, if a request for a hearing is made within a 
reasonable time (as specified in the notice). Such a hearing should be 
held within a reasonable time. (Informal review provisions applicable 
to denial of an application for a Federal preference under Sec. 950.305 
are contained in paragraph (k) of that section.)
    (g) Change in income. (1) If a family's income changes after 
selection but before execution of the MHO agreement in such a way as to 
make it ineligible (either too high or too low), the IHA may reject the 
family for this program. However, even a family with an income above 
the low-income limits may be admitted to this program, provided that 
the number of such families admitted does not exceed the limit stated 
in paragraph (a)(2) of this section.
    (2) If a family's income changes after the MHO agreement is 
executed but before the unit is occupied so that it no longer qualifies 
for the program, the IHA may reject the family for this program. If it 
becomes evident that a family's income is inadequate to meet its 
obligations, the IHA may counsel the family about other housing 
options, such as its rental program. Inability of the family to meet 
its obligations under the homebuyer agreement is grounds for 
termination of the agreement.

(Approved by the Office of Management and Budget under control 
number 2577-0003)


Sec. 950.419  MH contribution.

    (a) Amount and form of contribution. As a condition of occupancy, 
the MH homebuyer will be required to provide an MH contribution. 
Contributions other than labor may be made by an Indian Tribe on behalf 
of a family.
    (1) The value of the contribution must be $1500.
    (2) The MH contribution may consist of land, labor, cash, 
materials, equipment, or any combination thereof. Land contributed to 
satisfy this requirement must be owned in fee simple by the homebuyer 
or must be assigned or allotted to the homebuyer for his or her use 
before application for an MH unit. Contributions of land donated by 
another person on behalf of the homebuyer will satisfy the requirement 
for an MH contribution. A homebuyer may provide cash to satisfy the MH 
contribution requirement where the cash is used for the purchase of 
land, labor, or materials or equipment for the homebuyer's home.
    (3) The amount of credit for an MH contribution in the case of 
land, labor, or materials or equipment shall be based upon the market 
value at the time of the contribution, but in no case will the credit 
exceed $1500. In the case of labor, materials or equipment, market 
value shall be determined by the contractor and the IHA. In the case of 
land, market value shall be determined by the IHA, but in no case will 
the credit exceed $1,500 per homesite. The use of labor, materials or 
equipment as MH contributions must be reflected by a reduction in the 
Total Contract Price stated in the Construction Contract.
    (b) Execution of agreements. For projects other than Self-Help 
development projects, MHO Agreements must be signed for all units 
before execution of the construction contract for the project, unless 
the IHA obtains approval by the HUD Field Office of an exception. Land 
leases for trust land must be signed and approved by BIA before 
construction start. The MHO Agreement must include the homebuyer's 
agreement to satisfy the MH contribution requirement before occupancy 
of the unit.
    (c) Total contribution to be furnished before occupancy. The 
homebuyer cannot occupy the unit until the entire MH contribution is 
provided to the IHA. If the homebuyer is unable or unwilling to provide 
the MH contribution before occupancy of the project, the MHO Agreement 
for the homebuyer shall be terminated, any MH contribution paid by the 
homebuyer shall be refunded in accordance with Sec. 950.446, and the 
IHA shall select a substitute homebuyer from its waiting list.
    (d) MH contribution in event of substitution of homebuyer. If an 
MHO Agreement is terminated and a substitute homebuyer is selected, the 
amount of MH contribution to be provided by the substitute homebuyer 
shall be in accordance with paragraph (a) of this section. The 
substitute homebuyer may not occupy the unit until the complete MH 
contribution has been made.
    (e) Disposition of contribution. If an MHO Agreement is terminated 
by the IHA or the homebuyer before the date of occupancy, the homebuyer 
may receive reimbursement of the value of the MH contribution made plus 
other amounts contributed by the homebuyer, in accordance with 
Sec. 950.446.


Sec. 950.422  Commencement of occupancy.

    (a) Notice. (1) Upon acceptance by the IHA from the contractor of 
the home as ready for occupancy, the IHA shall determine whether the 
homebuyer has met all requirements for occupancy, including 
satisfaction in full of the MH contribution, and fulfillment of 
mandatory homebuyer counseling requirements. (See Sec. 950.453.) The 
IHA shall notify the homebuyer in writing that the home is available 
for occupancy as of a date specified in the notice, which is called the 
date of occupancy.
    (2) If the IHA determines that the homebuyer has not fully provided 
the MH contribution or met any of the other conditions for occupancy by 
the date of occupancy, the homebuyer shall be sent a notice in writing. 
This notice must specify the date by which all requirements must be 
satisfied and shall advise the homebuyer that the MHO Agreement will be 
terminated and a substitute homebuyer selected for the unit if the 
requirements are not satisfied. (See Secs. 950.446 and 950.419(d).)
    (b) Credits to MH accounts and reserves. Promptly after the date of 
occupancy, the IHA shall credit the amount of the MH contribution to 
the homebuyer's accounts and reserves in accordance with Sec. 950.437 
and shall give the homebuyer a statement of the amounts so credited.


Sec. 950.425  Inspections, responsibility for items covered by 
warranty.

    (a) Inspection before move-in and identification of warranties.
    (1) To establish a record of the condition of the home on the date 
of occupancy, the homebuyer (including a subsequent homebuyer) and the 
IHA shall make an inspection of the home as close as possible to, but 
not later than, the date the homebuyer takes occupancy. This inspection 
may be the final inspection required by Sec. 950.270 or may be a 
separate inspection with the homebuyer and IHA. After the inspection, 
the IHA representative shall give the homebuyer a signed statement of 
the condition of the home and equipment and a full written description 
of all homebuyer responsibilities. The homebuyer shall sign a copy of 
the statement, acknowledging concurrence or stating objections; and any 
differences shall be resolved by the IHA and a copy of the signed 
inspection report shall be kept at the IHA. This written statement of 
the condition of the home shall not limit the homebuyer's right to 
claim latent defects in construction that may be covered by warranties 
referenced in paragraph (a)(2) of this section.
    (2) Within 30 days of commencement of occupancy of each home, the 
IHA shall furnish the homebuyer with a list of applicable contractors', 
manufacturers' and suppliers' warranties, indicating the items covered 
and the periods of the warranties, and stating the homebuyer's 
responsibility for notifying the IHA of any deficiencies that would be 
covered under the warranties.
    (b) Inspections during contractors' warranty periods, 
responsibility for items covered by contractors', manufacturers' or 
suppliers' warranties. In addition to the inspection required under 
paragraph (a) of this section, the IHA will inspect the home regularly 
in accordance with paragraph (c) of this section. However, it is the 
responsibility of the homebuyer during the period of the applicable 
warranties, to promptly inform the IHA in writing of any deficiencies 
arising during the warranty period (including manufacturers' and 
suppliers' warranties) so that the IHA may enforce any rights under the 
applicable warranties. If a homebuyer fails to furnish such a written 
report in time, and the IHA is subsequently unable to obtain redress 
under the warranty, correction of the deficiency shall be the 
responsibility of the homebuyer.
    (c) Inspection upon termination of agreement. If the MHO Agreement 
is terminated for any reason after commencement of occupancy, the IHA 
shall inspect the home after notifying the homebuyer of the time for 
inspection and shall give the homebuyer a written statement of the cost 
of any maintenance work required to put the home in satisfactory 
condition for the next occupant (see Sec. 950.446).
    (d) Homebuyer permission for inspections; participation in 
inspections. The homebuyer shall permit the IHA to inspect the home at 
reasonable hours and intervals during the period of the MHO Agreement 
in accordance with rules established by the IHA. The homebuyer shall be 
notified of the opportunity to participate in the inspection made in 
accordance with this section.


Sec. 950.426  Homebuyer payments--pre-1976 projects.

    The amount of the required monthly payment for a homebuyer in an MH 
project placed under ACC before March 9, 1976 is determined in 
accordance with the MH Agreement and provisions of Secs. 950.315 and 
950.102 concerning income. Utility reimbursements are not applicable to 
the Mutual Help program.


Sec. 950.427  Homebuyer payments--post-1976 projects.

    (a) Applicability. The amount of the required monthly payment for a 
homebuyer in an MH project placed under ACC on or after March 9, 1976, 
and a homebuyer admitted to occupancy in an existing project on or 
after the conversion of the project in accordance with Sec. 950.455 is 
determined in accordance with this section.
    (b) Establishment of payment. (1) Each homebuyer shall be required 
to make a monthly payment (``required monthly payment'') as determined 
by the IHA. The minimum required monthly payment must equal the 
administration charge.
    (2) Subject to the requirement for payment of at least the 
administration charge, each homebuyer shall pay an amount of required 
monthly payment computed by:
    (i) Multiplying adjusted income (determined in accordance with 
Sec. 950.315) by a specified percentage; and
    (ii) Subtracting from that amount the utility allowance determined 
for the unit. The specific percentage shall be no less than 15 percent 
and no more than 30 percent, as determined by the IHA.
    (3) The IHA shall provide that the required monthly payment may not 
be more than a maximum amount. The maximum shall not be less than the 
sum of:
    (i) The administration charge; and
    (ii) The monthly debt service amount shown on the homebuyer's 
purchase price schedule.
    (4) If the ``required monthly payment'' exceeds the administration 
charge, the amount of the excess shall be credited to the homebuyer's 
monthly equity payments account (see Sec. 950.437(b)).
    (c) Administration charge. The administration charge should reflect 
differences in expenses attributable to different sizes or types of 
units. It is the amount budgeted by the IHA for monthly operating 
expenses covering the following categories (and any other operating 
expense categories included in the IHA's HUD-approved operating budget 
for a fiscal year or other period, excluding any operating cost for 
which operating subsidy is provided):
    (1) Administrative salaries, payroll taxes, etc.; travel, postage, 
telephone and telegraph, office supplies; office space, maintenance and 
utilities for office space; general liability insurance or risk 
protection costs; accounting services; legal expenses; and operating 
reserve requirements (Sec. 950.431); and
    (2) General expenses, such as premiums for fire and related 
insurance, payments in lieu of taxes, if any, and other similar 
expenses.
    (d) Adjustments in the amount of the required monthly payment. (1) 
After the initial determination of a homebuyer's required monthly 
payment, the IHA shall increase or decrease the amount of such payment 
in accordance with HUD regulations to reflect changes in adjusted 
income (pursuant to a reexamination by the IHA in accordance with 
Sec. 950.315), adjustment's in the administration charge, or in any of 
the other factors affecting computation of the homebuyer's required 
monthly payment.
    (2) In order to accommodate wide fluctuations in required monthly 
payments due to seasonal conditions, an IHA may agree with the 
homebuyer for payments to be made in accordance with a seasonally 
adjusted schedule which assures full payment of the required amount for 
each year.
    (e) Homebuyer payment collection policy. Each IHA shall establish 
and adopt written policies, and use its best efforts to obtain 
compliance to assure the prompt payment and collection of required 
homebuyer payments. A copy of the policies shall be posted prominently 
in the IHA office, and shall be provided to a homebuyer upon request. 
Unless HUD has issued a corrective action order with respect to this 
function, in accordance with Sec. 950.135, HUD approval is not 
required.


Sec. 950.428  Maintenance, utilities, and use of home.

    (a) General. Each IHA shall establish and adopt, and use its best 
efforts to obtain compliance with, written policies to assure full 
performance of the respective maintenance responsibilities of the IHA 
and homebuyers. A copy of such written policies shall be posted 
prominently in the IHA office, and shall be provided to an applicant or 
homebuyer upon entry into the program and upon request.
    (b) Provisions for MH projects. For MH Projects, the written 
maintenance policies shall contain provisions on at least the following 
subjects:
    (1) The responsibilities of homebuyers for maintenance and care of 
their dwelling units and common property;
    (2) Procedures for providing advice and technical assistance to 
homebuyers to enable them to meet their maintenance responsibilities;
    (3) Procedures for IHA inspections of homes and common property;
    (4) Procedures for IHA performance of homebuyer maintenance 
responsibilities (where homebuyers fail to satisfy such 
responsibilities), including procedures for charging the homebuyer's 
proper account for the cost thereof;
    (5) Special arrangements, if any, for obtaining maintenance 
services from outside workers or contractors; and
    (6) Procedures for charging homebuyers for damage for which they 
are responsible.
    (c) IHA responsibility in MH projects. The IHA shall enforce those 
provisions of a Homebuyer's Agreement under which the homebuyer is 
responsible for maintenance of the home. The IHA has overall 
responsibility to HUD for assuring that the housing is being kept in 
decent, safe, and sanitary condition, and that the home and grounds are 
maintained in a manner that will preserve their condition, normal wear 
and tear excepted. Failure of a homebuyer to meet the obligations for 
maintenance shall not relieve the IHA of responsibility in this 
respect. Accordingly, except as may be otherwise provided in this 
section, the IHA shall conduct a complete interior and exterior 
examination of each home at least once a year, and shall furnish a copy 
of the inspection report to the homebuyer. The IHA shall take 
appropriate action, as needed, to remedy conditions shown by the 
inspection, including steps to assure performance of the homebuyer's 
obligations under the homebuyer's agreement. The IHA may inspect the 
home once every three years, in lieu of an annual inspection where the 
homebuyer is in full compliance with the original terms of the 
homebuyer's agreement, including payments, and the home is maintained 
in decent, safe, and sanitary condition, as reflected by the last 
inspection by the IHA. However, if at any time the IHA determines that 
the homebuyer is not in compliance with the homebuyer's agreement, it 
must reinstate annual inspections.
    (d) Homebuyer responsibility in MH program. (1) The homebuyer shall 
be responsible for routine and nonroutine maintenance of the home, 
including all repairs and replacements (including those resulting from 
damage from any cause). The IHA shall not be obligated to pay for or 
provide any maintenance of the home other than the correction of 
warranty items reported during the applicable warranty period.
    (2) Homebuyer's failure to perform maintenance. (i) Failure of the 
homebuyer to perform maintenance obligations constitutes a breach of 
the MHO Agreement and grounds for its termination. Upon a determination 
by the IHA that the homebuyer has failed to perform its maintenance 
obligations, the IHA shall require the homebuyer to agree to a specific 
plan of action to cure the breach and to assure future compliance. The 
plan shall provide for maintenance work to be done within a reasonable 
time by the homebuyer, with such use of the homebuyer's account as may 
be necessary, or to be done by the IHA and charged to the homebuyer's 
account, in accordance with Sec. 950.437. If the homebuyer fails to 
carry out the agreed-to plan, the MHO agreement shall be terminated in 
accordance with Sec. 950.446.
    (ii) If the IHA determines that the condition of the property 
creates a hazard to the life, health, or safety of the occupants, or if 
there is a risk of damage to the property if the condition is not 
corrected, the corrective work shall be done promptly by the IHA with 
such use of the homebuyer's accounts as the IHA may determine to be 
necessary, or by the homebuyer with a charge of the cost to the 
homebuyer's accounts in accordance with Sec. 950.437.
    (iii) Any maintenance work performed by the IHA shall be accounted 
for through a work order stating the nature of and charge for the work. 
The IHA shall give the homebuyer copies of all work orders for the 
home.
    (e) Homebuyer's responsibility for utilities. The homebuyer is 
responsible for the cost of furnishing utilities for the home. The IHA 
shall have no obligation for the utilities. However, if the IHA 
determines that the homebuyer is unable to pay for the utilities for 
the home, and that this inability creates conditions that are hazardous 
to life, health, or safety of the occupants or threatens damage to the 
property, the IHA may pay for the utilities on behalf of the homebuyer 
and charge the homebuyer's accounts for the costs, in accordance with 
Sec. 950.437. When the homebuyer's account has been exhausted, the IHA 
shall pursue termination of the homebuyer agreement and may offer the 
homebuyer a transfer into the rental program if a unit is available.
    (f) Obligations with respect to home and other persons and 
property.
    (1) The homebuyer shall agree to abide by all provisions of the MHO 
Agreement concerning homebuyer responsibilities, occupancy and use of 
the home.
    (2) The homebuyer may request IHA permission to operate a small 
business in the unit. An IHA shall grant this authority where the 
homebuyer provides the following assurances and may rescind this 
authority upon violation of any of the following assurances:
    (i) The unit will remain the homebuyer's principal residence;
    (ii) The business activity will not disrupt the basic residential 
nature of the housing site; and
    (iii) The business will not require permanent structural changes to 
the unit that could adversely affect a future homebuyer's use of the 
unit. The IHA may rescind such authority whenever any of the above 
assurances are violated.
    (g) Structural changes. (1) A homebuyer shall not make any 
structural changes in or additions to the home unless the IHA has 
determined that such change would not:
    (i) Impair the value of the home, the surrounding homes, or the 
project as a whole; or
    (ii) Affect the use of the home for residential purposes.
    (2) (i) Additions to the home include, but are not limited to, 
energy-conservation items such as solar panels, wood-burning stoves, 
flues and insulation. Any changes made in accordance with this section 
shall be at the homebuyer's expense, and in the event of termination of 
the MHO Agreement the homebuyer shall not be entitled to any 
compensation for such changes or additions.
    (ii) If the homebuyer is in compliance with the terms of the MHO 
agreement, the IHA may agree to allow the homebuyer to use the funds in 
the MEPA for betterments and additions to the MH home. In such event, 
the IHA shall determine whether the homebuyer will be required to 
replenish the MEPA or if the funds are to be loaned to the homebuyer at 
an interest rate determined by the IHA. The homebuyer cannot use MEPA 
funds for luxury items, as determined by the IHA.

(Information collection requirement contained in paragraph (c) has 
been approved by the Office of Management and Budget under control 
number 2577-0114.)


Sec. 950.431  Operating reserve.

    (a) The IHA shall maintain an operating reserve for the project in 
an amount sufficient for working capital purposes, for estimated future 
nonroutine maintenance requirements for IHA-owned administrative 
facilities and common property, for the payment of advance premiums for 
insurance, for unanticipated project requirements and for other 
eligible uses as determined by the IHA. A contribution to this reserve 
shall be determined by the IHA and included in the administration 
charge. The amount of this contribution shall be increased or decreased 
annually to reflect the needs of the IHA for working capital and for 
reserves for anticipated future expenditures and shall be included in 
the operating budget submitted to the HUD Field Office for approval. If 
the IHA fails to maintain an adequate operating reserve level, HUD may 
issue a corrective action order prescribing specific actions that the 
IHA must take to improve its financial condition. (See Sec. 950.135).
    (b) At the end of each fiscal year or other budget period, the 
project operating reserve shall be:
    (1) Credited with the amount by which operating receipts exceed 
operating expenses of the project for the budget period; or
    (2) Charged with the amount by which operating expenses exceed 
operating receipts of the project for the budget period.


Sec. 950.432  Operating budget submission and approval.

    In addition to other budget documentation required by HUD, each 
operating budget or operating budget revision shall include a certified 
copy of a resolution of the board of commissioners stating that the 
board has reviewed and approved the operating budget or operating 
budget revision.


Sec. 950.434  Operating subsidy.

    (a) Scope. This section authorizes the use of operating subsidy for 
Mutual Help projects; establishes eligible costs; and provides for 
determination of operating subsidy on a uniform basis for all MH 
projects.
    (b) Eligible costs. The reasonable cost of an annual independent 
audit is an eligible cost for operating subsidy. Operating subsidy may 
also be paid to cover proposed expenditures approved by the HUD Field 
Office for the following purposes:
    (1) Administration charges for vacant units where the IHA submits 
evidence to the HUD Field Office's satisfaction that it is making every 
reasonable effort to fill the vacancies;
    (2) Collection losses due to payment delinquencies on the part of 
homebuyer families whose MHO Agreements have been terminated and who 
have vacated the home, and the actual cost of any maintenance 
(including repairs and replacements) necessary to put the vacant home 
in a suitable condition for a subsequent homebuyer family. Operating 
subsidy may be made available for these purposes only after the IHA has 
previously used all available homebuyer credits. Every reasonable 
effort shall be made to collect charges from a vacated homebuyer, 
including court judgments, professional collection services, etc., as 
appropriate;
    (3) A formula amount for the cost of a HUD-approved counseling 
program;
    (4) A formula amount for training and related travel of IHA staff 
and Commissioners;
    (5) The costs of a HUD-approved professional management contract; 
and
    (6) Operating costs resulting from other unusual circumstances 
justifying payment of operating subsidy, if approved by HUD.
    (7) Subject to appropriations, and in accordance with the 
provisions of subpart O of this part and procedures determined by HUD, 
each IHA with a duly elected resident organization shall receive $25 
per unit per year for resident participation activities. Of this 
amount, $15 per unit per year shall fund resident participation 
activities of the RO. Ten dollars per unit per year shall fund IHA 
costs incurred in carrying out resident participation activities.
    (c) Ineligible costs. No operating subsidy shall be paid for 
utilities, maintenance, or other items for which the homebuyer is 
responsible except, as necessary, to put a vacant home in condition for 
a subsequent family as provided in paragraph (b)(2) of this section.


Sec. 950.437  Homebuyer reserves and accounts.

    (a) Refundable and nonrefundable MH reserves. The IHA shall 
establish separate refundable and nonrefundable reserves for each 
homebuyer effective on the date of occupancy.
    (1) The refundable MH reserve represents a homebuyer's interest in 
funds that may be used to purchase the home at the option of the 
homebuyer. The IHA shall credit this account with the amount of the 
homebuyer's cash MH contribution or the value of the labor, materials 
or equipment MH contribution.
    (2) The nonrefundable MH reserve also represents a homebuyer's 
interest in funds that may be used to purchase the home at the option 
of the homebuyer. The IHA shall credit this account with the amount of 
the homebuyer's share of any credits for land contributed to the 
project and the homebuyer's share of any credit for non-land 
contributions by a terminated homebuyer.
    (b) Equity accounts. (1) Monthly equity payments account 
(``MEPA''). The IHA shall maintain a separate MEPA for each homebuyer. 
The IHA shall credit this account with the amount by which each 
required monthly payment exceeds the administration charge. Should the 
homebuyer fail to pay the required monthly payment, the IHA may elect 
to reduce the MEPA by the amount owed each month towards the 
administration charge, until the MEPA has been fully expended. The MEPA 
balance must be comprised of an amount backed by cash actually received 
in order for any such reduction to be made.
    (2) Investment of equity funds. (i) Funds held by the IHA in the 
equity accounts of all the homebuyers in the project shall be invested 
in HUD-approved investments. Income earned on the investments of such 
funds shall periodically, but at least annually, be prorated and 
credited to each homebuyer's equity accounts in proportion to the 
amount in each such account on the date of proration. If HUD determines 
that accounts are not properly managed and has issued a corrective 
action order pursuant to Sec. 950.135, it may ultimately remove 
responsibility of the IHA for managing such accounts to a HUD-approved 
escrow agent.
    (ii) Notwithstanding other provisions of this subpart and subject 
to HUD Field Office approval, an IHA may use a portion of the 
homebuyers' equity accounts for low-income housing purposes provided 
that a reserve of homebuyers' MEPA is maintained. The reserve must be 
at a percentage established by the IHA and approved by the HUD Field 
Office. (Interest must continue to be credited to the homebuyer's 
account based on the MEPA balance and the rate of interest that would 
have been earned if the funds were invested.)
    (c) Charges for maintenance. (1) If the IHA has maintenance work 
done in accordance with Sec. 950.428(a), the cost thereof shall be 
charged to the homebuyer's MEPA.
    (2) At the end of each fiscal year, the debit balance, if any in 
the MEPA shall be charged, first to the refundable MH reserve; and 
second, to the nonrefundable MH reserve, to the extent of the credit 
balances in that account and those reserves.
    (3) In lieu of charging the debit balance in the MEPA to the 
homebuyer's refundable MH reserve and/or nonrefundable MH reserve, the 
IHA may allow the debit balance to remain in the MEPA pending 
replenishment from subsequent credits to the homebuyer's MEPA.
    (4) The IHA shall at no time permit the accumulation of a debit 
balance in the MEPA in excess of the sum of the credit balances in the 
homebuyer's refundable and nonrefundable MH reserves, unless the 
expenditure is required to alleviate a hazard to the life, health or 
safety of the occupants, or to alleviate risk of damage to the 
property.
    (d) Disposition of reserves and accounts. When the homebuyer 
purchases the home, the balances in the homebuyer's reserves and 
accounts shall be disposed of in accordance with Sec. 950.440. If the 
MHO agreement is terminated by the homebuyer or the IHA, the balances 
in the homebuyer's reserves and accounts shall be disposed of in 
accordance with Sec. 950.446.
    (e) Use of reserves and accounts; nonassignability. The homebuyer 
shall have no right to receive or use the funds in any reserve or 
account except as provided in the MHO agreement, and the homebuyer 
shall not, without approval of the IHA and HUD, assign, mortgage or 
pledge any rights in the MHO agreement or to any reserve or account.


Sec. 950.440  Purchase of home.

    (a) General. The IHA provides the family an opportunity to purchase 
the dwelling under the Mutual Help and Occupancy Agreement (a lease 
with an option to purchase), under which the purchase price is 
amortized over the period of occupancy, in accordance with a purchase 
price schedule. For acquisition under the MHO agreement, see paragraph 
(e) of this section. If a homebuyer wants to acquire ownership in a 
shorter period than that shown on the purchase price schedule, the 
homebuyer may exercise his or her option to purchase the home on or 
after the date of occupancy, but only if the homebuyer has met all 
obligations under the MHO agreement. The homebuyer may obtain 
financing, from the IHA or an outside source, at any time, to cover the 
remaining purchase price. The financing may be provided using such 
methods as a mortgage or a loan agreement. If the homebuyer is able to 
obtain financing from an outside source, the IHA will release the 
homebuyer from the MHO agreement and terminate the homebuyer's 
participation in this program. For acquisition under methods other than 
under the MHO agreement, see Sec. 950.443.
    (b) Purchase price and purchase price schedule. (1) Initial 
purchase price. The initial purchase price of a home for a homebuyer 
shall be determined by the IHA.
    (2) Purchase price schedule. Promptly after execution of the 
construction contract, the IHA shall furnish to the homebuyer a 
statement of the initial purchase price of the home, and a purchase 
price schedule that will apply, based on amortizing the balance 
(purchase price less the MH contribution) over a period, not less than 
15 years or more than 25 as determined by the IHA, at an interest rate 
determined by the IHA. The IHA may choose to forego charging interest 
and calculate the payment with an interest rate of zero.
    (c) Purchase price schedule for subsequent homebuyer. (1) Initial 
purchase price. When a subsequent homebuyer executes the Mutual Help 
and Occupancy Agreement, the purchase price for the subsequent 
homebuyer shall be determined by the IHA.
    (2) Purchase price schedule. Each subsequent homebuyer shall be 
provided with a purchase price schedule, showing the monthly declining 
purchase price over a period, not less than 15 years or more than 25 
years as determined by the IHA, at an interest rate determined by the 
IHA.
    (d) [Reserved].
    (e) Conveyance of home. (1) Purchase procedure. In accordance with 
the MHO agreement, the IHA shall convey title to the homebuyer when the 
balance of the purchase price can be covered from the amount in the 
equity account. The homebuyer may supplement the amount in the equity 
account with reserves or any other funds of the homebuyer. 
Notwithstanding the requirement for prompt conveyance, an IHA may delay 
conveyance long enough to modernization a paid off unit in accordance 
with its Comprehensive Plan or CIAP application.
    (2) Amounts to be paid. The purchase price shall be the amount 
shown on the purchase price schedule for the month in which the 
settlement date falls.
    (3) Settlement costs. Settlement costs shall be paid by the 
homebuyer who may use equity accounts or reserves available for the 
purchase in accordance with paragraph (e)(4) of this section.
    (4) Disposition of homebuyer accounts and reserves. When the 
homebuyer purchases the home, the net credit balances in the 
homebuyer's equity account as described in Sec. 950.437), supplemented 
by the nonrefundable MH reserve and then the refundable MH reserve, 
shall be applied in the following order:
    (i) For the initial payment for fire and extended coverage 
insurance on the home after conveyance if the IHA finances purchase of 
the home in accordance with Sec. 950.443;
    (ii) For settlement costs, if the homebuyer so directs;
    (iii) For the purchase price; and
    (iv) The balance, if any, for refund to the homebuyer.
    (5) Settlement. A home shall not be conveyed until the homebuyer 
has met all the obligations under the MHO Agreement, except as provided 
in Sec. 950.440(e)(8). The settlement date shall be mutually agreed 
upon by the parties. On the settlement date, the homebuyer shall 
receive the documents necessary to convey to the homebuyer the IHA's 
right, title, and interest in the home, subject to any applicable 
restrictions or covenants as expressed in such documents. The required 
documents shall be approved by the attorneys representing the IHA, and 
by the homebuyer or the homebuyer's attorney.
    (6) IHA investment and use of purchase price payments. After 
conveyance, all homebuyer funds held or received by the IHA from the 
sale of a unit in a project financed with grants shall be held separate 
from other project funds, and shall be used for purposes related to 
low-income housing use, as approved by HUD. Homebuyer funds held or 
received by the IHA from the sale to a homebuyer of a unit in a project 
financed by loans are subject to loan forgiveness. Homebuyer funds 
include the amount applied to payment of the purchase price from the 
equity account), any cash paid by the homebuyer for application to the 
purchase price and, if the IHA finances purchase of the home in 
accordance with Sec. 950.446, any portion of the mortgage payments by 
the homeowner attributable to payment of the debt service (principal 
and interest) on the mortgage.
    (7) Removal of home from MH program. When a home has been conveyed 
to the homebuyer, whether or not with IHA financing, the unit is 
removed from the IHA's MH project under its ACC with HUD.
    (8) Homebuyers with delinquencies. (i) If a homebuyer has a 
delinquency at the end of the amortization period, the unit is no 
longer available for assistance from HUD or the IHA, even though the 
unit has not been conveyed. The IHA must take action to terminate the 
MHOA or to develop a repayment schedule for the remaining balance to be 
completed in a reasonable period, but not longer than three years. The 
payment should be equal to a monthly pro-rated share of the remaining 
balance owed by the homebuyer, plus an administrative fee consisting of 
the cost of insurance and the IHA's processing cost. If the homebuyer 
fails to meet the requirements of the repayment schedule, the IHA 
should proceed immediately with eviction.
    (ii) Notwithstanding the requirements in paragraphs (e)(1) through 
(8), an IHA may complete emergency and statutorily or regulatorily 
required modernization work on a unit which is paid off but not 
conveyed, during the term of the repayment schedule.
    (iii) Upon repayment of the total delinquency, the IHA may, in 
accordance with Sec. 950.602(b)(2), complete non-emergency 
modernization work on a unit prior to conveyance.


Sec. 950.443  IHA homeownership financing.

    (a) Eligibility. The IHA may offer a form of homeownership 
financing, similar to a purchase money mortgage. The IHA shall set 
standards for determining eligibility, developing promissory notes, 
mortgages and other financial instruments necessary to carry out the 
transaction. Further guidance is provided in HUD Handbooks.
    (b) HUD review and approval. Unless HUD has issued a corrective 
action order with respect to this function, in accordance with 
Sec. 950.135, the IHA may proceed with providing IHA financing without 
prior HUD approval. IHAs without prior experience in IHA financing 
should consult with the HUD Field Office.


Sec. 950.446  Termination of MHO agreement.

    (a) Termination upon breach. (1) In the event the homebuyer fails 
to comply with any of the obligations under the MHO agreement, the IHA 
may terminate the MHO agreement by written notice to the homebuyer, 
enforced by eviction procedures applicable to landlord-tenant 
relationships. Foreclosure is an inappropriate method for enforcing 
termination of the homeownership agreement, which constitutes a lease 
(with an option to purchase). The homebuyer is a lessee during the term 
of the agreement and acquires no equitable interest in the home until 
the option to purchase is exercised.
    (2) Misrepresentation or withholding of material information in 
applying for admission or in connection with any subsequent 
reexamination of income and family composition constitutes a breach of 
the homebuyer's obligations under the MHO agreement. ``Termination'', 
as used in the MHO agreement, does not include acquisition of ownership 
by the homebuyer.
    (b) Notice of termination of MHO agreement by the IHA, right of 
homebuyer to respond. Termination of the MHO agreement by the IHA for 
any reason shall be by written notice of termination. Such notice shall 
be in compliance with the terms of the MHO agreement and, in all cases, 
shall afford a fair and reasonable opportunity to have the homebuyer's 
response heard and considered by the IHA. Such procedures shall comply 
with the Indian Civil Rights Act, if applicable, and shall incorporate 
all the steps and provisions needed to comply with State, local, or 
Tribal law, with the least possible delay. (See Sec. 950.340.)
    (c) Termination of MHO agreement by homebuyer. The homebuyer may 
terminate the MHO Agreement by giving the IHA written notice in 
accordance with the agreement. If the homebuyer vacates the home 
without notice to the IHA, the homebuyer shall remain subject to the 
obligations of the MHO agreement, including the obligation to make 
monthly payments, until the IHA terminates the MHO agreement in 
writing. Notice of the termination shall be communicated by the IHA to 
the homebuyer to the extent feasible and the termination shall be 
effective on the date stated in the notice.
    (d) Disposition of funds upon termination of the MHO agreement. If 
the MHO agreement is terminated, the balances in the homebuyer's 
accounts and reserves shall be disposed of as follows:
    (1) The MEPA shall be charged with:
    (i) Any maintenance and replacement cost incurred by the IHA to 
prepare the home for the next occupant;
    (ii) Any amounts the homebuyer owes the IHA, including required 
monthly payments;
    (iii) The required monthly payment for the period the home is 
vacant, not to exceed 60 days from the date of receipt of the notice of 
termination, or if the homebuyer vacates the home without notice to the 
IHA, for the period ending with the effective date of termination by 
the IHA; and
    (iv) The cost of securing a vacant unit, the cost of notification 
and associated termination tasks, and the cost of storage and/or 
disposition of personal property.
    (2) If, after making the charges in accordance with paragraph 
(d)(1) of this section, there is a debit balance in the MEPA, the IHA 
shall charge that debit balance, first to the refundable MH reserve; 
and second, to the nonrefundable MH reserve, to the extent of the 
credit balances in these reserves and account. If the debit balance in 
the MEPA exceeds the sum of the credit balances in these reserves and 
account, the homebuyer shall be required to pay to the IHA the amount 
of the excess.
    (3) If, after making the charges in accordance with paragraph 
(d)(1) of this section, there is a credit balance in the MEPA, this 
amount shall be refunded.
    (4) Any credit balance remaining in the refundable MH reserve after 
making the charges described in paragraph (d)(2) of this section shall 
be refunded to the homebuyer.
    (5) Any credit balance remaining in the nonrefundable MH reserve 
after making the charges described in paragraph (d)(2) of this section 
shall be retained by the IHA for use by the subsequent homebuyer.
    (e) Settlement upon termination. (1) Time for settlement. 
Settlement with the homebuyer following a termination shall be made as 
promptly as possible after all charges provided in paragraph (d) of 
this section have been determined and the IHA has given the homebuyer a 
statement of such charges. The homebuyer may obtain settlement before 
determination of the actual cost of any maintenance required to put the 
home in satisfactory condition for the next occupant, if the homebuyer 
is willing to accept the IHA's estimate of the amount of such cost. In 
such cases, the amounts to be charged for maintenance shall be based on 
the IHA's estimate of the cost thereof.
    (f) Responsibility of IHA to terminate. (1) The IHA is responsible 
for taking appropriate action with respect to any noncompliance with 
the MHO agreement by the homebuyer. In cases of noncompliance that are 
not corrected as provided further in this paragraph, it is the 
responsibility of the IHA to terminate the MHO agreement in accordance 
with the provisions of this section and to institute eviction 
proceedings against the occupant.
    (2) As promptly as possible after a noncompliance comes to the 
attention of the IHA, the IHA shall discuss the matter with the 
homebuyer and give the homebuyer an opportunity to identify any 
extenuating circumstances or complaints which may exist. A plan of 
action shall be agreed upon that will specify how the homebuyer will 
come into compliance, as well as any actions by the IHA that may be 
appropriate. This plan shall be in writing and signed by both parties.
    (3) Compliance with the plan shall be checked by the IHA not later 
than 30 days from the date thereof. In the event of refusal by the 
homebuyer to agree to such a plan or failure by the homebuyer to comply 
with the plan, the IHA shall issue a notice of termination of the MHO 
agreement and evict the homebuyer in accordance with the provisions of 
this section on the basis of the noncompliance with the MHO agreement.
    (4) A record of meetings with the homebuyer, written plans of 
action agreed upon and all other related steps taken in accordance with 
paragraph (f) of this section shall be maintained by the IHA for 
inspection by HUD.
    (g) Subsequent use of unit. After termination of a homebuyer's 
interest in the unit, it remains as part of the MH project under the 
ACC. The IHA must follow its policies for selection of a subsequent 
homebuyer for the unit under the MH program. (See Sec. 950.449(g) for 
use of unit if no qualified subsequent homebuyer is available.)


Sec. 950.449  Succession.

    (a) Definition of ``event.'' ``Event'' means the death, mental 
incapacity, or other conditions as determined by the IHA, of all of the 
persons who have executed the MHO agreement as homebuyers.
    (b) Designation of successor by homebuyer. A homebuyer may 
designate a successor who, at the time of the ``event'', would assume 
the status of homebuyer, provided that at the time of the event, the 
successor meets the conditions established by the IHA which shall 
include satisfying program eligibility requirements. The designation 
may be made at the time of execution of the MHO agreement, and the 
homebuyer may change the designation at any later time by written 
notice to the IHA.
    (c) Succession by persons designated by homebuyer. Upon occurrence 
of an ``event'', the person designated as the successor shall succeed 
to the former homebuyer's rights and responsibilities under the MHO 
agreement if the designated successor meets the criteria established by 
the IHA which shall include program eligibility requirements.
    (d) Designation of successor by IHA. If at the time of the event 
there is no successor designated by the homebuyer, the IHA may 
designate, in accordance with its occupancy policy, any person who 
qualifies under paragraph (c) of this section.
    (e) Occupancy by appointed guardian. If at the time of the event 
there is no qualified successor designated by the homebuyer or by the 
IHA in accordance with paragraphs (a) through (d) of this section, and 
a minor child or children of the homebuyer are living in the home, the 
IHA may, in order to protect their continued occupancy and opportunity 
for acquiring ownership of the home, approve as occupant of the home an 
appropriate adult who has been appointed legal guardian of the children 
with a duty to perform the obligations of the MHO agreement in their 
interest and behalf.
    (f) Succession and occupancy on trust land. In the case of a home 
on trust land subject to restrictions on alienation under federal law 
(including federal trust or restricted land and land subject to trust 
or restriction under State law), or under State or Tribal law where 
such laws do not violate federal statutes, a person who is prohibited 
by law from succeeding to the IHA's interest on such land may, 
nevertheless, continue in occupancy with all the rights, obligations 
and benefits of the MHO agreement, modified to conform to these 
restrictions on succession to the land.
    (g) Termination in absence of qualified successor. If there is no 
qualified successor in accordance with the IHA's approved Admissions 
and Occupancy policy, the IHA shall terminate the MHO agreement and 
select a subsequent homebuyer from the top of the waiting list to 
occupy the unit under a new MHO agreement. If a new homebuyer is 
unavailable or if the home cannot continue to be used for low-income 
housing in accordance with the Mutual Help program, the IHA may submit 
an application to HUD to convert the unit to the Rental program in 
accordance with Sec. 950.458 or to approve a disposition of the home, 
in accordance with subpart M of this part.


Sec. 950.452  Miscellaneous.

    (a) Annual statement to homebuyer. The IHA shall provide an annual 
statement to the homebuyer that sets forth the credits and debits to 
the homebuyer equity accounts and reserves during the year and the 
balance in each account at the end of each IHA fiscal year. The 
statement shall also set forth the remaining balance of the purchase 
price.
    (b) Insurance before transfer of ownership, repair or rebuilding.
    (1) Insurance. The IHA shall carry all insurance prescribed by HUD, 
including fire and extended coverage insurance upon the home.
    (2) Repair or rebuilding. In the event the home is damaged or 
destroyed by fire or other casualty, the IHA shall consult with the 
homebuyers as to whether the home shall be repaired or rebuilt. The IHA 
shall use the insurance proceeds to have the home repaired or rebuilt 
unless there is good reason for not doing so. In the event the IHA 
determines that there is good reason why the home should not be 
repaired or rebuilt and the homebuyer disagrees, the matter shall be 
submitted to the HUD Field Office for final determination. If the final 
determination is that the home should not be repaired or rebuilt, the 
IHA shall terminate the MHO agreement, and the homebuyer's obligation 
to make required monthly payments shall be deemed to have terminated as 
of the date of the damage or destruction.
    (3) Suspension of payments. In the event of termination of a MHO 
Agreement because of damage or destruction of the home, or if the home 
must be vacated during the repair period, the IHA will use its best 
efforts to assist in relocating the homebuyer. If the home must be 
vacated during the repair period, required monthly payments shall be 
suspended during the vacancy period.
    (c) Notices. Any notices by the IHA to the homebuyer required under 
the MHO Agreement or by law shall be delivered in writing to the 
homebuyer personally or to any adult member of the homebuyer's family 
residing in the home, or shall be sent by certified mail, return 
receipt requested, properly addressed, postage prepaid. Notice to the 
IHA shall be in writing and either delivered to an IHA employee at the 
office of the IHA, or sent to the IHA by certified mail, return receipt 
requested, properly addressed, postage prepaid.


Sec. 950.453  Counseling of homebuyers.

    (a) General. (1) The IHA shall provide counseling to Homebuyers in 
accordance with this section. The purpose of the counseling program 
shall be to develop:
    (i) A full understanding by homebuyers of their responsibilities as 
participants in the MH Project;
    (ii) Ability on their part to carry out these responsibilities; and
    (iii) A cooperative relationship with the other Homebuyers.
    (2) All homebuyers shall be required to participate in and 
cooperate fully in all official pre-occupancy and post-occupancy 
counseling activities. Failure without good cause to participate in the 
program shall constitute a breach of the MHO Agreement.
    (b) The IHA shall submit to the local HUD Office a copy of its 
counseling program with its request for funding for approval.
    (c) Progress reports. Unless otherwise required in a corrective 
action order, IHAs shall submit an annual progress report with the 
annual budget submission to the HUD Field Office.
    (d) Termination of counseling program. If HUD determines that an 
IHA's counseling program is not being properly implemented, the program 
may be terminated after notice to the IHA stating the deficiencies in 
program implementation, and giving the IHA 90 days from the date of 
notification to take corrective action, and in the event of termination 
the amount included in the Development Cost Budget for the program 
shall be reduced so as not to exceed expenses already incurred at the 
time of termination.


Sec. 950.455  Conversion of rental projects.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the local HUD Office for approval to convert any or 
all of the units in an existing rental project to the MH program. Any 
conversion of existing units shall not affect in any way the IHA's 
status for funding for new development.
    (b) Minimum requirements. (1) In order to be eligible for 
conversion, the units must be single family detached homes, or 
apartment/row houses for conversion to condominium/cooperative 
ownership. In addition, the units must have individually metered 
utilities and be in decent, safe and sanitary condition. The project(s) 
which possess the proposed conversion units must have received an 
approved actual development cost certificate.
    (2) Tenants or other applicants to be homebuyers of the proposed 
conversion units must qualify for the program under Sec. 950.416(b). 
The entire MH contribution required of the homebuyer must be made 
before the rental unit occupied by a tenant can be converted to the MH 
program.
    (3) In the case of conversion of apartments or rowhouses to 
condominium or cooperative ownership, all units in a structure must be 
converted, with all occupants at the time of the application qualified, 
in accordance with paragraph (b)(2) of this section. Any occupants who 
do not qualify or desire to convert must be satisfactorily relocated 
and replaced with qualified occupants before application for conversion 
of the structure.
    (c) Application process. The IHA's application must be in the form 
required by HUD, including all necessary documentation. The local HUD 
Office shall review the application for legal sufficiency; Tribal 
acceptance; demonstration of family interest; evidence units are 
habitable, safe and sanitary; family qualifications as discussed in 
paragraph (b)(2) of this section; and financial feasibility. Where not 
all units in a project are proposed for conversion, the IHA's ability 
to operate the remaining rental units must not be adversely affected.


