[Federal Register Volume 76, Number 223 (Friday, November 18, 2011)]
[Proposed Rules]
[Pages 71474-71490]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29642]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 1000

[Docket No. FR-5275-P-11]
RIN 2577-AC80


Native American Housing Assistance and Self-Determination 
Reauthorization Act of 2008: Amendments to Program Regulations

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make several revisions to the 
regulations governing the Indian Housing Block Grant (IHBG) Program and 
the Title VI Loan Guarantee Program. HUD negotiated the proposed rule 
with active Tribal participation under the procedures of the Negotiated 
Rulemaking Act of 1990, pursuant to the Native American Housing 
Assistance and Self-Determination Reauthorization Act of 2008. The 
proposed regulatory changes would implement statutory amendments and 
reflect the consensus decisions reached by HUD and the Tribal 
representatives.

DATES: Comment Due Date: January 17, 2012.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 7th Street 
SW., Room 10276, Washington, DC 20410-0500. Communications must refer 
to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified above. 
Again, all submissions must refer to the docket number and title of 
the rule. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the toll-free 
Federal Relay Service at (800) 877-8339. Copies of all comments 
submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Rodger J. Boyd, Deputy Assistant 
Secretary for Native American Programs, Office of Public and Indian 
Housing, Department of Housing and Urban Development, 451 7th Street 
SW., Room 4126, Washington, DC 20410; telephone number (202) 401-7914 
(this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Relay Service at 1-(800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Native American Housing Assistance and Self-Determination Act 
of 1996 (25 U.S.C. 4101 et seq.) (NAHASDA) changed the way that housing 
assistance is provided to Native Americans. NAHASDA eliminated several 
separate assistance programs and replaced them with a single block 
grant program, known as the Indian Housing Block Grant (IHBG) Program. 
In addition, Title VI of NAHASDA authorizes Federal guarantees for the 
financing of certain Tribal activities (under the Title VI Loan 
Guarantee Program). The regulations governing the IHBG and Title VI 
Loan Guarantee programs are located in part 1000 of HUD's regulations 
in title 24 of the Code of Federal Regulations. In accordance with 
section 106 of NAHASDA, HUD developed the regulations with active 
Tribal participation under the procedures of the Negotiated Rulemaking 
Act of 1990 (5 U.S.C. 561-570).
    The Native American Housing Assistance and Self-Determination 
Reauthorization Act of 2008 (Pub. L. 110-411, approved October 14, 
2008) (NAHASDA Reauthorization Act) reauthorizes NAHASDA through 
September 30, 2013, and makes a number of amendments to the statutory 
requirements governing the IHBG and Title VI Loan Guarantee programs. 
The NAHASDA Reauthorization Act amends section 106 of NAHASDA by 
providing that HUD shall initiate a negotiated rulemaking in order to 
implement

[[Page 71475]]

aspects of the 2008 Reauthorization Act that require rulemaking. On 
January 5, 2010, at 75 FR 423, HUD published a Federal Register notice 
announcing the final list of members of the Native American Housing 
Assistance and Self-Determination Negotiated Rulemaking Committee (the 
NAHASDA Rulemaking Committee, or the Committee).
    The NAHASDA Rulemaking Committee convened for one, 2-day meeting 
and five, 3-day meetings in Scottsdale, Arizona; Westminster, Colorado; 
Seattle, Washington; and St. Paul, Minnesota, from March to August 
2010. Under the terms of the charter approved by the Committee, the 
negotiations were to focus on implementation of NAHASDA, as amended, 
except that subpart D of 24 CFR part 1000, which governs the NAHASDA 
allocation formula, was generally to be excluded from the negotiations. 
(The committee nonetheless agreed by consensus to make minor revisions 
to regulations in subpart D in order to address issues that primarily 
involved provisions under subpart C.) HUD also agreed to consider 
issues that did not directly arise from statutory amendments, if time 
permitted.

II. This Proposed Rule

    This proposed rule would amend HUD's regulations by implementing 
statutory amendments to NAHASDA. The proposed rule would make changes 
to the regulations under subpart A of 24 CFR part 1000 regarding the 
guiding principles of NAHASDA, definitions, labor standards, 
environmental review procedures, procurement, Tribal and Indian 
preference, and program income. Proposed changes to subpart B of 24 CFR 
part 1000 address eligible families, useful life of properties, and 
criminal conviction records. Proposed changes to subpart C of 24 CFR 
part 1000 would address the Tribal program year, Indian Housing Plan 
(IHP) requirements, administrative and planning expenses, reserve 
accounts, local cooperation agreements, and exemption from taxation. 
Proposed changes to subpart D of part 24 would address certain formula 
information that must be included in the IHP and Annual Performance 
Report (APR), as well as the date by which HUD must provide data used 
for the formula and projected allocation to a Tribe or Tribally 
Designated Housing Entity (TDHE). Proposed changes to subpart E of 24 
CFR part 1000 would address financing guarantees. Finally, proposed 
changes to subpart F of 24 CFR part 1000 would address HUD monitoring, 
APRs, APR review, HUD performance measures, recipient comments on HUD 
reports, remedial actions in the event of substantial noncompliance, 
audits, submission of audit reports, and records retention.
    Following is a section-by-section description of provisions that 
HUD proposes under this rule:

Subpart A

Section 1000.2, Guiding Principles
    Section 1000.2 would be revised to conform it to the provision of 
amended NAHASDA section 2, that the Federal government ``shall'' work 
to provide housing assistance and to assist development of private 
finance mechanisms, and that Federal assistance ``shall'' be provided 
in a manner that recognizes Indian self-determination and self-
governance. Prior to the NAHASDA Reauthorization Act, these provisions 
stated that the Federal government and Federal assistance ``should'' 
comply with the stated principles.
 Section 1000.9, Negotiated Rulemaking
    Section 1000.9 would establish provisions that apply to the 
negotiated rulemaking process that is used under NAHASDA. Paragraph (a) 
would require HUD to appoint representatives of the Federal government 
and representatives of diverse Tribes and program recipients. Paragraph 
(b) would codify the requirement of NAHASDA section 106(b)(2)(C) for 
HUD to initiate negotiated rulemaking within 90 days after enactment of 
any act reauthorizing NAHASDA, as well as any act that significantly 
amends NAHASDA. Paragraph (c) would provide that negotiated rulemaking 
committees may establish workgroups to develop proposals. Paragraph (d) 
would provide that the committee submits recommended rules to HUD and 
that once HUD determines what rules it will propose, it will publish 
notice of the proposal in the Federal Register. Finally, it would 
provide that the committee and HUD will review public comments before 
HUD makes a determination on the provisions of the final rule.
 Section 1000.10, Definitions
    Section 1000.10(b) would add a new definition of ``housing related 
activities,'' which is used in proposed Sec.  1000.64 with respect to 
permissible use requirements for program income. The proposed 
definition would be modeled, in significant part, on the new statutory 
definition of ``housing related community development.'' Section 
1000.10(b) would codify in regulations the new statutory definition of 
``housing related community development,'' which are those activities 
that may be financed with notes and other obligations guaranteed by HUD 
pursuant to section 601 of NAHASDA. It would revise the existing 
definition of ``Indian Area'' to conform to the amended definition in 
NAHASDA. It would also add a new definition of ``outcomes,'' which is 
used in NAHASDA section 102(b) to describe information required to be 
in the IHP, and which would be used in Sec.  1000.512 to describe items 
required to be included in IHPs and performance reports. Section 
1000.10(b) would also add a new definition of ``Tribal program year,'' 
which is used in Sec. Sec.  1000.110, 1000.201, 1000.214, and 1000.216 
to specify the basis on which grants are provided and the date by which 
IHPs must be submitted to HUD. The definition would provide that 
``Tribal program year'' means the fiscal year of the recipient.
Section 1000.12, Nondiscrimination Requirements
    Section 1000.12(d) would be revised to conform to amended NAHASDA 
section 201(b)(6), which exempts Federally recognized Tribes and their 
TDHEs from Title VI of the Civil Rights Act of 1964 and the Fair 
Housing Act in carrying out activities under NAHASDA. It would also 
provide that state-recognized Tribes may provide preference to Tribal 
members and other Indian families pursuant to NAHASDA section 201(b), 
and in employment and contracting pursuant to NAHASDA section 101(k).
Section 1000.16, Labor Standards
    Section 1000.16 would be revised to add a paragraph (e) based on 
NAHASDA section 104(b)(3), which addresses the applicability of Tribal 
laws that require payment of not less than prevailing wages to certain 
workers. The statute provides that if a contract or agreement for 
assistance, sale, or lease pursuant to NAHASDA is covered by such a 
Tribal law or laws, then the contract or agreement is not required to 
contain a provision requiring payment of prevailing wages in accordance 
with section 104(b)(1). The current paragraph (e) of 1000.16 would be 
redesignated as paragraph (f). In addition, the citation to the Davis-
Bacon Act in paragraph (a) would be revised to reflect current 
codification of the provision referenced in amended section 104(b)(1) 
of NAHASDA, and the citation to the Contract Work Hours and Safety 
Standards Act in paragraph (c) would be

[[Page 71476]]

updated to reflect the current codification of the referenced 
provision.
    The Committee draft included a provision that addressed 
construction and development contracts that are entered into by a 
recipient. The language sought to clarify that such construction and 
development contracts, if entered into pursuant to a HUD contract or 
agreement for assistance, sale, or lease under NAHASDA, are not 
required to contain the prevailing wage provision referenced in NAHASDA 
section 104(b)(1) if the contracts are subject to Tribal laws that 
require payment of not less than prevailing wages. Upon further review, 
HUD determined that revision of the draft rule provision was needed in 
order to reconcile the intent of the Committee with language as used in 
the statute, but the Committee did not take up the draft provision 
again. Although this proposed rule does not include the described 
provision, HUD agrees that such construction and development contracts 
are not required to include the provision referenced in NAHASDA section 
104(b)(1) under the described circumstances. HUD notes that in addition 
to construction and development contracts, contracts for the operation 
(including maintenance) of NAHASDA-assisted affordable housing are not 
required to include the provision under the described circumstances, 
and work performed directly by Tribal or TDHE employees on NAHASDA-
assisted housing is also not subject to the provisions in section 
104(b)(1) in those circumstances. HUD specifically solicits public 
comment on whether inclusion of a provision clarifying these exclusions 
would be necessary or beneficial in the final rule.
Section 1000.21, Waiver of Environmental Review Procedures
    A new Sec.  1000.21 would be added to conform to NAHASDA section 
105(d), which establishes the circumstances under which HUD may waive 
certain procedural requirements for the submission of certifications 
related to environmental reviews performed by Tribes. Following the 
amendment enacting section 105(d) of NAHASDA, HUD established, through 
the issuance of program Notice CPD-04-08, procedures \1\ for requesting 
a waiver of the statutory environmental review requirements. It is 
HUD's policy to follow the procedures in Notice CPD-04-08 when 
processing environmental review waivers.
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    \1\ The following is a brief summary of these procedures. When a 
procedural or nonsubstantive violation of NEPA by a Tribe has been 
identified, the grantee has the opportunity to request a waiver. The 
waiver request must be in writing and include all available and 
relevant information necessary for HUD to complete an environmental 
review under 24 CFR part 50. HUD conducts a site visit and prepares 
and signs the environmental assessment. The waiver request, executed 
environmental assessment, and all supporting documentation are 
provided to the Headquarters Office of Native American Programs 
(ONAP) for review. If the waiver request is acceptable, the Deputy 
Assistant Secretary for Native American Programs forwards it to the 
Environmental Review Division of the Office of Community Planning 
and Development (CPD). CPD has NEPA oversight authority for HUD. 
After appropriate review and consideration, if the waiver package is 
found to comply with section 105(d) of NAHASDA, it is then approved 
by the Assistant Secretary for Public and Indian Housing and the 
Assistant Secretary for CPD, and the grantee is notified that the 
waiver is approved.
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 Section 1000.26, Procurement
    Section 1000.26 would incorporate two statutory provisions related 
to procurement. The exemption in NAHASDA section 203(g) of procurements 
of less than $5,000 from competitive requirements would be incorporated 
in Sec.  1000.26(a)(11)(iii), and the provision in section 101(j) that 
recipients may use Federal supply sources made available by the General 
Services Administration would be incorporated in Sec.  
1000.26(a)(11)(iv). The existing regulatory provision with respect to 
bonding requirements in procurement would be redesignated as Sec.  
1000.26(a)(11)(ii).
 Section 1000.42, Section 3 of the Housing and Urban Development Act of 
1968
    Section 1000.42 would address section 3 of the Housing and Urban 
Development Act of 1968, which requires certain HUD recipients (e.g., 
recipients of more than $200,000 in HUD housing and community 
development assistance for a covered project) to provide economic 
opportunities to low- and very low-income residents. New paragraph (c) 
would clarify that recipients meet the section 3 requirements when they 
comply with employment and contract preference laws adopted by their 
Tribe in accordance with section 101(k) of NAHASDA. Paragraph (d) would 
provide that for purposes of section 3, NAHASDA funding is subject to 
the requirements applicable to the category of programs entitled 
``Other Programs'' that provide housing and community development 
assistance. The proposed provision would serve to clarify that NAHASDA 
recipients do not fall under the alternative category of recipients 
under section 3, which is for public and Indian housing agencies that 
award contracts in connection with assistance for development, 
modernization of units, and the operation of programs and projects 
under the 1937 Act. NAHASDA recipients do not receive assistance under 
the 1937 Act.
 Sections 1000.48, 1000.50, and 1000.52, Tribal and Indian Preference
    Sections 1000.48, 1000.50, and 1000.52 would be revised to 
implement section 101(k) of NAHASDA, which provides that the employment 
and contract preference laws of a Tribe that receives the benefit of a 
grant (or portion of a grant) apply to the administration of the grant 
(or portion of a grant), notwithstanding any other provision of law.
    Sections 1000.48, 1000.50, and 1000.52 would clarify that a 
recipient is required to apply Tribal preference in employment and 
contracting, if a Tribe has enacted Tribal preference laws, and that 
only to the extent that such Tribal preference laws have not been 
enacted, a recipient must instead apply Indian preference, as required 
under section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)).
    In addition, Sec. Sec.  1000.48(c) and 1000.52(d) would clarify 
that the exemption in NAHASDA section 203(g) for procurements of less 
than $5,000 from competitive rules and procedures serves to exempt such 
procurements from Indian preference requirements under section 7(b) of 
the Indian Self-Determination and Education Assistance Act.
 Sections 1000.26, 1000.62, and 1000.64, Program Income
    The NAHASDA Reauthorization Act amended NAHASDA section 
104(a)(1)(B) to change one of the conditions for a recipient to be able 
to retain program income. The amendment removed the requirement for a 
recipient to agree to use the program income for ``affordable housing 
activities'' in accordance with NAHASDA, and replaced it with a 
requirement for the recipient to agree to use the program income for 
``housing related activities'' in accordance with NAHASDA. Accordingly, 
a new Sec.  1000.64 would address the permissible uses of program 
income and clarify that the requirement for program income to be used 
for ``housing related activities'' is the only applicable Federal 
requirement. (As discussed above, ``housing related activities'' would 
be defined in Sec.  1000.10(b).) This clarification is consistent with 
HUD's treatment of proceeds of sale as outlined in the notice titled 
``IHBG Program: Notice of Revision to Transition Requirements--Proceeds 
of Sales of Former 1937 Act

[[Page 71477]]

Homeownership Units,'' published in the Federal Register on April 1, 
1999 (64 FR 15778). In addition, the provision in Sec.  1000.62(b) that 
reflects the former statutory provision regarding ``affordable housing 
activities'' would be removed, so that Sec.  1000.62 would address only 
what constitutes program income, rather than its permissible uses. The 
heading of Sec.  1000.62 would be revised accordingly. Finally, 
consistent with the amendments to NAHASDA section 104(a)(2) regarding 
expenditure of program income, Sec.  1000.26(a)(5) would be revised to 
provide that a recipient may draw down or expend IHBG funds before 
expending program income.
 Section 1000.58, Investment of IHBG Funds
    Paragraph (f) of Sec.  1000.58 would be revised to remove the 
current restriction on investing IHBG funds that have been allocated 
for the operating subsidy element of the Formula Current Assisted 
Housing Stock (FCAS) component of the IHBG formula. Paragraph (g) would 
be revised to increase the permissible period of investments from 2 to 
5 years. These changes would provide recipients greater flexibility in 
their financial management of IHBG funds pending their expenditure on 
IHBG activities.

Subpart B

 Sections 1000.104, 1000.106, 1000.108, 1000.110, 114, 116, and 118, 
Eligible Families
    The NAHASDA Reauthorization Act amended NAHASDA section 201(b)(3), 
which provides that, notwithstanding the general requirement for 
assistance to be provided to low-income Indian families, recipients may 
provide housing to other families whose presence is essential to the 
well-being of Indian families. The amendment removed the provision that 
the exception is for ``non-Indian'' essential families. Accordingly, 
corresponding regulatory references to ``non-Indian'' essential 
families would be removed throughout Sec. Sec.  1000.104, 1000.106, 
1000.108, 1000.110, 1000.114, 1000.116, and 1000.118.
    Section 1000.110(a) would clarify that a family that is low income 
at the times specified in redesignated Sec.  1000.147, but which 
subsequently becomes non low-income due to an increase in income, may 
continue to participate in the program in accordance with the 
recipient's admission and occupancy policies. The provision would 
clarify that NAHASDA does not prohibit the recipient from continuing to 
serve such families, but that the policy determination is to be made by 
the recipient. Amounts of assistance expended on such families would 
not be counted toward the 10 percent limit (or a higher limit approved 
by HUD) under Sec.  1000.110(c). Such families, as well as a family 
member or household member who takes ownership of a homeownership unit 
under Sec.  1000.146, would not be subject to the requirements of 
redesignated Sec.  1000.110(b), but would be subject to the limitations 
on benefits that non low-income families may receive under Sec.  
1000.110(d) only to the extent provided in the recipient's admission 
and occupancy policies.
    Section 1000.110(b), which enumerates three activities that may 
serve non low-income families, would be removed to conform to the 
amendment that removed these enumerated activities in NAHASDA section 
201(b)(2). The NAHASDA amendment added a blanket provision that any 
affordable housing activities may be provided to non low-income 
families to the extent that HUD approves the activities due to a need 
that cannot be reasonably met without the assistance. Prior to the 
statutory amendment, non low-income families could receive only 
homeownership assistance under section 202(2), model activities under 
section 202(6), or loan assistance activities under Title VI of 
NAHASDA.
    In addition, redesignated Sec.  1000.110(c) would be revised to 
provide that a recipient may, without HUD approval, use up to 10 
percent of the amount it plans to spend in a Tribal program year, 
rather than 10 percent of the amount of its annual grant, for families 
whose income falls within 80 to 100 percent of median income. (Use of 
amounts in excess of 10 percent would still require HUD approval.) This 
change would be consistent with HUD's practice of no longer requiring 
recipients to track expenditures against particular annual grants. 
Instead, activities and expenditures would be tracked to the grantee's 
fiscal year on a rolling year-to-year basis.
    Redesignated Sec.  1000.110(e) would clarify that amounts of 
assistance expended on essential families would not be counted toward 
the 10 percent limit (or a higher limit approved by HUD) under Sec.  
1000.110(c). It would retain the existing provision that essential 
families are not subject to the limitations on benefits that non low-
income families may receive under Sec.  1000.110(d).
    Finally, Sec.  1000.104(d) would incorporate the provision in 
NAHASDA section 201(b) that housing assistance may be provided to a law 
enforcement officer whose presence the recipient determines will deter 
crime.
 Sections 1000.141, 1000.142, 1000.143, 1000.144, 1000.145, and 
1000.146, Useful Life
    Proposed Sec.  1000.146 would incorporate the provision of NAHASDA 
section 205(c), which provides that a family or household member who 
subsequently takes ownership of a homeownership unit is not subject to 
the binding commitment requiring that a dwelling unit must remain 
affordable for the useful life of the property. Proposed Sec.  1000.146 
would clarify, however, that if such a family or household member then 
transfers the property to a third party, such a third party is subject 
to the requirement that the unit remain affordable for its useful life.
    Section 1000.141 would codify the definition of ``useful life.'' 
The question in the heading of Sec.  1000.142 was revised slightly to 
clarify ``how a recipient determines useful life'' rather than ``what 
is the useful life.'' The response was also revised slightly to respond 
to the revised question. Proposed Sec. Sec.  1000.143 and 1000.144 
would clarify that a recipient implements the useful life requirement 
by placing a binding commitment that is satisfactory to HUD on the 
assisted property, and that to be satisfactory to HUD, the binding 
commitment must be a written use restriction agreement that is placed 
on the property and that has a duration equal to the property's useful 
life. Existing Sec. Sec.  1000.144 and 1000.146 would be redesignated 
as Sec. Sec.  1000.145 and 1000.147 for organizational clarity.
    Redesignated Sec.  1000.147 (formerly Sec.  1000.146) would be 
revised to codify the provision in section 205(a) of NAHASDA that 
states when a family must be low-income to participate in a housing 
program under NAHASDA.
 Sections 1000.150 and 1000.152, Criminal Conviction Records
    The heading of Sec.  1000.150 would be revised to conform to the 
NAHASDA Reauthorization Act amendment to NAHASDA section 208(a) that 
permits Tribes and TDHEs to access criminal conviction records of 
applicants for employment.
    Section 1000.152 would be revised to specify how criminal 
conviction records may be used with respect to applicants for 
employment, by referencing permitted purposes under section 208 of 
NAHASDA.

[[Page 71478]]