Sec. 950.458  Conversion of Mutual Help projects to Rental Program.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the local HUD Office for approval to convert any or 
all Mutual Help project units to the rental program, wherever or 
whenever a homebuyer or homebuyers have lost the potential for 
ownership because of the inability to meet the cost of their homebuyer 
responsibilities.
    (b) Minimum requirements. (1) In order to be eligible for 
conversion, the project must have received an approved ADCC.
    (2) The remaining balances in any reserve accounts shall be 
accounted for individually for each unit converted in a manner 
consistent with project intent and in a manner prescribed by HUD.
    (3) The balance remaining in the MEPA, if any, is applied first to 
outstanding tenant accounts receivable, then to repair of homebuyer 
maintenance items, and finally returned to the homebuyer.
    (c) Application process. The IHA's application must be in the form 
required by HUD, including all necessary documentation. The local HUD 
Office shall review the application for legal sufficiency; Tribal 
acceptance; demonstration of family interest; and financial 
feasibility. Where not all units in a project are proposed for 
conversion, the IHA's ability to operate the remaining units must not 
be adversely affected.

Subpart F--Self-Help Development in the Mutual Help Homeownership 
Program


Sec. 950.470  Purpose and applicability.

    (a) Purpose. The purpose of the Self-Help program is to provide an 
alternate method of developing dwelling units that will be less costly 
than other methods of development, will engender community pride and 
cooperation, and will provide training in construction skills that will 
have lasting value to participants. If an IHA is interested in pursuing 
Self-Help development, it organizes a small group of families (six to 
ten) to build a substantial portion of the homes for all the families 
in the group, with technical assistance and supervision and materials 
provided by the IHA, augmented by skilled labor obtained under 
contract. The participants are individuals and/or families who qualify 
for participation in the Mutual Help Homeownership Opportunity program 
who have the ability to furnish their share of the required labor and 
who agree to participate in the cooperative effort to build homes for 
all members of the group.
    (b) Applicability. Any IHA eligible for development funds may 
submit an application for a Self-Help Mutual Help Homeownership 
Opportunity project.


Sec. 950.475  Basic requirements.

    (a) Contracts. A Self-Help Mutual Help Homeownership Opportunity 
project also involves three basic contracts in a form approved by HUD: 
an ACC for a Mutual Help project executed by HUD and the IHA after 
approval of the SH project application and after HUD approval of the 
development program, a Self-Help agreement executed by the 
participating families and the IHA before construction begins, and a 
Mutual Help and Occupancy agreement executed by the participating 
families and the IHA after construction completion. In addition, there 
may be organizational documents for the organization created by the 
participating families.
    (b) Family participation. The project is to be organized so that a 
small number of families (six to ten) build a substantial portion of 
their homes and contract for other skilled labor and supplies. Each 
family must show the desire to work with other families in building 
their own homes and must have the time to contribute the labor 
necessary to perform a substantial number of the tasks required in the 
construction of the homes. Each family must sign a Self-Help agreement 
with the IHA.
    (c) IHA capacity. The IHA must have the capacity to provide for the 
financial, legal, administrative, and technical responsibilities of the 
program. The IHA is required to provide assurance that the project will 
be completed, in the form of a letter of credit or its equivalent in an 
amount equal to ten percent of the estimated Total Development Cost 
Standard. The IHA may manage the project itself if it has staff with 
the necessary background and proven ability to perform responsibly in 
the field of mutual self-help and in construction; or it may contract 
with an organization that has this type of experience and ability for a 
fee that fits within the Total Development Cost Standard. Once an IHA 
has experience with this method of development, it is encouraged to 
have several groups of families participating in its Self-Help program 
for more cost-effective use of the construction supervisors, although 
each family will work only on the homes of its group.
    (d) Funding. The funding for technical training and supervision of 
participating families will be provided through development funds, and 
the cost will be included in the Total Development Cost of the project. 
The cost of construction supervision and technical assistance shall 
generally be no more than 15 percent, but may not exceed 20 percent of 
the TDC of these self-help homes.
    (e) Applicability of Indian preference. In the selection of 
contractors to perform construction supervision, skilled labor, or 
other work under this program, the provisions concerning preference for 
Indians (Sec. 950.165) apply. In the selection of participating 
families, the provisions of Sec. 950.416 apply.
    (f) Building code. The building code used by the IHA in accordance 
with Sec. 950.255 will apply to the homes constructed under this 
program.


Sec. 950.480  Self-Help agreement.

    (a) Timing. The obligations under the Self-Help agreement, executed 
by the IHA and the families in a group selected by the IHA to 
participate in a Self-Help program, will be contingent upon approval of 
the development program by HUD. Each family will be obligated to be 
available to commence work at a time that fits the IHA's schedule for 
completion of prior tasks by skilled labor, but generally within 120 
days of approval of the IHA's Self-Help project development program by 
HUD and to complete the work within a period not to exceed two years.
    (b) Pre-construction period. The Self-Help agreement will provide 
that, before construction begins, the participating families will be 
required to organize themselves, with the assistance of the IHA, and to 
participate in construction skills training.
    (c) Labor contribution. (1) The Self-Help agreement will specify 
the construction tasks to be performed by the participating families as 
their labor contribution and the construction tasks to be performed 
under contract by skilled laborers. The number of tasks to be performed 
by the participating families must constitute the vast majority of the 
tasks. Generally, the construction will be done in stages, with each 
stage of construction finished with respect to all the homes in the 
project before moving to the next stage.
    (2) The labor performed is not subject to the labor standards 
specified in section 12 of the United States Housing Act of 1937 (42 
U.S.C. 1437j).
    (3) The Self-Help agreement will specify the circumstances under 
which it may be terminated.
    (d) Insurance requirements. The families are working for 
themselves, and not the IHA, during the performance of their labor 
contribution. The Self-Help agreement will provide that the families 
waive any liability claim against the IHA for any injury that might 
occur during the development of the project. It is in the best 
interests of participating families to have their own insurance 
coverage to cover the possibility of injury. If the IHA is able to 
obtain insurance coverage at reasonable cost with reimbursement from 
the families, at their request, to cover this risk, it is encouraged to 
do so.
    (e) Standard provisions. The Self-Help agreement will include 
provisions prohibiting kickbacks and conflict of interest.
    (f) Completion. The Self-Help agreement will provide that upon 
successful completion of the family's obligations under it, the family 
and the IHA will execute a Mutual Help and Occupancy agreement.


Sec. 950.485  Application.

    (a) General. The application for a Self-Help development method of 
Mutual Help project must comply with the general requirements of 
Sec. 950.225.
    (b) Need for Self-Help housing. Evidence of the need for Self-Help 
housing must be submitted, including the following:
    (1) The names, addresses, number of persons in the household, and 
annual incomes of the families selected to participate;
    (2) The Self-Help agreement;
    (3) Certification by the IHA that the participating families are 
believed to have the time and ability to fulfill their obligations 
under the Self-Help agreement; and
    (4) Such information as the incomes and sizes of other interested 
families who appear to be eligible.
    (c) Ability of IHA to administer Self-Help housing. The IHA must 
demonstrate its ability to administer the program by identifying the 
staff members who will supervise construction and provide technical 
assistance, and describe their experience. If the IHA plans to contract 
with an outside entity to perform these functions, it must follow the 
requirements concerning Indian preference. Regardless of the identity 
of the firm selected to perform this function, the IHA should identify 
the firm and briefly describe its experience. The IHA also must 
demonstrate its capacity to administer the program, in accordance with 
Sec. 950.475.


Sec. 950.490  Development program.

    (a) In addition to complying with the requirements of Sec. 950.260, 
the IHA's development program for a Self-Help project submitted to HUD 
must include the following:
    (1) IHA coordination plan. The plan for organizing and implementing 
the development, including elements comparable to those covered in the 
standard Mutual Help construction contract, and the method of 
coordinating work of participating families and skilled contractors.
    (2) Difference in cost. A description of how the development cost 
differs from the cost for a project constructed under a construction 
contract. This difference should reflect the labor contribution, after 
considering the construction supervision cost.
    (3) Special provisions for acquisition with rehabilitation 
projects. A description of the repair or rehabilitation work needed on 
each home to be acquired. The work needed on all the homes should be 
reasonably comparable in the amount of labor exchange that is required. 
The estimated number of hours of labor and a description of the work to 
be done must be provided.
    (4) Certification of participation. Certification by the IHA that 
the participating families have signed the Self-Help agreement and 
remain able to fulfill their obligations under the Self-Help agreement.
    (5) Changes since application stage. Statement of any changes in 
the data submitted in the application.
    (b) HUD will review the development program submitted by an IHA for 
a Self-Help project with particular attention to the elements listed in 
paragraph (a) of this section.


Sec. 950.495  Default of self-help agreement.

    (a) Default in a Self-Help project. (1) If the IHA determines that 
a participating family is failing to provide its labor contribution, as 
required in accordance with its Self-Help agreement, it shall counsel 
the family about its obligations and encourage fulfillment of its 
responsibilities. If the failure of the family is jeopardizing the 
progress of the project, the IHA shall declare the family in default 
and terminate its participation in the project. Upon termination of the 
participation of one family, the IHA shall move expeditiously to select 
an alternate family to take over the responsibilities of the terminated 
family. If another qualified family cannot be found to assume the 
responsibilities of the terminated family, the unit may be converted to 
some other development method (e.g., force account, conventional bid, 
etc.) under the Mutual Help Homeownership Opportunity program.
    (2) If the IHA determines that an entire group is unable to 
continue its work to completion of construction, the IHA shall first 
counsel the group about its obligations and encourage fulfillment of 
its responsibilities. If counseling is unsuccessful in bringing about 
satisfactory progress toward completion, the IHA shall declare the 
families in default and convert the project to a regular Mutual Help 
Homeownership Opportunity project. The IHA's plan for completing the 
project must be submitted to HUD for review and consul prior to 
terminating the self-help project. Availability of additional HUD 
funding for this purpose is not assured.
    (b) [Reserved].

Subpart G--Turnkey III Program


Sec. 950.501  Introduction.

    (a) Purpose. This subpart sets forth the essential elements of the 
HUD Homeownership Opportunities Program for low income families, which 
is administered by HUD as part of the Indian Housing Program under the 
United States Housing Act of 1937. In its present form, this part 
covers only those matters pertinent to the management, operation, 
conversion and sale of existing Turnkey III homes that remain in Indian 
housing authority (IHA) ownership. IHAs are encouraged to consider the 
conversion of Turnkey III units to some other form of operation where 
compliance with the requirements of the Turnkey III Program has become 
infeasible.
    (b) Applicability. (1) This part is applicable to the operation of 
all Turnkey III developments operated by IHAs.
    (2) Program framework. All Turnkey III projects shall be operated 
in accordance with an executed Annual Contributions Contract (ACC), 
which includes the ``Special Provisions for Turnkey III Homeownership 
Opportunity Project'' and Homebuyer Ownership Opportunity Agreements 
(Homebuyer Agreement) between the IHA and the Homebuyer.
    (3) A Turnkey III development may only include units that are to be 
operated for the purpose of providing homeownership opportunities for 
eligible low-income families pursuant to this part and the special 
Turnkey III provisions of the ACC including units occupied temporarily 
by former homebuyers who, as a result of losing homeownership 
potential, have been transferred to rental status in place, pending the 
availability of a suitable rental unit. If for any reason it is 
determined that certain units should be converted to operation as 
conventional rental units, Mutual Help units, or some other form of 
operation, such units must be made a part of a conventional rental 
project, Mutual Help project, or such other project. However, when a 
homebuyer is converted to rental status while remaining in the same 
unit, pending availability of a satisfactory rental unit or approval of 
a request to convert the unit in accordance with Sec. 950.503, the unit 
remains under the Turnkey III project.
    (4) An IHA may, at its discretion and without HUD approval, 
establish for its Turnkey III developments any policies, procedures and 
requirements that are not contrary to the ACC, this part, other 
applicable Federal, State, and local statutes and regulations, and the 
rights of homebuyers under existing homebuyer agreements.
    (5) Program overview. The Turnkey III Program allows IHAs to 
provide homeownership opportunities for eligible low-income families 
who meet the specified standard for homeownership potential, through 
purchase of homes in those Indian housing developments that were 
established by certain IHAs under the Turnkey III Program. The program 
uses a lease-purchase arrangement, whereby the homebuyer family 
initially takes occupancy on a rental basis, under a homebuyer 
agreement that constitutes a lease with an option to purchase the home 
as soon as the family reaches the point where they can afford to buy 
and assume the responsibilities of homeownership. The purchase price is 
set at the time of initial occupancy, and then, for a subsequent 
homebuyer who takes occupancy after turnover. The purchase price for a 
subsequent homebuyer is determined by the IHA. During the period of 
rental tenancy, the homebuyer makes monthly rental payments based on an 
affordable percentage of family income and is responsible for routine 
maintenance. A portion of the homebuyer monthly payment is used to 
establish an Earned Home Payments Account (EHPA) and a Nonroutine 
Maintenance Reserve (NRMR). To the extent that these funds are not used 
by the IHA to perform maintenance relating to the home, the funds will 
be available to apply to the purchase price at the time the homebuyer 
is in a position to exercise the option to purchase. At closing, the 
homebuyer pays the IHA the balance of the purchase price due (or may be 
permitted by the IHA to finance all or a portion of that amount through 
a purchase-money mortgage) and the IHA deeds the home over to the 
homebuyer. The home becomes the privately-owned property of the 
homebuyer (now a homeowner), no longer Indian housing, and subject only 
to a restriction on the amount of resale profit that the homeowner is 
permitted to keep if the property is resold in five years.
    (c) [Reserved].
    (d) Contracts, agreements, other documents. All contracts, 
agreements and other documents referred to in this subpart must be in a 
form approved by HUD and changes must be made with the approval of the 
ONAP Field Office. Contracts, agreements and other documents include 
but are not limited to:
    (1) The Annual Contributions Contract (ACC), including the Special 
Provisions for Turnkey III Projects;
    (2) The Homebuyer Ownership Opportunity Agreement (Homebuyer 
Agreement);
    (3) Certification of Homebuyer Status;
    (4) Promissory Note for Payment Upon Resale by Homebuyer at Profit;
    (5) Articles of Incorporation and By-Laws of the Homebuyer 
Association (HBA), if any; and
    (6) Recognition Agreement Between Indian Housing Authority and the 
Homebuyer Association, if any.


Sec. 950.503  Conversion of Turnkey III developments.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the HUD Field Office for approval to convert any or 
all of the units in an existing Turnkey III development to the rental 
or MH program. Any conversion of existing units shall not affect in any 
way the IHA's status for funding for new development.
    (b) Minimum requirements. (1) In order to be eligible for 
conversion, the units must be single family detached homes, or 
apartment/row houses for conversion to condominium/cooperative 
ownership. In addition, the units must have individually metered 
utilities and be decent, safe and sanitary condition. If the units are 
not decent, safe and sanitary, the IHA shall submit a plan to correct 
unit deficiencies. The developments which possess the proposed 
conversion units must have received and approved actual development 
cost certificate.
    (2) For conversion to MH, applicants must qualify for the program 
under Sec. 950.416(b). The entire MH contribution required of the 
homebuyer must be made before the Turnkey III unit occupied by a tenant 
can be converted to the MH program. In determining the purchase price, 
the homebuyer may receive credit for the period of time they have been 
residing in a Turnkey III homeownership unit.
    (c) Application process. The IHA's application must be in the form 
required by HUD, including all necessary documentation. The HUD Field 
Office shall review the application for legal sufficiency; Tribal 
acceptance; demonstration of family interest; evidence units are 
habitable, safe and sanitary; family qualifications as discussed in 
paragraph (b)(2) of this section; and financial feasibility. Where not 
all units in a development are proposed for conversion, the IHA's 
ability to operate the remaining Turnkey III units must not be 
adversely affected.


Sec. 950.505  Eligibility and selection of Turnkey III homebuyers.

    (a) Applications. The availability of housing under Turnkey III 
shall be announced to the community at large, unless there is already a 
sufficient number of eligible applicants on the IHA's Turnkey III 
waiting list. Families who wish to be considered for Turnkey III, 
including, but not limited to existing occupants of the IHA's rental 
housing units and those on the waiting list for IHA rental housing must 
apply specifically for that program and a separate list of eligible 
applicants for Turnkey III shall be maintained. Applications shall be 
dated as received. The submission of an application for Turnkey III by 
a family which is also an applicant for conventional rental public 
housing or is an occupant of such housing shall in no way affect its 
status with regard to such rental housing. A family shall not lose its 
place on the waiting list until it is selected for Turnkey III and 
shall not receive any different treatment or consideration with respect 
to other rental housing programs because of its having applied for 
Turnkey III. In order to be considered for selection, a family must be 
determined to meet at least all of the following standards of potential 
for homeownership:
    (1) Sufficient income to cover the EHPA, NRMR, and the estimated 
cost of utilities with its required monthly payment (see Sec. 950.315);
    (2) Ability to meet all obligations under the Homebuyer Agreement; 
and
    (3) At least one member who is gainfully employed, or who has an 
established source of continuing income.
    (b) Selection and notification of homebuyers. Homebuyers shall be 
selected from those families determined to have potential for 
homeownership. Such selection shall be made in sequence from the 
waiting list.


Sec. 950.507  Homebuyer Ownership Opportunity Agreements (HOOA).

    (a) General. The HOOA must be executed between the IHA and the 
homebuyer as a condition for occupancy of a Turnkey III unit. The HOOA 
is a lease agreement which also provides the homebuyer with an option 
to purchase the home, subject to the homebuyer's compliance with 
certain conditions. The homebuyer acquires no equity in the home before 
purchase.
    (b) Pre-Existing Agreements. (1) Turnkey III Projects in operation 
on the effective date of this subpart shall be governed by this 
subpart, except to the extent that the terms of any pre-existing 
Homebuyer Agreements shall govern the relationship of an IHA and 
occupant until the termination or cancellation of such agreement(s). If 
the agreement establishes a maximum or a minimum monthly payment, the 
terms of the agreement shall govern. However, in no event will the 
monthly payment charged exceed the Total Tenant Payment determined in 
accordance with subpart D of this part.
    (2) Pre-existing Homebuyer Agreements that determined the required 
monthly payment in accordance with a ``Schedule'' developed by the IHA 
and approved by HUD should continue to determine the monthly payment in 
accordance with the schedule. This schedule is determined as follows:
    (i) The operating budget for the project is based on estimated 
expenses for a given period of time. The amount needed to operate a 
particular project is called the breakeven amount. This is comprised of 
the Operating Expenses, the total amount needed for EHPA, and the total 
needed for NRMR.
    (ii) The aggregate of all homebuyers' incomes is determined. (If no 
definition of income is stated in the homebuyer's contract, the 
definition in subpart A of this part is used.)
    (iii) The percentage of aggregated income needed to cover 110 
percent of the breakeven amount is determined. This percentage is the 
one that appears in the schedule.


Sec. 950.509  Responsibilities of homebuyer.

    (a) Repair, maintenance and use of home. The homebuyer shall be 
responsible for the routine maintenance of the home to the satisfaction 
of the HBA and the IHA. This routine maintenance includes the work 
(labor and materials) of keeping the dwelling structure, grounds, and 
equipment in good repair, condition, and appearance. In addition, the 
home must conform with the requirements of local housing codes and 
applicable regulations and guidelines of HUD. It includes repairs 
(labor and materials) to the dwelling structure, plumbing fixtures, 
dwelling equipment (such as range and refrigerator), shades and 
screens, water heater, heating equipment, and other component parts of 
the dwelling. It also includes all interior painting and the 
maintenance of grounds (lot) on which the dwelling is located. It does 
not include maintenance and replacements provided for by the NRMR.
    (b) Repair of damage. In addition to the obligation for routine 
maintenance, the homebuyer shall be responsible for repair of any 
damage caused by the homebuyer, other occupants, or visitors.
    (c) Care of home. A homebuyer shall keep the home in a sanitary 
condition; cooperate with the IHA and the HBA in keeping and 
maintaining the common areas and property, including fixtures and 
equipment, in good condition and appearance; and follow all rules of 
the IHA and of the HBA concerning the use and care of the dwellings and 
the common areas and property.
    (d) Inspections. A homebuyer shall agree to permit officials, 
employees, or agents of the IHA and of the HBA to inspect the home at 
reasonable hours and intervals in accordance with rules established by 
the IHA and the HBA.
    (e) Use of home. (1) A homebuyer shall not:
    (i) Sublet the home without the prior written approval of the IHA;
    (ii) Use or occupy the home for any unlawful purpose nor for any 
purpose deemed hazardous by insurance companies on account of fire or 
other risks; or
    (iii) Provide accommodations (unless approved by the HBA and the 
IHA) to boarders or lodgers.
    (2) The homebuyer shall agree to use the home primarily as a place 
to live for the family (as identified in the initial application or by 
subsequent amendment with the approval of the IHA), for children 
thereafter born to or adopted by members of such family, and for aged 
or widowed parents of the homebuyer or spouse who may join the 
household.
    (f) Obligations with respect to other persons and property. Neither 
the homebuyer nor any other member of the family shall interfere with 
rights of other occupants of the development, or damage the common 
property or the property of others, or create physical hazards.
    (g) Structural changes. A homebuyer shall not make any structural 
changes in or additions to the home unless the IHA has first determined 
in writing that such change would not:
    (1) Impair the value of the unit, the surrounding units, or the 
development as a whole; or
    (2) Affect the use of the home for residential purposes; or
    (3) Violate HUD requirements as to construction and design.
    (h) Statements of condition and repair. When each homebuyer moves 
in, the IHA shall inspect the home and shall give the homebuyer a 
written statement, to be signed by the IHA and the homebuyer, of the 
condition of the home and the equipment in it. Should the homebuyer 
vacate the home, the IHA shall inspect it and give the homebuyer a 
written statement of the repairs and other work, if any, required to 
put the home in good condition for the next occupant. The homebuyer or 
the homebuyer's representative and a representative of the HBA may join 
in any inspections by the IHA.
    (i) Maintenance of common property. The homebuyer may participate 
in nonroutine maintenance of the home and in maintenance of common 
property.
    (j) Assignment and survivorship. Until such time as the homebuyer 
obtains title to the home, the following conditions apply:
    (1) A homebuyer shall not assign any right or interest in the home 
or any interest under the Homebuyer Ownership Opportunity Agreement 
without the prior written approval of the IHA;
    (2) In the event of death or mental incapacity, the person 
designated as the successor in the Homebuyer Ownership Opportunity 
Agreement shall succeed to the rights and responsibilities under the 
agreement if that person is a family member and is determined by the 
IHA to meet all of the standards of potential for homeownership, 
including the requirement to make the home the person's principal 
residence. Such person shall be designated by the homebuyer at the time 
the Homebuyer Ownership Opportunity Agreement is executed. This 
designation may be changed by the homebuyer at any time. If there is no 
such designation, or the designee is not a family member or does not 
meet the standards of potential for homeownership, the IHA may consider 
as the homebuyer any family member who meets the standards of potential 
for homeownership;
    (3) If there is no qualified successor in accordance with paragraph 
(j)(2) of this section, and no minor child of the homebuyer's family is 
in occupancy, the IHA shall terminate the agreement and another family 
shall be selected. Where a minor child or children of the homebuyer's 
family is in occupancy, and an appropriate adult(s) who has been 
appointed legal guardian of the children is able and willing to perform 
the obligations of the Homebuyer Ownership Opportunity Agreement in 
their interest and on their behalf, then in order to protect continued 
occupancy and opportunity for acquisition of ownership of the home, the 
IHA may approve the guardian(s) as occupants of the unit with a duty to 
fulfill the homebuyer obligations under the agreement.

(Approved by the Office of Management and Budget under control 
number 2577-0114)


Sec. 950.511  Homebuyers' association (HBA).

    (a) General. (1) The homebuyers' association (HBA) is an 
incorporated organization composed of all homebuyers and homeowners. 
Except where the homes are on scattered sites (noncontiguous lots 
throughout a multi-block area with no common property), or where the 
number of homes in the development may be too few to support an HBA, 
each Turnkey III development shall have an HBA. For such cases, a 
modified form of homebuyers association may be called for or a less 
formal organization may be desirable. This decision shall be made 
jointly by the IHA and the homebuyers, acting on the recommendation of 
HUD.
    (2) The functions of the HBA shall be set forth in its articles of 
incorporation and by-laws. The IHA shall assist the HBA in its 
organization and operation to the extent possible.
    (b) Funding. The IHA may provide non-cash contributions to the HBA, 
such as office space, as well as cash contributions, which shall be 
provided for in the annual operating budgets of the IHA. The cash 
contributions shall be in an amount provided for in the IHA budget and 
approved by HUD and shall be subject to any HUD restrictions on 
funding.


Sec. 950.512  Homeowner's association (HOA).

    A homeowners' association means an association comprised of 
homeowners, to which the IHA conveys ownership of common property, and 
which thereafter has responsibilities with respect to the common 
property. Only residents who have acquired title to their homes are 
members of the HOA.


Sec. 950.513  Breakeven amount and application of monthly payments.

    (a) Definition. The term ``break-even amount'' as used herein means 
the minimum average monthly amount required to provide funds for the 
amounts budgeted for operating expenses, the EHPA, and the NRMR. A 
separate breakeven amount is established for each size and type of 
dwelling unit, as well as for the project as a whole. The breakeven 
amount for EHPA and NRMR will vary by size and type of dwelling unit. 
Similar variations may occur for operating expenses. The breakeven 
amount does not include the monthly allowance for utilities for which 
the homebuyer pays directly.
    (b) Application of monthly payments. The IHA shall apply the 
homebuyer's monthly payment as follows:
    (1) To the credit of the homebuyer's EHPA;
    (2) To the credit of the homebuyer's NRMR; and
    (3) For payment of monthly operating expense, including 
contributions to the operating reserve.
    (c) Excess over breakeven. When the homebuyer's required monthly 
payment exceeds the applicable breakeven amount, the excess shall 
constitute additional project income and shall be deposited and used in 
the same manner as other project income.
    (d) Deficit in monthly payment. When the homebuyer's required 
monthly payment is less than the applicable breakeven amount, the 
deficit shall be applied as a reduction of that portion of the monthly 
payment designated for operating expense (i.e., as a reduction of 
project income). In all cases, the homebuyer payment must be sufficient 
to cover the EHPA and the NRMR, which shall be credited with the amount 
included in the breakeven amount for these accounts.


Sec. 950.515  Monthly operating expense.

    (a) Definition and categories of monthly operating expense. The 
term ``monthly operating expense'' means the monthly amount needed for 
the following purposes:
    (1) Administration. Administrative salaries, travel, legal 
expenses, office supplies, etc.;
    (2) Homebuyer services. IHA expenses in the achievement of social 
goals, including costs such as salaries, publications, payments to the 
HBA to assist its operation, contract and other costs;
    (3) Utilities. Those utilities (such as water), if any, to be 
furnished by the IHA as part of operating expense;
    (4) Routine maintenance--common property. For community building, 
grounds and other common areas, if any. The amount required for routine 
maintenance of common property depends upon the type of common property 
included in the development and the extent of the IHA's responsibility 
for maintenance;
    (5) Protective services. The cost of supplemental protective 
services paid by the IHA for the protection of persons and property;
    (6) General expense. Premiums for fire and other insurance, 
payments in lieu of taxes to the local taxing body, collection losses, 
payroll taxes, etc.;
    (7) Nonroutine maintenance--common property (contribution to 
operating reserve). Extraordinary maintenance of equipment applicable 
to the community building and grounds, and unanticipated items for non-
dwelling structures.
    (b) Monthly operating expense rate. (1) The monthly operating 
expense rate to be included in the breakeven amount for each fiscal 
year shall be established on the basis of the IHA's HUD-approved 
operating budget for that fiscal year. The operating budget may be 
revised during the course of the fiscal year in accordance with HUD 
regulations, contracts, and handbooks.
    (2) If it is subsequently determined that the actual operating 
expense for a fiscal year was more or less than the amount provided by 
the monthly operating expense established for that fiscal year, the 
rate of monthly operating expenses to be established for the next 
fiscal year may be adjusted to account for the differences.
    (c) Posting of monthly operating expense statement. A statement 
showing the budgeted monthly amount allocated in the current operating 
expense category shall be provided to the HBA and copies shall be 
provided to homebuyers upon request.


Sec. 950.517  Earned Home Payments Account (EHPA).

    (a) Credits to the account. The IHA shall establish and maintain a 
separate EHPA for each homebuyer. Since the homebuyer is responsible 
for maintaining the home, a portion of the required monthly payment 
equal to the IHA's estimate, of the monthly cost for such routine 
maintenance, taking into consideration the relative type and size of 
the homeowner's home, shall be set aside in the EHPA. In addition, this 
account shall be credited with:
    (1) Any voluntary payments made pursuant to paragraph (f) of this 
section; and
    (2) Any amount earned through the performance of maintenance as 
provided in paragraph (c) of this section.
    (b) Charges to the account. (1) If for any reason the homebuyer is 
unable or fails to perform any item of required maintenance, the IHA 
shall arrange to have the work done in accordance with the procedures 
established by the IHA and the HBA, and the cost thereof shall be 
charged to the homebuyer's EHPA. Inspections of the home shall be made 
jointly by the IHA and HBA.
    (2) To the extent NRMR expense is attributable to the negligence of 
the homebuyer as determined by the HBA and approved by the IHA (see 
Sec. 950.519), the cost thereof shall be charged to the EHPA.
    (c) Additional equity through maintenance of common property. 
Homebuyers may earn addition EHPA credits by providing in whole or in 
part any of the maintenance necessary to the common property of the 
development. When such maintenance is to be provided by the homebuyer, 
this may be done and credit earned therefore only pursuant to a prior 
written agreement between the homebuyer and the IHA (or the homeowners' 
association, depending on who has responsibility for maintenance of the 
property involved), covering the nature and scope of the work and the 
amount of credit the homebuyer is to receive. In such cases, the agreed 
amount shall be charged to the appropriate maintenance account and 
credited to the homebuyer's EHPA upon completion of the work.
    (d) Investment of excess. (1) When the aggregate amount of all EHPA 
balances exceeds the estimated reserve requirements for 90 days, the 
IHA shall notify the HBA and shall invest the excess in federally 
insured savings accounts, federally insured credit unions, and/or 
securities approved by HUD and in accordance with any recommendations 
made by the HBA. If the HBA wishes to participate in the investment 
program, it should submit periodically to the IHA a list of HUD-
approved securities, bonds, or obligations which the association 
recommends for investment by the IHA of the funds in the EHPAs. 
Interest earned on the investment of such funds shall be prorated and 
credited to each homebuyer's EHPA in proportion to the amount in each 
such reserve account.
    (2)(i) Periodically, but not less often than annually, the IHA 
shall prepare a statement showing:
    (A) The aggregate amount of all EHPA balances;
    (B) The aggregate amount of investments (savings accounts and/or 
securities) held for the account of all the homebuyers' EHPAs; and
    (C) The aggregate uninvested balance of all the homebuyers' EHPAs.
    (ii) This statement shall be made available to any authorized 
representative of the HBA.
    (e) Voluntary payments. To enable the homebuyer to acquire title to 
the home within a shorter period than anticipated under the original 
schedule, the homebuyer may, either periodically or in a lump sum, 
voluntarily make payments over and above the required monthly payments. 
Such voluntary payments shall be credited to the homebuyer's EHPA.
    (f) Delinquent monthly payments. Under exceptional circumstances as 
determined by the HBA and the IHA, a homebuyer's EHPA may be used to 
pay the delinquent required monthly payments, provided the amount used 
for this purpose does not seriously deplete the account and provided 
that the homebuyer agrees to cooperate in such counseling as may be 
made available by the IHA or the HBA.
    (g) Annual statement to homebuyer. The IHA shall provide an annual 
statement to each homebuyer specifying at least the amounts in the 
EHPA, and the NRMR. Any maintenance or repair done on the dwelling by 
the IHA which is chargeable to the EHPA or to the NRMR shall be 
accounted for through a work order, a copy of which shall be sent to 
the homebuyer.
    (h) Withdrawal and assignment. The homebuyer shall have no right to 
assign, withdraw, or in any way dispose of the funds in its EHPA except 
as provided in this section or in Sec. 950.525.
    (i) Application of EHPA upon vacating of dwelling. (1) In the event 
a homebuyer agreement is terminated the IHA shall charge against the 
homebuyer's EHPA the amounts required to pay:
    (i) The amount due the IHA, including the monthly payments the 
homebuyer is obligated to pay up to the date the homebuyer vacates;
    (ii) The monthly payment for the period the home is vacant, not to 
exceed 60 days from the date of notice of intention to vacate, or, if 
the homebuyer fails to give notice of intention to vacate, 60 days from 
the date the home is put in good condition for the next occupant; and
    (iii) The cost of any routine maintenance, and of any nonroutine 
maintenance attributable to the negligence of the homebuyer, required 
to put the home in good condition for the next occupant.
    (2) If the EHPA balance is not sufficient to cover all of these 
charges, the IHA shall require the homebuyer to pay the additional 
amount due. If the amount in the account exceeds these charges, the 
excess shall be paid to the homebuyer.
    (3) Settlement with the homebuyer shall be made promptly after the 
actual cost of repairs to the dwelling has been determined provided 
that the IHA shall make every effort to make such settlement within 30 
days from the date the homebuyer vacates.


Sec. 950.519  Nonroutine Maintenance Reserve (NRMR).

    (a) Purpose of reserve. The IHA shall establish and maintain a 
separate NRMR for each home, using a portion of the homebuyer's monthly 
payment. The purpose of the NRMR is to provide funds for the nonroutine 
maintenance of the home, which consists of the infrequent and costly 
items of maintenance and replacement shown on the Nonroutine 
Maintenance Schedule for the home. Such maintenance may include the 
replacement of dwelling equipment (such as range and refrigerator), 
replacement of roof, exterior painting, major repairs to heating and 
plumbing systems, etc. The NRMR shall not be used for nonroutine 
maintenance of common property, or for nonroutine maintenance relating 
to the home to the extent such maintenance is attributable to the 
Homebuyer's negligence or to defective materials or workmanship.
    (b) Amount of reserve. The amount of the monthly payments to be set 
aside for NRMR shall be determined by the IHA, on the basis of the 
Nonroutine Maintenance Schedule showing the amount likely to be needed 
for nonroutine maintenance of the home during the term of the Homebuyer 
Ownership Opportunity Agreement, taking into consideration the type of 
construction and dwelling equipment. This schedule shall be prepared by 
the IHA and reexamined annually.
    (c) Charges to NRMR. (1) The IHA shall provide the nonroutine 
maintenance necessary for the home and the cost thereof shall be funded 
as provided in paragraph (c)(2) of this section. Such maintenance may 
be provided by the homebuyer but only pursuant to a prior written 
agreement with the IHA covering the nature and scope of the work and 
the amount of credit the homebuyer is to receive. The amount of any 
credit shall, upon completion of the work, be credited to the 
homebuyer's EHPA and charged as provided in paragraph (c)(2) of this 
section.
    (2) The cost of nonroutine maintenance shall be charged to the NRMR 
for the home except that:
    (i) To the extent such maintenance is attributable to the fault or 
negligence of the homebuyer, the cost shall be charged to the 
homebuyer's EHPA after consultation with the HBA if the homebuyer 
disagrees, and
    (ii) To the extent such maintenance is attributable to defective 
materials or workmanship not covered by the warranty, or even though 
covered by the warranty if not paid for thereunder through no fault or 
negligence of the homebuyer, the cost shall be charged to the 
appropriate operating expense account of the Project.
    (3) In the event the amount charged against the NRMR exceeds the 
balance therein, the difference (deficit) shall be made up from 
continuing monthly credits to the NRMR based upon the homebuyer's 
monthly payments. If there is still a deficit when the homebuyer 
acquires title, the homebuyer shall pay such deficit at settlement (see 
paragraph (d)(2) of this section).
    (d) Transfer of NRMR. (1) In the event the homebuyer agreement is 
terminated, the homebuyer shall not receive any balance or be required 
to pay any deficit in the NRMR. When a subsequent homebuyer moves in, a 
credit balance in the NRMR shall continue to be applicable to the home 
in the same amount as if the preceding homebuyer had continued in 
occupancy.
    (2) In the event the homebuyer purchases the home, and there 
remains a balance in the NRMR, the IHA shall pay such balance to the 
homeowner at settlement. In the event the homebuyer purchases and there 
is a deficit in the NRMR, the homebuyer shall pay such deficit to the 
IHA at settlement.
    (e) Investment of excess. (1) When the aggregate amount of the NRMR 
balances for all the homes exceeds the estimated reserve requirements 
for 90 days the IHA shall invest the excess in federally insured 
savings accounts, federally insured credit unions, and/or securities 
approved by HUD. Income earned on the investment of such funds shall be 
prorated and credited to each homebuyer's NRMR in proportion to the 
amount in each reserve account.
    (2)(i) Periodically, but not less often than annually, the IHA 
shall prepare a statement showing:
    (A) The aggregate amount of all NRMR balances;
    (B) The aggregate amount of investments (savings accounts and/or 
securities) held for the account of the NRMRs; and
    (C) The aggregate uninvested balance of the NRMRs.
    (ii) A copy of this statement shall be made available to any 
authorized representative of the HBA.


Sec. 950.521  Operating reserve.

    (a) Purpose of the reserve. To the extent that total operating 
receipts (including subsidies for operations) exceed total operating 
expenditures of the project, the IHA shall establish an operating 
reserve in connection with its approval of the annual operating budgets 
for the project. The purpose of this reserve is to provide funds for:
    (1) The infrequent but costly items of nonroutine maintenance and 
replacements of common property, taking into consideration the types of 
items which constitute common property, such as nondwelling structures 
and equipment, and in certain cases, common elements of dwelling 
structures;
    (2) Nonroutine maintenance for the homes to the extent such 
maintenance is attributable to defective materials or workmanship not 
covered by warranty;
    (3) Working capital, including funds to cover a deficit in a 
homebuyer's NRMR until such deficit is offset by future monthly 
payments by the homeowner or a settlement in the event the homebuyer 
should purchase; and
    (4) A deficit in the operation of the project for a fiscal year, 
including any deficit resulting from monthly payments totaling less 
than the breakeven amount for the project; and
    (5) Funds needed for nonroutine maintenance of vacated homes with 
insufficient NRMR balances to put them in suitable condition for 
reoccupancy by subsequent homeowners.
    (b) Nonroutine maintenance--common property (contribution to 
operating reserve. The amount under this heading to be included in 
operating expense (and in the breakeven amount) established for the 
fiscal year shall be determined by the IHA, on the basis of estimates 
of the monthly amount needed to accumulate an adequate reserve for the 
items described in paragraph (a)(1) of this section. This amount shall 
be subject to revision in the light of experience. This contribution to 
the operating reserve shall be made only during the period the IHA is 
responsible for the maintenance of any common property; and during such 
period, the amount shall be determined on the basis of the requirements 
of all common property in the development.
    (c) Transfer to homeowners' association. Where a Turnkey III 
development includes common property, the IHA shall be responsible for 
and shall retain custody of the operating reserve until the homeowners 
acquire voting control of the homeowners' association. When the 
homeowners acquire voting control, the homeowners' association shall 
then assume full responsibility for management and maintenance of 
common property under a plan, agreed upon by the IHA and the homeowners 
association and there shall be transferred to the homeowners' 
association a portion of the operating reserve then held by the IHA. 
This provision shall not apply where there is no common property or 
where there is no duly organized and functioning homeowners 
association.
    (d) Disposition of reserve. If, at the end of a fiscal year, there 
is an excess over the maximum operating reserve, this excess shall be 
applied to the operating deficit of the project, if any, and any 
remainder shall be used for such purposes as approved by HUD under an 
ACC. Following the end of the fiscal year in which the last home has 
been conveyed by the IHA, the balance of the operating reserve held by 
the IHA shall be paid to HUD, or retained by the IHA in a replacement 
reserve if an ACC amendment has been executed implementing loan 
forgiveness, provided that the aggregate amount of payments by the IHA 
under this paragraph shall not exceed the aggregate amount of annual 
contributions paid by HUD with respect to the development.


Sec. 950.523  Operating subsidy.

    Operating subsidy may be paid by HUD, subject to the availability 
of funds for this purpose and at HUD's sole discretion, to cover an 
operating deficit as approved by HUD in an operating budget submitted 
by an IHA for a Turnkey III project. However, operating subsidy or 
project funds may not be used to establish or maintain the homebuyer 
reserve accounts. Project funds may be used on a temporary basis to pay 
the cost of utilities for an individual unit by way of a utility 
reimbursement when a homebuyer has insufficient tenant income to cover 
even the utilities. In such a case, the inability of the homebuyer to 
pay utilities constitutes a loss of homeownership potential and 
continuing eligibility for the Turnkey III program.


Sec. 950.525  Purchase price and methods of purchase.

    (a) Purchase price. The purchase price for the initial and 
subsequent homebuyer shall be determined by the IHA.
    (b) Purchase price schedule. On the date when the homebuyer 
agreement is signed, the IHA shall provide the homebuyer with a 
Purchase Price Schedule, showing the monthly declining purchase price 
over the term of the HOOA agreement (a period not less than 15 years or 
more than 25 as determined by the IHA, at an interest rate determined 
by the IHA.) The IHA may choose to forego charging interest and 
calculate the payment with an interest rate of zero.
    (c) Methods of purchase. (1) The homebuyer may achieve ownership 
when the amount in the EHPA, plus such portion of the NRMR as the 
homebuyer wishes to use for the purchase, is equal to the unamortized 
balance purchase price as shown at that time on the homebuyer's 
purchase price schedule plus all incidental costs (the costs incidental 
to acquiring ownership, including, but not limited to, the costs for a 
credit report, field survey, title examination, title insurance, and 
inspections, the fees for attorneys other than the IHA's attorney, 
mortgage application, closing and recording, and the transfer taxes and 
loan discount payment, if any). If for any reason title to the home is 
not conveyed to the homebuyer during the month in which the combined 
total in the EHPA and designated portion of the NRMR equals the 
purchase price, the balance of the purchase price shall be fixed as the 
amount specified for that month and the homebuyer shall be refunded:
    (i) The net additions, if any, credited to the EHPA after that 
month, and
    (ii) Such part of the monthly payments made by the homebuyer after 
the balance of the purchase price has been fixed which exceeds the 
breakeven amount attributable to the unit.
    (2) Where the sum of the unamortized balance of the purchase price 
and incidental costs is greater than the amounts in the homebuyer's 
EHPA and NRMR, the homebuyer may achieve ownership by obtaining 
financing for or otherwise paying the excess amount. The unamortized 
balance of the purchase price shall be the amount shown on the 
homebuyer's purchase price schedule for the month in which the 
settlement date for the purchase occurred.
    (3) Period required to achieve ownership. The maximum period for 
achieving ownership shall be 30 years, but depending upon increases in 
the homebuyer's income and the amount of credit which the homebuyer can 
accumulate in the EHPA and NRMR the period may be shortened 
accordingly.
    (4) Residual receipts. After payment in full of the IHA's debt, if 
there are any subsequent homebuyers who have not acquired ownership of 
their homes, the IHA shall retain all residual receipts from the 
operation of the development in a replacement reserve.
    (5) IHA financing. The IHA may, at its discretion, provide 
financing for purchases by homebuyers, or assist with financing, by 
such methods and on such terms and conditions as be agreeable to the 
IHA and the homebuyer, without any requirement for prior HUD approval. 
The financing may be provided using such methods as a mortgage or a 
loan agreement.
    (6) Transfer of title to homebuyer. When the homebuyer is to obtain 
ownership, a closing date shall be mutually agreed upon by the parties. 
On the closing date the homebuyer shall pay the required amount of 
money to the IHA, sign the promissory note in accordance with 
Sec. 950.527, and receive a deed for the home.