Subpart C

 Section 1000.201, Tribal Program Year
    Section 1000.201 would be revised to conform to the amended 
provision of NAHASDA section 102(a) that IHPs are submitted for a 
Tribal program year, rather than for the Federal government's fiscal 
year.
 Sections 1000.214, 1000.216, 1000.220, and 1000.230, Indian Housing 
Plan and Annual Performance Report Requirements
    Sections 1000.214 and 1000.216 would be revised to conform to the 
amended provision of NAHASDA section 102(a) that an IHP must be 
submitted to HUD 75 days before the beginning of a Tribal program year. 
The existing regulatory provision requires submission of the IHP by 
July 1. Section 1000.220 would be revised by removing the statement 
that IHP requirements are contained in section 102(c) of NAHASDA. The 
referenced statutory provisions were removed under the NAHASDA 
Reauthorization Act. Section 1000.220 would be further revised to state 
that it enumerates the ``requirements,'' rather than the ``minimum 
requirements,'' for items to be included in the IHP. It would add Sec.  
1000.302 to the list of cross-referenced regulatory sections that 
include items required to be in the IHP, as further discussed below. It 
would also remove Sec.  1000.504 from the list, in accordance with the 
proposed removal of that section. Section 1000.230 would clarify that 
an IHP may use either the HUD estimated grant amount or the grant 
amount from the most recent compliant IHP.
 Sections 1000.224, 1000.225, and 1000.227, Waivers of Indian Housing 
Plan Requirements
    Section 1000.224 would be revised in accordance with the amendment 
to section 101(b)(2) of NAHASDA. The revision would clarify that a 
waiver of IHP submission requirements is available when noncompliance 
is due to exigent circumstances beyond the control of the Indian Tribe. 
It would also provide that HUD may not withhold the requested waiver 
unreasonably. Section 1000.225 would provide that a request for a 
waiver must be submitted not more than 90 days beyond the submission 
due date. Section 1000.227 would require HUD to decide upon the waiver 
request and notify the recipient of its decision within 45 days of 
receiving the request.
 Sections 1000.236 and 1000.238, Administrative and Planning Expenses
    Section 1000.236(a) would be revised to provide that eligible 
administrative and planning expenses include expenses associated with 
the expenditure of non-IHBG funds on affordable housing activities, to 
the extent that the source of the non-IHBG funds limits expenditure of 
its funds on such expenses. The provision is intended to encourage 
recipients to leverage IHBG funds with funds obtained from other 
sources and recognizes that some sources permit little or none of their 
funds to be expended on administrative and planning activities. Section 
1000.236(b) would be revised to conform to amended NAHASDA section 
101(h)'s provision that eligible uses include comprehensive housing and 
community development planning activities. Section 1000.238 would be 
revised to provide a two-tiered limit on the amount of IHBG funds that 
may be used on administrative and planning expenses. (The existing 
regulation imposes a limit equal to 20 percent of the annual grant 
amount.) Under the revision, recipients receiving in excess of $500,000 
would be permitted to use up to 20 percent of either their annual 
expenditures of grant funds or of their annual grant amount, whichever 
is greater, on such expenses. Recipients receiving $500,000 or less 
would be permitted to use up to 30 percent of either their annual 
expenditures or of their annual grant amount, whichever is greater, on 
such expenses. A recipient that is receiving grant funds on behalf of 
one or more grant beneficiaries would apply these rules to the amounts 
provided for the benefit of those grant beneficiaries, to determine the 
amount it may use for administrative and planning expenses. It would 
also provide that a recipient combining grant funds with other funding 
may request HUD approval to use a higher percentage and may justify the 
request based on its total expenditure of funds from all sources for 
that year.
 Section 1000.239, Reserve Accounts
    New Sec.  1000.239 would incorporate the provisions of NAHASDA 
section 202(9), which adds to the list of eligible activities the 
establishment of a reserve account for the purpose of accumulating 
funds for administrative and planning activities related to affordable 
housing activities. The proposed regulation would clarify that the 
amounts may be invested in accordance with existing regulatory 
provisions in Sec.  1000.58(c), and would provide that a recipient may 
have more than one such account, provided that the total amount of 
reserves in all accounts does not exceed the maximum amount established 
in NAHASDA. The proposed regulation would also incorporate NAHASDA's 
formula for calculating the maximum amount. Finally, it would clarify 
that interest earned on reserves is not program income and is not 
included in calculating the maximum amount of reserves.
 Sections 1000.244 and 1000.246, Local Cooperation Agreements and 
Exemption From Taxation
    Two new sections would implement NAHASDA sections 101(c) and (d). 
Section 1000.244 would provide the procedure for requesting a waiver of 
the requirements for a local cooperation agreement and tax-exempt 
status of dwelling units. Requests would have to be submitted to the 
Area ONAP and would be required to demonstrate that the recipient had 
made a good-faith effort to comply. Section 1000.246 would require HUD 
to make a determination on and respond to a request for a waiver within 
30 days of receipt, or to provide a reason for any delay and a timeline 
within which a determination would be made. It would also require HUD 
to notify the recipient as to whether the waiver is granted or denied. 
A granted waiver would remain effective until revoked. If a waiver 
request is denied, IHBG funds would not be permitted to be spent on 
housing units, and any amounts expended prior to the denial would have 
to be reimbursed.

Subpart D

 Section 1000.302, IHBG Formula Definitions
    Paragraph (2)(i)(B) of the definition of ``Formula area'' in Sec.  
1000.302 would be revised to provide that the forms on which a Tribe 
reports on substantial housing services are the IHP and APR. In the 
same section, the definition of ``Substantial housing services'' would 
provide that the required written verification that a Tribe must 
provide annually is to be included in the IHP and APR.
 Section 1000.328, Certification of Households at or Below 80 Percent 
of Median Income
    Section 1000.328 would be revised to provide that for a Tribe 
receiving minimum funding, it must certify in its IHP, rather than 
demonstrate, the presence of households at or below 80 percent of 
median family income.

[[Page 71479]]

 Section 1000.332, Schedule for HUD To Provide Formula Data and 
Projected Allocations
    Section 1000.332 would revise the date by which HUD is required to 
provide a Tribe or TDHE with the data used to determine its formula 
allocation. The existing regulation requires provision of the data by 
August 1, and under this proposed rule would be revised to June 1. The 
change is necessary in order to ensure timely provision of the 
information to a Tribe or TDHE with a program year that begins on 
October 1.

Subpart E

 Sections 1000.408 and 1000.410, Financing Guarantees
    Section 1000.408, which sets forth the manner in which a Tribe or 
TDHE was required to show that it had made efforts to obtain financing, 
prior to requesting financing guarantees from HUD, would be removed. 
The removal conforms to the NAHASDA Reauthorization Act's removal of 
this requirement, which was previously found in section 601(b) of 
NAHASDA, as a condition for obtaining guarantees from HUD. A new 
paragraph (e) would be added to Sec.  1000.410 to conform to NAHASDA 
section 602(d), which requires guarantees made under Title VI to 
guarantee repayment of 95 percent of the unpaid principal and interest 
due on guaranteed obligations.
 Sections 1000.424 and 1000.428, Financing Guarantees for Housing 
Related Community Development
    Section 1000.424 would be revised to provide that an application 
for financing guarantees under Title VI of NAHASDA may identify 
housing-related community development activities, as well as affordable 
housing activities for which the guarantees are sought. Section 
1000.428 would be revised to provide that an application may be 
disapproved if proposed activities are not within the definitions of 
these eligible activities. The proposed changes conform to the amended 
NAHASDA section 601(a)'s provision that housing-related community 
development is a permissible use for the proceeds of financing 
guaranteed by HUD under Title VI of NAHASDA.

Subpart F

 Section 1000.503, HUD Monitoring
    New Sec.  1000.503 would clarify the appropriate frequency and 
level of monitoring of recipients. Paragraph (a) would codify the 
standard risk assessment factors that HUD uses to determine the 
frequency and priority for monitoring a particular recipient, and would 
provide that HUD may establish other factors, consistent with HUD's 
Tribal Consultation Policy. In accordance with the policy, HUD would 
provide written notification and an opportunity for comment when 
establishing such other factors. The provisions would not apply to 
monitoring or compliance reviews concerning regulatory requirements 
that arise independently of NAHASDA, such as those concerning 
nondiscrimination and accessibility for persons with disabilities. Any 
new factors would be issued by program guidance.
    Paragraph (b) would provide the level of monitoring that HUD would 
apply once a recipient has been selected for monitoring. Monitoring 
would typically cover the current and prior 2 Tribal program years, and 
it would include inspection of no more than the greater of 10 dwelling 
units or 10 percent of all dwelling units, and review of no more than 
the greater of 10 client files or 10 percent of client files. HUD would 
undertake additional sampling and review if this initial sampling 
indicated noncompliance. Paragraph (c) would provide that, subject to 
the limitation on time that recipients are required to retain records 
under Sec.  1000.552, HUD would be permitted to undertake additional 
sampling and review, notwithstanding these sampling limits, whenever 
HUD has credible information suggesting noncompliance. HUD would share 
the information with the recipient, as appropriate. Finally, paragraph 
(e) would provide that a recipient may request to enter into a self-
monitoring agreement with HUD, under which HUD would monitor only the 
recipient in accordance with the agreement, absent reasonable evidence 
of fraud, a pattern of noncompliance, or significant unlawful 
expenditure of IHBG funds.
 Section 1000.512, Annual Performance Reports
    Paragraphs (b)(1) and (b)(2) of Sec.  1000.512 would be revised by 
replacing the term ``objectives'' with ``planned activities,'' 
consistent with the amendment to section 102(b)(2) of NAHASDA. Section 
1000.512 would also be revised to list additional items required to be 
included in APRs. Paragraph (d) would require inclusion of annual 
performance data, including jobs supported with IHBG funds, and outputs 
and outcomes by eligible activity. Paragraph (e) would cross-reference 
items that may be required to be included in the APR under Sec. Sec.  
1000.302 and 1000.544, as further discussed in this preamble.
 Section 1000.520, Annual Performance Report Review
    Section 1000.520 would be revised to clarify that HUD's review of 
an APR takes place upon submission and that there is only one such 
review.
 Sections 1000.504 and 1000.524, HUD's Performance Measures
    Section 1000.524 would be revised by removing the requirement that 
90 percent of grant funds must be obligated within 2 years of the grant 
award. The revision would conform to NAHASDA section 203(f)(1)'s 
provision that HUD may not require commitment of funds earlier than 
provided for in the IHP. In addition, section 1000.524(e) would be 
revised to remove reference to a 5-year plan and its contents, which 
were eliminated from NAHASDA section 102 by the NAHASDA Reauthorization 
Act. Section 1000.504, which describes performance objectives, would 
also be removed, because of the elimination of the 5-year plan and 
because performance objectives are no longer required to be included in 
the one-year plan.
 Section 1000.528, Recipient Comments on HUD Reports
    Section 1000.528 would be revised to increase from 30 days to 60 
days the time from HUD's completion of its review that HUD will have to 
issue its draft report. The section would also be revised to increase 
from 30 days to 60 days the time that a recipient and Indian Tribe will 
have to review the draft report from HUD. It would also provide for an 
additional 30-day review period, available upon notification to HUD, as 
well as the possibility of additional extensions as mutually agreed to 
by HUD and the recipient.
 Sections 1000.532 and 1000.538, Remedial Actions in the Event of 
Substantial Noncompliance
    Section 1000.538, which addresses remedies that are available to 
HUD in the event of substantial noncompliance, would be removed, and 
provisions addressing remedies for substantial noncompliance would be 
provided in a revised and expanded Sec.  1000.532. The existing 
provision at Sec.  1000.532(c), which addresses a recipient's 
significant noncompliance with a major activity of its IHP, would be 
removed. A new paragraph (a) would include a broad provision addressing 
remedies HUD may take if HUD finds, after reasonable notice and 
opportunity to be heard, that a recipient has failed to comply 
substantially with any provision of NAHASDA or the implementing 
regulations in 24 CFR part 1000. The

[[Page 71480]]

provision would cover significant noncompliance with a major activity 
of a recipient's IHP, which is specifically addressed in the existing 
provision at Sec.  1000.532(c), and corresponds to the existing 
provision at Sec.  1000.538(a).
    Paragraph (b) of Sec.  1000.532 would provide the procedures that 
HUD would follow for providing notice and the opportunity to be heard, 
prior to taking any action under paragraph (a). The procedures would 
include notification in writing of the action it intends to take and 
the opportunity for an informal meeting with HUD to resolve the 
deficiency. Prior to taking any remedial action under paragraph (a), 
HUD would provide the opportunity no less than 30 days prior to taking 
the action, in accordance with the procedures at 24 CFR part 26. 
Amounts would not be reallocated until 15 days after the hearing has 
been conducted and HUD has rendered a final decision.
    Paragraph (c) of Sec.  1000.532 would incorporate NAHASDA section 
401(a)(4)'s expedited procedures for HUD's limitation of the 
availability of funds, when HUD determines that the substantial 
noncompliance of a recipient is resulting, and would continue to 
result, in a continuing expenditure of funds that is not authorized by 
law. The procedures would allow HUD to limit the availability of such 
funds, provided that it gives notice of the action and then provides a 
hearing within 60 days.
    Paragraph (d) of Sec.  1000.532 would correspond to the provision 
in existing Sec.  1000.538(c), which provides that HUD may provide 
technical assistance to a recipient if HUD determines that the failure 
to comply substantially is not willful and is a result of limited 
capacity or capability. The provision in paragraph (d) would clarify 
that HUD shall provide the technical assistance if, upon HUD's 
determination, the recipient requests the technical assistance. It 
would also incorporate NAHASDA section 401(b)'s requirement that a 
recipient must enter into a performance agreement with HUD as a 
condition of receiving the technical assistance.
    Paragraph (e) of Sec.  1000.532 would include the substance of the 
provision in paragraph (d) of existing Sec.  1000.538, which provides 
that HUD may refer matters involving substantial noncompliance to the 
Attorney General, with a recommendation for taking civil action.
    Finally, cross-references to remove Sec.  1000.538 found in Sec.  
1000.60, Sec.  1000.530, and Sec.  1000.536 would be revised to refer 
to Sec.  1000.532.
 Section 1000.534, Substantial Noncompliance
    The reference to ``goals and objectives'' in Sec.  1000.534(a) 
would be changed to ``planned activities'' in a recipient's IHP. The 
change would conform to the amendment to NAHASDA section 102(b)(2), 
which describes information required to be included in the IHP.
 Section 1000.544, Audits
    Technical changes would be made to Sec.  1000.544 by adding 
statutory citations for NAHASDA and the Single Audit Act, and by 
removing the dollar amount that is the threshold for the annual audit 
requirement. In place of the dollar amount, Sec.  1000.544 would 
reference the section of OMB Circular A-133 that establishes the 
threshold, which may change from time to time. If applicable, a 
certification that the recipient has not expended Federal funds in 
excess of the audit threshold that is set by OMB would be required to 
be included in the recipient's APR.
 Section 1000.548, Submission of Audit Reports
    Section 1000.548 would be revised to require the recipient to 
submit a copy of its audit report to the appropriate HUD ONAP Area 
Office at the time the recipient submits the audit report to the 
Federal Audit Clearinghouse.
 Section 1000.552, Records Retention
    Section 1000.552(b) would be revised to provide that records must 
be retained for 3 years from the end of the Tribal program year in 
which funds are expended. The provision would be consistent with HUD's 
practice of no longer requiring recipients to track expenditures 
against particular annual grants.

III. Other Statutory Amendments Addressed

    The NAHASDA Reauthorization Act added two demonstration programs. 
Subtitle B of Title II of NAHASDA provides for Self Determined Housing 
Activities for Tribal Communities and section 606 created the 
demonstration program for guaranteed loans to finance Tribal community 
and economic development activities. The Committee agreed that HUD 
would implement both programs by PIH notice. The full Committee both 
reviewed and commented on the draft PIH notices before they were 
published.

IV. Nonconsensus Items

    The following section of the preamble summarizes issues that the 
Committee discussed but on which it did not reach consensus. Summaries 
of positions taken on nonconsensus items were drafted by the proponents 
of the positions.

Hearing Requirements for FCAS Overcounts

    The NAHASDA Reauthorization Act added a new section 401(a)(2) to 
provide that ``[t]he failure of a recipient to comply with section 
302(b)(1) (regarding the counting of FCAS units) * * * shall not, in 
itself, be considered to be substantial noncompliance for the purposes 
of this title.'' HUD and Tribal Committee members disagreed on the 
meaning of this paragraph. HUD construes this paragraph to mean that 
FCAS overcounts do not constitute substantial noncompliance under 
section 401(a)(1) of NAHASDA so as to require HUD to afford recipients 
an opportunity for a hearing prior to adjusting grant amounts. The 
Tribal Committee members construed this paragraph as, at least, 
requiring such a hearing where the amount in controversy was of 
sufficient magnitude. A proposal to define this paragraph in the manner 
proposed by the Tribal Committee members failed to achieve consensus, 
the two HUD committee members being the dissenting votes. As a result, 
the Committee did not propose any rule interpreting section 401(a)(2) 
of NAHASDA.

Recapturing Expenditures on Affordable Housing Activities

    In 2000, Congress, in Public Law 106-568, removed a portion of 
then-section 405(c) of NAHASDA that had provided that ``grant amounts 
already expended on affordable housing activities may not be recaptured 
or deducted from future assistance provided on behalf of an Indian 
Tribe.'' However, a regulation containing that same restriction remains 
at 24 CFR 1000.532(a). Since enactment of this 2000 statutory change, 
HUD's position has been that this statutory change removed the 
statutory basis for the corollary regulation, and required the 
regulation's repeal. The Tribal Committee members believed that HUD 
still has discretion under NAHASDA to retain the regulatory 
restriction, despite the removal from the statute of language requiring 
this restriction. The Committee was unable to achieve consensus on the 
inclusion of the disputed regulatory language in the new, consolidated 
Sec.  1000.532, the two HUD Committee members being opposed to its 
inclusion. As a result, the subject provision is not included in the 
revision of Sec.  1000.532 in this proposed rule.

[[Page 71481]]

Time Limitations on Noncompliance Claims

    The majority of the workgroup that examined limitations on 
noncompliance claims had proposed that administrative enforcement 
actions be barred if not commenced within 3 years of the alleged 
noncompliance, and recommended that this limitation be placed in the 
new, consolidated Sec.  532 of the regulations. HUD and some other 
Committee members did not support the adoption of a ``statute of 
limitations'' on enforcement actions. HUD's position was that the 
Committee had already adopted a regulation limiting the scope and 
frequency of monitoring, including a records retention schedule that 
essentially functions as a limitation similar to a statute of 
limitations. The proposal to add a statute of limitations to the new, 
consolidated Sec.  532 did not achieve consensus.

Line of Credit Control System (LOCCS) edits

    The Tribes proposed language for a new Sec.  1000.532(a) that did 
not have the consensus from HUD participants in the workgroup, because 
the language had been drafted specifically to prohibit HUD from 
continuing to use the process known as a ``LOCCS [Line of Credit 
Control System] edit,'' through which HUD can put a hold on a Tribe's/
TDHE's ability to continue to draw down their IHBG funds through LOCCS 
unless and until the Tribe/TDHE submits certain required documentation. 
The Tribes and HUD disagree as to whether a ``LOCCS edit'' is a 
``limitation on the availability of payments to programs, projects, or 
activities not affected by a failure to comply,'' as described under 
section 401(a)(1) of NAHASDA, which requires that HUD must provide 
notice and opportunity for a hearing before terminating, reducing, or 
limiting the availability of payments. HUD's interpretation, provided 
in a memorandum from HUD's Office of General Counsel (OGC), is that the 
LOCCS edit does not conflict with the statutory language because the 
funds remain ``available,'' and can be accessed by the Tribe/TDHE as 
soon as they submit the documentation required by HUD. Further, while a 
LOCCS edit will remain in place if the basis for the edit is 
``documented concerns on the part of ONAP regarding the use of grant 
funds,'' a recipient will be able to continue to draw down grant funds 
despite the edit even though the concerns remain unresolved, subject to 
the submission of appropriate supporting documentation. The memo also 
described the LOCCS edit as a permissible form of ``pre-drawdown 
monitoring,'' through which HUD can determine--ahead of drawdown--
whether a Tribe/TDHE is going to use the funds for a permissible 
purpose and according to legal requirements. HUD described the LOCCS 
edit not as a limitation on availability of payments, but as a change 
in the method of payment requiring certain documentation before 
payments are released. HUD reviewed the relevant case law on other HUD 
programs with similar governing statutory language and found that all 
cases were clearly distinguishable because they involved HUD action 
that amounted to either outright termination of grants, or refusal to 
enter into grant agreements to obligate funds.
    The Tribes responded that the HUD memorandum did not provide a 
legal basis for the practice of a LOCCS edit, for the following 
reasons: (1) The LOCCS edit process set out in the HUD memo (and in PIH 
Notice 2009-49) is a limit on the availability of payments because it 
is a means by which HUD can and does impose certain specific conditions 
prior to the release of funds, which meets the dictionary definition of 
the statutory language; (2) even if the IHBG funds were to remain 
``available'' (per HUD's reasoning), the LOCCS edit places an 
impermissible ``limit'' on that availability; (3) HUD's ``pre-drawdown 
monitoring'' justification is invalid because the monitoring process 
ends with the notice and hearing opportunity for substantial 
noncompliance, and a ``pre-drawdown monitoring'' that limits access to 
funding would circumvent the entirety of the monitoring process; (4) 
the cases cited by HUD OGC in the memo undermined HUD's position 
because those cases indicated the courts' rejection of prior, similar 
efforts by HUD to avoid the kind of due process requirements set out in 
NAHASDA 401(a)(1) (in similar provisions of other HUD statutes) through 
``hyper-technical'' reasoning and on the impermissible assertion of the 
need for agency ``flexibility.''
    The Tribes then put forward the language that they had proposed 
previously for a new Sec.  1000.532(a) that would in effect prohibit 
HUD from using the LOCCS edit. The HUD representatives on the committee 
did not agree to the proposal.

Content of Annual Performance Reports

    HUD held eight Tribal consultation meetings throughout the country 
from January through May 2005 to solicit comments and recommendations 
on the existing IHP and APR. A Tribal workgroup consisting of 12 Tribal 
representatives selected by the Regional Housing Associations worked 
with HUD staff to incorporate the suggestions gathered at the Tribal 
consultations into a revised form. The recommendations from the Tribal 
workgroup formed the basis for the majority of statutory revisions to 
the IHP and APR. In addition, the Tribal workgroup agreed to include 
more detailed data collection in the APR in order to better document 
the positive effects of the IHBG program. Proposals were developed to 
regulate the data collection in the APR to more fully prescribe the 
content required under NAHASDA section 404(b), consistent with the 
recommendations of the Tribal workgroup. The two HUD Committee members 
advocated for the full data collection recommended by the Tribal 
workgroup; however, some Tribal Committee members disagreed with most 
of the data collection items as being too burdensome. As a result, the 
Committee reached consensus only on the collection of jobs data, units 
completed or assisted, families assisted, and outcomes by eligible 
activity under new Sec.  1000.512(d). The Committee did not reach 
consensus on collecting housing unit cost information, a finite list of 
specific outcomes by eligible activity, or reduction in criminal 
activity data.

Indian Housing Plan and Annual Performance Report Formats

    Tribal representatives supported proposed revisions to permit HUD 
to accept alternative IHP and APR formats developed by each Tribe, as a 
means to enhance the congressional finding and guiding principle of 
NAHASDA implementation of providing assistance in a manner similar to 
that accorded in Public Law 93-638. HUD committee members objected.

V. Findings and Certifications

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. This rule was 
determined to be a ``significant regulatory action,'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order). The docket file is available for 
public inspection in the Regulations Division, Office of General 
Counsel, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Due 
to security measures at the HUD Headquarters building, an advance 
appointment to review the public comments must be scheduled by calling

[[Page 71482]]

the Regulations Division at (202) 402-3055 (this is not a toll-free 
number). Individuals with speech or hearing impairments may access this 
number via TTY by calling the Federal Relay Service at (800) 877-8339.

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by OMB in accordance with the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2577-0218. 
In accordance with the Paperwork Reduction Act, an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information, unless the collection displays a currently 
valid OMB control number.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis for any rule that is subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The requirements of this proposed rule apply to Indian Tribal 
governments and their Tribal housing authorities. Tribal governments 
and their Tribal housing authorities are not covered by the definition 
of ``small entities'' under the RFA. Accordingly, the undersigned 
certifies that this rule will not have a significant impact on a 
substantial number of small entities.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on state, local, and 
Tribal governments, and on the private sector. This rule will not 
impose any Federal mandate on any state, local, or Tribal government, 
or on the private sector, within the meaning of UMRA.

Environmental Review

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of 
No Significant Impact is available for public inspection between the 
hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office 
of General Counsel, Department of Housing and Urban Development, 451 
7th Street SW., Room 10276, Washington, DC 20410. Due to security 
measures at the HUD Headquarters building, please schedule an 
appointment to review the FONSI by calling the Regulations Division at 
(202) 708-3055 (this is not a toll-free number). Individuals with 
speech or hearing impairments may access this number via TTY by calling 
the Federal Relay Service at (800) 877-8339.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Number (CFDA) for Indian 
Housing Block Grants is 14.867, and the CFDA for Title VI Federal 
Guarantees for Financing Tribal Housing Activities is 14.869.

List of Subjects in 24 CFR Part 1000

    Aged, Community development block grants, Grant programs--housing 
and community development, Grant programs--Indians, Indians, 
Individuals with disabilities, Public housing, Reporting and 
recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 1000 as follows:

PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES

    1. The authority citation for 24 CFR part 1000 continues to read as 
follows:

    Authority:  25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).