Sec. 950.527  Payment upon resale at profit.

    (a) Promissory note. (1) When a homebuyer achieves ownership, the 
homebuyer shall sign a note obligating him or her to make payment to 
the IHA, subject to the provisions of paragraph (a)(2) of this section, 
in the event the homebuyer resells the home at a profit within five 
years of actual residence in the home after becoming a homeowner. If, 
however, the homeowner should purchase and occupy another home within 
one year (18 months in the case of a newly constructed home) of the 
resale of the Turnkey III home, the IHA shall refund to the homeowner 
the amount previously paid under the note, less the amount, if any, by 
which the resale price of the Turnkey III home exceeds the acquisition 
price of the new home, provided that application for such refund shall 
be made no later than 30 days after the date of acquisition of the new 
home.
    (2)(i) The note to be signed by the homebuyer pursuant to paragraph 
(a)(1) of this section shall be a noninterest-bearing promissory note 
to the IHA. The note shall be executed at the time the homebuyer 
becomes a homeowner and shall be secured by a second mortgage. The 
initial amount of the note shall be computed by taking the appraised 
value of the home at the time the homebuyer becomes a homeowner and 
subtracting:
    (A) The homebuyer's purchase price plus incidental costs (as 
described in Sec. 950.525(c);) and
    (B) The increase in value of the home as determined by appraisal, 
caused by improvements paid for by the homebuyer with funds from 
sources other than the EHPA or NRMR.
    (ii) The note shall provide that this initial amount shall be 
automatically reduced by 20 percent thereof at the end of each year of 
residency as a homeowner, with the note terminating at the end of the 
five-year period of residency, as determined by the IHA. To protect the 
homeowner, the note shall provide that the amount payable under it 
shall in no event be more than the net profit on the resale, that is, 
the amount by which the resale price exceeds the sum of:
    (A) The homebuyer's purchase price plus incidental costs,
    (B) The costs of the resale, including commissions and mortgage 
prepayment penalties, if any, and
    (C) The increase in value of the home, determined by appraisal, due 
to improvements paid for as a homebuyer (with funds from sources other 
than the EHPA or NRMR) or as a homeowner.
    (3) Amounts collected by the IHA under such notes shall be retained 
by the IHA for use in making refunds pursuant to paragraph (a)(1) of 
this section. After expiration of the period for the filing of claims 
for such refunds, any remaining amounts shall be used for such purposes 
as may be authorized or approved by HUD under such Annual Contributions 
Contract as the IHA may then have with HUD.
    (b) Residency requirements. The five-year note period does not end 
if the homeowner rents or otherwise does not use the home as the 
homeowner's principal place of residence for any period within the 
first five years after achieving ownership. Only the actual amount of 
time the homeowner is in residence is counted, and the note shall be in 
effect until a total of five years time of residence has elapsed, at 
which time the homeowner may request that the IHA release him or her 
from the note, and the mortgage securing the note. The IHA shall 
release the homeowner upon such a request.
    (c) Death of homeowner. In the event of the death of the homeowner, 
or last surviving co-owner, prior to the end of the five-year period of 
the promissory note, the IHA may, at its sole discretion, cancel the 
note and release the encumbrance of the mortgage, in whole or in part.


Sec. 950.529  Termination of Homebuyer Ownership Opportunity Agreement.

    (a) Termination by IHA. (1) In the event the homebuyer should 
breach the Homebuyer Ownership Opportunity Agreement by failure to make 
the required monthly payment within ten days after its due date, by 
misrepresentation or withholding of information in applying for 
admission or in connection with any subsequent reexamination of income 
and family composition, by failure to comply with any of the other 
homebuyer obligations under the agreement, by loss of homeownership 
potential (beyond a temporary, unforeseen change in circumstances) (see 
Sec. 950.503(c)(3)), an income that requires outright purchase (see 
Sec. 950.525(b)), the IHA may terminate the agreement 30 days after 
giving the homebuyer notice of its intention to do so in accordance 
with paragraph (a)(2) of this section.
    (2) Notice of termination by the IHA shall be in writing. Such 
notice shall state:
    (i) The reason for termination;
    (ii) That the homebuyer may respond to the IHA, in writing or in 
person, within a specified reasonable period of time regarding the 
reason for termination;
    (iii) That in such response the homebuyer may be represented by the 
HBA;
    (iv) That the IHA will consult the HBA concerning this termination;
    (v) That unless the IHA rescinds or modifies the notices, the 
termination shall be effective at the end of the 30-day notice period; 
and
    (vi) That, in the case of termination as a result of loss of 
homeownership potential when the homebuyer is otherwise in compliance 
with the agreement, the family will be offered a transfer to a rental 
unit (whether or not in concert with a conversion of that unit to the 
rental program). If a rental unit of appropriate size is available, the 
family will be notified of a transfer to that unit. If no other unit is 
then available and the homebuyer's current unit is not to be converted 
to rental, the family will be notified that it may remain in place 
until an appropriate rental unit becomes available (in which case the 
unit remains under the Turnkey III project). Otherwise, the notice 
shall state that the transfer shall occur as soon as a suitable rental 
unit is available for occupancy, but no earlier than 30 days from the 
date of the notice. The notice shall also state that if the homebuyer 
should refuse to move under such circumstances, the family may be 
required to vacate the homebuyer unit, without further notice.
    (b) Termination by the homebuyer. The homebuyer may terminate the 
Homebuyer Ownership Opportunity Agreement by giving the IHA 30 days 
notice in writing of this intention to terminate and vacate the home. 
In the event that the homebuyer vacates the home without notice to the 
IHA, the agreement shall be terminated automatically and the IHA may 
dispose of, in any manner deemed suitable by it, any items of personal 
property left by the homebuyer in the home.
    (c) Transfer to the rental program. In the event of termination of 
the Homebuyer Ownership Opportunity Agreement by the IHA or by the 
homebuyer with adequate notice, the homebuyer may be transferred to a 
suitable unit in the rental program, in accordance with 
Sec. 950.503(c)(3)(ii) or terminated from occupancy. If the homebuyer 
is transferred to the rental program, the amount in the homeowner's 
EHPA shall be paid in accordance with Sec. 950.517(i).
* * * * *

Subpart I--Modernization Program

General Provisions


Sec. 950.600  Purpose and applicability.

    (a) Purpose. The purpose of this section is to set forth the 
policies and procedures for the Modernization program, authorizing HUD 
to provide financial assistance to Indian Housing Authorities (IHAs) 
to:
    (1) Improve the physical condition and upgrade the management and 
operation of existing Indian housing developments;
    (2) Assure that such developments continue to be available to serve 
low-income families;
    (3) Assess the risks of lead-based paint poisoning through the use 
of professional risk assessments that include dust and soil sampling 
and laboratory analysis in all developments constructed before 1980 
that are, or will be occupied by families; and
    (4) Take effective interim measures to reduce and contain the risks 
of lead-based paint poisoning recommended in such professional risk 
assessments.
    (b) Applicability. (1) The undesignated heading entitled, General 
Provisions, applies to all modernization under this subpart. The 
undesignated heading entitled, Comprehensive Improvement Assistance 
Program (CIAP), sets forth the requirements and procedures for the CIAP 
for IHAs that own or operate fewer than 250 Indian housing units. An 
IHA that qualifies for participation in the CGP is not eligible to 
participate in the CIAP. The undesignated heading entitled, 
Comprehensive Grant program (CGP), sets forth the requirements and 
procedures for the CGP for IHAs that own or operate 250 or more Indian 
housing units. For purposes of the 250 or more unit threshold for 
participation in the CGP, and for the formula allocation under 
Sec. 950.601, an existing rental, Mutual Help or section 23 bond-
financed unit under the ACC shall count as one unit; and a unit under 
the Turnkey III program shall count as one-fourth of a unit. An IHA 
that has already qualified to participate in the CGP because it owns or 
operates 250 or more units, may elect to continue to participate in the 
CGP so long as it owns or operates at least 200 units.
    (2) This subpart applies to IHA-owned low-income Indian housing 
developments (including developments managed by a Resident Management 
Corporation pursuant to a contract with the IHA), and to section 23 
Leased Housing Bond-Financed developments, for which IHAs request 
assistance under the CIAP or CGP. This subpart also applies to the 
implementation of modernization programs which were approved before FFY 
1992. Rental developments that are planned for conversion to 
homeownership under sections 5(h), 21, or 301 of the Act, but which 
have not yet been sold by an IHA, continue to qualify for assistance 
under this part. This subpart does not apply to developments under the 
section 23 Leased Housing Non-Bond Financed program, the section 10(c) 
Leased program, or the section 23 or section 8 Housing Assistance 
Payments programs.
    (c) Transition. Any amount that HUD has obligated to an IHA under 
CIAP must be used for the purposes for which the funding was provided, 
or for purposes consistent with an approved action plan submitted by 
the IHA under the CGP, as the IHA determines to be appropriate.
    (d) Other. See subpart A of this part for applicable requirements, 
other than the Act, that apply to modernization under this subpart.


Sec. 950.601  Allocation of funds under section 14.

    (a) General. This section describes the process for allocating 
modernization funds to the aggregate of IHAs and PHAs participating in 
the CIAP (i.e., agencies that own or operate fewer than 250 units), and 
to individual IHAs and PHAs participating in the CGP (i.e., agencies 
that own or operate 250 or more units). The program requirements 
governing PHA participation in the CIAP and CGP are contained in 24 CFR 
part 968.
    (b) Set-aside for emergencies and disasters. For each FFY, HUD 
shall reserve from amounts approved in the appropriation act for grants 
under this part and 24 CFR part 968, $75 million (which shall include 
unused reserve amounts carried over from previous FFYs), which shall be 
made available to IHAs and PHAs for modernization needs resulting from 
natural and other disasters, and from emergencies. HUD shall replenish 
this reserve at the beginning of each FFY so that it always begins with 
a $75 million balance. Any unused funds from previous years will remain 
in the reserve until allocated. The requirements governing the reserve 
for disasters and emergencies and the procedures by which an IHA may 
request such funds, are set forth in Sec. 950.667.
    (c) Set-aside for credits for mod troubled PHAs under 24 CFR part 
968, subpart C. (1) General. After deducting amounts for the reserve 
for natural and other disasters and for emergencies under paragraph (b) 
of this section, HUD shall set aside no more than five percent of the 
remaining amount for the purpose of providing credits to PHAs under 24 
CFR part 968 (subpart C) that were formerly designated as mod troubled 
agencies under the Public Housing Management Assessment program 
(``PHMAP'') at 24 CFR part 901. The purpose of this set-aside is to 
compensate such PHAs for amounts previously withheld by HUD because of 
their prior designation as a mod troubled agency.
    (2) Nonapplicability to IHAs. Since the PHMAP performance 
indicators under 24 CFR part 901 do not apply to IHAs, these agencies 
cannot be deemed ``mod troubled'' for purposes of the CGP. Hence, IHAs 
are not subject to any reduction in funding under section 14(k)(5)(a) 
of the Act, nor do they participate in the set-aside of credits 
established under paragraph (c)(1) of this section.
    (d) Formula allocation based on relative needs. After determining 
the amounts to be reserved under paragraphs (b) and (c) of this 
section, HUD shall allocate the amount remaining pursuant to the 
formula set forth in paragraphs (e) and (f) of this section, which is 
designed to measure the relative backlog and accrual needs of IHAs and 
PHAs.
    (e) Allocation for backlog needs. HUD shall allocate half of the 
formula amount under paragraph (d) of this section based on the 
relative backlog needs of IHAs and PHAs, as follows:
    (1) Determination of backlog need. (i) Statistically reliable data. 
Where HUD determines that the data concerning the categories of backlog 
need identified under paragraph (e)(4) of this section are 
statistically reliable for individual IHAs and PHAs with 250 or more 
units, or the aggregate of IHAs and PHAs with fewer than 250 units not 
participating in the formula funding portion of the modernization 
program, it will base its allocation on direct estimates of the 
statutory categories of backlog need, based on the most recently 
available, statistically reliable data.
    (ii) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories 
of backlog need identified under paragraph (e)(4) of this section are 
not available for individual IHAs and PHAs with 250 or more units, it 
will base its allocation of funds under this section on estimates of 
the categories of backlog need using:
    (A) The most recently available data on the categories of backlog 
need under paragraph (e)(4) of this section;
    (B) Objectively measurable data concerning the following IHA or 
PHA, community and development characteristics:
    (1) The average number of bedrooms in the units in a development. 
(Weighted at 2858.7);
    (2) The proportion of units in a development available for 
occupancy by very large families. (Weighted at 7295.7);
    (3) The extent to which units for families are in high-rise 
elevator developments. (Weighted at 5555.8);
    (4) The age of the developments, as determined by the DOFA date 
(date of full availability). In the case of acquired developments, HUD 
will use the DOFA date unless the IHA provides HUD with the actual date 
of construction, in which case HUD will use the age of the development 
(or, for scattered sites, the average age of all the buildings), 
subject to a 50 year cap. (Weighted at 206.5);
    (5) In the case of a large agency, the number of units with 2 or 
more bedrooms. (Weighted at .433);
    (6) The cost of rehabilitating property in the area. (Weighted at 
27544.3);
    (7) For family developments, the extent of population decline in 
the unit of general local government determined on the basis of the 
1970 and 1980 censuses. (Weighted at 759.5); and
    (C) An equation constant of 1412.9.
    (2) Calibration of backlog need for developments constructed prior 
to 1985. The estimated backlog need, as determined under either 
paragraphs (e)(1)(i) or (e)(1)(ii) of this section, shall be adjusted 
upward for developments constructed prior to 1985 by a constant ratio 
of 1.5 to more accurately reflect the costs of modernizing the 
categories of backlog need under paragraph (e)(4) of this section, for 
the Indian housing stock as of 1991.
    (3) Deduction for prior modernization. HUD shall deduct from the 
estimated backlog need, as determined under either paragraphs (e)(1)(i) 
or (e)(1)(ii) of this section, amounts previously provided to an IHA or 
PHA for modernization, using one of the following methods:
    (i) Standard deduction for prior CIAP and MROP. HUD shall deduct 60 
percent of the CIAP funds made available on an IHA-wide or PHA-wide 
basis from FFY 1984 to 1991, and 40 percent of the funds made available 
on a development-specific basis for the Major Reconstruction of 
Obsolete Projects (MROP) (not to exceed the estimated formula need for 
the development), subject to a maximum fifty percent deduction of an 
IHA's or PHA's total need for backlog funding;
    (ii) Newly constructed units. Units with a DOFA date of October 1, 
1991 or thereafter will be considered to have a zero backlog; or
    (iii) Acquired developments. Developments acquired by an IHA with 
major rehabilitation, with a DOFA date of October 1, 1991 or thereafter 
will be considered to have a zero backlog.
    (4) Categories of backlog need. The most recently available data to 
be used under either paragraphs (e)(1)(i) or (e)(1)(ii) of this section 
must pertain to the following categories of backlog need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in Indian housing developments;
    (ii) Items that must be added to developments to meet HUD's 
modernization standards under Sec. 950.603, and State, local and Tribal 
codes; and
    (iii) Items that are necessary or highly desirable for the long-
term viability of a development, in accordance with HUD's modernization 
standards.
    (f) Allocation for accrual needs. HUD shall allocate the other half 
remaining under the formula allocation under paragraph (d) of this 
section based upon the relative accrual needs of IHAs and PHAs, 
determined as follows:
    (1) Statistically reliable data. Where HUD determines that 
statistically reliable data are available concerning the categories of 
need identified under paragraph (f)(3) of this section for individual 
IHAs and PHAs with 250 or more units and for the aggregate of IHAs and 
PHAs with fewer than 250 units it shall base its allocation of 
assistance under this section on the needs that are estimated to have 
accrued since the date of the last objective measurement of backlog 
needs under paragraph (e)(1)(i) of this section; or
    (2) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories 
of need identified under paragraph (f)(3) of this section are not 
available for individual IHAs and PHAs with 250 or more units, it shall 
base its allocation of assistance under this section on estimates of 
accrued need using:
    (i) The most recently available data on the categories of backlog 
need under paragraph (f)(3) of this section;
    (ii) Objectively measurable data concerning the following IHA or 
PHA, community, and development characteristics:
    (A) The average number of bedrooms in the units in a development. 
(Weighted at 100.1);
    (B) The proportion of units in a development available for 
occupancy by very large families. (Weighted at 356.7);
    (C) The age of the developments. (Weighted at 10.4);
    (D) The extent to which the buildings in developments of an agency 
average fewer than 5 units. (Weighted at 87.1.);
    (E) The cost of rehabilitating property in the area. (Weighted at 
679.1);
    (F) The total number of units of each IHA or PHA that owns or 
operates 250 or more units. (Weighted at .0144); and
    (iii) An equation constant of 602.1.
    (3) Categories of need. The data to be provided under either 
paragraph (f)(1) or (f)(2) of this section must pertain to the 
following categories of need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in Indian housing developments; and
    (ii) Items that must be added to developments to meet HUD's 
modernization standards under Sec. 950.603, and State, local and Tribal 
codes.
    (g) Allocation for CIAP. The formula amount determined under 
paragraphs (e) and (f) of this section for IHAs and PHAs with fewer 
than 250 units shall be allocated to IHAs in accordance with the 
requirements of the undesignated heading under this subpart entitled, 
``Comprehensive Improvement Assistance Program,'' (CIAP) and to PHAs in 
accordance with the requirements of 24 CFR part 968 (subpart B).
    (h) Allocation for CGP. The formula amount determined under 
paragraphs (e) and (f) of this section for IHAs with 250 or more units 
shall be allocated in accordance with the requirements of the 
undesignated heading under this subpart entitled, ``Comprehensive Grant 
Program,'' and for PHAs in accordance with the requirements of 24 CFR 
part 968 (subpart C). An IHA that is eligible to receive a grant under 
the CGP may appeal the amount of its formula allocation under this 
section in accordance with the requirements set forth in 
Sec. 950.669(b). An IHA which is eligible to receive modernization 
funds under the CGP because it owns or operates 250 or more units, is 
disqualified from receiving assistance under the CIAP under this part.
    (i) Use of formula allocation. Any amounts allocated to an IHA 
under paragraphs (e) and (f) of this section may be used for any 
eligible activity under this subpart, notwithstanding that the 
allocation amount is determined by allocating half based on the 
relative backlog needs and half based on the relative accrual needs of 
IHAs and PHAs.
    (j) Calculation of number of units. For purposes of determining 
under this section the number of units owned or operated by an IHA or 
PHA, and the relative modernization needs of IHAs and PHAs, HUD shall 
count as one unit each existing rental, Mutual Help and section 23 
Bond-Financed unit under the ACC, except that it shall count as one-
fourth of a unit each existing unit under the Turnkey III program. New 
development units that are added to an IHA's or PHA's inventory will be 
added to the overall unit count so long as they are under ACC amendment 
and have reached DOFA by the first day in the FFY in which the formula 
is being run. Any increase in units (reaching DOFA and under ACC 
amendment) as of the beginning of the FFY shall result in an adjustment 
upwards in the number of units under the formula. New units reaching 
DOFA after this date will be counted for formula purposes as of the 
following FFY.
    (k) Demolition, disposition and conversion of units. (1) General. 
Where an existing unit under an ACC is demolished, disposed of, or 
converted into a larger or smaller unit, HUD shall not adjust the 
amount the IHA or PHA receives under the formula, unless more than one 
percent of the units are affected on a cumulative basis. Where more 
than one percent of the existing units are demolished, disposed of, or 
converted, HUD shall reduce the formula amount for the IHA or PHA over 
a 3-year period to reflect removal of the units from the ACC.
    (2) Determination of one percent cap. In determining whether more 
than one percent of the units are affected on a cumulative basis, HUD 
will compare the units eligible for funding in the initial year under 
formula funding with the number of units eligible for funding for 
formula funding purposes for the current year, and shall base its 
calculations on the following:
    (i) Increases in the number of units resulting from the conversion 
of existing units will be added to the overall unit count so long as 
they are under ACC amendment by the first day of the FFY in which the 
formula is being run;
    (ii) Units which are lost as a result of demolition, disposition or 
conversion shall not be offset against units subsequently added to an 
IHA's or PHA's inventory;
    (iii) For purposes of calculating the number of converted units, 
HUD shall regard the converted size of the unit as the appropriate unit 
count (e.g., a unit that originally was counted as one unit under 
paragraph (j) of this section, but which later was converted into two 
units, shall be counted as two units under the ACC).
    (3) Phased-in reduction of units. (i) Reduction less than one 
percent. If HUD determines that the reduction in units under paragraph 
(k)(2) of this section is less than one percent, the IHA or PHA will be 
funded as though no change had occurred.
    (ii) Reduction greater than one percent. If HUD determines that the 
reduction in units under paragraph (k)(2) of this section is greater 
than one percent, the number of units on which formula funding is based 
will be the number of units reported as eligible for funding for the 
current program, plus two thirds of the difference between the initial 
year and the current year in the first year, plus one third of the 
difference in the second year, and at the level of the current year in 
the third year.
    (iii) Exception. A unit that is conveyed under the Mutual Help or 
Turnkey III programs will result in an automatic (rather than a phased-
in) reduction in the unit count.
    (4) Subsequent reductions in unit count. (i) Once an IHA's or PHA's 
unit count has been fully reduced under paragraph (k)(3)(ii) of this 
section to reflect the new number of units under the ACC, this new 
number of units will serve as the base for purposes of calculating 
whether there has been a one-percent reduction in units on a cumulative 
basis.
    (ii) A reduction in formula funding, based upon additional 
reductions to the number of an IHA's or PHA's units, will also be 
phased in over a three-year period, as described in paragraph (k)(2) of 
this section.


Sec. 950.602  Special requirements for Turnkey III and Mutual Help 
developments.

    (a) Modernization costs. Modernization work on a Mutual Help or 
Turnkey III unit shall not increase the purchase price or amortization 
period of the home.
    (b) Paid off units. (1) Turnkey III units. Modernization work on 
any Turnkey III units that have been paid off, even though not 
conveyed, by the time the CIAP application or CGP annual statement is 
submitted is ineligible. However, modernization work on any Turnkey III 
units that have not been paid off at the time the CIAP application or 
CGP annual statement is submitted and that is included in the CIAP 
application or annual statement is eligible even where the units are 
subsequently paid off before the work is completed. Notwithstanding 
this requirement, work which is necessary to meet statutory and 
regulatory requirements (e.g., handicapped accessibility, lead-based 
paint testing, interim containment, professional risk assessment, and 
abatement) may be performed on paid off Turnkey III units so long as 
the work is completed prior to conveyance.
    (2) Mutual Help units. An IHA may use CIAP or CGP funds under this 
subpart for the purposes of modernizing a Mutual Help unit which is 
paid off though not conveyed, and may do so only with a unit which the 
IHA has identified in its CIAP application or Comprehensive Plan 
(including its action plan and work statement). In accordance with the 
provisions of Sec. 950.440(e)(8)(iii), an IHA may perform non-emergency 
work on a paid off Mutual Help unit only after all delinquencies are 
repaid.
    (c) Other. The homebuyer family must be in compliance with its 
financial obligations under its homebuyer agreement in order to be 
eligible for non-emergency physical improvements, with the exception of 
work necessary to meet statutory and regulatory requirements, (e.g., 
handicapped accessibility, lead-based paint testing, interim 
containment, professional risk assessment, and abatement) and the 
correction of development deficiencies. Notwithstanding the above 
requirement, an IHA may, with prior HUD Field Office approval, complete 
non-emergency physical improvements on any homeownership unit where the 
IHA demonstrates that, due to economies of scale or geographic 
constraints, substantial cost savings may be realized by completing all 
necessary work in a development at one time.


Sec. 950.603  Modernization and energy conservation standards.

    (a) All improvements funded under this subpart, which may include 
alterations, betterments, additions, replacements or non-routine 
maintenance, shall meet the HUD modernization standards, described in 
paragraph (b) of this section, comply with lead-based paint testing and 
abatement requirements in subpart H of this part, and provide decent, 
safe, and sanitary living conditions in IHA-owned and IHA-operated 
housing. All improvements funded under this part shall meet the HUD-
energy conservation standards for cost-effective energy conservation 
measures in such developments, described in paragraphs (c) and (d) of 
this section.
    (b) The modernization standards are comprised of both mandatory and 
development-specific standards. The mandatory standards are intended to 
provide decent, safe, and sanitary living conditions in Indian housing, 
including corrections of violations of basic health and safety codes, 
and to address all deficiencies, including those related to deferred 
maintenance. The development-specific standards permit an IHA to 
undertake improvements that are necessary or highly desirable for the 
long-term physical and social viability of a development, which 
includes site and building security. The modernization standards are 
contained in HUD Handbook 7485.2, as revised, Public and Indian Housing 
Modernization Standards, and in other documents cited in the Handbook.
    (c) The energy conservation standards are standards for the 
installation of cost-effective energy conserving improvements, 
including solar energy systems. The energy conservation standards 
provide for the conducting or updating of energy audits, including 
cost-benefit analyses of energy saving opportunities, in order to 
determine which measures will be cost effective in conserving energy. 
The energy conservation standards are contained in the HUD Workbook, 
Energy conservation for Housing, and in other documents cited in the 
Workbook.
    (d) Life-cycle cost-effective energy performance standards 
established by HUD to reduce the operating costs of Indian housing 
developments over the estimated life of the buildings shall apply to 
developments modernized under this subpart. These standards are 
contained in HUD Handbook 7418.1, as revised, Life-Cycle Cost Analysis 
for Utility Combinations.

(Approved by the Office of Management and Budget under control 
number 2577-0024.)

Comprehensive Improvement Assistance Program (For IHAs that Own or 
Operate Fewer than 250 Indian Housing Units)


Sec. 950.609  Purpose.

    The purpose of the undesignated heading entitled, Comprehensive 
Improvement Assistance Program (CIAP), is to set forth the policies and 
procedures for the CIAP under which IHAs that own or operate fewer than 
250 units of Indian housing may receive financial assistance for the 
modernization of Indian housing developments, including Emergency and 
Other Modernization. Funding for this program is provided under section 
5(c) of the Act (42 U.S.C. 1437c(c)), pursuant to section 14(k) of the 
Act (42 U.S.C. 1437l(k)) (see Sec. 950.601 for the formula allocation 
process for the aggregate of CIAP agencies under this subpart).


Sec. 950.615  Eligible costs.

    (a) Demonstration of viability. Except in the case of emergency 
work, an IHA shall only expend funds on a development for which the IHA 
has determined, and HUD agrees, that the completion of the improvements 
and replacements will reasonably ensure the long-term physical and 
social viability of the development at a reasonable cost, as defined in 
Sec. 950.102.
    (b) Physical improvement costs for rental and Mutual Help 
developments. Eligible costs include alterations, betterments, non-
dwelling additions, replacements, and non-routine maintenance that are 
necessary to meet the modernization and energy conservation standards 
prescribed in Sec. 950.603. The modernization standards include 
mandatory and development specific work. The mandatory standards may be 
exceeded only when the IHA and HUD determine that it is necessary or 
highly desirable for the long-term physical and social viability of the 
individual development. If demolition or disposition is proposed, the 
IHA shall comply with subpart M of this part.
    (c) Turnkey III developments. (1) General. Eligible physical 
improvement costs for existing Turnkey III developments are limited to 
work items under Emergency Modernization or Other Modernization which 
are not the responsibility of the homebuyer families, and which are 
related to health and safety, correction of development deficiencies, 
physical accessibility, energy audits and cost-effective energy 
conservation measures, or lead-based paint testing, interim 
containment, professional risk assessment and abatement. In addition, 
eligible costs include management improvements under the modernization 
type of Other Modernization.
    (2) Ineligible costs. Nonroutine maintenance or replacements, 
dwelling additions, and items that are the responsibility of the 
homebuyer families are ineligible costs.
    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 
units.
    (i) Notwithstanding the requirements of paragraph (c)(1) of this 
section, an IHA may carry out Other Modernization in a Turnkey III 
development, whenever a Turnkey III unit becomes vacant or is occupied 
by a non-homebuyer family. An IHA that intends to use funds under this 
paragraph must identify in its CIAP application, the estimated number 
of units proposed for Other Modernization and subsequent sale. In 
addition, an IHA must certify that the IHA has homebuyers who are both 
eligible for homeownership, in accordance with the requirements of this 
part, and who have demonstrated their intent to be placed into each of 
the Turnkey III units proposed for Other Modernization.
    (ii) Before an IHA may be approved for Other Modernization of a 
unit under this paragraph, it must first deplete any Earned Home 
Payments Account (EHPA), or Non-Routine Maintenance Reserve (NRMR) 
pertaining to the unit, and request the maximum operating subsidy. Any 
increase in the value of a unit caused by its Other Modernization under 
this paragraph shall be reflected solely by its subsequent appraised 
value, and not by an automatic increase in its purchase price.
    (d) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or non-dwelling facilities, where 
the demolition is approved by HUD under subpart M of this part, and 
related costs, such as clearing and grading the site after demolition 
and subsequent site improvement to benefit the remaining portion of the 
existing development; and
    (2) Conversion of existing dwelling units to different bedroom 
sizes or to non-dwelling use.
    (e) Management improvement costs. (1) General. Management 
improvements that are development-specific or IHA-wide in nature are 
eligible costs where needed to upgrade the operation of the IHA's 
developments, sustain physical improvements at those developments or 
correct management deficiencies. Management improvements and planning 
costs may be funded as a single modernization project.
    (2) Ineligible costs. An IHA's ongoing operating expenses, 
including direct provision of social services through either contract 
or force account labor, are ineligible management improvement costs. In 
addition, where an approved modernization program includes management 
improvements which involve ongoing costs, HUD is not obligated to 
provide continued funding or additional operating subsidy after the end 
of the implementation period of the management improvements. An IHA is 
responsible for finding other funding sources, reducing its ongoing 
management costs, or terminating the management activities.
    (3) Eligible costs. Eligible costs include:
    (i) General management costs. Eligible general management costs 
include, but are not limited to: Management, financial, and accounting 
control systems of the IHA, rent collection and maintenance.
    (ii) Economic development costs. Economic development activities, 
such as job training and resident employment, for the purpose of 
carrying out activities related to the eligible management and physical 
improvements are eligible costs, as approved by HUD. HUD encourages 
IHAs, to the greatest extent feasible, to hire residents as trainees, 
apprentices, or employees to carry out the modernization program under 
this subpart.
    (iii) Resident management costs. Technical assistance to a resident 
council or resident management corporation (RMC), as defined in subpart 
O of this part, in order to determine the feasibility of the resident 
management entity or assist in its formation is an eligible cost.
    (iv) Resident homeownership costs. The study of the feasibility of 
converting rental to homeownership units, as well as the preparation of 
an application for conversion to homeownership, is an eligible cost.
    (f) Drug elimination costs. Drug elimination activities involving 
management or physical improvements are eligible costs, as specified by 
HUD.
    (g) Administrative costs. Administrative costs necessary for the 
planning (planning costs can be funded as a single modernization 
project), design, implementation and monitoring of the physical and 
management improvements are eligible costs, and include the following:
    (1) The salaries of nontechnical and technical IHA personnel 
assigned full-time or part-time to modernization are eligible costs 
only where the scope and volume of the work are beyond that which could 
reasonably be expected to be accomplished by such personnel in the 
performance of their non-modernization duties. An IHA shall properly 
apportion to the appropriate program budget any direct charges for the 
salaries of assigned full- or part-time staff (e.g., to the CIAP or 
operating budget);
    (2) IHA contributions to employee benefit plans on behalf of 
nontechnical and technical IHA personnel are eligible costs in direct 
proportion to the amount of salary charged to the CIAP; and
    (3) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (h) Architectural/engineering and consultant fees. Fees for 
planning, preparation of needs assessments and other required 
documents, detailed design work, assistance in the preparation of 
construction and bid documents, lead-based paint professional risk 
assessments and testing are eligible costs.
    (i) Relocation and moving costs. Relocation and other relocation 
assistance for permanent and temporary relocation are eligible costs, 
where this assistance is required by Sec. 950.117.
    (j) Cost limitations. (1) Management improvements. Management 
improvement costs shall not exceed 10 percent of the CIAP funds 
available to an Indian Field Office in a particular FFY.
    (2) Planning costs. Planning costs are costs incurred before HUD 
approval of the CIAP application and which are related to developing 
the CIAP application or carrying out eligible modernization planning, 
such as detailed design work, preparation of solicitations, and lead-
based paint professional risk assessment and testing. Planning costs 
may be funded as a single modernization project. If an IHA incurs 
planning costs without prior HUD approval, an IHA does so with the full 
understanding that the costs may not be reimbursed upon approval of the 
CIAP application. Planning costs shall not exceed 5 percent of the CIAP 
funds available to an Indian Field Office in a particular FFY.
    (3) Program benefit. Where the physical or management improvement 
will benefit programs other than Indian Housing, such as Section 8, 
local renewal, eligible costs are limited to the amount directly 
attributable to the Indian Housing Program.
    (k) Ineligible costs. An IHA shall not make luxury improvements, or 
carry out any other ineligible activities, as specified by HUD.


Sec. 950.618  Procedures for obtaining approval of a modernization 
program.

    (a) HUD notification. After modernization funds for a particular 
FFY become available, HUD shall publish in the Federal Register a 
notice of funding availability (NOFA) and the time frame for submission 
of applications.
    (b) IHA consultation with local officials and residents/homebuyers. 
An IHA shall develop the application in consultation with local 
officials and resident and homebuyers, as set forth in Sec. 950.624.
    (c) IHA application. An IHA shall submit to HUD an application, in 
a form prescribed by HUD, which shall include:
    (1) A general description of IHA development(s) (including the 
current physical condition, for each development for which the IHA is 
requesting funds, or for all the IHA's developments) and physical and 
management improvement needs (to meet the Secretary's standards in 
Sec. 950.603), general description of major work categories (e.g., 
kitchens, bathrooms) required to correct identified deficiencies and 
estimated costs, including a statement concerning consultation with 
local officials and residents and viability of the development(s). The 
application will also identify a cost estimate for the equipment 
systems or structural elements which would normally be replaced over 
the remaining period of the annual contributions contract or during the 
30-year period beginning on the date of submission of the application.
    (2) For management improvements, the application must identify the 
management improvement need, including a general description of the 
work required for correction and an estimated cost. Management areas 
for which needs should be identified include, but are not limited to, 
the following:
    (i) The management, financial, and accounting control systems of 
the IHA;
    (ii) The adequacy and qualifications of personnel employed by such 
IHA (in the management and operation of such developments) for each 
category of employment; and
    (iii) The adequacy and efficacy of resident programs and services 
in such developments, the security of each such development and its 
residents, policies and procedures of the IHA for the selection and 
eviction of residents in such developments, and other policies and 
procedures of such IHA relating to such developments, as specified by 
the Secretary; and
    (3) Any other documents, as may be required by HUD.
    (d) Completeness review. To be eligible for selection, an 
application must be received by the Field Office within the time period 
specified in the NOFA and must be complete. In order to determine 
whether an application is complete, responsive to the NOFA and 
acceptable for technical processing, the Field Office shall perform an 
initial completeness review upon receipt of the application. To make 
the above determination, the Field Office shall use the following 
criteria:
    (1) The application was received by HUD at the appropriate address 
by the date and time specified in the NOFA and was complete and 
responsive (excluding exhibits which are certifications); or
    (2) If an application is determined to be incomplete or to have 
missing certifications, the IHA shall be advised in writing of any 
deficiencies or any inconsistencies. The missing information is to be 
submitted within a specified period of time from the date of HUD's 
written notification. This is not additional time to substantially 
revise the application. Deficiencies which may be corrected at this 
time are inadvertently omitted documents or clarifications of 
previously submitted material and other changes which are not of such a 
nature as to improve the competitive position of the application. The 
IHA must acceptably correct deficiencies (including furnishing missing 
certifications) within the time specified in the NOFA.
    (e) Eligibility review. (1) Eligibility for processing. To be 
eligible for processing, based on the general description of its 
developments' condition and general statement of physical and 
management improvement needs, and the Field Office's knowledge of the 
development's conditions, the work items, particularly emergency work 
items, must appear to be eligible and needed.
    (2) Eligibility review on reduced scope. When the following 
conditions exist, the IHA will be reviewed on a reduced scope:
    (i) Where the IHA owes funds to HUD as a result of excess 
development, modernization or operating funds previously provided and 
the IHA has not repaid the funds, or has not entered into a repayment 
agreement, or is not meeting its obligations under a repayment 
agreement, the IHA is eligible for processing for Emergency 
Modernization only.
    (ii) Where the IHA has not complied with Fair Housing and Equal 
Opportunity (FHEO) requirements as set forth in Sec. 950.115, as 
evidenced by an action, finding or determination as described in 
paragraphs (e)(2)(ii)(A) through (E) of this section, unless the IHA is 
implementing a voluntary compliance agreement or settlement agreement 
designed to correct the area(s) of noncompliance, the IHA is eligible 
for processing only for Emergency Modernization or for work needed to 
remedy civil rights deficiencies.
    (A) A pending proceeding against the IHA based upon a charge of 
discrimination issued under the Fair Housing Act. A charge of 
discrimination is a charge under section 810(g)(2) of the Fair Housing 
Act (42 U.S.C. 3610(g)(2)), issued by the HUD's General Counsel or 
legally authorized designee;
    (B) A pending civil rights suit against the IHA, referred by the 
HUD's General Counsel and instituted by the Department of Justice;
    (C) Outstanding HUD findings of IHA noncompliance with civil rights 
statutes and executive orders under Sec. 950.115, or implementing 
regulations, as a result of formal administrative proceedings, unless 
the IHA is implementing a HUD-approved resident selection and 
assignment plan or compliance agreement designed to correct the area(s) 
of noncompliance;
    (D) A deferral of the processing of applications from the IHA 
imposed by HUD under title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d) and Sec. 950.115, the Attorney General's Guidelines (28 
CFR 50.3) and HUD's title VI regulations (24 CFR 1.8) and procedures 
(HUD Handbook 8040.1), or under section 504 of the Rehabilitation Act 
of 1973 (29 U.S.C. 794) and HUD's implementing regulations (24 CFR 
8.57); or
    (E) An adjudication of a violation under any of the authorities 
under Sec. 950.115 in a civil action filed against the IHA by a private 
individual, unless the IHA is implementing a HUD-approved resident 
selection and assignment plan or compliance agreement designed to 
correct the area(s) of noncompliance.
    (3) FHEO Division review. The processing office shall request the 
appropriate FHEO Division of the Field or Regional Office to identify 
any IHAs with equal opportunity-related problems. After consulting with 
Regional FHEO, as appropriate, and reviewing its own files, the FHEO 
Division shall identify each IHA by the following categories and 
provide any other relevant information within the requested time frame:
    (i) There are no known equal opportunity-related problems;
    (ii) There are known equal opportunity-related problems, as 
identified; or
    (iii) There are circumstances as set forth in paragraph (e)(2) of 
this section.
    (f) Technical processing. When an application is determined to be 
complete and responsive to the NOFA and eligible for processing, 
technical processing, consisting of the following, shall be 
accomplished:
    (1) The Field Office shall categorize the eligible IHAs and their 
developments into two processing groups: Group 1 for Emergency 
Modernization; and Group 2 for Other Modernization. IHA developments 
may be included in both groups and the same development may be in each 
group. The IHA only needs to submit one application which includes 
needs which the Field Office will process under Group 1 or Group 2. 
However, the IHA can submit Emergency Modernization applications 
whenever needed. Group 2 developments are subject to the long-term 
viability and reasonable cost analysis. Preference will be given to 
IHAs which request assistance for developments having conditions which 
threaten the health or safety of the residents or having a significant 
number of vacant, substandard units; and which have demonstrated a 
capability of carrying out the activities proposed. Within Group 2, the 
Secretary may give priority to compliance with statutory, regulatory, 
and court-ordered deadlines.
    (2) The Field Office will evaluate the Group 2 IHAs and 
developments to determine eligibility and acceptability based on the 
technical review factors in paragraph (g) of this section. Based on 
these factors, the Field Office shall determine the applications which, 
in its judgment, are approvable. Selections then shall be made in 
accordance with paragraph (h) of this section.
    (g) Technical review factors. The technical review factors for 
assistance include:
    (1) Extent and urgency of need, including need to comply with 
statutory, regulatory, or court-ordered deadlines;
    (2) Extent of vacancies;
    (3) IHA's modernization capability;
    (4) IHA's management capability;
    (5) Degree of resident involvement in IHA operations;
    (6) Degree of IHA activity in resident initiatives, including 
resident management, economic development, and drug elimination 
efforts;
    (7) Degree of resident employment;
    (8) Local government support for proposed modernization; and
    (9) Such additional factors as the Secretary determines necessary 
and appropriate.
    (h) Rating and ranking. The Field Office shall rate and rank each 
application in Group 2 on the basis of its assessment of the 
application using the technical review factors set forth in paragraph 
(g) of this section and in the NOFA. The Field Office shall identify 
for joint review selection the highest IHA ranking applications in 
Group 2 in descending order and other Group 2 HAs with lower ranking 
applications but with high priority needs, which most reasonably 
approximate the amount of modernization which can be funded. High 
priority needs are non-emergency needs, but related to: health or 
safety; vacant, substandard units; structural or system integrity; or 
compliance with statutory, regulatory or court-ordered deadlines. All 
Group 1 applications would be automatically selected for joint review.
    (i) Joint review. HUD shall notify each IHA whose application has 
been selected for further processing as to whether the joint review 
will be conducted on-site or off-site (e.g., by telephone or in-office 
meeting). The purpose of the joint review is to discuss the proposed 
modernization program, as set forth in the application, and determine 
the size of the grant, if any, to be awarded. Where the IHA has not 
included all its developments in the CIAP application, HUD may not, as 
a result of joint review consider funding any non-emergency work at 
excluded developments or subsequently approve use of leftover funds at 
excluded developments. An IHA shall prepare for the joint review by 
preparing a draft CIAP budget, and reviewing the other items to be 
covered during the joint review, as prescribed by HUD. If conducted on-
site, the joint review may include an inspection of the proposed 
physical work. IHAs not selected for joint review will be advised in 
writing of the reasons for nonselection.
    (j) HUD awards. Upon completion of the joint review, HUD shall 
adjust the amounts to be awarded, as necessary, based on information 
obtained at Joint Review, including the information received as a 
result of the FHEO review and completion of the environmental review, 
and announce the IHAs selected for CIAP grants (subject to their 
submission of an approvable CIAP budget and any other required 
documents). HUD would request the funded IHA to submit a CIAP budget, 
including an implementation schedule, a resolution by the IHA Board of 
Commissioners (approving the CIAP budget and containing certifications 
required by HUD), and any other necessary documents.
    (k) ACC amendment. After HUD approval of the CIAP budget, HUD and 
the IHA shall enter into an ACC amendment in order for the IHA to 
requisition modernization funds. The ACC amendment shall require low-
income use of the housing for not less than 20 years from the date of 
the ACC amendment (subject to sale of homeownership units in accordance 
with the terms of the ACC). HUD has the authority to condition an ACC 
amendment (e.g., to require an IHA to hire a modernization coordinator 
or contract administrator to a administer its modernization program).
    (l) Declaration of trust. An IHA shall execute and file for record 
a Declaration of Trust as provided under the ACC to protect the rights 
and interests of HUD throughout the 20-year period during which the IHA 
is obligated to operate its developments in accordance with the ACC, 
the Act, and HUD regulations and requirements. A Declaration of Trust 
is not required for Mutual Help units.


Sec. 950.624  Resident and homebuyer participation.