    2. Revise Sec.  1000.2(a)(6) and (a)(7) to read as follows:


Sec.  1000.2  What are the guiding principles in the implementation of 
NAHASDA?

    (a) * * *
    (6) The need for affordable homes in safe and healthy environments 
on Indian reservations, in Indian communities, and in Native Alaskan 
villages is acute and the Federal government shall work not only to 
provide housing assistance, but also, to the extent practicable, to 
assist in the development of private housing finance mechanisms on 
Indian lands to achieve the goals of economic self-sufficiency and 
self-determination for Indian Tribes and their members.
    (7) Federal assistance to meet these responsibilities shall be 
provided in a manner that recognizes the right of Indian self-
determination and Tribal self-governance by making such assistance 
available directly to the Indian Tribes or Tribally designated entities 
under authorities similar to those accorded Indian Tribes in Public Law 
93-638 (25 U.S.C. 450 et seq.).
* * * * *
    3. Add Sec.  1000.9, to read as follows:


Sec.  1000.9  How is negotiated rulemaking conducted when promulgating 
NAHASDA regulations?

    The negotiated rulemaking procedures and requirements set out in 
section 106(b) of NAHASDA shall be conducted as follows:
    (a) Committee membership. In forming a negotiated rulemaking 
committee, HUD shall appoint as committee members representatives of 
the Federal government and representatives of diverse Tribes and 
program recipients.
    (b) Initiation of rulemaking. HUD shall initiate a negotiated 
rulemaking not later than 90 days after the enactment of any act to 
reauthorize or significantly amend NAHASDA.
    (c) Work groups. Negotiated rulemaking committees may form 
workgroups made up of committee members and other interested parties to 
meet during committee sessions and between sessions to develop specific 
rulemaking proposals for committee consideration.
    (d) Further review. Negotiated rulemaking committees shall provide 
recommended rules to HUD. Once rules are proposed by HUD, they shall be 
published for comment in the Federal Register. Any comments will be 
further reviewed by the committee and HUD before HUD determines if the 
rule or rules will be adopted.
    4. In Sec.  1000.10(b), revise the definition of ``Indian area'' 
and add, in alphabetical order, the definitions for the terms ``Housing 
related activities,''

[[Page 71483]]

``Housing related community development,'' ``Outcomes,'' and ``Tribal 
program year,'' to read as follows:


Sec.  1000.10  What definitions apply in these regulations?

* * * * *
    (b) * * *
    Housing related activities, for purposes of program income, means 
any facility, community building, infrastructure, business, program, or 
activity, including any community development or economic development 
activity, that:
    (1) Is determined by the recipient to be beneficial to the 
provision of housing in an Indian area, and that:
    (2) Would meet at least one of the following conditions:
    (i) Would help an Indian Tribe or its Tribally designated housing 
entity to reduce the cost of construction of Indian housing;
    (ii) Would make housing more affordable, energy efficient, 
accessible, or practicable in an Indian area; or
    (iii) Would otherwise advance the purposes of NAHASDA.
* * * * *
    Housing related community development:
    (1) Means any facility, community building, business, activity, or 
infrastructure that:
    (i) Is owned by an Indian Tribe or a Tribally designated housing 
entity;
    (ii) Is necessary to the provision of housing in an Indian area; 
and
    (iii)(A) Would help an Indian Tribe or Tribally designated housing 
entity reduce the cost of construction of Indian housing;
    (B) Would make housing more affordable, energy efficient, 
accessible, or practicable in an Indian area; or
    (C) Would otherwise advance the purposes of NAHASDA.
    (2) Does not include any activity conducted by any Indian Tribe 
under the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.)
* * * * *
    Indian Area means the area within which an Indian Tribe operates 
affordable housing programs or the area in which a TDHE, as authorized 
by one or more Indian Tribes, operates affordable housing programs. 
Whenever the term ``jurisdiction'' is used in NAHASDA, it shall mean 
``Indian Area,'' except where specific reference is made to the 
jurisdiction of a court.
* * * * *
    Outcomes are the intended results or consequences important to 
program beneficiaries, the IHBG recipient, and the Tribe generally from 
carrying out the housing or housing-related activity as determined by 
the Tribe (and/or its TDHE).
* * * * *
    Tribal program year means the fiscal year of the IHBG recipient.
* * * * *
    5. In Sec.  1000.12, revise paragraph (d), to read as follows:


Sec.  1000.12  What nondiscrimination requirements are applicable?

* * * * *
    (d) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.) 
apply to Indian Tribes that are not covered by the Indian Civil Rights 
Act. The Title VI and Title VIII requirements do not apply to actions 
under NAHASDA by Federally recognized Indian Tribes and their TDHEs. 
State-recognized Indian Tribes and their TDHEs may provide preference 
for Tribal members and other Indian families pursuant to NAHASDA 
sections 201(b) and 101(k) (relating to Tribal preference in employment 
and contracting).
    6. In Sec.  1000.16, revise paragraphs (a)(1) and (c), redesignate 
paragraph (e) as paragraph (f), and add new paragraph (e), to read as 
follows:


Sec.  1000.16  What labor standards are applicable?

    (a) * * *
    (1) As described in section 104(b) of NAHASDA, contracts and 
agreements for assistance, sale, or lease under NAHASDA must require 
prevailing wage rates determined by the Secretary of Labor under the 
Davis-Bacon Act (40 U.S.C. 3141-44, 3146, and 3147) to be paid to 
laborers and mechanics employed in the development of affordable 
housing.
* * * * *
    (c) Contract Work Hours and Safety Standards Act. Contracts in 
excess of $100,000 to which Davis-Bacon or HUD-determined wage rates 
apply are subject by law to the overtime provisions of the Contract 
Work Hours and Safety Standards Act (40 U.S.C. 3701).
* * * * *
    (e) Paragraphs (a) through (d) of this section shall not apply to 
any contract or agreement for assistance, sale, or lease pursuant to 
NAHASDA, if such contract or agreement is otherwise covered by one or 
more laws or regulations adopted by an Indian Tribe that requires the 
payment of not less than prevailing wages, as determined by the Indian 
Tribe.
* * * * *
    7. Add Sec.  1000.21, to read as follows:


Sec.  1000.21  Under what circumstances are waivers of the 
environmental review procedures available to Tribes?

    A Tribe or recipient may request that the Secretary waive the 
requirements under section 105 of NAHASDA. The Secretary may grant the 
waiver if the Secretary determines that a failure on the part of a 
recipient to comply with provisions of this section:
    (a) Will not frustrate the goals of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.) or any other provision of 
law that furthers the goals of that Act;
    (b) Does not threaten the health or safety of the community 
involved by posing an immediate or long-term hazard to residents of 
that community;
    (c) Is a result of inadvertent error, including an incorrect or 
incomplete certification provided under section 105(c)(1) of NAHASDA; 
and
    (d) May be corrected through the sole action of the recipient.
    8. In Sec.  1000.26, revise paragraphs (a)(5) and (a)(11) to read 
as follows:


Sec.  1000.26  What are the administrative requirements under NAHASDA?

    (a) * * *
    (5) Section 85.21, ``Payment,'' except that HUD shall not require a 
recipient to expend retained program income before drawing down or 
expending IHBG funds.
* * * * *
    (11)(i) General. Section 85.36 of this title, ``Procurement,'' 
except paragraph (a), subject to paragraphs (a)(11)(ii) and 
(a)(11)(iii) of this section.
    (ii) Bonding requirements. There may be circumstances under which 
the bonding requirements of Sec.  85.36(h) are inconsistent with other 
responsibilities and obligations of the recipient. In such 
circumstances, acceptable methods to provide performance and payment 
assurance may include:
    (A) Deposit with the recipient 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;
    (B) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the recipient, subject to 
reduction during any warranty period commensurate with potential risk; 
or
    (C) Letter of credit for 10 percent of the total contract price 
unconditionally payable upon demand of the recipient, subject to 
reduction during any warranty period commensurate with potential risk, 
and compliance with the procedures for monitoring of disbursements by 
the contractor.

[[Page 71484]]

    (iii) De minimis procurement. A recipient shall not be required to 
comply with Sec.  85.36 of this title with respect to any procurement, 
using a grant provided under NAHASDA, of goods and services with a 
value of less than $5,000.
    (iv) Utilizing Federal supply sources in procurement. In accordance 
with Section 101(j) of NAHASDA, recipients may use Federal supply 
sources made available by the General Services Administration pursuant 
to 40 U.S.C. 501.
* * * * *
    9. In Sec.  1000.42, add paragraphs (c) and (d), to read as 
follows:


Sec.  1000.42  Are the requirements of section 3 of the Housing and 
Urban Development Act of 1968 applicable?

* * * * *
    (c) Tribal preference. Recipients meet the section 3 requirements 
when they comply with employment and contract preference laws adopted 
by their Tribe in accordance with section 101(k) of NAHASDA.
    (d) Applicability. For purposes of section 3, NAHASDA funding is 
subject to the requirements applicable to the category of programs 
entitled ``Other Programs'' that provide housing and community 
development assistance (12 U.S.C. 1701u(c)(2), (d)(2)).
    10. Revise Sec.  1000.48, to read as follows:


Sec.  1000.48  Are Indian or Tribal preference requirements applicable 
to IHBG activities?

    Grants under this part are subject to Indian preference under 
section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450e(b)) or, if applicable under section 101(k) of 
NAHASDA, Tribal preference in employment and contracting.
    (a)(1) Section 7(b) provides that any contract, subcontract, grant, 
or subgrant pursuant to an act authorizing grants to Indian 
organizations or for the benefit of Indians shall require that, to the 
greatest extent feasible:
    (i) Preference and opportunities for training and employment shall 
be given to Indians; and
    (ii) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises as 
defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452).
    (2) The following definitions apply:
    (i) The Indian Self-Determination and Education Assistance Act 
defines ``Indian'' to mean a person who is a member of an Indian Tribe 
and defines ``Indian Tribe'' to mean any Indian Tribe, band, nation, or 
other organized group or community including any Alaska Native village 
or regional or village corporation as defined 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.
    (ii) In section 3 of the Indian Financing Act of 1974, ``economic 
enterprise'' is defined as any Indian-owned commercial, industrial, or 
business activity established or organized for the purpose of profit, 
except that Indian ownership must constitute not less than 51 percent 
of the enterprise. This act defines ``Indian organization'' to mean the 
governing body of any Indian Tribe or entity established or recognized 
by such governing body.
    (b) If Tribal employment and contract preference laws have not been 
adopted by the Indian Tribe, section 7(b) Indian preference provisions 
shall apply.
    (c) Exception for de minimis procurements. A recipient shall not be 
required to apply Indian preference requirements under Section 7(b) of 
the Indian Self-Determination and Education Assistance Act with respect 
to any procurement, using a grant provided under NAHASDA, of goods and 
services with a value less than $5,000.
    11. Revise Sec.  1000.50, to read as follows:


Sec.  1000.50  What Tribal or Indian preference requirements apply to 
IHBG administration activities?

    (a) In accordance with Section 101(k) of NAHASDA, a recipient shall 
apply the Tribal employment and contract preference laws (including 
regulations and Tribal ordinances) adopted by the Indian Tribe that 
receives a benefit from funds granted to the recipient under NAHASDA.
    (b) In the absence of Tribal employment and contract preference 
laws, a recipient must, to the greatest extent feasible, give 
preference and opportunities for training and employment in connection 
with the administration of grants awarded under this part to Indians in 
accordance with section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)).
    12. Revise Sec.  1000.52, to read as follows:


Sec.  1000.52  What Tribal or Indian preference requirements apply to 
IHBG procurement?