    (a) Resident participation. For a rental development only, the IHA 
shall establish a Partnership Process, as defined in Sec. 950.102, to 
develop, implement and monitor the CIAP. Before submission of the 
application, an IHA shall consult with the residents, the resident 
organization or the RMC (see subpart O of this part) of the development 
being proposed for modernization regarding its intent to submit an 
application for CIAP funds. An IHA shall give residents a reasonable 
opportunity to present their views on the proposed modernization 
program and alternatives to it, and give full and serious consideration 
to resident recommendations. An IHA shall respond in writing to the 
residents, the resident organization or the RMC, indicating its 
acceptance or rejection of resident recommendations, consistent with 
HUD requirements and the IHA's own determination of efficiency, 
economy, and need. After HUD approval of the modernization program, an 
IHA shall inform the residents, the resident organization or the RMC of 
the approved work items and its progress during implementation. Where 
HUD does not approve the modernization program, an IHA shall so inform 
the residents, the resident organization or the RMC.
    (b) Homebuyer participation: Turnkey III and Mutual Help. For a 
homeownership development only, before submission of the application, 
an IHA shall consult with the homebuyer families of the development 
proposed for modernization regarding its intent to submit an 
application for CIAP funds. An IHA shall give the homebuyer families a 
reasonable opportunity to present their views on the proposed 
modernization program and alternatives to it, and give full and serious 
consideration to their recommendations. An IHA shall respond in writing 
to the homebuyer families, indicating its acceptance or rejection of 
their recommendations, consistent with HUD requirements and the IHA's 
own determination of efficiency, economy, and need. After HUD approval 
of the modernization program, an IHA shall inform the homebuyer 
families of the approved work items and its progress during 
implementation. Where HUD does not approve the modernization program, 
an IHA shall so inform the homebuyer families.


Sec. 950.635  Initiation of modernization activities.

    After HUD has approved the modernization program and entered into 
an ACC amendment with the IHA, an IHA shall undertake the modernization 
activities and expenditures set forth in its approved CIAP budget in a 
timely, efficient and economical manner, subject to the following 
requirement. An IHA shall ensure that there is no duplication between 
the activities carried out with CIAP funds and the activities carried 
out with other funds.


Sec. 950.639  Fund requisitions.

    An IHA shall requisition modernization funds against the approved 
CIAP budget in accordance with procedures prescribed by HUD.


Sec. 950.642  Contracting requirements.

    An IHA shall comply with the prevailing wage rate requirements in 
Secs. 950.120 and 950.172, as well as the Indian Preference 
requirements in Sec. 950.175. In addition, an IHA shall comply with 
State, Tribal and local laws and Federal requirements, as set forth in 
24 CFR part 85, except as follows:
    (a) Architect/engineer and other professional services contracts. 
Notwithstanding 24 CFR 85.36(g), an IHA shall comply with HUD 
requirements to either:
    (1) Where the proposed contract amount exceeds the HUD-established 
threshold, submit the contract for prior HUD approval before execution 
or issuance; or
    (2) Where the proposed contract amount does not exceed the HUD-
established threshold, certify that the scope of work is consistent 
with any agreements reached with HUD, and that the amount is 
appropriate and does not exceed the HUD-approved CIAP budget amount.
    (b) Assurance of completion. For each construction contract over 
$25,000, the contractor shall furnish a performance and payment bond 
for 100 percent of the contract price or, notwithstanding 24 CFR 
85.36(h), a twenty percent cash escrow, or a twenty-five percent letter 
of credit or, as may be required by law, separate performance and 
payment bonds, each for fifty percent or more of the contract price.
    (c) Construction solicitations. Notwithstanding 24 CFR 85.36(g), an 
IHA shall comply with HUD requirements to either:
    (1) Where the estimated contract amount exceeds the HUD-established 
threshold, submit a complete construction solicitation for prior HUD 
approval before issuance; or
    (2) Where the estimated contract amount does not exceed the HUD-
established threshold, certify receipt of the required architect's/
engineer's certification that the construction documents accurately 
reflect HUD-approved work and meet the modernization and energy 
conservation standards and that the construction solicitation is 
complete and includes all mandatory items.
    (d) Contract awards. An IHA shall obtain HUD approval of the 
proposed award of a contract if the award exceeds the HUD-approved CIAP 
budget amount or if the procurement meets the criteria set forth in 24 
CFR 85.36(g)(2) (i) through (iv). In all other instances, an IHA shall 
make the award without HUD approval after the IHA has certified that:
    (1) The solicitation and award procedures were conducted in 
compliance with State, Tribal and local laws and Federal requirements;
    (2) The award does not exceed the approved CIAP budget amount and 
does not meet the criteria in 24 CFR 85.36(g)(2) (i) through (iv) for 
prior HUD approval;
    (3) The contractor is not on the Lists of Parties Excluded from the 
Federal Procurement or Nonprocurement Programs; and
    (e) Contract modifications. Notwithstanding 24 CFR 85.36(g), except 
in an emergency endangering life or property, an IHA shall comply with 
HUD requirements to either:
    (1) Where the proposed contract modification exceeds the HUD-
established threshold, submit the proposed modification for prior HUD 
approval before issuance; or
    (2) Where the proposed contract modification does not exceed the 
HUD-established threshold, certify that the proposed modification is 
within the scope of the contract and that any additional costs are 
within the latest HUD-approved CIAP budget or otherwise approved by 
HUD.
    (f) Construction requirements. An IHA may be required to submit to 
HUD periodic progress reports and construction completion documents for 
prior HUD approval above a HUD-specified amount.
    (g) Previous participation. An IHA shall ensure that the contractor 
is not on the GSA List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs.


Sec. 950.645  On-site inspections.

    It is the responsibility of the IHA, not HUD, to provide, by 
contract or otherwise, adequate and competent supervisory and 
inspection personnel during modernization, whether work is performed by 
contract or force account labor and with or without the services of an 
architect/engineer, to assure work quality and progress.


Sec. 950.648  Budget revisions.

    An IHA shall not incur any modernization cost in excess of the 
total HUD-approved CIAP budget. An IHA shall submit a budget revision, 
in a form prescribed by HUD, if the IHA plans (within the total 
approved CIAP budget) to incur modernization costs in excess of the 
approved CIAP budget amount for any development. An IHA also shall 
comply with HUD requirements to either:
    (a) Submit the proposed CIAP budget revision for prior HUD approval 
if the IHA plans to delete or substantially revise approved work items, 
add new work items, or incur modernization costs in excess of the HUD-
established threshold; or
    (b) Certify that the revisions are necessary to carry out the 
approved work and do not result in the approved CIAP budget amount for 
any development being exceeded.


Sec. 950.651  Progress reports.

    For each six-month period, beginning October 1, until completion of 
the modernization program or expenditure of all funds, an IHA shall 
submit a report, in a form prescribed by HUD, to the HUD Field Office. 
Where HUD determines that an IHA is having implementation problems, HUD 
may require more frequent reporting. The report shall include:
    (a) Modernization fund obligations and expenditures and progress 
against the approved implementation schedule(s); and
    (b) Management improvement progress, where applicable.


Sec. 950.654  HUD review of IHA performance.

    HUD shall periodically review IHA performance in carrying out its 
approved modernization program to determine compliance with HUD 
requirements, the quality of an IHA's inspections as evidenced by the 
quality of work, and the timeliness of the work. Where deficiencies are 
noted, an IHA shall take corrective action, as directed by HUD.


Sec. 950.657  Fiscal closeout.

    Upon completion or termination of a modernization program, the IHA 
shall submit the actual modernization cost certificate, in a form 
prescribed by HUD, to HUD for review, audit verification, and approval. 
An IHA shall immediately remit any excess funds provided by HUD. The 
audit shall follow the guidelines prescribed in 24 CFR part 44, Non-
Federal Government Audit Requirements. If the audited modernization 
cost certificate indicates that there are still excess funds, an IHA 
shall immediately remit the excess funds as directed by HUD. If the 
audited modernization cost certificate discloses unauthorized or 
ineligible expenditures, an IHA shall take such corrective actions as 
HUD may direct.

Comprehensive Grant Program (For IHAs That Own or Operate 250 or More 
Indian Housing Units)


Sec. 950.660  Purpose.

    (a) The purpose of the Comprehensive Grant Program (CGP) under this 
subpart is:
    (1) To provide modernization assistance to IHAs that own or operate 
a total of 250 or more units of Indian Housing on a reliable and more 
predictable basis, to enable them to operate, upgrade, modernize, and 
rehabilitate Indian housing developments, to ensure their continued 
availability for low income families as decent, safe, and sanitary 
housing;
    (2) To provide considerable discretion to IHAs to decide the 
specific improvements, the manner of their execution, and the timing of 
the expenditure of funds;
    (3) To simplify significantly the program of Federal assistance for 
capital improvements in Indian Housing developments;
    (4) To provide increased opportunities and incentives for more 
efficient management of Indian housing developments; and
    (5) To give IHAs greater control in planning and expending funds 
for modernization, rehabilitation, maintenance, and improvement of 
Indian housing developments to benefit low income families.
    (b) The purpose of the sections under the undesignated heading 
entitled, Comprehensive Grant Program (CGP), is to set forth the 
policies and procedures for the CGP under which IHAs that own and 
operate a total of 250 or more units of Indian housing receive 
financial assistance on a formula grant basis in accordance with 
Sec. 950.601(e) and (f) for the modernization of Indian housing 
developments.


Sec. 950.666  Eligible costs.

    (a) General. An IHA may use financial assistance received under the 
CGP for the following eligible costs:
    (1) Undertaking activities described in its approved action plan 
under Sec. 950.672(d)(5);
    (2) Carrying out emergency work, whether or not the need is 
indicated in the IHA's approved Comprehensive Plan (including Five-Year 
Action Plan) or Annual Submission;
    (3) Funding a replacement reserve to carry out eligible activities 
in future years, subject to the restrictions set forth in paragraph (f) 
of this section;
    (4) Preparing the Comprehensive Plan and action plan under 
Sec. 950.672, including reasonable costs necessary to assist residents 
to participate in a meaningful way in the planning, implementation and 
monitoring process; and
    (5) Carrying out an audit, in accordance with 24 CFR part 44 and 
Sec. 950.120.
    (b) Demonstration of viability. Except in the case of emergency 
work, an IHA shall only expend funds on a development for which the IHA 
has demonstrated that completion of the improvements and replacements 
identified in the Comprehensive Plan will reasonably ensure the long-
term physical and social viability of the development at a reasonable 
cost.
    (c) Physical improvement costs for rental and Mutual Help 
developments. Eligible costs include alterations, betterments, 
additions, replacements, and non-routine maintenance that are necessary 
to meet the modernization and energy conservation standards prescribed 
in Sec. 950.603. These mandatory standards may be exceeded only when 
the IHA determines that it is necessary or highly desirable for the 
long-term physical and social viability of the individual development. 
Such development specific work may include property purchases. If 
demolition or disposition is proposed, the IHA shall comply with 
subpart M of this part.
    (d) Costs for Turnkey III developments. (1) Eligible costs. 
Eligible physical improvement costs for existing Turnkey III 
developments are limited to work items which are not the responsibility 
of homebuyer families and which are related to health and safety, 
correction of development deficiencies, physical accessibility, energy 
audits and cost-effective energy conservation measures, and lead-based 
paint testing and abatement. In addition, management improvements are 
eligible modernization costs for existing homeownership developments.
    (2) Ineligible costs. Nonroutine maintenance or replacements, 
additions, and items that are the responsibility of the homebuyer 
families are ineligible costs.
    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 
units. (i) Notwithstanding the requirements of paragraph (d)(2) of this 
section, an IHA may substantially rehabilitate a Turnkey III 
development whenever a unit becomes vacant or is occupied by a non-
homebuyer family. An IHA that intends to use funds under this paragraph 
must identify in its needs assessment the estimated number of units 
that the IHA is proposing for substantial rehabilitation and subsequent 
sale. In addition, an IHA must demonstrate in its needs assessment 
that: the IHA has homebuyers who are both eligible for homeownership, 
in accordance with the requirements of subpart G of this part, and who 
have demonstrated their intent to be placed into each of the Turnkey 
III units proposed to be substantially rehabilitated.
    (ii) Before an IHA may be approved for the substantial 
rehabilitation of a unit under this paragraph, it must first deplete 
any Earned Home Payments Account (EHPA) or Non-Routine Maintenance 
Reserve (NRMR) pertaining to the unit, and request the maximum amount 
of operating subsidy. Any increase in the value caused by its 
substantial rehabilitation under this paragraph shall be reflected 
solely by its subsequent appraised value, and not by an automatic 
increase in its selling price.
    (e) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or nondwelling facilities, where 
the demolition is approved by HUD under subpart M of this part, and 
related costs, such as clearing and grading the site after demolition 
and subsequent site improvement to benefit the remaining portion of the 
existing development; and
    (2) Conversion of existing dwelling units to different bedroom 
sizes.
    (f) Replacement reserve costs. (1) Funding a replacement reserve to 
carry out eligible activities in future years is an eligible cost, 
subject to the following restrictions:
    (i) Annual CGP funds are not needed for existing needs, as 
identified by the IHA in its needs assessments; or
    (ii) A physical improvement requires more funds than the IHA would 
receive under its annual formula allocation; or
    (iii) A management improvement requires more funds than the IHA may 
use under its 20 percent limit for management improvements, and the IHA 
needs to save a portion of subsequent year(s) grants, to fund the work 
item;
    (2) The IHA shall invest replacement reserve funds so as to 
generate a return equal to or greater than the average 91-day Treasury 
bill rate;
    (3) Interest earned on funds in the replacement reserve will not be 
added to the IHAs income in the determination of an IHA's operating 
subsidy eligibility, but must be used for eligible modernization costs;
    (4) To the extent that its annual formula allocation and any 
unobligated balances of modernization funds are not adequate to meet 
emergency needs, an IHA must first use its replacement reserve, where 
funded, to meet emergency needs, before requesting funds from the $75 
million reserve. An IHA is not required to use its replacement reserve 
for natural and other disasters.
    (g) Management improvement costs. Management improvements that are 
needed to upgrade the operation of the IHA's developments, sustain 
physical improvements at those developments or correct management 
deficiencies identified by the IHA in its Comprehensive Plan are 
eligible costs. An IHA's ongoing operating expenses, including direct 
provision of social services through either contract or force account 
labor, are ineligible management improvement costs.
    (1) Economic development activities costs. Economic development 
activities such as job training, resident employment and resident 
businesses, for the purpose of carrying out activities related to the 
eligible management and physical improvements are eligible costs, as 
approved by HUD. HUD encourages IHAs, to the greatest extent feasible, 
to hire residents as trainees or employees to carry out the 
modernization program under this subpart, and to contract with 
resident-owned businesses for modernization work.
    (2) Resident management costs. Technical assistance to a resident 
council or resident management corporation (RMC), as defined in 
Sec. 950.455, in order to determine the feasibility of the resident 
management entity or assist in its formation is an eligible cost.
    (3) Resident homeownership costs. The study of the feasibility of 
converting rental to homeownership units, as well as the preparation of 
an application for conversion to homeownership, is an eligible cost.
    (h) Drug elimination costs. Drug elimination activities involving 
management or physical improvements are eligible costs, as specified by 
HUD.
    (i) Administrative costs. Administrative costs necessary for the 
planning, design, implementation and monitoring of the physical and 
management improvements are eligible costs and include the following:
    (1) The salaries of nontechnical and technical IHA personnel 
assigned full-time or part-time to modernization are eligible costs 
only where the scope and volume of the work are beyond that which could 
be reasonably expected to be accomplished by such personnel in the 
performance of their nonmodernization duties. The IHA shall properly 
apportion to the appropriate program budget any direct charges for the 
salaries of assigned full- or part-time staff (e.g., to the CIAP, CGP 
or operating budgets);
    (2) IHA contributions to employee benefit plans on behalf of 
nontechnical and technical IHA personnel are eligible costs in direct 
proportion to the amount of salary charged to the CGP; and
    (3) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (j) Audit costs.
    (k) Architectural/engineering and consultant fees. Fees for 
planning, preparation of needs assessments and required documents, 
detailed design work, preparation of construction and bid documents, 
lead-based paint testing, etc., are eligible costs.
    (l) Relocation costs. Relocation costs as a direct result of 
rehabilitation, demolition or acquisition for a CGP-funded activity are 
eligible costs, as required by Sec. 950.117.
    (m) Cost limitation. (1) Notwithstanding the full fungibility of 
work items in Sec. 950.675(c), an IHA shall not use more than a total 
of 20 percent of its annual grant for management improvement costs in 
account 1408, unless specifically approved by HUD, or unless the IHA is 
determined by the Field Office to be high performing and have 
administrative capacity under Sec. 950.135.
    (2) Notwithstanding the full fungibility of work items in 
Sec. 950.675(c), an IHA shall not use more than a total of 7 percent of 
its annual grant on administrative costs in account 1410, excluding any 
costs related to in-house lead-based paint or asbestos testing, in-
house architectural/engineering (A/E) work, or other special 
administrative costs required by state, tribal or local law, unless 
specifically approved by HUD. In the case of an IHA whose jurisdiction 
covers an unusually large geographic area, an additional two percent of 
the annual grant may be spent on costs related to travelling to the 
IHA's developments for CGP-related business, as specifically approved 
by HUD. (For purposes of this paragraph (m)(2), ``an unusually large 
geographic area'' means an area served by an IHA whose offices are 
physically separated from the majority of its developments by distances 
that require overnight travel and/or travel by air or other commercial 
carriers, e.g., a statewide IHA with developments in multiple 
localities; a regional IHA with developments in multiple counties or 
states; or an Alaska IHA with developments in multiple villages.);
    (3) Where the physical or management improvement will benefit 
programs other than Indian Housing, such as Section 8, local renewal, 
etc., eligible costs are limited to the amount directly attributable to 
the Indian Housing Program.
    (n) Ineligible costs. An IHA (or an RMC acting on behalf of an IHA) 
shall not make luxury improvements, or carry out any other ineligible 
activities, as specified by HUD.


Sec. 950.667  Reserve for emergencies and disasters.

    (a) Emergencies. (1) Eligibility for assistance. An IHA (including 
an IHA that is not considered to be administratively capable under 
Sec. 950.135) may obtain funds at any time, for any eligible emergency 
work item as defined in Sec. 950.102 (for IHAs participating in CGP) or 
for any eligible emergency work item (described as emergency 
modernization in Sec. 950.102) (for IHAs participating in CIAP), from 
the reserve established under Sec. 950.601(b). However, emergency 
reserve funds may not be provided to an IHA participating in CGP that 
has the necessary funds available from any other source, including its 
annual formula allocation under Sec. 950.601(e) and (f), other 
unobligated modernization funds, and its replacement reserves under 
Sec. 950.666. Emergency reserve funds may not be provided to an IHA 
participating in CIAP that has the necessary funds available from any 
other source, including unobligated CIAP (and no CIAP modernization is 
available for the remainder of the fiscal year) and residual receipts. 
IHAs participating in CIAP must also have the emergency modernization 
work under contract within 6 months after receiving HUD's approval of 
emergency reserve funds. An IHA is not required to have an approved 
Comprehensive Plan under Sec. 950.672 before it can request emergency 
assistance from this reserve.
    (2) Procedure. To obtain emergency funds, an IHA must submit a 
request, in a form to be prescribed by HUD, which demonstrates that 
without the requested funds from the set-aside under this section, the 
IHA does not have adequate funds available to correct the conditions 
which present an immediate threat to the health or safety of the 
residents. HUD will immediately process a request for such assistance 
and, if it determines that the IHA's request meets the requirements of 
paragraph (a)(1) of this section, it shall approve the request, subject 
to the availability of funds in the reserve.
    (3) Repayment. An IHA that receives assistance for its emergency 
needs from the reserve under Sec. 950.601(b) must repay such assistance 
from its future allocations of assistance, where available. For HAs 
participating in the CGP, HUD shall deduct up to 50 percent of an IHA's 
succeeding year's formula allocation under Sec. 950.601(e) and (f) to 
repay emergency funds previously provided by HUD to the IHA. The 
remaining balance, if any, shall be deducted from an IHA's succeeding 
years' formula allocations.
    (b) Natural and other disasters. (1) Eligibility for assistance. An 
IHA (including an IHA which has been determined by HUD not to be 
administratively capable under Sec. 950.135) may request assistance at 
any time from the reserve under Sec. 950.601(b) for the purpose of 
permitting the IHA to respond to a natural or other disaster. To 
qualify for assistance, the disaster must pertain to an extraordinary 
event affecting only one or a few IHAs, such as an earthquake or 
hurricane. Any disaster declared by the President (or which HUD 
determines would qualify for a Presidential declaration if it were on a 
larger scale) qualifies for assistance under this paragraph. An IHA may 
receive funds from the reserve regardless of the availability of other 
modernization funds or reserves, but only to the extent its needs are 
in excess of its insurance coverage. An IHA is not required to have an 
approved Comprehensive Plan under Sec. 950.672 before it can request 
assistance from the reserve under Sec. 950.601(b).
    (2) Procedure. To obtain funding for natural or other disasters 
under Sec. 950.601(b), an IHA must submit a request, in a form 
prescribed by HUD, which demonstrates that it meets the requirements of 
paragraph (b)(1) of this section. HUD will immediately process a 
request for such assistance and, if it determines that the request 
meets the requirements under paragraph (b)(1) of this section, it will 
approve the request, subject to the availability of funds in the 
reserve.
    (3) Repayment. Funds provided to an IHA under paragraph (b)(1) of 
this section for natural and other disasters shall be in the form of a 
grant, and are not required to be repaid.


Sec. 950.669  Allocation of assistance.

    (a) Submission of formula characteristics report. (1) Formula 
characteristics report. In its first year of participation in the CGP, 
each IHA shall verify and provide data to HUD, in a form and at a time 
to be prescribed by HUD, concerning IHA and development 
characteristics, so that HUD can develop the IHA's annual funding 
allocation under the CGP in accordance with Sec. 950.601(e) and (f). If 
an IHA fails to submit to HUD the formula characteristics report by the 
prescribed deadline, HUD will use the data which it has available 
concerning IHA and development characteristics for purposes of 
calculating the IHA's formula share. After its first year of 
participation in the CGP, an IHA is required to respond to data 
transmitted by HUD if there have been changes to its inventory from 
that previously reported, or where requested by HUD. On an annual 
basis, HUD will transmit to the IHA the formula characteristics report 
which reflects the data that will be used to determine the IHA's 
formula share. The IHA will have 30 days to review and advise HUD of 
errors in this HUD report. Necessary adjustments will be made to the 
IHA's data before the formula is run for the current FFY.
    (b) HUD notification of formula amount; appeal rights. (1) Formula 
amounts notification. After HUD determines an IHA's formula allocation 
under Sec. 950.601 (e) and (f) based upon the IHA, development, and 
community characteristics, it shall notify the IHA of its formula 
amount and provide instruction on annual submission in accordance with 
Secs. 950.672(a) and 950.678.
    (2) Appeal based upon unique circumstances. An IHA may appeal in 
writing HUD's determination of its formula amount within 60 calendar 
days of the date of HUD's determination on the basis of ``unique 
circumstances.'' The IHA must indicate what is unique, and specify the 
manner in which it is different from all other IHAs participating in 
the CGP, and provide any necessary supporting documentation. HUD shall 
render a written decision on an IHA's appeal under this paragraph 
within 60 calendar days of the date of its receipt of the IHA's request 
for an appeal. HUD shall publish in the Federal Register a description 
of the facts supporting any successful appeals based upon ``unique 
circumstances.'' Any adjustments resulting from successful appeals in a 
particular FFY under this paragraph shall be made from the subsequent 
years' allocation of funds under this part.
    (3) Appeal based upon error. An IHA may appeal in writing HUD's 
determination of its formula amount within 60 calendar days of the date 
of HUD's determination on the basis of an error. The IHA may appeal on 
the basis of error the correctness of data in the formula 
characteristics report. The IHA must describe the nature of the error, 
and provide any necessary supporting documentation. HUD shall respond 
to the IHA's request within 60 calendar days of the date of its receipt 
of the IHA's request for an appeal. Any adjustment resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part.
    (c) IHAs determined to be high risk. If an IHA is determined to 
have serious deficiencies in accordance with Sec. 950.135, or if the 
IHA fails to meet, or to make reasonable progress toward meeting, the 
goals previously established in its management improvement plan under 
Sec. 950.135, HUD may designate the IHA high risk. If the IHA is 
designated high risk with respect to modernization, HUD may withhold 
some or all of the IHA's annual grant; HUD may declare a breach of the 
grant agreement with respect to all or some of the IHA's functions so 
that the IHA or a particular function of the IHA may be administered by 
another entity; or HUD may take other sanctions authorized by law or 
regulation.
    (d) Obligation of formula funding. All formula funding should be 
obligated within two years of allocation or such longer period approved 
by HUD. If the IHA fails to obligate funds within this period, they may 
be subject to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function. 
HUD would only require such action after a corrective action order had 
been issued under Sec. 950.687 and the IHA failed to comply with the 
order. HUD could then issue an alternative management strategy in a 
correction action order. An IHA may appeal in writing the corrective 
action order imposing an alternative management strategy within 60 days 
of that order. HUD Headquarters shall render a written decision on an 
IHA's appeal within 60 calendar days of the date of its receipt of the 
IHA's appeal.


Sec. 950.672  Comprehensive Plan (including Five-Year Action Plan).

    (a) Submission. HUD shall notify IHAs of the requested date for 
submitting or updating a Comprehensive Plan. For planning purposes, 
IHAs may use the amount they received under CGP in the prior year in 
developing their Comprehensive Plan or they may wait for the annual HUD 
notification of formula amount under Sec. 950.669(b)(1).
    (b)(1) Resident participation. An IHA is required to develop, 
implement, monitor and annually amend portions of its Comprehensive 
Plan in consultation with residents of the developments covered by the 
Comprehensive Plan, and with democratically elected resident groups. In 
addition, the IHA must also consult with resident management 
corporations (RMCs) to the extent that an RMC manages a development 
covered by the Comprehensive Plan. The IHA, in partnership with the 
residents, must develop and implement a process for resident 
participation which ensures that residents are involved in a meaningful 
way in all phases of the CGP. Such involvement shall involve 
implementing the Partnership Process as a critical element of the CGP.
    (2) Establishment of Partnership Process. The IHA, in partnership 
with the residents of the developments covered by the plan, and with 
democratically elected resident groups, must establish a Partnership 
Process to develop and implement the goals, needs, strategies and 
priorities identified in the Comprehensive Plan. After residents have 
organized to participate in the CGP, they may decide to establish a 
volunteer advisory group of experts in various professions to assist 
them in the CGP Partnership Process. The Partnership Process shall be 
designed to achieve the following:
    (i) To assure that residents are fully briefed and involved in 
developing the content of, and monitoring the implementation of, the 
Comprehensive Plan including, but not limited to, the physical and 
management needs assessments, viability analysis, Five-Year Action 
Plan, and Work Statements for each year. If necessary, the IHA shall 
develop and implement capacity building strategies to ensure meaningful 
resident participation in CGP. Such technical assistance efforts for 
residents are eligible management improvement costs under CGP;
    (ii) To enable residents to participate, on an IHA-wide or area-
wide basis, in ongoing discussions of the Comprehensive Plan and 
strategies for its implementation, and in all meetings necessary to 
ensure meaningful participation.
    (3) Public notice. Within a reasonable amount of time before the 
advance meeting for duly elected resident organizations under paragraph 
(b)(4) of this section, and the public hearing under paragraph (b)(5) 
of this section, the IHA shall provide public notice of the advance 
meeting and the public hearing in a manner determined by the IHA and 
which ensures notice to all duly elected resident organizations. The 
public notice shall also include a summary of activities of the 
previous year (uses of past funding) and progress update, estimated 
funding level (i.e., current year funding or formula amount, whichever 
the IHA elects); a summary of the CGP requirements; the estimated time 
frames for completion of the required CGP documents; and the 
requirement for resident participation in the planning, development and 
monitoring of modernization activities under the CGP;
    (4) Advance meeting for duly elected resident organizations. The 
IHA shall hold, within a reasonable amount of time before the public 
hearing under paragraph (b)(5) of the section, a meeting for residents 
and duly elected resident organizations at which the IHA shall explain 
the components of the Comprehensive Plan. The meeting shall be open to 
all residents and duly elected resident organizations;
    (5) Public hearing. The IHA shall hold at least one public hearing, 
and any appropriate number of additional hearings, to ensure ample 
opportunity for residents, duly elected resident organizations, local 
government officials, and other interested parties, to express their 
priorities and concerns. The IHA shall give full consideration to the 
comments and concerns of residents, local government officials, and 
other interested parties.
    (c) Local government participation. An IHA shall consult with 
appropriate local government officials with respect to the development 
of the Comprehensive Plan. In the case of an IHA with developments in 
multiple jurisdictions, the IHA may meet this requirement by consulting 
with an advisory group representative of all the jurisdictions. At a 
minimum, such consultation must include providing such officials with:
    (1) Advance written notice of the public hearing required under 
paragraph (b)(5) of this section;
    (2) A copy of the summary of total preliminary estimated costs to 
address physical needs by each development and management/operations 
needs IHA-wide and a specific description of the IHA's process for 
maximizing the level of participation by residents.
    (d) Contents of Comprehensive Plan. The Comprehensive Plan shall 
identify all of the physical and management improvements needed for an 
IHA and all of its developments, and that represent needs eligible for 
funding under Sec. 950.666. The plan shall also include preliminary 
estimates of the total cost of these improvements. The plan shall set 
forth general strategies for addressing the identified needs, and 
highlight any special strategies, such as major redesign or partial 
demolition of a development, that are necessary to ensure the long-term 
physical and social viability of the development. Each Comprehensive 
Plan shall contain the following elements:
    (1) Summaries. An IHA shall include as part of its Comprehensive 
Plan the following summaries:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and management needs IHA-wide; and
    (ii) A specific description of the IHA's process for maximizing the 
level of participation by residents during the development, 
implementation and monitoring of the Comprehensive Plan, a summary of 
the general issues raised on the plan by residents and others during 
the public comment process and the IHA's response to the general issue. 
IHA records, such as minutes of planning meetings or resident surveys, 
shall be maintained in the IHA's files and made available to residents, 
duly elected resident organizations, and other interested parties, upon 
request.
    (2) Physical needs assessment. (i) Requirements. The physical needs 
assessment identifies all of the work that an IHA would need to 
undertake to bring each of its developments up to the modernization and 
energy conservation standards, as required by section 14(e)(1)(A)(ii) 
of the Act, to comply with lead-based paint testing and abatement 
requirements under Sec. 950.120(i), and to comply with other program 
requirements under Sec. 950.120. The physical needs assessment is 
completed without regard to the availability of funds, and shall 
include the following information with respect to each of an IHA's 
developments:
    (A) A brief summary of the physical improvements necessary to bring 
each development to a level at least equal to the modernization 
standards contained in HUD Handbook 7485.2 (Public and Indian Housing 
Modernization Standards), and to the energy conservation and life-cycle 
cost-effective performance standards, as required in Sec. 950.603, and 
to comply with the Lead-Based Testing and Abatement requirements under 
Sec. 950.120(i), and the relative urgency of need also must be 
indicated. If the IHA has no physical improvement needs at a particular 
development at the time it completes its Comprehensive Plan, it must so 
indicate. Similarly, if the IHA intends to demolish, partially 
demolish, convert, or dispose of a development (or units within a 
development) it must so indicate in the summary of physical 
improvements;
    (B) The replacement needs of equipment systems and structural 
elements that will be required to be met (assuming routine and timely 
maintenance is performed) during the period covered by the action plan;
    (C) A preliminary estimate of the cost to complete the physical 
work;
    (D) The projected FFY in which the IHA anticipates that the 
development will meet the modernization and energy conservation 
standards;
    (E) In addition, the IHA shall provide with respect to vacant or 
non-homebuyer-occupied Turnkey III units, the estimated number of units 
that the IHA is proposing for substantial rehabilitation and subsequent 
sale, in accordance with Sec. 950.666(d)(3).
    (ii) Sources of data. The IHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
physical needs assessment under this paragraph, and shall retain such 
source documents in its files.
    (3) Management needs assessment. (i) Requirements. The plan shall 
include a comprehensive assessment of the improvements needed to 
upgrade the management and operation of the IHA and of each viable 
development so decent, safe and sanitary living conditions will be 
provided. The management needs assessment shall include the following, 
with the relative urgency of need indicated:
    (A) An identification of the most current needs related to the 
following areas (to the extent that any of these needs is addressed in 
a HUD-approved management improvement plan, the IHA may simply include 
a cross-reference to these documents);
    (1) The management, financial, and accounting control systems of 
the IHA;
    (2) The adequacy and qualifications of personnel employed by the 
IHA in the management and operation of its developments, for each 
significant category of employment;
    (3) The adequacy and efficacy of:
    (i) Resident programs and services;
    (ii) Resident and development security;
    (iii) Resident selection and eviction;
    (iv) Occupancy;
    (v) Maintenance;
    (vi) Resident management and resident capacity building programs;
    (vii) Resident opportunities for employment and business 
development and other self-sufficiency opportunities for residents; and
    (viii) Homeownership opportunities for residents.
    (B) Any additional deficiencies identified through audits and HUD 
monitoring reviews which are not addressed under paragraph (d)(3)(i)(A) 
of this section. To the extent that any of these is addressed in a HUD-
approved management improvement plan, the IHA may include a cross-
reference to these documents;
    (C) Any other management and operations needs which the IHA wants 
to address at the IHA-wide or development level;
    (D) An IHA-wide preliminary cost estimate for addressing all the 
needs identified in the management needs assessment, without regard to 
the availability of funds; and
    (E) The projected FFY in which the IHA anticipates that all 
identified management deficiencies will be corrected.
    (ii) Sources of data. The IHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
management needs assessment under this paragraph, and shall retain such 
source documents in its files.
    (4) Demonstration of long-term physical and social viability.
    (i) General. The plan shall include, on a development-by-
development basis, an analysis of whether completion of the 
improvements and replacements identified under paragraphs (d)(2) and 
(d)(3) of this section will reasonably ensure the long-term physical 
and social viability of the development at a reasonable cost. The IHA 
shall keep documentation in its files to support its reasonable cost 
determinations of each major work item (e.g., kitchen cabinets, 
exterior doors). HUD will review cost reasonableness as part of its 
review of the Annual Submission and the Performance and Evaluation 
Report. Where necessary, HUD will review the IHA's documentation in 
support of its cost reasonableness;
    (ii) Determination of non-viability. Where an IHA's analysis of a 
development, under paragraph (d) of this section, establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the 
development at a reasonable cost, the IHA shall not expend CGP funds 
for the development, except for emergencies and essential non-routine 
maintenance necessary to maintain habitability until residents can be 
relocated. The IHA shall specify in its Comprehensive Plan the actions 
it proposes to take with respect to the non-viable development (e.g., 
demolition or disposition under subpart M of this part).
    (5) Five-Year Action Plan. (i) General. The Comprehensive Plan 
shall include a rolling Five-Year Action Plan to carry out the 
improvements and replacements (or a portion thereof) identified under 
paragraphs (d)(2) and (d)(3) of this section. In developing its Five-
Year Action Plan, the IHA shall assume that the current year funding or 
formula amount will be available for each year of its Five-Year Action 
Plan, whichever the IHA is using for planning purposes, plus the IHA's 
estimate of the funds that will be available from other sources, such 
as State, local and tribal governments. All activities specified in an 
IHA's Five Year Action Plan are contingent upon the availability of 
funds, and the work items are fungible, i.e., interchangeable;
    (ii) Requirements. Under the action plan, an IHA must indicate how 
it intends to use the funds available to it under the CGP to address 
the deficiencies, or a portion of the deficiencies, identified under 
its physical and management needs assessments, as follows:
    (A) Physical condition. With respect to the physical condition of 
an IHA's developments, an IHA must indicate in its action plan how it 
intends to address, over a five-year period, the deficiencies (or a 
portion of the deficiencies) identified in its physical needs 
assessment so as to bring each of its developments up to a level at 
least equal to the modernization and energy conservation standards. 
This would include specifying the work to be undertaken by the IHA in 
major work categories (e.g., kitchens, electrical systems, etc.); 
establishing priorities among the major work categories by development 
and year based upon the relative urgency of need; and estimating the 
cost of each of the identified major work categories. In addition, an 
IHA must estimate the FFY in which it anticipates that the development 
will meet the modernization and energy conservation standards. In 
developing its action plan, an IHA shall give priority to the 
following:
    (1) Activities required to correct emergency conditions;
    (2) Activities required to meet statutory (or other legally 
mandated) requirements;
    (3) Activities required to meet the needs identified in the Section 
504 needs assessment within the regulatory timeframes; and
    (4) Activities required to complete lead-based paint testing and 
abatement requirements by December 6, 1994.
    (B) Management and operations. An IHA must address in its action 
plan the management and operations deficiencies (or a portion of the 
deficiencies) identified in its management needs assessment, as 
follows:
    (1) With respect to the management and operations needs of the IHA, 
the IHA must identify how it intends to address with CGP funds, if 
necessary, the deficiencies (or a portion thereof) identified in its 
management needs assessment, including work identified through audits, 
the ACA, HUD monitoring reviews, and self-assessments (this would 
include establishing priorities based upon the relative urgency of 
need);
    (2) A preliminary IHA-wide cost estimate, by major work category.
    (iii) Procedure for maintaining current Five-Year Action Plan. The 
IHA shall maintain a current Five-Year Action Plan by annually amending 
its Five-Year Action Plan, in conjunction with the Annual Submission;
    (6) Local government statement. The Comprehensive Plan shall 
include a statement signed by the chief executive officer of the 
appropriate governing body (or, in the case of an IHA with developments 
in multiple jurisdictions, from the CEO of each such jurisdiction), 
certifying as to the following:
    (i) The IHA developed the Comprehensive Plan/Five-Year Action Plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
Comprehensive Plan/Five-Year Action Plan, in accordance with the 
requirements of Sec. 950.672(b) and (c);
    (ii) The Comprehensive Plan/Five-Year Action Plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low-income housing needs and that the appropriate governing body 
will cooperate in providing resident programs and services; and
    (iii) The IHA's proposed drug elimination activities are 
coordinated with, and supportive of, local drug elimination strategies 
and neighborhood improvement programs, if applicable.
    (7) IHA resolution. The plan shall include a resolution adopted by 
the IHA Board of Commissioners, and signed by the Board Chairman of the 
IHA, approving the Comprehensive Plan or any amendments thereto and 
certifying that:
    (i) The IHA will comply with all policies, procedures, and 
requirements prescribed by HUD for modernization, including 
implementation of the modernization in a timely, efficient, and 
economical manner;
    (ii) IHA has established controls to assure that any activity 
funded by the CGP is not also funded by any other HUD program, thereby 
preventing duplicate funding of any activity;
    (iii) The IHA will not provide to any development more assistance 
under the CGP than is necessary to provide affordable housing, after 
taking into account other government assistance provided;
    (iv) The proposed physical work will meet the modernization and 
energy conservation standards under Sec. 950.603;
    (v) The proposed activities, obligations and expenditures in the 
Five-Year Action Plan/Annual Submission are consistent with the 
proposed or approved Comprehensive Plan of the IHA;
    (vi) The IHA will comply with applicable civil rights requirements 
under Sec. 950.115, and, where applicable, will carry out the 
Comprehensive Plan in conformity with title VI of the Civil Rights Act 
of 1964 (42 U.S.C. 2000d), the Fair Housing Act (42 U.S.C. 3601-3619), 
and section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794);
    (vii) The IHA will, to the greatest extent feasible, give 
preference to the award of modernization contracts to Indian 
organizations and Indian-owned economic enterprises under Sec. 950.165;
    (viii) The IHA has provided to HUD any documentation that HUD has 
requested to carry out its review under the National Environmental 
Policy Act (NEPA) and other related authorities in accordance with 
Sec. 950.120(a) and (b), and will not obligate, in any manner, the 
expenditure of CGP funds, or otherwise undertake the activities 
identified in its Comprehensive Plan/Annual Submission, until the IHA 
receives written notification from HUD indicating that HUD has complied 
with its responsibilities under NEPA and other related authorities;
    (ix) The IHA will comply with the wage rate requirements under 
Sec. 950.120 (c) and (d);
    (x) The IHA will comply with the relocation assistance and real 
property acquisition requirements under Sec. 950.117;
    (xi) The IHA will comply with the requirements for physical 
accessibility under Sec. 950.120(f);
    (xii) The IHA will comply with the requirements for access to 
records and audits under Sec. 950.120(g);
    (xiii) The IHA will comply with the uniform administrative 
requirements under Sec. 950.120(h);
    (xiv) The IHA will comply with lead-based paint testing and 
abatement requirements under Sec. 950.120(i);
    (xv) The IHA has complied with the requirements governing tribal 
government and resident participation in accordance with 
Secs. 950.672(b), 950.678(d), and 950.684, and has given full 
consideration to the priorities and concerns of tribal government and 
residents, including comments which were ultimately not adopted, in 
preparing the Comprehensive Plan/Five-Year Action Plan and any 
amendments thereto;
    (xvi) The IHA will comply with the special requirements of 
Sec. 950.666(d) with respect to a homeownership development; and
    (xvii) The IHA will comply with the special requirements of 
Sec. 950.633 with respect to a Section 23 leased housing bond-financed 
development.
    (xviii) The IHA will comply with section 3 of the Housing and Urban 
Development Act of 1968, as amended (12 U.S.C. 1701u), and make best 
efforts, consistent with existing Federal, State, and local laws and 
regulations, to give low- and very low-income persons, training and 
employment opportunities generated by CGP assistance, and to make best 
efforts, consistent with existing Federal, State, and local laws and 
regulations, to award contracts for work to be performed in connection 
with CGP assistance to business concerns that provide economic 
opportunities for low- and very low-income persons.
    (e) Amendments to the Comprehensive Plan. (1) Extension of time for 
performance. An IHA shall have the right to amend its Comprehensive 
Plan (including the action plan) to extend the time for performance 
whenever HUD has not provided the amount of assistance set forth in the 
Comprehensive Plan or has not provided the assistance in a timely 
manner.
    (2) Amendments to needs assessments. The IHA must amend its plan by 
revising its needs assessments whenever it proposes to carry out 
activities in its Five-Year Action Plan or Annual Submission, that are 
not reflected in its current needs assessments (except in the case of 
emergencies). If the bases for the needs assessment have changed 
substantially, an IHA may propose an amendment to its needs 
assessments, in connection with the submission of its Annual Submission 
(see Sec. 950.678(b), or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 950.675;
    (3) Six-year revision of Comprehensive Plan. The physical and 
management needs assessments, and the summaries listed in 
Sec. 950.672(d)(1) are required to be revised only every sixth year, 
although the IHA may elect to revise some or all of these more 
frequently. Every sixth year, an IHA must submit to HUD, as a part of 
its Annual Submission, a complete revision of its Comprehensive Plan.
    (4) Annual revision of Five-Year Action Plan. Annually, the IHA 
shall submit to HUD, with its Annual Submission, an update of its Five-
Year Action Plan. Notwithstanding the new fifth year, the IHA shall 
identify changes in work categories from the previous year Five-Year 
Action Plan when making this annual submission.
    (5) Required submissions. Any amendments to the Comprehensive Plan 
under this section must be submitted with the IHA resolution under 
Sec. 950.672(d)(7).
    (f) Prerequisite for receiving assistance. (1) Prohibition of 
assistance. No financial assistance, except for emergency work to be 
funded under Secs. 950.601(b) and 950.666(a)(2), and for modernization 
needs resulting from disasters under Sec. 950.601(b), may be made 
available under this subpart unless HUD has approved a Comprehensive 
Plan submitted by the IHA which meets the requirements of Sec. 950.672. 
An IHA that has failed to obtain approval of its Comprehensive Plan by 
the end of the FFY shall have its formula allocation for that year 
(less any formula amounts provided to the IHA for emergencies) added to 
the subsequent year's appropriation of funds for grants under this 
part. HUD shall allocate such funds to IHAs and PHAs participating in 
the CGP in accordance with the formula under Sec. 950.601(e) and (f) in 
the subsequent FFY. An IHA which elects in any FFY not to participate 
in the CGP under this subpart may participate in the CGP in subsequent 
FFYs. (2) Requests for emergency assistance. An IHA may receive funds 
from its formula allocation to address emergency modernization needs 
where HUD has not approved an IHA's Comprehensive Plan. To request such 
assistance, an IHA shall submit to HUD a request for funds in such form 
as HUD may prescribe, including any documentation necessary to support 
its claim that an emergency exists. HUD shall review the request and 
supporting documentation to determine if it meets the definition of 
``emergency work,'' as set forth in Sec. 950.102.


Sec. 950.675  HUD review and approval of Comprehensive Plan (including 
action plan).

    (a) Submission of Comprehensive Plan. (1) Upon receipt of a 
Comprehensive Plan from an IHA, HUD shall determine whether:
    (i) The plan contains each of the required components specified at 
Sec. 950.672(d); and
    (ii) Where applicable, the IHA has submitted any additional 
information or assurances required as a result of HUD monitoring, 
findings of inadequate IHA performance, audit findings, or civil rights 
compliance findings.
    (2) Acceptance for review. If the IHA has submitted a Comprehensive 
Plan (including the action plan) which meets the criteria specified in 
paragraph (a)(1) of this section, HUD shall accept the Comprehensive 
Plan for review, within 14 calendar days of its receipt in the Field 
Office. The IHA shall be notified in writing that the plan has been 
accepted by HUD, and that the 75-day review period is proceeding.
    (3) Time period for review. A Comprehensive Plan that is accepted 
by HUD for review shall be considered to be approved unless HUD 
notifies the IHA in writing, postmarked within 75 calendar days of the 
date of HUD's receipt of the Comprehensive Plan for review, that HUD 
has disapproved the plan. HUD shall not disapprove a Comprehensive Plan 
on the basis that it cannot complete its review within the 75-day 
deadline.
    (4) Rejection of Comprehensive Plan. If an IHA has submitted a 
Comprehensive Plan (including the action plan), which does not meet the 
requirements of paragraph (a)(1) of this section, HUD shall notify the 
IHA within 14 calendar days of its receipt that HUD has rejected the 
plan for review. In such case, HUD shall indicate the reasons for 
rejection, the modifications required to qualify the Comprehensive Plan 
for HUD review, and the deadline date for receipt of any modifications.
    (b) HUD approval of Comprehensive Plan (including action plan). (1) 
A Comprehensive Plan (including the action plan) that is accepted by 
HUD for review in accordance with paragraph (a) of this section shall 
be considered to be approved, unless HUD notifies the IHA in writing, 
postmarked within 75 days of the date of HUD's receipt of the 
Comprehensive Plan for review, that HUD has disapproved the plan, 
indicating the reasons for disapproval, and the modifications required 
to make the Comprehensive Plan approvable. The IHA must re-submit the 
Comprehensive Plan to HUD, in accordance with the deadline established 
by HUD, which may allow up to 75 calendar days before the end of the 
FFY for HUD review. If the revised plan is disapproved by HUD following 
its resubmission, or the IHA fails to resubmit the plan by the deadline 
established by HUD, any funds that would have been allocated to the IHA 
shall be added to the subsequent year's appropriation of funds for 
grants under this subpart. HUD shall allocate such funds to IHAs and 
PHAs participating in the CGP in accordance with the formula under 24 
CFR 968.103 and Sec. 950.601. HUD shall not disapprove a Comprehensive 
Plan on the basis that HUD cannot complete its review under this 
section within the 75-day deadline.
    (2) HUD shall approve the Comprehensive Plan except where it makes 
a determination in accordance with one or more of the following:
    (i) The Comprehensive Plan is incomplete in significant matters. 
HUD determines that the IHA has failed to include all required 
information or documentation in its Comprehensive Plan, e.g, the 
physical needs assessment does not provide all of the information 
required by HUD concerning all of its developments; or the IHA has 
supplied incomplete data on the current condition and other 
characteristics of its developments;
    (ii) Identified needs are plainly inconsistent with facts and data. 
On the basis of available significant facts and data pertaining to the 
physical and operational condition of the IHA's developments or the 
management and operations of the IHA, HUD determines that the IHA's 
identification of modernization needs (see Sec. 950.672(d) (2) and (3)) 
is plainly inconsistent with such facts and data. HUD will take into 
account facts and data such as those derived from recent HUD 
monitoring, audits, and resident comments and will disapprove a 
Comprehensive Plan based on such findings as:
    (A) Identified physical improvements and replacement are 
inadequate. The completion of the identified physical improvements and 
replacements will not bring all of an IHA's developments to a level at 
least equal to the modernization and energy conservation and life-cycle 
cost-effective standards in Sec. 950.603 (except that a development 
must meet the energy conservation standards under Sec. 950.603 only 
when they are applicable to the work being performed);
    (B) Identified management improvements are inadequate. The 
identified management and operations improvement needs do not address 
all of an IHA's areas of deficiency, or the completion of those 
improvements would not result in each area of deficiency under an IHA's 
management improvement plan under Sec. 950.135 being brought up to an 
acceptable level of performance under the ACA and the Field Office 
Monitoring of IHAs Handbook 7440.3; and
    (C) Proposed physical and management improvements fail to address 
identified needs. The proposed physical and management improvements in 
the action plan are not related to the identified needs in the needs 
assessments portion of the Comprehensive Plan, e.g., a heating plant 
renovation is in the action plan, but it was not included in the needs 
assessment for that development.
    (iii) Action plan is plainly inappropriate to meeting identified 
needs. On the basis of the Comprehensive Plan, HUD determines that the 
action plan (see Sec. 950.672(d)(5)) is plainly inappropriate to meet 
the needs identified in the Comprehensive Plan, e.g., the proposed work 
item will not correct the need identified in the needs assessment. HUD 
will take into account the availability of funds. In addition, HUD will 
take into account whether the action plan fails to address work items 
that are needed to correct known emergency conditions or which are 
otherwise needed to meet statutory or other legally mandated 
requirements, as identified by the IHA in its Comprehensive Plan.
    (iv) Inadequate demonstration of long-term viability at reasonable 
cost. HUD determines that the IHA has failed to demonstrate that 
completion of improvements and replacements identified in the 
Comprehensive Plan, as required by Sec. 950.672(d) (2) and (3), will 
reasonably ensure long-term viability of one or more Indian housing 
developments to which they relate at a reasonable cost, as required by 
Sec. 950.672(d)(4).
    (v) Contradiction of local government statement or IHA resolution. 
HUD has evidence which tends to challenge, in a substantial manner, the 
appropriate governing body's statement or IHA resolution contained in 
the Comprehensive Plan, as required in Sec. 950.672(d) (6) and (7). 
Such evidence may include, but is not necessarily limited to:
    (A) Evidence that the IHA failed to implement the Partnership 
Process and to meet the requirements for resident participation, as set 
forth in Sec. 950.672(b). In such cases, HUD shall review the IHA's 
resident participation process and any supporting documentation to 
determine whether the standards for participation under Sec. 950.672(b) 
were met;
    (B) With respect to an IHA established under State law and 
determined to be subject to the requirements of title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d) and the Fair Housing Act (42 
U.S.C. 3601-3619), HUD shall also consider as such evidence the 
following:
    (1) A pending proceeding against the IHA based upon a charge of 
discrimination pursuant to the Fair Housing Act. (For purposes of this 
provision, ``a charge of discrimination'' means a charge, pursuant to 
section 810(g)(2) of the Fair Housing Act (42 U.S.C. 3610(g)(2)), 
issued by the HUD General Counsel, or his or her legally authorized 
designee;)
    (2) A pending civil rights suit against the IHA instituted by the 
Department of Justice;
    (3) Outstanding HUD findings, under Sec. 950.120, of IHA 
noncompliance with civil rights statutes and executive orders or 
implementing regulations, as a result of formal administrative 
proceedings, unless the IHA is implementing a HUD-approved resident 
selection and assignment plan or compliance agreement designed to 
correct the area(s) of noncompliance;
    (4) A deferral of the processing of applications from the IHA 
imposed by HUD under title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d), the Attorney General's Guidelines (28 CFR 50.3) and 
HUD's title VI regulations (24 CFR 1.8) and procedures (HUD Handbook 
8040.1), or under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and HUD's section 504 regulations (24 CFR 8.57); or
    (5) An adjudication of a violation under any of the authorities 
under Sec. 950.120(a) in a civil action filed against the IHA by a 
private individual, unless the IHA is implementing a HUD-approved 
resident selection and assignment plan or compliance agreement designed 
to correct the area(s) of noncompliance.
    (c) Effect of HUD approval of Comprehensive Plan. After HUD 
approves the Comprehensive Plan (including the Five-Year Action Plan), 
or any amendments to the plan, it shall be binding upon HUD and the 
IHA, until such time as the IHA submits, and HUD approves, an amendment 
to its plan. The IHA shall have full fungibility of work items (may 
undertake any of the work items) identified in any of the five years of 
the approved Five-Year Action Plan without further HUD approval. Actual 
uses of the funds are to be reflected in the IHA annual Performance and 
Evaluation Report for each grant. See Sec. 950.684. Except for 
emergencies, the IHA shall consult, to the extent practicable, the 
residents on significant changes (such as changes in scope of work) 
whenever it moves work items within the approved Five-Year Action Plan. 
Documentation of that consultation is to be retained in IHA files. If 
HUD determines as a result of an audit or monitoring findings that an 
IHA has provided false or substantially inaccurate data in its 
Comprehensive Plan/Annual Submission or has circumvented the intent of 
the program, HUD may condition the receipt of assistance, in accordance 
with Sec. 950.687. Moreover, in accordance with 18 U.S.C. 1001, any 
individual or entity who knowingly and willingly makes or uses a 
document or writing containing any false, fictitious or fraudulent 
statement or entry, in any matter within the jurisdiction of any 
department or agency of the United States, shall be fined not more than 
$10,000 or imprisoned for not more than five years, or both.


Sec. 950.678  Annual Submission of activities and expenditures.

    (a) General. The Annual Submission consists of a Five-Year Action 
Plan with a Work Statement for each of the five years and an 
implementation schedule for the current year, local government 
statement, materials demonstrating the partnership process, and other 
miscellaneous documents outlined in this section. For planning 
purposes, an IHA may use either the amount of funding received in the 
current year or the formula amount provided in HUD's notification under 
Sec. 950.669(b)(1) in developing the Five-Year Action Plan for 
presentation at the resident meetings and public hearing. The Work 
Statement for the first year of the Five-Year Action Plan is intended 
to provide a statement of the activities and costs that the IHA plans 
to undertake, in whole or in part, with the assistance to be provided 
by HUD in that year. The Work Statements for all five years will be at 
the same level of detail so that the IHA may interchange work items as 
discussed in Sec. 950.672(d)(5)(i).
    (b) Submission. After considering the amount of HUD assistance 
under paragraph (a) of this section, and estimating how much funding 
will be available from other sources, such as State and tribal 
governments, and determining its activities and costs based on the 
current FFY formula amount, the IHA shall submit its Annual Submission 
in accordance with instructions provided by HUD.
    (c) Acceptance for review. Upon receipt of an Annual Submission 
from an IHA, HUD shall determine whether:
    (1) It contains each of the required components; and
    (2) The IHA has submitted any additional information or assurances 
required as a result of HUD monitoring findings of inadequate IHA 
performance, audit findings, and civil rights compliance findings. If 
the IHA has submitted a complete Annual Submission and all required 
information and assurances, HUD will accept the submission for review, 
as of the date of receipt. If the IHA has not submitted all required 
material, HUD will promptly notify the IHA that it has disapproved the 
submission, indicating the reasons for disapproval, the modifications 
required to qualify the Annual Submission for HUD review, and the date 
by which such modifications must be received by HUD.
    (d) Resident and local government participation. An IHA is required 
to develop its Annual Submission, including any proposed amendments to 
its Comprehensive Plan as provided in Sec. 950.672(e), in consultation 
with officials of the appropriate governing body (or, in the case of an 
IHA with developments in multiple jurisdictions, in consultation with 
the CEO of each such jurisdiction or with an advisory group 
representative of all jurisdictions) and with residents and especially 
duly elected resident organizations of the developments covered by the 
Comprehensive Plan, as follows:
    (1) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (d)(2) of this section, 
and the public hearing under paragraph (d)(3) of this section, the IHA 
shall provide public notice of the advance meeting and the public 
hearing in a manner determined by the IHA and which ensures notice to 
all duly elected resident organizations. The public notice shall also 
include a summary of activities of the previous year (uses of past 
funding) and progress update, estimated funding level (i.e., current 
year funding or formula amount, whichever the IHA elects); a summary of 
the CGP requirements; the estimated time frames for completion of the 
required CGP documents; and the requirement for resident participation 
in the planning, development and monitoring of modernization activities 
under the CGP;
    (2) Advance meeting with residents. The IHA shall at least annually 
hold a meeting open to all residents and duly elected resident 
organizations. The advance meeting shall be held within a reasonable 
amount of time before the public hearing under paragraph (d)(3) of this 
section. The IHA will provide residents with information concerning the 
contents of the IHA's Five-Year Action Plan (and any proposed 
amendments to the IHA's Comprehensive Plan to be submitted with the 
Annual Submission) so that residents can comment adequately at the 
public hearing on the contents of the Five-Year Action Plan and any 
proposed amendments to the Comprehensive Plan.
    (3) Public hearing. The IHA shall annually hold at least one public 
hearing, and any appropriate number of additional hearings, to ensure 
ample opportunity for residents of the developments covered by the 
Comprehensive Plan, officials of the appropriate governing body, and 
other interested parties, to express their priorities and concerns and 
discuss the current status of prior approved programs. The IHA shall 
give full consideration to the comments and concerns of residents, 
local government officials, and other interested parties in developing 
its Five-Year Action Plan, or any amendments to its Comprehensive Plan.
    (4) Expedited scheduling. IHAs are encouraged to hold the meeting 
with residents and duly elected resident organizations under paragraph 
(d)(2) of this section, and the public hearing under paragraph (d)(3) 
of this section between July 1 (i.e., after the end of the program 
year--June 30) and September 30, using the formula amount for the 
current FFY. If an IHA elects to use such expedited scheduling, it must 
explain at the meeting with residents and duly elected resident 
organizations and at the public hearing that the current FFY amount is 
not the actual grant amount for the subsequent year, but is rather the 
amount used for planning purposes and preparing the draft Performance 
and Evaluation Report. It must also explain that the Five-Year Action 
Plan will be adjusted when HUD provides notification of the actual 
formula amount, and explain which items may be added or deleted to 
adjust for the formula amount and that any added items will come from 
the Five-Year Action Plan.
    (e) Contents of Work Statement. The Work Statement for each year 
must include, for each development or on an IHA-wide basis for 
management improvements for which work is to be funded out of that 
year's grant:
    (1) A list of development accounts with a general description of 
work items;
    (2) The cost for each work item, as well as a summary of cost by 
development account;
    (3) The IHA-wide or development-specific management improvements to 
be undertaken during the year;
    (4) For each development and for or any management improvements not 
covered by a HUD-approved management improvement plan, a schedule for 
the use of current year funds, including target dates for the 
obligation and expenditure of the funds. In general, HUD expects that 
an IHA will obligate its current year's allocation of CGP funds (except 
for its funded replacement reserves) within two years, and expend such 
funds within three years, of the date of HUD approval, unless longer 
time-frames are approved by HUD due to local differences;
    (5) A summary description of the actions to be taken with non-CGP 
funds to meet physical and management improvement needs which have been 
identified by the IHA in its needs assessments;
    (6) Any documentation that HUD needs to assist it in carrying out 
its responsibilities under the National Environmental Policy Act (42 
U.S.C. 4321) and other related authorities in accordance with 
Sec. 950.120 (a) and (b);
    (7) Other information, as specified by HUD; and
    (8) An IHA resolution approving the Annual Submission or any 
amendments thereto, as set forth in Sec. 950.672(d)(7).
    (f) Additional submissions with Annual Submission. An IHA must 
submit with the Annual Submission:
    (1) Any amendments to the Comprehensive Plan, as set forth in 
Sec. 950.672(e);
    (2) A summary of the IHA's resident consultation activities, 
including a summary of the general issues raised by residents and 
others during the public comment process and the IHA's response to the 
general issues; and
    (3) Such additional information as may be prescribed by HUD. HUD 
shall review any proposed amendments to the Comprehensive Plan in 
accordance with review standards under Sec. 950.675(b).
    (g) HUD review and approval of Annual Submission. (1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the IHA 
in writing, postmarked within 75 calendar days of the date that HUD 
receives the Annual Submission for review under paragraph (c) of this 
section, that HUD has disapproved the Annual Submission, indicating the 
reasons for disapproval, the modifications required to make the Annual 
Submission approvable, and the date by which such modifications must be 
received by HUD. HUD shall not disapprove an Annual Submission on the 
basis that HUD cannot complete its review under this section within the 
75-day deadline;
    (2) Bases for disapproval for Annual Submission. HUD shall approve 
the Annual Submission, except where:
    (i) Incomplete insignificant matters. HUD determines that the IHA 
has failed to include all required information or documentation in its 
Annual Submission;
    (ii) Plainly inconsistent with Comprehensive Plan. HUD determines 
that the activities and expenditures proposed in the Annual Submission 
are plainly inconsistent with the IHA's approved Comprehensive Plan;
    (iii) Contradiction of IHA resolution. HUD has evidence which tends 
to challenge, in a substantial manner, the certifications contained in 
the board resolution, as required by Sec. 950.672(d)(7).
    (h) Amendments to Annual Submission. The IHA shall advise HUD of 
all changes to the IHA's approved Work Statement for year one in its 
Performance and Evaluation Report submitted under Sec. 950.684. Any 
additional work items (changes which add work items), except for 
emergency work, must be within the IHA's approved Five-Year Action Plan 
or receive prior HUD approval.
    (i) Extension of time for performance. An IHA may revise the target 
dates for fund obligation and expenditure in the approved Annual 
Submission whenever any valid delay outside the IHA's control occurs, 
as specified by HUD. Such revision is subject to HUD review under 
Sec. 950.687(a)(2) as to the IHA's continuing capacity. HUD shall not 
review as to an IHA's continuing capacity any revisions to an IHA's 
Comprehensive Plan and related statements where the basis for the 
revision is that HUD has not provided the amount of assistance set 
forth in the Annual Submission, or has not provided such assistance in 
a timely manner.
    (j) ACC Amendment. After HUD approval of each year's Annual 
Submission, HUD and the IHA shall enter into an ACC amendment to obtain 
modernization funds. The ACC amendment shall require low-income use of 
housing for not less than 20 years from the date of the ACC amendment 
(subject to sale of homeownership units in accordance with the terms of 
the ACC).
    (k) Declaration of Trust. An IHA shall execute and file for record 
a Declaration of Trust as provided under the ACC to protect the rights 
and interests of HUD throughout the 20-year period during which the IHA 
is obligated to operate its developments in accordance with the ACC, 
the Act, and HUD regulations and requirements. A Declaration of Trust 
is not required for Mutual Help units.


Sec. 950.681  Conduct of modernization activities.

    (a) Initiation of activities. After HUD has approved a Five-Year 
Action Plan and entered into an ACC amendment or grant agreement with 
the IHA for year one of the Plan, the IHA shall undertake the 
modernization activities and expenditures set forth in its approved 
Work Statement for year one or substitute work items from within the 
approved Five-Year Action Plan, subject to the following requirements:
    (1) The IHA may undertake the activities using force account or 
contract labor, including contracting with an RMC. If the entirety of 
modernization activity (including the planning and architectural design 
of the rehabilitation) is administered by an RMC, the IHA shall not 
retain for any administrative or other reason, any portion of the CGP 
funds provided, unless the IHA and the RMC provide otherwise by 
contract; and
    (2) All activities shall be monitored by resident groups within the 
framework and intent of the Partnership Process.
    (b) Fund requisitions. To request modernization funds against the 
approved Work Statement for year one, the IHA shall comply with 
requirements prescribed by HUD.
    (c) Contracting requirements. The IHA shall comply with the wage 
rate requirements in Sec. 950.120. In addition, the IHA shall comply 
with the requirements set forth in subpart B of this part, except as 
follows:
    (1) Assurance of completion. For each construction or equipment 
contract over $25,000, the contractors shall furnish a performance and 
payment bond for 100 percent of the contract price or, notwithstanding 
24 CFR 85.36(h) and Sec. 950.170, a 20 percent cash escrow, or a 25 
percent-letter of credit or, as may be required by law, separate 
performance and payments bonds, each for 50 percent or more of the 
contract price.
    (2) Previous participation. An IHA shall ensure that the contractor 
is not on the GSA List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs.
    (d) Assurance of non-duplication. The IHA shall ensure that there 
is no duplication between the activities carried out pursuant to the 
CGP, and activities carried out with other funds.
    (e) Fiscal closeout of a comprehensive grant. Upon expenditure by 
an IHA of all funds, or termination by HUD of the activities funded by 
each annual grant, the IHA shall submit the actual modernization cost 
certificate, in a form prescribed by HUD, to HUD for review, audit 
verification, and approval. The audit shall follow the guidelines 
prescribed by 24 CFR part 44, Non-Federal Government Audit 
Requirements. If the audited modernization cost certificate discloses 
unauthorized expenditures, the IHA shall take such corrective actions 
as HUD may direct.


Sec. 950.684  IHA Performance and Evaluation Report.

    (a) Submission. For any FFY in which an IHA has received assistance 
under this subpart, the IHA shall submit a Performance and Evaluation 
Report, in a form and at a time to be prescribed by HUD, describing its 
use of assistance in accordance with the approved Five-Year Action 
Plan. The IHA must make reasonable efforts to notify residents and 
officials of the appropriate governing body of the availability of the 
draft report, make copies available to residents in the development 
office, and provide residents with at least 30 calendar days in which 
to comment on the report.
    (b) Content. The report shall include the following:
    (1) An explanation of how the IHA has used other funds, such as 
Community Development Block Grant program assistance, State or Tribal 
assistance, and private funding, for the needs identified in the IHA's 
Comprehensive Plan and for the purposes of this subpart;
    (2) An explanation of how the IHA has used the CGP funds to address 
the needs identified in its Comprehensive Plan and to carry out the 
activities identified in its approved Five-Year Action Plan, and shall 
specifically address:
    (i) Any funds used for emergency needs not set forth in its Five-
Year Action Plan, and
    (ii) Any changes to the Annual Submission under Sec. 950.678(h);
    (3) The results of the IHA's process for consulting with residents 
on the implementation of the plan;
    (4) The current status of the IHA's obligations and expenditures 
and specifying how the IHA is performing with respect to its 
implementation schedules, and an explanation of any necessary revision 
to the planned target dates;
    (5) A summary of resident, Tribal or local government comments 
received on the report; and
    (6) A resolution by the IHA Board of Commissioners approving the 
Performance and Evaluation Report and containing a certification the 
IHA has made reasonable efforts to notify residents in the 
development(s) and local government officials of the opportunity to 
review the draft and comment on it before its submission to HUD, and 
that copies of the report were provided to residents in the development 
office, to local government officials, or furnished upon their request.


Sec. 950.687  HUD review of IHA performance.

    (a) HUD determination. At least annually, HUD shall carry out such 
reviews of the performance of each IHA as may be necessary or 
appropriate to make the determinations required by this paragraph, 
taking into consideration all available evidence.
    (1) Conformity with Comprehensive Plan. HUD will determine whether 
the IHA has carried out its activities under this subpart in a timely 
manner and in accordance with its Comprehensive Plan.
    (i) In making this determination, HUD will review the IHA's 
performance to determine whether the modernization activities 
undertaken during the period under review conform substantially to the 
activities specified in the approved Five-Year Action Plan. HUD will 
also review an IHA's schedules which are provided with its Annual 
Submission for purposes of determining whether the IHA has carried out 
its modernization activities in a timely manner;
    (ii) HUD will review an IHA's performance to determine whether the 
activities carried out comply with the requirements of the Act, 
including the requirement that the work carried out meets the 
modernization and energy conservation standards in Sec. 950.603, this 
part, and other applicable laws and regulations.
    (2) Continuing capacity. HUD will determine whether the IHA has a 
continuing capacity to carry out its Comprehensive Plan in a timely 
manner. After the first full operational year of CGP, CIAP experience 
will not be taken into consideration except where the IHA has not yet 
had comparable experience under the CGP.
    (i) The primary factors to be considered in arriving at a 
determination that a recipient has a continuing capacity are those 
described in paragraphs (a)(1) and (a)(3) of this section as they 
relate to carrying out the Comprehensive Plan. HUD generally will 
consider an IHA to have a continuing capacity if it determines that the 
IHA has:
    (A) Carried out its activities under the CGP program, as well as 
the CIAP, in a timely manner, taking into account the level of funding 
available and whether the IHA obligates its modernization funds within 
two years from the execution of the ACC amendment and expends such 
modernization funds within three years of ACC amendment execution, or 
such longer period if agreed to by HUD in an implementation schedule, 
except in circumstances beyond the IHA's reasonable control.
    (B) Adequately inspected the funded modernization to assure that 
the physical work is being carried out in accordance with the plans and 
specifications and the modernization and energy conservation standards 
(or, in the case of an IHA's performance under CIAP, whether the IHA 
has carried out the physical work in accordance with the HUD-approved 
budget and in conformance with the modernization and energy 
conservation standards) and that any HUD monitoring findings relating 
to the quality of the physical work have been, or are being, resolved);
    (C) Established and maintained internal controls for its 
modernization program in accordance with HUD requirements for financial 
management and accounting, as determined by the fiscal audit;
    (D) Administered its modernization contracts in accordance with a 
HUD-approved procurement policy, which meets the requirements of 24 CFR 
85.36(a) and Sec. 950.160;
    (E) Carried out its activities in accordance with its Comprehensive 
Plan and HUD requirements; and
    (F) Has satisfied, or made reasonable progress toward satisfying, 
the performance standards prescribed in paragraph (a)(3) of this 
section as they relate to activities under the CGP program;
    (ii) HUD will give particular attention to IHA efforts to 
accelerate the progress of the program and to prevent the recurrence of 
past deficiencies or noncompliance with applicable laws and 
regulations.
    (3) Reasonable progress. HUD shall determine whether the IHA has 
satisfied, or has made reasonable progress towards satisfying, the 
following performance standards:
    (i) With respect to the physical condition of each development, 
whether the work items being carried out by the IHA are in conformity 
with the modernization and energy conservation standards in 
Sec. 950.603, and whether the IHA has brought, or is making reasonable 
progress toward bringing, all of its developments to these standards, 
in accordance with its physical needs assessment; and
    (ii) With respect to the management condition of the IHA, whether 
the IHA is making reasonable progress in implementing, the work items 
(specified in its annual submission and Five-Year Action Plan), 
necessary to eliminate the deficiencies identified in its management 
needs assessment; and
    (iii) In determining whether the IHA has made reasonable progress, 
HUD will take into account the level of funding available and whether 
the IHA obligates its modernization funds within two years from the 
execution of the ACC amendment and expends such modernization funds 
within three years of ACC amendment execution, or such longer period if 
agreed to by HUD in an implementation schedule. The IHA must 
demonstrate to HUD's satisfaction that any lack of timeliness (beyond 
the time periods specified in this paragraph or date specified in a HUD 
approved implementation schedule) has resulted from factors beyond the 
IHA's reasonable control.
    (b) Notice of deficiency. Based on HUD reviews of IHA performance 
and findings of any of the deficiencies in paragraph (d) of this 
section, HUD may issue to the IHA a notice of deficiency stating the 
specific program requirements which the IHA has violated and requesting 
the IHA to take any of the actions in paragraph (e) of this section.
    (c) Corrective action order. (1) Based on HUD reviews of IHA 
performance and findings of any of the deficiencies paragraph (d) of 
this section, HUD may issue to the IHA a corrective action order, 
whether or not a notice of deficiency has previously been issued in 
regard to the specific deficiency on which the corrective action order 
is based. HUD may order corrective action at any time by notifying the 
IHA of the specific program requirements which the IHA has violated, 
and specifying that any of the corrective actions listed in paragraph 
(e) of this section must be taken. HUD shall design corrective action 
to prevent a continuation of the deficiency, mitigate any adverse 
effects of the deficiency to the extent possible, or prevent a 
recurrence of the same or similar deficiencies.
    (2) Before ordering corrective action, HUD will notify the IHA and 
give it an opportunity to consult with HUD regarding the proposed 
action.
    (3) Any corrective action ordered by HUD shall become a condition 
of the grant agreement.
    (4) If HUD orders corrective action by an IHA in accordance with 
this section, the IHA's Board of Commissioners must notify affected 
residents of HUD's determination, the bases for the determination, the 
conditioning requirements imposed under this paragraph, and the 
consequences to the IHA if it fails to comply with HUD's requirements.
    (d) Basis for corrective action. HUD may order an IHA to take 
corrective action only if HUD determines:
    (1) The IHA has not submitted a performance and evaluation report, 
in accordance with Sec. 950.684;
    (2) The IHA has not carried out its activities under the CGP 
program in a timely manner and in accordance with its Comprehensive 
Plan or HUD requirements, as described in paragraph (a)(1) of this 
section;
    (3) The IHA does not have a continuing capacity to carry out its 
Comprehensive Plan in a timely manner or in accordance with its 
Comprehensive Plan or HUD requirements, as described in paragraph 
(a)(2) of this section;
    (4) The IHA has not satisfied, or has not made reasonable progress 
towards satisfying, the performance standards specified in paragraph 
(a)(3) of this section;
    (5) An audit conducted in accordance with 24 CFR part 44 and 
Sec. 950.120, or pursuant to other HUD reviews (including monitoring 
findings) reveals deficiencies that HUD reasonably believes require 
corrective action;
    (6) The IHA has failed to repay HUD for amounts awarded under the 
CGP program that were improperly expended; or
    (7) The IHA has been determined to be high risk, in accordance with 
Sec. 950.135.
    (e) Types of corrective action. HUD may direct an IHA to take one 
or more of the following corrective actions:
    (1) Submit additional information:
    (i) Concerning the IHA's administrative, planning, budgeting, 
accounting, management, and evaluation functions, to determine the 
cause for a IHA not meeting the standards in paragraph (a) (1), (2), or 
(3) of this section;
    (ii) Explaining any steps the IHA is taking to correct the 
deficiencies;
    (iii) Documenting that IHA activities were not inconsistent with 
the IHA's annual statement or other applicable laws, regulations, or 
program requirements; and
    (iv) Demonstrating that the IHA has a continuing capacity to carry 
out the Comprehensive Plan in a timely manner;
    (2) Submit schedules for completing the work identified in its Work 
Statements and report periodically on its progress on meeting the 
schedules;
    (3) Notwithstanding 24 CFR 85.36(g), submit to HUD the following 
documents for prior approval, which may include, but are not limited 
to:
    (i) Proposed agreement with the architect/engineer (prior to 
execution);
    (ii) Complete construction and bid documents (prior to soliciting 
bids);
    (iii) Proposed award of contracts, including construction and 
equipment contracts and management contracts; or
    (iv) Proposed contract modifications prior to issuance, including 
modifications to construction and equipment contracts, and management 
contracts.
    (4) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's Comprehensive Plan, annual statement, or performance and 
evaluation report;
    (5) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
    (6) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended;
    (7) Take such other corrective actions HUD determines appropriate 
to correct IHA deficiencies.
    (8) Submit to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function 
(see Sec. 950.669(d)); and
    (9) Take such other corrective actions HUD determines appropriate 
to correct IHA deficiencies.
    (f) Failure to take corrective action. In cases where HUD has 
ordered corrective action and the IHA has failed to take the required 
actions within a reasonable time, as specified by HUD, HUD may take one 
or more of the following steps:
    (1) Withhold some or all of the IHA's grant;
    (2) Declare a breach of the ACC grant amendment with respect to 
some or all of the IHA's functions; or
    (3) Any other sanction authorized by law or regulation.
    (g) Reallocation of funds that have been withheld. Where HUD has 
withheld for a prescribed period of time some or all of an IHA's annual 
grant, HUD may reallocate such amounts to other IHAs/PHAs under the CGP 
program, subject to approval in appropriations acts. The reallocation 
shall be made to IHAs which HUD has determined to be administratively 
capable under Sec. 950.135, and to PHAs under the CGP program which are 
not designated as either troubled or mod troubled under the PHMAP at 24 
CFR part 901, based upon the relative needs of these IHAs and PHAs, as 
determined under the formula at Sec. 950.601.
    (h) Right to appeal. Before withholding some or all of the IHA's 
annual grant, declaring a breach of the ACC grant amendment, or 
reallocating funds that have been withheld, HUD will notify the IHA and 
give it an opportunity, within a prescribed period of time, to present 
to the Assistant Secretary for Public and Indian Housing any arguments 
or additional facts and data concerning the proposed action.
    (i) Notification of residents. The IHA's Board of Commissioners 
must notify affected residents of HUD's final determination to withhold 
funds, declare a breach of the ACC grant amendment, or reallocate 
funds, as well as the basis for, and the consequences resulting from, 
such a determination.
    (j) Recapture. In addition, HUD may recapture for good cause any 
grant amounts previously provided to an IHA, based upon a determination 
that the IHA has failed to comply with the requirements of the CGP 
program. Before recapturing any grant amounts, HUD will notify the IHA 
and give it an opportunity to appeal in accordance with 
Sec. 950.687(h). Any reallocation of recaptured amounts will be in 
accordance with Sec. 950.687(g). The IHA's board of Commissioners must 
notify affected residents of HUD's final determination to recapture any 
funds.

Subpart J--Operating Subsidy


Sec. 950.701  Purpose and applicability.

    (a) Implementation of section 9(a). (1) The purpose of this subpart 
is to establish standards and policies for the distribution of 
operating subsidy in accordance with section 9(a) of the United States 
Housing Act of 1937 (42 U.S.C. 1437g(a)). Section 9(a) authorizes the 
Secretary of Housing and Urban Development (HUD) to make annual 
contributions for the operation of IHA-owned rental housing (operating 
subsidy).
    (2) This subpart establishes standards for the cost of providing 
comparable services as determined in accordance with a formula 
representing the operations of a prototype well-managed project, taking 
into account the character and location of the project and the 
characteristics of the families served. These standards, policies and 
procedures are called the Performance Funding System (PFS), as 
described in this subpart. The provisions of PFS are intended to 
recognize and give an incentive for efficient and economical management 
and to avoid the expenditure of Federal funds to compensate for 
excessive costs attributable to poor or inefficient management. PFS is 
intended to provide the incentive and financial discipline for 
excessively high-cost IHAs to improve their management efficiency.
    (b) Applicability. This subpart is applicable to all IHA-owned 
rental units under Annual Contributions Contracts. This subpart is not 
applicable to the Section 23 Leased Housing Program, the Section 23 
Housing Assistance Payments Program, the Section 8 Housing Assistance 
Payments Program, the Mutual-Help Program, or the Turnkey III 
Homeownership Opportunity Program. Provisions regarding operating 
subsidy for the homeownership programs are found in the applicable 
subpart of this rule (subpart E for Mutual Help of this part, and 
subpart G for Turnkey III of this part).


Sec. 950.705   Determination of amount of operating subsidy under PFS.

    The amount of operating subsidy for which each IHA is eligible 
shall be determined as follows: The projected operating income level is 
subtracted from the total expense level (Allowable Expense Level plus 
Utilities Expense Level). These amounts are per-unit per-month dollar 
amounts, and must be multiplied by the Unit Months Available. 
Transition funding, if applicable, and other costs as specified in 
paragraphs (b) through (e) of Sec. 950.720 are then added to this total 
in order to determine the total amount of operating subsidy for the 
requested budget year, exclusive of consideration of the cost of an 
independent audit. As an independent operating subsidy eligibility 
factor, an IHA may receive operating subsidy in an amount, approved by 
HUD, equal to the actual or estimated cost of the independent audit to 
be prorated to operations of the IHA-owned rental housing (under 
Sec. 950.720(a)). (See Sec. 950.730 regarding adjustments.)


Sec. 950.710  Computation of allowable expense level.

    The IHA shall compute its Allowable Expense Level (AEL) using forms 
prescribed by HUD, as follows:
    (a) Computation of Base Year Expense Level. The Base Year Expense 
Level includes payments in lieu of taxes (PILOT) required by a 
Cooperation Agreement even if PILOT is not included in the approved 
operating budget for the base year because of a waiver of the 
requirements by the local taxing jurisdiction(s). The Base Year Expense 
Level includes all other operating expenditures as reflected in the 
IHA's operating budget for the base year approved by HUD except the 
following:
    (1) Utilities expense;
    (2) Cost of an independent audit;
    (3) Adjustments applicable to budget years before the base year;
    (4) Expenditures supported by supplemental subsidy payments 
applicable to budget years before the base year;
    (5) All other expenditures that are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended; and
    (6) Expenditures that were funded from a nonrecurring source of 
income.
    (b) Adjustment. In compliance with the six exclusions set forth in 
paragraph (a) of this section, the IHA shall adjust the AEL by 
excluding any of these items from the Base Year Expense Level if this 
has not already been accomplished. If such adjustment is made in the 
second or some later fiscal year of the PFS, the AEL shall be adjusted 
in the year in which the adjustment is made, but the adjustment shall 
not be applied retroactively. If the IHA does not make these 
adjustments, the HUD Field Office shall compute the adjustments.
    (c) Computation of ``Formula Expense Level''. The IHA shall compute 
its Formula Expense Level in accordance with a HUD- prescribed formula 
that estimates the cost of operating an average unit in a particular 
IHA's inventory. The formula takes into account such data as the number 
of two or more bedroom units, ratio of two or more bedroom units in 
high-rise family projects, ratio of units with three or more bedrooms, 
local government wage rates, and number of pre-1940 rental units 
occupied by poor households. It uses weights, and a local inflation 
factor assigned each year, to derive a Formula Expense Level for the 
current year and the requested budget year. The weights of the formula 
and the formula are subject to updating by HUD.
    (d) Computation of Allowable Expense Level. The IHA shall compute 
its Allowable Expense Level as follows:
    (1) Allowable Expense Level for first budget year under PFS where 
Base Year Expense Level does not exceed the top of the range. The top 
of the range is defined as: FEL plus $10.31 for fiscal years starting 
before April 1, 1992, and FEL multiplied by 1.15 for fiscal years 
starting on or after April 1, 1992. Every IHA whose Base Year Expense 
Level is less than the top limit of the range shall compute its AEL for 
the first budget year under PFS by adding the following to its Base 
Year Expense Level (before adjustment under Sec. 950.730);
    (i) Any increase approved by HUD in accordance with 
Sec. 950.730(a);
    (ii) The increase (decrease) between the Formula Expense Level for 
the base year and the Formula Expense Level for the first budget year 
under PFS; and
    (iii) The sum of the Base Year Expense Level, and any amounts 
described in paragraphs (d)(1) (i) and (ii) of this section multiplied 
by the local inflation factor.
    (2) Allowable Expense Level for first budget year under PFS where 
Base Year Expense Level exceeds the top of the range. The top of the 
range is defined as: FEL plus $10.31 for fiscal years starting before 
April 1, 1992, and FEL multiplied by 1.15 for fiscal years starting on 
or after April 1, 1992. Every IHA whose Base Year Expense Level exceeds 
the top of the range shall compute its AEL for the first budget year 
under PFS by adding the following to the top of the range (not to its 
Base Year Expense Level, as in paragraph (d)(1) of this section):
    (i) The increase (decrease) between the Formula Expense Level for 
the base year and the Formula Expense Level or the first budget year 
under PFS;
    (ii) The sum of the figure equal to the top of the range and the 
increase (decrease) described in paragraph (d)(2)(i) of this section, 
multiplied by the local inflation factor. (If the Base Year Expense 
Level is above the allowable expense level, computed as provided in 
paragraph (d) of this section, the IHA may be eligible for transition 
funding under Sec. 950.735.)
    (3) Allowable Expense Level for first budget year under PFS for a 
new project. A new project of a new IHA or a new project of an existing 
IHA that the IHA decides to place under a separate ACC, which did not 
have a sufficient number of units available for occupancy in the base 
year to have a level of operations representative of a full fiscal year 
of operation is considered to be a ``new project''. The AEL for the 
first budget year under PFS for a ``new project'' will be based on the 
AEL for a comparable project, as determined by the HUD Field Office. 
The IHA may suggest a project or projects it believes to be comparable.
    (4) Allowable Expense Level for budget years after the first budget 
year under PFS that begins on or after April 1, 1986. For each budget 
year after the first budget year under PFS that begin on or after April 
1, 1986, the AEL shall be computed as follows:
    (i) The allowable expense level shall be increased by any increase 
to the AEL approved by HUD under Sec. 950.720(c);
    (ii) The AEL for the current budget year also shall be increased 
(or decreased) by either;
    (A) If the IHA has not experienced a change in the number of its 
units in excess of 5 percent or 1,000 units, whichever is less, since 
the last adjustment to the AEL based on paragraph (d)(4)(ii)(B) of this 
section, the AEL shall be increased by one-half of one percent (.5 
percent); or
    (B) If the IHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on this paragraph (d)(4)(ii)(B) of this 
section, it shall use the increase (decrease) between the Formula 
Expense Level for the current budget year and the Formula Expense Level 
for the requested budget year. The IHA characteristics that shall be 
used to compute the Formula Expense Level for the current budget year 
shall be the same as those that were used for the requested budget year 
when the last adjustment to the AEL was made based on this paragraph 
(d)(4)(ii)(B) of this section, except that the number of interim years 
in which the .5 percent adjustment was made under paragraph 
(d)(4)(ii)(A) of this section shall be added to the average age that 
was used for the last adjustment; and
    (iii) The amount computed in accordance with paragraphs (d)(4) (i) 
and (ii) of this section shall be multiplied by the local inflation 
factor.

Example:

    FY 1987. Assume that: (1) The IHA has experienced no change in 
the number of its units, (2) the AEL for the IHA's FY 1986 is 
$64.00, and (3) the applicable local inflation factor is 6 percent 
(expressed as 1.06). The AEL for FY 1987 is $68.18, computed as 
follows:


1. Allowable Expense Level for FY 1986.......................     $64.00
2. Delta: Increase (or Decrease) in Formula Expense Level               
 ($64.00 x .5 percent).......................................        .32
                                                              ----------
3. Sum (line 1 plus line 2)..................................      64.32
4. Local Inflation Factor....................................       1.06
                                                              ----------
5. Allowable Expense Level for FY 1987 (line 3 multiplied by            
 line 4).....................................................    $68.18 
                                                                        

    FY 1988. Assume that the IHA has deprogrammed (e.g., demolished 
or sold) a project that represents seven percent of its units, and 
that the last time an adjustment to the AEL was made based on 
paragraph (d)(4)(ii)(B) of this section was in its FY 1985, at which 
time the IHA had the following characteristics for its requested 
budget year: average age of 10 years, average project height of 5 
stories, and average unit size of 4 bedrooms. The Formula Expense 
Level for the current budget year is calculated using 12 years (10 
years plus two years in which the standard .5 percent adjustment was 
used), 5 stories and 4 bedrooms.
    Also assume that Formula Expense Level calculated based on these 
characteristics is $70.00 and that the IHA average characteristics 
for the requested budget year are now an average age of 8 years, 
average project height of 4 stories and average unit size of 2 
bedrooms, resulting in a Formula Expense Level for the requested 
budget year of $68.00. The Formula Expense Level for the requested 
budget year, therefore, decreases by $2.00. Assuming that the local 
inflation factor is 4.5 percent (expressed as 1.045), the AEL for FY 
1988 is $69.16, computed as follows: 

1. Allowable Expense Level for FY 1987.......................     $68.18
2. Delta (or Decrease) in Formula Expense Level..............     (2.00)
                                                              ----------
3. Sum (line 1 plus line 2)..................................      66.18
4. Local Inflation Factor....................................     1.045 
                                                              ----------
5. Allowable Expense Level for FY 1988 (line 3 multiplied by            
 line 4).....................................................    $69.16 
                                                                        

    It should be noted that the Delta in line 2 of the example 
reflects the application of the formula weights, constant and local 
inflation factor for the requested budget year applied first to the 
IHA characteristics for the current budget year and then to the IHA 
characteristics for the requested budget year, to determine the 
respective Formula Expense Levels. The local inflation factor shown 
on line 4 of the example is the same one used in determining the 
Formula Expense Levels.