    (a) In accordance with Section 101(k) of NAHASDA, a recipient shall 
apply the Tribal employment and contract preference laws (including 
regulations and Tribal ordinances) adopted by the Indian Tribe that 
receives a benefit from funds granted to the recipient under NAHASDA.
    (b) In the absence of Tribal employment and contract preference 
laws, a recipient must, to the greatest extent feasible, give 
preference in the award of contracts for projects funded under this 
part to Indian organizations and Indian-owned economic enterprises in 
accordance with Section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)).
    (c) The following provisions apply to the application of Indian 
preference under paragraph (b) of this section:
    (1) In applying Indian preference, each recipient shall:
    (i) Certify to HUD that the policies and procedures adopted by the 
recipient will provide preference in procurement activities consistent 
with the requirements of section 7(b) of the Indian Self-Determination 
and Education Assistance Act (25 U.S.C. 450e(b)) (An Indian preference 
policy which was previously approved by HUD for a recipient will meet 
the requirements of this section); or
    (ii) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (iii) 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 or request for proposals 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.
    (2) If the recipient 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 recipient shall:
    (i) Re-advertise the contract, using any of the methods described 
in paragraph (a) of this section; or
    (ii) Re-advertise the contract without limiting the advertisement 
for bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (iii) If one approvable bid or proposal is received, request Area 
ONAP review and approval of the proposed contract and related 
procurement documents, in accordance with 24 CFR 85.36, in order

[[Page 71485]]

to award the contract to the single bidder or offeror.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36 need not follow the formal bid 
or proposal procedures of paragraph (a) of this section, since these 
procurements are governed by the small purchase procedures of 24 CFR 
85.36. However, a recipient's 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 bidding or proposal solicitation documents and the 
bidding and proposal documents.
    (5) A recipient, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. Recipients may require prospective 
contractors to provide the following information before submitting a 
bid or proposal, or at the time of submission:
    (i) Evidence showing fully the extent of Indian ownership 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; 
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 
recipient that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of 
the size and type involved.
    (6) The recipient 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)) (the 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.
    (iv) The contractor shall include this section 7(b) clause in every 
subcontract in connection with the project; shall require 
subcontractors at each level to include this section 7(b) clause in 
every subcontract they execute in connection with the project; and 
shall, at the direction of the recipient, take appropriate action 
pursuant to the subcontract upon a finding by the recipient or HUD that 
the subcontractor has violated the section 7(b) clause of the Indian 
Act.
    (d) A recipient shall not be required to apply Indian preference 
requirements under Section 7(b) of the Indian Self-Determination and 
Education Assistance Act with respect to any procurement, using a grant 
provided under NAHASDA, of goods and services with a value less than 
$5,000.
    13. In Sec.  1000.58, revise paragraphs (f) and (g) to read as 
follows:


Sec.  1000.58  Are there limitations on the investment of IHBG funds?

* * * * *
    (f) A recipient may invest its IHBG annual grant in an amount equal 
to the annual formula grant amount.
    (g) Investments under this section may be for a period no longer 
than 5 years.
    14. Revise Sec.  1000.60, to read as follows:


Sec.  1000.60  Can HUD prevent improper expenditure of funds already 
disbursed to a recipient?

    Yes. In accordance with the standards and remedies contained in 
Sec.  1000.532 relating to substantial noncompliance, HUD will use its 
powers under a depository agreement and take such other actions as may 
be legally necessary to suspend funds disbursed to the recipient until 
the substantial noncompliance has been remedied. In taking this action, 
HUD shall comply with all appropriate procedures, appeals, and hearing 
rights prescribed elsewhere in this part.
    15. In Sec.  1000.62, revise the heading and paragraph (b), to read 
as follows:


Sec.  1000.62  What is considered program income?

* * * * *
    (b) If the amount of income received in a single year by a 
recipient and all its subrecipients, which would otherwise be 
considered program income, does not exceed $25,000, such funds may be 
retained but will not be considered to be or treated as program income.
* * * * *
    16. Add Sec.  1000.64, to read as follows:


Sec.  1000.64  What are the permissible uses of program income?

    Program income may be used for any housing or housing related 
activity and is not subject to other Federal requirements.
    17. In Sec.  1000.104, revise paragraphs (b) and (c), and add 
paragraph (d), to read as follows:


Sec.  1000.104  What families are eligible for affordable housing 
activities?

* * * * *
    (b) A non low-income family may receive housing assistance in 
accordance with Sec.  1000.110.
    (c) A family may receive housing assistance on a reservation or 
Indian area if the family's housing needs cannot be reasonably met 
without such assistance and the recipient determines that the presence 
of that family on the reservation or Indian area is essential to the 
well-being of Indian families.
    (d) A recipient may provide housing or housing assistance provided 
through affordable housing activities assisted with grant amounts under 
NAHASDA for a law enforcement officer on an Indian reservation or other 
Indian area, if:
    (1) The officer:
    (i) Is employed on a full-time basis by the Federal government or a 
state, county, or other unit of local government, or lawfully 
recognized Tribal government; and
    (ii) In implementing such full-time employment, is sworn to uphold, 
and make arrests for, violations of Federal, state, county, or Tribal 
law; and
    (2) The recipient determines that the presence of the law 
enforcement officer on the Indian reservation or other Indian area may 
deter crime.
    18. Revise Sec.  1000.106, to read as follows:


Sec.  1000.106  What families receiving assistance under title II of 
NAHASDA require HUD approval?

    (a) Housing assistance for non low-income families requires HUD 
approval only as required in Sec. Sec.  1000.108 and 1000.110.
    (b) Assistance for essential families under section 201(b)(3) of 
NAHASDA does not require HUD approval but only requires that the 
recipient determine that the presence of that family on the reservation 
or Indian area is essential to the well-being of Indian families and 
that the family's housing needs cannot

[[Page 71486]]

be reasonably met without such assistance.
    19. Revise Sec.  1000.108, to read as follows:


Sec.  1000.108  How is HUD approval obtained by a recipient for housing 
for non low-income families and model activities?

    Recipients are required to submit proposals to operate model 
housing activities as defined in section 202(6) of NAHASDA and to 
provide assistance to non low-income families in accordance with 
section 201(b)(2) of NAHASDA. Assistance to non low-income families 
must be in accordance with Sec.  1000.110. Proposals may be submitted 
in the recipient's IHP or at any time by amendment of the IHP, or by 
special request to HUD at any time. HUD may approve the remainder of an 
IHP, notwithstanding disapproval of a model activity or assistance to 
non low-income families.
    20. Revise Sec.  1000.110, to read as follows:


Sec.  1000.110  Under what conditions may non low-income Indian 
families participate in the program?

    (a) A family that was low-income at the times described in Sec.  
1000.147 but subsequently becomes a non low-income family due to an 
increase in income may continue to participate in the program in 
accordance with the recipient's admission and occupancy policies. The 
10 percent limitation in paragraph (c) of this section shall not apply 
to such families. Such families may be made subject to the additional 
requirements in paragraph (d) of this section based on those policies. 
This includes a family member or household member who takes ownership 
of a homeownership unit under Sec.  1000.146.
    (b) A recipient must determine and document that there is a need 
for housing for each family that cannot reasonably be met without such 
assistance.
    (c) A recipient may use up to 10 percent of the amount planned for 
the Tribal program year for families whose income falls within 80 to 
100 percent of the median income without HUD approval. HUD approval is 
required if a recipient plans to use more than 10 percent of the amount 
planned for the Tribal program year for such assistance or to provide 
housing for families with income over 100 percent of median income.
    (d) Non low-income families cannot receive the same benefits 
provided low-income Indian families. The amount of assistance non low-
income families may receive will be determined as follows:
    (1) The rent (including homebuyer payments under a lease purchase 
agreement) to be paid by a non low-income family cannot be less than: 
(Income of non low-income family/Income of family at 80 percent of 
median income) x (Rental payment of family at 80 percent of median 
income), but need not exceed the fair market rent or value of the unit.
    (2) Other assistance, including down payment assistance, to non 
low-income families, cannot exceed: (Income of family at 80 percent of 
median income/Income of non low-income family) x (Present value of the 
assistance provided to family at 80 percent of median income).
    (e) The requirements set forth in paragraphs (c) and (d) of this 
section do not apply to non low-income families which the recipient has 
determined to be essential under Sec.  1000.106(b).
    21. Revise Sec.  1000.114, to read as follows:


Sec.  1000.114  How long does HUD have to review and act on a proposal 
to provide assistance to non low-income families or a model housing 
activity?

    Whether submitted in the IHP or at any other time, HUD will have 60 
calendar days after receiving the proposal to notify the recipient in 
writing that the proposal to provide assistance to non low-income 
families or for model activities is approved or disapproved. If no 
decision is made by HUD within 60 calendar days of receiving the 
proposal, the proposal is deemed to have been approved by HUD.
    22. Revise Sec.  1000.116, to read as follows:


Sec.  1000.116  What should HUD do before declining a proposal to 
provide assistance to non low-income families or a model housing 
activity?

    HUD shall consult with a recipient regarding the recipient's 
proposal to provide assistance to non low-income families or a model 
housing activity. To the extent that resources are available, HUD shall 
provide technical assistance to the recipient in amending and modifying 
the proposal, if necessary. In case of a denial, HUD shall give the 
specific reasons for the denial.
    23. In Sec.  1000.118, revise the heading and paragraph (a), to 
read as follows:


Sec.  1000.118  What recourse does a recipient have if HUD disapproves 
a proposal to provide assistance to non low-income families or a model 
housing activity?

    (a) Within 30 calendar days of receiving HUD's denial of a proposal 
to provide assistance to non low-income families or a model housing 
activity, the recipient may request reconsideration of the denial in 
writing. The request shall set forth justification for the 
reconsideration.
* * * * *
    24. Add Sec.  1000.141, to read as follows:


Sec.  1000.141  What is ``useful life'' and how is it related to 
affordability?

    Useful life is the time period during which an assisted property 
must remain affordable, as defined in section 205(a) of NAHASDA.
    25. Revise Sec.  1000.142, to read as follows:


Sec.  1000.142  How does a recipient determine the ``useful life'' 
during which low-income rental housing and low-income homebuyer housing 
must remain affordable as required in sections 205(a)(2) and 209 of 
NAHASDA?

    To the extent required in the IHP, each recipient shall describe 
its determination of the useful life of the assisted housing units in 
its developments in accordance with the local conditions of the Indian 
area of the recipient. By approving the plan, HUD determines the useful 
life in accordance with section 205(a)(2) of NAHASDA and for purposes 
of section 209.
    26. Add Sec.  1000.143, to read as follows:


Sec.  1000.143  How does a recipient implement its useful life 
requirements?

    A recipient implements its useful life requirements by placing a 
binding commitment, satisfactory to HUD, on the assisted property.


Sec. Sec.  1000.144 and 1000.146  [Redesignated]

    27. Redesignate Sec.  1000.144 and Sec.  1000.146 as Sec.  1000.145 
and Sec.  1000.147, respectively.
    28. Add Sec.  1000.144, to read as follows:


Sec.  1000.144  What are binding commitments satisfactory to HUD?

    A binding commitment satisfactory to HUD is a written use 
restriction agreement, developed by the recipient, and placed on an 
assisted property for the period of its useful life.
    29. Add Sec.  1000.146, to read as follows:


Sec.  1000.146  Are binding commitments for the remaining useful life 
of property applicable to a family member or household member who 
subsequently takes ownership of a homeownership unit?

    No. The transfer of a homeownership unit to a family member or 
household member is not subject to a binding commitment for the 
remaining useful life of the property. Any subsequent transfer by the 
family member or household member to a third party (not a family member 
or household member)

[[Page 71487]]

is subject to any remaining useful life under a binding commitment.
    30. Revise redesignated Sec.  1000.147, to read as follows:


Sec.  1000.147  When does housing qualify as affordable housing under 
NAHASDA?