    (5) Allowable Expense Level for budget years after the first budget 
year under PFS that begins on or after April 1, 1992. For each budget 
year after the first budget year under PFS that begins on or after 
April 1, 1992, the AEL shall be computed as follows:
    (i) The Allowable Expense Level shall be increased by any increase 
to the AEL approved by HUD under Sec. 950.720(c);
    (ii) The AEL for the Current Budget Year also shall be adjusted as 
follows:
    (A) Increased by one-half of one percent (.5 percent); and
    (B) If the IHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on this paragraph (d)(5)(ii)(B) of this 
section, it shall use the increase (decrease) between the Formula 
Expense Level for the Current Budget Year and the Formula Expense Level 
for the Requested Budget Year. The IHA's characteristics that shall be 
used to compute the Formula Expense Level for the Current Budget Year 
shall be the same as those that applied to the Requested Budget Year 
when the last adjustment to the AEL was made based on this paragraph 
(d)(5)(ii)(B) of this section, except that the number of interim years 
in which the .5 percent adjustment was made under paragraph 
(d)(5)(ii)(A) of this section shall be added to the average age that 
was used for the last adjustment.
    (iii) The amount computed in accordance with paragraphs (d)(5) (i) 
and (ii) of this section shall be multiplied by the Local Inflation 
Factor.
    (6) Adjustment of Allowable Expense Level for budget years after 
the first budget year under PFS. HUD may adjust the AEL of budget years 
after the first year under PFS under the provisions of Secs. 950.710(b) 
or 950.720(c).


Sec. 950.715  Computation of utilities expense level.

    (a) General. In recognition of the rapid rises which occur in 
utilities costs, the wide diversity among IHAs as to types of utilities 
services used and the manner in which utilities payments are allocated 
between IHAs and tenants, and the fact that utilities rates charged by 
suppliers are beyond the control of the IHA, the PFS treats utilities 
expenses separately from other IHA expenses. Utilities expenses are, 
therefore, excluded from the IHA's allowable expense level and the PFS 
provides for computation of the amount of operating subsidy for 
utilities costs based upon a calculated utilities expense of each IHA. 
Accordingly, the IHA's utilities expense level for the requested budget 
year shall be computed by multiplying the allowable utilities 
consumption level (AUCL) per-unit per-month for each utility, 
determined as provided in paragraph (c) of this section, by the 
projected utility rate determined as provided in paragraph (b) of this 
section. The AUCL for space heating utilities will be adjusted after 
the end of the affected fiscal year pursuant to the instructions of 
paragraph (d) of this section.
    (b) Utilities rates. (1) The currently applicable rates, with 
consideration of adjustments and pass-throughs, in effect at the time 
the operating budget is submitted to HUD will be used as the utilities 
rates for the requested budget year, except that, when the appropriate 
utility commission has, before the date of submission of the operating 
budget to HUD, approved and published rate changes to be applicable 
during the requested budget year, the future approved rates may be used 
as the utilities rates for the entire requested budget year.
    (2) If an IHA takes action, such as a well-head purchase of natural 
gas or administrative appeals or legal action beyond normal public 
participation in rate-making proceedings to reduce the rate it pays for 
utilities (including water, fuel oil, electricity, and gas), then the 
IHA will be permitted to retain one-half of the cost savings during the 
first 12 months attributable to its actions. Upon determination that 
the action was cost-effective in the first year, the IHA may be 
permitted to retain one-half the annual cost savings for an additional 
period not to exceed six years, if the actions continue to be cost-
effective. See also paragraph (f) of this section and Sec. 950.730(c).
    (c) Computation of ``Allowable Utilities Consumption Level''. The 
Allowable Utilities Consumption Level (AUCL) used to compute the 
utilities expense level of an IHA for the requested budget year 
generally will be based upon the availability of consumption data. For 
project utilities where consumption data are available for the entire 
rolling base period, the computation will be in accordance with 
paragraph (c)(1) of this section. Where data are not available for the 
entire period, the computation will be in accordance with paragraph 
(c)(2) of this section, unless the project is a new project, in which 
case the computation will be in accordance with paragraph (c)(3) of 
this section. For a project where the IHA has taken special energy 
conservation measures that qualify for special treatment in accordance 
with paragraph (g)(1) of this section, the computation of the AUCL may 
be made in accordance with paragraph (c)(4) of this section. The AUCL 
for all of an IHA's projects is the sum of the amounts determined using 
all of the paragraphs in this paragraph (c), as appropriate.
    (1) Rolling Base Period System. For project utilities with 
consumption data for the entire rolling base period, the AUCL is the 
average amount consumed per unit per month during the rolling base 
period, adjusted in accordance with paragraph (d) of this section. The 
IHA shall determine the average amount of each of the utilities 
consumed during the rolling base period (i.e., the 36-month period 
ending 12 months prior to the first day of the requested budget year).
    (i) IHA fiscal years affected. The rolling base period shall be 
used to compute the AUCL submitted with the operating budgets.
    (ii) An example of a rolling base is as follows: 

------------------------------------------------------------------------
    IHA fiscal year (affected fiscal year)        Rolling base period   
------------------------------------------------------------------------
 Beginning                 Ending                 Begins        Ends    
------------------------------------------------------------------------
1-1-92.....  12-31-92 (1st year)..............       1-1-88     12-31-90
1-1-93.....  12-31-93 (2nd year)..............       1-1-89    12-31-91 
------------------------------------------------------------------------

    (2) Alternative method where data is not available for the entire 
rolling base period:
    (i) If the IHA has not maintained or cannot recapture consumption 
data regarding a particular utility from its records for the whole 
rolling base period mentioned in paragraph (c)(1) of this section, it 
shall submit consumption data for that utility for the last 24 months 
of its rolling base period to the HUD Field Office for approval. If 
this is not possible, it shall submit consumption data for the last 12 
months of its rolling base period. The IHA also shall submit a written 
explanation of the reasons that data for the whole rolling base period 
is unavailable.
    (ii) In those cases where an IHA has not maintained or cannot 
recapture consumption data for a utility for the entire rolling base 
period, comparable consumption for the greatest of either 36, 24, or 12 
months, as needed, shall be used for the utility for which the data is 
lacking. The comparable consumption shall be estimated based upon the 
consumption experienced during the rolling base period of comparable 
project(s) with comparable utility delivery systems and occupancy. The 
use of actual and comparable consumption by each IHA, other than those 
IHAs defined as new projects in paragraph (c)(3) of this section, will 
be determined by the availability of complete data for the entire 36-
month rolling base period. Appropriate utility consumption records, 
satisfactory to HUD, shall be developed and maintained by all IHAs so 
that a 36-month rolling average utility consumption per unit per month 
under paragraph (c)(1) of this section can be determined.
    (iii) If an IHA cannot develop the consumption data for the rolling 
base period or for 12 or 24 months of the rolling base period, either 
from its own project(s) data, or by using comparable consumption data 
the actual per-unit per-month utility expenses stated in paragraph (e) 
of this section shall be used as the utilities expense level and no 
change factor shall be applied.
    (3) Computation of Allowable Utilities Consumption Levels for New 
Projects. (i) A new project, for the purpose of establishing the 
rolling base period and the utilities expense level, is defined as 
either:
    (A) A project that had not been in operation during at least 12 
months of the rolling base period, or a project that enters management 
after the rolling base period and before the end of the requested 
budget year, or
    (B) A project that during or after the rolling base period, has 
experienced conversion from one energy source to another; interruptible 
service; deprogrammed units, a switch from tenant-purchased to IHA-
supplied utilities; or a switch from IHA-supplied to tenant-purchased 
utilities.
    (ii) The actual consumption for new projects shall be determined so 
as not to distort the rolling base period in accordance with a method 
prescribed by HUD.
    (4) Freezing the Allowable Utilities Consumption Level (AUCL).
    (i) Notwithstanding the provisions of paragraphs (c)(1) and (c)(2) 
of this section, if an IHA undertakes energy conservation measures that 
are approved by HUD under paragraph (g) of this section, the AUCL for 
the project and the utilities involved may be frozen during the 
contract period. Before the AUCL is frozen, it shall be adjusted to 
reflect any energy savings resulting from the use of any HUD funding. 
The AUCL is then frozen at the level calculated for the year during 
which the conservation measures initially will be implemented, as 
determined in accordance with paragraph (g) of this section.
    (ii) See Sec. 950.730(c)(2)(ii) for the method of adjusting the 
AUCL for heating degree days.
    (iii) If the AUCL is frozen during the contract period, the annual 
three-year rolling base procedures for computing the AUCL shall be 
reactivated after the IHA satisfies the conditions of the contract. The 
three years of consumption data to be used in calculating the AUCL 
after the end of the contract period will be as follows:
    (A) First year: The energy consumption during the year before the 
year in which the contract ended and the energy consumption for each of 
the two years before installation of the energy conservation 
improvements;
    (B) Second year: The energy consumption during the year the 
contract ended, energy consumption during the year before the contract 
ended, and energy consumption during the year before installation of 
the energy conservation improvements;
    (C) Third year: The energy consumption during the year after the 
contract ended, energy consumption during the year the contract ended, 
and energy consumption during the year before the contract ended.
    (d) Adjustment to utilities used for space heating. For project 
utilities with consumption data for the entire rolling base period, and 
for new projects, consumption of utilities used for space heating shall 
be adjusted, after the end of the affected year, using a change factor 
as follows:
    (1) Adjustment of the rolling base period data. (i) Use of Change 
Factors. A change factor will be developed each year by HUD that 
indicates the relationship of the affected IHA fiscal year Heating 
Degree Days (HDD) to the average HDD of the rolling base period. This 
change factor is to be used to establish an AUCL for utilities used for 
space heating which reflects the severity of the winter weather of the 
affected IHA fiscal year. The change factors are developed by the 
National Climatic Center of the Department of Commerce for each 
established standard weather division of the country, by IHA fiscal 
year. Change factors will be supplied by HUD to the IHAs. When a change 
factor is greater than 1.000, it means that the HDD of the affected 
fiscal year were greater than the average annual HDD of the rolling 
base period. An example of the effect of the change factor on the 
rolling base period consumption is:

Assume:

Affected fiscal year HDD--5,250
Rolling Base Period average HDD--5,000
Rolling Base Period average annual consumption for heating purposes--
1,000 gallons

Results:

Change Factor is (5,250 divided by 5,000) = 1.050
Adjusted Rolling Base Period average consumption for heating purposes 
(1,000  x  1.050) = 1,050 gallons

    (ii) Application of change factor to consumption of the Rolling 
Base Period. The change factor is to be applied only to the consumption 
readings of meters of utilities, or gallons of oil, or tons of coal 
used for the purpose of generating heat for dwelling units and other 
IHA associated buildings. The change factor shall not be applied to the 
consumption readings of meters of utilities not used for the purpose of 
generating heat; e.g., water and sewer or electricity used solely for 
non-heating purposes. The change factor shall be applied to the total 
consumption reading of meters of utilities, or gallons of oil, or tons 
of coal used for heating even though the same meter or same energy 
source is used for other purposes; e.g., heating and cooking gas usage 
metered on the same meter or oil used for space heating and also 
heating of water. Such consumption for each fiscal year of the rolling 
base period shall be adjusted by the change factor. The adjusted 
consumption for each year shall be totalled. These totals then will be 
averaged. The consumption readings of meters of utilities not used for 
heating (not adjusted by the change factor) shall be included in the 
total consumption. 

              Example Showing Application of Change Factor              
------------------------------------------------------------------------
                                                Base years              
                                  --------------------------------------
                                    1st year     2nd year      3rd year 
------------------------------------------------------------------------
Gas meters used for heating:                                            
  No. 1234 (In therms)...........       15,000       18,000       17,000
  No. 2345.......................       10,000       12,000       11,000
    Subtotal.....................       25,000       30,000       28,000
Change Factor (from HUD).........      x 1.050      x 1.050      x 1.050
    Subtotal.....................       26,250       31,500       29,400
Gas meters not used for heating:                                        
  No. 3456.......................        2,500        2,600        2,650
Total adjusted allowable gas                                            
 consumption level...............       28,750       34,100       32,050
------------------------------------------------------------------------

    (iii) IHAs will be required to use change factors of less than 
1.000. Change factors are listed by county. If an IHA manages units in 
more than one county and those counties have different change factors, 
the above calculation shall be done considering the units in each 
county and each county's assigned change factor. If an IHA manages 
units in an independent city not within the jurisdiction of a county, 
it shall:
    (A) If within one county, use that county's change factor; or
    (B) If the city abuts more than one county, use the average of the 
change factors of the contiguous counties.
    (2) Adjusted consumption for new projects. (i) Use of change 
factor. For new projects, the IHA shall apply the change factor to the 
HUD approved consumption level of utilities used for heating.
    (ii) Application of change factor to consumption of new projects. 
The annual AUCL for new projects shall be adjusted by applying the 
change factor to the estimated consumption where the utility is used 
for heating in part or in total. This consumption shall be from a 
comparable project during the permissible rolling base period. Any 
other consumption of this utility which is not used for heating shall 
not be adjusted by the change factor, but the estimated annual 
consumption based upon data from a comparable project during the 
permissible rolling base period shall be added to the adjusted 
consumption.
    (e) Utilities expense level where consumption data for the full 
rolling base period is unavailable. If an IHA does not obtain the 
consumption data for the entire rolling base period, or for 12 or 24 
months of the rolling base period, either for its own project(s) or by 
using comparable consumption data as required in paragraph (c)(2) of 
this section, it shall request HUD Field Office approval to use actual 
per-unit per-month utility expenses. These expenses shall exclude 
utilities labor and other utilities expenses. The actual per-unit per-
month utility expenses shall be taken from the year-end statement of 
operating receipts and expenditures Form HUD-52599 (Office of 
Management and Budget approval number 2577-0067), prepared for the IHA 
fiscal year which ended 12 months before the beginning of the IHA 
requested budget year (e.g., for an IHA fiscal year beginning January 
1, 1983, the IHA would use data from the fiscal year ended December 31, 
1981). No change factor shall be applied to actual per-unit per-month 
utility expenses, and subsequent adjustments will not be approved for a 
budget year for which the utility expense level is established based 
upon actual per-unit per-month utility expenses.
    (f) Adjustments. IHAs shall request adjustments of utilities 
expense levels in accordance with Sec. 950.730(c), which requires an 
adjustment based upon a comparison of actual experience and estimates 
of consumption (after adjustment for heating degree days in accordance 
with paragraph (d) of this section) and of utility rates.
    (g) Incentives for energy conservation improvements. If an IHA 
undertakes energy conservation measures (including measures to save 
water, fuel oil, electricity, and gas) that are financed by an entity 
other than the Secretary, such as physical improvements financed by a 
loan from a utility or governmental entity, management of costs under a 
performance contract, or a shared savings agreement with a private 
energy service company, the IHA may qualify for one of two possible 
incentives under this part. For an IHA to qualify for these incentives, 
HUD approval shall be obtained. Approval will be based upon a 
determination that payments under the contract can be funded from the 
reasonably anticipated energy cost savings, and the contract period 
does not exceed 12 years.
    (1) If the contract allows the IHA's payments to be dependent on 
the cost savings it realizes, the IHA shall use at least 50 percent of 
the cost savings to pay the contractor. With this type of contract, the 
IHA may take advantage of a frozen AUCL under paragraph (c)(4) of this 
section, and it may use the full amount of the cost savings, as 
described in Sec. 950.730(c)(2)(ii).
    (2) If the contract does not allow the IHA's payments to be 
dependent on the cost savings it realizes, then the AUCL will continue 
to be calculated in accordance with paragraphs (c)(1) through (c)(3) of 
this section, as appropriate; the IHA will be able to retain part of 
the cost savings, in accordance with Sec. 950.730(c)(2)(i); and the IHA 
will qualify for additional operating subsidy eligibility (above the 
amount based on the allowable expense level) to cover the cost of 
amortizing the improvement loan during the term of the contract, in 
accordance with Sec. 950.730(f).


(Approved by the Office of Management and Budget under control 
number 2577-0029.)


Sec. 950.720  Other costs.

    (a) Costs of independent audits. (1) Eligibility to receive 
operating subsidy for independent audits is considered separately from 
the PFS. However, the IHA shall not request, nor will HUD approve, an 
operating subsidy for the cost of an independent audit if the audit has 
been funded by subsidy in a prior year. The IHA's estimate of cost of 
the independent audit is subject to adjustment by HUD. If the IHA 
requires assistance in determining the amount of cost to be estimated, 
the HUD Field Office should be contacted.
    (2) An IHA that is required by the Single Audit Act (31 U.S.C. 
7501-7507) (see 24 CFR part 44) to conduct a regular independent audit 
may receive operating subsidy to cover the cost of the audit. The 
amount shall be prorated between the IHA's development cost budget and 
one or all of its operating budgets, as appropriate. The estimated cost 
of an independent audit, applicable to the operations of IHA-owned 
rental housing, is not included in the allowable expense level, but it 
is allowed in full in computing the amount of operating subsidy under 
Sec. 950.705.
    (3) An IHA that is exempt from the audit requirements of the Single 
Audit Act (31 U.S.C. 7501-7507); see 24 CFR part 44) may receive 
operating subsidy to offset the cost of an independent audit chargeable 
to operations (after the end of the initial operating period) if the 
IHA chooses to have an audit.
    (b) Costs attributable to units approved for deprogramming and 
vacant.
    (1) Units approved for deprogramming are those for which the IHA's 
formal request has been approved by HUD but for which deprogramming has 
not been completed. Costs for these units may be eligible for 
inclusion, but shall be limited to the minimum services and protection 
necessary to protect and preserve the units until the units are 
deprogrammed. Costs attributable to units temporarily unavailable for 
occupancy because they are utilized for IHA related activities are not 
eligible for inclusion. In determining the PFS operating subsidy, these 
units shall not be included in the calculation of unit months 
available. Units approved for deprogramming shall be listed by the IHA 
and supporting documentation regarding direct costs attributable to 
such units shall be included as part of the operating budget in which 
the IHA requests operating subsidy for these units. If the IHA requires 
assistance in this matter, the HUD Field Office should be contacted.
    (2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for 
operating subsidy under the conditions provided in this paragraph 
(b)(2), and the costs attributable to them are to be included in the 
operating budget. If a unit satisfies the conditions stated in 
paragraphs (b)(2) (i) through (v) of this section, it will be eligible 
for subsidy at the rate of the AEL for the number of months the unit is 
devoted to such use. Approval will be given for a period of no more 
than three years. Renewal of the approval to allow payments after that 
period may be made only if the IHA can demonstrate that no other 
sources for paying the non-utility operating costs of the unit are 
available:
    (i) The unit must be used for either economic self-sufficiency 
activities directly related to maximizing the number of employed 
residents or for anti-drug programs directly related to ridding the 
development of illegal drugs and drug-related crime. The activities 
must be directed toward and for the benefit of residents of the 
development.
    (ii) The IHA must demonstrate that space for the service or program 
is not available elsewhere in the locality and that the space used is 
safe and suitable for its intended use or that resources are committed 
to make the space safe and suitable.
    (iii) The IHA must demonstrate satisfactorily that other funding is 
not available to pay for the non-utility operating costs. All rental 
income generated as a result of the activity must be reported as income 
in the operating subsidy calculation.
    (iv) Operating subsidy may be approved for only one site (involving 
one or more contiguous units) per Indian housing development for 
economic self-sufficiency services or anti-drug programs, and the 
number of units involved should be the minimum necessary to support the 
service or program. Operating subsidy for any additional sites per 
development can only be approved by HUD Headquarters.
    (v) The IHA must submit a certification with its Performance 
Funding System calculation that the units are being used for the 
purpose for which they were approved and that any rental income 
generated as a result of the activity is reported as income in the 
operating subsidy calculation. The IHA must maintain specific 
documentation of the units covered. Such documentation should include a 
listing of the units and project/management control numbers.
    (c) Costs attributable to changes in Federal law or regulation. In 
the event that HUD determines that enactment of a Federal law or 
revision in HUD or other Federal regulation has caused or will cause a 
significant increase in expenditures of a continuing nature above the 
allowable expense level and utilities expense level, and upon a 
determination that sufficient other funds are not available to cover 
the required expenditures, HUD may in HUD's sole discretion decide to 
prescribe a procedure under which the IHA may apply for or may receive 
an increase in operating subsidy.
    (d) Costs beyond the control of the IHA. Costs attributable to 
unique circumstances that are beyond the control of the IHA and were 
not reflected in the IHA's Base Year Expense Level may be considered 
for supplemental operating subsidy funding. Where costs were reflected 
in the IHA's Base Year Expense Level, but the rate of increase for such 
costs is greater than the prescribed PFS inflation rate(s), then the 
increase in excess of that provided by the inflation rate may be 
considered for supplemental operating subsidy funding. The IHA shall 
submit to the HUD Field Office complete documentation relating to those 
cost items which it claims to be beyond its control. Such documentation 
shall not be submitted as part of the requested operating budget, but 
shall be submitted separately as an addendum to the budget. The IHA 
also shall show that these additional costs cannot be funded from its 
own resources. In the event that excess funds are available after 
making all payments approvable under Secs. 990.705 and 950.720 of these 
regulations, HUD may, in HUD's sole discretion, solicit, evaluate and 
approve or disapprove, in full or in part, these requests for 
additional operating subsidy for costs beyond the control of the IHA.
    (e) Costs resulting from combination of two or more units. When an 
IHA redesigns or rehabilitates a project and combines two or more units 
into one larger unit and the combination of units results in a unit 
that houses at least the same number of people as were previously 
served, the AEL for the requested year shall be multiplied by the 
number of unit months not included in the requested year's unit months 
available as a result of these combinations that have occurred since 
the Base Year. The number of people served in a unit will be based on 
the formula [(2 x No. of bedrooms) minus 1], which yields the average 
number of people that would be served. An efficiency unit will be 
counted as a one bedroom unit for purposes of this calculation.
    (f) User fee. Additional operating subsidy will be provided to IHAs 
for payment of an annual User Fee separate from the PFS. An IHA 
operating a rental program shall pay an annual User Fee to 
municipalities, which may include Tribal, city, county government, or 
other political subdivision that provides any roads, water supply, 
sewage facilities, electrical systems or fuel distribution systems. The 
annual User Fee will be paid in an amount equal to 10 percent of the 
applicable shelter rent, minus the utility allowance; or $150, 
whichever is greater, for each rental housing unit covered by this 
section.

(Approved by the Office of Management and Budget under control 
number 2577-0029.)


Sec. 950.725  Projected operating income level.

    (a) Policy. PFS determines the amount of operating subsidy for a 
particular IHA based in part upon a projection of the actual dwelling 
rental income and other income for the particular IHA. The projection 
of dwelling rental income is obtained by computing the average monthly 
dwelling rental charge per unit for the IHA, and projecting this amount 
for the requested budget year by applying an upward trend factor 
(subject to updating) of 3 percent, and multiplying this amount by the 
projected occupancy percentage for the requested budget year. 
Nondwelling income is projected by the IHA subject to adjustment by 
HUD. There are special provisions for projection of dwelling rental 
income for new projects.
    (b) Computation of projected average monthly dwelling rental 
income. The projected average monthly dwelling rental income per unit 
for the IHA is computed as follows:
    (1) Average monthly dwelling rental charge per unit. The dollar 
amount of the average monthly dwelling rental charge per unit shall be 
computed on the basis of the total dwelling rental charges (total of 
the adjusted rent roll amounts) for all project units, as shown on the 
rent roll control and analysis of dwelling rent charges, which the IHA 
is required to maintain, for the first day of the month which is six 
months before the first day of the requested budget year, except that 
if a change in the total of the rent rolls has occurred in a subsequent 
month which is before the beginning of the requested budget year and 
before the submission of the requested budget year operating budget, 
the IHA shall use the latest changed rent roll for the purpose of the 
computation. This aggregate dollar amount shall be divided by the 
number of occupied dwelling units as of the same date.
    (2) Three percent increase. The average monthly dwelling rental 
charge per unit, computed under paragraph (b)(1) of this section, is 
increased by 3 percent to obtain the projected average monthly dwelling 
rental charge per unit of the IHA for the requested budget year.
    (3) Projected occupancy percentage. The IHA shall determine its 
projected percentage of occupancy for all project units (projected 
occupancy percentage) as follows:
    (i) High occupancy IHAs. If the IHA's actual occupancy percentage 
(see Sec. 950.760) is equal to or greater than 97 percent, the IHA's 
projected occupancy percentage is 97 percent.
    (ii) High occupancy IHAs exclusive of scheduled modernization. If 
the IHA's actual occupancy percentage (see Sec. 950.760) is less than 
97 percent solely because of vacant, on-schedule modernization units 
described in paragraph (b)(3)(v) of this section, the IHA's projected 
occupancy percentage is its actual occupancy percentage. An IHA may 
also use its actual occupancy percentage as its projected occupancy 
percentage if the IHA has five or fewer vacant units other than vacant, 
on-schedule modernization units described in paragraph (b)(3)(v) of 
this section.
    (iii) Low occupancy IHAs with an approved Comprehensive Occupancy 
Plan (COP). If the IHA has an actual occupancy percentage (see 
Sec. 950.760) less than 97 percent and more than five vacant units, not 
solely because of vacant, on-schedule modernization units described in 
paragraph (b)(3)(v) of this section and if the IHA has a HUD-approved 
COP, the IHA's projected occupancy percentage is determined under 
Sec. 950.770(h).
    (iv) Low Occupancy IHAs without an approved COP. (A) The IHA shall 
use 97 percent as its projected occupancy percentage, if the IHA:
    (1) Has an actual occupancy percentage (see Sec. 950.760) less than 
97 percent and has more than five vacant units, not solely because of 
vacant, on-schedule modernization units described in paragraph 
(b)(3)(v) of this section; and the IHA:
    (2)(i) Has completed the term of its approved COP but has not 
achieved a 97 percent actual occupancy percentage or has not had five 
or fewer vacant units other than vacant, on-schedule modernization 
units described in paragraph (b)(3)(v) of this section; or
    (ii) Is authorized to submit a COP but elects not to submit one; or
    (iii) Submits a COP that is disapproved by HUD.
    (B) Notwithstanding the requirement in paragraph (b)(3)(iv)(A) of 
this section that 97 percent be the projected occupancy percentage, a 
low occupancy IHA which satisfies all the conditions described in 
paragraph (b)(3)(iv)(A)(2)(i) of this section, may adjust the 97 
percent projected occupancy percentage to discount units that are 
vacant for reasons beyond its control, as provided in Sec. 950.770(i).
    (v) Vacant, on-schedule modernization units. Vacant, on-schedule 
modernization units are vacant units in an otherwise occupiable project 
that has received funding for modernization through the comprehensive 
improvement assistance program (subpart I of this part) or other 
sources; and for which:
    (A) It is expected that the vacant units will be occupied on 
completion of modernization work;
    (B) The IHA has a schedule for carrying out the modernization which 
is acceptable to HUD; and
    (C) The modernization work is on schedule.
    (4) Projected average monthly dwelling rental income. The projected 
occupancy percentage under paragraph (b)(3) of this section shall be 
multiplied by the projected average monthly dwelling rental charge 
under paragraph (b)(2) of this section to obtain the projected monthly 
dwelling rental income per unit.
    (c) Projected average monthly dwelling rental charge per unit for 
new projects. The projected average monthly dwelling rental charge for 
new projects that were not available for occupancy during the budget 
year before the requested budget year and which will reach the end of 
the initial operating period (EIOP) within the first nine months of the 
requested budget year, shall be calculated as follows:
    (1) If the IHA has another project or projects under management 
which are comparable in terms of elderly and nonelderly tenant 
composition, the IHA shall use the projected average monthly dwelling 
rental charge for such project or projects.
    (2) If the IHA has no other projects which are comparable in terms 
of elderly and nonelderly tenant composition, the HUD Field Office will 
provide the projected average monthly dwelling rental charge for such 
project or projects, based on comparable projects located in the area.
    (d) Estimate of additional dwelling rental income. After 
implementation of the provisions of any legislation enacted or any HUD 
administrative action taken after [THE EFFECTIVE DATE OF THE FINAL 
RULE], which affects rent paid by tenants of projects, each IHA shall 
submit a revision of its annual operating budget showing an estimate of 
any change in rental income which it anticipates as the result of the 
implementation of said provisions. HUD shall have complete discretion 
to adjust the projected average monthly dwelling rental charge per unit 
to reflect the IHA's estimate of change or, in the absence of this 
submission, to reflect HUD's estimate of such change. HUD also shall 
have complete discretion to reduce or increase the operating subsidy 
approved for the IHA current fiscal year in an amount equivalent to the 
change in the rental income.
    (e) IHA's estimate of income other than dwelling rental income.
    (1) Investment income. IHAs with an estimated average cash balance 
of less than $20,000, excluding investment income earned from a funded 
replacement reserve under Sec. 950.666(f), shall make a reasonable 
estimate of investment income for the Requested Budget Year. IHAs with 
an estimated average cash balance of $20,000 or more, excluding 
investment income earned from a funded replacement reserve under 
Sec. 950.666(f), shall estimate interest on general fund investments 
based on the estimated average yield for 91-day Treasury bills for the 
IHA's Requested Budget Year (yield information will be provided by 
HUD). The determination of average cash balance will allow a deduction 
of $10,000, plus $10 per unit for each unit over 1,000, subject to a 
total maximum deduction of $250,000. In all cases, the estimated 
investment income amount shall be subject to HUD approval. (See 
Sec. 950.730(b).)
    (2) Other income. All IHAs shall estimate other income based on 
past experience and a reasonable projection for the requested budget 
year, which estimate shall be subject to HUD approval.
    (3) Total. The estimated total amount of income from investments 
and other income, as approved, shall be divided by the number of unit 
months available to obtain a per-unit per-month amount. Such amount 
shall be added to the projected average dwelling rental income per unit 
to obtain the projected operating income level. This amount shall not 
be subject to the provisions regarding program income in 24 CFR 85.25.
    (f) Required adjustments to estimates. The IHA shall submit year-
end adjustments of projected operating income levels in accordance with 
Sec. 950.730(b), which covers investment income.

(Approved by the Office of Management and Budget under control 
number 2577-0029.)


Sec. 950.730  Adjustments.

    Adjustment information submitted to HUD under this section shall be 
accompanied by an original or revised operating budget.
    (a) Adjustment of Base Year Expense Level. (1) Eligibility. An IHA 
with projects that have been in management for at least one full fiscal 
year, for which operating subsidy is being requested under the formula 
for the first time, may, during its first budget year under PFS, 
request HUD to increase its Base Year Expense Level. Included in this 
category are existing IHAs requesting subsidy for a project or projects 
in operation at least one full fiscal year under separate ACC for which 
operating subsidy has never been paid, except for IPA audit costs. This 
request may be granted by HUD, in its discretion, only where the IHA 
establishes to HUD's satisfaction that the Base Year Expense Level 
computed under Sec. 950.710(a) will result in operating subsidy at a 
level insufficient to support a reasonable level of essential services. 
The approved increase cannot exceed the per-unit per-month amount by 
which the top of the range exceeds the Base Year Expense Level or 
$10.31.
    (2) Procedure. An IHA that is eligible for an adjustment under 
paragraph (a)(1) of this section may only make a request for such 
adjustment once for projects under a particular ACC, at the time it 
submits the operating budget for the first budget year under PFS. Such 
request shall be submitted to the HUD Field Office, which will review, 
modify as necessary, and approve or disapprove the request. A request 
under this paragraph shall include a calculation of the amount per-unit 
per-month of requested increase in the Base Year Expense Level, and 
shall show the requested increase as a percentage of the Base Year 
Expense Level.
    (b) Adjustments to estimated investment income. An IHA that has an 
estimated average cash balance of at least $20,000 shall submit a year-
end adjustment to the estimated amount of investment income that was 
used to determine subsidy eligibility at the beginning of the IHA's 
fiscal year. The amount of the adjustment will be the difference 
between the estimate and a target investment income amount based on the 
actual average yield on 91-day Treasury bills for the IHA's fiscal year 
being adjusted and the actual average cash balance available for 
investment during the IHA's fiscal year, computed in accordance with 
HUD requirements. HUD will provide the IHA with the actual average 
yield on 91-day Treasury bills for the IHA's fiscal year. Failure of an 
IHA to submit the required adjustment of investment income by the date 
due may, in the discretion of HUD, result in the withholding of 
approval of future obligation of operating subsidies until the 
adjustment is received.
    (c) Adjustments to Utilities Expense Level. An IHA receiving 
operating subsidy under Sec. 950.705, excluding those IHAs that receive 
operating subsidy solely for IPA audit (Sec. 950.720(a)), shall submit 
a year-end adjustment regarding the utility expense level approved for 
operating subsidy eligibility purposes. This adjustment, which will 
compare the actual utility expense and consumption for the IHA fiscal 
year to the estimates used for subsidy eligibility purposes, shall be 
submitted on forms prescribed by HUD. This request shall be submitted 
to the HUD Field Office by a deadline established by HUD, which will be 
during the IHA fiscal year following the IHA fiscal year for which an 
operating subsidy was received by the IHA, exclusive of a subsidy 
solely for IPA audit costs. Failure to submit the required adjustment 
of the utilities expense level by the due date may, in the discretion 
of HUD, result in the withholding of approval of future obligation of 
operating subsidies until it is received. Adjustments under this 
subsection normally will be made in the IHA fiscal year following the 
year for which the adjustment is applicable, except as provided in 
paragraph (c)(5) of this section or unless a repayment plan is 
necessary as noted in paragraph (d) of this section.
    (1) Rates. (i) A decrease in the utilities expense level because of 
decreased utility rates--to the extent funded by operating subsidy--
will be deducted by HUD from future operating subsidy payments. 
However, where the rate reduction covering utilities, such as water, 
fuel oil, electricity, and gas, is directly attributable to action by 
the IHA, such as well-head purchase of natural gas, or administrative 
appeals or legal action beyond normal public participation in 
ratemaking proceedings, then the IHA will be permitted to retain one-
half of the cost savings attributable to its actions for the first year 
and, upon determination that the action was cost-effective in the first 
year, for up to an additional six years, as long as the actions 
continue to be cost-effective, and the other one-half of the cost 
savings will be deducted from operating subsidy otherwise payable.
    (ii) An increase in the utilities expense level because of 
increased utility rates--to the extent funded by operating subsidy--
will be fully funded by increased operating subsidy, subject to 
availability of funds.
    (2) Consumption. (i) Generally, 50 percent of any decrease in the 
utilities expense level attributable to decreased consumption (adjusted 
for heating degree days in accordance with Sec. 950.715(d)), after 
adjustment for any utility rate change, will be retained by the IHA; 50 
percent will be offset by HUD against subsequent payment of operating 
subsidy.
    (ii) However, in the case of an IHA whose energy conservation 
measures have been approved by HUD as satisfying the requirements of 
Sec. 950.715(g)(1), the IHA may retain 100 percent of the savings from 
decreased consumption after payment of the amount due the contractor 
until the term of the financing agreement is completed. The decreased 
consumption is to be determined using a heating degree day adjustment 
for space heating utilities and by adjusting for any utility rate 
changes. The heating degree day experience during the frozen rolling 
base period will be used instead of the degree days in the year being 
adjusted. The documentation on the degree days shall be supplied by the 
IHA and is subject to HUD approval. The savings realized shall be 
applied in the following order:
    (A) Retention of up to 50 percent of the total savings from 
decreased consumption to cover training of IHA employees, counseling of 
tenants, IHA management of the cost reduction program and any other 
eligible costs; and
    (B) Prepayment of the amount due the contractor under the contract.
    (iii) Fifty percent of the increase in the Utilities Expense Level 
attributable to increased consumption will be funded by increased 
operating subsidy payments, subject to the availability of funds.
    (3) Emergency adjustments. In emergency cases, where an IHA 
establishes to HUD's satisfaction that a severe financial crisis would 
result from a utility rate increase, an adjustment covering only the 
rate increase may be submitted to HUD at any time during the IHA's 
Current Budget Year. Unlike the adjustments mentioned in paragraphs 
(c)(1) and (c)(2) of this section, this adjustment shall be submitted 
to the HUD Field Office by revision of the original submission of the 
estimated Utility Expense Level for the fiscal year to be adjusted.
    (4) Documentation. Supporting documentation substantiating the 
requested adjustments shall be retained by the IHA pending HUD audit.
    (d) Requests for adjustments to projected average monthly dwelling 
rental income. Requests for adjustments to projected average monthly 
dwelling rental income may be made as follows:
    (1) Criteria for granting request. An IHA may request an adjustment 
to projected average monthly dwelling rental income under PFS if the 
IHA can establish to HUD's satisfaction that the projected amount 
computed under Sec. 950.725 was not attained because of circumstances 
beyond the control of the IHA, such as a substantial increase in 
general unemployment in the locality, or because of a revision of the 
IHA's rent schedule which has been approved by HUD. The IHA shall also 
demonstrate to HUD's satisfaction that it has established and is 
effectively implementing tenant selection criteria in compliance with 
HUD requirements. HUD shall have complete discretion to approve 
completely, approve in part or deny any requested adjustments to 
projected average monthly dwelling rental income.
    (2) Procedure. A request for an adjustment under this subsection 
shall be submitted to the HUD Field Office by a deadline established by 
HUD, which will be within twelve months following the IHA's fiscal year 
being adjusted. In emergency cases, however, where an IHA establishes 
to HUD's satisfaction that decreased rental income would result in a 
severe financial crisis, a request for adjustments may be submitted to 
HUD at an earlier time.
    (e) Energy conservation financing. If HUD has approved an energy 
conservation contract under Sec. 950.715(g)(2), then the IHA is 
eligible for additional operating subsidy each year of the contract to 
amortize the cost of the energy conservation measures under the 
contract, subject to a maximum annual limit equal to the cost savings 
for that year (and a maximum contract period of 12 years).
    (1) Each year, the energy cost savings would be determined as 
follows:
    (i) The consumption level that would have been expected if the 
energy conservation measure had not been undertaken would be adjusted 
for the Heating Degree Days experience for the year, and for any change 
in utility rate.
    (ii) The actual cost of energy (of the type affected by the energy 
conservation measure) after implementation of the energy conservation 
measure would be subtracted from the expected energy cost, to produce 
the energy cost savings for the year. (See also paragraph (c)(2)(ii) of 
this section for retention of consumption savings.)
    (2) If the cost savings for any year during the contract period is 
less than the amount of operating subsidy to be made available under 
this paragraph (e) to pay for the energy conservation measure in that 
year, the deficiency will be offset against the IHA's operating subsidy 
eligibility for the IHA's next fiscal year.
    (3) If energy cost savings are less than the amount necessary to 
meet amortization payments specified in a contract, the contract term 
may be extended (up to the 12-year limit) if HUD determines that the 
shortfall is the result of changed circumstances rather than a 
miscalculation or misrepresentation of projected energy savings by the 
contractor or IHA. The contract term may only be extended to 
accommodate payment to the contractor and associated direct costs.
    (f) Formal review process (1992). (1) Eligibility for 
consideration. Any IHA with an established Allowable Expense Level may 
request to use a revised Allowable Expense Level for its requested 
budget year that starts on or after April 1, 1992 (and ends during 
calendar year 1993).
    (2) Eligibility for adjustment. (i) If an IHA's AEL for the budget 
year that ends during calendar year 1992 is either less than 85 percent 
of the Formula Expense Level or more than 115 percent of the Formula 
Expense Level, as calculated using the revised formula and the 
characteristics for the IHA and its community, then the IHA's AEL for 
the budget year that ends during calendar year 1993 is subject to 
adjustment at the IHA's request. The revised formula expense level for 
the fiscal year ending during calendar year 1992 is the IHA's value of 
the following formula, after updating by the local inflation factors 
from FY 1989 to the requested budget year.
    (ii) The revised formula is the sum of the following six numbers:
    (A) The number of pre-1940 rental units occupied by poor households 
in 1980 as a percentage of the 1980 population of the community 
multiplied by a weight of 7.954. This Census-based statistic applies to 
the county of the IHA, except that, if the IHA has 80 percent or more 
of its units in an incorporated city of more than 10,000 persons, it 
uses city-specific data. County data will exclude data for any 
incorporated cities of more than 10,000 persons within its boundaries.
    (B) The Local Government Wage Rate multiplied by a weight of 
116.496. The wage rate used is a figure determined by the Bureau of 
Labor Statistics. It is a county-based statistic, calibrated to a unit-
weighted IHA standard of 1.0. For multi-county IHAs, the local 
government wage is unit-weighted. For this formula, the local 
government wage index for a specific county cannot be less than 85 
percent or more than 115 percent of the average local government wage 
for counties of comparable population and metro/non-metro status, on a 
state-by-state basis. In addition, for counties of more than 150,000 
population in 1980, the local government wage cannot be less than 85 
percent or more than 115 percent of the wage index of private 
employment determined by the Bureau of Labor Statistics and the 
rehabilitation cost index of labor and materials determined by the R.S. 
Means Company.
    (C) The lesser of the current number of the IHA's two or more 
bedroom units available for occupancy, or 15,000 units, multiplied by a 
weight of .002896.
    (D) The current ratio of the number of the IHA's two or more 
bedroom units available for occupancy in high-rise family projects to 
the number of all the IHA's units available for occupancy multiplied by 
a weight of 37.294. For this indicator, a high-rise family project is 
defined as averaging 1.5 or more bedrooms per unit available for 
occupancy and averaging 35 or more units available for occupancy per 
building and containing at least one building with units available for 
occupancy that is 5 or more stories high.
    (E) The current ratio of the number of the IHA's three or more 
bedroom units available for occupancy to the number of all the IHA's 
units available for occupancy multiplied by a weight of 22.303.
    (F) An equation calibration constant of -.2344.
    (3) Procedure. If an IHA wants to request a revision to its AEL, it 
should determine whether its AEL for the fiscal year ending in calendar 
year 1992 (for purposes of this section, the ``unrevised AEL'') is 
either less than 85 percent of the Formula Expense Level or more than 
115 percent of the Formula Expense Level. Then, in lieu of using the 
unrevised AEL as the basis for developing the IHA's AEL and operating 
budget for the fiscal year ending in calendar year 1993, the IHA will 
use 85 percent of the FEL (if this is higher than the unrevised AEL) or 
115 percent of the FEL (if this is lower than the unrevised AEL). If an 
IHA has submitted its original operating budget before the publication 
of a change to the PFS handbook containing forms and instructions 
necessary to implementation of this regulatory change, the IHA shall 
submit a revision to its operating budget with calculations based on 
the new AEL. If an IHA requests such revision of its AEL in connection 
with submission of an operating budget and its current AEL is within 85 
to 115 percent of the FEL, HUD will not adjust the AEL. If an IHA 
requests revision and its AEL is not within 85 to 115 percent of the 
FEL, HUD will increase it to 85 percent or decrease it to 115 percent. 
The revised Allowable Expense Levels approved by HUD will be put into 
effect for the IHA's budget year that begins on or after April 1, 1992 
(and thus ends in calendar year 1993).
    (g) Additional HUD-initiated adjustments. Notwithstanding any other 
provisions of this subpart, HUD may at any time make an upward or 
downward adjustment in the amount of the IHA's operating subsidy as 
result of data subsequently available to HUD which alters projections 
upon which the approved operating subsidy was based. Normally 
adjustments shall be made in total in the IHA fiscal year in which the 
needed adjustment is determined; however, if a downward adjustment 
would cause a severe financial hardship on the IHA, the HUD Field 
Office may establish a recovery schedule which represents the minimum 
number of years needed for repayment.

(Approved by the Office of Management and Budget under control 
number 2577-0029)


Sec. 950.735  Transition funding for excessive high-cost IHAs.

    If an IHA's Base Year Expense Level exceeds its allowable expense 
level, computed as provided in Sec. 950.710, for any budget year under 
PFS, the IHA may be eligible for transition funding. Transition funding 
shall be an amount not to exceed the difference between the Base Year 
Expense Level and the allowable expense level for the requested budget 
year, multiplied by the number of units months available. HUD shall 
have the right to discontinue payment of all or part of the transition 
funding in the event HUD at any time determines that the IHA has not 
achieved a satisfactory level of management efficiency, or is not 
making efforts satisfactory to HUD to improve its management 
performance.


Sec. 950.740  Operating reserves.

    (a) The IHA shall maintain an operating reserve for the project in 
an amount sufficient for working capital purposes, for estimated future 
nonroutine maintenance requirements for IHA-owned administrative 
facilities, common property and dwelling units, for the payment of 
advanced insurance premiums and unanticipated project requirements. If 
an IHA fails to maintain an adequate operating reserve level, HUD may 
declare the IHA to be ``high risk'' and require that the IHA develop a 
plan for improving its financial condition.
    (b) At the end of each fiscal year or other budget period, the 
project operating reserve shall be:
    (1) Credited with the amount by which operating receipts exceed 
operating expenses of the project for the budget period, or
    (2) Charged with the amount by which operating expenses exceed 
operating receipts of the project for the budget period.


Sec. 950.745  Operating budget submission and approval.

    (a) Required board resolution. In addition to other budget 
documentation required by HUD, each operating budget or operating 
budget revision shall include a certified copy of a resolution of the 
board of commissioners stating that the board has reviewed and approved 
the operating budget or operating budget revision and has found:
    (1) That the proposed expenditures are necessary in the efficient 
and economical operation of the housing for the purpose of serving low 
income families.
    (2) That the financial plan is reasonable in that:
    (i) It indicates a source of funding adequate to cover all proposed 
expenditures.
    (ii) It does not provide for use of Federal funding in excess of 
that payable under the provisions of these regulations.
    (3) That all proposed rental charges and expenditures will be 
consistent with provisions of law and the annual contributions 
contract.
    (b) HUD limited operating budget review. Detailed HUD review of the 
operating budgets or operating budget revisions normally will be 
limited to the prescribed PFS forms. Under this procedure, although the 
operating budget normally will not be reviewed in depth, the operating 
reserve calculation in all cases will be examined and budget 
modifications will be made where the operating reserve provisions are 
not in accordance with HUD requirements. In addition, if the HUD Field 
Office finds that an operating budget is incomplete, includes illegal 
or ineligible expenditures, mathematical errors or errors in the 
application of accounting procedures, or is otherwise unacceptable, the 
HUD Field Office may at any time require the submission by the IHA of 
further information regarding an operating budget or operating budget 
revision.
    (c) Withdrawal by HUD of limited operating budget review. HUD 
reserves the right at any time to deviate from the limited operating 
budget review provided in paragraph (b) of this section if HUD finds 
that the IHA is operating its program in a manner which threatens the 
future serviceability, efficiency, economy, or stability of the housing 
that it operates. If such action is deemed necessary, the HUD Field 
Office will normally notify the IHA before its submission of the 
operating budget that HUD will subject the operating budget to a 
detailed review. When the IHA's operating no longer threaten the future 
serviceability, efficiency, economy or stability of the housing, HUD 
will notify the IHA that the limited review as provided in paragraph 
(b) of this section is being reinstated.

(Approved by the Office of Management and Budget under control 
number 2577-00267.)


Sec. 950.750  Payment procedure for operating subsidy under PFS.

    (a) General. Subject to the availability of funds, payments of 
operating subsidy under PFS shall be made generally by electronic funds 
transfers, based on a schedule submitted by the IHA and approved by 
HUD, reflecting the IHA's projected cash needs. The schedule may 
provide for several payments per month. If an IHA has an unanticipated, 
immediate need for disbursement of approved operating subsidy, it may 
make an informal request to HUD to revise the approved schedule. 
(Requests by telephone are acceptable.)
    (b) Payments procedure. In the event that the amount of operating 
subsidy has not been determined by HUD as of the beginning of an IHA's 
budget year under the PFS regulations in this subpart, annual or 
monthly or quarterly payments of operating subsidy shall be made, as 
provided in paragraph (a) of this section, based upon the amount of the 
IHA's operating subsidy for the previous budget year or such other 
amount as HUD may determine to be appropriate.
    (c) Availability of funds. In the event that insufficient funds are 
available to make payments approvable under PFS for operating subsidy 
payable by HUD, HUD shall have complete discretion to revise, on a pro 
rata basis or other basis established by HUD, the amounts of operating 
subsidy to be paid to IHAs.


Sec. 950.755  Payments of operating subsidy conditioned upon 
reexamination of income of families in occupancy.

    (a) Policy. The income and composition of each family shall be 
reexamined at least annually (see Sec. 950.315). IHAs must be in 
compliance with this reexamination requirement to be eligible to 
receive full operating subsidy payments.
    (b) IHAs in compliance with requirements. Each submission of the 
original operating budget for a fiscal year shall be accompanied by a 
certification by the IHA that it is in compliance with the annual 
income reexamination requirements and that rents have been or will be 
adjusted in accordance with subpart D of this part.
    (c) IHAs not in compliance with requirements. Any IHA not in 
compliance with the annual income reexamination requirement at the time 
of operating budget submission shall furnish to the HUD Field Office a 
copy of the procedure it is using to attain compliance and a statement 
of the number of families that have undergone reexamination during the 
twelve months preceding the date of the operating budget submission, or 
the revision thereof. If, on the basis of such submission, or any other 
information, the Field Office Director determines that the IHA is not 
substantially in compliance with the annual income reexamination 
requirement, HUD shall withhold payments to which the IHA might 
otherwise be entitled under this part, equal to his or her estimate of 
the loss of rental income to the IHA resulting from its failure to 
comply with those requirements.

(Approved by the Office of Management and Budget under control 
number 2577-0026.)


Sec. 950.760  Determining actual occupancy percentage.

    (a) For each requested budget year beginning on or after July 1, 
1986, the IHA shall determine the percentage of occupancy for all 
project units included in the unit months available (actual occupancy 
percentage), at its option, either:
    (1) For the last day of the month that ends six months before the 
beginning of the requested budget year; or
    (2) Based on the average occupancy during the month ending six 
months before the beginning of the requested budget year.
    (b) If the IHA elects to use an average, it shall maintain a record 
of its computation of its actual occupancy percentage. The actual 
occupancy percentage shall be adjusted to reflect expected changes in 
occupancy because of modernization, new development, demolition or 
disposition in order to reflect the expected average occupancy rate 
throughout the year. If, after that date, there are changes, up or 
down, in occupancy because of modernization, new development, 
demolition, or disposition not reflected in the adjustment, the IHA 
shall submit a budget revision to reflect the actual change in 
occupancy due to these actions.


Sec. 950.770  Comprehensive Occupancy Plan requirements.

    (a) IHAs that may submit a Comprehensive Occupancy Plan. An IHA may 
prepare and submit a COP to HUD in accordance with the provisions of 
this section:
    (1) For its first requested budget year beginning on or after July 
1, 1986, if the IHA has an actual occupancy percentage (Sec. 950.760) 
less than 97 percent, and has more than five vacant units, not solely 
because of vacant, on-schedule modernization units (as defined in 
Sec. 950.725(b)(3)(v)); or
    (2) For a requested budget year beginning on or after July 1, 1987, 
if:
    (i) The IHA projects an actual occupancy percentage (Sec. 950.760) 
for the requested budget year of less than 97 percent and has more than 
five vacant units, other than vacant, on-schedule modernization units;
    (ii) The IHA is not currently a low occupancy IHA, that is, the IHA 
had an actual occupancy percentage determined under Sec. 950.760 for 
the current requested budget year that equalled or exceeded 97 percent 
or had five or fewer vacant units other than vacant, on-schedule 
modernization units; and
    (iii) The IHA is not currently under a COP.
    (b) Comprehensive Occupancy Plan content. A COP shall provide a 
general IHA-wide strategy for returning to occupancy or deprogramming 
all vacant units and a specific strategy for returning to occupancy or 
deprogramming units for each project that has an occupancy percentage 
of less than 97 percent.
    (1) The general IHA-wide strategy for returning to occupancy or 
deprogramming all vacant units shall specify management actions the IHA 
is taking or intends to take to eliminate vacancies, such as revised 
occupancy policies, actions to reduce time to return vacated units to 
occupancy, and identification of the need to use the exception for 
nonelderly tenants in elderly projects, and shall include a schedule 
for completing these actions.
    (2) The project-specific strategy shall:
    (i) Identify each project that has a percentage of occupancy less 
than 97 percent.
    (ii) State the project-specific actions the IHA is taking or 
intends to take to eliminate vacancies, such as:
    (A) Modernization;
    (B) Demolition;
    (C) Disposition;
    (D) Change in occupancy policy; or
    (E) Physical or management improvements; and
    (iii) For each project identified, include a schedule for 
completing these actions and returning the units to occupancy.
    (3) The COP shall also include yearly IHA-wide occupancy goals and 
yearly occupancy goals for each project with an occupancy rate below 97 
percent stated for each year until there is a projected IHA-wide 
occupancy rate of at least 97 percent or an estimate that the IHA will 
have five or fewer vacant units, excluding units that are vacant, on-
schedule modernization units. These goals should reflect the average 
occupancy percentage for each year. The yearly occupancy goals (both 
IHA-wide and project specific) for the first year of a COP that is 
submitted with an IHA's budget for its first requested budget year 
beginning on or after July 1, 1986, shall take into account actions 
taken by the IHA from August 2, 1985, to reduce vacancies.
    (c) Time for submitting a Comprehensive Occupancy Plan. An IHA that 
submits a COP to HUD for approval in accordance with paragraph (a) of 
this section shall submit the COP with its budget.
    (d) Maximum term of a Comprehensive Occupancy Plan. (1) Except as 
provided in paragraph (d)(2) of this section, a COP:
    (i) Submitted for an IHA's first requested budget year beginning on 
or after July 1, 1986, shall be for a period approved by HUD as 
reasonable, which shall not exceed five years; or
    (ii) Submitted for a requested budget year beginning on or after 
July 1, 1987, shall be for a period of one or two years, as approved by 
HUD.
    (2) A COP that exceeds the maximum period provided in paragraphs 
(d)(1) (i) or (ii) of this section may be approved only if the 
Assistant Secretary for Public and Indian Housing has given written 
authorization for such longer period before the approval of the COP.
    (e) Local governing body review. The IHA shall have the COP 
reviewed by the local governing body for comment and shall submit any 
comments from the local governing body to HUD with the COP.
    (f) HUD review of Comprehensive Occupancy Plan. If HUD fails to 
approve, disapprove or otherwise substantively comment on a COP within 
45 days of receipt of the plan, the IHA-wide yearly occupancy goal for 
the first year of the COP shall be considered approved for the purpose 
of determining the IHA's projected occupancy percentage under paragraph 
(h) of this section.
    (g) Projected Occupancy Percentage (Comprehensive Occupancy Plan). 
An IHA that has a HUD-approved COP shall use as its projected occupancy 
percentage for computing its projected operating income level under 
Sec. 950.725 the greater of its actual occupancy percentage, as 
determined under Sec. 950.760 or its approved, yearly IHA-wide 
occupancy goal, adjusted, as necessary, to discount units that are 
vacant for reasons beyond the IHA's control, as provided in paragraph 
(i) of this section.
    (h) Units vacant for reasons beyond an IHA's control. A vacant unit 
is considered vacant for reasons beyond an IHA's control only if the 
unit is located in a project that meets one of the following 
conditions:
    (1) The IHA has applied for modernization, HUD cannot fund the 
project because of lack of sufficient funding, and it is expected that 
the units will be occupied when the units are modernized.
    (2) The vacant units are vacant, on-schedule modernization units.
    (3) The units are vacant because of natural disasters, or as a 
result of court-ordered, or HUD-approved, constraints relating to title 
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d).


Sec. 905.772  Financial management systems, monitoring and reporting.

    The financial management systems, reporting and monitoring on 
program performance and financial reporting will be in compliance with 
the requirements of 24 CFR 85.20, 85.40, and 85.41, except to the 
extent that HUD requirements provide for additional specialized 
procedures necessary to permit the Secretary to make the determinations 
regarding the payment of operating subsidy specified in section 9(a)(1) 
of the United States Housing Act of 1937 (42 U.S.C 1437g(a)(1)).

(Approved by the Office of Management and Budget under OMB control 
number 2577-0066.)


Sec. 950.774  Operating subsidy eligibility for projects owned by IHAs 
in Alaska.

    The provisions of this subpart are applicable to the development, 
modernization, and operation of the rental housing owned by the IHAs in 
the State of Alaska, excluding the formula calculation for the PFS.

Subpart K--Energy Audits, Energy Conservation Measures and Utility 
Allowances


Sec. 950.801  Purpose and applicability.

    (a) Purpose. The purpose of this subpart is to implement HUD 
policies in support of national energy conservation goals by reducing 
energy consumption, with consequent reduction of operating costs of 
IHA-owned housing projects, by requiring that IHAs conduct energy 
audits and undertake certain cost-effective, energy conservation 
measures. This subpart also provides for the establishment of utility 
allowances for tenants based on reasonable consumption of utilities by 
an energy-conscious household.
    (b) Applicability. The provisions of this subpart apply to all IHAs 
with IHA-owned housing including Mutual Help and Turnkey III.

Energy Audits and Energy Conservation Measures


Sec. 950.805  Requirements for energy audits.

    All IHAs shall complete an appropriate energy audit for each IHA-
owned project under management in accordance with the schedule 
specified in Sec. 950.822. Energy audits shall be conducted by IHA 
personnel or consultants as appropriate. Standards for energy audits 
shall be equivalent to State or Tribal standards for energy audits or 
as approved by HUD. Energy audits shall analyze all of the energy 
conservation measures, and the payback period for these measures, that 
are pertinent to the type of buildings and equipment operated by the 
IHA.


Sec. 950.810  Order of funding.

    Within the funds available to an IHA, energy conservation measures 
should be accomplished with the shortest pay-back periods funded first. 
However, HUD Field Offices should permit IHAs to make adjustments to 
this funding order because of insufficient funds to accomplish high-
cost energy conservation measures (ECM) or a situation in which an ECM 
with a longer pay-back period can be more efficiently installed in 
conjunction with other planned modernization. Field Offices may not 
authorize installation of individual utility meters that measure the 
energy or fuel used for space heating in dwelling units that need 
substantial weatherization, when installation of meters would result in 
economic hardship for tenants. In these cases, the ECMs related to 
weatherization must be accomplished before the installation of 
individual utility meters.


Sec. 950.812  Funding.

    (a) The cost of accomplishing cost-effective energy conservation 
measures, including the cost of performing energy audits, shall be 
funded from operating funds of the IHA to the extent feasible. When 
sufficient operating funds are not available for this purpose, such 
costs are eligible for inclusion in a modernization program, for 
funding from any available development funds in the case of projects 
still in development or for other available funds that HUD may 
designate to be used for energy conservation.
    (b) If an IHA finances energy conservation measures from sources 
other than CIAP or operating reserves, such as on the basis of a 
promise to repay, HUD may agree to provide adjustments in its 
calculation of the IHA's operating subsidy eligibility under the PFS 
for the project and utility involved if the financing arrangement is 
cost-beneficial to HUD. (See Sec. 950.730(e).)


Sec. 950.815  Energy conservation equipment and practices.

    In purchasing original or, when needed, replacement equipment, IHAs 
shall acquire only equipment that meets or exceeds the minimum 
efficiency requirements established by the U.S. Department of Energy. 
In the operation of their facilities, IHAs shall follow operating 
practices directed to maximum energy conservation.


Sec. 950.822  Compliance schedule.

    All energy conservation measures determined by energy audits to be 
cost effective shall be accomplished as funds are available.


Sec. 950.825  Energy performance contracts.

    (a) Method of procurement. Energy performance contracting shall be 
conducted using one of the following methods of procurement:
    (1) Competitive proposals (see Sec. 950.175(d)). In identifying the 
evaluation factors and their relative importance, as required by 
Sec. 950.175(d)(1), the solicitation shall state that technical factors 
are significantly more important than price (of the energy audit); or
    (2) If the services are available only from a single source, 
noncompetitive proposals (see Sec. 950.175(e)(2)).
    (b) HUD review. Solicitations for energy performance contracts 
shall be submitted to the HUD Field Office for review and approval 
before issuance. Energy performance contracts shall be submitted to the 
Office of Native American Programs for review and approval before 
award.

Individual Metering of Utilities


Sec. 950.840  Individually metered utilities.

    (a) All utility service shall be individually metered to tenants, 
either through provision of retail service to the tenants by the 
utility supplier or through the use of checkmeters unless:
    (1) Individual metering is impractical, such as in the case of a 
central heating system in an apartment building;
    (2) Change from a mastermetering system to individual meters would 
not be financially justified based upon a benefit/cost analysis; or
    (3) Checkmetering is not permissible under state or local law, or 
under the policies of the particular utility supplier or public service 
commission.
    (b) If checkmetering is not permissible, retail service must be 
considered. Where checkmetering is permissible, the type of individual 
metering offering the most savings to the IHA shall be selected.


Sec. 950.842  Benefit/cost analysis.

    (a) A benefit/cost analysis shall be made to determine whether a 
change from a mastermetering system to individual meters will be cost 
effective, except as otherwise provided in Sec. 950.846.
    (b) Proposed installation of checkmeters must be justified on the 
basis that the cost of debt service (interest and amortization) of the 
estimated installation costs plus the operating costs of the 
checkmeters will be more than offset by reduction in future utilities 
expenditures to the IHA under the mastermeter system.
    (c) Proposed conversion to retail service must be justified on the 
basis of net savings to the IHA. This determination involves making a 
comparison between the reduction in utility expense obtained through 
eliminating the expense to the IHA for IHA-supplied utilities compared 
to the resultant allowance for tenant-supplied utilities, based on the 
cost of utility service to the tenants after conversion.


Sec. 950.844  Funding.

    The cost to change mastermeter systems to individual metering of 
tenant consumption, including the costs of benefit/cost analysis and 
complete installation of checkmeters, shall be funded from operating 
funds of the IHA to the extent feasible. When sufficient operating 
funds are not available for this purpose, such costs are eligible for 
inclusion in a modernization project or for funding from any available 
development funds.


Sec. 950.845  Order of conversion.

    Conversions to individually metered utility service shall be 
accomplished in the following order where an IHA has projects of two or 
more of the designated categories, unless otherwise approved by the HUD 
Field Office:
    (a) In projects where retail service is provided by the utility 
supplier and the IHA is paying all the individual utility bills, no 
benefit/cost analysis is necessary and tenants shall be billed directly 
after the IHA adopts revised payment schedules providing appropriate 
allowances for tenant-supplied utilities.
    (b) In projects where checkmeters have been installed but are not 
being utilized as the basis for determining utility charges to the 
tenants, no benefit/cost analysis is necessary and the checkmeters 
shall be used as the basis for utility charges, and tenants shall be 
surcharged for excess utility use.
    (c) Projects where meter loops have been installed for utilization 
of checkmeters shall be analyzed both for the installation of 
checkmeters and for conversion to retail service.
    (d) Low or medium rise family units with a mastermeter system 
should be analyzed for both checkmetering and conversion to retail 
service, because of their large potential for energy savings.
    (e) Low or medium rise housing for elderly should next be analyzed 
for both checkmetering and conversion to retail service, since the 
potential for energy saving is less than for family units.
    (f) Electric service under mastermeters for high rise buildings, 
including projects for the elderly, should be analyzed for both use of 
retail service and of checkmeters.


Sec. 950.846  Actions affecting residents.

    (a) Before making any conversion to retail service, the IHA shall 
adopt revised payment schedules, providing appropriate allowances for 
the tenant-supplied utilities resulting from the conversion.
    (b) Before implementing any modifications to utility services 
arrangements with the tenants or charges with respect thereto, the 
requisite changes shall be made in tenant dwelling leases in accordance 
with subpart D of this part.
    (c) To the extent practicable, IHAs should work closely with 
resident organizations in making plans for conversion of utility 
service to individual metering, explaining the national policy 
objectives of energy conservation, the changes in charges and rent 
structure that will result, and the goals of achieving an equitable 
structure that will be advantageous to tenants who conserve energy.
    (d) A transition period of at least six months shall be provided in 
the case of initiation of checkmeters during which tenants will be 
advised of the charges but during which no surcharge will be made, 
based on the readings. This trial period will afford tenants ample 
notice of the effects the checkmetering system will have on their 
individual utility charges and also afford a test period for the 
adequacy of the utility allowances established.
    (e) During and after the transition period, IHAs shall advise and 
assist tenants with high utility consumption on methods for reducing 
their usage. This advice and assistance may include counseling, 
installation of new energy conserving equipment or appliances, and 
corrective maintenance.


Sec. 950.849  Waivers for similar projects.

    IHAs with more than one project of similar design and utilities 
service may prepare a benefit/cost analysis for a representative 
project. A finding that a change in metering is not cost effective for 
the representative project is sufficient reason for the HUD Field 
Office to waive the requirements of this subpart for benefit/cost 
analysis on the remaining similar projects.


Sec. 950.850  Reevaluations of mastermeter systems.

    Because of changes in the cost of utility services and the periodic 
changes in utility regulations, IHAs with mastermeter systems are 
required to reevaluate mastermeter systems without checkmeters by 
making benefit/cost analyses at least every 36 months. HUD Field 
Offices may grant waivers of this requirement upon making a finding as 
provided in Sec. 950.849.

Resident Utility Allowances


Sec. 950.860  Applicability.

    (a) Sections 950.860 through 950.876 apply to all Indian housing 
dwelling units, including those operated under the Mutual Help 
Homeownership Opportunity Program.
    (b) In rental units where utilities are furnished by the IHA but 
there are no checkmeters to measure the actual utilities consumption of 
the individual units, tenants shall be subject to charges for 
consumption of tenant-owned major appliances, or for optional functions 
of IHA-furnished equipment, in accordance with Sec. 950.865(e), but no 
utility allowance will be established.


Sec. 950.865  Establishment of utility allowances by IHAs.

    (a) IHAs shall establish allowances for IHA-furnished utilities for 
all checkmetered utilities and allowances for tenant-purchased 
utilities for all utilities purchased directly by tenants from the 
utilities suppliers.
    (b) The IHA shall maintain a record that documents the basis on 
which allowances and scheduled surcharges, and revisions thereof, are 
established and revised. Such record shall be available for inspection 
by tenants.
    (c) The IHA shall give notice to all tenants of proposed allowances 
and scheduled surcharges and revisions thereof. Such notice shall be 
given, in the manner provided in the lease or homebuyer agreement, not 
less than 60 days before the proposed effective date of the allowances 
or scheduled surcharges or revisions; shall describe with reasonable 
particularity the basis for determination of the allowances, scheduled 
surcharges or revisions, including a statement of the specific items of 
equipment and function whose utility consumption requirements were 
included in determining the amounts of the allowances or scheduled 
surcharges; shall notify tenants of the place where the IHA's record 
maintained in accordance with paragraph (b) of this section is 
available for inspection; and shall provide all tenants an opportunity 
to submit written comments during a period expiring not less than 30 
days before the proposed effective date of the allowances or scheduled 
surcharges or revisions. Such written comments shall be retained by the 
IHA and shall be available for inspection by tenants and, upon request, 
by HUD.
    (d) The IHA shall furnish to HUD, as instructed, a copy of its 
schedule of allowances and scheduled surcharges, and each revision 
thereof, promptly upon such schedule becoming effective. Schedules of 
allowances and scheduled surcharges shall not ordinarily be subject to 
approval by HUD before becoming effective but will be reviewed in the 
course of audits or reviews of IHA operations. Following such audits or 
reviews, HUD may require additional data concerning the IHA's basis for 
determination of allowances or scheduled surcharges, may require 
additional or different relevant data to be considered by the IHA in 
its next annual review on an exception basis, and may require that an 
IHA submit its proposed revision of allowances or scheduled surcharges 
to HUD for review and approval before the revision is adopted.
    (e) The IHA's determinations of allowances, scheduled surcharges 
and revisions thereof shall be final and valid unless found to be 
arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with the law.

(Approved by the Office of Management and Budget under control 
number 2577-0062)


Sec. 950.867  Categories for establishment of allowances.

    Separate allowances shall be established for each utility and for 
each category of dwelling units determined by the IHA to be reasonably 
comparable as to factors affecting utility usage. The IHA will 
establish allowances for different size units, in terms of numbers of 
bedrooms. Other categories may be established at the discretion of the 
IHA.


Sec. 950.869  Period for which allowances are established.

    (a) IHA-furnished utilities. Allowances will normally be 
established on a quarterly basis; however, tenants may be surcharged on 
a monthly basis. The allowances established may provide for seasonal 
variations.
    (b) Tenant-purchased utilities. Monthly allowances shall be 
established at a uniform monthly amount based on an average monthly 
utility requirement for a year; however, if the utility supplier does 
not offer tenants a uniform payment plan, the allowances established 
may provide for seasonal variations.


Sec. 950.870  Standards for allowances for utilities.

    (a) The objective of an IHA in designing methods of establishing 
utility allowances for each dwelling unit category and unit size shall 
be to approximate a reasonable consumption of utilities by an energy-
conservative household of modest circumstances consistent with the 
requirements of a safe, sanitary, and healthful living environment.
    (b) Allowances for both IHA-furnished and tenant-purchased 
utilities shall be designed to include such reasonable consumption for 
major equipment or for utility functions furnished by the IHA for all 
tenants (e.g., heating furnace, hot water heater), for essential 
equipment whether or not furnished by the IHA (e.g., range and 
refrigerator), and for minor items of equipment (such as toasters and 
radios) furnished by tenants.
    (c) The complexity and elaborateness of the methods chosen by the 
IHA, in its discretion, to achieve the foregoing objective will be 
dependent upon the data available to the IHA and the extent of the 
administrative resources reasonably available to the IHA to be devoted 
to the collection of such data, the formulation of methods of 
calculation, and actual calculation and monitoring of the allowances.
    (d) In establishing allowances, the IHA shall take into account 
relevant factors affecting consumption requirements, including:
    (1) The equipment and functions intended to be covered by the 
allowance for which the utility will be used. For instance, natural gas 
may be used for cooking or heating domestic water or space heating or 
any combination of the three.
    (2) The climatic location of the housing projects.
    (3) The size of the dwelling units and the number of occupants per 
dwelling unit.
    (4) Type of construction and design of the housing project.
    (5) The energy efficiency of IHA-supplied appliances and equipment.
    (6) The utility consumption requirements of appliances and 
equipment whose reasonable consumption is intended to be covered by the 
total tenant payment.
    (7) The physical condition, including insulation and 
weatherization, of the housing project.
    (8) Temperature levels intended to be maintained in the unit during 
the day and at night, and in cold and warm weather.
    (9) Temperature of domestic hot water.


Sec. 950.872  Surcharges for excess consumption of IHA-furnished 
utilities.

    (a) For dwelling units subject to allowances for IHA-furnished 
utilities where checkmeters have been installed, the IHA shall 
establish surcharges for utility consumption in excess of the 
allowances. Surcharges may be computed on a straight per unit of 
purchase basis (e.g., cents per kilowatt hour of electricity) or for 
stated blocks of excess consumption, and shall be based on the IHA's 
average utility rate. The basis for calculating such surcharges shall 
be described in the IHA's schedule of allowances. Changes in the dollar 
amounts of surcharges based directly on changes in the IHA's average 
utility rate shall not be subject to the advance notice requirements of 
this section.
    (b) For dwelling units served by IHA-furnished utilities where 
checkmeters have not been installed, the IHA shall establish schedules 
of surcharges indicating additional dollar amounts tenants will be 
required to pay by reason of estimated utility consumption attributable 
to tenant-owned major appliances or to optional functions of IHA-
furnished equipment. Such surcharge schedules shall state the tenant-
owned equipment (or functions of IHA-furnished equipment) for which 
surcharges shall be made and the amounts of such charges, which shall 
be based on the cost to the IHA of the utility consumption estimated to 
be attributable to reasonable usage of such equipment.


Sec. 950.874   Review and revision of allowances.

    (a) Annual review. The IHA shall review at least annually the basis 
on which utility allowances have been established and, if reasonably 
required in order to continue adherence to the standards stated in 
Sec. 950.870, shall establish revised allowances. The review shall 
include all changes in circumstances (including completion of 
comprehensive or special purpose modernization under the Comprehensive 
Improvement Assistance Program and/or other energy conservation 
measures implemented by the IHA) indicating probability of a 
significant change in reasonable consumption requirements and changes 
in utility rates.
    (b) Revision as a result of rate changes. The IHA may revise its 
allowances for tenant-purchased utilities between annual reviews if 
there is a rate change (including fuel adjustments) and shall be 
required to do so if such change, by itself or together with prior rate 
changes not adjusted for, results in a change of 10 percent or more 
from the rates on which such allowances were based. Adjustments to 
tenant payments as a result of such changes shall be retroactive to the 
first day of the month following the month in which the last rate 
change taken into account in such revision became effective.

(Approved by the Office of Management and Budget under control 
number 2577-0062)


Sec. 950.876  Individual relief.

    Requests for relief from surcharges for excess consumption of IHA-
purchased utilities, or from payment of utility supplier billings in 
excess of the allowances for tenant-purchased utilities, may be granted 
by the IHA on reasonable grounds, such as special needs of elderly, ill 
or handicapped tenants, or special factors affecting utility usage not 
within the control of the tenant, as the IHA shall deem appropriate. 
The IHA's criteria for granting such relief, and procedures for 
requesting such relief, shall be adopted at the time the IHA adopts the 
methods and procedures for determining utility allowances. Notice of 
the availability of such procedures (including identification of the 
IHA representative with whom initial contact may be made by tenants), 
and the IHA's criteria for granting such relief, shall be included in 
each notice to tenants given in accordance with Sec. 950.865(c) and in 
the information given to new tenants upon admission.
* * * * *

Subpart M--Disposition or Demolition of Projects


Sec. 950.921  Purpose and applicability.

    (a) Purpose. This subpart sets forth requirements for HUD approval 
of an IHA's application to dispose of or demolish (in whole or in part) 
IHA-owned projects assisted under the Act. The rules and procedures 
contained in 24 CFR part 85 are inapplicable.
    (b) Applicability.--(1) Type of projects. This subpart applies to 
any Indian housing project which is owned by an IHA and is subject to 
an ACC under section 5 of the United States Housing Act of 1937 (42 
U.S.C. 1437c), including rental, Turnkey III, or Mutual Help housing. 
This subpart does not apply to:
    (i) IHA-owned Section 8 housing or housing leased under section 
10(c) or section 23 of the Act (42 U.S.C. 1437h(c) or 1437u);
    (ii) Demolition or disposition before the end of the initial 
operating period (EIOP), as determined under the ACC, of property 
acquired incident to the development of an Indian housing project 
(however, this exception does not apply to units occupied or available 
for occupancy by Indian housing tenants before EIOP);
    (iii) Conveyance of Indian housing for the purpose of providing 
homeownership opportunities for low-income families under section 21 of 
the Act, the Turnkey III or Mutual Help Homeownership Opportunity 
programs, or any other homeownership programs established under 
sections 5(h) and 6(c)(4)(D) of the Act (42 U.S.C. 1437c(h), 
1437d(c)(4)(3)) or titles II and III of the Act (42 U.S.C. 1437aa, 
1437aaa).
    (iv) Leasing of dwelling or nondwelling space incident to the 
normal operation of the project for Indian housing purposes, as 
permitted by the ACC;
    (v) Easements, rights-of-way and transfers of utility systems 
incident to the normal operation of the project for Indian housing 
purposes, as permitted by the ACC;
    (vi) Reconfiguration of the interior space of buildings (e.g., 
moving or removing interior walls to change the design, sizes or number 
of units) without demolition; and
    (vii) A whole or partial taking by a public or quasi-public entity 
through the exercise of its power of eminent domain.
    (2) [Reserved]
    (c) Type of actions. Any action by an IHA to dispose of or demolish 
an Indian housing project or a portion of an Indian housing project is 
subject to the requirements of this subpart. Until such time as HUD 
approval may be obtained, the IHA may not take any action to dispose of 
or demolish an Indian housing project or portion of an Indian housing 
project, and the IHA shall continue to meet its ACC obligations to 
maintain and operate the property as housing for low-income families. 
This does not mean that HUD approval under this subpart is required for 
planning activities, analysis, or consultations, such as project 
viability studies, comprehensive modernization planning or 
comprehensive occupancy planning.


Sec. 950.923  General requirements for HUD approval of disposition or 
demolition.

    (a) For purposes of this subpart, the term ``tenant'' will also 
include ``homebuyer'' where the development involved is a homeownership 
project, and the term ``unit of general government'' will include the 
tribal government, where applicable.
    (b) HUD will not approve an application for disposition or 
demolition unless:
    (1) The application has been developed in consultation with tenants 
of the project involved, any tenant organizations for the project, and 
any IHA-wide tenant organizations that will be affected by the 
disposition or demolition;
    (2) The IHA has complied with the requirement to offer the project 
or portion of the project proposed for demolition or disposition to the 
resident organizations as required under Sec. 950.925 of this subpart;
    (3) The application contains a certification by the chief executive 
officer, or designee, that the unit of general government will comply 
with displacement, relocation, and real property acquisition policies 
described in Sec. 950.117;
    (4) Demolition or disposition (including any related replacement 
housing plan) will meet the requirements of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321), the National Historic Preservation 
Act of 1966 (16 U.S.C. 469), and related laws, as stated in the HUD's 
regulations at 24 CFR part 50. Where the site of the replacement 
housing is unknown at the time of submission of the application for 
demolition or disposition, the application shall contain a 
certification that the applicant agrees to assist HUD to comply with 24 
CFR part 50 and that the applicant shall:
    (i) Supply HUD with all available, relevant information necessary 
for HUD to perform for each property any environmental review required 
by 24 CFR part 50;
    (ii) Carry out mitigating measures required by HUD or select 
alternate eligible property; and
    (iii) Not acquire, rehabilitate, convert, lease, repair or 
construct property, or commit HUD funds or other funds to such program 
activities with respect to any eligible property, until HUD approval is 
received.
    (5) The IHA has developed a replacement housing plan, in accordance 
with Sec. 950.935, and has obtained a commitment for the funds 
necessary to carry out the plan over the approved schedule of the plan. 
To the extent such funding is not provided from other sources (e.g., 
State, tribal or local programs or proceeds of disposition), HUD 
approval of the application for demolition or disposition is 
conditioned on HUD's agreement to commit the necessary funds (subject 
to availability of future appropriations).


Sec. 950.925  Resident organization opportunity to purchase.

    (a) Applicability. (1) This section applies to applications for 
demolition or disposition of a development which involve dwelling 
units, nondwelling spaces (e.g., administration and community 
buildings, maintenance facilities), and excess land.
    (2) The requirements of this section do not apply to the following 
cases which it has been determined do not present appropriate 
opportunities for resident purchase:
    (i) The IHA has determined that the property proposed for 
demolition is an imminent threat to the health and safety of residents;
    (ii) The tribal or local government has condemned the property 
proposed for demolition;
    (iii) A tribal or local government agency has determined and 
notified the IHA that units must be demolished to allow access to fire 
and emergency equipment;
    (iv) The IHA has determined that the demolition of selected 
portions of the development in order to reduce density is essential to 
ensure the long term viability of the development or the IHA (but in no 
case should this be used cumulatively to avoid Section 412 
requirements); or
    (v) A public body has requested to acquire vacant land that is less 
than two acres in order to build or expand its services (e.g., a tribal 
or local government wishes to use the land to build or establish a 
police substation).
    (3) In the situations listed in paragraph (a)(2) of this section, 
the IHA may proceed to submit its request to demolish or dispose of the 
property, or the portion of the property, to HUD, in accordance with 
section 18 of the United States Housing Act of 1937 (42 U.S.C. 1437p) 
and this subpart without affording an opportunity for purchase by a 
resident organization. However, resident consultation would be required 
in accordance with Sec. 950.923(b)(1). The IHA must submit written 
documentation, on official stationery, with date and signatures to 
justify paragraphs (a)(2)(i) through (v) of this section. Examples of 
such documentation include:
    (i) A certification from a tribal or local agency, such as the fire 
or health department, that a condition exists in the development that 
is an imminent threat to residents; or
    (ii) A copy of the condemnation order from the local health 
department. If, however, at some future date, the IHA proposes to sell 
the remaining property described in paragraphs (a)(2)(i) through (iii) 
of this section, the IHA will be required to comply with this section.
    (b) Opportunity for residents to organize. Where the affected 
development does not have an existing resident organization, resident 
management corporation or resident cooperative at the time of the IHA 
proposal to demolish or dispose of the development or a portion of the 
development, the IHA shall make a reasonable effort to inform residents 
of the development of the opportunity to organize and purchase the 
property proposed for demolition or disposition. Examples of 
``reasonable effort'' at a minimum include at least one of the 
following activities: convening a meeting, sending letters to all 
residents, publishing an announcement in the resident newsletter, where 
available, or hiring a consultant to provide technical assistance to 
the residents. HUD will not approve any application that cannot 
demonstrate that the IHA has allowed at least 45 days for the residents 
of the affected development to organize a resident organization. The 
IHA should initiate its efforts to inform the residents of their right 
to organize as an integral part of the resident consultation 
requirement under Sec. 950.923(b)(1).
    (c) Established organizations. Where there are duly formed resident 
management corporations, resident organizations or resident 
cooperatives at the affected development, the IHA should follow the 
procedures beginning in paragraph (d) of this section. Where the 
affected development is fully or partially occupied, the residents must 
be given the opportunity to form under the procedures in paragraph (b) 
of this section.
    (d) Offer of sale to resident organizations. (1) The IHA shall make 
the formal offer for sale which must include the information listed in 
this section. All contacted organizations shall have 30 days to express 
an interest in the offer. The IHA must offer to sell the property 
proposed for demolition or disposition to the resident management 
corporation, the resident organization or resident cooperative of the 
affected development under at least as favorable terms and conditions 
as the IHA would offer it for sale to another purchaser. The offer 
shall include:
    (i) An identification of the development, or portion of the 
development, in the proposed demolition or disposition, including the 
development number and location, the number of units and bedroom 
configuration, the amount of space and use for non-dwelling space, the 
current physical condition (e.g., fire damaged, friable asbestos, lead 
based paint test results), and occupancy status (e.g., percent 
occupancy);
    (ii) In the case of disposition, a copy of the appraisal of the 
property and any terms of sale;
    (iii) An IHA disclosure and description of plans proposed for reuse 
of land, if any, after the proposed demolition or disposition;
    (iv) An identification of available resources (including its own 
and HUD's) to provide technical assistance to the resident management 
corporation, resident organization or resident cooperative of the 
affected development to enable the organization to better understand 
its opportunity to purchase the development, the development's value 
and potential use;
    (v) Any and all terms of sale that the IHA requires for the Section 
18 action; [If the resident management corporation, resident 
organization or resident cooperative of the affected development 
submits a proposal that is other than the terms of sale (e.g., purchase 
at less than fair market value with demonstrated commensurate public 
benefit or for the purposes of homeownership), the IHA may consider 
accepting the offer.]
    (vi) A date by which the resident management corporation, resident 
organization or resident cooperative of the affected development must 
respond to the IHA's offer to sell the property proposed for demolition 
or disposition, which shall be no less than 30 days from the date of 
the official offering of the IHA which will be made sometime after the 
meeting. The response from the resident management corporation, 
resident organization or resident cooperative of the affected 
development shall be in the form of a letter expressing its interest in 
accepting the IHA's written offer.
    (vii) A statement that the resident management corporation, 
resident organization and resident cooperative of the affected 
development will be given up to 60 days to develop and submit a 
proposal to the IHA to purchase the property and to obtain a firm 
financial commitment. It shall explain that the IHA shall approve the 
proposal from the resident management corporation, resident 
organization or resident cooperative of the affected development, if it 
meets the terms of sale. However, the statement shall indicate that the 
IHA can consider accepting an offer from the resident management 
corporation, resident organization or resident cooperative of the 
affected development that is other than the terms of sale; e.g., 
purchase at less than fair market value with demonstrated commensurate 
public benefit or for the purposes of homeownership. The statement 
shall explain that if the IHA receives more than one proposal from a 
resident management corporation, resident organization or resident 
cooperative at the affected development, the IHA shall select the 
proposal that meets the terms of sale. In the event that two proposals 
from the affected development meet the terms of sale, the IHA shall 
choose the best proposal.
    (2) After the 30 day time frame for the resident management 
corporation, resident organization or resident cooperative of the 
affected development to respond to the notification letter has expired, 
the IHA is to prepare letters to those organizations that responded 
affirmatively inviting them to submit a formal proposal to purchase the 
property. The organization has up to 60 days from the date of its 
affirmative response to prepare and submit a proposal to the IHA that 
provides all the information requested in paragraph (d)(1) of this 
section and meets the terms of sale.
    (e) IHA review of proposals. The IHA has up to 60 days from the 
date of receipt of the proposals to review them and determine whether 
they meet the terms of sale set forth in its offer. If the resident 
management corporation, resident organization or resident cooperative 
of the affected development submits a proposal that is other than the 
terms of sale (e.g., purchase at less than the fair market value with 
demonstrated commensurate public benefit or for the purposes of 
homeownership), the IHA may consider accepting the offer. If the terms 
of sale are met, within 14 days of the IHA's final decision, the IHA 
shall notify the resident management corporation, resident organization 
or resident cooperative of the affected development of that fact and 
that the proposal has been accepted or rejected.
    (f) Appeals. The resident management corporation, resident 
organization or resident cooperative of the affected development has 
the right to appeal the IHA's decision to the HUD Field Office. A 
written appeal must be made within 30 days of the decision by the IHA. 
The appeal should include copies of the proposal and any related 
correspondence. The HUD Field Office will render a final decision 
within 30 days. A letter communicating the decision is to be prepared 
and sent to the IHA and the resident management corporation, resident 
organization or resident cooperative of the affected development.
    (g) Contents of proposal. (1) The proposal from the resident 
management corporation, resident organization or resident cooperative 
of the affected development shall at a minimum include the following:
    (i) The length of time the organization has been in existence;
    (ii) A description of current or past activities which demonstrate 
the organization's organizational and management capability or the 
planned acquisition of such capability through a partner or other 
outside entities;
    (iii) A statement of financial capability;
    (iv) A description of involvement of any non-resident organization 
(non-profit, for-profit, governmental or other entities), if any, the 
proposed division of responsibilities between the two, and the non-
resident organization's financial capabilities;
    (v) A plan for financing the purchase of the property and a firm 
commitment for funding resources necessary to purchase the property and 
pay for any necessary repairs;
    (vi) A plan for the use of the property;
    (vii) The proposed purchase price in relation to the appraised 
value;
    (viii) Justification for purchase at less than the fair market 
value in accordance with Sec. 950.931(h), if appropriate;
    (ix) Estimated time schedule for completing the transaction;
    (x) The response to the IHA's terms of sale;
    (xi) A resolution from the resident organization approving the 
proposal; and
    (xii) A proposed date of settlement, generally not to exceed six 
months from the date of IHA approval of the proposal, or such period as 
the IHA may determine to be reasonable.
    (2) If the proposal is to purchase the property for homeownership 
under section 5(h) or HOPE 1, then the requirements of section 18 of 
the United States Housing Act of 1937 (42 U.S.C. 1437p) and this 
subpart do not apply, and the applicable requirements shall be those 
under the HOPE 1 guidelines, as set forth at 24 CFR Subtitle A, App. A, 
or the section 5(h) regulation, as set forth in subpart P of this part. 
In order for the IHA to consider a proposal to purchase under section 
412, using homeownership opportunities under section 5(h) or HOPE 1, 
the resident management corporation, organization or resident 
cooperative of the affected development shall meet the provisions of 
this paragraph (g), including items in paragraph (g)(1) of this 
section.
    (3) If the proposal is to purchase the property for other than the 
aforementioned homeownership programs or for uses other than 
homeownership, then the proposal must meet all the disposition 
requirements of section 18 of the United States Housing Act of 1937 (42 
U.S.C. 1437p) and this subpart.
    (h) IHA Obligations. (1) Prepare and disperse the formal offer of 
sale to the resident management corporation, resident organization and 
resident cooperative of the affected development.
    (2) Evaluate proposals received and make the selection based on the 
considerations set forth in paragraph (b) of this section. Issue 
letters of acceptance and rejection.
    (3) Prepare certifications, where appropriate, as discussed in 
paragraph (j)(3) of this section. The IHA shall comply with its 
obligations under Sec. 950.923(b)(1) regarding tenant consultation and 
provide evidence to HUD that it has met those obligations. The IHA 
shall not act in an arbitrary manner and shall give full and fair 
consideration to any qualified resident management corporation, 
resident organization or resident cooperative of the affected 
development and accept the proposal if it meets the terms of sale.
    (i) IHA application submission requirements for proposed demolition 
or disposition. (1) If the proposal from the resident organization is 
rejected by the IHA, and either there is no appeal by the organization 
or the appeal has been denied, the IHA shall submit its demolition or 
disposition application to HUD in accordance with section 18 of the 
United States Housing Act of 1937 (42 U.S.C. 1437p) and this subpart. 
The demolition or disposition application must include complete 
documentation that the requirements of this section have been met. IHAs 
must submit written documentation that the resident management 
corporation, resident organization and resident cooperative of the 
affected development have been apprised of their opportunity to 
purchase under this section. This documentation shall include a copy of 
the signed and dated IHA notification letter(s) to each organization 
informing them of the IHA's intention to submit an application for 
demolition or disposition and the responses from each organization.
    (2) If the IHA accepts the proposal of the resident organization, 
the IHA shall submit a disposition application in accordance with 
section 18 of the United States Housing Act of 1937 (42 U.S.C. 1437p) 
and this subpart, with appropriate justification for a negotiated sale 
and for sale at less than fair market value, if applicable.
    (3) HUD will not process an application for demolition or 
disposition unless the IHA provides HUD with one of the following:
    (i) Where no resident management corporation, resident organization 
or resident cooperative exists in the affected development and the 
residents of the affected development have not formed a new 
organization, a certification from either the executive director or the 
board of commissioners stating that no such organization(s) exists and 
documentation that a reasonable effort to inform residents of their 
opportunity to organize has been made; or
    (ii) Where a resident management corporation, resident organization 
or resident cooperative exists in the affected development one of the 
following, either paragraph (i)(3), (ii) (A) or (B) of this section:
    (A) A board resolution or its equivalent from each resident 
management corporation, resident organization or resident cooperative 
stating that such organization has received the IHA letter, and that it 
understands the offer and waives its opportunity to purchase the 
project, or portion of the project, covered by the demolition or 
disposition application. The response should clearly state that the 
resolution was adopted by the entire organization at a formal meeting; 
or
    (B) A certification from the executive director or board of 
commissioners of the IHA that the thirty (30) day timeframe has expired 
and no response was received to its offer.