    (a) Housing qualifies as affordable housing, provided that the 
family occupying the unit is low-income at the following times:
    (1) In the case of rental housing, at the time of the family's 
initial occupancy of such unit;
    (2) In the case of a contract to purchase existing housing, at the 
time of purchase;
    (3) In the case of a lease-purchase agreement for existing housing 
or for housing to be constructed, at the time the agreement is signed; 
and
    (4) In the case of a contract to purchase housing to be 
constructed, at the time the contract is signed.
    (b) Families that are not low-income as described in this section 
may be eligible under Sec.  1000.104 or Sec.  1000.110.
    31. In Sec.  1000.150, revise the heading to read as follows:


Sec.  1000.150  How may Indian Tribes and TDHEs receive criminal 
conviction information on applicants for employment and on adult 
applicants for housing assistance, or tenants?

    32. Revise Sec.  1000.152 to read as follows:


Sec.  1000.152  How is the recipient to use criminal conviction 
information?

    (a) With regard to adult tenants and applicants for housing 
assistance, the recipient shall use the criminal conviction information 
described in Sec.  1000.150 only for applicant screening, lease 
enforcement, and eviction actions.
    (b) With regard to applicants for employment, the recipient shall 
use the criminal conviction information described in Sec.  1000.150 for 
the purposes set out in section 208 of NAHASDA.
    (c) The criminal conviction information described in Sec.  1000.150 
may be disclosed only to any person who has a job-related need for the 
information and who is an authorized officer, employee, or 
representative of the recipient or the owner of housing assisted under 
NAHASDA.
    33. Revise Sec.  1000.201, to read as follows:


Sec.  1000.201  How are funds made available under NAHASDA?

    Every fiscal year HUD will make grants under the IHBG program to 
recipients who have submitted to HUD for a Tribal program year an IHP 
in accordance with Sec.  1000.220 to carry out affordable housing 
activities.
    34. Revise Sec.  1000.214, to read as follows:


Sec.  1000.214  What is the deadline for submission of an IHP?

    IHPs must be initially sent by the recipient to the Area ONAP no 
later than 75 days before the beginning of a Tribal program year. Grant 
funds cannot be provided until the plan due under this section is 
determined to be in compliance with section 102 of NAHASDA and funds 
are available.
    35. Revise Sec.  1000.216, to read as follows:


Sec.  1000.216  What happens if the recipient does not submit the IHP 
to the Area ONAP by not later than 75 days before the beginning of the 
Tribal program year?

    If the IHP is not initially sent by at least 75 days before the 
beginning of the Tribal program year, the recipient will not be 
eligible for IHBG funds for that fiscal year. Any funds not obligated 
because an IHP was not received before this deadline has passed shall 
be distributed by formula in the following year.
    36. Revise Sec.  1000.220, to read as follows:


Sec.  1000.220  What are the requirements for the IHP?

    The IHP requirements are set forth in section 102(b) of NAHASDA. In 
addition, Sec. Sec.  1000.56, 1000.108, 1000.120, 1000.134, 1000.142, 
1000.238, 1000.302, and 1000.328, require or permit additional items to 
be set forth in the IHP for HUD determinations required by those 
sections. Recipients are only required to provide IHPs that contain 
these elements in a form prescribed by HUD. If a TDHE is submitting a 
single IHP that covers two or more Indian Tribes, the IHP must contain 
a separate certification in accordance with section 102(d) of NAHASDA 
and IHP Tables for each Indian Tribe when requested by such Indian 
Tribes. However, Indian Tribes are encouraged to perform comprehensive 
housing needs assessments and develop comprehensive IHPs and not limit 
their planning process to only those housing efforts funded by NAHASDA. 
An IHP should be locally driven.
    37. Revise Sec.  1000.224, to read as follows:


Sec.  1000.224  Can any part of the IHP be waived?

    Yes. HUD has general authority under section 101(b)(2) of NAHASDA 
to waive any IHP requirements when an Indian Tribe cannot comply with 
IHP requirements due to exigent circumstances beyond its control, for a 
period of not more than 90 days. The waiver authority under section 
101(b)(2) of NAHASDA provides flexibility to address the needs of every 
Indian Tribe, including small Indian Tribes. The waiver may be 
requested by the Indian Tribe or its TDHE (if such authority is 
delegated by the Indian Tribe), and such waiver shall not be 
unreasonably withheld.
    38. Add Sec.  1000.225, to read as follows:


Sec.  1000.225  When may a waiver of the IHP submission deadline be 
requested?

    A recipient may request a waiver for a period of not more than 90 
days beyond the IHP submission due date.
    39. Add Sec.  1000.227, to read as follows:


Sec.  1000.227  What shall HUD do upon receipt of a IHP submission 
deadline waiver request?

    The waiver shall be decided upon by HUD within 45 days of receipt 
of the waiver request. HUD shall notify the recipient in writing within 
45 days of receipt of the waiver request whether the request is 
approved or denied.
    40. In Sec.  1000.230, revise paragraph (a)(1), to read as follows:


Sec.  1000.230  What is the process for HUD review of IHPs and IHP 
amendments?

* * * * *
    (a) * * *
    (1) Comply with the requirements of section 102 of NAHASDA, which 
outlines the IHP submission requirements; however, the recipient may 
use either the HUD-estimated IHBG amount or the IHBG amount from their 
most recent compliant IHP;
* * * * *
    41. In Sec.  1000.236, revise paragraphs (a)(4), (a)(5), and (b), 
and add paragraph (a)(6), to read as follows:


Sec.  1000.236  What are eligible administrative and planning expenses?

    (a) * * *
    (4) Preparation of the annual performance report;
    (5) Challenge to and collection of data for purposes of challenging 
the formula; and
    (6) Administrative and planning expenses associated with 
expenditure of non-IHBG funds on affordable housing activities if the 
source of the non-IHBG funds limits expenditure of its funds on such 
administrative expenses.
    (b) Staff and overhead costs directly related to carrying out 
affordable housing activities or comprehensive and community 
development planning activities can be determined to be eligible costs 
of the affordable housing activity or considered administration or

[[Page 71488]]

planning at the discretion of the recipient.
    42. Revise Sec.  1000.238, to read as follows:


Sec.  1000.238  What percentage of the IHBG funds can be used for 
administrative and planning expenses?

    Recipients receiving in excess of $500,000 may use up to 20 percent 
of their annual expenditures of grant funds or may use up to 20 percent 
of their annual grant amount, whichever is greater. Recipients 
receiving $500,000 or less may use up to 30 percent of their annual 
expenditures of grant funds or up to 30 percent of their annual grant 
amount, whichever is greater. When a recipient is receiving grant funds 
on behalf of one or more grant beneficiaries, the recipient may use up 
to 30 percent of the annual expenditure of grant funds or up to 30 
percent of their annual grant amount, whichever is greater, of each 
grant beneficiary whose allocation is $500,000 or less, and up to 20 
percent of the annual expenditure of grant funds or up to 20 percent of 
their annual grant amount, whichever is greater, of each grant 
beneficiary whose allocation is greater than $500,000. HUD approval is 
required if a higher percentage is requested by the recipient. 
Recipients combining grant funds with other funding may request HUD 
approval to use a higher percentage based on its total expenditure of 
funds from all sources for that year. When HUD approval is required, 
HUD must take into consideration any cost of preparing the IHP, 
challenges to and collection of data, the recipient's grant amount, 
approved cost allocation plans, and any other relevant information with 
special consideration given to the circumstances of recipients 
receiving minimal funding.
    43. Add Sec.  1000.239, to read as follows:


Sec.  1000.239  May a recipient establish and maintain reserve accounts 
for administration and planning?

    Yes. In addition to the amounts established for planning and 
administrative expenses under Sec. Sec.  1000.236 and 1000.238, a 
recipient may establish and maintain separate reserve accounts only for 
the purpose of accumulating amounts for administration and planning 
relating to affordable housing activities. These amounts may be 
invested in accordance with Sec.  1000.58(c). Interest earned on 
reserves is not program income and shall not be included in calculating 
the maximum amount of reserves. The maximum amount of reserves, whether 
in one or more accounts, that a recipient may have available at any one 
time is calculated as follows:
    (a) Determine the 5-year average of administration and planning 
amounts, not including reserve amounts, expended in a Tribal program 
year.
    (b) Establish \1/4\ of that amount for the total eligible reserve.
    44. Add Sec.  1000.244, to read as follows:


Sec.  1000.244  If the recipient has made a good-faith effort to 
negotiate a cooperation agreement and tax-exempt status but has been 
unsuccessful through no fault of its own, may the Secretary waive the 
requirement for a cooperation agreement and a tax exemption?

    Yes. Recipients must submit a written request for waiver to the 
recipient's Area ONAP. The request must detail a good-faith effort by 
the recipient, identify the housing units involved, and include all 
pertinent background information about the housing units. The recipient 
must further demonstrate that it has pursued and exhausted all 
reasonable channels available to it to reach an agreement to obtain 
tax-exempt status, and that failure to obtain the required agreement 
and tax-exempt status has been through no fault of its own. The Area 
ONAP will forward the request, its recommendation, comments, and any 
additional relevant documentation to the Deputy Assistant Secretary for 
Native American Programs for processing to the Assistant Secretary.
    45. Add Sec.  1000.246, to read as follows:


Sec.  1000.246  How must HUD respond to a request for waiver of the 
requirement for a cooperation agreement and a tax exemption?

    (a) HUD shall make a determination to such request for a waiver 
within 30 days of receipt or provide a reason to the requestor for the 
delay, identify all additional documentation necessary, and provide a 
timeline within which a determination will be made.
    (b) If the waiver is granted, HUD shall notify the recipient of the 
waiver in writing and inform the recipient of any special condition or 
deadlines with which it must comply. Such waiver shall remain effective 
until revoked by the Secretary.
    (c) If the waiver is denied, HUD shall notify the recipient of the 
denial and the reason for denial in writing. If the request is denied, 
IHBG funds may not be spent on the housing units. If IHBG funds have 
been spent on the housing units prior to the denial, the recipient must 
reimburse the grant for all IHBG funds expended.
    46. In Sec.  1000.302, revise paragraph (2)(i)(B) of the definition 
of ``Formula area'' and paragraph (3) of the definition of 
``Substantial housing services,'' to read as follows:


Sec.  1000.302  What are the definitions applicable for the IHBG 
formula?

* * * * *
    Formula area. * * *
    (2)(i) * * *
    (B) Is providing substantial housing services and will continue to 
expend or obligate funds for substantial housing services, as reflected 
in its Indian Housing Plan and Annual Performance Report for this 
purpose.
* * * * *
    Substantial housing services are:
    * * *
    (3) HUD shall require that the Indian Tribe annually provide 
written verification, in its Indian Housing Plan and Annual Performance 
Report, that the affordable housing activities it is providing meet the 
definition of substantial housing services.
* * * * *
    47. In Sec.  1000.328, revise paragraph (b)(2), to read as follows:


Sec.  1000.328  What is the minimum amount that an Indian Tribe may 
receive under the need component of the formula?

* * * * *
    (b) * * *
    (2) Certify in its Indian Housing Plan the presence of any 
households at or below 80 percent of median income.
    48. Revise Sec.  1000.332, to read as follows:


Sec.  1000.332  Will data used by HUD to determine an Indian Tribe's or 
TDHE's formula allocation be provided to the Indian Tribe or TDHE 
before the allocation?

    Yes. HUD shall provide notice to the Indian Tribe or TDHE of the 
data to be used for the formula and projected allocation amount by June 
1.


Sec.  1000.408  [Removed]

    49. Remove Sec.  1000.408.
    50. In Sec.  1000.410, revise paragraphs (c) and (d), and add 
paragraph (e) to read as follows:


Sec.  1000.410  What conditions shall HUD prescribe when providing a 
guarantee for notes or other obligations issued by an Indian Tribe?