Sec. 950.927  Specific criteria for HUD approval of disposition 
requests.

    In addition to other applicable requirements of this subpart, HUD 
will not approve a request for disposition unless HUD determines that 
retention is not in the best interests of the tenants and the IHA, 
because at least one of the following criteria is met:
    (a) Developmental changes in the area surrounding the project 
adversely affect the health or safety of the tenants or the feasible 
operation of the project by the IHA.
    (b) Disposition will allow the acquisition, development, or 
rehabilitation of other properties that will be more efficiently or 
effectively operated as low-income housing projects, and that will 
preserve the total amount of low-income housing stock available to the 
community.
    (c) There are other factors justifying disposition that HUD 
determines are consistent with the best interests of the tenants and 
the IHA that are not inconsistent with other provisions of the Act.
    (d) In the case of disposition of property other than dwelling 
units:
    (1) The property is determined by HUD to be excess to the needs of 
the project (after the end of the initial operating period); or
    (2) The disposition of the property is incidental to, or does not 
interfere with, continued operation of the remaining portion of the 
project.


Sec. 950.928  Specific criteria for HUD approval of demolition 
requests.

    In addition to other applicable requirements of this subpart, HUD 
will not approve an application for demolition unless HUD determines 
that at least one of the following criteria is met:
    (a) In the case of demolition of all or a portion of a project, the 
project, or a portion of the project, is obsolete as to physical 
condition, location, or other factors, making it unusable for housing 
purposes; and
    (b) No reasonable program of modifications, in keeping with the 
provisions of subpart I of this part, is feasible to return the project 
or portion of the project to useful life.


Sec. 950.931  IHA application for HUD approval.

    Written approval by HUD shall be required before the IHA may 
undertake any transaction involving demolition or disposition. To 
request approval, the IHA shall submit an application to the HUD Field 
Office that includes the following:
    (a) A description of the property involved;
    (b) A description of, as well as a timetable for, the specific 
action proposed (including, in the case of disposition, the specific 
method proposed);
    (c) A statement justifying the proposed disposition or demolition 
under one or more of the applicable criteria of Secs. 950.927 or 
950.928;
    (d) If applicable, a plan that meets the requirements of 
Sec. 950.117 for the relocation of tenants who would be displaced by 
the proposed demolition or disposition;
    (e) A description of the IHA's consultations with tenants and any 
tenant organizations (as required under Sec. 950.923(b)(1)), with 
copies of any written comments which may have been submitted to the IHA 
and the IHA's evaluation of the comments;
    (f) A replacement housing plan, as required under Sec. 950.935, and 
a resolution by the governing body of the unit of tribal or general 
local government in which the project is located, indicating approval 
of the replacement plan;
    (g) Evidence that the IHA has complied with the requirement to 
offer the project or portion of the project proposed for demolition or 
disposition to the resident organizations as required under 
Sec. 950.925;
    (h) The estimated balance of project debt, if any, under the ACC, 
for development and modernization;
    (i) In the case of disposition, an estimate of the fair market 
value of the property, established on the basis of one independent 
appraisal unless, as determined by HUD:
    (1) More than one appraisal is warranted; or
    (2) Another method of valuation is clearly sufficient and the 
expense of an independent appraisal is unjustified because of the 
limited nature of the property interest involved or other available 
data;
    (j) In the case of disposition, estimates of the gross and net 
proceeds to be realized, with an itemization of estimated costs to be 
paid out of gross proceeds and the proposed use of any net proceeds in 
accordance with Sec. 950.933;
    (k) A copy of a resolution by the IHA's Board of Commissioners 
approving the application;
    (l) If determined to be necessary by HUD, an opinion by the IHA's 
legal counsel that the proposed action is consistent with applicable 
requirements of Federal, State, Tribal and local laws; and
    (m) Any additional information necessary to support the application 
and assist HUD in making determinations under this subpart.


Sec. 950.933  Use of proceeds.

    (a) Disposition. (1) Where HUD approves the disposition of real 
property of a project, in whole or in part, the IHA shall dispose of it 
promptly by public solicitation of bids for not less than fair market 
value, unless HUD authorizes negotiated sale for reasons found to be in 
the best interests of the IHA or the Federal government, or for sale 
for less than fair market value (where permitted by State, Tribal or 
local law), based on commensurate public benefits to the community, the 
IHA or the Federal government justifying such an exception.
    (2) Net proceeds (after payment of HUD-approved costs of 
disposition and relocation under paragraph (a) of this section) shall 
be used, subject to HUD approval, as follows: first for the retirement 
of outstanding obligations, if any, issued to finance development or 
modernization of the project, which in the case of scattered site 
housing of an IHA, shall be in an amount that bears the same ratio to 
the total of such costs and obligations as the number of units disposed 
of bears to the total number of units of the project at the time of 
disposition, and thereafter for the provision of housing assistance for 
low-income families, through such measures as modernization of low-
income housing or the acquisition, development or rehabilitation of 
other properties to operate as low-income housing.
    (b) Demolition. Where HUD has approved demolition of a project, or 
a portion of a project, and the proposed action is part of a 
modernization program under subpart I of this part, the costs of 
demolition and of relocation of displaced tenants may be included in 
the modernization budget.


Sec. 950.935  Replacement housing plan.

    (a) HUD may not approve an application or furnish assistance under 
this subpart unless the IHA submitting the application for disposition 
or demolition also submits a plan for the provision of an additional 
decent, safe, sanitary, and affordable dwelling unit (at rents no 
higher than permitted under the Act) for each dwelling unit to be 
disposed of or demolished under the application. The plan must include 
any one or a combination of the following:
    (1) The acquisition or development of additional low-income housing 
dwelling units;
    (2) The use of 15-year project-based assistance under section 8 (as 
provided for in 24 CFR part 882, subpart G);
    (3) The use of not less than 15-year project-based assistance under 
other Federal programs;
    (4) The acquisition or development of dwelling units assisted under 
a State or local Tribal government program that provides for project-
based assistance comparable in terms of eligibility, contribution to 
rent, and length of assistance contract (not less than 15 years) to 
assistance under section 8(b)(1) of the Act; or
    (5) The use of 15-year tenant-based assistance under section 8 of 
the Act (excluding vouchers under section 8(o) of the Act (42 U.S.C. 
1437f(o)), under the conditions described in paragraph (b) of this 
section.
    (b) Fifteen-year tenant-based assistance under section 8 may be 
approved under the replacement plan only if:
    (1) There is a finding by HUD that replacement with project-based 
assistance is not feasible; that the supply of private rental housing 
actually available to those who would receive project-based assistance 
under the plan is sufficient for the total number of certificates and 
vouchers available in the community after implementation of the plan; 
and that this available housing supply is likely to remain available 
for the full 15-year term of the assistance; and
    (2) HUD's findings under paragraph (b)(1) of this section are based 
on objective information, which must include rates of participation by 
landlords in the Section 8 program; size, condition, and rent levels of 
available rental housing as compared to Section 8 standards; the supply 
of vacant existing housing meeting the Section 8 housing quality 
standards with rents at or below the fair market rent or the likelihood 
of adjusting the fair market rent; the number of eligible families 
waiting for housing assistance under the Act; the extent of 
discrimination practiced against the types of individuals or families 
to be served by the assistance; and such additional data as HUD may 
determine to be relevant in particular circumstances.
    (c) The plan must be approved by the unit of general local 
government (including tribal government) in which the project is 
located.
    (d) The plan must include a schedule for carrying out all its terms 
within a period consistent with the size of the proposed disposition or 
demolition, except that the schedule for completing the plan shall in 
no event exceed 6 years from the date specified to begin plan 
implementation.
    (e) The plan must include a method that ensures that at least the 
same total number of individuals and families will be provided housing, 
allowing for replacement with units of different sizes to accommodate 
changes in local priority needs.
    (f) The plan must include an assessment of the suitability of the 
location of proposed replacement housing based upon application of the 
site selection criteria established in Sec. 950.230.
    (g) The plan must contain assurances that any replacement units 
acquired, newly constructed or rehabilitated will meet the applicable 
accessibility requirements set forth in 24 CFR 8.25.
* * * * *

Subpart Q--[Reserved]

Subpart R--Family Self-Sufficiency


Sec. 950.3001  Purpose, scope, and applicability.

    (a) Purpose. The purpose of the Family Self-Sufficiency (FSS) 
program is to develop local strategies to coordinate the use of public 
and Indian housing assistance and housing assistance under the section 
8 rental certificate and rental voucher programs with public and 
private resources, to enable families eligible to receive assistance 
under these programs to achieve economic independence and self-
sufficiency.
    (b) Applicability. This subpart applies to Indian housing 
authorities that elect to operate a local FSS program, and where such 
an election is made, to Indian housing assisted under the U.S. Housing 
Act of 1937, and developed or operated by an IHA in an Indian area, as 
defined in Sec. 950.102. This subpart does not apply to the Mutual Help 
Homeownership Program or the Turnkey III Program. Indian housing 
authorities that elect to participate in the FSS program are not 
subject to minimum program size requirements. Additionally, Indian 
housing authorities that received Indian housing units under the FSS 
incentive award competitions are not subject to the minimum program 
size requirements.


Sec. 950.3002  Program objectives.

    The objective of the FSS program is to reduce the dependency of 
low-income families on welfare assistance and on section 8, public or 
Indian housing assistance or any Federal, State, or local rent or 
homeownership subsidies. The FSS program provides, low-income families 
opportunities for education, job training, counseling, and other forms 
of social service assistance, while living in assisted housing, so that 
they may obtain the education, employment, and business and social 
skills necessary to achieve self-sufficiency, as this term is defined 
in Sec. 950.3003 of this subpart. HUD will measure the success of a 
local FSS program not only by the number of families who achieve self-
sufficiency, but also by the number of FSS families who, as a result of 
participation in the program, have family members who obtain their 
first job, or who obtain higher paying jobs; no longer need benefits 
received under one or more welfare programs; obtain a high school 
diploma or higher education degree; or accomplish similar goals that 
will assist the family in obtaining economic independence.


Sec. 950.3003  Definitions.

    As used in this subpart:
    Act means the United States Housing Act of 1937 (42 U.S.C. 1437-
1440).
    Action Plan. See Sec. 950.3011 of this subpart.
    Certification means a written assertion based on supporting 
evidence, provided by the FSS family or the IHA, as may be required 
under this subpart, and which:
    (1) Shall be maintained by the IHA in the case of the family's 
certification, or by HUD in the case of the IHA's certification;
    (2) Shall be made available for inspection by HUD, the IHA, and the 
public, as appropriate; and
    (3) Shall be deemed to be accurate for purposes of this subpart, 
unless the Secretary or the IHA, as applicable, determines otherwise 
after inspecting the evidence and providing due notice and opportunity 
for comment.
    Chief executive officer (CEO). (1) The CEO of a unit of general 
local government means the elected official or the legally designated 
official who has the primary responsibility for the conduct of that 
entity's governmental affairs. Examples of the CEO of a unit of general 
local government are:
    (i) The elected mayor of a municipality; the elected county 
executive of a county;
    (ii) The chairperson of a county commission or board in a county 
that has no elected county executive; or
    (iii) The official designated pursuant to law by the governing body 
of a unit of general local government (e.g., city manager).
    (2) The CEO for an Indian tribe is the tribal governing official.
    Contract of participation means a contract in a form approved by 
HUD, entered into between a participating family and an IHA operating 
an FSS program that sets forth the terms and conditions governing 
participation in the FSS program. The contract of participation 
includes all individual training and services plans entered into 
between the IHA and all members of the family who will participate in 
the FSS program, and which plans are attached to the contract as 
exhibits. For additional detail, see Sec. 950.3022 of this subpart.
    Earned income means income or earnings included in annual income 
from wages, tips, salaries, other employee compensation, and self-
employment. (See Sec. 950.102.) Earned income does not include any 
pension or annuity, transfer payments, any cash or in-kind benefits, or 
funds deposited in or accrued interest on the FSS escrow account 
established by an IHA on behalf of a participating family.
    Effective date of contract of participation means the first day of 
the month following the month in which the FSS family and the IHA 
entered into the contract of participation.
    Eligible families mean current residents of Indian housing.
    Enrollment means the date that the FSS family entered into the 
contract of participation with the IHA.
    Family Self-Sufficiency program or FSS program means the program 
established by an IHA within its jurisdiction to promote self-
sufficiency among participating families, including the provision of 
supportive services to these families, as authorized by section 23 of 
the U.S. Housing Act of 1937 (42 U.S.C. 1437u).
    FSS account means the FSS escrow account authorized by section 23 
of the Act, and as provided by Sec. 950.3025 of this subpart.
    FSS credit means the amount credited by the IHA to the 
participating family's FSS account.
    FSS family or participating family means a family that resides in 
Indian housing, and that elects to participate in the FSS program, and 
whose designated head of the family has signed the contract of 
participation.
    FSS related service program means any program, publicly or 
privately sponsored, that offers the kinds of supportive services 
described in the definition of ``supportive services'' set forth in 
this Sec. 950.3003.
    FSS slots refer to the total number of Indian housing units that 
comprise the minimum size of an IHA's Indian housing FSS program.
    FY means Federal Fiscal Year (starting with October 1, and ending 
September 30, and designated by the calendar year in which it ends).
    Head of FSS family means the adult member of the FSS family who is 
the head of the household for purposes of determining income 
eligibility and rent.
    Housing subsidies means assistance to meet the costs and expenses 
of temporary shelter, rental housing or homeownership, including rent, 
mortgage or utility payments.
    HUD or Department means the Department of Housing and Urban 
Development Field Offices, unless HUD Headquarters is specified.
    Indian housing authority or IHA. See definition in Sec. 950.102.
    Individual training and services plan means:
    (1) A written plan that is prepared for the head of the FSS family, 
and each adult member of the FSS family who elects to participate in 
the FSS program, by the IHA in consultation with the family member, and 
which sets forth:
    (i) The supportive services to be provided to the family member;
    (ii) The activities to be completed by that family member; and
    (iii) The agreed upon completion dates for the services and 
activities.
    (2) Each individual training and services plan must be signed by 
the IHA and the participating family member, and is attached to, and 
incorporated as part of the contract of participation. An individual 
training and services plan must be prepared for the head of the FSS 
family.
    JOBS Program means the Job Opportunities and Basic Skills Training 
Program authorized under part F of title IV of the Social Security Act 
(42 U.S.C. 402(a)(19)).
    JTPA means the Job Training Partnership Act (29 U.S.C. 1579(a)).
    Low-income family. See definition in 24 CFR 950.102.
    Participating family. See definition for ``FSS family'' in this 
section.
    Program Coordinating Committee or PCC is the committee described in 
Sec. 950.3012 of this subpart.
    Secretary means the Secretary of Housing and Urban Development.
    Self-sufficiency means that an FSS family is no longer receiving 
section 8, public or Indian housing assistance, or any Federal, State, 
or local rent or homeownership subsidies or welfare assistance. 
Achievement of self-sufficiency, although an FSS program objective, is 
not a condition for receipt of the FSS account funds. (See 
Sec. 950.3025.)
    Supportive services means those appropriate services that an IHA 
will make available, or cause to be made available to an FSS family 
under a contract of participation, and may include:
    (1) Child care--child care of a type that provides sufficient hours 
of operation and serves an appropriate range of ages;
    (2) Transportation--transportation necessary to enable 
participating family members to receive available services, or to 
commute to their places of employment;
    (3) Education--remedial education; education for completion of 
secondary or post secondary schooling;
    (4) Employment--job training, preparation, and counseling; job 
development and placement; and follow-up assistance after job placement 
and completion of the contract of participation;
    (5) Personal welfare--substance/alcohol abuse treatment and 
counseling;
    (6) Household skills and management--training in homemaking and 
parenting skills; household management; and money management;
    (7) Counseling--counseling in the areas of:
    (i) The responsibilities of homeownership;
    (ii) Opportunities available for affordable rental and 
homeownership in the private housing market; and
    (iii) Money management; and
    (8) Other services--any other services and resources, including 
case management, reasonable accommodations for individuals with 
disabilities, that the IHA may determine to be appropriate in assisting 
FSS families to achieve economic independence and self-sufficiency.
    Unit size or size of unit refers to the number of bedrooms in a 
dwelling unit.
    Very low-income family. See definition in Sec. 950.102.
    Welfare assistance means income assistance from Federal or State 
welfare programs, and includes assistance provided under the Aid to 
Families with Dependent Children (AFDC) Program, Supplemental Security 
Income (SSI) that is subject to an income eligibility test; Medicaid, 
food stamps, general assistance, or other assistance provided under a 
Federal or State program directed to meeting general living expenses, 
such as food, health care, child care, but does not include assistance 
solely directed to meeting housing expenses (e.g., rent, mortgage or 
utilities payments), and does not include transitional welfare 
assistance (e.g. medicaid) provided to JOBS participants.


Sec. 950.3004  Basic requirements of the FSS program.

    (a) Compliance with program regulations. An FSS program established 
under this subpart shall be operated in conformity with the regulations 
of this part.
    (b) Compliance with Action Plan. An FSS program established under 
this subpart shall be operated in compliance with an Action Plan, as 
described in Sec. 950.3011, and provide comprehensive supportive 
services as defined in Sec. 950.3003.
    (c) Compliance with equal opportunity requirements. An FSS program 
established under this subpart shall be operated in compliance with all 
applicable Indian housing regulations and all applicable civil rights 
authorities including: the Indian Civil Rights Act of 1968 (25 U.S.C. 
1301-1303); title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d), 
the Fair Housing Act (42 U.S.C. 3601-3619); section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794); the Age Discrimination Act 
of 1975 (42 U.S.C. 6101-6107); Executive Order 11063 on Equal 
Opportunity in Housing, 27 FR 11527 (1962), as amended, 46 FR 1253 
(1980); section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450(e)(b)); section 3 of the Housing and 
Urban Development Act of 1968 (12 U.S.C. 1701u); and the regulations 
implementing these authorities. (The Indian Civil Rights Act applies to 
IHAs organized pursuant to tribal laws; and Title VI of the Civil 
Rights Act of 1964 and the Fair Housing Act applies to state authorized 
IHAs.)


Sec. 950.3011  Action Plan.

    (a) General. To participate in the FSS program, an IHA must have a 
HUD-approved Action Plan that complies with the requirements of this 
section.
    (b) Development of Action Plan. The Action Plan shall be developed 
by the IHA in consultation with the chief executive officer of the 
applicable unit of general local government, and the Program 
Coordinating Committee.
    (c) Initial submission and revisions. (1) Initial submission. 
Unless the dates set forth in this paragraph are extended by HUD for 
good cause, an IHA that is establishing its first FSS program must 
submit an Action Plan to HUD for approval within:
    (i) 90 days of notification by HUD of approval of the IHA's 
application for FY 1991 or FY 1992 incentive award units; or
    (ii) If the IHA did not apply for FSS incentive award units, within 
90 days of notification by HUD of approval of the IHA's first 
application, commencing in FY 1993, for new Indian housing units.
    (2) Revision. Following initial approval of the Action Plan by HUD, 
no further approval of the Action Plan is required unless the IHA 
proposes to make policy changes to the Action Plan, or changes are 
required by HUD. Any changes to the Action Plan must be submitted to, 
and approved by HUD.
    (d) Contents of Plan. The Action Plan shall describe the policies 
and procedures of the IHA for operation of a local FSS program, and 
shall contain, at a minimum, the following information:
    (1) Family demographics--a description of the number, size, 
characteristics, and other demographics (including racial and ethnic 
data), and the supportive service needs of the families expected to 
participate in the FSS program;
    (2) Estimate of participating families--an estimate of the number 
of eligible FSS families who can reasonably be expected to receive 
supportive services under the FSS program, based on available and 
anticipated Federal, tribal, State, local, and private resources;
    (3) Eligible families from other self-sufficiency program--if 
applicable, the number of eligible families, by program type, who are 
participating in Operation Bootstrap, Project Self-Sufficiency, or any 
other local self-sufficiency program who are expected to agree to 
execute an FSS contract of participation.
    (4) FSS family selection procedures--a statement indicating the 
procedures to be utilized to select families for participation in the 
FSS program, subject to the requirements governing the selection of FSS 
families, set forth in Sec. 950.3013.
    (5) Incentives to encourage participation--a description of the 
incentives that the IHA intends to offer eligible families to encourage 
their participation in the FSS program (incentives plan). The 
incentives plan shall provide for the establishment of the FSS account 
in accordance with the requirements set forth in Sec. 950.3025, and 
other incentives, if any, designed by the IHA. The incentives plan 
shall be part of the Action Plan.
    (6) Outreach efforts--a description of:
    (i) The IHA's efforts, including notification and outreach efforts, 
to recruit FSS participants from among eligible families; and
    (ii) The IHA's actions to be taken to assure that both minority and 
non-minority groups are informed about the FSS program, and how the IHA 
will make this information known (e.g., through door-to-door flyers, 
posters in any common rooms, advertisements in newspapers of general 
circulation, as well as any media targeted to minority groups).
    (7) FSS activities and supportive services--a description of the 
activities and supportive services to be provided by both public and 
private resources to FSS families, and identification of the public and 
private resources, which are expected to provide the supportive 
services.
    (8) Method for identification of family support needs--a 
description of how the FSS program will identify the needs and deliver 
the services and activities according to the needs of the FSS families;
    (9) Program termination; withholding of services; and grievance 
procedures--a description of the IHA's policies concerning: termination 
of participation in the FSS program, or withholding of supportive 
services on the basis of a family's failure to comply with the 
requirements of the contract of participation; and the grievance and 
hearing procedures available to FSS families.
    (10) Assurances of non-interference with rights of non-
participating families--an assurance that a family's election to not 
participate in the FSS program will not affect the family's admission 
to Indian housing or the family's right to occupancy in accordance with 
its lease.
    (11) Timetable for program implementation--a timetable for 
implementation of the FSS program, as provided in Sec. 950.3020(a)(1), 
including the schedule for filling FSS slots with eligible FSS 
families, as provided in Sec. 950.3013;
    (12) Certification of coordination--a certification that 
development of the services and activities under the FSS program has 
been coordinated with the JOBS Program; the programs provided under the 
JTPA; and any other relevant employment, child care, transportation, 
training, and education programs (e.g., Job Training for the Homeless 
Demonstration program) in the applicable area, and that implementation 
will continue to be coordinated, in order to avoid duplication of 
services and activities; and
    (13) Optional additional information--such other information that 
would help HUD determine the soundness of the IHA's proposed FSS 
program.
    (e) Eligibility of a combined program. An IHA that wishes to 
operate a joint FSS program with other IHAs may combine its resources 
with one or more IHAs to deliver supportive services under a joint 
Action Plan that will provide for the establishment and operation of a 
combined FSS program that meets the requirements of this subpart.
    (f) Single action plan. IHAs implementing both a section 8 FSS 
program and an Indian housing FSS program may submit one Action Plan.


Sec. 950.3012  Program Coordinating Committee (PCC).

    (a) General. Each participating IHA must establish a PCC whose 
functions will be to assist the IHA in securing commitments of public 
and private resources for the operation of the FSS program within the 
IHA's jurisdiction, including assistance in developing the Action Plan 
and in implementing the program.
    (b) Membership. (1) The PCC may consist of representatives of the 
IHA and of residents of Indian housing.
    (2) Recommended membership. Membership on the PCC also may include 
representatives of the unit of general local government served by the 
IHA, local agencies (if any) responsible for carrying out JOBS training 
programs, or programs under the JTPA, and other organizations, such as 
other State, local or tribal welfare and employment agencies, public 
and private education or training institutions, child care providers, 
nonprofit service providers, private business, and any other public and 
private service providers with resources to assist the FSS program.
    (c) Alternative committee. The IHA may, in consultation with the 
chief executive officer of the unit of general local government served 
by the IHA, utilize an existing entity as the PCC if the membership of 
the existing entity consists or will consist of the individuals 
identified in paragraph (b)(1) of this section, and also includes 
individuals from the same or similar organizations identified in 
paragraph (b)(2) of this section.


Sec. 950.3013  FSS family selection procedures.

    (a) Preference in the FSS selection process. An IHA has the option 
of giving a selection preference for up to 50 percent of its FSS slots 
to eligible families, as defined in Sec. 950.3003, who have one or more 
family members currently enrolled in an FSS related service program or 
on the waiting list for such a program. The IHA may limit the selection 
preference given to participants in and applicants for FSS related 
service programs to one or more eligible FSS related service programs. 
An IHA that chooses to exercise the selection preference option must 
include the following information in its Action Plan:
    (1) The percentage of FSS slots, not to exceed 50 percent of the 
total number of FSS slots, for which it will give a selection 
preference;
    (2) The FSS related service programs to which it will give a 
selection preference to the programs' participants and applicants; and
    (3) The method of outreach to, and selection of, families with one 
or more members participating in the identified programs.
    (b) FSS selection without preference. For those FSS slots for which 
the IHA chooses not to exercise the selection preference provided in 
paragraph (a) of this section, the FSS slots must be filled with 
eligible families in accordance with an objective selection system, 
such as a lottery, the length of time living in subsidized housing, or 
the date the family expressed an interest in participating in the FSS 
program. The objective system to be used by the IHA must be described 
in the IHA's Action Plan.
    (c) Motivation as a selection factor. (1) General. An IHA may 
screen families for interest, and motivation to participate in the FSS 
program, provided that the factors utilized by the IHA are those which 
solely measure the family's interest, and motivation to participate in 
the FSS program.
    (2) Permissible motivational screening factors. Permitted 
motivational factors include requiring attendance at FSS orientation 
sessions or preselection interviews, and assigning certain tasks which 
indicate the family's willingness to undertake the obligations which 
may be imposed by the FSS contract of participation (e.g., contacting 
job training or educational program referrals). However, any tasks 
assigned shall be those which may be readily accomplishable by the 
family, based on the family members' educational level, and 
disabilities, if any. Reasonable accommodations must be made for 
individuals with mobility, manual, sensory, speech impairments, mental 
or developmental disabilities.
    (3) Prohibited motivational screening factors. Prohibited 
motivational screening factors include the family's educational level, 
educational or standardized motivational test results, previous job 
history or job performance, credit rating, marital status, number of 
children, or other factors, such as sensory or manual skills, and any 
factors which may result in discriminatory practices or treatment 
toward individuals with disabilities or minority or non-minority 
groups.


Sec. 950.3014  On-site facilities.

    Each IHA may, subject to the approval of HUD, make available and 
utilize common areas or unoccupied units in Indian housing projects to 
provide supportive services under an FSS program.


Sec. 950.3020  Program implementation.

    (a) Program implementation deadline. (1) Program start-up. Full 
delivery of the supportive services to be provided to the total number 
of families required to be served under the program need not occur 
within 12 months, but must occur by the deadline set forth in paragraph 
(a)(2) of this section.
    (2) Full enrollment and delivery of services. Except as provided in 
paragraph (a)(3) of this section, the IHA must have completed 
enrollment of the total number of families to be served under the FSS 
program and must have begun delivery of the supportive services within 
two years from the date of notification of approval of the application 
for new Indian housing units.
    (3) Extension of program deadlines for good cause. HUD may extend 
the deadline set forth in either paragraph (a)(1) or paragraph (a)(2) 
of this section if the IHA requests an extension, and the HUD Field 
Office determines that, despite best efforts on the part of the IHA, 
the development of new Indian housing units will not occur within the 
deadlines set forth in this paragraph (a), the commitment by public or 
private resources to deliver supportive services has been withdrawn, 
the delivery of such services has been delayed, or other local 
circumstances which the HUD Field Office determines warrants an 
extension of the deadlines set forth in paragraph (a) of this section.
    (b) Program administration. An IHA may employ appropriate staff, 
including a service coordinator or program coordinator to administer 
its FSS program, and may contract with an appropriate organization to 
establish and administer the FSS program, including the FSS account, as 
provided by Sec. 950.3025.


Sec. 950.3021  Administrative fees.

    The performance funding system (PFS), provided under section 9(a) 
of the Act, shall provide for the inclusion of reasonable and 
administrative costs incurred by IHAs in carrying out the local FSS 
programs. These costs are subject to appropriations by the Congress.


Sec. 950.3022  Contract of participation.

    (a) General. Each family that is selected to participate in an FSS 
program must enter into a contract of participation with the IHA that 
operates the FSS program in which the family will participate. The 
contract of participation shall be signed by the head of the FSS 
family.
    (b) Form and content of contract. (1) General. The contract of 
participation, which incorporates the individual training and services 
plan, shall be in the form prescribed by HUD, and shall set forth the 
principal terms and conditions governing participation in the FSS 
program, including the rights and responsibilities of the FSS family 
and of the IHA, the services to be provided to, and the activities to 
be completed by, the head of the FSS family, and each adult member of 
the family who elects to participate in the program.
    (2) Interim goals. The individual training and services plan, 
incorporated in the contract of participation, shall establish specific 
interim and final goals by which the IHA, and the family, may measure 
the family's progress toward fulfilling its obligations under the 
contract of participation, and becoming self-sufficient. For each 
participating FSS family that is a recipient of welfare assistance, the 
IHA must establish as an interim goal that the family become 
independent from welfare assistance and remain independent from welfare 
assistance for at least one year before expiration of the term of the 
contract of participation, including any extension thereof.
    (3) Compliance with lease terms. The contract of participation 
shall provide that one of the obligations of the FSS family is to 
comply with the terms and conditions of the Indian housing lease.
    (4) Employment obligation. (i) Head of family's obligation. The 
head of the FSS family shall be required under the contract of 
participation to seek and maintain suitable employment during the term 
of the contract and any extension thereof. Although other members of 
the FSS family may seek and maintain employment during the term of the 
contract, only the head of the FSS family is required to seek and 
maintain suitable employment.
    (ii) Seek employment. The obligation to seek employment means that 
the head of the FSS family has applied for employment, attended job 
interviews, and has otherwise followed through on employment 
opportunities.
    (iii) Determination of suitable employment. A determination of 
suitable employment shall be made by the IHA based on the skills, 
education, and job training of the individual that has been designated 
the head of the FSS family, and based on the available job 
opportunities within the jurisdiction served by the IHA.
    (5) Consequences of noncompliance with contract. The contract of 
participation shall specify that if the FSS family fails to comply with 
the terms and conditions of the contract of participation, the IHA may:
    (i) Withhold the supportive services; or
    (ii) Terminate the family's participation in the FSS program.
    (c) Contract term. The contract of participation shall provide that 
each FSS family will be required to fulfill those obligations to which 
the participating family has committed itself under the contract of 
participation no later than 5 years after the effective date of the 
contract.
    (d) Contract extension. The IHA shall, in writing, extend the term 
of the contract of participation for a period not to exceed two years 
for any FSS family that requests, in writing, an extension of the 
contract, provided that the IHA finds that good cause exists for 
granting the extension. The family's written request for an extension 
must include a description of the need for the extension. As used in 
this paragraph (d) of this section, ``good cause'' means circumstances 
beyond the control of the FSS family, as determined by the IHA, such as 
a serious illness or involuntary loss of employment. Extension of the 
contract of participation will entitle the FSS family to continue to 
have amounts credited to the family's FSS account in accordance with 
Sec. 950.3025.
    (e) Unavailability of supportive services. (1) Good faith effort to 
replace unavailable services. If a social service agency fails to 
deliver the supportive services pledged under an FSS family member's 
individual training and services plan, the IHA shall make a good faith 
effort to obtain these services from another agency.
    (2) Assessment of necessity of services. If the IHA is unable to 
obtain the services from another agency, the IHA shall reassess the 
family member's needs, and determine whether other available services 
would achieve the same purpose. If other available services would not 
achieve the same purpose, the IHA shall determine whether the 
unavailable services are integral to the FSS family's advancement or 
progress toward self-sufficiency. If the unavailable services are:
    (i) Determined not to be integral to the FSS family's advancement 
toward self-sufficiency, the IHA shall revise the individual training 
and services plan to delete these services, and modify the contract of 
participation to remove any obligation on the part of the FSS family to 
accept the unavailable services, in accordance with paragraph (f) of 
this section; or
    (ii) Determined to be integral to the FSS family's advancement 
toward self-sufficiency (which may be the case if the affected family 
member is the head of the FSS family), the IHA shall declare the 
contract of participation null and void.
    (f) Modification. The IHA and the FSS family may mutually agree to 
modify the contract of participation. The contract of participation may 
be modified in writing with respect to the individual training and 
services plan, the contract term in accordance with paragraph (d) of 
this section, and designation of the head of the family.
    (g) Completion of the contract. The contract of participation is 
considered to be completed, and a family's participation in the FSS 
program is considered to be concluded when one of the following occurs:
    (1) The FSS family has fulfilled all of its obligations under the 
contract of participation on or before the expiration of the contract 
term, including any extension thereof; or
    (2) Thirty (30) percent of the monthly adjusted income of the FSS 
family equals or exceeds the published existing housing fair market 
rent for the size of the unit for which the FSS family qualifies based 
on the IHA's occupancy standards. The contract of participation will be 
considered completed and the family's participation in the FSS program 
concluded on this basis even though the contract term, including any 
extension thereof, has not expired, and the family members who have 
individual training and services plans, have not completed all the 
activities set forth in their plans.
    (h) Termination of the contract. The contract of participation may 
be terminated before the expiration of the contract term, and any 
extension thereof, by:
    (1) Mutual consent of the parties;
    (2) The failure of the FSS family to meet its obligations under the 
contract of participation without good cause;
    (3) The family's withdrawal from the FSS program;
    (4) Such other act as is deemed inconsistent with the purpose of 
the FSS program; or
    (5) By operation of law.
    (i) Transitional supportive service assistance. An IHA may continue 
to offer to a former FSS family who has completed its contract of 
participation and whose head of the family is employed, appropriate FSS 
supportive services in becoming self-sufficient (if the family still 
resides in Indian housing), or in remaining self-sufficient (if the 
family no longer resides in Indian or other assisted housing).


Sec. 950.3024  Total tenant payment and increases in family income.

    (a) Calculation of total tenant payment. Total tenant payment for a 
family participating in the FSS program is determined in accordance 
with the regulations set forth in Secs. 950.315 through 950.325.
    (b) Increases in FSS family income. Any increase in the earned 
income of an FSS family during its participation in an FSS program may 
not be considered as income or a resource for purposes of eligibility 
of the FSS family for other benefits, or amount of benefits payable to 
the FSS family, under any other program administered by HUD, unless the 
income of the FSS family equals or exceeds 80 percent of the median 
income of the area (as determined by HUD, with adjustments for smaller 
and larger families).


Sec. 950.3025  FSS account.

    (a) Establishment of FSS account. (1) General. The IHA shall 
deposit the FSS account funds of all families participating in the 
IHA's FSS program into a single depository account. The IHA must 
deposit the FSS account funds in one or more of the HUD-approved 
investments.
    (2) Accounting for FSS account funds. (i) Accounting records. The 
total of the FSS account funds will be supported in the IHA accounting 
records by a subsidiary ledger showing the balance applicable to each 
FSS family. During the term of the contract of participation, the IHA 
shall credit monthly, to each family's FSS account, the amount of the 
FSS credit determined in accordance with paragraph (b) of this section.
    (ii) Proration of investment income. The investment income for 
funds in the FSS account will be prorated and credited to each family's 
FSS account based on the balance in each family's FSS account at the 
end of the period for which the investment income is credited.
    (iii) Reduction of amounts due by FSS family. If the FSS family has 
not paid the family contribution towards rent, or other amounts, if 
any, due under the Indian housing lease, the balance in the family's 
FSS account shall be reduced by that amount before prorating the 
interest income. If the FSS family has fraudulently under-reported 
income, the amount credited to the FSS account will be based on the 
income amounts originally reported by the FSS family.
    (3) Reporting on FSS account. Each IHA will be required to make a 
report, at least once annually, to each FSS family on the status of the 
family's FSS account. At a minimum, the report will include:
    (i) The balance at the beginning of the reporting period;
    (ii) The amount of the family's rent payment that was credited to 
the FSS account, during the reporting period;
    (iii) Any deductions made from the account for amounts due the IHA 
before interest is distributed;
    (iv) The amount of interest earned on the account during the year; 
and
    (v) The total in the account at the end of the reporting period.
    (b) FSS credit. (1) Computation of amount. For purposes of 
determining the FSS credit, ``family rent'' is the total tenant payment 
as defined in this part 950. The FSS credit shall be computed as 
follows:
    (i) For FSS families who are very low-income families, the FSS 
credit shall be the amount which is the lesser of:
    (A) Thirty (30) percent of the family's current monthly adjusted 
income less the family rent, which is obtained by disregarding any 
increase in earned income (as defined in Sec. 950.3003) from the 
effective date of the contract of participation; or
    (B) The current family rent less the family rent at the time of the 
effective date of the contract of participation.
    (ii) For FSS families who are low-income families but not very low-
income families, the FSS credit shall be the amount determined 
according to paragraph (b)(1)(i) of this section, but which shall not 
exceed the amount computed for 50 percent of median income.
    (2) Ineligibility for FSS credit. FSS families who are not low-
income families shall not be entitled to any FSS credit.
    (3) Cessation of FSS credit. The IHA shall not make any additional 
credits to the FSS family's FSS account when the FSS family has 
completed the contract of participation, as defined in 
Sec. 950.3022(g), or when the contract of participation is terminated 
or otherwise nullified.
    (c) Disbursement of FSS account funds. (1) General. The amount in 
an FSS account, in excess of any amount owed to the IHA by the FSS 
family, as provided in paragraph (a)(3)(iii) of this section, shall be 
paid to the head of the FSS family when the contract of participation 
has been completed as provided in Sec. 950.3022(g), and if, at the time 
of contract completion, the head of FSS family submits to the IHA a 
certification, as defined in Sec. 950.3003, that, to the best of his or 
her knowledge and belief, no member of the FSS family is a recipient of 
welfare assistance.
    (2) Disbursement before expiration of contract term. (i) If the IHA 
determines that the FSS family has fulfilled its obligations under the 
contract of participation before the expiration of the contract term, 
and the head of the FSS family submits a certification that, to the 
best of his or her knowledge, no member of the FSS family is a 
recipient of welfare assistance, the amount in the family's FSS 
account, in excess of any amount owed to the IHA by the FSS family as 
provided in paragraph (a)(3)(iii) of this section, shall be paid to the 
head of the FSS family.
    (ii) If the IHA determines that the FSS family has fulfilled 
certain interim goals established in the contract of participation and 
needs a portion of the FSS account funds for purposes consistent with 
the contract of participation, such as completion of higher education 
(i.e., college, graduate school), or job training, or to meet start-up 
expenses involved in creation of a small business, the IHA may, at the 
IHA's sole option, disburse a portion of the funds from the family's 
FSS account to assist the family meet those expenses.
    (3) Verification of family certification. Before disbursement of 
the FSS account funds to the family, the IHA may verify that the FSS 
family is no longer a recipient of welfare assistance by requesting 
copies of any documents which may indicate whether the family is 
receiving any welfare assistance, and contacting welfare agencies.
    (d) Succession to FSS account. If the head of the FSS family ceases 
to reside with other family members in the Indian housing unit, the 
remaining members of the FSS family, after consultation with the IHA, 
shall have the right to designate another family member to receive the 
funds in accordance with paragraph (d) (1) or (2) of this section.
    (e) Use of FSS account funds for homeownership. An FSS family may 
use its FSS account funds for the purchase of a home, including the 
purchase of a home under one of HUD's homeownership programs, or other 
Federal, State, or local homeownership programs, unless such use is 
prohibited by the statute or regulations governing the particular 
homeownership program.
    (f) Forfeiture of FSS account funds. (1) Conditions for forfeiture. 
Amounts in the FSS account shall be forfeited upon the occurrence of 
the following:
    (i) The contract of participation is terminated, as provided in 
Secs. 950.3022(e) or 950.3022(h); or
    (ii) The contract of participation is completed by the family, as 
provided in Sec. 950.3022(g), but the FSS family is receiving welfare 
assistance at the time of expiration of the term of the contract of 
participation, including any extension thereof.
    (2) Treatment of forfeited FSS account funds. FSS account funds 
forfeited by the FSS family will be credited to the IHA's operating 
reserves and counted as other income in the calculation of the PFS 
operating subsidy eligibility for the next budget year.


Sec. 950.3030  Reporting.

    Each IHA that carries out an FSS program under this subpart shall 
submit to HUD, in the form prescribed by HUD, a report regarding its 
FSS program. The report shall include the following information:
    (a) A description of the activities carried out under the program;
    (b) A description of the effectiveness of the program in assisting 
families to achieve economic independence and self-sufficiency;
    (c) A description of the effectiveness of the program in 
coordinating resources of communities to assist families to achieve 
economic independence and self-sufficiency; and
    (d) Any recommendations by the IHA or the appropriate local program 
coordinating committee for legislative or administrative action that 
would improve the FSS program and ensure the effectiveness of the 
program.

    Dated: July 18, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-17838 Filed 7-29-94; 8:45 am]
BILLING CODE 4210-33-P