* * * * *
    (c) The repayment period may exceed 20 years, and the length of the 
repayment period cannot be the sole basis for HUD disapproval;
    (d) Lender and issuer/borrower must certify that they acknowledge 
and agree to comply with all applicable Tribal laws; and
    (e) A guarantee made under Title VI of NAHASDA shall guarantee

[[Page 71489]]

repayment of 95 percent of the unpaid principal and interest due on the 
notes or other obligations guaranteed.
    51. In Sec.  1000.424, revise paragraph (a), remove paragraph 
(d)(2), and redesignate paragraphs (d)(3) and (d)(4) as paragraphs 
(d)(2) and (d)(3), respectively, to read as follows:


Sec.  1000.424  What are the application requirements for guarantee 
assistance under title VI of NAHASDA?

* * * * *
    (a) An identification of each of the activities to be carried out 
with the guaranteed funds and a description of how each activity 
qualifies:
    (1) As an affordable housing activity as defined in section 202 of 
NAHASDA; or
    (2) As a housing related community development activity under 
section 601(a) of NAHASDA.
* * * * *
    52. In Sec.  1000.428, revise paragraphs (b) and (e) to read as 
follows:


Sec.  1000.428  For what reasons may HUD disapprove an application or 
approve an application for an amount less than that requested?

* * * * *
    (b) The loan or other obligation for which the guarantee is 
requested exceeds any of the limitations specified in sections 601(c) 
or section 605(d) of NAHASDA.
* * * * *
    (e) The activities to be undertaken are not eligible under either:
    (1) Section 202 of NAHASDA; or
    (2) Section 601(a) of NAHASDA.
* * * * *
    53. Add Sec.  1000.503, to read as follows:


Sec.  1000.503  What is an appropriate extent of HUD monitoring?

    (a) Subject to any conflicting or supplementary requirement of 
specific legislation, and upon the effective date of this regulation, 
the frequency of HUD monitoring of a particular recipient will be 
determined by application of the HUD standard risk assessment factors, 
provided that when a recipient requests to be monitored, HUD shall 
conduct such monitoring as soon as practicable. The HUD standard risk 
assessment factors may be but are not limited to the following:
    (1) Annual grant amount;
    (2) Disbursed amounts--all open grants;
    (3) Months since last on-site monitoring;
    (4) Delinquent audits;
    (5) Open audit findings;
    (6) Conclusions of auditor;
    (7) Open monitoring findings;
    (8) Delinquent Annual Performance Reports or Annual Status and 
Evaluation Reports;
    (9) Status of Corrective Action Plan (CAP) or Performance Agreement 
(PA);
    (10) Recipient Self-Monitoring;
    (11) Inspection of 1937 Act units;
    (12) Preservation of 1937 Act units; and
    (13) Any other additional factors that may be determined by HUD, 
consistent with HUD's Tribal Consultation Policy, by which HUD will 
send written notification and provide a comment period. Such additional 
factors shall be provided by program guidance.
    (b) Provided that if monitoring indicates noncompliance, HUD may 
undertake additional sampling and review to determine the extent of 
such noncompliance, the level of HUD monitoring of a recipient once 
that recipient has been selected for HUD monitoring is as follows:
    (1) Review recipient program compliance for the current program 
year and the 2 prior program years;
    (2) On-site inspection of no more than 10 dwelling units or 10 
percent of total dwelling units, whichever is greater;
    (3) Review of no more than 10 client files or 10 percent of client 
files, whichever is greater.
    (c) Notwithstanding paragraph (b) of this section, HUD may at any 
time undertake additional sampling and review of prior program years, 
subject to the records retention limitations of Sec.  1000.552, if HUD 
has credible information suggesting noncompliance. HUD will share this 
information with the recipient as appropriate.
    (d) A recipient may request ONAP to enter into self-monitoring 
mutual agreements or other self-monitoring arrangements with 
recipients. ONAP will monitor the recipient only in accordance with 
such agreement or arrangement, unless ONAP finds reasonable evidence of 
fraud, a pattern of noncompliance, or the significant unlawful 
expenditure of IHBG funds.


Sec.  1000.504  [Removed]

    54. Remove Sec.  1000.504.
    55. In Sec.  1000.512, revise paragraphs (b) and (c), and add 
paragraphs (d) and (e), to read as follows:


Sec.  1000.512  Are performance reports required?

* * * * *
    (b) Brief information on the following:
    (1) A comparison of actual accomplishments to the planned 
activities established for the period;
    (2) The reasons for slippage if established planned activities were 
not met; and
    (3) Analysis and explanation of cost overruns or high unit costs;
    (c) Any information regarding the recipient's performance in 
accordance with HUD's performance measures, as set forth in section 
Sec.  1000.524; and
    (d) Annual performance data to reflect the accomplishments of the 
recipient to include, as specified in the IHP:
    (1) Permanent and temporary jobs supported with IHBG funds;
    (2) Outputs by eligible activity, including:
    (i) Units completed or assisted, and
    (ii) Families assisted; and
    (3) Outcomes by eligible activity.
    (e) As applicable, items required under Sec. Sec.  1000.302 and 
1000.544.
    56. In Sec.  1000.520, revise the heading, introductory text, and 
paragraph (c), to read as follows:


Sec.  1000.520  What are the purposes of HUD's review of the Annual 
Performance Report?

    HUD will review each recipient's Annual Performance Report when 
submitted to determine whether the recipient:
* * * * *
    (c) Whether the Annual Performance Report of the recipient is 
accurate.
    57. In Sec.  1000.524, remove paragraph (a), redesignate paragraphs 
(b) through (f) as paragraphs (a) through (e), and revise redesignated 
paragraph (d), to read as follows:


Sec.  1000.524  What are HUD's performance measures for the review?

* * * * *
    (d) The recipient has met the IHP--planned activities in the one-
year plan.
* * * * *
    58. Revise Sec.  1000.528, to read as follows:


Sec.  1000.528  What are the procedures for the recipient to comment on 
the result of HUD's review when HUD issues a report under section 
405(b) of NAHASDA?

    HUD will issue a draft report to the recipient and Indian Tribe 
within 60 days of the completion of HUD's review. The recipient will 
have at least 60 days to review and comment on the draft report, as 
well as provide any additional information relating to the draft 
report. Upon written notification to HUD, the recipient may exercise 
the right to take an additional 30 days to complete its review and 
comment to the draft report. Additional extensions of time for the 
recipient to complete review and comment may be mutually agreed upon in 
writing by HUD and the recipient. HUD shall consider the comments and 
any additional information provided by the recipient. HUD may also 
revise the

[[Page 71490]]

draft report based on the comments and any additional information 
provided by the recipient. HUD shall make the recipient's comments and 
a final report readily available to the recipient, grant beneficiary, 
and the public not later than 30 days after receipt of the recipient's 
comments and additional information.
    59. In Sec.  1000.530, revise the heading and paragraph (b), to 
read as follows:


Sec.  1000.530  What corrective and remedial actions will HUD request 
or recommend to address performance problems prior to taking action 
under Sec.  1000.532?

* * * * *
    (b) Failure of a recipient to address performance problems 
specified in paragraph (a) of this section may result in the imposition 
of sanctions as prescribed in Sec.  1000.532.
    60. Revise Sec.  1000.532, to read as follows:


Sec.  1000.532  What are the remedial actions that HUD may take in the 
event of recipient's substantial noncompliance?

    (a) If HUD finds after reasonable notice and opportunity for 
hearing that a recipient has failed to comply substantially with any 
provision of NAHASDA or these regulations, HUD shall carry out any of 
the following actions with respect to the recipient's current or future 
grants, as appropriate:
    (1) Terminate payments under NAHASDA to the recipient;
    (2) Reduce payments under NAHASDA to the recipient by an amount 
equal to the amount of such payments that were not expended in 
accordance with NAHASDA or these regulations;
    (3) Limit the availability of payments under NAHASDA to programs, 
projects, or activities not affected by the failure to comply; or
    (4) In the case of noncompliance described in Sec.  1000.542, 
provide a replacement TDHE for the recipient.
    (b) Before undertaking any action in accordance with paragraph (a) 
of this section, HUD will notify the recipient in writing of the action 
it intends to take and provide the recipient an opportunity for an 
informal meeting to resolve the deficiency. Before taking any action 
under paragraph (a) of this section, HUD shall provide the recipient 
with the opportunity for a hearing no less than 30 days prior to taking 
the proposed action. The hearing shall be held in accordance with Sec.  
1000.540. The amount in question shall not be reallocated under the 
provisions of Sec.  1000.536, until 15 days after the hearing has been 
conducted and HUD has rendered a final decision.
    (c) Notwithstanding paragraphs (a) and (b) of this section, if HUD 
makes a determination that the failure of a recipient to comply 
substantially with any material provision of NAHASDA or these 
regulations is resulting, and would continue to result, in a continuing 
expenditure of funds provided under NAHASDA in a manner that is not 
authorized by law, HUD may, in accordance with section 401(a)(4) of 
NAHASDA, take action under paragraph (a)(3) of this section prior to 
conducting a hearing under paragraph (b) of this section. HUD shall 
provide notice to the recipient at the time that HUD takes that action 
and conducts a hearing, in accordance with section 401(a)(4)(B) of 
NAHASDA, within 60 days of such notice.
    (d) Notwithstanding paragraph (a) of this section, if HUD 
determines that the failure to comply substantially with the provisions 
of NAHASDA or these regulations is not a pattern or practice of 
activities constituting willful noncompliance, and is a result of the 
limited capability or capacity of the recipient, if the recipient 
requests HUD shall provide technical assistance for the recipient 
(directly or indirectly) that is designed to increase the capability or 
capacity of the recipient to administer assistance under NAHASDA in 
compliance with the requirements under NAHASDA. A recipient's 
eligibility for technical assistance under this subsection is 
contingent on the recipient's execution of, and compliance with, a 
performance agreement pursuant to Section 401(b) of NAHASDA.
    (e) In lieu of, or in addition to, any action described in this 
section, if the Secretary has reason to believe that the recipient has 
failed to comply substantially with any provisions of NAHASDA or these 
regulations, HUD may refer the matter to the Attorney General of the 
United States, with a recommendation that appropriate civil action be 
instituted.
    61. In Sec.  1000.534, revise paragraph (a) to read as follows:


Sec.  1000.534  What constitutes substantial noncompliance?

* * * * *
    (a) The noncompliance has a material effect on the recipient 
meeting its planned activities as described in its Indian Housing Plan;
* * * * *
    62. In Sec.  1000.536, revise the heading to read as follows:


Sec.  1000.536  What happens to NAHASDA grant funds adjusted, reduced, 
withdrawn, or terminated under Sec.  1000.532?

* * * * *


Sec.  1000.538  [Removed]

    63. Remove Sec.  1000.538.
    64. Revise Sec.  1000.544 to read as follows:


Sec.  1000.544  What audits are required?

    Pursuant to NAHASDA Section 405(a), the recipient must comply with 
the requirements of the Single Audit Act (chapter 75 of title 31, 
United States Code), including OMB Circular A-133, which require annual 
audits of recipients that expend Federal funds equal to or in excess of 
an amount specified by the Office of Management and Budget (OMB), as 
set out in OMB Circular A-133, subpart B, section 200. If applicable, a 
certification that the recipient has not expended Federal funds in 
excess of the audit threshold that is set by OMB shall be included in 
the recipient's Annual Performance Report.
    65. Revise Sec.  1000.548, as follows:


Sec.  1000.548  Must a copy of the recipient's audit pursuant to the 
Single Audit Act relating to NAHASDA activities be submitted to HUD?

    Yes. A copy of the latest recipient audit under the Single Audit 
Act relating to NAHASDA activities must be submitted to the appropriate 
HUD ONAP area office at the same time it is submitted to the Federal 
Audit Clearinghouse pursuant to OMB Circular A-133.
    66. Revise Sec.  1000.552 paragraph (b), to read as follows:


Sec.  1000.552  How long must the recipient maintain program records?

* * * * *
    (b) Except as otherwise provided herein, records must be retained 
for 3 years from the end of the Tribal program year during which the 
funds were expended.
* * * * *

    Dated: October 4, 2011.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2011-29642 Filed 11-17-11; 8:45 am]
BILLING CODE 4210-67-P